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

|            |                   | 
|----------- | ----------------- | 
|FORM
10-K/A
|(Mark One)  | (Amendment
No. 3) | 

|  |                                                                                                
|- | -----------------------------------------------------------------------------------------------
|þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934           
|  | For the
 fiscal year ended December 31, 2008                                                   
|  | 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)

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|--------------------------------------------------------------------------------------------------- |  | ---------------------------------------
|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: 011-852-3666-9939

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

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|----------------------------------------------------------- |  | -----------------------------------------
|Title of each class                                         |  | Name of each exchange on which registered
|NONE                                                        |  | N/A                                      
|                                                            |  |                                          
|                                                            |  |                                          
|Securities registered pursuant to Section 12(g) of the Act:
|                                                           
|Common Stock, $0.001 par value                             
|                                                           
|(Title of class)                                           

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|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------
|Indicate by
 check mark if the registrant is a well-known seasoned issuer, as defined in
 Rule 405 of the Securities Act.                                                                                                                                                                                                                                                                                                                                                                                                                               | oYes þNo
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |         
|Indicate by
 check mark if the registrant is not required to file reports pursuant to
 Section 13 or 15(d) of the Act.                                                                                                                                                                                                                                                                                                                                                                                                                                  | oYes þNo
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |         
|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.þYes oNo                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |         
|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.)                              
                              
                         
                  
                                          oYes oNo
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |         
|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.                                                                                                                                                                                                                                                       

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|--------------------------------------------------------------------------------------------------------- | ---------------------------- | 
|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). | oYes þNo                    

The aggregate market value of the voting common equity held by
non-affiliates of the registrant as of June 30, 2008 was approximately
$1,427,985 based upon the closing price of $0.24 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 April 13, 2009 was 28,729,936.

DOCUMENTS INCORPORATED BY REFERENCE

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|NONE
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Table of Contents

Form 10-K Index

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|------------------------------------------ | ----------------------------------------------------------------------------------------------------------------- | --- | ----
|                                           |                                                                                                                   |     | PAGE
|                                           |                                                                                                                   |     |     
|                                           | EXPLANATORY NOTE                                                                                                  |     | 1   
|                                           |                                                                                                                   |     |     
|                                           | FORWARD LOOKING STATEMENT                                                                                         |     | 2   
|                                           |                                                                                                                   |     |     
|PART I                                    
|                                           |                                                                                                                   |     |     
|Item 1.                                    | Business                                                                                                          |     | 2   
|Item 1A.                                   | Risk Factors                                                                                                      |     | 5   
|Item 1B.                                   | Unresolved Staff Comments                                                                                         |     | 8   
|Item 2.                                    | Properties                                                                                                        |     | 8   
|Item 3.                                    | Legal Proceedings                                                                                                 |     | 9   
|Item 4.                                    | Submission of Matters to a Vote of Security Holders                                                               |     | 9   
|                                           |                                                                                                                   |     |     
|PART II                                   
|                                           |                                                                                                                   |     |     
|Item 5.                                    | Market for the Registrants Common Equity, Related Stockholder
 Matters and Issuer Purchases of Equity Securities |     | 10  
|Item 6.                                    | Selected Financial Data                                                                                           |     | 11  
|Item 7.                                    | Managements Discussion and Analysis of Financial Condition and
 Results of Operations                            |     | 11  
|Item 7A.                                   | Quantitative and Qualitative Disclosures About Market Risk                                                        |     | 20  
|Item 8.                                    | Financial Statements and Supplementary Data                                                                       |     | 20  
|Item 9.                                    | Changes in and Disagreements with Accountants on Accounting and
 Financial Disclosure                             |     | 20  
|Item 9AT.                                  | Controls and Procedures                                                                                           |     | 21  
|Item 9B.                                   | Other Information                                                                                                 |     | 23  
|                                           |                                                                                                                   |     |     
|PART III                                  
|                                           |                                                                                                                   |     |     
|Item 10.                                   | Directors, Executive Officers and Corporate Governance                                                            |     | 24  
|Item 11.                                   | Executive Compensation                                                                                            |     | 25  
|Item 12.                                   | Security Ownership of Certain Beneficial Owners and Management and
 Related Stockholder Matters                   |     | 28  
|Item 13.                                   | Certain Relationships and Related Transactions, and Director
 Independence                                        |     | 29  
|Item 14.                                   | Principal Accounting Fees and Services                                                                            |     | 31  
|                                           |                                                                                                                   |     |     
|PART IV                                   
|                                           |                                                                                                                   |     |     
|Item 15.                                   | Exhibits and Financial Statement Schedules                                                                        |     | 32  
|Signatures                                 |                                                                                                                   | 35 
|Index to Consolidated Financial Statements |                                                                                                                   | F-1

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EXPLANATORY NOTE

This is the Amendment No. 3 to the Registrants Annual Report on Form
10-K/A for the year ended December 31, 2008 dated May 4, 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.

This Form 10-K/A amends and restates Item 1 of Part I, Item 1A of Part
I, Item 7 of Part II, Item 9AT of Part II, Item 10 of Part II, Item 11 of Part
II, Item 13 of Part III, Report of Independent Registered Public Accounting
Firm, Consolidated Financial Statements and the Notes to Consolidated Financial
Statements of Part IV. This amendment also adds a restatement footnote as Note
15 of the Notes to Consolidated Financial Statements of Part IV. No other
information included in the previous Form 10-K/A is amended hereby.

For convenience and ease of reference, the Company is filing the Annual
Report in its entirety with applicable changes. Unless otherwise stated, all
information contained in this amendment is as of December 31, 2008, the end of
the fiscal year covered by the Annual Report. Except as stated herein, this
Form 10-K/A does not reflect events or transactions occurring after such filing
date or modify or update those disclosures in the Annual Report that may have
been affected by events or transactions occurring subsequent to such filing
date. No information in the Annual Report other than as set forth above is
amended hereby. Currently-dated certifications from our Chief Executive Officer
and our Chief Financial Officer have been included as exhibits to this
amendment.

1

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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.

2

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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, Micron, 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, 2008, pricing for the Samsung memory products
ranged from approximately $0.17 to $750 per product depending on the product
specifications.

The Distribution Agreement has a one-year term. The
Distribution Agreement has been renewed more than ten times, most recently on
March 1, 2009.

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 2008,
Samsung NAND Flash revenue was approximately US$4,614 million, representing
40.4% 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, workstations and
servers, handheld computer devices, cellular phones, camcorders, MP3 music
players, digital answering machines and game boxes, DVD player, STB (set-top
box), 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.

3

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Customers

As of
December 31, 2008, 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 43% of the Companys net sales for the year ended December 31,
2008, no other customer accounted for more than 25% of the Companys net sales
for 2008 and 2007, respectively. 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, 2008, the Company employed a total of 24 sales and marketing
personnel, each of whom has several years experience in the memory products
industry. 11 of these salespeople are stationed in the Companys headquarters
in Hong Kong, and 13 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, 2008, 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, Micron, 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, 2008, 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.

4

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Employees

As of
December 31, 2008, 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 and 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, prospects, 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 this amended Form 10-K for the
year ended 2008 and in an amended Form 10-K for the year ended 2007 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 Sarbanes
Oxley 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.

5

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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 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.

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, 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.

6

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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.

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 78.9% 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, 2009, the
closing price of our Common Stock fluctuated from a per share high of $2.95 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, 2008,
there were 28,329,936 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.

7

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| |                                                                                                                                                                     |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

|         |                          
|-------- | -------------------------
|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 offices occupy approximately 4,989 square feet and are located at
B24-B27, 1/F., Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon
Bay, Kowloon, Hong Kong, which was acquired from Classic, 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.

We lease a warehouse
unit of approximately 1,846 square feet that 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, from May 23, 2007 to May 22, 2009, from Lin
Chin Hsiung with monthly lease payments of HK$16,800 (approximately US$2,154).

We lease a
warehouse unit of approximately 873 square feet that 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 from Systematic Information Limited
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 that is located at B10, 1/F.,
Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon Bay, Kowloon,
Hong Kong. The lease was for two years with Solution Semiconductor (China) Ltd.
and expired on March 31, 2009, with monthly rentals of HK$8,500 (approximately
US$1,090). The lease continues on a month-to-month basis and the Company
expects to renew it. Mr. Ben Wong, one of our directors, is also a 99%
shareholder of Solution Semiconductor (China) Ltd.

We leased a
warehouse unit of approximately 3,000 square feet located at 6/F, Kevin Wong
Development Building, 11 Tai Yip Street, Kwun Tong, Kowloon, Hong Kong. The
lease was for two years with Kevin Wong Holding Limited and expired on January
24, 2009, with monthly rental payments of HK$12,800 (approximately US$1,641).

We lease an
office unit of approximately 2,682.9 square feet that is located at Room 2208,
22/F., Building A, United Plaza, No.5022 Binhe Road, Futian Centre, Shenzhen,
China. The lease is from August 24, 2007 to 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 located at No. 76, 5th
Street, Hong Lok Yuen, Tai Po, New Territories, Hong Kong, which is leased to
Macdermid Hong Kong Limited from August 1, 2007 to August 31, 2009 with monthly
lease income of HK$58,000 (approximately US$7,436).

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.

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

8

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|        |                  
|------- | -----------------
|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. | Submission of Matters to a Vote of Security Holders

No matters
were submitted to a vote of security holders during the three months ended
December 31, 2008.

9

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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, 2009         |  |      |      |     |   |      | 
|Quarter ended March 31, 2009         |  | $    | 0.28 |     | $ | 0.14 | 
|                                     |  |      |      |     |   |      | 
|Fiscal Year ended December 31, 2008: |  |      |      |     |   |      | 
|Quarter ended December 31, 2008      |  | $    | 0.40 |     | $ | 0.15 | 
|Quarter ended September 30, 2008     |  | $    | 0.40 |     | $ | 0.21 | 
|Quarter ended June 30, 2008          |  | $    | 0.27 |     | $ | 0.12 | 
|Quarter ended March 31, 2008         |  | $    | 0.15 |     | $ | 0.09 | 
|                                     |  |      |      |     |   |      | 
|Fiscal Year ended December 31, 2007  |  |      |      |     |   |      | 
|Quarter ended December 31, 2007      |  | $    | 0.10 |     | $ | 0.07 | 
|Quarter ended September 30, 2007     |  | $    | 0.14 |     | $ | 0.07 | 
|Quarter ended June 30, 2007          |  | $    | 0.15 |     | $ | 0.10 | 
|Quarter ended March 31, 2007         |  | $    | 0.11 |     | $ | 0.10 | 

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 April 6, 2009, the last reported sale price of our Common Stock, as reported
by the OTC Bulletin Board, was $0.20 per share.

As
of April 6, 2009, there were approximately 209 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.

10

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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 regrant 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, 2008, 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, 2008, 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 $0.17 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, 2008 and 2007, the largest 5 customers accounted
for 62% and 51% of our net sales, respectively. As of December 31, 2008, we had
net current liabilities of $11,153,759 and an accumulated deficit of $1,968,298.
We generated net sales of $209,556,926 for the year ended December 31, 2008 and
recorded a net loss of $172,872. In addition, during the year ended December
31, 2008, net cash provided by operating activities amounted to $2,181,184.

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.

11

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Net sales

Net
sales are recognized upon the transfer of legal title of the electronic
components to customers.

As
of December 31, 2008 we had over 150 active customers. Net sales for fiscal
year 2008 were $209,556,926, which increased by 25.7% or $42,785,320 compared
to fiscal year 2007. The major sales increase came from the first half of 2008
due to expansion in China market share and the reduction in production
capacities by Samsungs rival, Hynix, and other memory makers, which led to
larger demand for Samsungs products. The net sales for the quarter ended
December 31, 2008 (2008 4th Quarter) was $57,613,777, representing an
increase of 7.5% compared to $53,600,270 for the quarter ended December 31,
2007 (2007 4th Quarter). The sales increase is clearly smaller due to the
impacts on market demand, financial support and cash flow due to recent
economic conditions. More memory makers such as Qimonda, Elpida and Micron
reported strong cutbacks in production capacities to clear up excess supply.
With large amounts of supplies pouring into the market, the prices of memory
components have dropped significantly. Through the Companys expanded network,
sales volume has increased significantly to maintain high sales turnover during
recent economic conditions.

The
Companys gross profit for fiscal year 2008 was $4,168,640, representing a 8.6%
increase compared to $3,837,950 for fiscal year 2007. The growth was due to the
successful promotional campaign with Samsung in the second quarter and the high
demand for consumer electronics from the Olympic Games in the third quarter.
The gross profit for 2008 4th Quarter was $696,623, as compared to $867,600 for
2007 4th Quarter, representing a 19.7% decrease. The gross profit margin for
the Company for 2008 4th Quarter was 1.2%, compared to 1.6% for the corresponding
quarter in 2007. The decrease in gross profit margin was mainly due to low unit
prices caused by oversupply of products. Even though manufacturers reduced
their production capacities, recent economic conditions still have a strong
impact on market demand. This has led to inventory consumption problems and
caused manufacturers to dump excess inventories at very low prices. Due to slow
price adjustments from Samsung, the Company had to bear the difference between
the contract prices and market prices, which caused the gross profit margin to
decrease. Furthermore, it has also affected the Companys rebate income.

The
Company predicts that the demand for memory components will start to increase
as supplies decrease due to the reduction in production capacities and as
excess inventory levels decrease. The Company forecasts that the unit price of
memory components will increase in the first quarter of 2009. Moreover, the
Company believes that Samsung will further strengthen its cost competitiveness
by increasing its 56nm DRAM market share, and its 35nm and 42nm NAND Flash
market share. This would greatly increase the Companys gross profit margin.
Furthermore, the Company believes that the current situation may present
opportunities for Samsung to further increase its market share while the other
memory makers are reducing their production capacities or restructuring. The
Company believes its sales turnover and gross profit margin will increase by a
sufficient amount in 2009.

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
situation. 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 98.0% for the year ended December 31, 2008 and approximately
97.7% for the year ended December 31, 2007.

Operating Expenses

Our
operating expenses for the years ended December 31, 2008 and 2007 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 2009. 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.

12

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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 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. In addition, we write down unproven, excess and obsolete inventories to
net realizable value. This policy requires us to make a number of estimates and
assumptions including market and economic conditions, product lifecycles and
forecast demand for our product to value our inventory. To the extent actual
results differ from these estimates and assumptions, the balances of reported
inventory and cost of products sold will change accordingly.

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, 2008 and 2007 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$) |             
|                                            |  | 2008                          |              | 2007       |  
|                                            |  | (Restated)                    |              | (Restated) |  
|                                            |  |                               |              |            |  
|                                            |  |                               |              |            |   |              |  
|Net sales                                   |  | $                             | 209,556,926  |            | $ | 166,771,606  |  
|Cost of sales                               |  |                               | (205,388,286 | )          |   | (162,933,656 | )
|                                            |  |                               |              |            |   |              |  
|Gross profit                                |  |                               | 4,168,640    |            |   | 3,837,950    |  
|                                            |  |                               |              |            |   |              |  
|Operating expenses:                         |  |                               |              |            |   |              |  
|Sales and marketing                         |  |                               | (82,285      | )          |   | (73,508      | )
|General and administrative                  |  |                               | (3,315,840   | )          |   | (3,066,995   | )
|                                            |  |                               |              |            |   |              |  
|Total operating expenses                    |  |                               | (3,398,125   | )          |   | (3,140,503   | )
|                                            |  |                               |              |            |   |              |  
|                                            |  |                               |              |            |   |              |  
|Income from operations                      |  |                               | 770,515      |            |   | 697,447      |  
|Other income (expenses)                     |  |                               | (977,258     | )          |   | (230,771     | )
|                                            |  |                               |              |            |   |              |  
|(Loss) income before income taxes provision |  |                               | (206,743     | )          |   | 466,676      |  
|Income taxes (provision) reversal           |  |                               | 33,871       |            |   | (187,833     | )
|                                            |  |                               |              |            |   |              |  
|Net (loss) income                           |  | $                             | (172,872     | )          | $ | 278,843      |  
|                                            |  |                               |              |            |   |              |  

13

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Year Ended December 31, 2008 Compared to the
Year Ended December 31, 2007

Net Sales

| |                         |             |      |   |             |  |       | 
| | ----------------------- | ----------- | ---- | - | ----------- |  | ----- | 
| | Year Ended December 31, |             |      |  
| | 2008                    |             | 2007 |   | % Change    | 
| |                         |             |      |   |             | 
|
| | $                       | 209,556,926 |      | $ | 166,771,606 |  | 25.7% | 

Sales
increased by $42,785,320 or 25.7% from $166,771,606 for the year ended December
31, 2007 to $209,556,926 for the year ended December 31, 2008. The increase was
mainly due to expansion in South China market share and the reduction in
production capacities by Samsung, resulting in a higher turnover when compared
to the year ended December 31, 2007.

