|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|Washington, D.C. 20549            

|                                                       |                                                                                           | 
|------------------------------------------------------ | ----------------------------------------------------------------------------------------- | 
|(Mark One)                                             | FORM 10-K/A (Amendment No. 1)                                                             | 
|                                                       |                                                                                           | 
|þ                                                      | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934    
|                                                       | For the
 fiscal year ended December 31, 2009                                              | 
|                                                       |                                                                                           | 
|or                                                    
|                                                       |                                                                                           | 
|o                                                      | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934
|                                                       | For the
 transition period from ________________________ to ________________________      | 
|                                                       |                                                                                           | 
|Commission file number: 000-50140                     
|                                                       |                                                                                           | 
|ACL Semiconductors Inc.                               
|(Exact name of Registrant as specified in its charter)

|                                                                                                    |  |                                         |           
|--------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ----------
|Delaware                                                                                            |  | 16-1642709                             
|                                                                                                    |  |                                        
|State or other jurisdiction of incorporation or organization                                        |  | (I.R.S. Employer Identification Number)
|                                                                                                    |  |                                        
|Room 1701, 17/F., Tower 1, Enterprise Square, 9 Sheung Yuet Road, Kowloon
 Bay, Kowloon, Hong Kong.
|                                                                                                   
|(Address of principal executive offices)                                                            |  |                                         | (Zip Code)
|                                                                                                    |  |                                         |           
|Registrants
 telephone number including area code: 011-852-2799-1996                               | 
|                                                                                                    |  |                                         |           
|Securities
 registered pursuant to Section 12(b) of the Act:                                        |  |                                         |           

|                                                            |  |                                          
|----------------------------------------------------------- |  | -----------------------------------------
|Title of each class                                         |  | Name of each exchange on which registered
|Common Stock, $0.001 par value                              |  | Over-the-Counter Bulletin Board          
|                                                            |  |                                          
|Securities registered pursuant to Section 12(g) of the Act:

| |                  | 
| | ---------------- | 
| | NONE             | 
| |                  | 
| | (Title of class) | 

Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities
Act.                  
                  
      
o Yes  þ No

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act.                          
                  
         o
Yes  þ 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.               
                      
                      
                      
                      
                      
                      
                      
                       
þ Yes  o No

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, 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.)
                      
                      
                      
                      
                      
                        
      o Yes  o No

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K, or any amendment to this Form 10-K.               
                       
                       
                       
           
                      
                      
                      
                      
 


o

Indicate by check mark whether the registrant is large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of large accelerated filer, accelerated filer and
smaller reporting company in Rule 12b-2 of the Exchange Act.

|                                                                        |                             
|----------------------------------------------------------------------- | ----------------------------
|Large
 accelerated filer o                                              | Accelerated
 filer o        
|Non-accelerated
 filer o (Do not
 check if a smaller reporting company) | Smaller
 reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-5 of the
Act).                      
                 
                  
       
o Yes  þ No

The aggregate market value of the voting common equity held by
non-affiliates of the registrant as of June 30, 2009 was approximately
$1,333,486 based upon the closing price of $0.21 of the registrants common
stock on the OTC Bulletin Board. (For purposes of determining this amount, only
directors, executive officers, and 10% or greater stockholders have been deemed
affiliates).

The number of shares of Registrants Common Stock outstanding as of
March 15, 2010 was 28,729,936.

DOCUMENTS INCORPORATED BY REFERENCE

NONE

---



EXPLANATORY NOTE

This is an
amendment to the Registrants  Annual Report on Form 10-K for the year
ended  December 31, 2009 dated April 15, 2010 (the  Annual  Report).
The purpose of this  amendment is to make certain  immaterial  changes that were
not  reflected in the  as-filed  version of the Annual  Report.  Except for such
changes,  this  amendment does not update,  modify,  or amend any disclosure set
forth in the Annual Report.

---



Table of Contents

Form 10-K Index

|                                           |                                                                                                                   |     
|------------------------------------------ | ----------------------------------------------------------------------------------------------------------------- | ----
|                                           |                                                                                                                   | PAGE
|                                           |                                                                                                                   |     
|                                           | FORWARD LOOKING STATEMENT                                                                                         | 1   
|                                           |                                                                                                                   |     
|PART I                                     |                                                                                                                  
|                                           |                                                                                                                   |     
|Item 1.                                    | Business                                                                                                          | 1   
|Item 1A.                                   | Risk Factors                                                                                                      | 4   
|Item 1B.                                   | Unresolved Staff Comments                                                                                         | 7   
|Item 2.                                    | Properties                                                                                                        | 7   
|Item 3.                                    | Legal Proceedings                                                                                                 | 7   
|Item 4.                                    | (Removed and Reserved)                                                                                            | 7   
|                                           |                                                                                                                   |     
|PART II                                    |                                                                                                                  
|                                           |                                                                                                                   |     
|Item 5.                                    | Market for the Registrants Common Equity, Related Stockholder
 Matters and Issuer Purchases of Equity Securities | 8   
|Item 6.                                    | Selected Financial Data                                                                                           | 9   
|Item 7.                                    | Managements Discussion and Analysis of Financial Condition and
 Results of Operations                            | 9   
|Item 7A.                                   | Quantitative and Qualitative Disclosures About Market Risk                                                        | 17  
|Item 8.                                    | Financial Statements and Supplementary Data                                                                       | 17  
|Item 9.                                    | Changes in and Disagreements with Accountants on Accounting and
 Financial Disclosure                             | 17  
|Item 9AT.                                  | Controls and Procedures                                                                                           | 18  
|Item 9B.                                   | Other Information                                                                                                 | 20  
|                                           |                                                                                                                   |     
|PART III                                   |                                                                                                                  
|                                           |                                                                                                                   |     
|Item 10.                                   | Directors, Executive Officers and Corporate Governance                                                            | 20  
|Item 11.                                   | Executive Compensation                                                                                            | 21  
|Item 12.                                   | Security Ownership of Certain Beneficial Owners and Management and
 Related Stockholder Matters                   | 24  
|Item 13.                                   | Certain Relationships and Related Transactions, and Director
 Independence                                        | 24  
|Item 14.                                   | Principal Accounting Fees and Services                                                                            | 27  
|                                           |                                                                                                                   |     
|PART IV                                    |                                                                                                                  
|                                           |                                                                                                                   |     
|Item 15.                                   | Exhibits and Financial Statement Schedules                                                                        | 28  
|Signatures                                 |                                                                                                                   | 31  
|Index to Consolidated Financial Statements | F-1                                                                                                              

---



FORWARD LOOKING
STATEMENTS

This Annual Report on Form 10-K and the
documents incorporated herein contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. When used in this Annual Report, statements that
are not statements of current or historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words plan,
intend, may, will, expect, believe, could, anticipate,
estimate, or continue or similar expressions or other variations or
comparable terminology are intended to identify such forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. Except as
required by law, the Company undertakes no obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise.

Any reference to ACL, the Company, we,
us, our or the Registrant means ACL Semiconductors Inc. and its
subsidiaries.

PART I

|        |         
|------- | --------
|Item 1. | Business

General

ACL
Semiconductors Inc. (the Company) was incorporated under the laws of the
State of Delaware on September 17, 2002. Our predecessor, Print Data Corp.
(Historic Print Data) was incorporated under the laws of the State of
Delaware on August 15, 1984 as a business forms distributor and supplier of
office and computer environment supply needs.

On
September 8, 2003, the Company entered into a Share Exchange and Reorganization
Agreement (the Exchange Agreement) with Atlantic Components Limited, a Hong
Kong corporation (Atlantic), and Mr. Chung-Lun Yang, the sole beneficial
stockholder of Atlantic (Mr. Yang), which set forth the terms and conditions
of the exchange by Mr. Yang of his common shares of Atlantic, representing all
of the issued and outstanding capital stock of Atlantic, in exchange for the
issuance by the Company to Mr. Yang and certain financial advisors of an
aggregate of twenty five million (25,000,000) shares of common stock, par value
$0.001 per share (the Common Stock), of the Company (the Transaction).
Pursuant to the Exchange Agreement, the Company and Atlantic agreed, inter
alia, to elect Mr. Yang and Mr. Ben Wong to the board of directors (Board of
Directors) of the Company upon the closing of the Transaction (the Closing),
effective as of that date (the Closing Date), at which time, all of the Companys
existing directors resigned.

The Closing
occurred on September 30, 2003, upon the satisfaction or waiver of the
conditions to the Closing set forth in the Exchange Agreement, as a result of
which (i) Atlantic became a wholly-owned subsidiary of the Company, (ii) Mr.
Yang received an aggregate of 22,380,000 shares of Common Stock, (iii) the
Companys existing directors resigned and Mr. Yang and Mr. Wong were appointed
to fill their vacancies and became the only members of the Board of Directors,
and (iv) certain financial advisors to Atlantic became entitled to receive an
aggregate of 2,620,000 shares of Common Stock. Giving effect to the Closing
(including required issuances to financial advisors), Mr. Yang held
approximately 80.4% of the outstanding Common Stock immediately following the
Closing.

On December
16, 2003, the Company filed a Certificate of Amendment with the Secretary of
State of the State of Delaware changing its name from Print Data Corp. to ACL
Semiconductors Inc.

On March
23, 2010, the Company concluded that Aristo Technologies Limited (Aristo), a
related company solely owned by Mr. Yang, is a variable interest entity under
FASB ASC 810-10-25 and is therefore subject to consolidation with the Company beginning
fiscal year 2007 under the guidance applicable to variable interest entities.

Business

Atlantic is
one of the authorized distributors in the Hong Kong and southern region of the
Peoples Republic of China (Southern China) markets of memory products of
Samsung Electronics Hong Kong Co., Ltd. (Samsung), a wholly-owned subsidiary
of Samsung Electronics Co., Ltd., the worlds largest producer of memory chips
and a global producer of memory products, pursuant to a distributorship agreement
with Samsung (the Distribution Agreement) since 1993. Atlantic was
established as a Hong Kong corporation in May 1991 by Mr. Yang as a regional
distributor of memory products of various manufacturers. In 1993, Samsung
appointed Atlantic as its authorized distributor and marketer of Samsungs
memory products in Hong Kong and overseas markets. In 2001, Atlantic
established a representative office in Shenzhen, China and began concentrating
its distribution and marketing efforts in Southern China.

Since 1993,
Atlantic has diversified its product portfolio to include all of Samsungs
memory products marketed under the Samsung brand name which comprise Dynamic
Random Access Memory (DRAM), Double Data Rate RAM (DDR), Graphic Random
Access Memory (Graphic RAM), NAND Flash, NOR Flash, and Multi-Chip Packing
(MCP). Atlantic believes it is one of the largest and most successful
distributors of Samsung memory products in Hong Kong and Southern China.

1

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Aristo
    is engaged in the marketing, selling and servicing of computer products and
accessories including semiconductors, LCD products, mass storage devices,
consumer electronics, computer peripherals and electronic components. In addition
    to Samsung-branded products, Aristo sells Hynix, Micro, Elpida,
Qimonda, Lexar, Dane-Elec, Elixir, SanDisk and Winbond branded products.

The
Companys business objective is to build the best memory solutions platform for
electronics manufacturers in the region. It also aims to offer updated market
intelligence to Samsung in connection with the Hong Kong and Southern China
markets demand in memory products and secure high-quality Samsung products in
order to meet the market demands of individual and corporate users in Hong Kong
and Southern China. The Company works closely with Samsung and presents Samsung
with updated market information that its collects from retail channels and
corporate users to assist Samsung to plan their production and allocation
schedule in advance. The Companys business strategy is to assist Samsung in
implementing their production planning using market intelligence to balance the
supply and demand of memory products in the Hong Kong and Southern China
markets. Accordingly, the Company maintains and develops a sales and market
research team to answer marketing questions from Samsung on a regular basis. In
addition, the Company has established distribution channels covering retail
outlets and major corporate users in the region which allows those retail or
ultimate customers a secure stable supply of Samsungs memory products with
competitive prices. The Company is a non-exclusive distributor of Samsung, and
enjoys a minimum guaranteed gross profit margin range of approximately 1.5% to
2% of products sold in form of sales rebate payable by Samsung.

Approximately
80% of the Companys revenues are derived from sales of Samsung memory
products. As of December 31, 2009, pricing for the Samsung memory products
ranged from approximately $0.70 to $750 per product depending on the product
specifications.

The
Distribution Agreement has a one-year term and contains certain sales quotas to
be met by the Company. The Distribution Agreement has been renewed more than
ten times, most recently on March 1, 2009 and expired on February 28, 2010. As
of March 1, 2010, Samsung has confirmed the annual renewal of such agreement
for one year. The Company has never failed to meet the sales quotas set forth
in the Distribution Agreement.

Products

Synchronous
Dynamic Random Access Memory (SDRAMs), or mobile SDRAM, are the most widely
used semiconductor memory component in computer peripheral (HDD), Digital Still
Camera (DSC), Modems, ADSL Applications, DVD player, Set-top Box (STB), Digital
TV, High Definition TV (HDTV) and Portable Multimedia Players (PMP).

DDRs (DDR1,
DDR2 and DDR3) are random access memory components that transfer data on both
0-1 and 1-0 clock transitions, theoretically yielding twice the data transfer
rate of normal RAM or SDRAM. Currently, the market has been dominated by DDR2
and DDR3, which are also starting to penetrate into the mainstream markets in
PCs and graphic cards. The DDR1 is nearly fading out in the market.

Flash
memory is a specialized type of memory component used to store user data and
program code; it retains this information even when the power is off. Although
flash memory is currently used predominantly in mobile phones and PDAs, it is
commonly used in multi-media digital storage applications for products such as
MP3 players, DSC, Digital Voice Recorders, USB Disks, Flash Cards, etc. In
addition, Solid State Disk hard disks (SSD) will be the next arena that NAND
Flash is expected by the Company to penetrate in the marketplace. The SSD hard
disk has the potential to dominate the traditional hard disk for notebook
markets. Samsung is a major supplier in the world of Flash products. In 2009,
Samsung NAND Flash revenue was approximately US$4,575 million, representing
37.9% of Flashs (NAND + NOR) market share.

Graphic RAM
is a special purpose DDR (GDDR1, GDDR2, GDDR3, GDDR4) as graphic products
require high-speed 3-dimensional calculation performance and large memory size
as data storage buffer for DVD and computer game display. The current GDDR4 currently
is the fastest graphic memory in volume production.

The LCD
panel is the major component used in most consumer electronics such as LCD TV,
notebook, digital phone frame, portable game console, mobile phone, etc.

Mass
storage devices such as micro SD card, SD card, and CF card are widely used for
digital camera, mobile phone, portable game console, MP3 player, etc.

Industry Background

Memory
products are integral parts of a wide variety of consumer products and industry
applications including personal computer systems, notebooks, netbooks,
workstations and servers, handheld computer devices, e-Reader, cellular phones,
camcorders, MP3 music players, digital answering machines and game boxes, DVD
player, STB, HDTV and PMP, among others. Market trends, such as increased
emphasis on high-through put applications, including networking, graphics,
multimedia, computer, consumer, and telecommunications products, have created
opportunities for high performance memory products. At present, NAND Flash,
DDR2 and SDRAM are the major memory products and will continue to be sold in
the future for Consumer Electronics, PC field and Home Appliance products, and
Samsung is among the worlds largest developers and manufacturers of those memory
products.

2

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Customers

As of
December 31, 2009, the Company had over 150 active customers in Hong Kong and
Southern China, the majority of whom are memory product traders and PC/Servers
OEM manufacturers. Other than the Companys most significant customer who
accounted for 53% of the Companys net sales for the years ended December 31,
2009, no other customer accounted for more than 25% of the Companys net sales
for 2009 and 2008. In order to control the Companys credit risks, the Company
does not offer any credit terms to its customers other than a small number of
clients who have long-established business relationships with the Company.

Sales and Marketing

As of
December 31, 2009, the Company employed a total of 24 sales and marketing
personnel, each of whom has several years experience in the memory products
industry. Eleven of these salespeople are stationed in the Companys
headquarters in Hong Kong, and thirteen of them work out of the Companys China
offices. These sales personnel co-operate with key memory product retailers and
PC/Servers OEM manufacturers to ensure that clients are supplied promptly with
Samsung memory products.

Market Research

The Company
invests significant resources in market research for its own account to provide
prompt and accurate market intelligence and feedback on a daily, weekly and
monthly basis to Samsung in order to assist Samsungs production planning and
products allocation functions and thus maintains a close business relationship
with Samsung.

Suppliers

As of
December 31, 2009, a majority of the distributed products are Samsung memory
products. Since 1993, our procurement operations have been supported by Samsung
to ensure there are enough supplies of memory products according to our monthly
sales quota although there is no written long-term distribution agreement in
place with Samsung. Samsung is allocated quantities of its memory products each
year based on anticipated demand for such products by the customers of the
various distributors of Samsung memory products in Hong Kong and in the PRC.
The distributors that are supported by Samsung provide Samsung with their own
annual estimates of product demand. In case of unexpected strong demand in the
market exceeding our monthly sales quota, there is no assurance that Samsung
will be able to supply sufficient memory products to us and other non-exclusive
distributors to meet such demand in excess of Samsungs global allocation
policy to Samsung. In the event of a supply shortage, the market prices of such
memory products will rise and any loss of income attributable to our inability
to fulfill all of our orders would be offset by the increase in income as a
result of any increase in the market prices of such memory products.

Atlantic
relies on Samsung to supply it with memory products for distribution to its
clients. Atlantics relationship with Samsung is primarily maintained through
Mr. Yang, the founder of the Company.

In
    addition to  Samsung-branded
    products, Aristo sells brands such as Hynix, Micro, Elpida, Qimonda, Lexar,
    Dane-Elec, Elixir, SanDisk and Winbond. Aristo is not an authorized distributor
    of any of these brands but instead is a trader of a broad range of products
    and brands in the computer accessories market.

Competition

The memory
products industry in the Hong Kong and Southern China markets is very
competitive. However, as one of the worlds largest memory products
manufacturers, Samsungs memory products are competitively priced and have an
established reputation for product quality and brand name recognition in the
retail and PC/Server OEM & Consumer Electronic segments. The Company, as
one of the largest distributors of Samsungs memory products for the Hong Kong
and Southern China markets, believes it is in a strong competitive position
against other US, European, Japanese and Taiwanese memory products
manufacturers and distributors.

Samsungs
principal competitors in the Hong Kong and Southern China markets include Hynix
and other Taiwanese manufacturers such as Nanya, PSC, Promos, ISSI and ESMT.
The Companys principal competitors also include the five other non-exclusive
distributors of Samsung memory products in the Hong Kong and Southern China
markets. Samsung may, in its sole discretion, increase the number of
distributors of its products in Hong Kong and Southern China which would result
in increased competition for the Company.

Regulation

As of
December 31, 2009, the Companys business operations were not subject to the
regulations of any jurisdiction other than the Peoples Republic of China.
Although the Company is not formally authorized to do business in the Peoples
Republic of China, it has been permitted by the Chinese authorities to
establish a representative office in Shenzhen, China to carry out liaison works
for its customers in Southern China. The Company executes its sales contracts
and delivers its products in Hong Kong for its Chinese customers and there have
been no restrictions imposed on the Company by the mainland Chinese authorities
with respect to the Companys pursuit of business growth and opportunities in
China.

3

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Employees

As of
December 31, 2009, the Company had 54 employees. Of the 54 employees, 24
employees are in sales and marketing, 15 employees are in administration, 5
employees are in engineering, 10 employees are in customer service and liaison.
None of the Company employees are represented by labor unions.

The
Companys primary hiring sources for its employees include referrals from
existing employees, print and Internet advertising and direct recruiting. All
of the Companys employees are highly skilled and educated and subject to
rigorous recruiting standards appropriate for a company involved in the
distribution of brand name memory products. The Company attracts talent from
numerous sources, including higher learning institutions, colleges and
industry. Competition for these employees is intense. The Company believes its
relationship with its employees to be good. However, the Companys ability to
achieve its financial and operational objectives depends in large part upon its
continuing ability to attract, integrate, retain and motivate highly qualified
personnel, and upon the continued service of its senior management and key
personnel, especially Mr. Yang.

|         |             
|-------- | ------------
|Item 1A. | Risk Factors

We
are subject to a number of risks. Some of these risks are endemic to the
high-technology and semiconductor industry and are the same or similar to those
disclosed in our previous SEC filings. This section should be read in
conjunction with the consolidated financial statements and the accompanying
notes thereto, and Managements Discussion and Analysis of Financial Condition
and Results of Operations included in this Annual Report. The risks and
uncertainties set out below are not the only risks and uncertainties we face.
Our business could be harmed by any of these risks. The trading price of our
common stock could decline due to any of these risks and investors may lose all
or part of their investment. The information included in this Annual Report is
provided as of the filing date with the SEC and future events or circumstances
could differ significantly from the forward-looking statements included herein.

The restatement of our financial statements may result in litigation or government enforcement actions. Any such action would likely harm our business, financial condition and results of operations.

Our management recently concluded that Aristo Technologies Limited (Aristo), a related party, is a variable interest entity under
FASB ASC 810-10-25. Consequently, we are consolidating the financial statements of Aristo with those of the Company for the period effective and are restating our previously filed annual and interim financial statements in amended Form 10-Ks for
years ended 2007 and 2008 to correct the errors related to accounting for variable interest entities. The financial statements as originally filed for those periods should not be relied upon. The restatement of our financial statements may expose us
to risks associated with litigation, regulatory proceedings and government enforcement actions. In addition, securities class action litigation has often been brought against companies who have been unable to provide current public information or
who have restated previously filed financial statements. Any of these actions could result in substantial costs, divert managements attention and resources, and harm our business, prospects, financial condition and results of operations.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the SarbanesOxley Act of 2002 may result in actions
filed against us by regulatory agencies or in a reduction in the price of our common stock.

We are required to maintain effective internal control over financial reporting under the Sarbanes Oxley Act of 2002 and related regulations. Any
material weakness in our internal control over financial reporting that needs to be addressed, or disclosure of a material weakness in managements assessment of internal control over financial reporting, may reduce the price of our common
shares because investors may lose confidence in our financial reporting. Our failure to maintain effective internal control over financial reporting could also lead to actions being filed against us by regulatory agencies. We identified material
weaknesses in internal control over financial reporting as more fully discussed in Controls and Procedures at Item 9AT of this Annual Report. Currently, we have plans for certain remediation actions, but they will take time to implement because of
their cost. There can be no assurance when remediation will be complete, if at all. Therefore, future reports may have statements indicating that our controls and procedures are not effective. We cannot assure you that even if we remediate our
internal control over financial reporting relating to the identified material weaknesses that it will establish the effectiveness of our internal control over financial reporting or that we will not be subject to material weaknesses in the future.

If our relationship with Samsung is
terminated, we may not be able to continue operations.

We rely ultimately
on Samsung to provide us with memory products for distribution to our clients
though with the consent of Samsung, we can purchase the required memory
products from other Samsung distributors. Our relationship with Samsung is
primarily maintained through our Chairman Mr. Chung-Lun Yang, who has verbally
agreed to remain with us. If our relationship with Samsung is terminated or if
Mr. Yang terminates his employment with us, we may be unable to replace or
retain Samsung on favorable terms.

Although we
are not an exclusive distributor of Samsungs memory products, we believe we
are the largest Samsung memory products distributor for the Hong Kong and
Southern China markets. Although the Distribution Agreement is subject to
annual renewal at Samsungs option, we do not foresee, based upon the long-term
business relationship with Samsung established by Mr. Yang and our sales
history with respect to the distribution of Samsungs memory products, any
significant obstacles to obtaining renewals of the Distribution Agreement in
the foreseeable future. However, no assurances can be given that Samsung will
definitely renew the Distribution Agreement or, if renewed, on terms
satisfactory to us.

In
addition, Samsung has the right to increase the number of distributors of its
memory products in Hong Kong and the Southern China markets without consulting
us. If Samsung significantly increases the number of authorized distributors of
its memory products, competition among Samsung distributors, would increase and
we may not be able to meet our annual sales quota, which could increase the
likelihood that Samsung would not renew the Distribution Agreement, or if
renewed, that we could operate profitably.

If the growth rate of either memory products
sold or the amount of memory used in each product decreases, sales of our
products could decrease.

We
    are dependent on the computer and consumer electronics market as many of
    the memory products that we distribute are used in PCs or peripheral products.
    DRAMs are the most widely used semiconductor components in PCs and Flash
    products are mostly used in the consumer electronics products. In recent
    years, the growth rate of PCs sold has slowed or declined. If there is a
    continued reduction in the growth rate of either PCs sold or the average
    amount of semiconductor memory included in each PC, sales of our memory products
    built for those markets could decrease, and our results of operations, cash
    flows and financial condition could be adversely affected. However, the continued
    growth of consumer electronics markets over the past several years has favorably
    affected our operations, cash flow and financial condition.

4

---



If Samsung is unable to respond to customer
demand for diversified semiconductor memory products or is unable to do so in a
cost-effective manner, we may lose market share and our results of operations
may be adversely affected.

In recent
periods, the semiconductor memory market has become relatively segmented, with
diverse memory needs being driven by the different requirements of desktop and
notebook PCs, netbooks, servers, workstations, handheld devices, and
communications, industrial and other applications that demand specific memory
solutions. Samsung
currently offers customers a variety of memory products including DDR, Graphic
RAM and Flash.

Samsung needs to dedicate significant resources to product
design and development to respond to customer demand for the continued
diversification of memory products. If Samsung is unable or unwilling to invest
sufficient resources to meet the diverse memory needs of customers, we, as a
Samsung memory products major distributor may lose market share. In addition,
as we diversify our product lines, we may encounter difficulties penetrating
certain markets, particularly markets where we do not have existing customers.
If we are unable to respond to customer demand for market diversification in a
cost-effective manner, our results of operations may be adversely affected.

If
Samsungs global allocation process results in Samsung not having sufficient
supplies of memory products to meet all of our customer orders, this would have
a negative impact on our sales and could result in our loss of customers.
However, such shortages are infrequent. On the other hand, no assurance can be
given that such shortages will not occur in the future.

If Samsungs manufacturing process is
disrupted, our results of operations, cash flows and financial condition could
be adversely affected.

Samsung
manufactures products using highly complex processes that require
technologically advanced equipment and continuous modification to improve
yields and performance. Difficulties in the manufacturing process can reduce
yields or disrupt production. From time to time, we have experienced minor
disruptions in product deliveries from Samsung and we may be unable to meet our
customers requirements and they may purchase products from other suppliers.
This could result in loss of revenues or affect our customer relationships.

We are heavily dependent upon the electronics
industry, and excess capacity or decreased demand for products produced by this
industry could result in increased price competition as well as a decrease in
our gross margins and unit volume sales.

Our
business is heavily dependent on the electronics industry. A majority of our
revenues are generated from the networking, high-end computing and computer
peripherals segments of the electronics industry, which is characterized by
intense competition, relatively short product life-cycles and significant
fluctuations in product demand. Furthermore, these segments are subject to
economic cycles, which have occurred in the past and are likely to occur in the
future. A recession or any other event leading to excess capacity or a downturn
in these segments of the electronics industry could result in intensified price
competition, a decrease in our gross margins and unit volume sales and
materially affect our business, prospects, financial condition and results of
operations.

The memory product industry is highly
competitive.

We face
intense competition from a number of companies, some of which are large
corporations or conglomerates that may have greater resources to withstand
downturns in the semiconductor memory market, invest in technology and
capitalize on growth opportunities. To the extent Samsung memory products
become less competitive, our ability to effectively compete against
distributors of other memory products will diminish.

Current economic and political conditions may
harm our business.

Global
economic conditions and the effects of military or terrorist actions may cause
significant disruptions to worldwide commerce. If these disruptions result in
delays or cancellations of customer orders, a decrease in corporate spending on
information technology or our inability to effectively market, manufacture or
ship our products, our results of operations, cash flows and financial
condition could be adversely affected. In addition, our ability to raise
capital for working capital purposes and ongoing operations is dependent upon
ready access to capital markets. During times of adverse global economic and
political conditions, accessibility to capital markets could decrease. If we
are unable to access the capital markets over an extended period of time, we
may be unable to fund operations, which could materially adversely affect our
results of operations, cash flows and financial condition.

We believe that we will require additional
equity financing to reduce our long-term debts and implement our business plan.

We
anticipate that we will require additional equity financing in order to reduce
our long-term debts and implement our business plan of increasing sales in the
Southern China markets. There can be no assurance that we will be able to
obtain the necessary additional capital on a timely basis or on terms
acceptable to us. If we obtain such financing, the holders of our Common Stock
may experience substantial dilution.

5

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Our major stockholder controls our business,
and could delay, deter or prevent a change of control or other business
combination.

One
shareholder, Mr. Yang, our Chief Executive Officer and Chairman of the Board of
Directors, holds approximately 77.9% of our outstanding Common Stock. By virtue
of his stock ownership, Mr. Yang will control all matters submitted to our
board and our stockholders, including the election of directors, and will be
able to exercise control over our business, policies and affairs. Since he has
substantial voting power, he could cause us to take actions that we would not
otherwise consider, or could delay, deter or prevent a change of control or
other business combination that might otherwise be beneficial to our
stockholders.

Our stock price has been volatile and may
fluctuate in the future.

There has
been significant volatility in the market prices for publicly traded shares of
computer related companies, including ours. From September 30, 2003, the
effective date of the reverse-acquisition of Atlantic, to March 31, 2010, the
closing price of our Common Stock fluctuated from a per share high of $3.00 to
a low of $0.06 per share. The per share price of our Common Stock may not
remain at or exceed current levels. The market price for our Common Stock, and
for the stock of electronic companies generally, has been highly volatile. The
market price of our Common Stock may be affected by: (1) incidental level of
demand and supply of the stock; (2) daily trading volume of the stock; (3)
number of public stockholders in our stock; (4) fundamental results announced
by ACL; and (5) any other unpredictable and uncontrollable factors.

If additional authorized shares of our Common
Stock available for issuance or shares eligible for future sale were introduced
into the market, it could hurt our stock price.

We are
authorized to issue 50,000,000 shares of Common Stock. As of December 31, 2009,
there were 28,729,936 shares of our Common Stock issued and outstanding.

Currently,
outstanding shares of Common Stock are eligible for resale. We are unable to
estimate the amount, timing or nature of future sales of outstanding Common
Stock. Sales of substantial amounts of the Common Stock in the public market by
these holders or perceptions that such sales may take place may lower the
Common Stocks market price.

If penny stock regulations impose
restrictions on the marketability of our Common Stock, the ability of our
stockholders to sell shares of our stock could be impaired.

The SEC has
adopted regulations that generally define a penny stock to be an equity
security that has a market price of less than $5.00 per share or an exercise
price of less than $5.00 per share subject to certain exceptions. Exceptions
include equity securities issued by an issuer that has (i) net tangible assets
of at least $2,000,000, if such issuer has been in continuous operation for
more than three years, or (ii) net tangible assets of at least $5,000,000, if
such issuer has been in continuous operation for less than three years, or
(iii) average revenue of at least $6,000,000 for the preceding three years.
Unless an exception is available, the regulations require that prior to any transaction
involving a penny stock, a risk of disclosure schedule must be delivered to the
buyer explaining the penny stock market and its risks. Our Common Stock is
currently trading at under $5.00 per share. Although we currently fall under
one of the exceptions, if at a later time we fail to meet one of the
exceptions, our Common Stock will be considered a penny stock. As such the
market liquidity for the Common Stock will be limited to the ability of
broker-dealers to sell it in compliance with the above-mentioned disclosure
requirements.

| |                                                                                                                                                                     |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | You should be aware that, according to the SEC, the market for penny
 stocks has suffered in recent years from patterns of fraud and abuse. Such
 patterns include:
| |                                                                                                                                                                     |                                                                                                                                                                         
| |                                                                                                                                                                    | Control of the market for the security by one or a few
 broker-dealers;                                                                                                 
| |                                                                                                                                                                     |                                                                                                                                                                         
| |                                                                                                                                                                    | Boiler room practices involving high-pressure sales tactics;                                                                                                          
| |                                                                                                                                                                     |                                                                                                                                                                         
| |                                                                                                                                                                    | Manipulation of prices through prearranged matching of purchases and
 sales;                                                                                            
| |                                                                                                                                                                     |                                                                                                                                                                         
| |                                                                                                                                                                    | The release of misleading information;                                                                                                                                  
| |                                                                                                                                                                     |                                                                                                                                                                         
| |                                                                                                                                                                    | Excessive and undisclosed bid-ask differentials and markups by
 selling broker-dealers; and                                                                             
| |                                                                                                                                                                     |                                                                                                                                                                         
| |                                                                                                                                                                    | Dumping of securities by broker-dealers after prices have been
 manipulated to a desired level, which hurts the price of the stock and causes
 investors to suffer loss.

We are
aware of the abuses that have occurred in the penny stock market. Although we
do not expect to be in a position to dictate the behavior of the market or of
broker-dealers who participate in the market, we will strive within the
confines of practical limitations to prevent such abuses with respect to our
Common Stock.

Section 203 of the Delaware General
Corporation Law may deter a third party from acquiring us.

Section 203
of the Delaware General Corporation Law prohibits a merger with a 15%
shareholder within three years of the date such shareholder acquired 15%,
unless the merger meets one of several exceptions. The exceptions include, for
example, approval by two-thirds of the shareholders (not counting the 15%
shareholder), or approval by the Board prior to the 15% shareholder acquiring
its 15% ownership. This provision makes it difficult for a potential acquirer
to force a merger with or takeover of the Company, and could thus limit the
price that certain investors might be willing to pay in the future for shares
of our Common Stock.

6

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|         |                          
|-------- | -------------------------
|Item 1B. | Unresolved Staff Comments

We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this item.

|        |           
|------- | ----------
|Item 2. | Properties

Our
principal office occupies approximately 7,643 square feet and is located at
Room 1701, 17/F., Tower 1, Enterprise Square, 9 Sheung Yuet Road, Kowloon Bay,
Kowloon, Hong Kong. The lease is for five years, expiring November 30, 2014
with monthly lease payments of HK$90,000 (approximately US$11,538).

We own an
office unit of approximately 4,989 square feet, which is located at B24-B27,
1/F., Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon Bay,
Kowloon, Hong Kong, and which was acquired from Classic Electronic Limited, a
related party, on July 21, 2006 (see Item 13  Certain Relationships and
Related Transactions). Mr. Ben Wong, one of our directors, is also a director
of Classic Electronic Limited.

We lease a
warehouse unit of approximately 1,846 square feet, which is located at B14-15,
1/F., Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon Bay,
Kowloon, Hong Kong. The lease is for two years, expiring May 22, 2011 with
monthly lease payments of HK$15,691 (approximately US$2,012).

We lease a
warehouse unit of approximately 873 square feet, from Systematic Information
Limited, a related party, which is located at B9, 1/F., Block B, Proficient
Industrial Centre, 6 Wang Kwun Road, Kowloon Bay, Kowloon, Hong Kong. The lease
is for two years expiring on August 31, 2010, with monthly rental payments of
HK$5,000 (approximately US$641). Mr. Ben Wong, one of our directors, is also a
director of Systematic Information Limited.

We lease a
warehouse unit of approximately 968 square feet from Solution Semiconductor
(China) Limited (Solution), a related party, which is located at B10, 1/F.,
Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon Bay, Kowloon,
Hong Kong. The lease is on a month-to-month basis, with monthly rentals of
HK$8,500 (approximately US$1,090). Mr. Ben Wong, one of our directors, is also
a 99% shareholder of Solution.

We lease a
warehouse unit of approximately 1,070 square feet, which is located at B11,
1/F., Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon Bay,
Kowloon, Hong Kong. The lease is for two years expiring on June 30, 2011, with
monthly rentals of HK$10,000 (approximately US$1,282).

We lease an
office unit of approximately 2,682.9 square feet, which is located at Room
2208, 22/F., Building A, United Plaza, No.5022 Binhe Road, Futian Centre,
Shenzhen, China. The lease is for three years expiring on August 23, 2010 with
monthly lease payments of RMB20,122 (approximately US$2,719).

We
    own an investment property of approximately 3,000 square feet, which is located
    at No. 76, 5th Street, Hong Lok Yuen, Tai Po, New Territories, Hong Kong.
    The current lease is for two years expiring on August 31, 2011
with monthly lease income of HK$48,000 (approximately US$6,154).

We own a
property of approximately 3,000 square feet that is used for Mr. Yangs
personal residence and is located at No. 78, 5th Street, Hong Lok Yuen, Tai Po,
New Territories, Hong Kong.

We
    own an investment property of approximately 2,670 square feet, which is located
    at House 19, Casas Domingo, 8 Kam Ka Street, New Territories, Hong Kong with
2 parking lots namely No. 39 and No. 40 of the estate.

In the
event that the above facilities become unavailable, we believe that alternative
facilities could be obtained on a competitive basis.

|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

In the
ordinary course of business the Company may be subject to litigation from time
to time. There is no past, pending or, to the Companys knowledge, threatened
litigation or administrative action (including litigation or action involving
the Companys officers, directors or other key personnel) which in the
Companys opinion has, had, or is expected to have, a material adverse effect
upon its business, prospects, financial condition or operations.

|        |                       
|------- | ----------------------
|Item 4. | (Removed and Reserved)

7

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PART II

|        |                                                                                                              
|------- | -------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters
 and Issuer Purchases of Equity Securities

|                                     |  |      |      |     |   |      | 
|------------------------------------ |  | ---- | ---- | --- | - | ---- | 
|Quarters ended                       |  | High |      | Low |  
|                                     |  |      |      |     |  
|Quarter ended March 31, 2010         |  |      |      |     |   |      | 
|Quarter ended March 31, 2010         |  | $    | 0.70 |     | $ | 0.45 | 
|                                     |  |      |      |     |   |      | 
|Fiscal Year ended December 31, 2009: |  |      |      |     |   |      | 
|Quarter ended December 31, 2009      |  | $    | 0.96 |     | $ | 0.43 | 
|Quarter ended September 30, 2009     |  | $    | 1.01 |     | $ | 0.21 | 
|Quarter ended June 30, 2009          |  | $    | 0.24 |     | $ | 0.17 | 
|Quarter ended March 31, 2009         |  | $    | 0.28 |     | $ | 0.14 | 
|                                     |  |      |      |     |   |      | 
|Fiscal Year ended December 31, 2008: |  |      |      |     |   |      | 
|Quarter ended December 31, 2008      |  | $    | 0.40 |     | $ | 0.10 | 
|Quarter ended September 30, 2008     |  | $    | 0.40 |     | $ | 0.19 | 
|Quarter ended June 30, 2008          |  | $    | 0.28 |     | $ | 0.10 | 
|Quarter ended March 31, 2008         |  | $    | 0.15 |     | $ | 0.08 | 

Stock price
information has been derived from Yahoo Finance. Such quotations reflect
inter-dealer bids, without retail mark-up, mark-down or commissions, and may
not reflect actual transactions.

As of March
15, 2010, the last reported sale price of our Common Stock, as reported by the
OTC Bulletin Board, was $0.58 per share.

As of March
15, 2010, there were approximately 201 holders of record of our Common Stock.

Dividend Policy

Since our
recapitalization with Atlantic, effective September 30, 2003, we have never
paid cash dividends on our Common Stock. We currently anticipate that we will
retain all available funds for use in the operation and expansion of our
business, and do not anticipate paying any cash dividends in the foreseeable
future.

Equity Compensation
Plan Information

2006 STOCK OPTION PLAN

On March
31, 2006, the Board of Directors adopted the 2006 Equity Incentive Stock Plan
(the Plan) and the majority stockholder approved the Plan by written consent.
The purpose of the Plan is to provide additional incentive to employees,
directors and consultants and to promote the success of the Companys business.
The Plan permits the Company to grant both incentive stock options (Incentive
Stock Options or ISOs) within the meaning of Section 422 of the Internal
Revenue Code (the Code), and other options which do not qualify as Incentive
Stock Options (the Non- Qualified Options) and stock awards.

Unless
earlier terminated by the Board of Directors, the Plan (but not outstanding
options) terminates on March 31, 2016, after which no further awards may be
granted under the Plan. The Plan is administered by the full Board of Directors
or, at the Board of Directors discretion, by a committee of the Board of
Directors consisting of at least two persons who are disinterested persons
defined under Rule 16b-2(c)(ii) under the Securities Exchange Act of 1934, as
amended (the Committee).

Recipients
of options under the Plan (Optionees) are selected by the Board of Directors
or the Committee. The Board of Directors or Committee determines the terms of
each option grant, including (1) the purchase price of shares subject to
options, (2) the dates on which options become exercisable and (3) the
expiration date of each option (which may not exceed ten years from the date of
grant). The minimum per share purchase price of options granted under the Plan
for Incentive Stock Options and Non-Qualified Options is the fair market value
(as defined in the Plan) on the date the option is granted.

Optionees
will have no voting, dividend or other rights as stockholders with respect to
shares of Common Stock covered by options prior to becoming the holders of
record of such shares. The purchase price upon the exercise of options may be
paid in cash, by certified bank or cashiers check, by tendering stock held by
the Optionee, as well as by cashless exercise either through the surrender of
other shares subject to the option or through a broker. The total number of
shares of Common Stock available under the Plan, and the number of shares and
per share exercise price under outstanding options will be appropriately
adjusted in the event of any stock dividend, reorganization, merger or
recapitalization or similar corporate event.

8

---



The Board
of Directors may at any time terminate the Plan or from time to time make such
modifications or amendments to the Plan as it may deem advisable and the Board
of Directors or Committee may adjust, reduce, cancel and re-grant an
unexercised option if the fair market value declines below the exercise price
except as may be required by any national stock exchange or national market
association on which the Common Stock is then listed. In no event may the Board
of Directors, without the approval of stockholders, amend the Plan if required
by any federal, state, local or foreign laws or regulations or any stock
exchange or quotation system on which the Common Stock is listed or quoted and
the applicable laws of any other country or jurisdiction where options or stock
purchase rights are granted under the Plan.

Subject to
limitations set forth in the Plan, the terms of option agreements will be
determined by the Board of Directors or Committee, and need not be uniform
among Optionees.

As of December 31, 2009, there were no options outstanding
under the Plan.

|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this item.

|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial Condition and
 Results of Operations

This
Managements Discussion and Analysis of Financial Condition and Results of
Operations and other portions of this report contain forward-looking
information that involve risks and uncertainties. The Companys actual results
could differ materially from those anticipated by the forward-looking
information. Factors that may cause such differences include, but are not
limited to, availability and cost of financial resources, product demand,
market acceptance and other factors discussed in this report under the heading
Risk Factors. This Managements Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Companys
financial statements and the related notes included elsewhere in this report.

Overview

Corporate Background

We
are engaged primarily in the business of distribution of memory products under
the Samsung brand name which comprise DRAM, Graphic RAM and Flash for the
Hong Kong and Southern China markets.

As
of December 31, 2009, we had over 150 active customers in Hong Kong and
Southern China.

Depending
on the product specifications, pricing for the Samsung memory products range
from approximately $0.70 to $750. We sell our products in Hong Kong and
Southern China and do not anticipate selling our products outside of these
regions in the foreseeable future.

For
the years ended December 31, 2009 and 2008, the largest 5 customers accounted
for 70% and 62% of our net sales, respectively. As of December 31, 2009, we had
net current liabilities of $12,072,030 and accumulated earnings of $954,185.
    We generated net sales of $304,655,159 for the year ended December 31, 2009
    and recorded a net income of $2,922,483. In addition, during the year ended
December 31, 2009, net cash provided by operating activities amounted to
$7,865,309.

We
are in the mature stage of operations and, as a result, the relationships
between revenue, cost of revenue, and operating expenses reflected in the
financial information included in this document to a large extent represent
future expected financial relationships. Much of the cost of sales and
operating expenses reflected in our consolidated financial statements are
recurring costs in nature.

Plan of Operations

Our
business objectives are to offer updated market intelligence to Samsung in
connection with the Hong Kong and Southern China markets demand in memory
products and secure high-quality Samsung products in order to meet the market
demands of individual and corporate users in Hong Kong and Southern China. Each
quarter, we work closely with Samsung to present updated market information
collected from retail channels and corporate users to assist Samsung to plan
their production and allocation schedule six months in advance. Our business
strategy is to assist Samsung in implementing their production planning using
market intelligence to balance the supply and demand of memory products in the
Hong Kong and Southern China markets. Accordingly, we maintain and develop a
sales and market research team to answer marketing questions from Samsung on a
regular basis. In addition, our established distribution channels covering
retail outlets and major corporate users in the region allow those retail or
ultimate customers a secure stable supply of Samsungs memory products with
competitive prices. We are a non-exclusive distributor of Samsung, and enjoy a
minimum guaranteed gross profit margin range of approximately 1.5% to 2% of
products sold in form of sales rebate payable by Samsung.

9

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Net sales

Net sales
are recognized upon the transfer of legal title of the products to customers.
As of December 31, 2009 we had over 150 active customers.

Net sales
for fiscal year 2009 were $304,655,159, which increased by 45.4% or $95,098,233
compared to fiscal year 2008. The net sales for the quarter ended December 31,
2009 (2009 4th Quarter) was $90,357,166, representing an increase
of 56.8% compared to $57,613,777 for the quarter ended December 31, 2008 (2008
4th Quarter). The net sales increase was mostly due to limited supplies
as well as higher selling prices for memory products due to the increasing
demand. The increase in net sales also provided higher rebate income from
Samsung.

The
Companys gross profit for fiscal year 2009 was $8,478,982, representing a 103.4%
increase compared to $4,168,640 for fiscal year 2008. Gross profit margin for
fiscal year 2009 was improved from 2.0% for fiscal year 2008 to 2.8%. The
Company reported income before income taxes of $3,573,873, representing a
3,780,616 increase compared to $206,743 loss before income taxes for fiscal
year 2008. The results were mainly due to the increase in gross profit and
decrease in bank interest expense due to reduction on external financing from
banks

The Company
had recorded its net income of $2,922,483, representing a $3,095,355 increased
from net loss of $172,872 for fiscal year 2008. The amazing growth was due to
better market condition and supply shortage, which led to higher selling prices
compare to the fiscal year 2008. The gross profit for 2009 4th
Quarter was $653,721, as compared to $696,623 for 2008 4thQuarter,
representing a 6.2% decrease. The gross profit margin for the Company for 2009
4th Quarter was 0.7%, compared to 1.2% for the corresponding quarter
in 2008. The decrease in gross profit margin was mainly due to the increase of
cost of goods sold compare to the 2008 4thQuarter.

The Company
predicts that the supply shortage will continue in 2010, while the average
selling price and demand for memory components will be steady. The Company
believes its sales turnover and gross profit margin will continue to increase
in 2010 as the Company is expanding its business.

Cost of Sales

Cost of
revenues consists of costs of goods purchased from our principal supplier,
Samsung and purchases from other Samsung authorized distributors. Many factors
affect our gross margin, including, but not limited to, the volume of
production orders placed on behalf of our customers, the competitiveness of the
memory products industry and the availability of cheaper Samsung memory
products from overseas Samsung distributors due to regional demand and supply.
Nevertheless, our procurement operations are supported by Samsung, although
there is no written long-term supply agreement in place between us and Samsung.
Our cost of goods, as a percentage of total revenues, amounted to approximately
97.2% for the year ended December 31, 2009 and approximately 98.0% for the year
ended December 31, 2008.

Operating Expenses

Our operating
expenses for the years ended December 31, 2009 and 2008 were comprised of sales
and marketing, general and administrative expenses.

Selling and
marketing expenses consisted primarily of costs associated with transportation
and marketing activities.

General and
administrative expenses include all corporate and administrative functions that
serve to support our current and future operations and provide an
infrastructure to support future growth. Major items in this category include
management and staff salaries, rent/leases, professional services, and travel
and entertainment. We expect these expenses to remain at approximately the same
level in 2010. Sales and marketing costs are expected to fluctuate due to the
addition of sales personnel and various marketing activities planned throughout
the year.

Interest expense, including finance charges, relate primarily to our
short-term and long-term bank borrowings.

Critical Accounting Policies

The U.S.
Securities and Exchange Commission (SEC) recently issued Financial Reporting
Release No. 60, Cautionary Advice Regarding Disclosure About Critical Accounting
Policies (FRR 60), suggesting companies provide additional
disclosure and commentary on their most critical accounting policies. In FRR
60, the SEC defined the most critical accounting policies as the ones that are
most important to the portrayal of a companys financial condition and
operating results, and require management to make its most difficult and
subjective judgments, often as a result of the need to make estimates of
matters that are inherently uncertain. Based on this definition, our most
critical accounting policies include: inventory valuation, which affects cost
of sales and gross margin; policies for revenue recognition, and allowance for
doubtful accounts. The methods, estimates and judgments we use in applying
these most critical accounting policies have a significant impact on our
results we report in our consolidated financial statements.

Revenue Recognition

The Company
derives revenues from resale of computer memory products. The Company
recognizes revenue in accordance with the SEC Staff Accounting Bulletin No.
104, Revenue Recognition (SAB 104). Under SAB 104, revenue is recognized
when there is persuasive evidence of an arrangement, delivery has occurred or
services are rendered, the sales price is determinable, and

10

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collectability is reasonably assured. Revenue typically is recognized
at time of shipment. Sales are recorded net of discounts, rebates, and returns,
which historically were not material.

Inventory Valuation

Our policy
is to value inventories at the lower of cost or market on a part-by-part basis.
This policy requires us to make estimates regarding the market value of our
inventories, including an assessment of excess or obsolete inventories. We
determine excess and obsolete inventories based on an estimate of the future
demand for our products within a specified time horizon, generally 12 months.
The estimates we use for demand are also used for near-term capacity planning
and inventory purchasing and are consistent with our revenue forecasts. If our
demand forecast is greater than our actual demand we may be required to take
additional excess inventory charges, which will decrease gross margin and net
operating results in the future. In addition, as a result of the downturn in
demand for our products, we have excess capacity in our manufacturing
facilities. Currently, we are not capitalizing any inventory costs related to
this excess capacity as the recoverability of such costs is not certain. The
application of this policy adversely affects our gross margin.

Allowance for Doubtful Accounts

We maintain
an allowance for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments. Our allowance for
doubtful accounts is based on our assessment of the collectability of specific
customer accounts, the aging of accounts receivable, our history of bad debts,
and the general condition of the industry. If a major customers credit
worthiness deteriorates, or our customers actual defaults exceed our
historical experience, our estimates could change and impact our reported
results.

Results of Operations

The
following table sets forth audited consolidated statements of operations data
for the years ended December 31, 2009 and 2008 and should be read in
conjunction with Managements Discussion and Analysis of Financial Condition
and Results of Operations and our financial statements and the related notes
appearing elsewhere in this document.

|                                             |  |                                |              |   |                 |   |              |  
|-------------------------------------------- |  | ------------------------------ | ------------ | - | --------------- | - | ------------ | -
|                                             |  | Year Ended December 31,
 (US$) |             
|                                             |  | 2009                           |              |   | 2008
(Restated) |  
|                                             |  |                                |              |   |                 |  
|Net sales                                    |  | $                              | 304,655,159  |   |                 | $ | 209,556,926  |  
|Cost of
 sales                               |  |                                | (296,176,177 | ) |                 |   | (205,388,286 | )
|Gross profit                                 |  |                                | 8,478,982    |   |                 |   | 4,168,640    |  
|                                             |  |                                |              |   |                 |   |              |  
|Operating
 expenses:                         |  |                                |              |   |                 |   |              |  
|Sales and marketing                          |  |                                | (139,124     | ) |                 |   | (82,285      | )
|General and administrative                   |  |                                | (4,549,182   | ) |                 |   | (3,315,840   | )
|Total operating expenses                     |  |                                | (4,688,306   | ) |                 |   | (3,398,125   | )
|                                             |  |                                |              |   |                 |   |              |  
|Income from
 operations                      |  |                                | 3,790,676    |   |                 |   | 770,515      |  
|Other income
 (expenses)                     |  |                                | (216,803     | ) |                 |   | (977,258     | )
|Income
 (loss) before income taxes provision |  |                                | 3,573,873    |   |                 |   | (206,743     | )
|Income taxes (provision)
 reversal           |  |                                | (651,390     | ) |                 |   | 33,871       |  
|Net income
 (loss)                           |  |                                | 2,922,483    |   |                 |   | (172,872     | )

11

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Year Ended December 31, 2009 Compared to the
Year Ended December 31, 2008

Net Sales

| |                         |  |                  |  |          | 
| | ----------------------- |  | ---------------- |  | -------- | 
| | Year Ended December 31, |  |                  | 
| | 2009                    |  | 2008             |  | % Change | 
| |                         |  |                  |  |          | 
| |                         |  |                  |  |          | 
| | $    304,655,159        |  | $    209,556,926 |  | 45.4%    | 

Sales
increased by $95,098,233 or 45.4% from $209,556,926 for the year ended December
31, 2008 to $304,655,159 for the year ended December 31, 2009. The increase was
mainly due to increase in demand and prices in memory products market,
resulting in a higher turnover when compared to the year ended December 31,
2008.

Cost of Sales

| |                         |  |                  |  |          | 
| | ----------------------- |  | ---------------- |  | -------- | 
| | Year Ended December 31, |  |                  | 
| | 2009                    |  | 2008             |  | % Change | 
| |                         |  |                  |  |          | 
| |                         |  |                  |  |          | 
| | $    296,176,177        |  | $    205,388,286 |  | 44.2%    | 

Cost of
sales increased by $90,787,891 or 44.2%, from $205,388,286 for the year ended
December 31, 2008 to $296,176,177 for the year ended December 31, 2009. The
cost of sales increased in proportion to the increase of net sales and
reduction of rebate by Samsung.

Gross Profit

| |                         |  |                    |  |          | 
| | ----------------------- |  | ------------------ |  | -------- | 
| | Year Ended December 31, |  |                    | 
| | 2009                    |  | 2008               |  | % Change | 
| |                         |  |                    |  |          | 
| |                         |  |                    |  |          | 
| | $        8,478,982      |  | $        4,168,640 |  | 103.4%   | 

Gross
profit increased by $4,310,342 or 103.4% from $4,168,640 for the year ended
December 31, 2008 to $8,478,982 for the year ended December 31, 2009. The
increase in gross profit amount is mainly due to the increase in net sales. The
gross profit percentage increased to 2.8% of revenue for the year ended
December 31, 2009 compared to 2.0% of revenue for the year ended December 31,
2008, as a result of high selling prices caused by supply shortage. We expect
the gross profit for the year ended December 31, 2010 to remain at
approximately the same level as in the year ended December 31, 2009.

Sales and Marketing

| |                         |  |                      |  |          | 
| | ----------------------- |  | -------------------- |  | -------- | 
| | Year Ended December 31, |  |                      | 
| | 2009                    |  | 2008                 |  | % Change | 
| |                         |  |                      |  |          | 
| |                         |  |                      |  |          | 
| | $           139,124     |  | $             82,285 |  | 69.1%    | 

Sales and
marketing expenses increased by $56,839, or 69.1%, from $82,285 for the year
ended December 31, 2008 to $139,124 for the year ended December 31, 2009. The
increase was in proportion to the increase in net sales for fiscal year 2009.
We expect the sales and marketing expenses for the year ended December 31, 2010
to remain at approximately the same level as the year ended December 31, 2009.

General and Administrative

| |                         |  |                    |  |          | 
| | ----------------------- |  | ------------------ |  | -------- | 
| | Year Ended December 31, |  |                    | 
| | 2009                    |  | 2008               |  | % Change | 
| |                         |  |                    |  |          | 
| |                         |  |                    |  |          | 
| | $        4,549,182      |  | $        3,315,840 |  | 37.2%    | 

General and
administrative expenses increased by $1,233,342 or 37.2% from $3,315,840 for
the year ended December 31, 2008 to $4,549,182 for the year ended December 31,
2009. This increase was primarily attributable to an increase in professional
expenses and compensation paid to Company employees and executives during
fiscal year 2009. We intend to continue to keep general and administrative
expenses for the year ended December 31, 2010 at approximately the same level
as the year ended December 31, 2009.

12

---



Income from Operations

| |                         |  |                     |  |          | 
| | ----------------------- |  | ------------------- |  | -------- | 
| | Year Ended December 31, |  |                     | 
| | 2009                    |  | 2008                |  | % Change | 
| |                         |  |                     |  |          | 
| |                         |  |                     |  |          | 
| | $        3,790,676      |  | $           770,515 |  | 392.0%   | 

Income from
operations was $3,790,676 for the year ended December 31, 2009 compared to
$770,515 for the year ended December 31, 2008, an increase of $3,020,161. This
increase was mainly due to increase in gross profit and decrease of interest
expenses.

Interest Expense

| |                         |  |                    |  |          | 
| | ----------------------- |  | ------------------ |  | -------- | 
| | Year Ended December 31, |  |                    | 
| | 2009                    |  | 2008               |  | % Change | 
| |                         |  |                    |  |          | 
| |                         |  |                    |  |          | 
| | $          460,329      |  | $        1,073,798 |  | -57.1%   | 

Interest
expense decreased $613,469, or 57.1%, from interest expense of $1,073,798 in
the year ended December 31, 2008, to $460,329 in the year ended December 31,
2009. This decrease was mainly due to a decrease in the use of letters of
credit by the Company to obtain goods from suppliers. We expect to keep
interest expenses for the year ended December 31, 2010 at approximately the
same level as in the year ended December 31, 2009.

Loss on Dispositions of Marketable Securities

| |                         |  |                     |  |          | 
| | ----------------------- |  | ------------------- |  | -------- | 
| | Year Ended December 31, |  |                     | 
| | 2009                    |  | 2008                |  | % Change | 
| |                         |  |                     |  |          | 
| |                         |  |                     |  |          | 
| | $              
      - |  | $         (227,781) |  | N/A      | 

Loss on
disposal of marketable securities decreased by $227,781, from $227,781 in the
year ended December 31, 2008 to $0 in the year ended December 31, 2009. This
decrease was due to no trading of marketable securities during the year 2009.

Net Income on Cash Flow Hedge

| |                         |  |                     |  |          | 
| | ----------------------- |  | ------------------- |  | -------- | 
| | Year Ended December 31, |  |                     | 
| | 2009                    |  | 2008                |  | % Change | 
| |                         |  |                     |  |          | 
| |                         |  |                     |  |          | 
| | $             78,978    |  | $           161,288 |  | -51.0%   | 

Net income
on cash flow hedge decreased by $82,310 from $161,288 in the year ended
December 31, 2008 to $78,978 in the year ended December 31, 2009. This decrease
was due to the expiration or termination of several currency hedging contracts
in 2009.