Cost of Sales

| |                         |             |      |   |             |  |       | 
| | ----------------------- | ----------- | ---- | - | ----------- |  | ----- | 
| | Year Ended December 31, |             |      |  
| | 2008                    |             | 2007 |   | % Change    | 
| |                         |             |      |   |             | 
|
| | $                       | 205,388,286 |      | $ | 162,933,656 |  | 26.1% | 

Cost of
sales increased $42,454,630 or 26.1%, from $162,933,656 for the year ended
December 31, 2007 to $205,388,286 for the year ended December 31, 2008. 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, |           |      |  
| | 2008                    |           | 2007 |   | % Change  | 
| |                         |           |      |   |           | 
|
| | $                       | 4,168,640 |      | $ | 3,837,950 |  | 8.6% | 

Gross
profit increased by $330,690 or 8.6% from $3,837,950 for the year ended
December 31, 2007 to $4,168,640 for the year ended December 31, 2008. The
slight increase in gross profit amount is mainly due to the increase in net
sales. The gross profit percentage decreased to 2% of revenue for the year
ended December 31, 2008 compared to 2.3% of revenue for the year ended December
31, 2007, as a result of recent economic conditions that have had a strong
impact on market demand and low unit prices caused by oversupply. We expect the
gross profit for the year ended December 31, 2009 to remain at approximately
the same level as in the year ended December 31, 2008.

Sales and Marketing

| |                         |        |      |   |          |  |       | 
| | ----------------------- | ------ | ---- | - | -------- |  | ----- | 
| | Year Ended December 31, |        |      |  
| | 2008                    |        | 2007 |   | % Change | 
| |                         |        |      |   |          | 
|
| | $                       | 82,285 |      | $ | 73,508   |  | 11.9% | 

Sales and
marketing expenses increased by $8,777, or 11.9%, from $73,508 for the year
ended December 31, 2007 to $82,285 for the year ended December 31, 2008. The
increase was in proportion to the increase in net sales for the year 2008. We
expect the sales and marketing expenses for the year ended December 31, 2009 to
remain at approximately the same level as the year ended December 31, 2008.

General and Administrative

| |                         |           |      |   |           |  |      | 
| | ----------------------- | --------- | ---- | - | --------- |  | ---- | 
| | Year Ended December 31, |           |      |  
| | 2008                    |           | 2007 |   | % Change  | 
| |                         |           |      |   |           | 
|
| | $                       | 3,315,840 |      | $ | 3,066,995 |  | 8.1% | 

General and
administrative expenses increased $248,845 or 8.1% from $3,066,995 for the year
ended December 31, 2007 to $3,315,840 for the year ended December 31, 2008.
This increase was primarily attributable to an increase in Shenzhen office
expenses during the year 2008. We intend to continue to keep general and
administrative expenses for the year ended December 31, 2009 at approximately
the same level as the year ended December 31, 2008.

14

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Income from Operations

| |                         |         |      |   |          |  |       | 
| | ----------------------- | ------- | ---- | - | -------- |  | ----- | 
| | Year Ended December 31, |         |      |  
| | 2008                    |         | 2007 |   | % Change | 
| |                         |         |      |   |          | 
|
| | $                       | 770,515 |      | $ | 697,447  |  | 10.5% | 

Income from
operations was $770,515 for the year ended December 31, 2008 compared to
$697,447 for the year ended December 31, 2007, an increase of $73,068. This
increase was mainly due to increase in gross profit.

Interest Expense

| |                         |           |      |   |           |  |      | 
| | ----------------------- | --------- | ---- | - | --------- |  | ---- | 
| | Year Ended December 31, |           |      |  
| | 2008                    |           | 2007 |   | % Change  | 
| |                         |           |      |   |           | 
|
| | $                       | 1,073,798 |      | $ | 1,009,010 |  | 6.4% | 

Interest
expense increased $64,788, or 6.4%, from interest expense of $1,009,010 in the
year ended December 31, 2007, to $1,073,798 in the year ended December 31,
2008. This increase was mainly due to an increase in the Companys need to open
and draw down on letters of credit to obtain goods from its suppliers. We
expect to keep interest expenses for the year ended December 31, 2009 at
approximately the same level as in the year ended December 31, 2008.

Unrealized Gains on Pledged Marketable
Securities

| |                         |   |      |   |          |  |     | 
| | ----------------------- | - | ---- | - | -------- |  | --- | 
| | Year Ended December 31, |   |      |  
| | 2008                    |   | 2007 |   | % Change | 
| |                         |   |      |   |          | 
|
| | $                       |  |      | $ | 404,780  |  | N/A | 

Unrealized
gains on pledged marketable securities decreased by $404,780 from $404,780 in
the year ended December 31, 2007, to $0 in the year ended December 31, 2008.
This decrease was mainly due to all pledged marketable securities being sold
during the year ended December 31, 2008. The profits were reclassified to the
loss on disposal of marketable securities.

Loss on Dispositions of Marketable Securities

| |                         |          |      |   |          |  |     | 
| | ----------------------- | -------- | ---- | - | -------- |  | --- | 
| | Year Ended December 31, |          |      |  
| | 2008                    |          | 2007 |   | % Change | 
| |                         |          |      |   |          | 
|
| | $                       | (227,781 | )    | $ |         |  | N/A | 

Loss on
disposal of marketable securities increased by $227,781, from $0 in the year
ended December 31, 2007 to $227,781 in the year ended December 31, 2008. This
increase was due to sales of marketable securities at profits of $176,999
during the year end December 31, 2008, adjusted to reflect losses of $227,781
after deductions of $404,780 of unrealized gains as recognized revenue in the
year ended December 31, 2007.

Net Income on Cash Flow Hedge

| |                         |         |      |   |          |  |        | 
| | ----------------------- | ------- | ---- | - | -------- |  | ------ | 
| | Year Ended December 31, |         |      |  
| | 2008                    |         | 2007 |   | % Change | 
| |                         |         |      |   |          | 
|
| | $                       | 161,288 |      | $ | 64,590   |  | 149.7% | 

Net income
on cash flow hedge increased by $96,698 from $64,590 in the year ended December
31, 2007 to $161,288 in the year ended December 31, 2008. This increase was due
to the Company entering into more currency hedging contracts through its banks
in 2008. Details of the currency hedging contracts can be found in Note 12 of
the Notes to Consolidated Financial Statements.

Interest Income

| |                         |        |      |   |          |  |        | 
| | ----------------------- | ------ | ---- | - | -------- |  | ------ | 
| | Year Ended December 31, |        |      |  
| | 2008                    |        | 2007 |   | % Change | 
| |                         |        |      |   |          | 
|
| | $                       | 90,706 |      | $ | 169,055  |  | -46.3% | 

Interest
income decreased by $78,349 from $169,055 in the year ended December 31, 2007
to $90,706 in the year ended December 31, 2008 principally as a result of a
reduction in interest rates during 2008.

15

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Income Tax Provision (reversal)

| |                         |         |      |   |          |  |         | 
| | ----------------------- | ------- | ---- | - | -------- |  | ------- | 
| | Year Ended December 31, |         |      |  
| | 2008                    |         | 2007 |   | % Change | 
| |                         |         |      |   |          | 
|
| | $                       | (33,871 | )    | $ | 187,833  |  | -118.0% | 

Income tax
provision decreased by $221,704 from $187,833 for the year ended December 31,
2007 compared to income tax credits of $33,871 for the year ended December 31,
2008. This decrease in income tax provision in 2008 was attributable to a
refund for income tax expenses paid in previous years rather than a decrease in
net income in 2008 from 2007. The effective tax rate is 0% for 2008 as compared
to 40% for 2007.

Net Income

| |                         |          |      |   |          |  |         | 
| | ----------------------- | -------- | ---- | - | -------- |  | ------- | 
| | Year Ended December 31, |          |      |  
| | 2008                    |          | 2007 |   | % Change | 
| |                         |          |      |   |          | 
|
| | $                       | (172,872 | )    | $ | 278,843  |  | -162.0% | 

Our net
income decreased by $451,715 from $278,843 for the year ended December 31, 2007
compared to a net loss of $172,872 for the year ended December 31, 2008. This
decrease was mainly due to the decrease in profit margin and other income.

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, 2008, the Company had revolving lines of credit and loan
facilities in the aggregate amount of $30,943,589, of which $11,334,309 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. Subsequent to December
31, 2008, the Company terminated two credit lines with the banks in an
aggregate amount of $2,884,616 or 9.3% of the Companys total credit and loan
facilities. In connection therewith, $1,597,436 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.

To address
the reduction in available credit facilities, the Company is relying on its own
cash reserves and cash flows from operations to fund its ongoing operations and
has tightened the credit terms it extends to its customers. As a result, the
Company does not expect that the reduction in available credit facilities is
going to have a materially adverse impact upon its operations for the
foreseeable future.

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.

16

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Net Cash Provided by Operating Activities

In the year
ended December 31, 2008, net cash provided by operating activities amounted to
$2,181,184 while in the year ended December 31, 2007, it amounted to
$7,170,779, a decrease of $4,989,595. This decrease was primarily due to a
$2,750,961 increase in accounts receivable, which was partially offset by a $1,127,565
decrease in inventory, and decreases of $3,411,728 in accounts payable and
increase of $331,679 in accrued expenses.

Net Cash Used for Investing Activities

In the year
ended December 31, 2008, net cash used for investing activities amounted to
$2,527,948 while in the year ended December 31, 2007, it amounted to
$12,394,037, a decrease of $9,866,089. This decrease was primarily due to sales
of investments in marketable securities, decrease in amount due to Aristo / Mr.
Yang, and no real property acquisition activity during the year 2008.

Net Cash Provided by Financing Activities

In the year
ended December 31, 2008, net cash provided by financing activities amounted to
$629,171 while in the year ended December 31, 2007, it amounted to $5,436,828,
a decrease of $4,807,657. This decrease was due to the Company repayment of
certain bank lines of credit and cancellation of bank facilities.

Contractual Obligations

The following table presents our contractual obligations as of December
31, 2008 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                               |  | $      | 78,433     |                    | $ | 53,333     |  | $          | 25,100  |                | $ |        |  | $ |          | 
|Line of credit and notes payable 
 short-term |  |        | 16,447,742 |                    |   | 16,447,742 |  |            |        |                |   |        |  |   |          | 
|Short term loans                               |  |        | 10,016     |                    |   | 10,016     |  |            |        |                |   |        |  |   |          | 
|Long term loans                                |  |        | 2,613,994  |                    |   | 209,114    |  |            | 359,232 |                |   | 257,789 |  |   | 1,787,859 | 
|                                               |  |        |            |                    |   |            |  |            |         |                |   |         |  |   |           | 
|Total Contractual Obligations                  |  | $      | 19,150,185 |                    | $ | 16,720,205 |  | $          | 384,332 |                | $ | 257,789 |  | $ | 1,787,859 | 
|                                               |  |        |            |                    |   |            |  |            |         |                |   |         |  |   |           | 

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 taking necessary steps to reduce our dependence on Samsung, including
looking into the potential acquisition of a company.

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

17

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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.

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, 2010 and made necessary
changes accordingly including but not limited to filing amendments for the
prior relevant periods to comply with applicable requirements.

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

18

---



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.

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 change if required.

19

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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.

20

---



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

(a) Disclosure 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.

Limitations
on the Effectiveness of Disclosure Controls. In designing and evaluating
the Companys disclosure controls and procedures, management recognized that
disclosure controls and procedures, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
disclosure controls and procedures are met. Additionally, in designing
disclosure controls and procedures, Company management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship of possible
disclosure controls and procedures. The design of any disclosure controls and
procedures also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.

Evaluation
of Disclosure Controls and Procedures. The Companys CEO and CFO have
evaluated the effectiveness of the design and operation of the Companys
disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e) as of December 31, 2008, and based on this evaluation, the
Companys principal executive and financial officers have concluded that the
Companys disclosure controls and procedures were not effective to ensure that
material information is recorded, processed, summarized and reported by
management of the Company on a timely basis in order to comply with the
Companys disclosure obligations under the Exchange Act and the rules and
regulations promulgated thereunder. The Companys principal executive and
financial officers conclusion regarding the Companys disclosure controls and
procedures is based on managements conclusion that the Companys internal
control over financial reporting are ineffective, as described below.

(b) Management Report on Internal Control over Financial Reporting

The
Companys CEO and CFO are responsible for establishing and maintaining adequate
internal control over financial reporting, as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Our internal control system was designed to
provide reasonable assurance to the companys management and board of directors
regarding the preparation and fair presentation of published financial
statements. All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.

In making
its assessment of internal control over financial reporting management used the
criteria issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework. Because of the
material weakness described in the following paragraphs, management believes
that, as of December 31, 2008, the companys internal control over financial
reporting was not effective based on those criteria.

Managements
evaluation was retrospective and conducted as of December 31, 2008, the last
day of the fiscal year covered by this Form 10-K. Based upon managements
evaluation, our CEO and CFO have concluded that our internal controls over
financial reporting were not effective as of December 31, 2008 because we have
not completed the remediation discussed elsewhere in this below for the fiscal
year ended December 31, 2008 due to the following material weaknesses:

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;                  

21

---



|  |                                                                                                                                                                                                                                                                                                                                                                                 |                                                                        
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                | 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;                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                
| | 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 this amended Form 10-Ks for the year ended 2008
and in amended Form 10-K for year ended 2007 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.

22

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As of
December 31, 2008, 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.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 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, 2008 that
have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

|         |                  
|-------- | -----------------
|Item 9B. | Other Information

None.

23

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PART III

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

Directors and Executive Officers

Our directors and executive officers, as of December 31, 2008, and
their biographical information are set forth below:

|                      |  |     |  |                                                                
|--------------------- |  | --- |  | ---------------------------------------------------------------
|NAME                  |  | AGE |  | POSITION                                                       
|                      |  |     |  |                                                                
|Chung-Lun
 Yang       |  | 47  |  | Chairman of
 the Board of Directors and Chief Executive Officer
|Ben Wong              |  | 45  |  | Director                                                       
|Kenneth
 Lap-Yin Chan |  | 46  |  | 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.

Board Meetings

During the
fiscal year ended December 31, 2008, our Board of Directors held 4 meetings. No
director who served during the fiscal year ended December 31, 2008 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.

24

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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, 2008 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.

Named Executive Officers

The named
executive officers for the fiscal year ended December 31, 2008 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/A as the Named Executive Officers.

25

---



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 may provide the Named
Executive Officers with compensation opportunities.

ELEMENTS OF OUR EXECUTIVE COMPENSATION
PROGRAM

Base Salary

We pay a
base salary to our 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 2008 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 2008.

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.

Option Exercises and Stock Vested

No options
have been exercised by our Named Executive Officers during the fiscal year
ended December 31, 2008.

26

---



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, 2008 and December 31, 2007.

Summary Compensation Table

|                             |  |      |      |        |   |         |  |               |   |                |  |                                      |  |                                                                               |   |                            |  |       |  |  |   |  |   |        |  |   |         | 
|---------------------------- |  | ---- | ---- | ------ | - | ------- |  | ------------- | - | -------------- |  | ------------------------------------ |  | ----------------------------------------------------------------------------- | - | -------------------------- |  | ----- |  |  | - |  | - | ------ |  | - | ------- | 
|Name and
 Principal Position |  | Year |      | Salary |   | Bonus   |  | Stock
 Awards |   | Option
 Awards |  | Non-EquityIncentive PlanCompensation |  | Change in
 Pension Value
 and
 Nonqualified
 Deferred
 Compensation
 Earnings |   | All Other
 Compensation(1) |  | Total | 
|                             |  |      |      | ($)    |   | ($)     |  | ($)           |   | ($)            |  | ($)                                  |  | ($)                                                                           |   | ($)                        |  | ($)   | 
|                             |  |      |      |        |   |         |  |               |   |                |  |                                      |  |                                                                               |   |                            |  |       |  | 
|                             |  |      |      |        |   |         |  |               |   |                |  |                                      |  |                                                                               |   |                            |  |       |  |  |   |  |   |        |  |   |         | 
|Chung-Lun
 Yang,             |  |      | 2008 |        | $ | 735,026 |  |               |  |                |  |                                     |  |                                                                               |  |                            |  |      |  |  |  |  |   |       |  | $ | 735,026 | 
|Chief Executive              |  |      | 2007 |        | $ | 812,821 |  |               |  |                |  |                                     |  |                                                                               |  |                            |  |      |  |  |  |  | $ | 17,521 |  | $ | 830,342 | 
|Officer and                  |  |      |      |        |   |         |  |               |   |                |  |                                      |  |                                                                               |   |                            |  |       |  |  |   |  |   |        |  |   |         | 
|Chairman of the              |  |      |      |        |   |         |  |               |   |                |  |                                      |  |                                                                               |   |                            |  |       |  |  |   |  |   |        |  |   |         | 
|Board                        |  |      |      |        |   |         |  |               |   |                |  |                                      |  |                                                                               |   |                            |  |       |  |  |   |  |   |        |  |   |         | 
|                             |  |      |      |        |   |         |  |               |   |                |  |                                      |  |                                                                               |   |                            |  |       |  |  |   |  |   |        |  |   |         | 
|Kenneth Lap
 Yin             |  |      | 2008 |        | $ | 64,615  |  |               |  |                |  |                                     |  |                                                                               |  |                            |  |      |  |  |  |  |   |       |  | $ | 64,615  | 
|Chan, Chief                  |  |      | 2007 |        | $ | 72,435  |  |               |  |                |  |                                     |  |                                                                               |  |                            |  |      |  |  |  |  |   |       |  | $ | 72,435  | 
|Financial Officer            |  |      |      |        |   |         |  |               |   |                |  |                                      |  |                                                                               |   |                            |  |       |  |  |   |  |   |        |  |   |         | 

|    |                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Yangs
 other annual compensation includes rent and housing allowance in the amount
 of $0 for the year ended December 31, 2008 and $17,521 for the year ended
 December 31, 2007.