Interest Income

| |                         |  |                      |  |          | 
| | ----------------------- |  | -------------------- |  | -------- | 
| | Year Ended December 31, |  |                      | 
| | 2009                    |  | 2008                 |  | % Change | 
| |                         |  |                      |  |          | 
| |                         |  |                      |  |          | 
| | $             38,576    |  | $             90,706 |  | -57.5%   | 

Interest
income decreased by $52,130 from $90,706 in the year ended December 31, 2008 to
$38,576 in the year ended December 31, 2009. This decrease was due to a
reduction in interest from restricted cash and lower interest rate.

Income Tax Provision (reversal)

| |                         |  |                      |  |          | 
| | ----------------------- |  | -------------------- |  | -------- | 
| | Year Ended December 31, |  |                      | 
| | 2009                    |  | 2008                 |  | % Change | 
| |                         |  |                      |  |          | 
| |                         |  |                      |  |          | 
| | $           651,390     |  | $           (33,871) |  | 2023.1%  | 

Income tax
provision increased by $685,261 from tax credit of $33,871 for the year ended
December 31, 2008 to tax provision of $651,390 for the year ended December 31,
2009. This increase was due to an increase in the estimated Hong Kong taxes
payable by Atlantic. The effective income tax rate is 18% for 2009 as compared to 0% for 2008.

13

---



Net Income

| |                         |  |                     |  |          | 
| | ----------------------- |  | ------------------- |  | -------- | 
| | Year Ended December 31, |  |                     | 
| | 2009                    |  | 2008                |  | % Change | 
| |                         |  |                     |  |          | 
| |                         |  |                     |  |          | 
| | $         2,922,483     |  | $         (172,872) |  | 1790.5%  | 

Our net
income increased by $3,095,355 from a loss $172,872 for the year ended December
31, 2008 compared to income of $2,922,483 for the year ended December 31, 2009.
This increase was mainly due to the increase in gross profit and decrease of
interest expenses.

Liquidity and capital resources

Our
principal sources of liquidity have been cash from operations, bank lines of
credit and credit terms from suppliers. Our principal uses of cash have been
for operations and working capital. We anticipate these uses will continue to
be our principal uses of cash in the future.

As
    of December 31, 2009, the Company had revolving lines of credit and loan
facilities in the aggregate amount of $16,900,393, of which $3,972,111 was
available for drawdown as short-term loans repayable within 90 days. Detailed
disclosures regarding our outstanding credit facilities are set forth in Notes
4 and 5 of the Notes to Consolidated Financial Statements, including the
amounts of the facilities, outstanding balances, interest rates, maturity
periods (for long term loans) and pledge of assets.

Our ability
to draw down under our various credit and loan facilities is, in each case,
subject to the ongoing willingness of the relevant lending institution to make
advances thereunder, and security coverage ratios as required from time to
time. No assurance can be given that we will continue to have access to these
or other lines of credit in the same amount or at all. During fiscal year 2009,
the Company terminated three credit lines with the banks in an aggregate amount
of $14,562,619 of the Companys total credit and loan facilities. In connection
therewith, $3,083,249 of restricted bank deposits which were previously used to
secure such lines of credit were released to the Company. As a result of the
general tightening of credit markets in Hong Kong and Asia, many lenders have
revised the terms of their revolving credit lines to levels the Company did not
deem commercially reasonable. Accordingly, on a case by case basis, the Company
has elected to terminate or not renew several of its credit facilities
resulting in a significant reduction in the Companys available short term
borrowings.

The Company
intends to continue to seek additional sources of available financing on
acceptable terms; however, there can be no assurance that the Company will be
able to obtain the necessary additional capital on a timely basis or on
acceptable terms, if at all. In addition, if the results are negatively
impacted and delayed as a result of political and economic factors beyond
managements control, our capital requirements may increase.

The
short-term borrowings from banks to finance the cash flow required to finance
the purchase of Samsung memory products from Samsung HK must be made a day in
advance of the release of goods from Samsung HKs warehouse before receiving
payments from customers upon physical delivery of such goods in Hong Kong
which, in most instances, take approximately two days from the date of such
delivery.

The
following factors, among others, could have a negative impact on the Companys
results of operations and financial position: the termination or change in
terms of the Distributorship Agreement; pricing pressures in the industry; a
continued downturn in the economy in general or in the memory products sector;
an unexpected decrease in demand for Samsungs memory products; the Companys
ability to attract new customers; an increase in competition in the memory
products market; and the ability of some of the Companys customers to obtain
financing.

Although we
believe the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. We are under no duty to update any of the forward-looking
statements after the date of this report to conform them to actual results or
to make changes in our expectations.

Net Cash Provided by Operating Activities

In the year
ended December 31, 2009, net cash provided by operating activities amounted to
$7,865,309 while in the year ended December 31, 2008, it amounted to
$2,181,184, an increase of $5,684,125. This increase was primarily due to a
$3,095,355 increase in operating income, a $1,716,781 decrease of accounts
receivable from related parties and $2,071,055 increase in accounts payable,
which was partially offset by a $2,642,167 increase in inventory.

Net Cash Used for Investing Activities

In
    the year ended December 31, 2009, net cash used for investing activities
    amounted to $696,233 while in the year ended December 31, 2008, it amounted
    to $2,527,948, a decrease of $1,831,715. This decrease was primarily due
    to a decrease of restricted cash and marketable securities and increase of
    purchases of property, automobiles and machinery, and amount due from Aristo
    / Mr. Yang in 2009.

14

---



Net Cash Provided by Financing Activities

In the year
ended December 31, 2009, net cash used for financing activities amounted to
$7,110,735 while net cash provided by financing activities in the year ended
December 31, 2008, amounted to $629,171, an increase of $7,739,906. This
decrease was due to the Company repayment of certain bank lines of credit and
cancellation of bank facilities in 2009.

Contractual Obligations

The
following table presents our contractual obligations as of December 31, 2009
over the next five years and thereafter:

|                                               |  |        |            |                    |   |            |  |            |         |                |   |         |  |   |           | 
|---------------------------------------------- |  | ------ | ---------- | ------------------ | - | ---------- |  | ---------- | ------- | -------------- | - | ------- |  | - | --------- | 
|Payments by Period                             | 
|                                               | 
|                                               |  | Amount |            | Less
 Than
 1 Year |   | 1-3
 Years |  | 4-5
 Years |         | After 5
 Years |  
|                                               |  |        |            |                    |   |            |  |            |         |                |  
|Operating Leases                               |  |        | 796,183    |                    |   | 220,362    |  |            | 168,705 |                |   | 141,731 |  |   | 265,385   | 
|Line of credit and notes payable 
 short-term |  |        | 9,013,813  |                    |   | 9,013,813  |  |            | ---     |                |   | ---     |  |   | ---       | 
|Short term loans                               |  |        | 162,244    |                    |   | 162,244    |  |            | ---     |                |   | ---     |  |   | ---       | 
|Long term loans                                |  |        | 3,522,915  |                    |   | 628,817    |  |            | 732,131 |                |   | 508,049 |  |   | 1,653,918 | 
|                                               |  |        |            |                    |   |            |  |            |         |                |   |         |  |   |           | 
|Total Contractual Obligations                  |  | $      | 13,495,155 |                    | $ | 10,025,236 |  | $          | 900,836 |                | $ | 649,780 |  | $ | 1,919,303 | 
|                                               |  |        |            |                    |   |            |  |            |         |                |   |         |  |   |           | 

Off-Balance Sheet Arrangements

None.

Related Party Transactions

We conduct
business with several affiliated companies. All the related party transactions
taking place during the reporting periods were conducted during the normal
course of business. The prices of products sold to or purchased from these
related entities are in the same price ranges as those offered to other
non-related customers or purchased from other vendors.

Dependence of Samsung

We are
highly dependent on the product supplies from Samsung. If the relationship with
Samsung is terminated, we may not be able to continue our business. We have been working on diversifying our product line and seeking new market opportunities.

Impact of Inflation

We believe
that our results of operations are not dependent upon moderate changes in
inflation rates as we expect to be able to pass along component price increases
to our customers.

Seasonality

We have not
experienced any material seasonality in sales fluctuations over the past 2
years in the memory products markets.

New Accounting Pronouncements

ASC 105, Generally Accepted Accounting Principles (ASC 105) (formerly Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles a replacement of FASB Statement No. 162) reorganized by topic existing accounting and reporting guidance issued by the Financial Accounting Standards Board (FASB) into a single source of
authoritative generally accepted accounting principles (GAAP) to be applied by nongovernmental entities. All guidance contained in the Accounting Standards Codification (ASC) carries an equal level of authority. Rules and
interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Accordingly, all other accounting literature will be deemed
non-authoritative. ASC 105 is effective on a prospective basis for financial statements issued for interim and annual periods ending after September 15, 2009. The Company has implemented the guidance included in ASC 105 as of July 1,
2009. The implementation of this guidance changed the Companys references to GAAP authoritative guidance but did not impact the Companys financial position or results of operations.

ASC 855, Subsequent Events (ASC 855) (formerly Statement of Financial Accounting Standards No. 165, Subsequent Events) includes guidance that was issued by the FASB in May 2009, and is
consistent with current auditing standards in defining a subsequent event. Additionally, the guidance provides for disclosure regarding the existence and timing of a companys evaluation of its subsequent events. ASC 855 defines two types of
subsequent events, recognized and non-recognized. Recognized subsequent events provide additional evidence about conditions that existed at the date of the balance sheet and are required to be reflected in the financial
statements. Non-recognized subsequent events provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date and, therefore; are not required to be reflected in the financial statements. However,
certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. This guidance was effective prospectively for interim or annual financial periods ending after June 15, 2009. The Company
implemented the guidance included in ASC 855 as of April 1, 2009. The effect of implementing this guidance was not material to the Companys financial position or results of operations.

ASC 944, Financial Services  Insurance (ASC 944) contains guidance that was previously issued by the FASB in May 2008 as Statement of Financial Accounting Standards No. 163,
Accounting for Financial Guarantee Insurance Contracts  an interpretation of FASB Statement No. 60 that provides for changes to both the recognition and measurement of premium revenues and claim liabilities for financial guarantee insurance
contracts that do not qualify as a derivative instrument in accordance with ASC 815, Derivatives and Hedging (formerly included under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities).
This financial guarantee insurance contract guidance also expands the disclosure requirements related to these contracts to include such items as a companys method of tracking insured financial obligations with credit deterioration, financial
information about the insured financial obligations, and managements policies for placing and monitoring the insured financial obligations. ASC 944, as it relates to financial guarantee insurance contracts, was effective for fiscal years beginning after December 15, 2008, except for certain disclosures related to the insured financial obligations, which were effective for the third quarter of 2008. The Company does not have financial guarantee insurance products,
and, accordingly, the implementation of this portion of ASC 944 did not have an effect on the Companys results of operations or financial position.

15

---



ASC 805, Business Combinations (ASC 805) (formerly included under Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations) contains guidance that was
issued by the FASB in December 2007. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with certain exceptions. Additionally, the
guidance requires changes to the accounting treatment of acquisition related items, including, among other items, transaction costs, contingent consideration, restructuring costs, indemnification assets and tax benefits. ASC 805 also provides for a
substantial number of new disclosure requirements. ASC 805 also contains guidance that was formerly issued as FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies which was
intended to provide additional guidance clarifying application issues regarding initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business
combination. ASC 805 was effective for business combinations initiated on or after the first annual reporting period beginning after December 15, 2008. The Company implemented this guidance effective January 1, 2009. Implementing this guidance did
not have an effect on the Companys financial position or results of operations; however it will likely have an impact on the Companys accounting for future business combinations, but the effect is dependent upon acquisitions, if any,
that are made in the future.

ASC 810, Consolidation (ASC 810) includes new guidance issued by the FASB in December 2007 governing the accounting for and reporting of noncontrolling interests (previously referred to as
minority interests). This guidance established reporting requirements which include, among other things, that noncontrolling interests be reflected as a separate component of equity, not as a liability. It also requires that the interests of the
parent and the noncontrolling interest be clearly identifiable. Additionally, increases and decreases in a parents ownership interest that leave control intact shall be reflected as equity transactions, rather than step acquisitions or
dilution gains or losses. This guidance also requires changes to the presentation of information in the financial statements and provides for additional disclosure requirements. ASC 810 was effective for fiscal years beginning on or after December
15, 2008. The Company implemented this guidance as of January 1, 2009. The Company is in the process of evaluating ASC 810 and will make necessary changes accordingly.

ASC 825, Financial Instruments (ASC 825) includes guidance which was issued in February 2007 by the FASB and was previously included under Statement of Financial Accounting Standards No.
159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115. The related sections within ASC 825 permit a company to choose, at specified election dates, to measure at fair value certain
eligible financial assets and liabilities that are not currently required to be measured at fair value. The specified election dates include, but are not limited to, the date when an entity first recognizes the item, when an entity enters into a
firm commitment or when changes in the financial instrument causes it to no longer qualify for fair value accounting under a different accounting standard. An entity may elect the fair value option for eligible items that exist at the effective
date. At that date, the difference between the carrying amounts and the fair values of eligible items for which the fair value option is elected should be recognized as a cumulative effect adjustment to the opening balance of retained earnings. The
fair value option may be elected for each entire financial instrument, but need not be applied to all similar instruments. Once the fair value option has been elected, it is irrevocable. Unrealized gains and losses on items for which the fair value
option has been elected will be reported in earnings. This guidance was effective as of the beginning of fiscal years that began after November 15, 2007. The Company does not have eligible financial assets and liabilities, and, accordingly, the
implementation of ASC 825 did not have an effect on the Companys results of operations or financial position.

ASC 820, Fair Value Measurements and Disclosures (ASC 820) (formerly included under Statement of Financial Accounting Standards No. 157, Fair Value Measurements) includes guidance that was
issued by the FASB in September 2006 that created a common definition of fair value to be used throughout generally accepted accounting principles. ASC 820 applies whenever other standards require or permit assets or liabilities to be measured at
fair value, with certain exceptions. This guidance established a hierarchy for determining fair value which emphasizes the use of observable market data whenever available. It also required expanded disclosures which include the extent to which
assets and liabilities are measured at fair value, the methods and assumptions used to measure fair value and the effect of fair value measures on earnings. ASC 820 also provides additional guidance for estimating fair value when the volume and
level of activity for the asset or liability have significantly decreased. The emphasis of ASC 820 is that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing
market participants, under current market conditions. ASC 820 also further clarifies the guidance to be considered when determining whether or not a transaction is orderly and clarifies the valuation of securities in markets that are not active.
This guidance includes information related to a companys use of judgment, in addition to market information, in certain circumstances to value assets which have inactive markets.

Fair value guidance in ASC 820 was initially effective for fiscal years beginning after November 15, 2007 and for interim periods within those fiscal years for financial assets and liabilities. The
effective date of ASC 820 for all non-recurring fair value measurements of nonfinancial assets and nonfinancial liabilities was fiscal years beginning after November 15, 2008. Guidance related to fair value measurements in an inactive market was
effective in October 2008 and guidance related to orderly transactions under current market conditions was effective for interim and annual reporting periods ending after June 15, 2009.

16

---



The Company applied the provisions of ASC 820 to its financial assets and liabilities upon adoption at January 1, 2008 and adopted the remaining provisions relating to certain nonfinancial assets and
liabilities on January 1, 2009. The difference between the carrying amounts and fair values of those financial instruments held upon initial adoption, on January 1, 2008, was recognized as a cumulative effect adjustment to the opening balance of
retained earnings and was not material to the Companys financial position or results of operations. The Company implemented the guidance related to orderly transactions under current market conditions as of April 1, 2009, which also was not
material to the Companys financial position or results of operations.

In August 2009, the FASB issued ASC Update No. 2009-05, Fair Value Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value (ASC Update No. 2009-05). This update
amends ASC 820, Fair Value Measurements and Disclosures and provides further guidance on measuring the fair value of a liability. The guidance establishes the types of valuation techniques to be used to value a liability when a quoted market price
in an active market for the identical liability is not available, such as the use of an identical or similar liability when traded as an asset. The guidance also further clarifies that a quoted price in an active market for the identical liability
at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are both Level 1 fair value measurements. If adjustments are
required to be applied to the quoted price, it results in a level 2 or 3 fair value measurement. The guidance provided in the update is effective for the first reporting period (including interim periods) beginning after issuance. The Company does
not expect that the implementation of ASC Update No. 2009-05 will have a material effect on its financial position or results of operations.

In September 2009, the FASB issued ASC Update No. 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities that Calculate Net Asset Value per Share (or Its
Equivalent) (ASC Update No. 2009-12). This update sets forth guidance on using the net asset value per share provided by an investee to estimate the fair value of an alternative investment. Specifically, the update permits a reporting
entity to measure the fair value of this type of investment on the basis of the net asset value per share of the investment (or its equivalent) if all or substantially all of the underlying investments used in the calculation of the net asset value
is consistent with ASC 820. The update also requires additional disclosures by each major category of investment, including, but not limited to, fair value of underlying investments in the major category, significant investment strategies,
redemption restrictions, and unfunded commitments related to investments in the major category. The amendments in this update are effective for interim and annual periods ending after December 15, 2009 with early application permitted. The Company
does not expect that the implementation of ASC Update No. 2009-12 will have a material effect on its financial position or results of operations.

In June 2009, FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (Statement No. 167). Statement No. 167 amends FASB Interpretation
No. 46R, Consolidation of Variable Interest Entities an interpretation of ARB No. 51 (FIN 46R) to require an analysis to determine whether a company has a controlling financial interest in a variable interest entity. This analysis
identifies the primary beneficiary of a variable interest entity as the enterprise that has a) the power to direct the activities of a variable interest entity that most significantly impact the entitys economic performance and b) the
obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. The statement
requires an ongoing assessment of whether a company is the primary beneficiary of a variable interest entity when the holders of the entity, as a group, lose power, through voting or similar rights, to direct the actions that most significantly
affect the entitys economic performance. This statement also enhances disclosures about a companys involvement in variable interest entities. Statement No. 167 is effective as of the beginning of the first annual reporting period that
begins after November 15, 2009. Although Statement No. 167 has not been incorporated into the Codification, in accordance with ASC 105, the standard shall remain authoritative until it is integrated. The Company is in the process of evaluating
Statement No. 167 and will make necessary changes if required.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140 (Statement No. 166).
Statement No. 166 revises FASB Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Extinguishment of Liabilities a replacement of FASB Statement 125 (Statement No. 140) and requires additional disclosures
about transfers of financial assets, including securitization transactions, and any continuing exposure to the risks related to transferred financial assets. It also eliminates the concept of a qualifying special-purpose entity, changes
the requirements for derecognizing financial assets, and enhances disclosure requirements. Statement No. 166 is effective prospectively, for annual periods beginning after November 15, 2009, and interim and annual periods thereafter. Although
Statement No. 166 has not been incorporated into the Codification, in accordance with ASC 105, the standard shall remain authoritative until it is integrated. The Company does not expect the adoption of Statement No. 166 will have a material impact
on its financial position or results of operations.

|         |                                                           
|-------- | ----------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market Risk

We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this item.

|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

Attached
hereto and filed as a part of this Annual Report on Form 10-K are our
Consolidated Financial Statements, beginning on page F-1.

|Item 9. | Changes in and Disagreements with Accountants on Accounting and
 Financial Disclosure
|------- | -------------------------------------------------------------------------------------

None.

17

---



|          |                        
|--------- | -----------------------
|Item 9AT. | Controls and Procedures

We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed by us in reports that we file or submit
under the Securities Exchange Act of 1934, as amended (the Exchange Act), is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission (SEC) rules and forms, and that such
information is accumulated and communicated to our management, including our
Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as
appropriate, to allow timely decisions regarding required disclosure.

Management Report on
Internal Control over Financial Reporting

In
connection with the preparation of this Form 10-K, we carried out an evaluation
under the supervision and with the participation of our management, including
the CEO and CFO, of the effectiveness of the design and operation of our
disclosure controls and procedures, as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act. This evaluation was retrospective and conducted as of
December 31, 2009, the last day of the fiscal year covered by this Form 10-K.
Based upon that evaluation, our CEO and CFO have concluded that our disclosure
controls and procedures were not effective as of December 31, 2009 because we
have not completed the remediation discussed elsewhere in this Item 9AT of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Our
management has concluded that there are material weaknesses in our internal
controls over financial reporting. These weaknesses include:

Company-level
controls.We
did not maintain effective company-level controls as defined in the Internal ControlIntegrated
Framework published by COSO. These deficiencies related to each of the five
components of internal control as defined by COSO (control environment, risk
assessment, control activities, information and communication, and monitoring).
These deficiencies resulted in more than a remote likelihood that a material
misstatement of our annual or interim financial statements would not be
prevented or detected. Specifically,

|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our control environment did
 not sufficiently promote effective internal control over financial reporting
 throughout our organizational structure, and this material weakness was a
 contributing factor to the other material weaknesses described in this Item
 9AT;                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                 
| | Our board of directors has not
 established adequate financial reporting monitoring activities to mitigate
 the risk of management override, specifically:                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                 | none of our board of directors
 is independent;                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                 | no financial expert on our
 board of directors has been designated;                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                 | no formally documented
 financial analysis is presented to our board of directors, specifically
 fluctuation, variance, trend analysis or business performance reviews;
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                 | an effective whistleblower
 program has not been established;                                                                                                          
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                 | there is insufficient
 oversight of external audit specifically related to fees, scope of
 activities, executive sessions, and monitoring of results;                  
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                 | there is insufficient
 oversight of accounting principle implementation;                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                 | there is insufficient review
 of related party transactions; and                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                 | there is insufficient review
 of recording of stock transactions.                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
| | We have not maintained
 sufficient competent evidence to support the effective operation of our
 internal controls over financial reporting, specifically related to our board
 of directors oversight of quarterly and annual SEC filings; and managements
 review of SEC filings, journal entries, account analyses and reconciliations,
 and critical spreadsheet controls;
|  |                                                                                                                                                                                                                                                                                                                                                                                 
| | We had inadequate risk
 assessment controls, including inadequate mechanisms for anticipating and
 identifying financial reporting risks; and for reacting to changes in the
 operating environment that could have a material effect on financial
 reporting;                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
| | There was inadequate
 communication from management to employees regarding the general importance
 of controls and employees duties and control responsibilities;                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                 
| | We had inadequate monitoring
 controls, including inadequate staffing and procedures to ensure periodic
 evaluations of internal controls to ensure that appropriate personnel
 regularly obtain evidence that controls are functioning effectively and that
 identified control deficiencies are remediated timely;                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                        
| | We had an inadequate number of
 trained finance and accounting personnel with appropriate expertise in U.S.
 generally accepted accounting principles. Accordingly, in certain
 circumstances, an effective secondary review of technical accounting matters
 was not performed;                                                                                                

18

---



|  |                                                                                                                                                                                                                                                                                                                                                                       
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We had inadequate controls
 over our management information systems related to program changes,
 segregation of duties, and access controls;                                                                                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                                                                                                       
| | We had inadequate access and
 change controls over end-user computing spreadsheets. Specifically, our
 controls over the completeness, accuracy, validity and restricted access and
 review of certain spreadsheets used in the period-end financial statement
 preparation and reporting process were not designed appropriately or did not
 operate as designed; and
|  |                                                                                                                                                                                                                                                                                                                                                                       
| | We were unable to assess effectiveness of our internal control over
 financial reporting in a timely matter.                                                                                                                                                                                                                                                          

Financial
statement preparation and review procedures.We had inadequate policies,
procedures and personnel to ensure that accurate, reliable interim and annual
consolidated financial statements were prepared and reviewed on a timely basis.
Specifically, we had insufficient: a) levels of supporting documentation; b)
review and supervision within the accounting and finance departments; c)
preparation and review of footnote disclosures accompanying our financial
statements; and d) technical accounting resources. These deficiencies resulted
in errors in the financial statements and more than a remote likelihood that
a material misstatement of our annual or interim financial statements would not
be prevented or detected.  In addition, as discussed in Note 2 in Notes to the
Consolidated Financial Statements of this Form 10-K, we recently determined that
Aristo Technologies Limited (Aristo),
a related party, is a variable interest entity under FASB ASC 810-10-25. Consequently,
we are consolidating the financial statements of Aristo with those of the Company
for the period effective and are restating our previously filed annual and interim
financial statements in amended Form 10-Ks for years ended 2007 and 2008 to reflect
the disclosure in accordance with ASC 810-10-25.

Inadequate
reviews of account reconciliations, analyses and journal entries.We had inadequate review procedures over
account reconciliations, account and transaction analyses, and journal entries.
Specifically, deficiencies were noted in the following areas: a) management
review of supporting documentation, calculations and assumptions used to
prepare the financial statements, including spreadsheets and account analyses;
and b) management review of journal entries recorded during the financial
statement preparation process. These deficiencies resulted in a more than a
remote likelihood that a material misstatement of our annual or interim
financial statements would not be prevented or detected.

Inadequate
controls over purchases and disbursements.We had inadequate controls over the
segregation of duties and authorization of purchases, and the disbursement of
funds. These weaknesses increase the likelihood that misappropriation of assets
and/or unauthorized purchases and disbursements could occur and not be detected
in a timely manner. These deficiencies resulted in errors in the financial
statements and in more than a remote likelihood that a material misstatement of
our annual or interim financial statements would not be prevented or detected.
Specifically,

|  |                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We had inadequate procedures
 and controls to ensure proper segregation of duties within our purchasing and
 disbursements processes and accounting systems;
|  |                                                                                                                                                             
| | We had inadequate procedures
 and controls to ensure proper authorization of purchase orders; and                                                           
|  |                                                                                                                                                             
| | We had inadequate approvals
 for payment of invoices and wire transfers.                                                                                    

This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to
provide only managements report in this annual report.

As
of December 31, 2009, we had not completed the remediation of any of these
material weaknesses.

We
are addressing the outstanding material weaknesses described above, as well as
our control environment. We also expect to undertake the following remediation
efforts:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We plan to evaluate the
 composition of our board of directors and to determine whether to add
 independent directors or to replace an inside director with an independent
 director, in both cases, in order to have a majority of our board of
 directors become independent;                                                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | We plan on drafting quarterly
 financial statement variance analysis of actual versus budget with relevant
 explanations of variances for distribution to our board of directors.                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | We are in the process of
 developing, documenting, and communicating a formal whistleblower program to
 employees. We expect to post the policy on the Company web site in the
 governance section and in the common areas in the office. We plan on
 providing a toll free number for reporting complaints and will hire a
 specific third party whistleblower company to monitor the hotline and provide
 monthly reports of activity to our board of directors.       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Management intends to continue
 to provide SEC and US GAAP training for employees and retain external
 consultants with appropriate SEC and US GAAP expertise to assist in financial
 statement review, account analysis review, review and filing of SEC reports,
 policy and procedure compilation assistance, and other related advisory services.                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | We intend on developing an
 internal control over financial reporting evidence policy and procedures
 which contemplates, among other items, a listing of all identified key
 internal controls over financial reporting, assignment of responsibility to
 process owners within the Company, communication of such listing to all
 applicable personnel, and specific policies and procedures around the nature
 and retention of evidence of the operation of controls.

19

---



|  |                                                                                                                                                                                                                                                                              
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We intend on undertaking a
 restricted access review to analyze all financial modules and the list of
 persons authorized to have edit access to each. We will remove or add
 authorized personnel as appropriate to mitigate the risks of management or
 other override; and
|  |                                                                                                                                                                                                                                                                              
| | We plan to re-assign roles and
 responsibilities in order to improve segregation of duties.                                                                                                                                                                                  

These
specific actions are part of an overall program that we are currently
developing in an effort to remediate the material weaknesses described above.

Attached
as exhibits to this report are certifications of our CEO and CFO, which are
required in accordance with Rule 13a-14 of Securities Exchange Act of 1934, as
amended. The discussion above in this Item 9AT includes information concerning
the controls and controls evaluation referred to in the certifications and
those certifications should be read in conjunction with this Item 9AT for a
more complete understanding of the topics presented.

We
are committed to improving our internal control processes and will continue to
diligently review our internal control over financial reporting and our
disclosure controls and procedures. The failure to implement adequate controls
may result in deficient and inaccurate reports under the Exchange Act.

Changes in Internal Control over Financial
Reporting

Except as
described above, there have been no changes in our internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fourth quarter ended December 31, 2009 that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

|         |                  
|-------- | -----------------
|ITEM 9B. | Other Information

None.

PART III

|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

Our directors
and executive officers, as of December 31, 2009, and their biographical
information are set forth below:

|                      |  |     |  |                                                                
|--------------------- |  | --- |  | ---------------------------------------------------------------
|NAME                  |  | AGE |  | POSITION                                                       
|                      |  |     |  |                                                                
|Chung-Lun
 Yang       |  | 48  |  | Chairman of
 the Board of Directors and Chief Executive Officer
|Ben Wong              |  | 46  |  | Director                                                       
|Kenneth
 Lap-Yin Chan |  | 47  |  | Chief
 Financial Officer                                       

Chung-Lun Yang, Chairman of the Board and
Chief Executive Officer. Mr. Yang became a Director on September 30, 2003. Mr.
Yang is the founder of Atlantic and has been a director of Atlantic since 1991.
Mr. Yang graduated from The Hong Kong Polytechnic in 1982 with a degree in
electronic engineering. From October 1982 until April 1985, he was the sales
engineer of Karin Electronics Supplies Ltd. From June 1986 until September
1991, he was Director of Sales (Samsung Components Distribution) of Evertech
Holdings Limited, a Hong Kong based company. Mr. Yang has over 15 years
extensive experience in the electronics distribution business. The breadth of Mr. Yangs sales and operational experience led the Board of Directors to believe this individual is qualified to serve as a director of the Company. Mr. Yang is also
a member of The Institution of Electrical Engineers, United Kingdom.

Ben Wong, Director. Mr. Wong became a
Director on September 30, 2003. Since 1992, Mr. Wong has been the
vice-president of Atlantic and is responsible for the purchasing, sales and
marketing of Atlantics products. The breadth of Mr. Wong sales experience led the Board of Directors to believe this individual is qualified to serve as a director of the Company. Mr. Wong graduated from the Chinese Culture
University of Taiwan in 1986 with a Bachelors Degree of Science in Mechanical
Engineering.

Kenneth Lap-Yin Chan, Chief Financial
Officer. Mr. Chan was appointed our Chief Financial Officer effective September
30, 2003. Mr. Chan has been with Atlantic since 2001 serving as Financial
Controller. From 1998 to 2001, Mr. Chan worked for Standard Chartered Bank.
Prior to September 2001, Mr. Chan worked for a number of other banks in Hong Kong,
including Dao Heng Bank and Asia Commercial Bank. He has more than 12 years of
experience in corporate and commercial finance. Mr. Chan graduated from the
University of Toronto in 1986 with a Bachelors Degree in Commerce.

Each
director holds office (subject to our By-Laws) until the next annual meeting of
shareholders and until such directors successor has been elected and
qualified. All of our executive officers are serving until the next annual
meeting of directors and until their successors have been duly elected and
qualified. There are no family relationships between any of our directors and
executive officers.

There have
been no events under any bankruptcy act, no criminal proceedings and no
judgments, orders or decrees material to the evaluation of the ability and
integrity of any director or executive officer of the Company during the past
five years.

20

---



Board Meetings

During the
fiscal year ended December 31, 2009, our Board of Directors held 10 meetings.
No director who served during the fiscal year ended December 31, 2009 attended
fewer than 75% of the meetings of the Board of Directors during that year.

Committees of the Board

Our Board
of Directors does not have a separate Compensation Committee, Audit Committee
or Nominating Committee. All of the members of our Board of Directors are
acting as our audit committee. None of the members of our Board of Directors is
deemed an audit committee financial expert. We are in the process of recruiting
an appropriate candidate to be our audit committee financial expert. Our Board
of Directors plans to expand the number of members on the board and create an
independent Compensation Committee, Audit Committee and a Nominating Committee.

Board Leadership Structure and Risk Oversight Role

Our Chief Executive Officer also serves as Chairman of our Board of Directors and we do not presently maintain a Lead Independent Director. We believe that such a leadership structure is
suitable for the Company at its present stage of development, and that the interests of the Company are best served by the combination of the roles of Chairman of the Board and Chief Executive Officer.

As a matter of regular practice, and as part of its oversight function, our Board of Directors undertakes a review of the significant risks in respect of our business. Such review is supplemented as
necessary by outside professionals with expertise in substantive areas germane to our business. With our current governance structure, our Board of Directors and senior executives are the same individuals, and consequently, there is not a
significant division of oversight and operational responsibilities in managing the material risks facing the Company.

Code of Business Conduct and Ethics

We have
adopted a written code of business conduct and ethics, known as our Code of
Business Conduct and Ethics which applies to all of our directors, officers,
and employees, including our principal executive officer and our principal
financial and accounting officer. A copy of the Code of Business Conduct and
Ethics is attached as Exhibit 14 to the Annual Report on Form 10-K for the
period ended December 31, 2003. To receive a copy of our Code of Business
Conduct and Ethics, at no cost, requests should be directed to the Secretary,
ACL Semiconductor, Inc., Room 1701, 17/F., Tower 1, Enterprise Square, 9 Sheung
Yuet Road, Kowloon Bay, Kowloon, Hong Kong. We intend to disclose any amendment
to, or waiver of, a provision of the Code of Business Conduct and Ethics in a
report filed under the Securities Exchange Act of 1934, as amended, within four
business days of the amendment or waiver.

Stockholder Communications

Stockholders
and other interested parties may contact the Board of Directors or the
non-management directors as a group at the following address: Board of
Directors or Outside Directors, ACL Semiconductor, Inc., Room 1701, 17/F.,
Tower 1, Enterprise Square, 9 Sheung Yuet Road, Kowloon Bay, Kowloon, Hong
Kong. All communications received at the above address will be relayed to the
Board of Directors or the non-management directors, respectively.
Communications regarding accounting, internal accounting controls or auditing
matters may also be reported to the Board of Directors using the above address.

Typically,
we do not forward to our directors communications from our stockholders or
other communications which are of a personal nature or not related to the
duties and responsibilities of the Board, including:

|  |                                         
|- | ----------------------------------------
| | Junk mail and mass mailings             
|  |                                         
| | New product suggestions                 
|  |                                         
| | Resumes and other forms of job inquiries
|  |                                         
| | Opinion surveys and polls               
|  |                                         
| | Business solicitations or advertisements

Compliance with Section 16(A) of The
Securities Exchange Act of 1934

Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors and executive officers and persons who own more than ten percent of a
registered class of our equity securities (collectively, Reporting Person) to
file with the SEC initial reports of ownership and reports of changes in
ownership of our Common Stock and other equity securities of the Company.
Reporting Persons are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms that they file. To our knowledge, based
solely on a review of the copies of such reports furnished to us, we believe
that during fiscal year ended December 31, 2009 all Reporting Persons complied
with all applicable filing requirements.

|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

Summary

Our
approach to executive compensation is influenced by our belief in rewarding
people for consistently strong execution and performance. We believe that the
ability to attract and retain qualified executive officers and other key
employees is essential to our long term success.

Our plan to
obtain and retain highly skilled employees is to provide significant market
competitive salaries and also incentive awards. Our approach is to link
individual employee objectives with overall company strategies and results, and
to reward executive officers and significant employees for their individual
contributions to those strategies and results. We use compensation and
performance data from comparable companies in the electronics distribution
industry to establish market competitive compensation and performance standards
for our employees. Furthermore, we believe that equity awards serve to align
the interests of our executives with those of our stockholders. As such, we
intend for equity to become a key component of our compensation program.

21

---



Named Executive Officers

The named
executive officers for the fiscal year ended December 31, 2009 are Chung-Lun
Yang, our Chief Executive Officer, and Kenneth Lap-Yin Chan, our Chief
Financial Officer. These individuals are referred to collectively in this
Annual Report on Form 10-K as the Named Executive Officers.

OUR EXECUTIVE COMPENSATION PROGRAM

Overview

The primary
elements of our executive compensation program are base salary, incentive cash
and stock bonus opportunities and equity incentives typically in the form of
stock option grants. Although we provide other types of compensation, these
three elements are the principal means by which we provide the Named Executive
Officers with compensation opportunities.

The
emphasis on the annual bonus opportunity and equity compensation components of
the executive compensation program reflect our belief that a large portion of
an executives compensation should be performance-based. This compensation is
performance-based because payment is tied to the achievement of corporate
performance goals. To the extent that performance goals are not achieved,
executives will receive a lesser amount of total compensation. We have entered
into employment agreements with three of our Named Executive Officers. Such
employment agreements set forth base salaries, bonuses and stock option grants.
Such stock option grants are predicated on our achievement of corporate
performance goals as set forth in such agreements.

ELEMENTS OF OUR EXECUTIVE COMPENSATION
PROGRAM

Base Salary

We pay a
base salary to certain of the Named Executive Officers. In general, base
salaries for the Named Executive Officers are determined by evaluating the
responsibilities of the executives position, the executives experience and
the competitive marketplace. Base salary adjustments are considered and take
into account changes in the executives responsibilities, the executives
performance and changes in the competitive marketplace. We believe that the
base salaries of the Named Executive Officers are appropriate within the
context of the compensation elements provided to the executives and because they
are at a level which remains competitive in the marketplace.

Bonuses

The Board
of Directors may authorize us to give discretionary bonuses, payable in cash or
shares of Common Stock, to the Named Executive Officers and other key
employees. Such bonuses are designed to motivate the Named Executive Officers
and other employees to achieve specified corporate, business unit and/or
individual, strategic, operational and other performance objectives.

Stock Options

Stock
options constitute performance-based compensation because they have value to
the recipient only if the price of our Common Stock increases. We have not granted any stock
options to any of our Named Executive Officers and the grant of stock
options to Named Executive Officers is not a material factor in making
compensation determinations with respect to our Named Executive Officers. However, we have in the past used stock options as
incentives for our other employees. Stock options generally vest over
time, obtainment of a corporate goal or a combination. The grant of stock
options is designed to motivate our employees to achieve our short term and
long term corporate goals.

Retirement and Deferred Compensation Benefits

We do not
have any arrangements with the Named Executive Officers to provide them with
retirement and/or deferred compensation benefits.

Perquisites

There were
no perquisites provided to the Named Executive Officers.

Post-Termination/Change of Control
Compensation

We do not
have any arrangements with the Named Executive Officers to provide them with
compensation following termination of employment.

Tax Implications of Executive Compensation

Our
aggregate deductions for each Named Executive Officer compensation are
potentially limited by Section 162(m) of the Internal Revenue Code to the
extent the aggregate amount paid to an executive officer exceeds $1 million,
unless it is paid under a predetermined objective performance plan meeting
certain requirements, or satisfies one of various other exceptions specified in
the Internal Revenue Code. At our 2009 Named Executive Officer compensation
levels, we did not believe that Section 162(m) of the Internal Revenue Code
would be applicable, and accordingly, we did not consider its impact in determining
compensation levels for our Named Executive Officers in 2009.

Hedging Policy

We do not
permit the Named Executive Officers to hedge ownership by engaging in short
sales or trading in any options contracts involving our securities.

22

---



Option Exercises and Stock Vested

No options
have been exercised by our Named Executive Officers during the fiscal year
ended December 31, 2009.

Pension Benefits

Under the
Mandatory Provident Fund (MPF) Scheme Ordinance in Hong Kong, the Company is
required to set up or participate in an MPF scheme to which both the Company
and employees must make continuous contributions throughout their employment
based on 5% of the employees earnings, subject to maximum and minimum level of
income. For those earning less than the minimum level of income, they are not
required to contribute but may elect to do so. However, regardless of the
employees election, their employers must contribute 5% of the employees
income. Contributions in excess of the maximum level of income are voluntary.
All contributions to the MPF scheme are fully and immediately vested with the
employees accounts. The contributions must be invested and accumulated until
the employees retirement.

Nonqualified Deferred Compensation

We do not
have any defined contribution or other plan that provides for the deferral of
compensation on a basis that is not tax-qualified.

Employment Agreements

We have not
entered into any employment agreements with any of our Named Executive
Officers.

Executive Officer Compensation

The
following table sets forth the annual and long-term compensation of our Named
Executive Officers for services in all capacities to the Company for the last
two fiscal years ended December 31, 2009 and December 31, 2008.

Summary Compensation Table

|                                                      |  |      |  |        |           |       |  |               |  |                |    |                                          |  |                                                                               |  |                         |    |       |  |    |  |   |    |  |   |           | 
|----------------------------------------------------- |  | ---- |  | ------ | --------- | ----- |  | ------------- |  | -------------- | -- | ---------------------------------------- |  | ----------------------------------------------------------------------------- |  | ----------------------- | -- | ----- |  | -- |  | - | -- |  | - | --------- | 
|Name and
 Principal Position                          |  | Year |  | Salary |           | Bonus |  | Stock
 Awards |  | Option
 Awards |    | Non-Equity
 Incentive Plan
 Compensation |  | Change in
 Pension Value
 and
 Nonqualified
 Deferred
 Compensation
 Earnings |  | All Other
 Compensation |    | Total | 
|                                                      |  |      |  | ($)    |           | ($)   |  | ($)           |  | ($)            |    | ($)                                      |  | ($)                                                                           |  | ($)                     |    | ($)   | 
|                                                      |  |      |  |        |           |       |  |               |  |                |    |                                          |  |                                                                               |  |                         |    |       | 
|Chung-Lun Yang,                                       |  | 2009 |  | $      | 1,300,000 |       |  | --            |  |                | -- |                                          |  | --                                                                            |  |                         | -- |       |  | -- |  |   | -- |  | $ | 1,300,000 | 
|Chief
 Executive
 Officer and
 Chairman of the
 Board |  | 2008 |  | $      | 735,026   |       |  | --            |  |                | -- |                                          |  | --                                                                            |  |                         | -- |       |  | -- |  | $ | -- |  | $ | 735,026   | 
|                                                      |  |      |  |        |           |       |  |               |  |                |    |                                          |  |                                                                               |  |                         |    |       |  |    |  |   |    |  |   |           | 
|Kenneth Lap Yin                                       |  | 2009 |  | $      | 87,051    |       |  | --            |  |                | -- |                                          |  | --                                                                            |  |                         | -- |       |  | -- |  |   | -- |  | $ | 87,051    | 
|Chan,
 Chief
 Financial Officer                       |  | 2008 |  | $      | 64,615    |       |  | --            |  |                | -- |                                          |  | --                                                                            |  |                         | -- |       |  | -- |  |   | -- |  | $ | 64,615    | 

Outstanding equity awards at fiscal year-end

None.

Compensation of Directors

Except
with respect to Ben Wong who was paid fees of $85,128 during the year ended
December 31, 2009 for his role as Sales Director of Atlantic, none of our directors
    who served during the year ended December 31, 2009 received compensation
    for serving as such, other than reimbursement for out of pocket expenses
incurred in attending director meetings.

23

---



|         |                                                                                                
|-------- | -----------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and Management and
 Related Stockholder Matters

The
following table sets forth certain information regarding beneficial ownership
of our Common Stock as of December 31, 2009: (i) by each person who is known by
us to own beneficially more than 5% of the Common Stock, (ii) by each of our
directors, (iii) by each of our executive officers and (iv) by all our
directors and executive officers as a group. On such date, we had 28,729,936
shares of Common Stock outstanding.

As
used in the table below, the term beneficial ownership with respect to a
security consists of sole or shared voting power, including the power to vote
or direct the vote, and/or sole or shared investment power, including the power
to dispose or direct the disposition, with respect to the security through any
contract, arrangement, understanding, relationship, or otherwise, including a
right to acquire such power(s) during the 60 days immediately following
December 31, 2009. Except as otherwise indicated, the stockholders listed in
the table have sole voting and investment powers with respect to the shares
indicated

|                                                                                                  |  |                        |            |                       |  |      |  
|------------------------------------------------------------------------------------------------- |  | ---------------------- | ---------- | --------------------- |  | ---- | -
|Name and Address of                                                                               |  | Shares of Common Stock |            | Percentage of Class   | 
|                                                                                                  |  |                        |            |                       | 
|Beneficial Owner                                                                                  |  | Beneficially Owned     |            | Beneficially Owned(1) | 
|                                                                                                  |  |                        |            |                       | 
|Chung-Lun
 Yang (2) (3)
 No. 78, 5th Street, Hong Lok Yuen, Tai Po, New Territories, Hong Kong    |  |                        | 22,380,000 |                       |  | 77.9 | %
|                                                                                                  |  |                        |            |                       |  |      |  
|Ben Wong (3)
 19B, Tower 8, Bellagio, 33 Castle Peak Road, Sham Tseng,New Territories, Hong
 Kong |  |                        | 0          |                       |  | 0.0  | %
|                                                                                                  |  |                        |            |                       |  |      |  
|Kenneth
 Lap-Yin Chan (2)
 Flat B, 8/F., Block 19, South Horizons, Aplei Chau, Hong Kong          |  |                        | 0          |                       |  | 0.0  | %
|                                                                                                  |  |                        |            |                       |  |      |  
|All
 Directors and Officers as a Group                                                            |  |                        | 22,380,000 |                       |  | 77.9 | %

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Applicable percentage of ownership is based on 28,729,936 shares of
 Common Stock outstanding as of December 31, 2009, together with securities
 exercisable or convertible into shares of Common Stock within 60 days of
 December 31, 2009, for each stockholder. Beneficial ownership is determined
 in accordance with the rules of the United States Securities and Exchange
 Commission and generally includes voting or investment power with respect to
 securities. Shares of Common Stock subject to securities exercisable or
 convertible into shares of Common Stock that are currently exercisable or
 exercisable within 60 days of December 31, 2009, are deemed to be
 beneficially owned by the person holding such securities for the purpose of
 computing the percentage of ownership of such person, but are not treated as
 outstanding for the purpose of computing the percentage ownership of any
 other person. The Common Stock is the only outstanding class of equity
 securities of the Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(2) | Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(3) | Director Except as otherwise set forth, information on the stock
 ownership of these persons was provided to us by such persons.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|         |                                                                           
|-------- | --------------------------------------------------------------------------
|Item 13. | Certain Relationships and Related
 Transactions, and Director Independence

All related
person transactions are reviewed and, as appropriate, may be approved or
ratified by the Board of Directors. Related person transactions are approved by
the Board of Directors only if, based on all of the facts and circumstances,
they are in, or not inconsistent with, our best interests and our stockholders,
as the Board of Directors determines in good faith. The Board of Directors
takes into account, among other factors it deems appropriate, whether the
transaction is on terms generally available to an unaffiliated third-party
under the same or similar circumstances and the extent of the related persons
interest in the transaction. The Board of Directors may also impose such
conditions as it deems necessary and appropriate on us or the related person in
connection with the transaction.

In the case
of a transaction presented to the Board of Directors for ratification, the
Board of Directors may ratify the transaction or determine whether rescission
of the transaction is appropriate.

24

---



CERTAIN RELATED PERSON TRANSACTIONS

Transactions with Aristo Technologies Limited
      / Mr. Yang

As
    of December 31, 2009 and 2008, we had an outstanding receivable from Mr.
    Yang, the President and Chairman of our Board of Directors, totaling $11,233,839
    and $7,900,404. These advances bear no interest and are payable on demand.
    The receivable due from Mr. Yang  to the Company is derived from the consolidation
    of the financial statements of Aristo, a variable interest entity, with the
    Company. A repayment plan has been entered into (see Note 14 to consolidated
    financial statements).

For the
years ended December 31, 2009 and 2008, we recorded compensation to Mr. Yang of
$1,300,000 and $735,026 respectively, and paid $1,300,000 and $735,026
respectively to Mr. Yang as compensation to him.

Transactions with Classic Electronic Limited

Mr.
    Ben Wong, one of our directors, is a 99.9% shareholder of of Classic Electronics
Ltd. (Classic). The remaining 0.1% of Classic is owned by a non-related
party. As of December 31, 2009 and 2008, the Company had outstanding accounts
receivable from Classic totaling $0 and $1,717,320 respectively. This account
receivable was outstanding for more than 12 months in 2008 and paid off
in 2009.

Transactions with Solution Semiconductor
(China) Limited

Mr. Ben
Wong, one of our directors, is a 99% shareholder of Solution Semiconductor
(China) Ltd. (Solution). The remaining 1% of Solution is owned by a
non-related party. On April 1, 2009, we entered into a lease agreement with
Solution pursuant to which we lease one facility. The lease agreement for this
facility expires on March 31, 2012. The monthly lease payment for this lease is
$1,090. We incurred and paid an aggregate rent expense of $13,077 to Solution
during the years ended December 31, 2009 and 2008.

During the
years ended December 31, 2009 and 2008, we purchased inventories of $10,138 and
$0 respectively from Solution. As of December 31, 2009 and 2008, there were no
outstanding accounts payable to Solution.

Two
facilities located in Hong Kong owned by Solution were used by the Company as
collateral for loans from Citic Ka Wah Bank Limited (Citic)and Standard
Chartered Bank (Hong Kong) Limited (SCB) respectively.

Transactions with Systematic Information
Limited

Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
a director and shareholder of Systematic Information Ltd. (Systematic
Information) with a total of 100% interest. On September 1, 2008, we entered
into a lease agreement with Systematic Information pursuant to which we lease
one facility. The lease agreement for this facility expires on August 31, 2010.
The monthly lease payment for this lease totals $641. We incurred and paid an
aggregate rent expense of $7,692 to Systematic Information during the years
ended December 31, 2009 and 2008.

During the
years ended December 31, 2009 and 2008, we received service charges of $5,436
and $0 respectively from Systematic Information. The service fee was charged
for back office support for Systematic Information.

During the
years ended December 31, 2009 and 2008, we sold products for $326,578 and
$1,913,071 respectively, to Systematic Information. As of December 31, 2009 and
2008, there were no outstanding accounts receivables from Systematic
Information.

During the
years ended December 31, 2009 and 2008, we purchased inventories of $74,688 and
$1,446,680 respectively from Systematic Information. As of December 31, 2009
and 2008, there were no outstanding accounts payable to Systematic Information.

A workshop
located in Hong Kong owned by Systematic Information was used by the Company as
collateral for loans from SCB.

Transactions with Global Mega Development
Limited

Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
the sole beneficial owner of the equity interest of Global Mega Development
Ltd. (Global). During the years ended December 31, 2009 and 2008, we sold
products for $1,393 and $0 respectively, to Global. As of December 31, 2009 and
2008, there were no outstanding accounts receivables from Global.

Transactions with Systematic Semiconductor
Limited

Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
the sole beneficial owner of the equity interest of Systematic Semiconductor
Ltd. (Systematic). During the years ended December 31, 2009 and 2008, we
received a management fee of $9,615 and $15,384 respectively from Systematic.
The management fee was charged for back office support for Systematic.

During the
years ended December 31, 2009 and 2008, we sold products for $19,914 and
$275,766 respectively, to Systematic. As of December 31, 2009 and 2008, there
were no outstanding accounts receivables from Systematic.

25

---



During the
years ended December 31, 2009 and 2008, we purchased inventories of $0 and
$560,750 respectively from Systematic. As of December 31, 2009 and 2008, there
were no outstanding accounts payable to Systematic.

Transactions with Aristo Components Limited

Mr. Ben
Wong, one of our directors, is a 90% shareholder of Aristo Components Ltd.
(Aristo Comp). The remaining 10% of Aristo Comp is owned by a non-related
party. During the years ended December 31, 2009 and 2008, we received a
management fee of $11,923 and $8,077 respectively from Aristo Comp. The
management fee was charged for back office support for Aristo Comp.

During the
years ended December 31, 2009 and 2008, we sold products for $12,060 and
$67,968 respectively, to Aristo Comp. As of December 31, 2009 and 2008, there
were no outstanding accounts receivables from Aristo Comp.

During the
years ended December 31, 2009 and 2008, we purchased inventories of $241,367
and $37,665 respectively from Aristo Comp. As of December 31, 2009 and 2008,
there were no outstanding accounts payable to Aristo Comp.

Transactions with Atlantic Storage Devices
Limited

Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
a 40% shareholder of Atlantic Storage Devices Ltd. (Atlantic Storage). The
remaining 60% of Atlantic Storage is owned by a non-related party. During the
years ended December 31, 2009 and 2008, we sold products for $337,946 and
$575,386 respectively, to Atlantic Storage. As of December 31, 2009 and 2008,
there were no outstanding accounts receivables from Atlantic Storage.

During the
years ended December 31, 2009 and 2008, we purchased inventories of $0 and
$679,049 respectively, from Atlantic Storage. As of December 31, 2009 and 2008,
there were no outstanding accounts payable to Atlantic Storage.

Transactions with Rambo Technologies Limited

Mr. Ben
Wong, one of our directors, is a 60% shareholder of Rambo Technologies Ltd.
(Rambo). The remaining 40% of Rambo is owned by a non-related party. During
the years ended December 31, 2009 and 2008, we sold products for $73,219 and
$1,077,653 respectively, to Rambo. As of December 31, 2009 and 2008, there were
no outstanding accounts receivables from Rambo.

During the
years ended December 31, 2009 and 2008, we purchased inventories of $54,930 and
$10,314 respectively, from Rambo. As of December 31, 2009 and 2008, there were
no outstanding accounts payable to Rambo.

Transactions with Usmart Electronic Products
Limited

Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
the sole beneficial owner of the equity interest of Usmart Electronic Products
Ltd. (Usmart). On October 7, 2009, we entered into a leasing payment
agreement with Usmart pursuant to which we lease one lot machinery facility to
Usmart. The leasing payment agreement for this facility expires on September
16, 2011. The monthly lease income for this lease totals $3,846. We received aggregate lease income of $13,333 and $0 from Usmart during the years ended December 31, 2009 and 2008.

During the years ended December 31, 2009 and 2008, we sold
products for $4,837 and $5,509 respectively, to Usmart. As of December 31, 2009
and 2008, there were no outstanding accounts receivables from Usmart.

During the
years ended December 31, 2009 and 2008, we purchased inventories of $42,596 and
$199,712 respectively, from Usmart. As of December 31, 2009 and 2008, there
were no outstanding accounts payable to Usmart.

Transactions with Imax Technology Limited

Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
the sole beneficial owner of the equity interest of Imax Technology Ltd.
(Imax). During the years ended December 31, 2009 and 2008, we purchased
inventories of $0 and $3,167 respectively, from Imax. As of December 31, 2009
and 2008, there were no outstanding accounts payable from Imax.

Transactions with City Royal Limited

Mr. Yang,
the Companys Chief Executive Officer, majority shareholder and a director, is
a 50% shareholder of City Royal Limited (City). The remaining 50% of City is
owned by the wife of Mr. Yang. A residential property located in Hong Kong
owned by City was used by the Company as collateral for loans from DBS Bank
(Hong Kong) Limited (DBS Bank).

Transactions with Kadatco Company Limited

Mr.
    Yang, the Companys Chief Executive Officer, majority shareholder and
    a director,  a 99.99% shareholder of Kadatco Company Limited (Kadatco).
    The remaining 0.01% of Kadatco is owned  by a non-related party. During the
    years ended December 31, 2009 and 2008, we purchased inventories of  $24,895
    and $0 respectively, from Kadatco. As of December 31, 2009 and 2008, there
    was no outstanding payable from Kadatco.

26

---



|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services

The
following table presents fees, including reimbursements for expenses,
professional audit services and other services rendered by JTC Fair Song and
Albert Wong & Co. CPA firms during the years ended December 31, 2009 and
2008. JTC Fair Song CPA Firm conducted interim reviews of our quarterly
financial statements for the quarter ended March 31, 2009, June 30, 2009 and
September 30, 2009, and our annual financial statements and interim reviews of
our quarterly financial statements for the year ended December 31, 2008. Albert
Wong & Co. has re-audited our annual financial statements for the years
ended December 31, 2008 and 2007 and audited our annual financial statements
for the year ended December 31, 2009.

|                        |  |             |        |             |   |        | 
|----------------------- |  | ----------- | ------ | ----------- | - | ------ | 
|                        |  | Fiscal 2009 |        | Fiscal 2008 |  
|Audit Fees
 (1)         |  | $           | 75,000 |             | $ | 35,000 | 
|Audit
 Related Fees (2) |  | $           | --     |             | $ | --     | 
|Tax Fees (3)            |  | $           | --     |             | $ | --     | 
|All Other
 Fees (4)     |  | $           | --     |             | $ | --     | 
|                        |  |             |        |             |   |        | 
|Total                   |  | $           | 75,000 |             | $ | 35,000 | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit Fees consist of fees billed for professional services rendered
 for the audit of the Companys consolidated annual financial statements and
 review of the interim consolidated financial statements included in quarterly
 reports and services that are normally provided by JTC Fair Song CPA and
 Albert Wong & Co. CPA firms in connection with statutory and regulatory
 filings or engagements. Audit Fees billed by Albert Wong & Co. CPA firm
 includes re-audited fees for auditing our annual financial statements and interim reviews for the
 fiscal year 2007 to 2009.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) | Audit-Related Fees consist of fees billed for assurance and related
 services that are reasonably related to the performance of the audit or
 review of the Companys consolidated financial statements and are not
 reported under Audit Fees. There were no such fees in fiscal year 2009 or
 2008.                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(3) | Tax Fees consist of fees billed for professional services rendered
 for tax compliance, tax advice and tax planning. There were no such fees in
 fiscal year 2009 or 2008.                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(4) | All Other Fees consist of fees for products and services other than
 the services reported above. There were no such fees in fiscal year 2009 or
 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                   

27

---



PART
IV

|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

|                                                                          |                                                   |                                                                                                                        
|------------------------------------------------------------------------- | ------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------
|(a)                                                                       | Documents
 filed as part of this Report          
|                                                                          |                                                  
|                                                                          | (1)                                               | The financial statements listed in the Index to Consolidated
 Financial Statements are filed as part of this report    
|                                                                          |                                                   |                                                                                                                        
|                                                                          | (2)                                               | The financial
 statements listed in the Index are filed a part of this report.                                         
|                                                                          |                                                   |                                                                                                                        
|                                                                          |                                                   | Schedule II  Valuation and Qualifying Accounts and Reserves.
 Schedule II on page S-1 is filed as part of this report.
|                                                                          |                                                   |                                                                                                                        
|                                                                          |                                                   | Schedule III  Quarterly Information (Unaudited). Schedule III on page S-1 is filed as part of this report.            
|                                                                          |                                                   |                                                                                                                        
|                                                                          | (3)                                               | List of
 Exhibits                                                                                                      
|                                                                          |                                                   |                                                                                                                        
|                                                                          |                                                   | See Index to
 Exhibits in paragraph (b) below.                                                                         
|                                                                          |                                                   |                                                                                                                        
|The Exhibits
 are filed with or incorporated by reference in this report.
|                                                                         
|(b)                                                                       | Exhibits
 required by Item 601 of Regulation S-K.

|            |                                                                                                                                                                                                                                                                                                        
|----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. | Description                                                                                                                                                                                                                                                                                            
|3.1         | Certificate of incorporation of the Company, together with all
 amendments thereto, as filed with the Secretary of State of the State of
 Delaware, incorporated by reference to Exhibit 3.1 to the Form 8-K filed with
 the Securities and Exchange Commission on December 19, 2003.                  
|            |                                                                                                                                                                                                                                                                                                        
|3.2         | By-Laws of the Company, as amended, incorporated by reference to
 Exhibit 3.2 to the Companys Registration Statement.                                                                                                                                                                                 
|            |                                                                                                                                                                                                                                                                                                        
|4.1(a)      | Form of
 specimen certificate for common stock of the Company.                                                                                                                                                                                                                                         
|            |                                                                                                                                                                                                                                                                                                        
|10.1        | Share Exchange and Reorganization Agreement, dated as of September 8,
 2003, among Print Data Corp., Atlantic Components Limited and Mr. Chung-Lun
 Yang, incorporated by reference to Exhibit 10.1 to the Form 8-K filed with
 the Securities and Exchange Commission on October 16, 2003.            
|            |                                                                                                                                                                                                                                                                                                        
|10.2        | Conveyance Agreement, dated as of September 30, 2003, between Print
 Data Corp. and New Print Data Corp., incorporated by reference to Exhibit
 10.2 to the Form 8-K filed with the Securities and Exchange Commission on
 October 16, 2003.                                                           
|            |                                                                                                                                                                                                                                                                                                        
|10.3        | Securities Purchase Agreement, dated October 1, 2003, among Print Data
 Corp, Jeffery Green, Phyllis Green and Joel Green, incorporated by reference
 to Exhibit 10.3 to the Form 8-K filed with the Securities and Exchange
 Commission on October 16, 2003.                                          
|            |                                                                                                                                                                                                                                                                                                        
|10.4        | Sales Restriction Agreement, dated September 30, 2003, between Print
 Data Corp. and Phyllis Green, incorporated by reference to Exhibit 10.4 to
 the Form 8-K filed with the Securities and Exchange Commission on October 16,
 2003.                                                                 
|            |                                                                                                                                                                                                                                                                                                        
|10.5        | Sales Restriction Agreement, dated September 30, 2003, between Print
 Data Corp. and Jeffery Green, incorporated by reference to Exhibit 10.5 to
 the Form 8-K filed with the Securities and Exchange Commission on October 16,
 2003.                                                                 
|            |                                                                                                                                                                                                                                                                                                        
|10.6        | Distribution Agreement, dated May 1, 1993, by and between Samsung
 Electronics Co., Ltd. and Atlantic Components Limited, incorporated by
 reference to Exhibit 10.6 to the Form 8-K filed with the Securities and
 Exchange Commission on October 16, 2003.                                           
|            |                                                                                                                                                                                                                                                                                                        
|10.7        | Renewal of Distributorship Agreement, dated March 1, 2002, by and
 between Samsung Electronics Co., Ltd. and Atlantic Components Limited,
 incorporated by reference to Exhibit 10.7 to the Form 8-K filed with the
 Securities and Exchange Commission on October 16, 2003.                           
|            |                                                                                                                                                                                                                                                                                                        
|10.8        | Form of Note Subscription, dated as of December 31, 2003, by and
 between the Company and Professional Traders Fund LLC, a New York limited
 liability company (PTF), incorporated by reference to Exhibit 10.1 to the
 Form 8-K filed with the Securities and Exchange Commission on March 24, 2004.
|            |                                                                                                                                                                                                                                                                                                        
|10.9        | Form of 12% Senior Subordinated Convertible Note due December 31,
 2004 in the aggregate principal amount of $250,000 issued by the Company to
 PTF, incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the
 Securities and Exchange Commission on March 24, 2004.                   