Outstanding equity awards at fiscal year-end

None.

Compensation of Directors

Except with
respect to Ben Wong who was paid fees of $64,615 during the year ended December
31, 2008 for his role as Sales Director of Atlantic, none of our directors who
served during the year ended December 31, 2008 received compensation for
serving as such, other than reimbursement for out of pocket expenses incurred
in attending director meetings.

27

---



|         |                                                                                                
|-------- | -----------------------------------------------------------------------------------------------
|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, 2008: (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 28,329,936
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, 2008. 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)                                                |  | 22,380,000             |  | 78.9%                 | 
|No. 78, 5th
 Street, Hong Lok Yuen, Tai Po, New Territories, Hong Kong |  |                        |  |                       | 
|                                                                       |  |                        |  |                       | 
|Ben Wong (3)                                                           |  | 0                      |  | 0.0%                  | 
|19B, Tower
 8, Bellagio, 33 Castle Peak Road, Sham Tseng,              |  |                        |  |                       | 
|New
 Territories, Hong Kong                                            |  |                        |  |                       | 
|                                                                       |  |                        |  |                       | 
|Kenneth
 Lap-Yin Chan (2)                                              |  | 0                      |  | 0.0%                  | 
|Flat B,
 8/F., Block 19, South Horizons, Aplei Chau, Hong Kong         |  |                        |  |                       | 
|                                                                       |  |                        |  |                       | 
|All
 Directors and Officers as a Group                                 |  | 22,380,000             |  | 78.9%                 | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Applicable percentage of ownership is based on 28,329,936 shares of
 Common Stock outstanding as of December 31, 2008, together with securities
 exercisable or convertible into shares of Common Stock within 60 days of
 December 31, 2008, 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, 2008, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

28

---



|         |                                                                           
|-------- | --------------------------------------------------------------------------
|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.

CERTAIN RELATED PERSON TRANSACTIONS

Transactions with Aristo Technologies Limited
/ Mr. Yang

As of December 31, 2008 and 2007, we had an outstanding receivable from
Mr. Yang, the President and Chairman of our Board of Directors, totaling
$7,900,404 and $6,057,488 respectively. Because the Companys business is
distributing computer components and is heavily dependant on Samsung, Mr. Yang
took a loan from the Company and used it to invest in other companies to create
new business platforms. These business platforms include manufacturing,
research and development, which Mr. Yang believes can help improve the Companys
business in the long term. 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.

For the years ended December 31, 2008 and 2007, we recorded
compensation to Mr. Yang of $735,026 and $812,821 respectively, and paid
$735,026 and $812,821 respectively to Mr. Yang as compensation to him.

During each of the years ended December 31, 2008 and 2007, we paid rent
of $0 and $17,521 respectively for Mr. Yangs personal residence as fringe
benefits to him. All such payments have been recorded as compensation expense
in the accompanying financial statements.

Transactions with Classic Electronic Limited

Mr. Ben Wong, one of our directors, is a 99.9% shareholder of Classic
Electronic Ltd. (Classic). The remaining 0.1% of Classic is owned by a
non-related party. During the years ended December 31, 2008 and 2007, we sold
products for $0 and $366,840 respectively, to Classic. As of December 31, 2008
and 2007, the Company had outstanding accounts receivable from Classic totaling
$1,717,320 and $1,717,859 respectively. This account receivable has been
outstanding for more than 12 months.

Classic has historically met its payment obligations to the Company and
the Company has no reason to believe that Classics receivables are not
collectible. Pursuant to a written personal guarantee agreement, Mr. Yang has
personally guaranteed up to $10.0 million of the outstanding accounts
receivable from Classic. The Company has received verbal assurances from Mr.
Yang of his intent and ability to perform under the above-referenced guarantee
and based on information provided by Mr. Yang, his net worth is approximately
$17 million. In addition, as discussed in Note 14 to Consolidated Financial
Statements, the Company has entered into a payment plan with Classic, and the
amount due from Classic had been settled.

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, 2007, 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, 2009. The monthly lease payment for this
lease is $1,090. We incurred and paid an aggregate rent expense of $13,077 and
$12,385 to Solution during the years ended December 31, 2008 and 2007.

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, 2008 and 2007.

During the years ended December 31, 2008 and 2007, we received service
charges of $0 and $11,538 respectively from Systematic Information. The service
fee was charged for back office support for Systematic Information.

During the years ended December 31, 2008 and 2007, we sold products for
$1,913,071 and $666,742 respectively, to Systematic Information. As of December
31, 2008 and 2007, there were no outstanding accounts receivables from
Systematic Information.

29

---



During the years ended December 31, 2008 and 2007, we purchased
inventories of $1,446,680 and $1,523,238 respectively from Systematic
Information. As of December 31, 2008 and 2007, there were no outstanding
accounts payable to Systematic Information.

On April 1, 2005, we entered into a lease agreement with Systematic
Information pursuant to which we lease one residential property for Mr. Yangs
personal use for a monthly lease payment of $3,205. Upon expiration of the
lease on June 15, 2007, ACL acquired this residential property from Systematic
Information. We incurred and paid an aggregate rent expense of $0 and $17,521
to Systematic Information during the years ended December 31, 2008 and 2007.

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, 2008 and
2007, we received management fees of $0 and $5,769 respectively from Global. As
of December 31, 2008 and 2007, there were no outstanding accounts receivables
from Global. The management fees were charged for back office support for
Global.

During the years ended December 31, 2008 and 2007, we sold products for
$0 and $25,337 respectively, to Global. As of December 31, 2008 and 2007, there
were no outstanding accounts receivables from Global.

During the years ended December 31, 2008 and 2007, we purchased
inventories of $2,323 and $18,294 respectively from Global. As of December 31,
2008 and 2007, there were no outstanding accounts payable to Global.

Transactions with Intelligent Network
Technology Limited

Mr. Yang the Companys Chief Executive Officer, majority shareholder
and a director, is a director and 80% shareholder of Intelligent Network Technology
Ltd. (Intelligent). The remaining 20% of Intelligent is owned by a
non-related party. During the years ended December 31, 2008 and 2007, we
purchased inventories of $0 and $1,343,501 respectively from Intelligent. As of
December 31, 2008 and 2007, there were no outstanding accounts payable to
Intelligent.

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, 2008 and 2007, we received a
management fee of $15,384 and $16,026 respectively from Systematic. The
management fee was charged for back office support for Systematic.

During the years ended December 31, 2008 and 2007, we sold products for
$275,766 and $779,879 respectively, to Systematic. As of December 31, 2008 and
2007, there were no outstanding accounts receivables from Systematic.

During
the years ended December 31, 2008 and 2007, we purchased inventories of
$560,750 and $1,007,352 respectively from Systematic. As of December 31, 2008
and 2007, 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, 2008 and 2007, we
received a management fee of $8,077 and $0 respectively from Aristo Comp. The
management fee was charged for back office support for Aristo Comp.

During the years ended December 31, 2008 and 2007, we sold products for
$67,968 and $349,327 respectively, to Aristo Comp. As of December 31, 2008 and
2007, there were no outstanding accounts receivables from Aristo Comp.

During the years ended December 31, 2008 and 2007, we purchased
inventories of $37,665 and $0 respectively, from Aristo Comp. As of December
31, 2008 and 2007, there were no outstanding accounts payable to Aristo Comp.

Transactions 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, 2008 and 2007, we sold products for
$575,386 and $1,471,471 respectively, to Atlantic Storage. As of December 31,
2008 and 2007, there were no outstanding accounts receivables from Atlantic
Storage.

During the years ended December 31, 2008 and 2007, we purchased
inventories of $679,048 and $581,444 respectively, from Atlantic Storage. As of
December 31, 2008 and 2007, there were no outstanding accounts payable to
Atlantic Storage.

Transactions 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, 2008 and 2007, we sold products
for $1,077,653 and $2,574,096 respectively, to Rambo. As of December 31, 2008
and 2007, there were no outstanding accounts receivables from Rambo.

During the years ended December 31, 2008 and 2007, we purchased
inventories of $10,314 and $0 respectively, from Rambo. As of December 31, 2008
and 2007, there were no outstanding accounts payable to Rambo.

30

---



Transactions 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). During the years ended December 31, 2008
and 2007, we sold products for $5,509 and $703,683 respectively, to Usmart. As
of December 31, 2008 and 2007, there were no outstanding accounts receivables
from Usmart.

During the years ended December 31, 2008 and 2007, we purchased
inventories of $199,712 and $736,888 respectively, from Usmart. As of December
31, 2008 and 2007, 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, 2008 and 2007, we sold products of
$0 and $51,060 respectively, to Imax. As of December 31, 2008 and 2007, there
were no outstanding accounts receivables from Imax.

During the years ended
December 31, 2008 and 2007, we purchased inventories of $3,167 and $0
respectively, from Imax. As of December 31, 2008 and 2007, there were no
outstanding accounts payable to Imax.

Transactions Kadatco Co Limited

Mr. Yang, the Companys Chief Executive Officer, majority shareholder
and a director, is a 99.99% shareholder of Kadatco Co Ltd. (Kadatco). The
remaining 0.01% of Kadatco is owned by a non-related party. During the years ended December 31, 2008 and 2007, we sold products for
$0 and $518,040 respectively, to Kadatco. As of December 31, 2008 and 2007,
there were no outstanding accounts receivables from Kadatco.

During the years ended December 31, 2008 and 2007, we purchased
inventories of $0 and $590,742 respectively, from Kadatco. As of December 31,
2008 and 2007, there were no outstanding accounts payable to Kadatco.

Transactions 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).

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

The
following table presents fees, including reimbursements for expenses, for
professional audit services rendered by JTC Fair Song CPA Firm for the audits
of our annual financial statements and interim reviews of our quarterly
financial statements for the years ended December 31, 2008 and December 31, 2007
and fees billed for other services rendered by JTC Fair Song CPA Firm during
those periods.

|                        |  |             |        |             |   |        | 
|----------------------- |  | ----------- | ------ | ----------- | - | ------ | 
|                        |  | Fiscal 2008 |        | Fiscal 2007 |  
|Audit Fees
 (1)         |  | $           | 35,000 |             | $ | 35,000 | 
|Audit
 Related Fees (2) |  | $           |       |             | $ |       | 
|Tax Fees (3)            |  | $           |       |             | $ |       | 
|All Other
 Fees (4)     |  | $           |       |             | $ |       | 
|                        |  |             |        |             |   |        | 
|Total                   |  | $           | 35,000 |             | $ | 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 Firm in
 connection with statutory and regulatory filings or engagements.
|    |                                                                                                                                                                                                                                                                                                                                                                                 
|(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 2008 or
 2007.                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                 
|(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 2008 or 2007.                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                 
|(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 2008 or
 2007.                                                                                                                                                                                                                         

31

---



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 II 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 incorporated by reference to Exhibit 4.1(a) to the Form 10-K filed April 14, 2004.                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                        
|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.                   

32

---



|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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    |  | Subsidiaries of the Company                                                                                                                                                                                                                                                                                                                                                             
|      |  | Atlantic Components Limited, a Hong Kong corporation                                                                                                                                                                                                                                                                                                                                    
|      |  | Alpha Perform Technologies Limited, a British Virgin Islands
 corporationAristo Technologies Limited, a Hong Kong corporation (variable
 interest entity)                                                                                                                                                                                                                               
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|23.1  |  | Consent of Albert Wong & Co. incorporated by reference to Exhibit 23.1 of the Form 10-K/A filed May 04, 2010.                                                                                                                                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|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.*                                                                                                                                                                              

33

---



|     |  |                                                                                                                                                      
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|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.*
|     |  |                                                                                                                                                      
|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).

34

---



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:
 September 20, 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
 Executive                     |  | September
 20, 2010
|                          |  | Officer and
 Chairman of the         |  |                    
|Chung-Lun
 Yang           |  | Board of
 Directors                  |  |                    
|                          |  | (Principal
 Executive                |  |                    
|                          |  | Officer)                             |  |                    
|                          |  |                                      |  |                    
|/s/ Kun Lin
 Lee          |  | Chief
 Financial Officer             |  | September
 20, 2010
|                          |  | (Principal
 Financial and Accounting |  |                    
|Kun Lin Lee               |  | Officer) and
 Director               |  |                    
|                          |  |                                      |  |                    
|/s/ Kenneth
 Lap Yin Chan |  | Chief
 Operating Officer             |  | September
 20, 2010
|                          |  | and Director                         |  |                    
|Kenneth Lap
 Yin Chan     |  |                                      |  |                    
|                          |  |                                      |  |                    
|/s/ Ming Yan
 Leung       |  | Chief
 Technology Officer            |  | September
 20, 2010
|                          |  | and Director                         |  |                    
|Ming Yan
 Leung           |  |                                      |  |                    
|                          |  |                                      |  |                    
|/s/ Wun Kin
 Fong         |  | Director                             |  | September
 20, 2010
|                          |  |                                      |  |                    
|Wun Kin Fong              |  |                                      |  |                    

35

---



ACL
Semiconductors Inc. and Subsidiaries Consolidated Financial StatementsAs of December 31, 2008 and December 31, 2007 and 
the Years Ended December 31, 2008 and 2007 With Report of Independent Registered Public
Accounting Firm

---



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 Income and Comprehensive Income                                 |  | F-5 
|Consolidated
 Statements of Stockholders Equity and Accumulated Other Comprehensive Income |  | F-6 
|Consolidated
 Statements of Cash Flows                                                      |  | F-7 
|Notes to
 Consolidated Financial Statements                                                 |  | F-9 
|                                                                                            |  |     
|Schedule II  Valuation and Qualifying Accounts                                             |  | S-1 
|                                                                                            |  |     
|Schedule III  Quarterly Information                                                        |  | S-1 

F-1

---



|                                              | 
|--------------------------------------------- | 
|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 consolidated balance sheets of the
Company as of December 31, 2008 and 2007 and the related consolidated
statements of income and comprehensive income, consolidated statements of
stockholders equity and accumulated other comprehensive income and
consolidated 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, 2008 and 2007 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.