28

---



|      |                                                                                                                                                                                                                                                                                                                                                                                         
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10 | Form of Limited Guaranty and Security Agreement, dated as of December
 31, 2003, by and among, the Company, PTF, Orient Financial Services Limited,
 Mr. Li Wing-Kei and Emerging Growth Partners, Inc., incorporated by reference
 to Exhibit 10.3 to the Form 8-K filed with the Securities and Exchange
 Commission on March 24, 2004.                                               
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|10.11 | Form of Stock Purchase and Escrow Agreement, dated as of December 31,
 2003, by and among, PTF, Orient Financial Services Limited, Mr. Li Wing-Kei
 and Emerging Growth Partners, Inc., and the law firm of Sullivan &
 Worcester LLP, as escrow agent, incorporated by reference to Exhibit 10.4 to
 the Form 8-K filed with the Securities and Exchange Commission on March 24,
 2004.
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|10.12 | Form of Letter Agreement, dated as of December 31, 2003, by and
 between the Company and PTF, incorporated by reference to Exhibit 10.5 to the
 Form 8-K filed with the Securities and Exchange Commission on March 24, 2004.                                                                                                                                                           
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|10.13 | Letter of Intent, dated December 29, 2003, between the Company and
 Classic Electronics, Ltd., incorporated by reference to Exhibit 10.1 to the
 Form 8-K filed with the Securities and Exchange Commission on March 25, 2004.                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|10.14 | Note Subscription, dated as of December 31, 2003, by and between the
 Company and Professional Traders Fund LLC, a New York limited liability
 company (PTF), incorporated by reference to Exhibit 10.6 to the Form 8-K/A
 filed with the Securities and Exchange Commission on April 13, 2004.                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|10.15 | 12% Senior Subordinated Convertible Note due December 31, 2004 in the
 aggregate principal amount of $250,000 issued by the Company to PTF,
 incorporated by reference to Exhibit 10.7 to the Form 8-K/A filed with the
 Securities and Exchange Commission on April 13, 2004.                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|10.16 | Limited Guaranty and Security Agreement, dated as of December 31,
 2003, by and among, the Company, PTF, Orient Financial Services Limited, Mr.
 Li Wing-Kei and Emerging Growth Partners, Inc., incorporated by reference to
 Exhibit 10.8 to the Form 8-K/A filed with the Securities and Exchange
 Commission on April 13, 2004.                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|10.17 | Stock Purchase and Escrow Agreement, dated as of December 31, 2003,
 by and among, PTF, Orient Financial Services Limited, Mr. Li Wing-Kei and
 Emerging Growth Partners, Inc., and the law firm of Sullivan & Worcester
 LLP, as escrow agent, incorporated by reference to Exhibit 10.9 to the Form
 8-K/A filed with the Securities and Exchange Commission on April 13, 2004.       
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|10.18 | Letter Agreement, dated as of December 31, 2003, by and between the
 Company and PTF, incorporated by reference to Exhibit 10.10 to the Form 8-K/A
 filed with the Securities and Exchange Commission on April 13, 2004.                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|10.19 | Stock Purchase Agreement, dated as of December 30, 2005, by and among
 the Company, Classic Electronics, Ltd. (Classic) and the shareholders of
 Classic, incorporated by reference to Exhibit 10.1 to the Form 8-K filed with
 the Securities and Exchange Commission on January 6, 2006.                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|10.20 | 2006 Incentive Equity Stock Plan, incorporated by reference to
 Exhibit 4.1 to the Form S-8 filed with the Securities and Exchange Commission
 on April 27, 2006.                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|14    | Code of Business Conduct and Ethics of the Company incorporated by
 reference to Exhibit 14 to the Form 10-K for the period ended December 31,
 2003.                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|16.1  | Letter dated March 19, 2008 from Jeffrey Tsang & Co.,
 incorporated by reference to Exhibit 16.1 to the Form 8-K filed with the
 Securities and Exchange Commission on March 24, 2008.                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|21.1* | Subsidiaries of the Company                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|23.1* | Consent of Albert Wong & Co.                                                                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|31.1  | Certification of Principal Executive Officer required by Rule
 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|31.2  | Certification of Principal Financial Officer required by Rule
 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                         
|32.1  | Certification of Chief Executive Officer pursuant to 18 U.S.C.
 Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
 2002.*                                                                                                                                                                                                                                   

29

---



|     |                                                                                                                                                      
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C.
 Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
 2002.*

|                  |                                                                                                                             
|----------------- | ----------------------------------------------------------------------------------------------------------------------------
|* Filed
 herewith
|                 
|(c)               | Financial statements required by Regulation S-X which are excluded
 from the annual report to shareholders by Rule 14a-3(b).

30

---



SIGNATURES

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

| |                          |                        
| | ------------------------ | -----------------------
| | ACL
 SEMICONDUCTORS INC.
| |                         
| | By:                      | /s/ Chung-Lun Yang     
| |                          | Chung-Lun Yang         
| |                          | Chief Executive Officer
| |                          |                        
| | Dated: April
 22, 2010  

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

|                          |  |                                                                                              |       |                 |  |      | 
|------------------------- |  | -------------------------------------------------------------------------------------------- | ----- | --------------- |  | ---- | 
|Signature                 |  |                                                                                              | Title |                 |  | Date | 
|                          |  |                                                                                              |       |                 |  |      | 
|                          |  |                                                                                              |       |                
|/s/ Chung-Lun Yang        |  | Chief
 ExecutiveOfficer and
 Chairman of theBoard of
 Directors(Principal
 ExecutiveOfficer) |       | April 22,
 2010
|                          |  |                                                                                              |      
|Chung-Lun Yang            |  |                                                                                              |      
|                          |  |                                                                                              |      
|                          |  |                                                                                              |       |                
|                          |  |                                                                                              |      
|/s/ Kenneth
 Lap-Yin Chan |  | Chief
 Financial Officer(Principal
 Financial and AccountingOfficer)                         |       | April 22,
 2010
|                          |  |                                                                                              |      
|Kenneth
 Lap-Yin Chan     |  |                                                                                              |      
|                          |  |                                                                                              |       |                
|/s/ Ben Wong              |  | Director                                                                                     |       | April 22,
 2010
|                          |  |                                                                                              |       |                
|Ben Wong                  |  |                                                                                              |       |                

31

---



|                                          
|------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES  
|                                          
|AS OF DECEMBER 31, 2009 AND 2009 AND      
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|(Stated in US Dollars)                    
|                                          
|Index to Consolidated Financial Statements

|                                                        |  |     
|------------------------------------------------------- |  | ----
|                                                        |  | Page
|                                                        |  |     
|                                                        |  |     
|Report of Independent Registered Public Accounting Firm |  | F-2 
|                                                        |  |     
|Financial
Statements:                                   |  |     
|Consolidated
 Balance Sheets                            |  | F-3 
|Consolidated
 Statements of Operations                  |  | F-4 
|Consolidated
 Statements of Stockholders Equity        |  | F-4 
|Consolidated
 Statements of Cash Flows                  |  | F-5 
|Notes to
 Consolidated Financial Statements             |  | F-6 
|.                                                       |  |     
|Schedule II  Valuation and Qualifying Accounts         |  | S-1 
|                                                        |  |     
|Schedule III  Quarterly Information                    |  | S-1 

F-1

---



|                                          
|------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES  
|                                          
|AS OF DECEMBER 31, 2009 AND 2009 AND      
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|(Stated in US Dollars)                    
|                                          

|                                             
|---------------------------------------------
|ALBERT
 WONG & CO.                           
|CERTIFIED
 PUBLIC ACCOUNTANTS                
|7th
Floor, Nan Dao Commercial Building       
|359-361
Queens Road Central                 
|Hong Kong                                    
|Tel :
2851 7954                              
|Fax: 2545
4086                               
|                                             
|ALBERT WONG                                  
|B.Soc., Sc., ACA., LL.B.,
 C.P.A.(Practising)

|    |                                            
|--- | -------------------------------------------
|    |                                            
|    |                                            
|To: | The board of directors and
 stockholders of
|    | ACL Semiconductors Inc.
 (the Company)   

Report of Independent
Registered Public Accounting Firm

We have audited the
accompanying balance sheets of the Company as of December 31, 2009 and 2008 and
the related statements of income, stockholders equity and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in
accordance with 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 consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
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
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31,
2009 and 2008 and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.

As discussed in Note 13 to
the consolidated financial statements, the Company does have numerous
significant transactions with businesses and affiliates controlled by, and/or
with personnel who are related to, the officers and directors of the Company.

|                 |                              
|---------------- | -----------------------------
|                 | /s/ Albert Wong & Co.        
|Hong Kong, China | Albert Wong & Co.            
|April 15, 2010   | Certified Public
 Accountants

F-2

---



|                                          
|------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES  
|                                          
|AS OF DECEMBER 31, 2009 AND 2009 AND      
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|(Stated in US Dollars)                    
|                                          
|CONSOLIDATED BALANCE SHEETS               

|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----- | - | ---- | - | ---------- |  | ---------- | ---------- | -
|                                                                                                                                                                                                 |  | Notes |   | 2009 |   | 2008       | 
|                                                                                                                                                                                                 |  |       |   |      |   |            |  | (RESTATED) |           
|ASSETS                                                                                                                                                                                           |  |       |   |      |   |            |  |            |            |  
|Current assets                                                                                                                                                                                   |  |       |   |      |   |            |  |            |            |  
|Cash and cash equivalents                                                                                                                                                                        |  |       |   |      | $ | 2,001,805  |  | $          | 1,943,463  |  
|Restricted cash                                                                                                                                                                                  |  |       |   |      |   | 2,086,504  |  |            | 5,169,753  |  
|Accounts receivable, net of allowance for
doubtful accounts of $0 for 2009 and 2008                                                                                                              |  |       |   |      |   | 12,434,386 |  |            | 10,342,453 |  
|Accounts receivable, related parties                                                                                                                                                             |  |       |   |      |   |           |  |            | 1,717,320  |  
|Inventories, net                                                                                                                                                                                 |  |       |   |      |   | 6,048,116  |  |            | 3,668,568  |  
|Restricted marketable securities                                                                                                                                                                 |  |       |   |      |   |           |  |            | 500,000    |  
|Other current assets                                                                                                                                                                             |  |       |   |      |   | 274,351    |  |            | 525,918    |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|Total current assets                                                                                                                                                                             |  |       |   |      | $ | 22,845,162 |  | $          | 23,867,475 |  
|Property, plant and equipment, net                                                                                                                                                               |  |       | 3 |      |   | 8,179,765  |  |            | 6,922,623  |  
|Other deposits                                                                                                                                                                                   |  |       |   |      |   | 213,535    |  |            | 396,900    |  
|Amounts
    due from Aristo / Mr. Yang                                                                                                                                                           |  |       |   |      |   | 11,233,839 |  |            | 7,900,404  |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|TOTAL ASSETS                                                                                                                                                                                     |  |       |   |      | $ | 42,472,301 |  | $          | 39,087,402 |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                             |  |       |   |      |   |            |  |            |            |  
|Current liabilities                                                                                                                                                                              |  |       |   |      |   |            |  |            |            |  
|Accounts payable                                                                                                                                                                                 |  |       |   |      | $ | 23,838,753 |  | $          | 17,318,949 |  
|Accruals                                                                                                                                                                                         |  |       |   |      |   | 527,582    |  |            | 409,367    |  
|Lines of credit and loan facilities                                                                                                                                                              |  |       | 4 |      |   | 9,013,813  |  |            | 16,447,742 |  
|Current portion of long-term debt                                                                                                                                                                |  |       | 5 |      |   | 318,972    |  |            | 160,447    |  
|Current portion of capital lease                                                                                                                                                                 |  |       | 6 |      |   | 318,135    |  |            | 58,683     |  
|Income tax payable                                                                                                                                                                               |  |       |   |      |   | 505,078    |  |            | 5,588      |  
|Due to shareholders for converted pledged
collateral                                                                                                                                             |  |       |   |      |   | 112,385    |  |            | 112,385    |  
|Other current liabilities                                                                                                                                                                        |  |       |   |      |   | 282,475    |  |            | 508,073    |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|Total current liabilities                                                                                                                                                                        |  |       |   |      | $ | 34,917,193 |  | $          | 35,021,234 |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|Long-term
          liabilities                                                                                                                                                                  |  |       |   |      |   |            |  |            |            |  
|Long-term
          debt, less current portion                                                                                                                                                   |  |       | 5 |      | $ | 2,747,981  |  | $          | 2,361,711  |  
|Capital
          lease, less current portion                                                                                                                                                    |  |       | 6 |      |   | 146,117    |  |            | 43,055     |  
|Deferred
          tax liabilities                                                                                                                                                               |  |       |   |      |   | 19,468     |  |            | 8,343      |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|Total
          long-term liabilities                                                                                                                                                            |  |       |   |      |   | 2,913,566  |  |            | 2,413,109  |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|TOTAL LIABILITIES                                                                                                                                                                                |  |       |   |      | $ | 37,830,759 |  | $          | 37,434,343 |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|Commitments
          and contingencies                                                                                                                                                          |  |       |   |      | $ |           |  | $          |           |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|STOCKHOLDERS
      EQUITY                                                                                                                                                                       |  |       |   |      |   |            |  |            |            |  
|Common
          stock, $.001 par value; 50,000,000 shares authorized; 28,729,936 and
          28,329,936 shares issued and outstanding as of December 31, 2009 and
          2008 respectively |  |       |   |      |   | 28,730     |  |            | 28,330     |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|Additional
          paid in capital                                                                                                                                                             |  |       |   |      |   | 3,658,627  |  |            | 3,593,027  |  
|Retained
          earnings/accumulated losses                                                                                                                                                   |  |       |   |      |   | 954,185    |  |            | (1,968,298 | )
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|                                                                                                                                                                                                 |  |       |   |      | $ | 4,641,542  |  | $          | 1,653,059  |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  
|TOTAL LIABILITIES
            AND STOCKHOLDERS EQUITY                                                                                                                                           |  |       |   |      | $ | 42,472,301 |  | $          | 39,087,402 |  
|                                                                                                                                                                                                 |  |       |   |      |   |            |  |            |            |  

See
accompanying notes to the consolidated financial statements

F-3

---



|                                                              
|--------------------------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES                      
|                                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND                          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008                    
|(Stated in US Dollars)                                        
|                                                              
|CONSOLIDATED STATEMENTS OF
    INCOME AND COMPREHENSIVE INCOME
|                                                              

|                                                      |  |       |   |  |      |              |            |   |              |  
|----------------------------------------------------- |  | ----- | - |  | ---- | ------------ | ---------- | - | ------------ | -
|                                                      |  |       |   |  | 2009 |              | 2008       |  
|                                                      |  | Notes |   |  |      |              | (RESTATED) |  
|                                                      |  |       |   |  |      |              |            |   |              |  
|Net sales                                             |  |       |   |  | $    | 304,655,159  |            | $ | 209,556,926  |  
|Costs of sales                                        |  |       |   |  |      | (296,176,177 | )          |   | (205,388,286 | )
|                                                      |  |       |   |  |      |              |            |   |              |  
|Gross profit                                          |  |       |   |  | $    | 8,478,982    |            | $ | 4,168,640    |  
|Selling and distribution costs                        |  |       |   |  |      | (139,124     | )          |   | (82,285      | )
|General and administrative expenses                   |  |       |   |  |      | (4,549,182   | )          |   | (3,315,840   | )
|                                                      |  |       |   |  |      |              |            |   |              |  
|Income from operation                                 |  |       |   |  | $    | 3,790,676    |            | $ | 770,515      |  
|Other income (expenses)                               |  |       |   |  |      |              |            |   |              |  
|Rental income                                         |  |       |   |  |      | 96,154       |            |   | 89,231       |  
|Interest expenses                                     |  |       |   |  |      | (460,329     | )          |   | (1,073,798   | )
|Loss on disposal of marketable securities             |  |       |   |  |      |             |            |   | (227,781     | )
|Management and service income                         |  |       |   |  |      | 28,257       |            |   | 23,462       |  
|Net income on cash flow hedge                         |  |       |   |  |      | 78,978       |            |   | 161,288      |  
|Interest income                                       |  |       |   |  |      | 38,576       |            |   | 90,706       |  
|Profit on disposals of equipment                      |  |       |   |  |      | 18,946       |            |   |             |  
|Exchange differences                                  |  |       |   |  |      | (25,217      | )          |   | (48,677      | )
|Miscellaneous                                         |  |       |   |  |      | 7,832        |            |   | 8,311        |  
|                                                      |  |       |   |  |      |              |            |   |              |  
|Income (loss) before income taxes                     |  |       |   |  | $    | 3,573,873    |            | $ | (206,743     | )
|                                                      |  |       |   |  |      |              |            |   |              |  
|Income taxes                                          |  |       | 7 |  |      | (651,390     | )          |   | 33,871       |  
|                                                      |  |       |   |  |      |              |            |   |              |  
|Net income (loss)                                     |  |       |   |  | $    | 2,922,483    |            | $ | (172,872     | )
|                                                      |  |       |   |  |      |              |            |   |              |  
|Earnings (loss) per share  basic and diluted         |  |       |   |  | $    | 0.10         |            | $ | (0.01        | )
|                                                      |  |       |   |  |      |              |            |   |              |  
|Weighted average number of shares  basic and diluted |  |       | 8 |  |      | 28,681,717   |            |   | 28,329,936   |  
|                                                      |  |       |   |  |      |              |            |   |              |  

|                                                                                                       |  |                        |            |        |   |                                 |  |                                                           |           |       |   |            |   |   |           |  
|------------------------------------------------------------------------------------------------------ |  | ---------------------- | ---------- | ------ | - | ------------------------------- |  | --------------------------------------------------------- | --------- | ----- | - | ---------- | - | - | --------- | -
|CONSOLIDATED STATEMENTS
            OF STOCKHOLDERS EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME
|                                                                                                       |  |                        |            |        |   |                                 |  |                                                           |           |       |  
|                                                                                                       |  | Number
      of shares |            | Amount |   | Additional
      paid-incapital |  | Retained
      earnings/
      (accumulated
      losses) |           | Total |  
|                                                                                                       |  |                        |            |        |   |                                 |  |                                                           |           |       |   |            |   |   |           |  
|Balance,
          January 1, 2008                                                                     |  |                        | 28,329,936 |        | $ | 28,330                          |  | $                                                         | 3,593,027 |       | $ | (1,795,426 | ) | $ | 1,825,931 |  
|Net
          loss                                                                                     |  |                        |           |        |   |                                |  |                                                           |          |       |   | (172,872   | ) |   | (172,872  | )
|                                                                                                       |  |                        |            |        |   |                                 |  |                                                           |           |       |   |            |   |   |           |  
|Balance,
          December 31, 2008                                                                   |  |                        | 28,329,936 |        | $ | 28,330                          |  | $                                                         | 3,593,027 |       | $ | (1,968,298 | ) | $ | 1,653,059 |  
|                                                                                                       |  |                        |            |        |   |                                 |  |                                                           |           |       |   |            |   |   |           |  
|                                                                                                       |  |                        |            |        |   |                                 |  |                                                           |           |       |   |            |   |   |           |  
|Balance,
          January 1, 2009                                                                     |  |                        | 28,329,936 |        | $ | 28,330                          |  | $                                                         | 3,593,027 |       | $ | (1,968,298 | ) | $ | 1,653,059 |  
|Issue
          of capital                                                                             |  |                        | 400,000    |        |   | 400                             |  |                                                           | 65,600    |       |   |           |   |   | 66,000    |  
|Net
          income                                                                                   |  |                        |           |        |   |                                |  |                                                           |          |       |   | 2,922,483  |   |   | 2,922,483 |  
|                                                                                                       |  |                        |            |        |   |                                 |  |                                                           |           |       |   |            |   |   |           |  
|Balance,
          December 31, 2009                                                                   |  |                        | 28,729,936 |        | $ | 28,730                          |  | $                                                         | 3,658,627 |       | $ | 954,185    |   | $ | 4,641,542 |  
|                                                                                                       |  |                        |            |        |   |                                 |  |                                                           |           |       |   |            |   |   |           |  

See
accompanying notes to the consolidated financial statements

F-4

---



|                                          
|------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES  
|                                          
|AS OF DECEMBER 31, 2009 AND 2009 AND      
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|(Stated in US Dollars)                    
|                                          
|CONSOLIDATED STATEMENTS OF
    CASH FLOWS 

|                                                                                                              |  |      |            |            |   |            |  
|------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---------- | - | ---------- | -
|                                                                                                              |  | 2009 |            | 2008       |  
|                                                                                                              |  |      |            | (RESTATED) |  
|Cash flows from operating activities                                                                          |  |      |            |            |   |            |  
|Net income (loss)                                                                                             |  | $    | 2,922,483  |            | $ | (172,872   | )
|Depreciation and amortisation                                                                                 |  |      | 291,968    |            |   | 238,477    |  
|Bad debts                                                                                                     |  |      | 697,803    |            |   |           |  
|Change in inventory reserve                                                                                   |  |      | (26,970    | )          |   | (190,000   | )
|Issuance of common stocks to
 consultant as professional fee under share option scheme                        |  |      | 66,000     |            |   |           |  
|Gain on disposal of equipment                                                                                 |  |      | (18,946    | )          |   |           |  
|Loss on disposal of marketable
 securities                                                                    |  |      |           |            |   | 227,781    |  
|                                                                                                              |  |      |            |            |   |            |  
|Adjustments to reconcile net loss to net cash used in operating
 activities:                                  |  |      |            |            |   |            |  
|Accounts receivable  other                                                                                   |  |      | (2,789,737 | )          |   | (2,715,435 | )
|Accounts receivable  related parties                                                                         |  |      | 1,717,320  |            |   | 539        |  
|Inventories                                                                                                   |  |      | (2,352,579 | )          |   | 289,588    |  
|Other assets                                                                                                  |  |      | 183,365    |            |   | (9,656     | )
|Income tax refundable                                                                                         |  |      |           |            |   | 49,375     |  
|Other current assets                                                                                          |  |      | 251,566    |            |   | (436,734   | )
|Accounts payable                                                                                              |  |      | 6,519,804  |            |   | 4,448,749  |  
|Accrued expenses                                                                                              |  |      | 118,215    |            |   | 213,411    |  
|Income tax payable                                                                                            |  |      | 499,490    |            |   | 5,588      |  
|Other current liabilities                                                                                     |  |      | (225,598   | )          |   | 239,501    |  
|Deferred tax                                                                                                  |  |      | 11,125     |            |   | (7,128     | )
|                                                                                                              |  |      |            |            |   |            |  
|Net cash provided by operating activities                                                                     |  | $    | 7,865,309  |            | $ | 2,181,184  |  
|                                                                                                              |  |      |            |            |   |            |  
|                                                                                                              |  |      |            |            |   |            |  
|Cash flows from investing activities                                                                          |  |      |            |            |   |            |  
|Advance (to) fromAristo
     / Mr. Yang                                                                       |  | $    | (3,333,435 | )          | $ | (1,842,916 | )
|                                                                                                              |  |      |            |            |   |            |  
|Increase in restricted cash                                                                                   |  |      | 3,083,249  |            |   | (966,696   | )
|Increase in restricted
 marketable securities                                                                 |  |      | 500,000    |            |   | (500,000   | )
|Cash proceeds from sales of
 marketable securities and restricted marketable securities                       |  |      |           |            |   | 946,229    |  
|Cash proceeds from sales of automobiles                                                                       |  |      | 48,077     |            |   |           |  
|Purchase of property, plant and equipment                                                                     |  |      | (994,124   | )          |   | (164,565   | )
|                                                                                                              |  |      |            |            |   |            |  
|Net cash used in investing
 activities                                                                        |  | $    | (696,233   | )          | $ | (2,527,948 | )
|                                                                                                              |  |      |            |            |   |            |  
|                                                                                                              |  |      |            |            |   |            |  
|Cash flows from financing
          activities                                                                |  |      |            |            |   |            |  
|Net
          borrowings on lines of credit and notes payable                                                 |  | $    | (7,433,929 | )          | $ | 837,254    |  
|Borrowing
          under long-term debt                                                                      |  |      | 937,180    |            |   |           |  
|Principal
          payments under long-term debt                                                             |  |      | (392,384   | )          |   | (152,321   | )
|Principal
          payments under capital lease obligation                                                   |  |      | (221,602   | )          |   | (55,762    | )
|                                                                                                              |  |      |            |            |   |            |  
|Net cash provided by financing activities                                                                     |  | $    | (7,110,735 | )          | $ | 629,171    |  
|                                                                                                              |  |      |            |            |   |            |  
|                                                                                                              |  |      |            |            |   |            |  
|Net cash and cash equivalents
          sourced                                                               |  | $    | 58,341     |            | $ | 282,407    |  
|                                                                                                              |  |      |            |            |   |            |  
|Cash and cash equivalentsbeginning
          of year                                                         |  |      | 1,943,463  |            |   | 1,661,056  |  
|                                                                                                              |  |      |            |            |   |            |  
|Cash and cash equivalentsend
          of year                                                               |  | $    | 2,001,805  |            | $ | 1,943,463  |  
|                                                                                                              |  |      |            |            |   |            |  
|                                                                                                              |  |      |            |            |   |            |  
|Supplementary cash flow information:                                                                          |  |      |            |            |   |            |  
|Interest
          paid                                                                                       |  | $    | 460,329    |            | $ | 1,073,798  |  
|Income
          tax paid                                                                                     |  |      | 140,775    |            |   | 57,582     |  
|Income
          tax refund                                                                                   |  |      |           |            |   | 139,289    |  
|Compensation
          received from insurance company related to bad debt under factoring
          coverage |  |      | 719,711    |            |   |           |  
|                                                                                                              |  |      |            |            |   |            |  
|                                                                                                              |  |      |            |            |   |            |  
|Supplementary
          schedule of non-cash investing and                                                    |  |      |            |            |   |            |  
|financing
          activities:                                                                               |  |      |            |            |   |            |  
|Income
          tax provision                                                                                |  | $    | 651,390    |            | $ | 17,411     |  
|                                                                                                              |  |      |            |            |   |            |  
|Capital
          lease obligations incurred when capital                                                     |  |      |            |            |   |            |  
|leases
          were entered for new automobiles                                                             |  | $    | 584,117    |            | $ | 62,538     |  
|                                                                                                              |  |      |            |            |   |            |  