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.

|                    |                             
|------------------- | ----------------------------
|Hong Kong,
 China   | Albert Wong
 & Co.          
|September 20,
 2010 | Certified Public Accountants

F-2

---



ACL SEMICONDUCTORS INC. AND SUBSDIARIES

CONSOLIDATED
BALANCE SHEETS
AS AT DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)

ASSETS

|                                                                                        |  |       |   |      |            |            |            |   |            | 
|--------------------------------------------------------------------------------------- |  | ----- | - | ---- | ---------- | ---------- | ---------- | - | ---------- | 
|                                                                                        |  | Notes |   | 2008 |            | 2007       |           
|                                                                                        |  |       |   |      |            |            |           
|                                                                                        |  |       |   |      | (Restated) |            | (Restated) |  
|Current assets:                                                                         |  |       |   |      |            |            |            |   |            | 
|Cash and cash equivalents                                                               |  |       |   |      | $          | 1,943,463  |            | $ | 1,661,056  | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|Restricted cash                                                                         |  |       |   |      |            | 5,169,753  |            |   | 4,203,057  | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|Accounts receivable, net of allowance for
 doubtful accounts of $0 for 2008 and 2007    |  |       |   |      |            | 10,342,453 |            |   | 7,627,017  | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|Accounts receivable, related parties                                                    |  |       |   |      |            | 1,717,320  |            |   | 1,717,859  | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|Inventories, net                                                                        |  |       |   |      |            | 3,668,568  |            |   | 3,768,155  | 
|Restricted marketable securities                                                        |  |       |   |      |            | 500,000    |            |   | 769,231    | 
|Marketable securities                                                                   |  |       |   |      |            |           |            |   | 404,780    | 
|Income tax refundable                                                                   |  |       |   |      |            |           |            |   | 49,375     | 
|Other current assets                                                                    |  |       |   |      |            | 525,918    |            |   | 89,183     | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|Total
 current assets                                                                   |  |       |   |      |            | 23,867,475 |            |   | 20,289,713 | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|Property, equipment and
 improvements, net of accumulated depreciation and amortization |  |       | 3 |      |            | 6,922,623  |            |   | 6,933,998  | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|Other deposits                                                                          |  |       |   |      |            | 396,900    |            |   | 387,245    | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|Amounts due from Aristo / Mr.
 Yang                                                     |  |       |   |      |            | 7,900,404  |            |   | 6,057,488  | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 
|Total Assets                                                                            |  |       |   |      | $          | 39,087,402 |            | $ | 33,668,444 | 
|                                                                                        |  |       |   |      |            |            |            |   |            | 

See accompanying notes to the consolidated
financial statements

F-3

---



ACL SEMICONDUCTORS INC. AND SUBSDIARIES

CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)

LIABILITIES AND STOCKHOLDERS EQUITY

|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----- | - | ---- | - | ---------- | - | - | ---------- | -
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|                                                                                                                                                 |  | Notes |   | 2008 |   | 2007       |  
|                                                                                                                                                 |  |       |   |      |   |            |  
|                                                                                                                                                 |  |       |   |      |   | (Restated) |   |   | (Restated) |  
|Current liabilities:                                                                                                                             |  |       |   |      |   |            |   |   |            |  
|Accounts payable                                                                                                                                 |  |       |   |      | $ | 17,318,949 |   | $ | 12,870,200 |  
|Accrued expenses                                                                                                                                 |  |       |   |      |   | 409,367    |   |   | 195,956    |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Lines of credit and loan facilities                                                                                                              |  |       | 4 |      |   | 16,447,742 |   |   | 15,610,488 |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Current portion of long-term debt                                                                                                                |  |       | 5 |      |   | 160,447    |   |   | 135,237    |  
|Current portion of capital lease                                                                                                                 |  |       | 6 |      |   | 58,683     |   |   | 44,991     |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Income tax payable                                                                                                                               |  |       |   |      |   | 5,588      |   |   |           |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Due to shareholders for converted pledged
 collateral                                                                                            |  |       |   |      |   | 112,385    |   |   | 112,385    |  
|Other current liabilities                                                                                                                        |  |       |   |      |   | 508,073    |   |   | 268,572    |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Total
 current liabilities                                                                                                                       |  |       |   |      |   | 35,021,234 |   |   | 29,237,829 |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Long-term liabilities                                                                                                                            |  |       |   |      |   |            |   |   |            |  
|Long-term debt, less current portion                                                                                                             |  |       | 5 |      |   | 2,361,711  |   |   | 2,539,242  |  
|Capital lease, less current portion                                                                                                              |  |       | 6 |      |   | 43,055     |   |   | 49,971     |  
|Deferred tax liabilities                                                                                                                         |  |       |   |      |   | 8,343      |   |   | 15,471     |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Total
 long-term liabilities                                                                                                                     |  |       |   |      |   | 2,413,109  |   |   | 2,604,684  |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Total liabilities                                                                                                                                |  |       |   |      |   | 37,434,343 |   |   | 31,842,513 |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Commitments and contingencies                                                                                                                    |  |       |   |      |   |           |   |   |           |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Stockholders equity (deficit):                                                                                                                  |  |       |   |      |   |            |   |   |            |  
|Common stock - $0.001 par value, 50,000,000
 shares authorized, 28,329,936 issued and outstanding as of December 31, 2008
 and 2007 respectively |  |       |   |      |   | 28,330     |   |   | 28,330     |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Additional paid-in capital                                                                                                                       |  |       |   |      |   | 3,593,027  |   |   | 3,593,027  |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Accumulated losses                                                                                                                               |  |       |   |      |   | (1,968,298 | ) |   | (1,795,426 | )
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|Total stockholders equity                                                                                                                       |  |       |   |      |   | 1,653,059  |   |   | 1,825,931  |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  
|                                                                                                                                                 |  |       |   |      | $ | 39,087,402 |   | $ | 33,668,444 |  
|                                                                                                                                                 |  |       |   |      |   |            |   |   |            |  

See accompanying notes to the consolidated
financial statements

F-4

---



ACL SEMICONDUCTORS INC. AND SUBSDIARIES

CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMEBR 31, 2008 AND 2007
(Stated in US Dollars)

|                                                      |  |       |   |      |   |              |   |   |              |  
|----------------------------------------------------- |  | ----- | - | ---- | - | ------------ | - | - | ------------ | -
|                                                      |  | Notes |   | 2008 |   | 2007         |  
|                                                      |  |       |   |      |   |              |  
|                                                      |  |       |   |      |   | (Restated)   |   |   | (Restated)   |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|Net sales                                             |  |       |   |      | $ | 209,556,926  |   | $ | 166,771,606  |  
|Cost of sales                                         |  |       |   |      |   | (205,388,286 | ) |   | (162,933,656 | )
|                                                      |  |       |   |      |   |              |   |   |              |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|Gross profit                                          |  |       |   |      |   | 4,168,640    |   |   | 3,837,950    |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|Selling and
 distribution costs                       |  |       |   |      |   | (82,285      | ) |   | (73,508      | )
|General and
 administrative expenses                  |  |       |   |      |   | (3,315,840   | ) |   | (3,066,995   | )
|                                                      |  |       |   |      |   |              |   |   |              |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|Income from operations                                |  |       |   |      |   | 770,515      |   |   | 697,447      |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|Other income (expenses):                              |  |       |   |      |   |              |   |   |              |  
|Rental income                                         |  |       |   |      |   | 89,231       |   |   | 37,179       |  
|Interest expense                                      |  |       |   |      |   | (1,073,798   | ) |   | (1,009,010   | )
|Loss on disposal of marketable securities             |  |       |   |      |   | (227,781     | ) |   |             |  
|Unrealized gain on marketable securities              |  |       |   |      |   |             |   |   | 404,780      |  
|Management and service income                         |  |       |   |      |   | 23,462       |   |   | 33,333       |  
|Net income on cash flow hedge                         |  |       |   |      |   | 161,288      |   |   | 64,590       |  
|Interest income                                       |  |       |   |      |   | 90,706       |   |   | 169,055      |  
|Director life insurance policy refund                 |  |       |   |      |   |             |   |   | 29,617       |  
|Exchange differences                                  |  |       |   |      |   | (48,677      | ) |   | 34,672       |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|Miscellaneous                                         |  |       |   |      |   | 8,311        |   |   | 5,013        |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|(Loss) income before income taxes provision           |  |       |   |      |   | (206,743     | ) |   | 466,676      |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|Income taxes reversal (provision)                     |  |       | 7 |      |   | 33,871       |   |   | (187,833     | )
|                                                      |  |       |   |      |   |              |   |   |              |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|Net (loss) income                                     |  |       |   |      | $ | (172,872     | ) | $ | 278,843      |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|(Loss) earnings per share - basic and diluted         |  |       |   |      | $ | (0.01        | ) | $ | 0.01         |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|                                                      |  |       |   |      |   |              |   |   |              |  
|Weighted average number of shares - basic and diluted |  |       | 8 |      |   | 28,329,936   |   |   | 28,329,936   |  
|                                                      |  |       |   |      |   |              |   |   |              |  

See accompanying notes to the consolidated
financial statements

F-5

---



ACL SEMICONDUCTORS INC. AND SUBSDIARIES

CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY AND
ACCUMULATED OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)

|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|----------------------------- |  | ------------ | ---------- | ------ | - | ------ |  | ---------------------------- | --------- | -------------------------------------- | - | -------------------- | - | --------------------------------------- | ---------- | - | - | --------- | -
|                              |  |              |            |        |   |        |  | Additional
 paid-in
 capital |           | Due
 (from)/to
 stockholder/
 Director |   | Accumulated
 deficit |   | Total
 stockholders
 Equity
 (deficit) |           
|                              |  | Common stock |            |        |   |        | 
|                              |  |              |            |        |   |        | 
|                              |  | Shares       |            | Amount |   |        |  |                              |          
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |  
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|Balance at
 January 1, 2007   |  |              | 28,329,936 |        | $ | 28,330 |  | $                            | 3,593,027 |                                        | $ | 913,463              |   | $                                       | (2,074,269 | ) | $ | 2,460,551 |  
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|Reclassification              |  |              |           |        |   |       |  |                              |          |                                        |   | (913,463             | ) |                                         |           |   |   | (913,463  | )
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|Net income                    |  |              |           |        |   |       |  |                              |          |                                        |   |                     |   |                                         | 278,843    |   |   | 278,843   |  
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|Balance at
 December 31, 2007 |  |              | 28,329,936 |        |   | 28,330 |  |                              | 3,593,027 |                                        |   |                     |   |                                         | (1,795,426 | ) |   | 1,825,931 |  
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|Balance at
 January 1, 2008   |  |              | 28,329,936 |        |   | 28,330 |  |                              | 3,593,027 |                                        |   |                     |   |                                         | (1,795,426 | ) |   | 1,825,931 |  
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|Net loss                      |  |              |           |        |   |       |  |                              |          |                                        |   |                     |   |                                         | (172,872   | ) |   | (172,872  | )
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  
|Balance at
 December 31, 2008 |  |              | 28,329,936 |        | $ | 28,330 |  | $                            | 3,593,027 |                                        | $ |                     |   | $                                       | (1,968,298 | ) | $ | 1,653,059 |  
|                              |  |              |            |        |   |        |  |                              |           |                                        |   |                      |   |                                         |            |   |   |           |  

See accompanying notes to the consolidated
financial statements

F-6

---



ACL SEMICONDUCTORS INC. AND SUBSDIARIES

CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)



|                                                                                        |  |            |             |            |   |             |  
|--------------------------------------------------------------------------------------- |  | ---------- | ----------- | ---------- | - | ----------- | -
|                                                                                        |  | 2008       |             | 2007       |  
|                                                                                        |  |            |             |            |  
|                                                                                        |  | (Restated) |             | (Restated) |  
|Cash flows provided by (used for) operating activities:                                 |  |            |             |            |   |             |  
|Net income (loss)                                                                       |  | $          | (172,872    | )          | $ | 278,843     |  
|Depreciation and amortization                                                           |  |            | 238,477     |            |   | 230,614     |  
|Change in inventory reserve                                                             |  |            | (190,000    | )          |   | 323,077     |  
|Gain on disposal of equipment                                                           |  |            |            |            |   | (218        | )
|Loss (Gain) on disposal of marketable
 securities                                       |  |            | 227,781     |            |   | (404,780    | )
|                                                                                        |  |            |             |            |   |             |  
|Adjustments to reconcile net loss to net cash used in operating
 activities:            |  |            |             |            |   |             |  
|Accounts receivable  other                                                             |  |            | (2,715,435  | )          |   | (5,618,543  | )
|Accounts receivable  related parties                                                   |  |            | 539         |            |   | 5,654,608   |  
|Inventories                                                                             |  |            | 289,588     |            |   | (837,977    | )
|Refundable deposits                                                                     |  |            | (9,656      | )          |   | (6,207      | )
|Income tax refundable                                                                   |  |            | 49,375      |            |   |            |  
|Other current assets                                                                    |  |            | (436,734    | )          |   | (48,246     | )
|Other assets                                                                            |  |            |            |            |   |            |  
|Accounts payable                                                                        |  |            | 4,448,749   |            |   | 7,860,477   |  
|Accrued expenses                                                                        |  |            | 213,411     |            |   | (118,268    | )
|Income tax payable                                                                      |  |            | 5,588       |            |   | (124,214    | )
|Other current liabilities                                                               |  |            | 239,501     |            |   | (33,858     | )
|Deferred tax                                                                            |  |            | (7,128      | )          |   | 15,471      |  
|                                                                                        |  |            |             |            |   |             |  
|Total adjustments                                                                       |  |            | 2,077,798   |            |   | 6,891,936   |  
|                                                                                        |  |            |             |            |   |             |  
|                                                                                        |  |            |             |            |   |             |  
|Net cash provided by (used for) operating activities                                    |  |            | 2,181,184   |            |   | 7,170,779   |  
|                                                                                        |  |            |             |            |   |             |  
|                                                                                        |  |            |             |            |   |             |  
|Cash flows used for investing activities:                                               |  |            |             |            |   |             |  
|Advanced from Aristo / Mr. Yang                                                         |  |            | 11,453,796  |            |   | 11,153,115  |  
|Advanced to Aristo / Mr. Yang                                                           |  |            | (13,296,712 | )          |   | (18,124,066 | )
|Increase in restricted cash                                                             |  |            | (966,696    | )          |   | (1,494,480  | )
|Increase in restricted marketable
 securities                                           |  |            | (500,000    | )          |   | (769,231    | )
|Cash Proceeds from sales of marketable
 securities and restricted marketable securities |  |            | 946,229     |            |   |            |  
|Cash Proceeds from sales of equipment                                                   |  |            |            |            |   | 385         |  
|Purchases of property, equipment and
 improvements                                      |  |            | (164,565    | )          |   | (3,159,760  | )
|                                                                                        |  |            |             |            |   |             |  
|                                                                                        |  |            |             |            |   |             |  
|Net cash used for investing activities                                                  |  |            | (2,527,948  | )          |   | (12,394,037 | )
|                                                                                        |  |            |             |            |   |             |  
|                                                                                        |  |            |             |            |   |             |  
|Cash flows provided by financing activities:                                            |  |            |             |            |   |             |  
|Net borrowings on lines of credit and notes
 payable                                    |  |            | 837,254     |            |   | 4,772,021   |  
|Borrowing under long-term debt                                                          |  |            |            |            |   | 801,723     |  
|Principal payments under long-term debt                                                 |  |            | (152,321    | )          |   | (91,625     | )
|Principal payments under capital lease
 obligation                                      |  |            | (55,762     | )          |   | (45,291     | )
|                                                                                        |  |            |             |            |   |             |  
|                                                                                        |  |            |             |            |   |             |  
|Net cash provided by financing activities                                               |  |            | 629,171     |            |   | 5,436,828   |  
|                                                                                        |  |            |             |            |   |             |  
|                                                                                        |  |            |             |            |   |             |  
|Net cash and
 cash equivalents sourced (used)                                           |  |            | 282,407     |            |   | 213,570     |  
|                                                                                        |  |            |             |            |   |             |  
|Cash and
 cash equivalents, beginning of year                                           |  |            | 1,661,056   |            |   | 1,447,486   |  
|                                                                                        |  |            |             |            |   |             |  
|                                                                                        |  |            |             |            |   |             |  
|Cash and cash equivalents,end of year                                                   |  | $          | 1,943,463   |            | $ | 1,661,056   |  
|                                                                                        |  |            |             |            |   |             |  

F-7

---



ACL SEMICONDUCTORS INC. AND SUBSDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)

|                                                                                         |  |            |           |            |   |           | 
|---------------------------------------------------------------------------------------- |  | ---------- | --------- | ---------- | - | --------- | 
|                                                                                         |  | 2008       |           | 2007       |  
|                                                                                         |  |            |           |            |  
|                                                                                         |  | (Restated) |           | (Restated) |  
|Supplemental cash flow information:                                                      |  |            |           |            |   |           | 
|                                                                                         |  |            |           |            |   |           | 
|Interest paid                                                                            |  | $          | 1,073,798 |            | $ | 1,009,010 | 
|Income tax paid                                                                          |  |            | 57,582    |            |   | 305,389   | 
|Income tax refund                                                                        |  |            | 139,289   |            |   |          | 
|                                                                                         |  |            |           |            |   |           | 
|                                                                                         |  |            |           |            |   |           | 
|Supplement schedule of non-cash investing and financing activities:                      |  |            |           |            |   |           | 
|Income tax provision                                                                     |  | $          | 17,411    |            | $ |          | 
|                                                                                         |  |            |           |            |   |           | 
|Capital lease obligations incurred when
 capital leases were entered for new automobiles |  | $          | 62,538    |            | $ | 95,898    | 
|                                                                                         |  |            |           |            |   |           | 

See accompanying notes to the consolidated
financial statements

F-8

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 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.