See accompanying
notes to the consolidated financial statements

F-5

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

1. ORGANIZATION AND PRINCIPAL ACTIVITY

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Organization and Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | On September
 8, 2003, ACL Semiconductors Inc. (formerly Print Data Corp.) (ACL) entered
 into a Share Exchange and Reorganization Agreement with Atlantic Components
 Ltd. (Atlantic), a Hong Kong based company, and Mr. Chung-Lun Yang (Mr.
 Yang), the then sole beneficial stockholder of Atlantic. Under the terms of
 the agreement, ACL issued 22,380,000 of its shares to Mr. Chung-Lun Yang and
 2,620,000 of its shares to certain financial advisors in exchange for 100% of
 the issued and outstanding shares of Atlantics capital stock. The Company
 recorded an expense of $2,753,620 related to the issuance of 2,620,000 shares
 of its common stock to these advisors, which was computed based on the quoted
 market price of $1.05 on September 30, 2003, the effective date of the merger
 and was classified as merger cost in the accompanying consolidated statements
 of operations for the year ended December 31, 2003.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The share
 exchange agreement closed and became effective on September 30, 2003. Upon
 the completion of this transaction, Atlantic became the wholly owned
 subsidiary of ACL, and Mr. Yang became the owner of approximately 80% of
 ACLs issued and outstanding shares of common stock. In addition, ACLs
 directors and officers resigned and were replaced by directors and officers
 of Atlantic. For accounting purposes, the acquisition was accounted for as a
 reverse-acquisition, whereby Atlantic was deemed to have acquired ACL.
 Because the acquisition was accounted for as a purchase of ACL, the
 historical financial statements of Atlantic became the historical financial
 statements of ACL after this transaction.                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | In
 connection with this transaction, ACL entered into a Conveyance Agreement on
 September 30, 2003 with New Print Data Corp. (NewCo). Under the terms of
 this agreement, effective September 30, 2003, ACL conveyed its historic
 operations of providing supplies used in a computer or office environment to
 NewCo, by assigning all of the assets and liabilities related to such
 operations to NewCo which accepted the assignment and assumed all such
 liabilities in exchange for 1,000,000 shares of common stock of NewCo.                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | On October
 1, 2003, Print Data Corp. entered into a Securities Purchase Agreement with
 the holders of Print Data Corp.s Series A Preferred Stock. Under the terms
 of this agreement, Print Data Corp. sold its 1,000,000 shares of NewCo common
 stock in exchange for the cancellation of the issued and outstanding 500,400
 shares of ACLs Series A Preferred Stock (representing 100% of Print Data
 Corp.s issued and outstanding preferred stock previously held by three
 preferred stockholders).                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | On December
 16, 2003, Print Data Corp. filed a Certificate of Amendment with the
 Secretary of State of the State of Delaware changing its name from Print Data
 Corp. to ACL Semiconductors Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-6

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              
|CONSOLIDATED STATEMENTS OF
    CASH FLOWS     
|                                              

1. ORGANIZATION AND PRINCIPAL ACTIVITY
(Continued)

|                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                              | Business Activity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                              | ACL
 Semiconductors Inc. (Company or ACL) was incorporated
 in the State of Delaware on September 17, 2002. Through a reverse-acquisition
 of Atlantic Components Ltd., a Hong Kong based company, effective September
 30, 2003, the Companys principal activities are distribution of electronic
 components under the Samsung brand-name which comprise DRAM and
 graphic RAM, Flash, SRAM and MASK ROM for the Hong Kong and Southern China
 markets. Atlantic Components Ltd., its wholly owned subsidiary, was incorporated
 in Hong Kong on May 30, 1991 with limited liability. On October 2, 2003, the
 Company set up a wholly-owned subsidiary, Alpha Perform Technology Limited (Alpha),
 a British Virgin Islands company, to provide services on behalf of the Company
 in jurisdictions outside of Hong Kong. Effective January 1, 2004, the Company
 ceased the operations of Alpha and all the related activities are
 consolidated with those of Atlantic.
|                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|                                             
|(a) Method of Accounting                     
|                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                              | The Company
 maintains its general ledger and journals with the accrual method accounting
 for financial reporting purposes. The consolidated financial statements and
 notes are representations of management. Accounting policies adopted by the
 Company conform to generally accepted accounting principles in the United
 States of America and have been consistently applied in the presentation of
 consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) Principles of consolidation              
|                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                              | The
 consolidated financial statements are presented in US Dollars and include the
 accounts of the Company and its subsidiary. All significant inter-company
 balances and transactions are eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                              | The Company
 owned its subsidiary soon after its inception and continued to own the
 equitys interests through December 31, 2009. The following table depicts the
 identity of the subsidiary:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                  |  |                        |            |                                 |     |                     |  |   |         | 
|--------------------------------- |  | ---------------------- | ---------- | ------------------------------- | --- | ------------------- |  | - | ------- | 
|Name of subsidiary                |  | Place of Incorporation |            | Attributable equity
 interest % |     | Registered
 capital | 
|                                  |  |                        |            |                                 |     |                     |  |   |         | 
|Alpha Perform Technology
 Limited |  |                        | BVI        |                                 | 100 |                     |  | $ | 1,000   | 
|                                  |  |                        |            |                                 |     |                     |  |   |         | 
|Atlantic Components Ltd           |  |                        | Hong
 Kong |                                 | 100 |                     |  | $ | 384,615 | 
|                                  |  |                        |            |                                 |     |                     |  |   |         | 
|*Aristo Technologies
 Limited     |  |                        | Hong
 Kong |                                 | 100 |                     |  | $ | 1,282   | 

*Note: Deemed variable
interest entity

F-7

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

(b) Principles of consolidation (Continued)

According to ASC 810-10-25 which codified FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities  an interpretation of ARB No. 51 (FIN 46R), an entity that has one or more of the
three characteristics set forth therein is considered a variable interest entity. One of such characteristics is that the equity investment at risk in the relevant entity is not sufficient to permit the entity to finance its activities without
additional subordinated financial support provided by any parties, including the equity holders. Based on a review of the equity investment at risk, the Company concluded that Aristo Technologies Limited (Aristo) is a variable interest
entity and is therefore subject to consolidation with the Company under the guidance applicable to variable interest entities.

Aristo Technologies Limited

Aristo is engaged in the marketing, selling and servicing of computer products and accessories including semiconductors, LCD products, mass storage devices, consumer electronics, computer peripherals and electronic components for
various brands such as Samsung, Hynix, Micro, Elpida, Qimonda, Lexar, Dane-Elec, Elixir, SanDisk and Winbond.

The Company sells to Aristo in order to fulfill Aristos
periodic need for Samsung memory products based on prevailing market prices,
which Aristo, in turn, sells to its customers. For fiscal
year 2009, sales to Aristo were $13,160,521 with accounts receivable of $10,315,388
as of December 31, 2009. For fiscal year 2008, sales to Aristo were $9,076,034
with accounts receivable of $6,695,409 as of December 31, 2008. For fiscal year
2007, sales to Aristo were
$17,165,728 with accounts receivable of $6,237,905 as of December 31,
2007.

The Company purchases from Aristo, from time to time,
LCD panels, Samsung memory chips, DRAM, Flash memory, central processing units,
external hard disks, DVD readers and writers that the Company cannot obtain from
Samsung directly due to supply limitations.

F-8

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) Use of estimates             
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                  | The
 preparation of the consolidated financial statements in conformity with
 generally accepted accounting principles 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 consolidated financial statements
 and the reported amounts of revenues and expenses during the reporting periods.
 Management makes these estimates using the best information available at the
 time the estimates are made; however actual results could differ materially
 from those estimates.
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(d) Economic and political risks 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                  | The
 Companys operation is conducted in Hong Kong. Accordingly, the Companys
 business, financial condition and results of operations may be influenced by
 the political, economic and legal environment in Hong Kong, and by the
 general state of Hong Kong economy.                                                                                                                                                                                                                                                                                                                                                                             
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                  | The
 Companys operations in Hong Kong are subject to special considerations and
 significant risks not typically associated with companies in North America
 and Western Europe. These include risks associated with, among others, the
 political, economic and legal environment and foreign currency exchange. The
 Companys results may be adversely affected by changes in the political and
 social conditions in Hong Kong, and by changes in governmental policies with
 respect to laws and regulations, anti-inflationary measures, currency
 conversion, remittances abroad, and rates and methods of taxation, among
 other things.     
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(e) Property, plant and equipment
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                  | Plant and
 equipment are carried at cost less accumulated depreciation. Depreciation is
 provided over their estimated useful lives, using the straight-line method.
 Estimated useful lives of the plant and equipment are as follows:                                                                                                                                                                                                                                                                                                                                                                                                               

|                       |  |  |                          | 
|---------------------- |  |  | ------------------------ | 
|Automobiles            |  |  | 3 1/3 years              | 
|Computers              |  |  | 5 years                  | 
|Leasehold
 improvement |  |  | 5 years                  | 
|Land and
 buildings    |  |  | By estimated useful life | 
|Office equipment       |  |  | 5 years                  | 
|Machinery              |  |  | 10 years                 | 

The cost and
related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income.

F-9

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

|                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(f) Account receivable                                
|                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                       | Accounts
 receivable is carried at the net invoiced value charged to customer. The
 Company records an allowance for doubtful accounts to cover estimated credit
 losses. Management reviews and adjusts this allowance periodically based on
 historical experience and its evaluation of the collectability of outstanding
 accounts receivable. The Company evaluates the credit risk of its customers
 utilizing historical data and estimates of future performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(g) Accounting for the impairment of long-lived assets
|                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                       | The Company
 periodically evaluates the carrying value of long-lived assets to be held and
 used, including intangible assets subject to amortization, when events and
 circumstances warrant such a review, pursuant to the guidelines established
 in ASC No. 360 (formerly Statement of Financial Accounting Standards No.
 144). The carrying value of a long-lived asset is considered impaired when
 the anticipated undiscounted cash flow from such asset is separately
 identifiable and is less than its carrying value. In that event, a loss is
 recognised based on the amount by which the carrying value exceeds the fair
 market value of the long-lived asset. Fair market value is determined
 primarily using the anticipated cash flows discounted at a rate commensurate
 with the risk involved. Losses on long-lived assets to be disposed of are
 determined in a similar manner, except that fair market values are reduced
 for the cost to dispose.During the reporting years, there was no impairment
 loss.
|                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(h) Cash and cash equivalents                         
|                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                       | The Company
 considers all highly liquid investments purchased with original maturities of
 three months or less to be cash equivalents. The Company maintains bank
 accounts in Hong Kong. The Company does not maintain any bank accounts in the
 United States of America.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(i) Inventories                                       
|                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                       | Inventories
 are stated at the lower of cost or market and are comprised of purchased
 computer technology resale products. Cost is determined using the first-in,
 first-out method. The reserve for obsolescence was decreased by $26,970 for
 2009 and increased by $190,000 for 2008. Inventory obsolescence reserves
 totalled $347,133 and $374,103 as of December 31, 2009 and 2008,
 respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F-10

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(j) Lease assets                
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                 | Leases that
 substantially transfer all the benefits and risks of ownership of assets to
 the company are accounted for as capital leases. At the inception of a
 capital lease, the asset is recorded together with its long term obligation
 (excluding interest element) to reflect the purchase and the financing.Leases which do not transfer substantially all the risks and rewards of
 ownership to the company are classified as operating leases. Payments made
 under operating leases are charged to income statement in equal instalments
 over the accounting periods covered by the lease term. Lease incentives
 received are recognized in income statement as an integral part of the
 aggregate net lease payments made. Contingent rentals are charged to income
 statement in the accounting period which they are incurred.                                                                                                                                                                                                                                                                                                                                                                                                       
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(k) Income taxes                
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                 | 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, including tax loss and credit carry forwards, and liabilities are
 measured using enacted tax rates expected to apply to taxable income in the
 years in which those temporary differences are expected to be recovered or
 settled. The effect on deferred tax assets and liabilities of a change in tax
 rates is recognized in income in the period that includes the enactment date.
 Deferred income tax expense represents the change during the period in the
 deferred tax assets and deferred tax liabilities. The components of the
 deferred tax assets and liabilities are individually classified as current
 and non-current based on their characteristics. Realization of the deferred
 tax asset is dependent on generating sufficient taxable income in future
 years. Deferred tax assets are reduced by a valuation allowance when, in the
 opinion of management, it is more likely than not that some portion or all of
 the deferred tax assets will not be realized.
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(l) Foreign currency translation
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                 | The
 accompanying consolidated financial statements are presented in United States
 dollars. The functional currency of the Company is the Hong Kong Dollar
 (HK$). The consolidated financial statements are translated into United
 States dollars from HK$US$1.00=HKD7.80, a fixed exchange rate maintained
 between Hong Kong and United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(m) Revenue recognition         
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                 | The Company
 derives revenues from resale of computer memory products. The Company
 recognizes revenue in accordance with the SEC Staff Accounting Bulletin No.
 104, Revenue Recognition (SAB 104). Under SAB 104, revenue is recognized
 when there is persuasive evidence of an arrangement, delivery has occurred or
 services are rendered, the sales price is determinable, and collectability is
 reasonably assured. Revenue typically is recognized at time of shipment.
 Sales are recorded net of discounts, rebates, and returns, which historically
 were not material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-11

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(n) Advertising                                
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                | The Group
 expensed all advertising costs as incurred. Advertising expenses included in
 selling expenses were $5,377 and $7,118 for the years ended December 31, 2009
 and 2008, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(o) Segment reporting                          
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                | The
 Companys sales are generated from Hong Kong and the rest of China and
 substantially all of its assets are located in Hong Kong.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(p) Fair value of financial instruments        
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                | The carrying
 amount of the Companys cash and cash equivalents, accounts receivable, lines
 of credit, convertible debt, accounts payable, accrued expenses, and
 long-term debt approximates their estimated fair values due to the short-term
 maturities of those financial instruments.                                                                                                                                                                                                                                                                                                                                       
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(q) Comprehensive income                       
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                | Comprehensive
 income is defined to include all changes in equity except those resulting
 from investments by owners and distributions to owners. Among other
 disclosures, all items that are required to be recognized under current accounting
 standards as components of comprehensive income are required to be reported
 in a financial statement that is presented with the same prominence as other
 consolidated financial statements. The Company has no items that represent
 other comprehensive income and, therefore, has not included a schedule of
 comprehensive income in the consolidated financial statements.
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(r) Basic and diluted earnings (loss) per share
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                | In
 accordance with ASC No. 260 (formerly SFAS No. 128), Earnings Per Share,
 the basic earnings (loss) per common share is computed by dividing net
 earnings (loss) available to common stockholders by the weighted average
 number of common shares outstanding. Diluted earnings (loss) per common share
 is computed similarly to basic earnings (loss) per common share, except that
 the denominator is increased to include the number of additional common
 shares that would have been outstanding if the potential common shares had
 been issued and if the additional common shares were dilutive.                 
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(s) Reclassification                           
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                | Certain
 amounts in the prior year have been reclassified to conform to the current
 years presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-12

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

(t) Recently implemented standards

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ASC 105,
 Generally Accepted Accounting Principles (ASC 105) (formerly Statement of
 Financial Accounting Standards No. 168, The FASB Accounting Standards
 Codification and the Hierarchy of Generally Accepted Accounting Principles a
 replacement of FASB Statement No. 162) reorganized by topic existing
 accounting and reporting guidance issued by the Financial Accounting Standards
 Board (FASB) into a single source of authoritative generally accepted
 accounting principles (GAAP) to be applied by nongovernmental entities. All
 guidance contained in the Accounting Standards Codification (ASC) carries
 an equal level of authority. Rules and interpretive releases of the
 Securities and Exchange Commission (SEC) under authority of federal
 securities laws are also sources of authoritative GAAP for SEC registrants.
 Accordingly, all other accounting literature will be deemed non-authoritative.
 ASC 105 is effective on a prospective basis for financial statements issued
 for interim and annual periods ending after September 15, 2009. The Company
 has implemented the guidance included in ASC 105 as of July 1, 2009. The
 implementation of this guidance changed the Companys references to GAAP
 authoritative guidance but did not impact the Companys financial position or
 results of operations.                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ASC 855,
 Subsequent Events (ASC 855) (formerly Statement of Financial Accounting
 Standards No. 165, Subsequent Events) includes guidance that was issued by
 the FASB in May 2009, and is consistent with current auditing standards in
 defining a subsequent event. Additionally, the guidance provides for
 disclosure regarding the existence and timing of a companys evaluation of
 its subsequent events. ASC 855 defines two types of subsequent events,
 recognized and non-recognized. Recognized subsequent events provide
 additional evidence about conditions that existed at the date of the balance
 sheet and are required to be reflected in the financial statements.
 Non-recognized subsequent events provide evidence about conditions that did
 not exist at the date of the balance sheet but arose after that date and,
 therefore; are not required to be reflected in the financial statements.
 However, certain non-recognized subsequent events may require disclosure to
 prevent the financial statements from being misleading. This guidance was
 effective prospectively for interim or annual financial periods ending after
 June 15, 2009. The Company implemented the guidance included in ASC 855 as of
 April 1, 2009. The effect of implementing this guidance was not material to
 the Companys financial position or results of operations.                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ASC 944,
 Financial Services  Insurance (ASC 944) contains guidance that was
 previously issued by the FASB in May 2008 as Statement of Financial
 Accounting Standards No. 163, Accounting for Financial Guarantee Insurance
 Contracts  an interpretation of FASB Statement No. 60 that provides for
 changes to both the recognition and measurement of premium revenues and claim
 liabilities for financial guarantee insurance contracts that do not qualify
 as a derivative instrument in accordance with ASC 815, Derivatives and
 Hedging (formerly included under Statement of Financial Accounting Standards
 No. 133, Accounting for Derivative Instruments and Hedging Activities). This
 financial guarantee insurance contract guidance also expands the disclosure
 requirements related to these contracts to include such items as a companys
 method of tracking insured financial obligations with credit deterioration,
 financial information about the insured financial obligations, and
 managements policies for placing and monitoring the insured financial
 obligations. ASC 944, as it relates to financial guarantee insurance
 contracts, was effective for fiscal years beginning after December 15, 2008,
 except for certain disclosures related to the insured financial obligations,
 which were effective for the third quarter of 2008. The Company does not have
 financial guarantee insurance products, and, accordingly, the implementation
 of this portion of ASC 944 did not have an effect on the Companys results of
 operations or financial position.

F-13

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

(t) Recently implemented standards(Continued)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ASC 805, Business Combinations (ASC 805) (formerly included under
 Statement of Financial Accounting Standards No. 141 (revised 2007), Business
 Combinations) contains guidance that was issued by the FASB in December 2007.
 It requires the acquiring entity in a business combination to recognize all
 assets acquired and liabilities assumed in a transaction at the
 acquisition-date fair value, with certain exceptions. Additionally, the
 guidance requires changes to the accounting treatment of acquisition related
 items, including, among other items, transaction costs, contingent
 consideration, restructuring costs, indemnification assets and tax benefits.
 ASC 805 also provides for a substantial number of new disclosure
 requirements. ASC 805 also contains guidance that was formerly issued as FSP
 FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a
 Business Combination That Arise from Contingencies which was intended to
 provide additional guidance clarifying application issues regarding initial
 recognition and measurement, subsequent measurement and accounting, and
 disclosure of assets and liabilities arising from contingencies in a business
 combination. ASC 805 was effective for business combinations initiated on or
 after the first annual reporting period beginning after December 15, 2008.
 The Company implemented this guidance effective January 1, 2009. Implementing
 this guidance did not have an effect on the Companys financial position or
 results of operations; however it will likely have an impact on the Companys
 accounting for future business combinations, but the effect is dependent upon
 acquisitions, if any, that are made in the future.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ASC 810, Consolidation (ASC 810) includes new guidance issued by
 the FASB in December 2007 governing the accounting for and reporting of
 noncontrolling interests (previously referred to as minority interests). This
 guidance established reporting requirements which include, among other
 things, that noncontrolling interests be reflected as a separate component of
 equity, not as a liability. It also requires that the interests of the parent
 and the noncontrolling interest be clearly identifiable. Additionally,
 increases and decreases in a parents ownership interest that leave control
 intact shall be reflected as equity transactions, rather than step
 acquisitions or dilution gains or losses. This guidance also requires changes
 to the presentation of information in the financial statements and provides
 for additional disclosure requirements. ASC 810 was effective for fiscal
 years beginning on or after December 15, 2008. The Company implemented this
 guidance as of January 1, 2009. The Company is in the process of evaluating ASC 810 and will make necessary changes accordingly.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-14

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(t) Recently implemented standards(Continued)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ASC 825, Financial Instruments (ASC 825) includes guidance which
 was issued in February 2007 by the FASB and was previously included under
 Statement of Financial Accounting Standards No. 159, The Fair Value Option
 for Financial Assets and Financial Liabilities Including an amendment of FASB
 Statement No. 115. The related sections within ASC 825 permit a company to
 choose, at specified election dates, to measure at fair value certain
 eligible financial assets and liabilities that are not currently required to
 be measured at fair value. The specified election dates include, but are not
 limited to, the date when an entity first recognizes the item, when an entity
 enters into a firm commitment or when changes in the financial instrument
 causes it to no longer qualify for fair value accounting under a different
 accounting standard. An entity may elect the fair value option for eligible
 items that exist at the effective date. At that date, the difference between
 the carrying amounts and the fair values of eligible items for which the fair
 value option is elected should be recognized as a cumulative effect
 adjustment to the opening balance of retained earnings. The fair value option
 may be elected for each entire financial instrument, but need not be applied
 to all similar instruments. Once the fair value option has been elected, it
 is irrevocable. Unrealized gains and losses on items for which the fair value
 option has been elected will be reported in earnings. This guidance was
 effective as of the beginning of fiscal years that began after November 15,
 2007. The Company does not have eligible financial assets and liabilities,
 and, accordingly, the implementation of ASC 825 did not have an effect on the
 Companys results of operations or financial position.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ASC 820, Fair Value Measurements and Disclosures (ASC 820)
 (formerly included under Statement of Financial Accounting Standards No. 157,
 Fair Value Measurements) includes guidance that was issued by the FASB in
 September 2006 that created a common definition of fair value to be used
 throughout generally accepted accounting principles. ASC 820 applies whenever
 other standards require or permit assets or liabilities to be measured at
 fair value, with certain exceptions. This guidance established a hierarchy
 for determining fair value which emphasizes the use of observable market data
 whenever available. It also required expanded disclosures which include the
 extent to which assets and liabilities are measured at fair value, the
 methods and assumptions used to measure fair value and the effect of fair
 value measures on earnings. ASC 820 also provides additional guidance for
 estimating fair value when the volume and level of activity for the asset or
 liability have significantly decreased. The emphasis of ASC 820 is that fair
 value is the price that would be received to sell an asset or paid to
 transfer a liability in an orderly transaction between willing market
 participants, under current market conditions. ASC 820 also further clarifies
 the guidance to be considered when determining whether or not a transaction
 is orderly and clarifies the valuation of securities in markets that are not
 active. This guidance includes information related to a companys use of
 judgment, in addition to market information, in certain circumstances to
 value assets which have inactive markets.                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Fair value guidance in ASC 820 was initially effective for fiscal
 years beginning after November 15, 2007 and for interim periods within those
 fiscal years for financial assets and liabilities. The effective date of ASC
 820 for all non-recurring fair value measurements of nonfinancial assets and
 nonfinancial liabilities was fiscal years beginning after November 15, 2008.
 Guidance related to fair value measurements in an inactive market was
 effective in October 2008 and guidance related to orderly transactions under
 current market conditions was effective for interim and annual reporting
 periods ending after June 15, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-15

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(t) Recently
implemented standards(Continued)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company applied the provisions of ASC 820 to its financial assets
 and liabilities upon adoption at January 1, 2008 and adopted the remaining
 provisions relating to certain nonfinancial assets and liabilities on January
 1, 2009. The difference between the carrying amounts and fair values of those
 financial instruments held upon initial adoption, on January 1, 2008, was
 recognized as a cumulative effect adjustment to the opening balance of
 retained earnings and was not material to the Companys financial position or
 results of operations. The Company implemented the guidance related to
 orderly transactions under current market conditions as of April 1, 2009,
 which also was not material to the Companys financial position or results of
 operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | In August 2009, the FASB issued ASC Update No. 2009-05, Fair Value
 Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value
 (ASC Update No. 2009-05). This update amends ASC 820, Fair Value
 Measurements and Disclosures and provides further guidance on measuring the
 fair value of a liability. The guidance establishes the types of valuation
 techniques to be used to value a liability when a quoted market price in an
 active market for the identical liability is not available, such as the use
 of an identical or similar liability when traded as an asset. The guidance
 also further clarifies that a quoted price in an active market for the
 identical liability at the measurement date and the quoted price for the
 identical liability when traded as an asset in an active market when no
 adjustments to the quoted price of the asset are required are both Level 1
 fair value measurements. If adjustments are required to be applied to the
 quoted price, it results in a level 2 or 3 fair value measurement. The
 guidance provided in the update is effective for the first reporting period
 (including interim periods) beginning after issuance. The Company does not
 expect that the implementation of ASC Update No. 2009-05 will have a material
 effect on its financial position or results of operations.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | In September 2009, the FASB issued ASC Update No. 2009-12, Fair Value
 Measurements and Disclosures (Topic 820): Investments in Certain Entities
 that Calculate Net Asset Value per Share (or Its Equivalent) (ASC Update No.
 2009-12). This update sets forth guidance on using the net asset value per
 share provided by an investee to estimate the fair value of an alternative
 investment. Specifically, the update permits a reporting entity to measure
 the fair value of this type of investment on the basis of the net asset value
 per share of the investment (or its equivalent) if all or substantially all
 of the underlying investments used in the calculation of the net asset value
 is consistent with ASC 820. The update also requires additional disclosures
 by each major category of investment, including, but not limited to, fair
 value of underlying investments in the major category, significant investment
 strategies, redemption restrictions, and unfunded commitments related to
 investments in the major category. The amendments in this update are
 effective for interim and annual periods ending after December 15, 2009 with
 early application permitted. The Company does not expect that the
 implementation of ASC Update No. 2009-12 will have a material effect on its
 financial position or results of operations. 

F-16

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(t) Recently
implemented standards(Continued)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In June 2009, FASB issued Statement of Financial Accounting Standards
 No. 167, Amendments to FASB Interpretation No. 46(R) (Statement No. 167).
 Statement No. 167 amends FASB Interpretation No. 46R, Consolidation of Variable
 Interest Entities an interpretation of ARB No. 51 (FIN 46R) to require an
 analysis to determine whether a company has a controlling financial interest
 in a variable interest entity. This analysis identifies the primary
 beneficiary of a variable interest entity as the enterprise that has a) the
 power to direct the activities of a variable interest entity that most
 significantly impact the entitys economic performance and b) the obligation
 to absorb losses of the entity that could potentially be significant to the
 variable interest entity or the right to receive benefits from the entity
 that could potentially be significant to the variable interest entity. The
 statement requires an ongoing assessment of whether a company is the primary
 beneficiary of a variable interest entity when the holders of the entity, as
 a group, lose power, through voting or similar rights, to direct the actions
 that most significantly affect the entitys economic performance. This
 statement also enhances disclosures about a companys involvement in variable
 interest entities. Statement No. 167 is effective as of the beginning of the
 first annual reporting period that begins after November 15, 2009. Although
 Statement No. 167 has not been incorporated into the Codification, in accordance
 with ASC 105, the standard shall remain authoritative until it is integrated.
 The Company is in  the process of evaluating Statement No. 167 and will
make necessary changes if required.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | In June 2009, the FASB issued Statement of Financial Accounting
 Standards No. 166, Accounting for Transfers of Financial Assets an amendment
 of FASB Statement No. 140 (Statement No. 166). Statement No. 166 revises
 FASB Statement of Financial Accounting Standards No. 140, Accounting for
 Transfers and Extinguishment of Liabilities a replacement of FASB Statement
 125 (Statement No. 140) and requires additional disclosures about transfers
 of financial assets, including securitization transactions, and any
 continuing exposure to the risks related to transferred financial assets. It
 also eliminates the concept of a qualifying special-purpose entity, changes
 the requirements for derecognizing financial assets, and enhances disclosure
 requirements. Statement No. 166 is effective prospectively, for annual
 periods beginning after November 15, 2009, and interim and annual periods
 thereafter. Although Statement No. 166 has not been incorporated into the
 Codification, in accordance with ASC 105, the standard shall remain
 authoritative until it is integrated. The Company does not expect the
 adoption of Statement No. 166 will have a material impact on its financial
 position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-17

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

3.PROPERTY,PLANT AND EQUIPMENT, NET

Property,
plant and equipment, net comprise the following:

|                               |  |      |           |      |   |           |  
|------------------------------ |  | ---- | --------- | ---- | - | --------- | -
|                               |  | 2009 |           | 2008 |  
|At cost                        |  |      |           |      |   |           |  
|Land and buildings             |  | $    | 7,663,340 |      | $ | 6,754,351 |  
|Automobiles                    |  |      | 168,181   |      |   | 152,185   |  
|Office equipment               |  |      | 218,462   |      |   | 194,896   |  
|Leasehold improvements         |  |      | 13,273    |      |   | 13,273    |  
|Furniture and fixtures         |  |      | 449,713   |      |   | 405,467   |  
|Machinery                      |  |      | 499,614   |      |   |          |  
|                               |  |      |           |      |   |           |  
|                               |  | $    | 9,012,583 |      | $ | 7,520,172 |  
|Less: accumulated depreciation |  |      | (832,818  | )    |   | (597,549  | )
|                               |  |      |           |      |   |           |  
|                               |  | $    | 8,179,765 |      | $ | 6,922,623 |  
|                               |  |      |           |      |   |           |  

| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Depreciation expenses included in the general
 and administrative expenses
 for the years ended December 31, 2009 and 2008 were $291,968 and $238,477
 respectively.

4.
REVOLVING LINES OF CREDIT AND LOAN FACILITIES

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has available to it a
 $5,128,205 revolving line of credit with DBS Bank with an outstanding balance
 of $5,378,000 at December 31, 2009 and $4,722,616 at December 31, 2008. The
 line of credit bears interest at the banks standard bills rate less 1% for
 HKD borrowings and at the banks standard bills rate less 0.50% for other
 currency borrowings as of December 31, 2009. The weighted average interest
 rate approximated 4.5% for 2009 and 4.4% for 2008.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The Company has available to it a $641,026
 factoring facility without recourse with DBS Bank without any outstanding
 balance at December 31, 2009. The factoring facility bears a discounting
 charge at the banks standard bills rate less 1% for advance in HKD or the
 banks standard bills rate less 0.50% for advance in other currency as of
 December 31, 2009. The weighted average interest rate approximated 4.5% for
 2009 and 4.5% for 2008.                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The Company has available to it a $384,615
 letter of guarantee with DBS Bank with an outstanding balance of $384,615 at
 December 31, 2009 and the letter of guarantee will expire on October 31,
 2010. The line of credit bears a commission of 1.5% per annum which will be
 refunded on a pro-rata basis upon return and cancellation of the letter of
 guarantee.                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The Company has available to it a
 $3,846,154 factoring facility with SCB with an outstanding balance of
 $888,000 at December 31, 2009. The factoring facility bears discounting
 charges at the banks standard bills rate less 0.75% rate for advances in HKD
 or the banks standard bills rates less 0.75% for advances in other currency
 as of December 31, 2009. The weighted average interest rate approximated
 4.75% for 2009 and 4.9% for 2008.                          

F-18

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

4.
REVOLVING LINES OF CREDIT AND LOAN FACILITIES (Continued)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has available to it a
 $3,076,923 revolving line of credit with The Bank of East Asia, Limited
 (BEA) with an outstanding balance of $2,747,813 at December 31, 2009 and
 $2,303,868 at December 31, 2008. The line of credit bears interest at the
 higher of Hong Kong prime rate plus 0.25% or HIBOR plus 2% for HKD facilities
 and LIBOR plus 2% for other currency facilities as of December 31, 2009. The
 weighted average interest rate approximated 5.5% for 2009 and 5.9% for 2008.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | The Company has available to it a $576,923
 revolving line of credit with Fubon Bank (Hong Kong) Limited (Fubon) with
 an outstanding balance of $308,947 at December 31, 2009 and $0 at December
 31, 2008. The line of credit bears interest at the Hong Kong prime rate plus
 0.5% as of December 31, 2009. The weighted average interest rate approximated
 5.75% for 2009.                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | The summary of banking facilities at
 December 31, 2009 is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                    |  |                      |            |                      |   |                          |  |   |           | 
|------------------- |  | -------------------- | ---------- | -------------------- | - | ------------------------ |  | - | --------- | 
|                    |  | Granted 
 facilities |            | Utilized
 facilities |   | Not utilized
 facilities | 
|                    |  |                      |            |                      |   |                          |  |   |           | 
|Overdraft           |  | $                    | 602,564    |                      | $ | 308,947                  |  | $ | 293,617   | 
|Instalment loan     |  |                      | 2,361,825  |                      |   | 2,361,825                |  |   |          | 
|Factoring loan      |  |                      | 4,487,179  |                      |   | 888,000                  |  |   | 3,599,179 | 
|Import/export loan  |  |                      | 8,205,128  |                      |   | 8,125,813                |  |   | 79,315    | 
|Term Loan           |  |                      | 859,081    |                      |   | 859,081                  |  |   |          | 
|Letter of guarantee |  |                      | 384,615    |                      |   | 384,615                  |  |   |          | 
|                    |  |                      |            |                      |   |                          |  |   |           | 
|                    |  | $                    | 16,900,392 |                      | $ | 12,928,281               |  | $ | 3,972,111 | 
|                    |  |                      |            |                      |   |                          |  |   |           | 

F-19

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

5. LONG-TERM DEBTS

Long-term debts were comprised of the following:

|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | -
|                                                                                                                                                                                                                                                                                                           |  | 2009 |           | 2008 |  
|                                                                                                                                                                                                                                                                                                          
|Installment loan having a
 maturity date in July 2026 and carrying an interest rate of 2.75% below the
 Hong Kong dollar Prime Rate (5.25% at December 31, 2009) to DBS Bank payable
 in monthly installments of $9,663 including interest through December 2009
 without any balloon payment requirements |  | $    | 1,572,720 |      | $ | 1,648,222 |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|Installment
 loan having a maturity date in July 2011 and carrying an interest rate of 2%
 below the Hong Kong dollar Prime Rate (5.25% at December 31, 2009) to DBS
 Bank payable in monthly installments of $3,782 including interest through
 December 2009 without any balloon payment requirements    |  |      | 69,949    |      |   | 112,312   |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|Installment
 loan having a maturity date in July 2023 and carrying an interest rate of
 2.5% below the Hong Kong dollar Prime Rate (5.25% at December 31, 2009) to
 DBS Bank payable in monthly installments of $5,240 including interest through
 December 2009 without any balloon payment requirements  |  |      | 719,156   |      |   | 761,624   |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|Installment loan having a maturity date in
 July 2014 and carrying an interest rate of 0.25% plus the Hong Kong dollar
 Prime Rate (5.25% at December 31, 2009) to BEA Bank payable in monthly
 installments of $16,111 including interest through December 2009 without any
 balloon payment requirements |  |      | 705,128   |      |   |          |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                           |  | $    | 3,066,953 |      | $ | 2,522,158 |  
|Less:
 current maturities                                                                                                                                                                                                                                                                                  |  |      | (318,972  | )    |   | (160,447  | )
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                           |  | $    | 2,747,981 |      | $ | 2,361,711 |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  

| |                                                               
| | --------------------------------------------------------------
| | An analysis of long-term debt as of December 31 is as follows:

|                                  |  |      |           |      |   |           | 
|--------------------------------- |  | ---- | --------- | ---- | - | --------- | 
|                                  |  | 2009 |           | 2008 |  
|                                  |  |      |           |      |   |           | 
|Current portion                   |  | $    | 318,972   |      | $ | 160,447   | 
|                                  |  |      |           |      |   |           | 
|After 1 year, but within 2 years  |  | $    | 586,013   |      | $ | 316,063   | 
|After 2 years, but within 5 years |  |      | 508,050   |      |   | 257,789   | 
|After 5 years                     |  |      | 1,653,918 |      |   | 1,787,859 | 
|                                  |  |      |           |      |   |           | 
|                                  |  | $    | 2,747,981 |      | $ | 2,361,711 | 
|                                  |  |      |           |      |   |           | 
|                                  |  | $    | 3,066,953 |      | $ | 2,522,158 | 
|                                  |  |      |           |      |   |           | 

F-20

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

5. LONG-TERM DEBTS
(Continued)

| |                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | With respect to all of the above referenced debt and credit
 arrangements in Note 4, the Company pledged its assets as collateral
 collectively to a bank group in Hong Kong comprised of DBS (formerly Overseas
 Trust Bank Limited), BEA and Fubon for all current and future borrowings from
 the bank group by the Company. In addition to the above pledged collateral,
 the debt is also secured by:
| |                                                                                                                                                                                                                                                                                                                                                                                                           
| | 1.                                                                                                                                                                                                                                                                                                                                                                                                         | a fixed cash
 deposit of $703,974 (HK$5,491,000), a security interest on two residential
 properties and a workshop located in Hong Kong owned by Atlantic, a wholly
 owned subsidiary of ACL, a security interest on a residential property
 located in Hong Kong owned by City, a related party, a workshop located in
 Hong Kong owned by Solution, a related party, plus a personal guarantee by
 Mr. Yang as collateral for loans from DBS Bank;
| |                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 2.                                                                                                                                                                                                                                                                                                                                                                                                         | a fixed cash
 deposit of $1,382,662 (HK$10,784,762), a workshop located in Hong Kong owned
 by Systematic Information, a related party, a workshop located in Hong Kong
 owned by Solution, a related party, plus an unlimited personal guarantee by
 Mr. Yang, as collateral for loans from BEA;                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 3.                                                                                                                                                                                                                                                                                                                                                                                                         | a security
 interest on residential properties located in Hong Kong owned by Aristo, a
 wholly owned company by Mr. Yang plus a personal guarantee by Mr. Yang as
 collateral for loans from Fubon.                                                                                                                                                                                                                                                  

F-21

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

6. CAPITAL LEASE
OBLIGATIONS

| |                                                                                 
| | --------------------------------------------------------------------------------
| | The Company has several non-cancellable capital leases relating to
 automobiles:

|                    |  |      |         |      |   |         | 
|------------------- |  | ---- | ------- | ---- | - | ------- | 
|                    |  | 2009 |         | 2008 |  
|                    |  |      |         |      |   |         | 
|Current portion     |  | $    | 318,135 |      | $ | 58,683  | 
|Non-current portion |  |      | 146,117 |      |   | 43,055  | 
|                    |  |      |         |      |   |         | 
|                    |  | $    | 464,252 |      | $ | 101,738 | 
|                    |  |      |         |      |   |         | 

| |                                                                           
| | --------------------------------------------------------------------------
| | At December 31, the value of automobiles under capital leases as
 follows:

|                               |  |      |          |      |   |         |  
|------------------------------ |  | ---- | -------- | ---- | - | ------- | -
|                               |  | 2009 |          | 2008 |  
|                               |  |      |          |      |   |         |  
|Cost                           |  | $    | 716,855  |      | $ | 193,514 |  
|Less: accumulated depreciation |  |      | (106,393 | )    |   | (51,463 | )
|                               |  |      |          |      |   |         |  
|                               |  | $    | 610,462  |      | $ | 142,051 |  
|                               |  |      |          |      |   |         |  

| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | At December
 31, the Company had obligations under capital leases repayable as follows:

|                                              |  |      |         |      |   |         |  
|--------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                              |  | 2009 |         | 2008 |  
|                                              |  |      |         |      |   |         |  
|Total minimum lease payments                  |  |      |         |      |   |         |  
|-Within one year                              |  | $    | 338,502 |      | $ | 65,055  |  
|- After one year but within 5 years           |  |      | 156,078 |      |   | 47,329  |  
|                                              |  |      |         |      |   |         |  
|                                              |  | $    | 494,580 |      | $ | 112,384 |  
|Interest expenses relating to future
 periods |  |      | (30,328 | )    |   | (10,646 | )
|                                              |  |      |         |      |   |         |  
|Present value of the minimum lease payments   |  | $    | 464,252 |      | $ | 101,738 |  
|                                              |  |      |         |      |   |         |  

F-22

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

7. INCOME TAXES

| |                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Income tax (refund) expense amounted to $651,390 for 2009 and
 $(33,871) for 2008 (an effective rate of 18% for 2009 and 0% for 2008). A
 reconciliation of the provision for income taxes with amounts determined by
 applying the statutory federal income tax rate of 34% to income before income
 taxes is as follows:

|                                                                                               |  |      |           |      |   |          |  
|---------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | -------- | -
|                                                                                               |  | 2009 |           | 2008 |  
|                                                                                               |  |      |           |      |   |          |  
|Computed tax at federal
 statutory rate                                                        |  | $    | 1,215,117 |      | $ | (70,292  | )
|Tax rate
 differential on foreign earnings of Atlantic and Aristo,
 Hong Kong based
 companies |  |      | (826,464  | )    |   | (121,297 | )
|Expenses
 not deductible for tax                                                               |  |      |          |      |   | 166,477  |  
|Unrecognized
 timing difference                                                                |  |      |          |      |   | 23,480   |  
|Tax
 under/(over) provision for Atlantic                                                       |  |      | 125,749   |      |   | (97,973  | )
|Net
 operating loss carry forward                                                              |  |      | 136,988   |      |   | 65,734   |  
|                                                                                               |  |      |           |      |   |          |  
|                                                                                               |  | $    | 651,390   |      | $ | (33,871  | )
|                                                                                               |  |      |           |      |   |          |  

| |                                                               
| | --------------------------------------------------------------
| | The income tax provision consists of the following components:

|        |  |      |         |      |   |         |  
|------- |  | ---- | ------- | ---- | - | ------- | -
|        |  | 2009 |         | 2008 |  
|        |  |      |         |      |   |         |  
|Federal |  | $    |        |      | $ |        |  
|Foreign |  |      | 651,390 |      |   | (33,871 | )
|        |  |      |         |      |   |         |  
|        |  | $    | 651,390 |      | $ | (33,871 | )
|        |  |      |         |      |   |         |  

| |                                                                           
| | --------------------------------------------------------------------------
| | The Components of the deferred tax assets and liabilities are as
 follows:

|                          |  |      |            |      |   |            |  
|------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                          |  | 2009 |            | 2008 |  
|                          |  |      |            |      |   |            |  
|Net operating losses      |  | $    | 1,259,714  |      | $ | 1,122,726  |  
|                          |  |      |            |      |   |            |  
|Total deferred tax assets |  | $    | 1,259,714  |      | $ | 1,122,726  |  
|Less: valuation allowance |  |      | (1,259,714 | )    |   | (1,122,726 | )
|                          |  |      |            |      |   |            |  
|                          |  | $    |           |      | $ |           |  
|                          |  |      |            |      |   |            |  

F-23

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

8. WEIGHTED AVERAGE NUMBER OF SHARES

| |                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company
 has a 2006 Incentive Equity Stock Plan, under which the Company may grant
 options to its employees for up to 5 million shares of common stock. There
 was no dilutive effect to the weighted average number of shares for the years
 ended December 31, 2009 and 2008 since there were no outstanding options at December
 31, 2009 and 2008.

9. CONCENTRATIONS OF CREDIT RISK AND MAJOR
CUSTOMERS

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company
 has a non-exclusive Distributorship Agreement with Samsung Electronics Hong
 Kong Co., Ltd. (Samsung), which was initially entered into in May 1993 and
 has been renewed annually. Under the terms of the agreement, Samsung
 appointed the Company on a non-exclusive basis as Samsungs distributor to
 distribute and market its products in the designated territory. The Company
 has the right to market and sell the products of other manufacturers and
 render service related to such activities, unless such activities result in
 the Companys inability to fulfill its obligations under the Agreement.
 However, the Company shall not purchase to sell any of the same product lines
 as Samsung produces and deals in from any other Korean manufacturer during
 the term of this Agreement. The most recent renewal of the Distributorship
 Agreement expired on February 28, 2010. As of March 1, 2010, Samsung has
 confirmed the annual renewal of such agreement for one year. Official signed
 agreement should be received by the Company in May 2010.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The
 Companys distribution operations are dependent on the availability of an
 adequate supply of electronic components under the Samsung brand name which
 have historically been principally supplied to the Company by the Hong Kong
 office of Samsung. The Company purchased 51% and 48%, of materials from
 Samsung for the years ended December 31, 2009 and 2008, respectively.
 However, there is no written supply contract between the Company and Samsung
 and, accordingly, there is no assurance that Samsung will continue to supply
 sufficient electronic components to the Company on terms and prices
 acceptable to the Company or in volumes sufficient to meet the Companys
 current and anticipated demand, nor can assurance be given that the Company
 would be able to secure sufficient products from other third party
 supplier(s) on acceptable terms.                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | In addition,
 the Companys operations and business viability are to a large extent
 dependent on the provision of management services and financial support by
 Mr. Yang. See Note 5 for details for Mr. Yangs support of the Companys
 banking facilities. At December 31, 2009 and 2008, included in accounts
 payable were $17,406,347 and $8,675,069, respectively, to Samsung.
 Termination of such distributorship by Samsung will significantly impair and
 adversely affect the continuation of the Companys business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | As of
 December 31, 2008, Samsung has withheld a total of $350,000 of
 rebate due to the Company as deposits. As agreed with Samsung, the deposits
 were fully refunded to the Company on January 22, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-24

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

10. RETIREMENT PLAN

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Under the
 Mandatory Provident Fund (MPF) Scheme Ordinance in Hong Kong, the Company
 is required to set up or participate in an MPF scheme to which both the
 Company and employees must make continuous contributions throughout their
 employment based on 5% of the employees earnings, subject to maximum and
 minimum level of income. For those earning less than the minimum level of
 income, they are not required to contribute but may elect to do so. However,
 regardless of the employees election, their employers must contribute 5% of
 the employees income. Contributions in excess of the maximum level of income
 are voluntary. All contributions to the MPF scheme are fully and immediately
 vested with the employees accounts. The contributions must be invested and
 accumulated until the employees retirement. The Company contributed and
 expensed $34,099 for 2009 and $29,650 for 2008.

11. COMMITMENTS

| |                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company
 leases its facilities. The following is a schedule by years of future minimum
 rental payments required under operating leases that have non-cancellable
 lease terms in excess of one year as of December 31, 2009:

|                         |  |                  |        |        |   |         |  |   |         | 
|------------------------ |  | ---------------- | ------ | ------ | - | ------- |  | - | ------- | 
|                         |  | Related
 parties |        | Others |   | Total   | 
|                        
|Year ending December 31, |  |                  |        |        |   |         |  |   |         | 
|2010                     |  | $                | 18,846 |        | $ | 201,516 |  | $ | 220,362 | 
|2011                     |  |                  | 13,077 |        |   | 155,628 |  |   | 168,705 | 
|Thereafter               |  |                  | 3,269  |        |   | 403,847 |  |   | 407,116 | 
|                         |  |                  |        |        |   |         |  |   |         | 
|Total                    |  | $                | 35,192 |        | $ | 760,991 |  | $ | 796,183 | 
|                         |  |                  |        |        |   |         |  |   |         | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | See Note 13
 for related party leases. All leases expire prior to December 31, 2014. Real
 estate taxes, insurance, and maintenance expenses are obligations of the
 Company. It is expected that in the normal course of business, leases that
 expire will be renewed or replaced by leases on other properties; thus, it is
 anticipated that future minimum lease commitments will likely be more than
 the amounts shown for 2009. Rent expense for the years ended December 31,
 2009 and 2008 totalled $136,017 and $142,985, respectively.

F-25

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

12. DERIVATIVE INSTRUMENTS

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|On February
 1, 2009, the Company adopted ASC 815 (formerly SFAS No. 161) as referenced in
 Note 2. The adoption of ASC 815 requires additional disclosures about
 Companys objectives and strategies for using derivative instruments, the
 accounting for the derivative instruments and related hedged items under ASC
 815 (formerly SFAS No. 133), Accounting for Derivative Instruments and
 Hedging Activities, and the effect of derivative instruments and related
 hedged items on the financial statements. The adoption had no financial
 impact on the consolidated condensed financial statements.                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Since all of
 the Company sales are done in USD, the bank is exposed to foreign currency
 exchange rate fluctuations in the normal course of its business. As part of
 its risk management strategy, the Company purchases FX forward contracts from
 the banks to secure the exchange rate for a period of time in order to hedge
 any FX exposure between HKD and USD throughout the purchase & sale
 period. The Company applies hedge accounting based upon the criteria
 established by ASC 815, whereby the Company designates its derivatives as
 cash flow hedges. Cash flows from the derivative programs were classified as
 operating activities in the Consolidated Statement of Cash Flows.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|As at
 December 31, 2009 there is a participating forward currency option agreement
 between the Company and SCB for the Company to buy US$500,000 from SCB at a
 contract rate of 7.735 at specified dated up to January 7, 2010. According to
 the terms of the agreement, the Company will buy USD in triple amounts if the
 spot rate is less than the contract rate at specified dates. The gain on this
 forward contract during the year ended December 31, 2009 was $12,564.                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|As at
 December 31, 2009, there is a target redemption forward currency option
 agreement between the Company and SCB for the Company to buy US$750,000 from
 SCB at a lower strike contract rate of 7.75 and an upper strike contract rate
 of 7.85 at specified dates up to April 29, 2010. According to the terms of
 the agreement, the Company will buy USD in triple amounts if the spot rate is
 less than the lower strike contract rate or greater than the upper strike
 contract rate at specified dates. The gain on this forward contract during
 the year ended December 31, 2009 was $1,260.                                                                                             

F-26

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

12. DERIVATIVE INSTRUMENTS (Continued)

There are
three foreign currency exchange agreements that matured as of December 31, 2009.
These agreements are:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pivot bonus
 forward currency option agreement between the Company and SCB for the Company
 to buy US$1,000,000 from SCB at a lower strike contract rate of 7.73 and an
 upper strike contract rate 7.749 at specified dates up to July 2, 2009.
 According to the terms of the agreement, the Company will buy in triple
 amounts if the spot rate is less than the lower strike contract rate. The
 gain on this forward contract during the year ended December 31, 2009 was
 $35,897.                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The Company
 has holdings of US$500,000 Commodity Basket Linked Notes which were issued by
 SCB at specified dates up to February 17, 2009. According to the terms of
 agreements, the Company will receive interest at a rate equal to 6% if the
 Basket Return is larger than 0% and 100% redeemed if the Basket Return is
 less than or equal to 0% on the maturity date. The Company fully redeemed the
 securities at cost value on the maturity date of February 17, 2009.                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | As at
 December 31, 2009, there is a cancellable target redemption forward currency
 option agreement between the Company and SCB for the Company to buy
 US$1,000,000 from SCB at a lower strike contract rate of 7.725 and an upper
 strike contract rate of 7.75 at specified dates up to March 1, 2010.
 According to the terms of the agreement, the Company will buy USD in triple
 amounts if the spot rate is less than the lower strike contract rate or
 greater than the upper strike contract rate at specified dates. The gain on
 this forward contract during the year ended December 31, 2009 was $29,257.

The gross
notional and fair values of derivative financial instruments in the
Consolidated Balance Sheet as of December 31, 2009 were as follows:

|                                                                      |  |                         |           |                        |   |                                                      |  |                             |   |                    |   |   |  |   |   | 
|--------------------------------------------------------------------- |  | ----------------------- | --------- | ---------------------- | - | ---------------------------------------------------- |  | --------------------------- | - | ------------------ | - | - |  | - | - | 
|                                                                      |  | As of December 31, 2009 |           |                        |   |                                                     
|                                                                      |  | Gross
 Notional(1)      |           | Other
 current
 assets |   | Long-term
 Financing
 Receivables
 and Other
 Assets |  | Other
 Accrued
 Liabilities |   | Other
 Liabilities |  
|Derivatives designated as hedging instruments under ASC 815           |  |                         |           |                        |   |                                                      |  |                             |   |                    |   |   |  |   |   | 
|Cash flow hedges:                                                     |  |                         |           |                        |   |                                                      |  |                             |   |                    |   |   |  |   |   | 
|Foreign exchange contracts                                            |  | $                       | 1,500,000 |                        | $ |                                                     |  | $                           |  |                    | $ |  |  | $ |  | 
|Total derivatives not designated as hedging instruments under ASC 815 |  |                         |          |                        |   |                                                     |  |                             |  |                    |   |  |  |   |  | 
|                                                                      |  |                         |           |                        |   |                                                      |  |                             |   |                    |   |   |  |   |   | 
|Total derivatives                                                     |  | $                       | 1,500,000 |                        | $ |                                                     |  | $                           |  |                    | $ |  |  | $ |  | 
|                                                                      |  |                         |           |                        |   |                                                      |  |                             |   |                    |   |   |  |   |   | 

|    |                                                                                         
|--- | ----------------------------------------------------------------------------------------
|(1) | Represents
 the face amounts of contracts that were outstanding as of December 31, 2009.

F-27

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

12. DERIVATIVE INSTRUMENTS (Continued)

The before-tax
effect of derivative instruments in cash flow and net investment hedging
relationships for the year ended December 31, 2009 and 2008 was as follows:

|                                                   |  |                          |  |                                                                        |        |  |   |         |  
|-------------------------------------------------- |  | ------------------------ |  | ---------------------------------------------------------------------- | ------ |  | - | ------- | -
|                                                   |  |                          |  | Gain recognised in income on 
 derivative(1) 
 Year ended December 31, |       
|                                                   |  | Location                 |  |                                                                        | 2009   |  |   | 2008    |  
|Cash flow hedges:                                  |  |                          |  |                                                                        |        |  |   |         |  
|Foreign exchange contracts
 US$200,000 (HKD/USD)   |  | Interest
 and other, net |  | $                                                                      |       |  | $ | 12,644  |  
|Foreign exchange contracts
 USD500,000 (HKD/USD)   |  | Interest
 and other, net |  |                                                                        | 12,564 |  |   | 36,346  |  
|Foreign exchange contracts
 US$500,000 (HKD/USD)   |  | Interest
 and other, net |  |                                                                        |       |  |   | 11,538  |  
|Foreign exchange contracts
 USD500,000 (HKD/USD)   |  | Interest
 and other, net |  |                                                                        |       |  |   | 17,917  |  
|Foreign exchange contracts
 US$2,000,000 (CNY/USD) |  | Interest
 and other, net |  |                                                                        |       |  |   | (30,000 | )
|Foreign exchange contracts
 USD750,000 (HKD/USD)   |  | Interest
 and other, net |  |                                                                        | 1,260  |  |   | 56,433  |  
|Foreign exchange contracts
 US$1,000,000 (HKD/USD) |  | Interest
 and other, net |  |                                                                        | 35,897 |  |   | 56,410  |  
|Foreign exchange contracts
 US$1,000,000 (HKD/USD) |  | Interest
 and other, net |  |                                                                        | 29,257 |  |   |        |  
|                                                   |  |                          |  |                                                                        |        |  |   |         |  
|Total cash flow hedges                             |  |                          |  | $                                                                      | 78,978 |  | $ | 161,288 |  
|                                                   |  |                          |  |                                                                        |        |  |   |         |  

13. RELATED PARTY TRANSACTIONS

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Transactions with Aristo Technologies Limited / Mr. Yang                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | As of
 December 31, 2009 and 2008, we had an outstanding receivable from Mr. Yang,
 the President and Chairman of our Board of Directors, totaling $11,233,839
 and $7,900,404. These advances bear no interest and are payable on demand.
 The receivable due from Mr. Yang to the Company is derived from the
 consolidation of the financial statements of Aristo, a variable interest entity,
     with the Company. A repayment plan has been entered into (See Note 14 for
     details).
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | For the
 years ended December 31, 2009 and 2008, we recorded compensation to Mr. Yang
 of $1,300,000 and $735,026 respectively, and paid $1,300,000 and $735,026
 respectively to Mr. Yang as compensation to him.                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Transactions with Classic Electronic Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Mr. Ben
 Wong, one of our directors, is a 99.9% shareholder of Classic Electronics Ltd.
     (Classic). The remaining
 0.1% of Classic is owned by a non-related
 party. As of December 31, 2009 and 2008, the Company had outstanding accounts
 receivable from Classic totaling $0 and $1,717,320 respectively. This
 account receivable has been outstanding for more than 12 months in 2008 and
 paid off in 2009.                                                                       

F-28

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

13. RELATED PARTY TRANSACTIONS (Continued)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Transactions with Solution Semiconductor (China) Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Mr. Ben
 Wong, one of our directors, is a 99% shareholder of Solution Semiconductor
 (China) Ltd. (Solution). The remaining 1% of Solution is owned by a
 non-related party. On April 1, 2009, we entered into a lease agreement with
 Solution pursuant to which we lease one facility. The lease agreement for
 this facility expires on March 31, 2012. The monthly lease payment for this
 lease is $1,090. We incurred and paid an aggregate rent expense of $13,077
 and $13,077 to Solution during the year ended December 31, 2009 and 2008.                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | During the
 years ended December 31, 2009 and 2008, we purchased inventories of $10,138
 and $0 respectively from Solution. As of December 31, 2009 and 2008, there
 were no outstanding accounts payable to Solution.                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Two facilities
 located in Hong Kong owned by Solution were used by the Company as collateral
 for loans from Citic Ka Wah Bank Limited (Citic)and Standard Chartered Bank
 (Hong Kong) Limited (SCB) respectively.                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Transactions with Systematic Information Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is a director and shareholder of Systematic Information Ltd. (Systematic
 Information) with a total of 100% interest. On September 1, 2008, we entered
 into a lease agreement with Systematic Information pursuant to which we lease
 one facility. The lease agreement for this facility expires on August 31,
 2010. The monthly lease payment for this lease totals $641. We incurred and
 paid an aggregate rent expense of $7,692 and $7,692 to Systematic Information
 during the years ended December 31, 2009 and 2008.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | During the
 years ended December 31, 2009 and 2008, we received service charges of $5,436
 and $0 respectively from Systematic Information. The service fee was charged
 for back office support for Systematic Information.                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | During the
 years ended December 31, 2009 and 2008, we sold products for $326,578 and
 $1,913,071 respectively, to Systematic Information. As of December 31, 2009
 and 2008, there were no outstanding accounts receivables from Systematic
 Information.                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | During the
 years ended December 31, 2009 and 2008, we purchased inventories of $74,688
 and $1,446,680 respectively from Systematic Information. As of December 31,
 2009 and 2008, there were no outstanding accounts payable to Systematic
 Information.                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | A workshop
 located in Hong Kong owned by Systematic Information was used by the Company
 as collateral for loans from SCB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Transactions with Global Mega Development Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is the sole beneficial owner of the equity interest of Global Mega
 Development Ltd. (Global). During the years ended December 31, 2009 and
 2008, we sold products for $1,393 and $0 respectively, to Global. As of
 December 31, 2009 and 2008, there were no outstanding accounts receivables
 from Global.                                                                                                                                                                                                                  