F-9

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

|        |                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | ------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 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, 2008. The
 following table depicts the identity of the subsidiary:                                                                                                                                                                                                                                                 

| |  |                                        |  |                        |  |                              |  |                   |         | 
| |  | -------------------------------------- |  | ---------------------- |  | ---------------------------- |  | ----------------- | ------- | 
| |  | Name of subsidiary                     |  | Place of Incorporation |  | AttributableequityInterest % |  | RegisteredCapital |        
| |  |                                        |  |                        |  |                              |  |                   |         | 
| |  | 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

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Variable Interests Entities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | ASC 810-05-08A specifies the two characteristics of a controlling
 financial interest in a variable interest entity (VIE): (1) the
 power to direct the activities of a VIE that most significantly impact the
 VIEs economic performance; and (2) the obligation to absorb losses of the
 VIE that could potentially be significant to the VIE or the right to receive
 benefits from the VIE that could potentially be significant to the VIE. The
 Company is the primary beneficiary of Aristo because the Company can direct
 the activities of Aristo through the common director and major shareholder,
 Also, the Company extended substantial account receivable to Aristo and
 created an obligation to absorb losts if Aristo failed. Moreover, ASC 810-25-42
 & 43 provides guidance on related parties treatment of VIE and specifies
 the relationship of de-facto agent and principal. Those guidance will help to
 determine whether the Company will consolidate Aristo.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Owing to the extent of outstanding large amounts of accounts
 receivable since 2007 together with the nominal amount of paid-up capital
 contributed by Mr. Yang when Aristo was formed, it has been determined that
 Aristo cannot finance its operations without subordinated financial support
 from ACL and accordingly, ACL is considered to be the de facto principal of
 Aristo, Aristo is considered to be the de facto subsidiary of the Company and
 Mr. Yang is considered to be the related party of both the Company and
 Aristo.                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | By virtue of the above analysis, it has been determined that the
 Company is the primary beneficiary of Aristo.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-10

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Aristo Technologies Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company sells Samsung memory chips to Aristo and allows long
 grace periods for Aristo to repay the open accounts receivable. Being the
 biggest creditor, the Company does not require Aristo to pledge assets or
 enter into any agreements to bind Aristo to specific repayment terms. The
 Company does not provide any bad debt provision or experience derived from
 Aristo. Although, the Company is not involved in Aristos daily operation, it
 believes that there will not be significant additional risk derived from the
 trading relationship and transactions with Aristo.                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | 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, Micron, Elpida, Qimonda, Lexar,
 Dane-Elec, Elixir, SanDisk and Winbond. Aristo 2008 and 2007 sales were
 around 20 million and 27 million; it was only a small distributor that
 accommodated special requirements for specific customers.                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company sells to Aristo in order to fulfill Aristos periodic
 need for Samsung memory products based on prevailing market prices, which
 products Aristo, in turn, sells to its customers. 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 from Aristo that the Company cannot
 obtain from Samsung directly due to supply limitations.                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (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                 

| |  |                                                                                                                                                                                   
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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-11

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | ----------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 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 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 recognized 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 $190,000 for 2008 and increased by $323,077 for 2007.
 Inventory obsolescence reserves were $374,103 and $564,103 as of December 31,
 2008 and 2007, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | (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 the income statement in equal
 installments over the accounting periods covered by the lease term. Lease
 incentives received are recognized in the 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.

F-12

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | ----------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | (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.                                            
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | (n)                                                   | Advertising                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                       | The Company expensed all advertising costs as incurred. Advertising
 expenses included in selling expenses were $7,118 and $7,937 for the years
 ended December 31, 2008 and 2007, 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-13

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | ----------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 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-14

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | ----------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | (t)                                                   | Recently implemented standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                       | 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, 2010 and made necessary changes accordingly
 including but not limited to filing amendments for the prior periods to
 comply with all applicable requirements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                       | 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.

F-15

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | ----------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | (t)                                                   | Recently implemented standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                       | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                       | 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.                                                                                                                                                                                                                                                                                                 

F-16

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ----------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | (t)                                                   | Recently implemented standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                       | 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 change 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

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|        |                                   
|------- | ----------------------------------
|Note 3. | PROPERTY, PLANT AND EQUIPMENT, NET
|        |                                   
|        | A summary is
 as follows:         

|                                                 |  |      |           |      |   |           |  
|------------------------------------------------ |  | ---- | --------- | ---- | - | --------- | -
|                                                 |  | 2008 |           | 2007 |  
|                                                 |  |      |           |      |  
|Land and
 buildings                              |  | $    | 6,754,351 |      | $ | 6,794,629 |  
|Office
 equipment                                |  |      | 152,185   |      |   | 148,568   |  
|Leasehold
 improvements                          |  |      | 194,896   |      |   | 150,822   |  
|Furniture
 and fixtures                          |  |      | 13,273    |      |   | 13,273    |  
|Automobiles                                      |  |      | 405,467   |      |   | 226,056   |  
|                                                 |  |      |           |      |   |           |  
|                                                 |  |      |           |      |   |           |  
|                                                 |  |      | 7,520,172 |      |   | 7,333,348 |  
|Less:
 accumulated depreciation and amortization |  |      | (597,549  | )    |   | (399,350  | )
|                                                 |  |      |           |      |   |           |  
|                                                 |  |      |           |      |   |           |  
|                                                 |  | $    | 6,922,623 |      | $ | 6,933,998 |  
|                                                 |  |      |           |      |   |           |  

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | Depreciation and amortization expense for property, equipment, and
 improvements amounted to $238,477 and $230,614 for the years ended December
 31, 2008 and 2007 respectively.                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Note 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 $4,722,616 at December 31, 2008
 and $5,635,176 at December 31, 2007. The line of credit bears interest at the
 banks standard bills rate less 1.25% for HKD borrowings and at the banks
 standard bills rate less 0.75% for other currency borrowings as of December
 31, 2008. The weighted average interest rate approximated 4.4% for 2008 and
 6.7% for 2007.                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | The Company has available to it a $5,769,231 factoring facility
 without recourse with DBS Bank without any outstanding balance at December
 31, 2008. The factoring facility bears a discounting charge at the banks
 standard bills rate less 1.25% for advance in HKD or the banks standard
 bills rate less 0.75% for advance in other currency as of December 31, 2008.
 The weighted average interest rate approximated 4.4% for 2008 and 6.7% for
 2007.                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 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, 2008 and the
 letter of guarantee will expire on October 31, 2009. 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 $6,410,256 revolving line of credit
 with SCB with an outstanding balance of $5,742,934 at December 31, 2008 and
 $3,709,379 at December 31, 2007. The line of credit bears interest at a rate
 of the banks standard bills rate less 0.5% for HKD facilities and at a rate
 of the banks standard bills rate plus 1% for other foreign currency facilities
 as of December 31, 2008. The weighted average interest rate approximated 5.1%
 for 2008 and 7.4% for 2007. 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | The Company has available to it a $5,128,205 factoring facility with
 SCB with an outstanding balance of $1,753,562 at December 31, 2008. 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, 2008. The
 weighted average interest rate approximated 4.9% for 2008 and 7.2% for 2007.                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | The Company has available to it a $2,307,692 revolving line of credit
 with The Bank of East Asia, Limited (BEA) with an outstanding balance of
 $2,060,747 at December 31, 2008 and $2,303,868 at December 31, 2007. The line
 of credit bears interest at the higher of Hong Kong prime rate plus 0.25% or
 HIBOR plus 1% for HKD facilities and LIBOR plus 2% for other currency
 facilities as of December 31, 2008. The weighted average interest rate
 approximated 5.9% for 2008 and 7.9% for 2007.

F-18

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 4. | REVOLVING LINES OF CREDIT AND LOAN FACILITIES (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | The Company has available to it a $1,153,846 revolving line of credit
 with Citic with an outstanding balance of $1,014,883 at December 31, 2008 and
 $2,297,061 at December 31, 2007. The line of credit bears interest at the
 higher of the Hong Kong prime rate less 1.5% or HIBOR plus 2% as of December
 31, 2008. The weighted average interest rate approximated 4.1% for 2008 and
 7.4% for 2007.                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | The line of credit granted by Hang Seng Bank Limited (Hang Seng) to
 the Company matured on September 19, 2008. The outstanding balances with Hang
 Seng were $0 at December 31, 2008 and $1,665,003 at December 31, 2007. The
 line of credit bore interest at a rate of the Hong Kong prime rate less 0.5%
 for HKD facilities and at a rate of the banks board rate less 0.25% for USD
 facilities as of December 31, 2007. The weighted average interest rate
 approximated 5% for 2008 and 7.4% for 2007.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | The Company has available to it a $1,602,564 revolving line of credit
 with the ICBC with an outstanding balance of $1,153,000. The line of credit
 bears interest at the higher of the Hong Kong prime rate less 0.5% or HIBOR
 plus 3% for HKD facilities and a rate of the banks board rate less 0.5% for
 foreign currency facilities as of December 31, 2008. The weighted average interest
 rate approximated 5.1% for 2008.                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | The summary of banking facilities at December 31, 2008 is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                     |  |                    |            |                     |   |                          |  |   |            | 
|------------------------------------ |  | ------------------ | ---------- | ------------------- | - | ------------------------ |  | - | ---------- | 
|                                     |  | Granted facilities |            | Utilized facilities |   | Not Utilized
 Facilities | 
|                                     |  |                    |            |                     |   |                          | 
|Lines of
 credit and loan facilities |  |                    |            |                     |   |                          |  |   |            | 
|Factoring Loan                       |  | $                  | 10,897,436 |                     | $ | 1,753,562                |  | $ | 9,143,874  | 
|Import/Export Loan                   |  |                    | 16,602,564 |                     |   | 14,694,180               |  |   | 1,908,384  | 
|                                     |  |                    |            |                     |   |                          |  |   |            | 
|                                     |  | $                  | 27,500,000 |                     | $ | 16,447,742               |  | $ | 11,052,258 | 
|                                     |  |                    |            |                     |   |                          |  |   |            | 
|Instalment/Term
 Loan  Long Term    |  | $                  | 2,776,923  | (a)                 | $ | 2,522,158                |  | $ | 254,765    | 
|Overdraft                            |  |                    | 282,051    |                     |   | 0                        |  |   | 282,051    | 
|Letter of
 Guarantee                 |  |                    | 384,615    | (b)                 |   | 384,615                  |  |   | 0          | 
|                                     |  |                    |            |                     |   |                          |  |   |            | 
|                                     |  |                    |            |                     |   |                          |  |   |            | 
|                                     |  | $                  | 30,943,589 |                     | $ | 19,354,515               |  | $ | 11,589,074 | 
|                                     |  |                    |            |                     |   |                          |  |   |            | 

| |                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) Per
 summary of Note (5)                                                                                                                                                                                                                                                               
| | (b)
 Guarantee granted to a supplier                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                            
| | With the
 exception of the $384,615 letter of guarantee issued by DBS Bank, which will
 expire on 31 October, 2009, amounts borrowed by the Company under the
 revolving lines of credit and loan facilities described above are repayable
 within a period of three (3) months of drawdown

F-19

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|        |                                            
|------- | -------------------------------------------
|Note 5. | LONG-TERM
DEBTS                            
|        |                                            
|        | A summary is
 as follows as of December 31:

|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | -
|                                                                                                                                                                                                                                                                                                                                          |  | 2008 |           | 2007 |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |  
|Installment
 loan having a maturity date in July 2026 and carrying an interest rate of
 2.75% below the Hong Kong dollar Prime Rate (7.25% and 5.25% at December 31,
 2007 and 2008) from DBS Bank. The monthly installments are approximately
 $9,663 including interest through December 2008 without any balloon payment
 requirements |  | $    | 1,648,222 |      | $ | 1,719,704 |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|Installment
 loan having a maturity date in July 2011 and carrying an interest rate of 2%
 below the Hong Kong dollar Prime Rate (7.25% and 5.25% at December 31, 2007
 and 2008) from DBS Bank. The monthly installments are approximately $3,782
 including interest through December 2008 without any balloon payment
 requirements    |  |      | 112,312   |      |   | 153,052   |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|Installment
 loan having a maturity date in July 2023 and carrying an interest rate of
 2.5% below the Hong Kong dollar Prime Rate (7.25% and 5.25% at December 31,
 2008) from DBS Bank. The monthly installments are approximately $5,240
 including interest through December 2008 without any balloon payment
 requirements           |  |      | 761,624   |      |   | 801,723   |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                          |  |      | 2,522,158 |      |   | 2,674,479 |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|Less:
 current maturities                                                                                                                                                                                                                                                                                                                 |  |      | (160,447  | )    |   | (135,237  | )
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                          |  | $    | 2,361,711 |      | $ | 2,539,242 |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|An analysis
 of long-term debt as of December 31 is as follows:                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|Current
 portion                                                                                                                                                                                                                                                                                                                          |  | $    | 160,447   |      | $ | 135,237   |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|After 1
 year, but within 2 years                                                                                                                                                                                                                                                                                                         |  |      | 316,063   |      |   | 290,618   |  
|After 2
 years, but within 5 years                                                                                                                                                                                                                                                                                                        |  |      | 257,789   |      |   | 247,571   |  
|After 5
 years                                                                                                                                                                                                                                                                                                                            |  |      | 1,787,859 |      |   | 2,001,053 |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                          |  |      | 2,361,711 |      |   | 2,539,242 |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                          |  | $    | 2,522,158 |      | $ | 2,674,479 |  
|                                                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           |  

F-20

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 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 Bank. (formerly Overseas Trust Bank Limited), SCB, BEA,
 Citic and Industrial and Commercial Bank of China (Asia) Limited (ICBC) 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 $641,025 (HK$5,000,000), a security interest on two residential
 properties and a workshop located in Hong Kong owned by Atlantic Components
 Ltd (Atlantic), a wholly owned subsidiary of ACL, a security interest on a
 residential property located in Hong Kong owned by City, a related party,
 plus a personal guarantee by Mr. Yang as collateral for loans from DBS Bank;
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | a fixed cash
 deposit of $1,380,010 (HK$10,764,075) plus an unlimited personal guarantee by
 Mr. Yang, as collateral for loans from BEA;                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | a cash
 deposit/securities not less than $2,051,282 (HK$16,000,000), a security
 interest on a workshop located in Hong Kong owned by Systematic Information,
 a related party, a security interest on 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 SCB;                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 4.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | a cash
 deposit not less than $1,015,407 (US$756,402 plus HK$2,020,236), a security
 interest on a workshop located in Hong Kong owned by Solution, a related
 party, plus a personal guarantee by Mr. Yang as collateral for loans from
 Citic;                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | a cash
 deposit not less than $641,025 (HK$5,000,000) plus an unlimited personal
 guarantee by Mr. Yang as collateral for loans from ICBC.                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Note 6. | CAPITAL LEASE OBLIGATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | The Company
 has several non-cancelable capital leases relating to automobiles:                                                                                                                                                                                                                                                                                                                                                                                                        

|                                                                                        |  |      |         |      |   |         |  
|--------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                                                                        |  | 2008 |         | 2007 |  
|                                                                                        |  |      |         |      |  
|                                                                                       
|Current
 portion                                                                        |  | $    | 58,683  |      | $ | 44,991  |  
|Non-current
 portion                                                                    |  |      | 43,055  |      |   | 49,971  |  
|                                                                                        |  |      |         |      |   |         |  
|                                                                                        |  |      |         |      |   |         |  
|                                                                                        |  |      | 101,738 |      |   | 94,962  |  
|                                                                                        |  |      |         |      |   |         |  
|                                                                                       
|At December
 31, the value of automobiles under capital leases as follows:              |  |      |         |      |   |         |  
|                                                                                        |  |      |         |      |   |         |  
|                                                                                        |  | 2008 |         | 2007 |  
|                                                                                        |  |      |         |      |  
|                                                                                        |  |      |         |      |   |         |  
|Cost                                                                                    |  | $    | 193,514 |      | $ | 145,890 |  
|Less:
 depreciation                                                                     |  |      | (51,463 | )    |   | (39,344 | )
|                                                                                        |  |      |         |      |   |         |  
|                                                                                        |  |      |         |      |   |         |  
|                                                                                        |  |      | 142,051 |      |   | 106,546 |  
|                                                                                        |  |      |         |      |   |         |  
|                                                                                        |  |      |         |      |   |         |  
|At December
 31, the company had obligations under capital leases repayable as follows: |  |      |         |      |   |         |  
|                                                                                        |  |      |         |      |   |         |  
|                                                                                        |  | 2008 |         | 2007 |  
|                                                                                        |  |      |         |      |  
|Total minimum
 lease payments                                                           |  |      |         |      |   |         |  
|-Within one year                                                                        |  | $    | 65,055  |      | $ | 50,381  |  
|- After one year but within 5 years                                                     |  |      | 47,329  |      |   | 56,081  |  
|                                                                                        |  |      |         |      |   |         |  
|                                                                                        |  |      |         |      |   |         |  
|                                                                                        |  |      | 112,384 |      |   | 106,462 |  
|                                                                                        |  |      |         |      |   |         |  
|Interest
 expenses relating to future periods                                           |  |      | (10,646 | )    |   | (11,500 | )
|                                                                                        |  |      |         |      |   |         |  
|                                                                                        |  |      |         |      |   |         |  
|Present
 value of the minimum lease payments                                            |  | $    | 101,738 |      | $ | 94,962  |  
|                                                                                        |  |      |         |      |   |         |  

F-21

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|        |                                                                                                                                                                                                                                                                                                                           
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 7. | INCOME TAXES                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                           
|        | Income tax (refund) expense amounted to $(33,871) for 2008 and
 $187,833 for 2007 (an effective rate of 0% for 2008 and 40% for 2007). 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:

|                                                                                             |  |      |            |      |   |            |  
|-------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                                             |  | 2008 |            | 2007 |  
|                                                                                             |  |      |            |      |  
|Computed tax at federal statutory rate                                                       |  | $    | (70,292    | )    | $ | 158,670    |  
|                                                                                             |  |      |            |      |   |            |  
|Tax rate differential on foreign earnings
 of Atlantic and Aristo, Hong Kong based companies |  |      | (121,297   | )    |   | (65,717    | )
|                                                                                             |  |      |            |      |   |            |  
|Expenses not deductible for tax                                                              |  |      | 166,477    |      |   |           |  
|                                                                                             |  |      |            |      |   |            |  
|Unrecognized timing difference                                                               |  |      | 23,480     |      |   |           |  
|                                                                                             |  |      |            |      |   |            |  
|Tax under/(over) provision for Atlantic                                                      |  |      | (97,973    | )    |   | 61,428     |  
|                                                                                             |  |      |            |      |   |            |  
|Net operating loss carry forward                                                             |  |      | 65,734     |      |   | 33,452     |  
|                                                                                             |  |      |            |      |   |            |  
|                                                                                             |  |      |            |      |   |            |  
|Other                                                                                        |  |      |           |      |   |           |  
|                                                                                             |  |      |            |      |   |            |  
|                                                                                            
|                                                                                             |  | $    | (33,871    | )    | $ | 187,833    |  
|                                                                                             |  |      |            |      |   |            |  
|                                                                                            
|The income
 tax provision consists of the following components:                              |  |      |            |      |   |            |  
|                                                                                             |  |      |            |      |   |            |  
|                                                                                             |  | 2008 |            | 2007 |  
|                                                                                             |  |      |            |      |  
|                                                                                            
|Federal                                                                                      |  | $    |           |      | $ |           |  
|Foreign                                                                                      |  |      | (33,871    | )    |   | 187,833    |  
|                                                                                             |  |      |            |      |   |            |  
|                                                                                             |  | $    | (33,871    | )    | $ | 187,833    |  
|                                                                                             |  |      |            |      |   |            |  
|                                                                                            
|The
 Components of the deferred tax assets and liabilities are as follow                     |  |      |            |      |   |            |  
|                                                                                             |  |      |            |      |   |            |  
|                                                                                             |  | 2008 |            | 2007 |  
|                                                                                             |  |      |            |      |  
|                                                                                            
|Net
 operating losses                                                                        |  | $    | 1,122,726  |      | $ | 1,056,992  |  
|                                                                                             |  |      |            |      |   |            |  
|                                                                                             |  |      |            |      |   |            |  
|Total
 deferred tax assets                                                                   |  | $    | 1,122,726  |      | $ | 1,056,992  |  
|Less:
 valuation allowance                                                                   |  |      | (1,122,726 | )    |   | (1,056,992 | )
|                                                                                             |  |      |            |      |   |            |  
|                                                                                             |  | $    |           |      | $ |           |  
|                                                                                             |  |      |            |      |   |            |  

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | The Company did not have any interest and penalty recognized in the
 income statements for the year ended December 31, 2008 and 2007 or balance
 sheet as of December 31, 2008 and 2007. The Company did not have uncertainty
 tax positions or events leading to uncertainty tax position within the next
 12 months. The Companys 2006, 2007 and 2008 U.S. Corporation Income Tax
 Return are subject to U.S. Internal Revenue Service examination and the
 Companys2002/3, 2003/4, 2004/5, 2005/6, 2006/7, 2007/8, 2008/9 Hong Kong
 Corporations Profits Tax Return filing are subject to Hong Kong Inland
 Revenue Department examination.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Note 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, 2008 and 2007 since there were no
 outstanding options at December 31, 2008 and 2007.                                                                                                                                                                                                                                                                                       

F-22

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 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 48% and 66% of materials from
 Samsung for the years ended December 31, 2008 and 2007, 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, 2008 and 2007, included in accounts
 payable were $8,675,069 and $9,562,199, 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 and 2007, Samsung has withheld a total of $350,000 of
 rebate due to the Company as deposits. As agreed with Samsung, the rebate
 deposits were fully refunded to the Company on January 22, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Note 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 $29,650 for 2008 and $29,062 for 2007.                                                                                                                                                              

F-23

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                                                                                                                                                                                                                                  
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 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, 2008:

|                          |  |               |        |       |   |        |  |   |        | 
|------------------------- |  | ------------- | ------ | ----- | - | ------ |  | - | ------ | 
|                          |  | Related Party |        | Other |   | Total  | 
|                          |  |               |        |       |   |        | 
|Year ending
 December 31, |  |               |        |       |   |        |  |   |        | 
|2009                      |  | $             | 10,961 |       | $ | 42,372 |  | $ | 53,333 | 
|2010                      |  |               | 5,128  |       | $ | 19,972 |  | $ | 25,100 | 
|Thereafter                |  |               |       |       | $ |       |  | $ |       | 
|                          |  |               |        |       |   |        |  |   |        | 
|                          |  |               |        |       |   |        |  |   |        | 
|Total                     |  | $             | 16,089 |       | $ | 62,344 |  | $ | 78,433 | 
|                          |  |               |        |       |   |        |  |   |        | 

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | See Note 13
 for related party leases. All leases expire prior to December 31, 2010. 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 2008. Rent expense for the years ended December 31, 2008
 and 2007 are $142,985 and $120,942, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Note 12. | DERIVATIVE INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | On February
 1, 2009, the Company adopted SFAS 161 as referenced in Note 2. The adoption
 of SFAS 161 requires additional disclosures about Companys objectives and
 strategies for using derivative instruments, the accounting for the
 derivative instruments and related hedged items under SFAS No. 133,
 Accounting for Derivative Instruments and Hedging Activities (SFAS 133),
 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 and sale period.
 The Company applies hedge accounting based upon the criteria established by
 SFAS 133, 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,
 2008 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, 2008 was $36,346.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | As at
 December 31, 2008, 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, 2008 was $56,433.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | As at
 December 31, 2008, there is a 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, 2008 was $56,410.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | As at
 December 31, 2008, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F-24

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                                   
|-------- | ----------------------------------
|Note 12. | DERIVATIVE INSTRUMENTS (Continued)

| |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There are three foreign currency exchange agreements matured as of
December 31, 2008. These agreements are:                                        
| |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                    | Ratio par
 forward contract agreement between the Company and DBS Bank for the Company
 to buy US$500,000 from DBS Bank at a contract rate of 7.735 at specified
 dated up to March 18, 2008. According to the terms of the agreement, the
 Company will buy USD in double 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, 2008 was $11,538.
| |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                    | Ratio par
 forward contract agreement between the Company and DBS Bank for the Company
 to buy US$500,000 from DBS Bank at a contract rate of 7.74 at specified dated
 up to May 27, 2008. According to the terms of the agreement, the Company will
 buy USD in double 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, 2008 was $17,917.   
| |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                    | Ratio par
 forward contract agreement between the Company and SCB for the Company to buy
 US$200,000 from SCB at a contract rate of 7.725 at specified dated up to July
 3, 2008. According to the terms of the agreement, the Company will buy USD in
 double 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,
 2008 was $12,644.            
| |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The gross notional and fair values of derivative financial
 instruments in the Consolidated Balance Sheet as of December 31, 2008 were as
 follows:

|                                                                       |  |                         |           |                       |  |                                                      |  |                             |   |                    |  |   |  |  |   | 
|---------------------------------------------------------------------- |  | ----------------------- | --------- | --------------------- |  | ---------------------------------------------------- |  | --------------------------- | - | ------------------ |  | - |  |  | - | 
|                                                                       |  | As of December 31, 2008 |          
|                                                                       |  |                         |          
|                                                                       |  | 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                                             |  | $                       | 2,250,000 |                       |  |                                                     |  |                             |  |                    |  |  |  |  |  | 
|Total derivatives not designated as hedging
 instruments under ASC 815 |  |                         | 500,000   |                       |  | 500,000                                              |  |                             |  |                    |  |  |  |  |  | 
|                                                                       |  |                         |           |                       |  |                                                      |  |                             |   |                    |  |   |  |  |   | 
|Total derivatives                                                      |  | $                       | 2,750,000 |                       |  | 500,000                                              |  |                             |  |                    |  |  |  |  |  | 

|                                                                                             | 
|-------------------------------------------------------------------------------------------- | 
|(1) Represents
 the face amounts of contracts that were outstanding as of December 31, 2008.

F-25

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                                                                                                                                                                       
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 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, 2008 and 2007 was as
 follows:

|                                                   |  |                                            |                         |                                |   |                                |   |   |        | 
|-------------------------------------------------- |  | ------------------------------------------ | ----------------------- | ------------------------------ | - | ------------------------------ | - | - | ------ | 
|                                                   |  | Gain Recognized in Income on Derivative(1) |                        
|                                                   |  | Location                                   |                         | Year ended
 December 31,
 2008 |   | Year ended
 December 31,
 2007 |  
|                                                   |  |                                            |                         |                                |   |                                |  
|                                                   |  |                                            |                         |                                |   |                                |   |   |        | 
|Cash flow hedges:                                  |  |                                            |                         |                                |   |                                |   |   |        | 
|                                                   |  |                                            |                         |                                |   |                                |   |   |        | 
|Foreign exchange contracts US$200,000
 (HKD/USD)   |  |                                            | Interest and other, net |                                | $ | 12,644                         |   | $ | 20,897 | 
|Foreign exchange contracts USD500,000
 (HKD/USD)   |  |                                            | Interest and other, net |                                |   | 36,346                         |   |   | 6,449  | 
|Foreign exchange contracts US$500,000
 (HKD/USD)   |  |                                            | Interest and other, net |                                |   | 11,538                         |   |   | 37,244 | 
|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 |                                |   | 56,433                         |   |   |        | 
|Foreign exchange contracts US$1,000,000
 (HKD/USD) |  |                                            | Interest and other, net |                                |   | 56,410                         |   |   |       | 
|                                                   |  |                                            |                         |                                |   |                                |   |   |        | 
|                                                   |  |                                            |                         |                                |   |                                |   |   |        | 
|Total cash flow hedges                             |  |                                            |                         |                                | $ | 161,288                        |   | $ | 64,590 | 
|                                                   |  |                                            |                         |                                |   |                                |   |   |        | 

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 13. | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | Transactions with Aristo Technologies Limited / Mr. Yang                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | As of December 31, 2008 and 2007, we had an outstanding receivable
 from Mr. Yang, the President and Chairman of our Board of Directors, totaling
 $7,900,404 and $6,057,488 respectively. Because the Companys business is
 distributing computer components and is heavily dependant on Samsung, Mr.
 Yang took a loan from the Company and used it to invest in other companies to
 create new business platforms. These business platforms include
 manufacturing, research and development, which Mr. Yang believes can help
 improve the Companys business in the long term. 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.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | For the years ended December 31, 2008 and 2007, we recorded
 compensation to Mr. Yang of $735,026 and $812,821 respectively, and paid
 $735,026 and $812,821 respectively to Mr. Yang as compensation to him.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | During each of the years ended December 31, 2008 and 2007, we paid
 rent of $0 and $17,521 respectively for Mr. Yangs personal residence as
 fringe benefits to him. All such payments have been recorded as compensation
 expense in the accompanying financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | 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. During the years ended December 31, 2008 and 2007, we sold
 products for $0 and $366,840 respectively, to Classic. As of December 31,
 2008 and 2007, the Company had outstanding accounts receivable from Classic
 totaling $1,717,320 and $1,717,859 respectively. This account receivable has
 been outstanding for more than 12 months.                                                                                                                                                                                                                                                                                                         
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | Classic has historically met its payment obligations to the Company
 and the Company has no reason to believe that Classics receivables are not
 collectible. Pursuant to a written personal guarantee agreement, Mr. Yang has
 personally guaranteed up to $10.0 million of the outstanding accounts
 receivable from Classic. The Company has received verbal assurances from Mr.
 Yang of his intent and ability to perform under the above-referenced
 guarantee and based on information provided by Mr. Yang, his net worth is
 approximately $17 million. In addition, as discussed in Note 14, the Company
 has entered into a payment plan with Classic and the amount due from Classic
 has been settled.                                                                                                     

F-26

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 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, 2007, 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, 2009. The monthly lease
 payment for this lease is $1,090. We incurred and paid an aggregate rent
 expense of $13,077 and $12,385 to Solution during the years ended December
 31, 2008 and 2007.                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | 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, 2008 and 2007.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | During the years ended December 31, 2008 and 2007, we received
 service charges of $0 and $11,538 respectively from Systematic Information.
 The service fee was charged for back office support for Systematic
 Information.                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | During the years ended December 31, 2008 and 2007, we sold products
 for $1,913,071 and $666,742 respectively, to Systematic Information. As of
 December 31, 2008 and 2007, there were no outstanding accounts receivables
 from Systematic Information.                                                                                                                                                                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | During the years ended December 31, 2008 and 2007, we purchased
 inventories of $1,446,680 and $1,523,238 respectively from Systematic
 Information. As of December 31, 2008 and 2007, there were no outstanding
 accounts payable to Systematic Information.                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | On April 1, 2005, we entered into a lease agreement with Systematic
 Information pursuant to which we lease one residential property for Mr.
 Yangs personal use for a monthly lease payment of $3,205. Upon expiration of
 the lease on June 15, 2007, ACL acquired this residential property from Systematic
 Information. We incurred and paid an aggregate rent expense of $0 and $17,521
 to Systematic Information during the years ended December 31, 2008 and 2007.                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | 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, 2008
 and 2007, we received management fees of $0 and $5,769 respectively from
 Global. As of December 31, 2008 and 2007, there were no outstanding accounts
 receivables from Global. The management fees were charged for back office support for Global.                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | During the years ended December 31, 2008 and 2007, we sold products for $0
 and $25,337 respectively, to Global. As of December 31, 2008 and 2007, there were no outstanding accounts
 receivables from Global.                                                                                                                                                                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | During the years ended December 31, 2008 and 2007,
 we purchased inventories of $2,323 and $18,294 respectively from Global. As
 of December 31, 2008 and 2007, there were no outstanding accounts payable to
 Global.                                                                                                                                                                                                                                                                                                                                                                                                   

F-27

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 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, 2008 and 2007, we received a management fee of $15,384 and $16,026
 respectively from Systematic. As of December 31, 2008 and 2007, there were no
 outstanding accounts receivables from Systematic. The management fee was
 charged for back office support for Systematic.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | During the years ended December 31, 2008 and 2007, we sold products
 for $275,766 and $779,879 respectively, to Systematic. As of December 31,
 2008 and 2007, there were no outstanding accounts receivables from
 Systematic.                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | During the years ended December 31, 2008 and 2007, we purchased
 inventories of $560,750 and $1,007,352 respectively from Systematic. As of
 December 31, 2008 and 2007, there were no outstanding accounts payable to
 Systematic.                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Transactions with Intelligent Network
 Technology Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Mr. Yang the Companys Chief Executive Officer, majority shareholder
 and a director, is a director and 80% shareholder of Intelligent Network
 Technology Ltd. (Intelligent). The remaining 20% of Intelligent is owned by
 a non-related party.During the years ended December 31, 2008 and 2007, we
 purchased inventories of $0 and $1,343,501 respectively from Intelligent. As
 of December 31, 2008 and 2007, there were no outstanding accounts payable to
 Intelligent.                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | 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, 2008 and 2007, we
 received a management fee of $8,077 and $0 respectively from Aristo Comp. The
 management fee was charged for back office support for Aristo Comp.                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | During the years ended December 31, 2008 and 2007, we sold products
 for $67,968 and $349,327 respectively, to Aristo Comp. As of December 31,
 2008 and 2007, there were no outstanding accounts receivables from Aristo
 Comp.During the years ended December 31, 2008 and 2007, we purchased
 inventories of $37,665 and $0 respectively, from Aristo Comp. As of December
 31, 2008 and 2007, there were no outstanding accounts payable to Aristo Comp.                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Transactions 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, 2008 and 2007, we sold
 products for $575,386 and $1,471,471 respectively, to Atlantic Storage. As of
 December 31, 2008 and 2007, there were no outstanding accounts receivables
 from Atlantic Storage.                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | During the years ended December 31, 2008 and 2007, we purchased
 inventories of $679,049 and $581,444 respectively, from Atlantic Storage. As
 of December 31, 2008 and 2007, there were no outstanding accounts payable to
 Atlantic Storage.                                                                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Transactions 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, 2008 and 2007, we sold
 products for $1,077,653 and $2,574,096 respectively, to Rambo. As of December
 31, 2008 and 2007, there were no outstanding accounts receivables from Rambo.                                                                                                                         
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | During the years ended December 31, 2008 and 2007, we purchased
 inventories of $10,314 and $0 respectively, from Rambo. As of December 31,
 2008 and 2007, there were no outstanding accounts payable to Rambo.                                                                                                                                                                                                                                                                                              