F-29

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

13. RELATED PARTY TRANSACTIONS (Continued)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Transactions with Systematic Semiconductor Limited                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is the sole beneficial owner of the equity interest of Systematic
 Semiconductor Ltd. (Systematic). During the years ended December 31, 2009
 and 2008, we received a management fee of $9,615 and $15,384 respectively
 from Systematic. The management fee was charged for back office support for
 Systematic.                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | During the
 years ended December 31, 2009 and 2008, we sold products for $19,914 and
 $275,766 respectively, to Systematic. As of December 31, 2009 and 2008, there
 were no outstanding accounts receivables from Systematic.                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | During the
 years ended December 31, 2009 and 2008, we purchased inventories of $0 and
 $560,750 respectively from Systematic. As of December 31, 2009 and 2008,
 there were no outstanding accounts payable to Systematic.                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Transactions with Aristo Components Limited                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Mr. Ben
 Wong, one of our directors, is a 90% shareholder of Aristo Components Ltd.
 (Aristo Comp). The remaining 10% of Aristo Comp is owned by a non-related
 party. During the years ended December 31, 2009 and 2008, we received a
 management fee of $11,923 and $8,077 respectively from Aristo Comp. The
 management fee was charged for back office support for Aristo Comp.                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | During the
 years ended December 31, 2009 and 2008, we sold products for $12,060 and
 $67,968 respectively, to Aristo Comp. As of December 31, 2009 and 2008, there
 were no outstanding accounts receivables from Aristo Comp.                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | During the
 years ended December 31, 2009 and 2008, we purchased inventories of $241,367
 and $37,665 respectively from Aristo Comp. As of December 31, 2009 and 2008,
 there were no outstanding accounts payable to Aristo Comp.                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Transactions with Atlantic Storage Devices Limited                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is a 40% shareholder of Atlantic Storage Devices Ltd. (Atlantic Storage).
 The remaining 60% of Atlantic Storage is owned by a non-related party. During
 the years ended December 31, 2009 and 2008, we sold products for $337,946 and
 $575,386 respectively, to Atlantic Storage. As of December 31, 2009 and 2008,
 there were no outstanding accounts receivables from Atlantic Storage.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | During the
 years ended December 31, 2009 and 2008, we purchased inventories of $0 and
 $679,048 respectively, from Atlantic Storage. As of December 31, 2009 and
 2008, there were no outstanding accounts payable to Atlantic Storage.                                                                                                                                                                                                                                               

F-30

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

13. RELATED PARTY TRANSACTIONS (Continued)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Transactions with Rambo Technologies Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Mr. Ben
 Wong, one of our directors, is a 60% shareholder of Rambo Technologies Ltd.
 (Rambo). The remaining 40% of Rambo is owned by a non-related party. During
 the years ended December 31, 2009 and 2008, we sold products for $73,219 and
 $1,077,653 respectively, to Rambo. As of December 31, 2009 and 2008, there
 were no outstanding accounts receivables from Rambo.                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | During the
 years ended December 31, 2009 and 2008, we purchased inventories of $54,930
 and $10,314 respectively, from Rambo. As of December 31, 2009 and 2008, there
 were no outstanding accounts payable to Rambo.                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Transactions with Usmart Electronic Products Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is the sole beneficial owner of the equity interest of Usmart Electronic
 Products Ltd. (Usmart). On October 7, 2009, we entered into a leasing
 payment agreement with Usmart pursuant to which we lease one lot machinery facility
 to Usmart. The leasing payment agreement for this facility expires on
 September 16, 2011. The monthly lease income for this lease totals $3,846. We
 received aggregate lease income of $13,333 and $0 from Usmart during the
 years ended December 31, 2009 and 2008.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | During the
 years ended December 31, 2009 and 2008, we sold products for $4,837 and
 $5,509 respectively, to Usmart. As of December 31, 2009 and 2008, there were
 no outstanding accounts receivables from Usmart.                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | During the
 years ended December 31, 2009 and 2008, we purchased inventories of $42,596
 and $199,712 respectively, to Usmart. As of December 31, 2009 and 2008, there
 were no outstanding accounts payable to Usmart.                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Transactions Imax Technology Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is the sole beneficial owner of the equity interest of Imax Technology Ltd.
 (Imax). During the years ended December 31, 2009 and 2008, we purchased
 inventories of $0 and $3,167 respectively, to Imax. As of December 31, 2009
 and 2008, there was no outstanding accounts payable from Imax.                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Transactions with Kadatco Company Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Mr. Yang, the Company's Chief Executive Officer, majority shareholder
     and a director, is a 99.99% shareholder of Kadatco Company Limited (Kadatco).
     The remaining 0.01% of Kadatco is owned by a  non-related party. During
     the years ended December 31, 2009 and 2008, we purchased inventories of $24,895
     and $0 respectively, from Kadatco. As of December 31, 2009 and 2008,
     there were no outstanding  accounts payable to Kadatco.                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Transactions with City Royal Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is a 50% shareholder of City Royal Limited (City). The remaining 50% of
 City is owned by the wife of Mr. Yang. A residential property located in Hong
 Kong owned by City was used by the Company as collateral for loans from DBS
 Bank (Hong Kong) Limited (DBS Bank).                                                                                                                                                                                                                                  

F-31

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

14. SUBSEQUENT EVENTS

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In preparing
 these financial statements, the Company evaluated the events and transactions
 that occurred from January 1, 2010 through April 15, 2010, the date these
 financial statements are issued. The Company has made the required additional
 disclosures in reporting periods in which subsequent events occur.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | As discussed in Note 9 of the consolidated
         financial statements, the Company is dependent on one single vendor
         to supply its inventories. This vendor accounted for the majority of
         the Companys purchases for 2009. The
Companys non-exclusive distributorship agreement with this vendor has a
one-year term and contains certain sales quotas to be met by the Company. This
agreement has been renewed more than ten times, most recently on March 1, 2009
and expired on February 28, 2010. As of March 1, 2010, this vendor has confirmed
the annual renewal of such agreement for one year. The Company has already signed
a renewal agreement with Samsung. The Company expects to receive the return of
a fully executed renewal agreement in the next two months. Termination of such
distributorship agreement by this vendor would have a material adverse effect
on the operations of the Company.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Aristo agreed to repay the Company a monthly payment of HK$1,000,000 (approximately $128,205) over the course of 5 years beginning June 1, 2010. The repayment plan is subject to review by the
    Company from time to time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F-32

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

15. RESTATEMENTS

On January 7, 2010, the Company filed the consolidated balance sheets
as of December 31, 2009 and 2008, its consolidated statements of income,
stockholders equity and cash flow for the year ended December 31, 2008, in
Form 10K/A (Amendment No. 2) Part IV Item 15 Page F-1- F-26 with the Securities
and Exchange Commission (SEC). The Company received a comment letter from the
Office of the Chief Accountant of the Division of Corporation Finance of SEC
regarding certain disclosures in the Companys financial statements for
the year ended December 31, 2008. The Company determined to re-do the 2007 and
2008 audit and restate the financial statements. The restated financial statements
will be filed with SEC. The effects of the restatements are shown in the
following tables.

CONSOLIDATED
BALANCE SHEETS

|                                                                                     |  |              |            |          |   |            | 
|------------------------------------------------------------------------------------ |  | ------------ | ---------- | -------- | - | ---------- | 
|                                                                                     |  | Original     |            | Restated |  
|                                                                                     |  |              |            |          |  
|                                                                                     |  | December 31, |           
|                                                                                     |  |              |           
|ITEMS                                                                                |  | 2008         |            | 2008     |  
|                                                                                     |  |              |            |          |  
|ASSETS                                                                               |  |              |            |          |   |            | 
|Current assets                                                                       |  |              |            |          |   |            | 
|Cash and cash equivalents                                                            |  | $            | 1,784,355  |          | $ | 1,943,463  | 
|Restricted cash                                                                      |  |              | 5,169,753  |          |   | 5,169,753  | 
|Accounts receivable, net of
 allowance for doubtful accounts of $0 for 2009 and 2008 |  |              | 10,230,464 |          |   | 10,342,453 | 
|Accounts receivable, related
 parties                                                |  |              | 8,412,729  |          |   | 1,717,320  | 
|Inventories, net                                                                     |  |              | 2,060,195  |          |   | 3,668,568  | 
|Restricted marketable
 securities                                                    |  |              | 500,000    |          |   | 500,000    | 
|Income tax refundable                                                                |  |              |           |          |   |           | 
|Other current assets                                                                 |  |              | 30,051     |          |   | 525,918    | 
|                                                                                     |  |              |            |          |   |            | 
|Total current assets                                                                 |  | $            | 28,187,547 |          | $ | 23,867,475 | 
|Property, plant
 and equipment, net                                                  |  |              | 6,007,456  |          |   | 6,922,623  | 
|Other deposits                                                                       |  |              | 392,069    |          |   | 396,900    | 
|Amounts
     due from Aristo / Mr. Yang                                              |  |              |           |          |   | 7,900,404  | 
|                                                                                     |  |              |            |          |   |            | 
|TOTAL ASSETS                                                                         |  | $            | 34,587,072 |          | $ | 39,087,402 | 
|                                                                                     |  |              |            |          |   |            | 

F-33

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

15.
RESTATEMENTS (Continued)

CONSOLIDATED
BALANCE SHEETS (Continued)

|                                                      |  |              |            |          |   |            | 
|----------------------------------------------------- |  | ------------ | ---------- | -------- | - | ---------- | 
|                                                      |  | Original     |            | Restated |  
|                                                      |  | December 31, |           
|ITEMS                                                 |  | 2008         |            | 2008     |  
|                                                      |  |              |            |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                  |  |              |            |          |   |            | 
|Current liabilities                                   |  |              |            |          |   |            | 
|Accounts payable                                      |  | $            | 13,669,779 |          |   | 17,318,949 | 
|Accruals                                              |  |              | 396,755    |          |   | 409,367    | 
|Lines of credit and loan
 facilities                  |  |              | 16,447,742 |          |   | 16,447,742 | 
|Current portion of long-term
 debt                    |  |              | 160,447    |          |   | 160,447    | 
|Current portion of capital
 lease                     |  |              | 58,683     |          |   | 58,683     | 
|Income tax payable                                    |  |              | 5,588      |          |   | 5,588      | 
|Due to shareholders for
 converted pledged collateral |  |              | 112,385    |          |   | 112,385    | 
|Other current liabilities                             |  |              | 301,076    |          |   | 508,073    | 
|                                                      |  |              |            |          |   |            | 
|Total current liabilities                             |  | $            | 31,152,455 |          | $ | 35,021,234 | 
|                                                      |  |              |            |          |   |            | 
|Long-term liabilities                                 |  |              |            |          |   |            | 
|Long-term debt, less current
 portion                 |  |              | 2,361,711  |          |   | 2,361,711  | 
|Capital lease, less current
 portion                  |  |              | 43,055     |          |   | 43,055     | 
|Deferred tax liabilities                              |  |              |           |          |   | 8,343      | 
|                                                      |  |              |            |          |   |            | 
|Total long-term liabilities                           |  |              | 2,404,766  |          |   | 2,413,109  | 
|Deferred tax                                          |  |              | 8,343      |          |   |           | 
|                                                      |  |              |            |          |   |            | 
|TOTAL LIABILITIES                                     |  |              | 33,565,564 |          |   | 37,434,343 | 
|                                                      |  |              |            |          |   |            | 
|Commitments and contingencies                         |  | $            |           |          | $ |           | 
|                                                      |  |              |            |          |   |            | 

F-34

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

15.
RESTATEMENTS (Continued)

CONSOLIDATED
BALANCE SHEETS (Continued)

|                                                                                                                                |  |   |            |   |   |            |  
|------------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- | - | - | ---------- | -
|STOCKHOLDERS
 EQUITY                                                                                                           |  |   |            |   |   |            |  
|Common stock, $.001 par value;
 50,000,000 shares authorized; 28,329,936 shares issued and outstanding as of
 December 31, 2008 |  | $ | 28,330     |   | $ | 28,330     |  
|                                                                                                                                |  |   |            |   |   |            |  
|Additional paid in capital                                                                                                      |  |   | 3,593,027  |   |   | 3,593,027  |  
|Amount due from
 stockholder/director                                                                                           |  |   | (39,633    | ) |   |           |  
|Accumulated losses                                                                                                              |  |   | (2,560,216 | ) |   | (1,968,298 | )
|                                                                                                                                |  |   |            |   |   |            |  
|                                                                                                                                |  |   | 1,021,508  |   |   | 1,653,059  |  
|                                                                                                                                |  |   |            |   |   |            |  
|TOTAL
 LIABILITIES AND STOCKHOLDERS EQUITY                                                                                     |  |   | 34,587,072 |   |   | 39,087,402 |  
|                                                                                                                                |  |   |            |   |   |            |  

As a result of restatement of the consolidated balance sheet as of
December 31, 2008, total assets increased from $34,587,072 as originally
reported, to $39,087,402, an increase of $4,500,330. The increase of total
assets was derived from an increase of $159,108 in cash and cash equivalents,
an increase of $111,989 in accounts receivable, a decrease of $6,695,409
in accounts receivables from related parties, an increase of $1,608,373 in
inventories, an increase of $495,867
in other current assets, an increase of $915,167 in property, plant and equipment,
an increase of $4,831 in other deposits, and an increase of $7,900,404 in amounts due from
stockholder/director.

The total liabilities increased from $33,565,564 as
originally reported, to $37,434,343, an increase of $3,868,779. The increase
    of total liabilities was derived from an increase $3,649,170 in accounts
    payable, an increase of $12,612 in accruals, and an increase of $206,997
    in other current liabilities.

The total stockholders equity was restated from $1,021,508 as
originally reported, to $1,653,059, an increase of $631,551. The
increase of total stockholders equity was derived from a decrease of $591,918
in accumulated losses, and a reclassification of  $39,633 in amount due from to
stockholder/director from stockholders equity.

The total liabilities and stockholders
equity were restated from $34,587,072 as originally reported, to $39,087,402,
an increase of $4,500,330.

F-35

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

15.
RESTATEMENTS (Continued)

CONSOLIDATED STATEMENTS OF INCOMEAND COMPREHENSIVE INCOME

|                                                      |  |                                 |              |          |   |              |  
|----------------------------------------------------- |  | ------------------------------- | ------------ | -------- | - | ------------ | -
|                                                      |  | Original                        |              | Restated |  
|                                                      |  |                                 |              |          |  
|                                                      |  | For the year ended December 31, |             
|                                                      |  |                                 |             
|ITEMS                                                 |  | 2008                            |              | 2008     |  
|                                                      |  |                                 |              |          |  
|Net sales                                             |  | $                               | 206,082,770  |          | $ | 209,556,926  |  
|Costs of sales                                        |  |                                 | (201,880,793 | )        |   | (205,388,286 | )
|                                                      |  |                                 |              |          |   |              |  
|Gross profit                                          |  | $                               | 4,201,977    |          | $ | 4,168,640    |  
|Selling and distribution costs                        |  |                                 | (76,072      | )        |   | (82,285      | )
|General and administrative
 expenses                  |  |                                 | (4,099,249   | )        |   | (3,315,840   | )
|                                                      |  |                                 |              |          |   |              |  
|Income from operation                                 |  | $                               | 26,656       |          | $ | 770,515      |  
|Other income (expenses)                               |  |                                 |              |          |   |              |  
|Rental income                                         |  |                                 | 89,231       |          |   | 89,231       |  
|Interest expenses                                     |  |                                 | (1,073,795   | )        |   | (1,073,798   | )
|Profit on disposals of
 equipment                     |  |                                 |              |          |   |             |  
|Loss on disposal of marketable
 securities            |  |                                 | (227,781     | )        |   | (227,781     | )
|Unrealised gain on disposal of
 marketable securities |  |                                 |              |          |   |             |  
|Management and service income                         |  |                                 | 23,462       |          |   | 23,462       |  
|Net income on cash flow hedge                         |  |                                 | 161,288      |          |   | 161,288      |  
|Director life insurance policy
 refund                |  |                                 |              |          |   |             |  
|Exchange differences                                  |  |                                 | (48,677      | )        |   | (48,677      | )
|Interest income                                       |  |                                 | 90,706       |          |   | 90,706       |  
|                                                     
|Miscellaneous                                         |  |                                 | 3,000        |          |   | 8,311        |  
|                                                      |  |                                 |              |          |   |              |  
|Loss before income taxes                              |  | $                               | (955,910     | )        | $ | (206,743     | )

F-36

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

15. RESTATEMENTS (Continued)

CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME (Continued)

|                                                       |  |                                 |            |          |   |            |  
|------------------------------------------------------ |  | ------------------------------- | ---------- | -------- | - | ---------- | -
|                                                       |  | Original                        |            | Restated |  
|                                                       |  |                                 |           
|                                                       |  | For the year ended December 31, |           
|                                                       |  |                                 |           
|ITEMS                                                  |  | 2008                            |            | 2008     |  
|                                                       |  |                                 |            |          |   |            |  
|                                                       |  |                                 |            |          |   |            |  
|Income taxes                                           |  | $                               | 33,871     |          | $ | 33,871     |  
|                                                       |  |                                 |            |          |   |            |  
|Net loss                                               |  | $                               | (922,039   | )        | $ | (172,872   | )
|                                                       |  |                                 |            |          |   |            |  
|Loss per share  basic and diluted                     |  | $                               | (0.03      | )        | $ | (0.01      | )
|                                                       |  |                                 |            |          |   |            |  
|Weighted average number of shares  basic
 and diluted |  |                                 | 28,329,936 |          |   | 28,329,936 |  
|                                                       |  |                                 |            |          |   |            |  

As a result of
restatement of consolidated income and comprehensive income for the year ended
December 31, 2008, total net loss decreased from $922,039 as originally
reported to $172,872, a decrease of $749,167. The decreased loss was composed
of an increase of $3,474,156 in net sales, an increase of $3,507,493 in costs of sales,
an increase of $6,213 in selling and distribution costs, a decrease of $783,409 in general
and administrative expenses, an increase of $3 in interest expenses, and an increase
of $5,311 in sundry income.

F-37

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                             |  |                                 |            |          |   |            |  
|---------------------------------------------------------------------------- |  | ------------------------------- | ---------- | -------- | - | ---------- | -
|                                                                             |  | Original                        |            | Restated |  
|                                                                             |  |                                
|                                                                             |  | For the year ended December 31, |           
|                                                                             |  |                                
|ITEMS                                                                        |  | 2008                            |            | 2008     |  
|                                                                             |  |                                 |            |          |   |            |  
|                                                                             |  |                                 |            |          |   |            |  
|Cash flows from operating activities                                         |  |                                 |            |          |   |            |  
|Net loss                                                                     |  | $                               | (922,039   | )        | $ | (172,872   | )
|Depreciation and amortisation                                                |  |                                 | 238,477    |          |   | 238,477    |  
|Change in inventory reserve                                                  |  |                                 | (190,000   | )        |   | (190,000   | )
|Loss on disposal of marketable
 securities                                   |  |                                 | 227,782    |          |   | 227,781    |  
|Loss on revaluation of
 properties                                           |  |                                 | 883,116    |          |   |           |  
|                                                                             |  |                                 |            |          |   |            |  
|Adjustments to reconcile net loss
 to net cash used in operating activities: |  |                                 |            |          |   |            |  
|Accounts receivable  other                                                  |  |                                 | (2,635,680 | )        |   | (2,715,435 | )
|Accounts receivable  related parties                                        |  |                                 | (456,965   | )        |   | 539        |  
|Inventories                                                                  |  |                                 | 1,613,799  |          |   | 289,588    |  
|Other assets                                                                 |  |                                 | (4,824     | )        |   | (9,656     | )
|Income tax refundable                                                        |  |                                 | 49,375     |          |   | 49,375     |  
|Other current assets                                                         |  |                                 | 53,010     |          |   | (436,734   | )
|Accounts payable                                                             |  |                                 | 1,077,094  |          |   | 4,448,749  |  
|Accrued expenses                                                             |  |                                 | 210,017    |          |   | 213,411    |  
|Income tax payable                                                           |  |                                 | 5,588      |          |   | 5,588      |  
|Other current liabilities                                                    |  |                                 | 32,503     |          |   | 239,501    |  
|Deferred tax                                                                 |  |                                 | (7,128     | )        |   | (7,128     | )
|                                                                             |  |                                 |            |          |   |            |  

F-38

---



|                                              
|----------------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES      
|                                              
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
|                                              
|AS OF DECEMBER 31, 2009 AND 2009 AND          
|THE YEARS ENDED DECEMBER 31, 2009 AND 2008    
|(Stated in US Dollars)                        
|                                              

15.
RESTATEMENTS (Continued)

CONSOLIDATED STATEMENTS OF CASH FLOWS(Continued)

|                                                                                         |  |                                 |           |          |   |            |  
|---------------------------------------------------------------------------------------- |  | ------------------------------- | --------- | -------- | - | ---------- | -
|                                                                                         |  | Original                        |           | Restated |  
|                                                                                         |  |                                 |          
|                                                                                         |  | For the year ended December 31, |          
|ITEMS                                                                                    |  | 2008                            |           | 2008     |  
|                                                                                         |  |                                 |           |          |  
|                                                                                         |  |                                 |           |          |   |            |  
|Net cash provided by operating activities                                                |  | $                               | 174,125   |          | $ | 2,181,184  |  
|                                                                                         |  |                                 |           |          |   |            |  
|                                                                                         |  |                                 |           |          |   |            |  
|Cash flows from investing activities                                                     |  |                                 |           |          |   |            |  
|Advance (to) from stockholders                                                           |  | $                               | 36,365    |          | $ | (1,842,916 | )
|Increase in restricted cash                                                              |  |                                 | (966,696  | )        |   | (966,696   | )
|Increase in restricted
 marketable securities                                            |  |                                 | (500,000  | )        |   | (500,000   | )
|Cash proceeds from sales of
 marketable securities and restricted marketable securities  |  |                                 | 946,229   |          |   | 946,229    |  
|Purchase of property, plant and equipment                                                |  |                                 | (132,513  | )        |   | (164,565   | )
|                                                                                         |  |                                 |           |          |   |            |  
|Net cash used in investing
 activities                                                   |  | $                               | (616,615  | )        | $ | (2,527,948 | )
|                                                                                         |  |                                 |           |          |   |            |  
|                                                                                         |  |                                 |           |          |   |            |  
|Cash flows from financing activities                                                     |  |                                 |           |          |   |            |  
|Net borrowings on lines of
 credit and notes payable                                     |  | $                               | 837,254   |          | $ | 837,254    |  
|Principal payments under
 long-term debt                                                 |  |                                 | (152,321  | )        |   | (152,321   | )
|Principal payments under
 capital lease obligation                                       |  |                                 | (55,762   | )        |   | (55,762    | )
|                                                                                         |  |                                 |           |          |   |            |  
|Net cash provided by financing activities                                                |  | $                               | 629,171   |          | $ | 629,171    |  
|                                                                                         |  |                                 |           |          |   |            |  
|Net cash and cash equivalents sourced                                                    |  |                                 | 186,681   |          |   | 282,407    |  
|                                                                                         |  |                                 |           |          |   |            |  
|Cash and cash equivalentsbeginning
 of year                                             |  |                                 | 1,597,674 |          |   | 1,661,056  |  
|                                                                                         |  |                                 |           |          |   |            |  
|Cash and cash equivalentsend
 of year                                                   |  |                                 | 1,784,355 |          |   | 1,943,463  |  
|                                                                                         |  |                                 |           |          |   |            |  
|                                                                                         |  |                                 |           |          |   |            |  
|Supplementary cash flow
 information:                                                    |  |                                 |           |          |   |            |  
|Interest paid                                                                            |  | $                               | 1,073,795 |          | $ | 1,073,798  |  
|Income tax paid                                                                          |  |                                 | 57,582    |          |   | 57,582     |  
|Income tax refund                                                                        |  |                                 | 139,289   |          |   | 139,289    |  
|                                                                                         |  |                                 |           |          |   |            |  
|Supplementary schedule of
 non-cash investing and financing activities:                  |  |                                 |           |          |   |            |  
|Capital lease obligations
 incurred when capital leases were entered for new automobiles |  | $                               | 62,538    |          | $ | 62,538     |  
|                                                                                         |  |                                 |           |          |   |            |  

As a result of the restatement, the net cash
provided by operating activities for the year ended December 31, 2008 increased
by $2,007,059 from $174,125 as originally reported, to $2,181,184; net cash used
in investing activities increased by $1,911,333 from $616,615 as originally
reported, to $2,527,948. The cash and cash equivalents at end of year was increased by $159,108
from $1,784,355 as originally reported, to $1,943,463 owing to the
reclassification of cash and cash equivalents to restricted cash.

F-39

---



|                                                     
|-----------------------------------------------------
|ACL SEMICONDUCTORS INC. AND
           SUBSIDIARIES  
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL
           STATEMENTS
|                                                     
|AS OF DECEMBER 31, 2009 AND
           2009 AND      
|THE YEARS ENDED DECEMBER 31,
           2009 AND 2008
|(Stated in US Dollars)                               
|                                                     
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES             
|                                                     
|SCHEDULE II                                          
|                                                     
|VALUATION AND QUALIFYING ACCOUNTS AND RESERVES       
|YEARS ENDED DECEMBER 31, 2009 AND 2008               

|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|--------------------------------------------- |  | -------------------------------------- | --------- | ------------------------------- | - | ---------- |  | -------------------------------- | ------- |  | - | --------- | 
|                                              |  | Balance
 at the Beginning
 of the Year |           | Charged
 to Costs
 and Expenses |   | Deductions |  | Balance
 At the End
 of the Year |        
|                                              |  |                                        |           |                                 |   |            |  |                                  |        
|Allowance for Doubtful
 Accounts:             |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Year ended December 31,
 2008                 |  | $                                      |          |                                 | $ |           |  | $                                |        |  | $ |          | 
|Year ended December 31,
 2009                 |  | $                                      |          |                                 | $ |           |  | $                                |        |  | $ |          | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Inventory Obsolescence
 Reserve:              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Year ended December 31,
 2008                 |  | $                                      | 564,103   |                                 | $ |           |  | $                                | 190,000 |  | $ | 374,103   | 
|Year ended December 31,
 2009                 |  | $                                      | 374,103   |                                 | $ |           |  | $                                | 26,970  |  | $ | 347,133   | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Valuation Allowance for
 Deferred Tax Assets: |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Year ended December 31,
 2008                 |  | $                                      | 1,056,992 |                                 | $ | 65,734     |  | $                                |        |  | $ | 1,122,726 | 
|Year ended December 31,
 2009                 |  | $                                      | 1,122,726 |                                 | $ | 136,988    |  | $                                |        |  | $ | 1,259,714 | 

|                                        
|----------------------------------------
|ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
|                                        
|SCHEDULE III                            
|                                        
|QUARTERLY INFORMATION (UNAUDITED)       

The summarized quarterly financial data
presented below reflects all adjustments, which in the opinion of management,
are of a normal and recurring nature necessary to present fairly the results of
operations for the periods presented.

|                              |  |                                              |         |        |   |        |   |        |        |       |   |        |  |   |        |  
|----------------------------- |  | -------------------------------------------- | ------- | ------ | - | ------ | - | ------ | ------ | ----- | - | ------ |  | - | ------ | -
|                              |  | (dollars in thousands except per share data) |        
|                              |  |                                              |        
|                              |  | Total                                        |         | Fourth |   | Third  |   | Second |        | First |  
|                              |  |                                              |         |        |   |        |   |        |        |       |  
|2009                          |  |                                              |         |        |   |        |   |        |        |       |   |        |  |   |        |  
|Total net sales               |  | $                                            | 304,655 |        | $ | 90,357 |   | $      | 75,973 |       | $ | 75,892 |  | $ | 62,433 |  
|Gross profit                  |  |                                              | 8,479   |        |   | 654    |   |        | 2,414  |       |   | 2,553  |  |   | 2,858  |  
|Net income (loss)             |  |                                              | 2,923   |        |   | (317   | ) |        | 987    |       |   | 1,084  |  |   | 1,169  |  
|Net income (loss) per
 share: |  |                                              |         |        |   |        |   |        |        |       |   |        |  |   |        |  
|basic and diluted             |  |                                              | 0.10    |        |   | (0.01  | ) |        | 0.03   |       |   | 0.04   |  |   | 0.04   |  
|                              |  |                                              |         |        |   |        |   |        |        |       |   |        |  |   |        |  
|2008                          |  |                                              |         |        |   |        |   |        |        |       |   |        |  |   |        |  
|Total net sales               |  | $                                            | 209,557 |        | $ | 57,614 |   | $      | 51,849 |       | $ | 46,603 |  | $ | 53,491 |  
|Gross profit                  |  |                                              | 4,169   |        |   | 697    |   |        | 1,747  |       |   | 1,394  |  |   | 331    |  
|Net income (loss)             |  |                                              | (173    | )      |   | (294   | ) |        | 571    |       |   | 365    |  |   | (815   | )
|Net income (loss) per
 share: |  |                                              |         |        |   |        |   |        |        |       |   |        |  |   |        |  
|basic and diluted             |  |                                              | (0.01   | )      |   | (0.01  | ) |        | 0.02   |       |   | 0.01   |  |   | (0.03  | )

S-1

---