F-28

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 13. | RELATED PARTY TRANSACTIONS (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | Transactions 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). During the years ended December 31, 2008
 and 2007, we sold products for $5,509 and $703,683 respectively, to Usmart.
 As of December 31, 2008 and 2007, there were no outstanding accounts
 receivables from Usmart.                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | During the years ended December 31, 2008 and 2007, we purchased
 inventories of $199,712 and $736,888 respectively, from Usmart. As of
 December 31, 2008 and 2007, 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, 2008 and 2007,
 we sold products of $0 and $51,060 respectively, to Imax. As of December 31,
 2008 and 2007, there were no outstanding accounts receivables from Imax.During
 the years ended December 31, 2008 and 2007, we purchased inventories
 of $3,167 and $0 respectively, from Imax. As of December 31, 2008 and 2007, there were no outstanding accounts
 payable to Imax.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | 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, 2008 and 2007, we sold products for $0 and $518,040
 respectively, to Kadatco. As of December 31, 2008 and 2007, there were no
 outstanding accounts receivables from Kadatco.                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | During the years ended December 31, 2008 and 2007, we purchased
 inventories of $0 and $590,742 respectively, from Kadatco. As of December 31,
 2008 and 2007, there was no outstanding accounts payable to Kadatco.                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | Transactions 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-29

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 14. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | In preparing
 these financial statements, the Company evaluated the events and transactions
 that occurred from January 1, 2009 through May 3, 2010, the date these
 financial statements were issued. The Company has made the required
 additional disclosures in reporting periods in which subsequent events occur.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | After year
 ended December 31, 2008, two banks canceled the banking facilities granted to
 the Company and restricted bank deposits were released. One bank reduced the
 amount of facilities granted to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | Effective as
 of October 1, 2009, Classic, a related party, and the Company agreed to a
 payment plan for the pay down of accounts receivable from Classic of
 $1,717,320 as of June 30, 2009 according to which Classic has agreed to pay
 to the Company $650,000 before the end of 2009 with the remainder of the
 accounts receivable balance to be paid during 2010. Mr. Alan Yang, our Chief
 Executive Officer, director and majority stockholder has personally
 guaranteed up to $10 million of outstanding accounts receivable of Classic.
 As of December 31, 2009, the accounts receivable from Classic has been fully
 settled.                                                                                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | On November
 2, 2009, the Company entered into two leases for office space. The leases
 expire on November 30, 2014. The monthly lease payments are $4,487 and
 $7,051, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | 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.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | The Company
 is seeking to finalize a loan repayment agreement with Mr. Yang whereby Mr.
 Yang will repay the outstanding loan at an interest rate of 0.5% and monthly
 repayment amounts of $95,706 over a period of ten years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-30

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 15. | RESTATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | On January 7, 2010, the Company filed the consolidated balance sheets
 as of December 31, 2008 and 2007, its consolidated statements of income,
 stockholders equity and cash flow for the year ended December 31, 2007 and
 2008, in Form 10K/A (Amendment No. 1) Part IV Item 15 Page F-1- F-26 with the
 Securities and Exchange Commission (SEC). The Company determined to re-do the
 2007 and 2008 audit and restate the financial statements. All the changes and
 related corrections are incurred in accordance with the ASC 250 Accounting
 Change and Error Correction.  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | There was a change on applicable accounting principle according to
 ASC 810-10 Consolidation of Variable Interest and Special-Purpose Entities
 where Aristo was considered a de facto agent of the Company and the Company
 is the primary beneficiary of Aristo and get control of Aristo through the
 related party, Mr. Yang. Therefore, Aristo is a deemed subsidiary and should
 consolidate with the Company. See Note 2(b) for detail analysis. ASC 810
 changes are listed in a separate column below.                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | There was a change on estimate of the value of the property according
 to ASC 820-10-35 where the properties in-use reflected the maximum value for
 the Company. Therefore, the fair value of the Company to obtain the same
 in-use property should include the valuation of land and building and their
 related improvements which rendered the assets impairment provision on a
 temporary market over or under reaction not applicable in this group of real
 property assets that was fully in-use by the Company. The ASC 820 changes are
 listed in a separate column below.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | The effects
 of the restatements are shown in the following tables.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

CONSOLIDATED BALANCE SHEETS

|                                                                                     |  |                |            |                  |  |                  |   |                |         |  |   |            | 
|------------------------------------------------------------------------------------ |  | -------------- | ---------- | ---------------- |  | ---------------- | - | -------------- | ------- |  | - | ---------- | 
|                                                                                     |  |                |            | December 31,     |  |                  |  
|                                                                                     |  | 2008
 Original |            | ASC 810
 changes |  | ASC 820
 changes |   | 2008
 Restated |        
|                                                                                     |  |                |            |                  |  |                  |   |                |        
|ASSETS                                                                               |  |                |            |                  |  |                  |   |                |         |  |   |            | 
|Current assets                                                                       |  |                |            |                  |  |                  |   |                |         |  |   |            | 
|Cash and cash equivalents                                                            |  | $              | 1,784,355  |                  |  | 159,108          |   |                |         |  | $ | 1,943,463  | 
|Restricted cash                                                                      |  |                | 5,169,753  |                  |  |                 |   |                |         |  |   | 5,169,753  | 
|Accounts receivable, net of allowance for
 doubtful accounts of $0 for 2008 and 2007 |  |                | 10,230,464 |                  |  | 111,989          |   |                |         |  |   | 10,342,453 | 
|Accounts receivable, related parties                                                 |  |                | 8,412,729  |                  |  | (6,695,409       | ) |                |         |  |   | 1,717,320  | 
|Inventories, net                                                                     |  |                | 2,060,195  |                  |  | 1,608,373        |   |                |         |  |   | 3,668,568  | 
|Restricted marketable securities                                                     |  |                | 500,000    |                  |  |                 |   |                |         |  |   | 500,000    | 
|Income tax refundable                                                                |  |                |           |                  |  |                 |   |                |         |  |   |           | 
|Other current assets                                                                 |  |                | 30,051     |                  |  | 495,867          |   |                |         |  |   | 525,918    | 
|                                                                                     |  |                |            |                  |  |                  |   |                |         |  |   |            | 
|                                                                                     |  |                |            |                  |  |                  |   |                |         |  |   |            | 
|Total current assets                                                                 |  | $              | 28,187,547 |                  |  | (4,320,072       | ) |                |         |  | $ | 23,867,475 | 
|Property, plant and equipment, net                                                   |  |                | 6,007,456  |                  |  | 32,051           |   |                | 883,116 |  |   | 6,922,623  | 
|Other deposits                                                                       |  |                | 392,069    |                  |  | 4,831            |   |                |         |  |   | 396,900    | 
|Amounts due from Aristo / Mr. Yang                                                   |  |                |           |                  |  | 7,900,404        |   |                |         |  |   | 7,900,404  | 
|                                                                                     |  |                |            |                  |  |                  |   |                |         |  |   |            | 
|                                                                                     |  |                |            |                  |  |                  |   |                |         |  |   |            | 
|TOTAL ASSETS                                                                         |  | $              | 34,587,072 |                  |  | 3,617,214        |   |                | 883,116 |  | $ | 39,087,402 | 
|                                                                                     |  |                |            |                  |  |                  |   |                |         |  |   |            | 

F-31

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                         
|-------- | ------------------------
|Note 15. | RESTATEMENTS (Continued)

CONSOLIDATED BALANCE SHEETS (Continued)

|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|----------------------------------------------------- |  | -------------- | ---------- | ---------------- |  | ---------------- | - | -------------- |  |  | - | ---------- | 
|                                                      |  |                |            | December 31,     |  |                  |  
|                                                      |  | 2008
 Original |            | ASC 810
 changes |  | ASC 820
 changes |   | 2008
 Restated | 
|                                                      |  |                |            |                  |  |                  |   |                | 
|LIABILITIES AND STOCKHOLDERS EQUITY                  |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Current liabilities                                   |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Accounts
 payable                                     |  | $              | 13,669,779 |                  |  | 3,649,170        |   |                |  |  |   | 17,318,949 | 
|Accruals                                              |  |                | 396,755    |                  |  | 12,612           |   |                |  |  |   | 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    |                  |  | 206,997          |   |                |  |  |   | 508,073    | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Total current liabilities                             |  | $              | 31,152,455 |                  |  | 3,868,779        |   |                |  |  | $ | 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            |   |                |  |  |   | 8,343      | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Total long-term liabilities                           |  |                | 2,404,766  |                  |  | 8,343            |   |                |  |  |   | 2,413,109  | 
|Deferred tax                                          |  |                | 8,343      |                  |  | (8,343           | ) |                |  |  |   |           | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|TOTAL
LIABILITIES                                     |  |                | 33,565,564 |                  |  | 3,868,779        |   |                |  |  |   | 37,434,343 | 
|                                                     
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Commitments
 and contingencies                        |  | $              |           |                  |  |                 |   |                |  |  | $ |           | 
|                                                     
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 

F-32

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

|         |                         
|-------- | ------------------------
|Note 15. | RESTATEMENTS (Continued)

CONSOLIDATED BALANCE SHEETS (Continued)

|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |         |  |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ---------- | ---------------- |  | ---------------- | - | -------------- | ------- |  | - | ---------- | -
|                                                                                                                                                      |  |                |            | December 31,     |  |                  |  
|                                                                                                                                                      |  | 2008
 Original |            | ASC 810
 Changes |  | ASC 820
 Changes |   | 2008
 Restated |        
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |         |  |  
|STOCKHOLDERS EQUITY                                                                                                                                  |  |                |            |                  |  |                  |   |                |         |  |   |            |  
|Common stock, $.001 par value; 50,000,000 shares authorized;
 28,329,936 shares issued and outstanding as of December 31, 2008 and 2007
 respectively |  | $              | 28,330     |                  |  |                 |   |                |         |  | $ | 28,330     |  
|                                                                                                                                                     
|Additional paid in capital                                                                                                                            |  |                | 3,593,027  |                  |  |                 |   |                |         |  |   | 3,593,027  |  
|Amount due (from) to stockholder/director                                                                                                             |  |                | (39,633    | )                |  | 39,633           |   |                |         |  |   |           |  
|Accumulated losses                                                                                                                                    |  |                | (2,560,216 | )                |  | (291,198         | ) |                | 883,116 |  |   | (1,968,298 | )
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |         |  |   |            |  
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |         |  |   |            |  
|                                                                                                                                                      |  |                | 1,021,508  |                  |  | (251,565         | ) |                | 883,116 |  |   | 1,653,059  |  
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |         |  |   |            |  
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |         |  |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                            |  | $              | 34,587,072 |                  |  | 3,617,214        |   |                | 883,116 |  | $ | 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 Aristo/Mr. Yang.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 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 of $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 stockholder/director from
 stockholders equity.                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The total
 liabilities and stockholders equity was restated from $34,587,072 as
 originally reported, to $39,087,402, an increase of $4,500,330.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

F-33

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                         
|-------- | ------------------------
|Note 15. | RESTATEMENTS (Continued)

CONSOLIDATED BALANCE SHEETS (Continued)

|                                                                                     |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|------------------------------------------------------------------------------------ |  | -------------- | ---------- | ---------------- |  | ---------------- | - | -------------- |  |  | - | ---------- | 
|                                                                                     |  |                |            | December 31,     |  |                  |  
|                                                                                     |  | 2007
 Original |            | ASC 810
 Changes |  | ASC 820
 changes |   | 2007
 Restated | 
|                                                                                     |  |                |            |                  |  |                  |   |                | 
|ASSETS                                                                               |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Current assets                                                                       |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Cash and cash equivalents                                                            |  | $              | 1,597,674  |                  |  | 63,382           |   |                |  |  | $ | 1,661,056  | 
|Restricted cash                                                                      |  |                | 4,203,057  |                  |  |                 |   |                |  |  |   | 4,203,057  | 
|Accounts receivable, net of allowance for
 doubtful accounts of $0 for 2007 and 2006 |  |                | 7,594,784  |                  |  | 32,233           |   |                |  |  |   | 7,627,017  | 
|Accounts receivable, related parties                                                 |  |                | 7,955,764  |                  |  | (6,237,905       | ) |                |  |  |   | 1,717,859  | 
|Inventories, net                                                                     |  |                | 3,483,994  |                  |  | 284,161          |   |                |  |  |   | 3,768,155  | 
|Restricted marketable securities                                                     |  |                | 769,231    |                  |  |                 |   |                |  |  |   | 769,231    | 
|Marketable securities                                                                |  |                | 404,780    |                  |  |                 |   |                |  |  |   | 404,780    | 
|Income tax refundable                                                                |  |                | 49,375     |                  |  |                 |   |                |  |  |   | 49,375     | 
|Other current assets                                                                 |  |                | 83,061     |                  |  | 6,122            |   |                |  |  |   | 89,183     | 
|                                                                                     |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                                                     |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Total current assets                                                                 |  | $              | 26,141,720 |                  |  | (5,852,007       | ) |                |  |  | $ | 20,289,713 | 
|Property, plant and equipment, net                                                   |  |                | 6,933,998  |                  |  |                 |   |                |  |  |   | 6,933,998  | 
|Other deposits                                                                       |  |                | 387,245    |                  |  |                 |   |                |  |  |   | 387,245    | 
|Amounts due from Aristo / Mr. Yang                                                   |  |                |           |                  |  | 6,057,488        |   |                |  |  |   | 6,057,488  | 
|                                                                                     |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                                                     |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|TOTAL ASSETS                                                                         |  | $              | 33,462,963 |                  |  | 205,481          |   |                |  |  | $ | 33,668,444 | 
|                                                                                     |  |                |            |                  |  |                  |   |                |  |  |   |            | 

F-34

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                         
|-------- | ------------------------
|Note 15. | RESTATEMENTS (Continued)

CONSOLIDATED BALANCE SHEETS (Continued)

|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|----------------------------------------------------- |  | -------------- | ---------- | ---------------- |  | ---------------- | - | -------------- |  |  | - | ---------- | 
|                                                      |  |                |            | December 31,     |  |                  |  
|                                                      |  | 2007
 Original |            | ASC 810
 changes |  | ASC 820
 changes |   | 2007
 Restated | 
|                                                      |  |                |            |                  |  |                  |   |                | 
|LIABILITIES AND STOCKHOLDERS EQUITY                  |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Current liabilities                                   |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Accounts payable                                      |  | $              | 12,592,685 |                  |  | 277,515          |   |                |  |  |   | 12,870,200 | 
|Accruals                                              |  |                | 186,738    |                  |  | 9,218            |   |                |  |  |   | 195,956    | 
|Lines of credit and loan facilities                   |  |                | 15,610,488 |                  |  |                 |   |                |  |  |   | 15,610,488 | 
|Current portion of long-term debt                     |  |                | 135,237    |                  |  |                 |   |                |  |  |   | 135,237    | 
|Current portion of capital lease                      |  |                | 44,991     |                  |  |                 |   |                |  |  |   | 44,991     | 
|Due to shareholders for converted pledged
 collateral |  |                | 112,385    |                  |  |                 |   |                |  |  |   | 112,385    | 
|Other current liabilities                             |  |                | 268,573    |                  |  | (1               | ) |                |  |  |   | 268,572    | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                     
|Total current liabilities                             |  | $              | 28,951,097 |                  |  | 286,732          |   |                |  |  | $ | 29,237,829 | 
|                                                     
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Long-term liabilities                                 |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Long-term debt, less current portion                  |  |                | 2,539,242  |                  |  |                 |   |                |  |  |   | 2,539,242  | 
|Capital lease, less current portion                   |  |                | 49,971     |                  |  |                 |   |                |  |  |   | 49,971     | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Total long-term liabilities                           |  |                | 2,589,213  |                  |  |                 |   |                |  |  |   | 2,589,213  | 
|Deferred tax                                          |  |                | 15,471     |                  |  |                 |   |                |  |  |   | 15,471     | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|TOTAL LIABILITIES                                     |  |                | 31,555,781 |                  |  | 286,732          |   |                |  |  |   | 31,842,513 | 
|                                                     
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                     
|Commitments and contingencies                         |  | $              |           |                  |  |                 |   |                |  |  | $ |           | 
|                                                     
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 

F-35

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                         
|-------- | ------------------------
|Note 15. | RESTATEMENTS (Continued)

CONSOLIDATED BALANCE SHEETS (Continued)

|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ---------- | ---------------- |  | ---------------- | - | -------------- |  |  | - | ---------- | -
|                                                                                                                                                      |  |                |            | December 31,     |  |                  |  
|                                                                                                                                                      |  | 2007
 Original |            | ASC 810
 changes |  | ASC 820
 changes |   | 2007
 Restated | 
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                | 
|STOCKHOLDERS EQUITY                                                                                                                                  |  |                |            |                  |  |                  |   |                |  |  |   |            |  
|Common stock, $.001 par value; 50,000,000
 shares authorized; 28,329,936 shares issued and outstanding as of December
 31, 2007 and 2006 respectively |  | $              | 28,330     |                  |  |                 |   |                |  |  | $ | 28,330     |  
|Additional paid in capital                                                                                                                            |  |                | 3,593,027  |                  |  |                 |   |                |  |  |   | 3,593,027  |  
|Amount due (from) to stockholder/director                                                                                                             |  |                | (75,998    | )                |  | 75,998           |   |                |  |  |   |           |  
|Accumulated losses                                                                                                                                    |  |                | (1,638,177 | )                |  | (157,249         | ) |                |  |  |   | (1,795,426 | )
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            |  
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            |  
|                                                                                                                                                      |  | $              | 1,907,182  |                  |  | (81,251          | ) |                |  |  | $ | 1,825,931  |  
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            |  
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                            |  | $              | 33,462,963 |                  |  | 205,481          |   |                |  |  | $ | 33,668,444 |  
|                                                                                                                                                     
|                                                                                                                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            |  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As a result of restatement of the consolidated balance sheet as of
 December 31, 2007, total assets increased from $33,462,963 as originally
 reported, to $33,668,444, an increase of $205,481. The increase of total
 assets was derived from an increase of $63,382 in cash and cash equivalents,
 an increase of $32,232 in accounts receivable, a decrease of $6,237,905 in
 accounts receivables from related parties, an increase of $284,161 in
 inventories, an increase of $6,122 in other current assets, and an increase
 of $6,057,488 in amounts due from Aristo/Mr. Yang.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | The total liabilities increased from $31,555,781 as originally
 reported, to $31,842,513, an increase of $286,732. The increase of total
 liabilities was derived from an increase of $277,515 in accounts payable, an
 increase of $9,218 in accruals, and a decrease of $1 in other current
 liabilities.                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | The total stockholders equity was restated from $1,907,182 as
 originally reported, to $1,825,931, a decrease of $81,251. The increase of
 total stockholders equity was derived from a increase of $157,249 in
 accumulated losses, and a decrease of $75,998 in amount due from
 stockholder/director.                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | The total liabilities and stockholders equity was restated from
 $33,462,963 as originally reported, to $33,668,444, an increase of $205,481.                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-36

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

|         |                         
|-------- | ------------------------
|Note 15. | RESTATEMENTS (Continued)

CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME

|                                                       |  |                |              |                  |  |                  |   |                |         |  |   |              |  
|------------------------------------------------------ |  | -------------- | ------------ | ---------------- |  | ---------------- | - | -------------- | ------- |  | - | ------------ | -
|                                                       |  |                |              | December 31,     |  |                  |  
|                                                       |  | 2008
 Original |              | ASC 810
 Changes |  | ASC 820
 changes |   | 2008
 Restated |        
|                                                       |  |                |              |                  |  |                  |   |                |        
|Net sales                                              |  | $              | 206,082,770  |                  |  | 3,474,156        |   |                |         |  | $ | 209,556,926  |  
|Costs of sales                                         |  |                | (201,880,793 | )                |  | (3,507,493       | ) |                |         |  |   | (205,388,286 | )
|                                                       |  |                |              |                  |  |                  |   |                |        
|                                                       |  |                |              |                  |  |                  |   |                |         |  |   |              |  
|Gross profit                                           |  | $              | 4,201,977    |                  |  | (33,337          | ) |                |         |  | $ | 4,168,640    |  
|Selling and distribution costs                         |  |                | (76,072      | )                |  | (6,213           | ) |                |         |  |   | (82,285      | )
|General and administrative expenses                    |  |                | (4,099,249   | )                |  | (99,707          | ) |                | 883,116 |  |   | (3,315,840   | )
|                                                       |  |                |              |                  |  |                  |   |                |        
|                                                       |  |                |              |                  |  |                  |   |                |         |  |   |              |  
|Income from operation                                  |  | $              | 26,656       |                  |  | (139,257         | ) |                | 883,116 |  | $ | 770,515      |  
|Other income (expenses)                                |  |                |              |                  |  |                  |   |                |         |  |   |              |  
|Rental income                                          |  |                | 89,231       |                  |  |                 |   |                |         |  |   | 89,231       |  
|Loss on disposal of marketable securities              |  |                | (227,781     | )                |  |                 |   |                |         |  |   | (227,781     | )
|Management and service income                          |  |                | 23,462       |                  |  |                 |   |                |         |  |   | 23,462       |  
|Net income on cash flow hedge                          |  |                | 161,288      |                  |  |                 |   |                |         |  |   | 161,288      |  
|Exchange differences                                   |  |                | (48,677      | )                |  |                 |   |                |         |  |   | (48,677      | )
|Interest income                                        |  |                | 90,706       |                  |  |                 |   |                |         |  |   | 90,706       |  
|Interest expenses                                      |  |                | (1,073,795   | )                |  | (3               | ) |                |         |  |   | (1,073,798   | )
|Miscellaneous                                          |  |                | 3,000        |                  |  | 5,311            |   |                |         |  |   | 8,311        |  
|                                                       |  |                |              |                  |  |                  |   |                |        
|                                                       |  |                |              |                  |  |                  |   |                |         |  |   |              |  
|Loss before
 income taxes                              |  | $              | (955,910     | )                |  | (133,949         | ) |                | 883,116 |  | $ | (206,743     | )
|Income taxes                                           |  | $              | 33,871       |                  |  |                 |   |                |         |  | $ | 33,871       |  
|                                                       |  |                |              |                  |  |                  |   |                |        
|                                                       |  |                |              |                  |  |                  |   |                |         |  |   |              |  
|Net loss                                               |  | $              | (922,039     | )                |  | (133,949         | ) |                | 883,116 |  | $ | (172,872     | )
|                                                       |  |                |              |                  |  |                  |   |                |         |  |   |              |  
|                                                       |  |                |              |                  |  |                  |   |                |        
|                                                       |  |                |              |                  |  |                  |   |                |         |  |   |              |  
|Loss per
 share  basic and diluted                    |  | $              | (0.03        | )                |  | 0.02             |   |                |         |  | $ | (0.01        | )
|                                                       |  |                |              |                  |  |                  |   |                |        
|                                                       |  |                |              |                  |  |                  |   |                |         |  |   |              |  
|Weighted
 average number of shares  basic and diluted |  |                | 28,329,936   |                  |  |                 |   |                |         |  |   | 28,329,936   |  
|                                                       |  |                |              |                  |  |                  |   |                |        

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As a result of the 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 miscellaneous income.

F-37

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007 
(Stated in US Dollars)

|         |                         
|-------- | ------------------------
|Note 15. | RESTATEMENTS (Continued)

CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME (Continued)

|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|------------------------------------------------------ |  | -------------- | ------------ | ---------------- |  | ---------------- | - | -------------- |  |  | - | ------------ | -
|                                                       |  |                |              | December 31,     |  |                  |  
|                                                       |  | 2007
 Original |              | ASC 810
 changes |  | ASC 820
 changes |   | 2007
 Restated | 
|                                                       |  |                |              |                  |  |                  |   |                | 
|Net sales                                              |  | $              | 160,404,924  |                  |  | 6,366,682        |   |                |  |  | $ | 166,771,606  |  
|Costs of
 sales                                        |  |                | (156,533,635 | )                |  | (6,400,021       | ) |                |  |  |   | (162,933,656 | )
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|Gross profit                                           |  | $              | 3,871,289    |                  |  | (33,339          | ) |                |  |  | $ | 3,837,950    |  
|Selling and
 distribution costs                        |  |                | (69,260      | )                |  | (4,248           | ) |                |  |  |   | (73,508      | )
|General and
 administrative expenses                   |  |                | (2,942,542   | )                |  | (124,453         | ) |                |  |  |   | (3,066,995   | )
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|Income from
 operation                                 |  | $              | 859,487      |                  |  | (162,040         | ) |                |  |  | $ | 697,447      |  
|Other income
 (expenses)                               |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|Rental income                                          |  |                | 37,179       |                  |  |                 |   |                |  |  |   | 37,179       |  
|Unrealized gain on disposal of marketable
 securities  |  |                | 404,780      |                  |  |                 |   |                |  |  |   | 404,780      |  
|Management and service income                          |  |                | 33,333       |                  |  |                 |   |                |  |  |   | 33,333       |  
|Net income on cash flow hedge                          |  |                | 64,590       |                  |  |                 |   |                |  |  |   | 64,590       |  
|Exchange differences                                   |  |                | 34,672       |                  |  |                 |   |                |  |  |   | 34,672       |  
|Director life insurance policy refund                  |  |                | 29,617       |                  |  |                 |   |                |  |  |   | 29,617       |  
|Interest income                                        |  |                | 169,055      |                  |  |                 |   |                |  |  |   | 169,055      |  
|Interest expenses                                      |  |                | (1,009,006   | )                |  | (4               | ) |                |  |  |   | (1,009,010   | )
|Miscellaneous                                          |  |                | 218          |                  |  | 4,795            |   |                |  |  |   | 5,013        |  
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|Income before income taxes                             |  | $              | 623,925      |                  |  | (157,249         | ) |                |  |  | $ | 466,676      |  
|Income taxes                                           |  |                | (187,833     | )                |  |                 |   |                |  |  |   | (187,833     | )
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|Net income                                             |  | $              | 436,092      |                  |  | (157,249         | ) |                |  |  | $ | 278,843      |  
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|Earnings per share  basic and diluted                 |  | $              | 0.02         |                  |  | (0.01            | ) |                |  |  | $ | 0.01         |  
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  
|Weighted average number of shares  basic
 and diluted |  |                | 28,329,936   |                  |  |                 |   |                |  |  |   | 28,329,936   |  
|                                                       |  |                |              |                  |  |                  |   |                |  |  |   |              |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As a result of the restatement of consolidated income and
 comprehensive income for the year ended December 31, 2007, total net income
 decreased from $436,092 as originally reported to $278,843, a decrease of
 $157,249. The decreased income was composed of an increase of $6,366,682 in
 net sales, an increase of $6,400,021 in costs of sales, an increase of $4,248
 in selling and distribution costs, an increase of $124,453 in general and
 administrative expenses, an increase of $4 in interest expenses, and an
 increase of $4,795 in miscellaneous income.

F-38

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007(Stated in US Dollars)

|         |                         
|-------- | ------------------------
|Note 15. | RESTATEMENTS (Continued)

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|---------------------------------------------------------------------------- |  | -------------- | ---------- | ---------------- |  | ---------------- | - | -------------- | -------- | - | - | ----------- | -
|                                                                             |  | December 31,   |           
|                                                                             |  | 2008
 Original |            | ASC 810
 changes |  | ASC 820
 changes |   | 2008
 Restated |         
|                                                                             |  |                |            |                  |  |                  |   |                |         
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Cash flows
 from operating activities                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Net (loss) income                                                            |  | $              | (922,039   | )                |  | (133,949         | ) |                | 883,116  |   | $ | (172,872    | )
|Depreciation and amortization                                                |  |                | 238,477    |                  |  |                 |   |                |          |   |   | 238,477     |  
|Change in inventory reserve                                                  |  |                | (190,000   | )                |  |                 |   |                |          |   |   | (190,000    | )
|Loss (gain) on disposal of marketable
 securities                            |  |                | 227,782    |                  |  | (1               | ) |                |          |   |   | 227,781     |  
|Loss on revaluation of properties                                            |  |                | 883,116    |                  |  |                 |   |                | (883,116 | ) |   |            |  
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Adjustments to reconcile net loss to net
 cash used in operating activities: |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Accounts receivable  other                                                  |  |                | (2,635,680 | )                |  | (79,755          | ) |                |          |   |   | (2,715,435  | )
|Accounts receivable  related parties                                        |  |                | (456,965   | )                |  | 457,504          |   |                |          |   |   | 539         |  
|Inventories                                                                  |  |                | 1,613,799  |                  |  | (1,324,211       | ) |                |          |   |   | 289,588     |  
|Refundable deposits                                                          |  |                |           |                  |  | (9,656           | ) |                |          |   |   | (9,656      | )
|Income tax refundable                                                        |  |                | 49,375     |                  |  |                 |   |                |          |   |   | 49,375      |  
|Other current assets                                                         |  |                | 53,010     |                  |  | (489,744         | ) |                |          |   |   | (436,734    | )
|Other assets                                                                 |  |                | (4,824     | )                |  | 4,824            |   |                |          |   |   |            |  
|Accounts payable                                                             |  |                | 1,077,094  |                  |  | 3,371,655        |   |                |          |   |   | 4,448,749   |  
|Accrued expenses                                                             |  |                | 210,017    |                  |  | 3,394            |   |                |          |   |   | 213,411     |  
|Income tax payable                                                           |  |                | 5,588      |                  |  |                 |   |                |          |   |   | 5,588       |  
|Other current liabilities                                                    |  |                | 32,503     |                  |  | 206,998          |   |                |          |   |   | 239,501     |  
|Deferred tax                                                                 |  |                | (7,128     | )                |  |                 |   |                |          |   |   | (7,128      | )
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Net cash
 provided by operating activities                                   |  | $              | 174,125    |                  |  | 2,007,059        |   |                |         |   | $ | 2,181,184   |  
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Cash flows
 from investing activities                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Advanced from Aristo / Mr. Yang                                              |  | $              | 36,365     |                  |  | 11,417,431       |   |                |          |   | $ | 11,453,796  |  
|Advanced to Aristo / Mr. Yang                                                |  |                |           |                  |  | (13,296,712      | ) |                |          |   |   | (13,296,712 | )
|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   | )                |  | (32,052          | ) |                |          |   |   | (164,565    | )
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Net cash
 used in investing activities                                       |  | $              | (616,615   | )                |  | (1,911,333       | ) |                |          |   | $ | (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    |                  |  | 95,726           |   |                |         |   |   | 282,407     |  
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Cash and
 cash equivalentsbeginning of year                                 |  |                | 1,597,674  |                  |  | 63,382           |   |                |          |   |   | 1,661,056   |  
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Cash and
 cash equivalentsend of year                                       |  |                | 1,784,355  |                  |  | 159,108          |   |                |         |   |   | 1,943,463   |  
|                                                                             |  |                |            |                  |  |                  |   |                |          |   |   |             |  

F-39

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

Note 15.            RESTATEMENTS
(Continued)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

|                                                                                         |  |                |           |  |                  |              |                  |   |                |  |  | 
|---------------------------------------------------------------------------------------- |  | -------------- | --------- |  | ---------------- | ------------ | ---------------- | - | -------------- |  |  | 
|                                                                                         |  |                |           |  |                  | December 31, |                  |   |                | 
|                                                                                         |  | 2008
 Original |           |  | ASC 810
 changes |              | ASC 820
 changes |   | 2008
 Restated | 
|                                                                                         |  |                |           |  |                  |              |                  |   |                | 
|                                                                                         |  |                |           |  |                  |              |                  |   |                |  |  | 
|Supplementary
 cash flow information:                                                    |  |                |           |  |                  |              |                  |   |                |  |  | 
|Interest paid                                                                            |  | $              | 1,073,795 |  |                  | 3            |                  | $ | 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 beginning of year were increased
by $63,382 from $1,597,674 as originally reported, to $1,661,056. The cash and
cash equivalents at end of year were increased by $159,108 from $1,784,355 as
originally reported, to $1,943,463.

F-40

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

Note 15.            RESTATEMENTS (Continued)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|---------------------------------------------------------------------------- |  | -------------- | ---------- | ---------------- |  | ---------------- | - | -------------- |  |  | - | ----------- | -
|                                                                             |  | 2007
 Original |            | ASC 810
 changes |  | ASC 820
 changes |   | 2007
 Restated | 
|                                                                             |  |                |            |                  |  |                  |   |                | 
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Cash flows
 from operating activities                                        |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Net income                                                                   |  | $              | 436,092    |                  |  | (157,249         | ) |                |  |  | $ | 278,843     |  
|Depreciation and amortization                                                |  |                | 230,614    |                  |  |                 |   |                |  |  |   | 230,614     |  
|Change in inventory reserve                                                  |  |                | 323,077    |                  |  |                 |   |                |  |  |   | 323,077     |  
|Gain on disposal of equipment                                                |  |                | (218       | )                |  |                 |   |                |  |  |   | (218        | )
|Gain on disposal of marketable securities                                    |  |                | (404,780   | )                |  |                 |   |                |  |  |   | (404,780    | )
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Adjustments to reconcile net loss to net
 cash used in operating activities: |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Accounts receivable  other                                                  |  |                | (5,586,310 | )                |  | (32,234          | ) |                |  |  |   | (5,618,544  | )
|Accounts receivable  related parties                                        |  |                | (583,297   | )                |  | 6,237,905        |   |                |  |  |   | 5,654,608   |  
|Inventories                                                                  |  |                | (553,816   | )                |  | (284,161         | ) |                |  |  |   | (837,977    | )
|Refundable deposits                                                          |  |                |           |                  |  | (6,207           | ) |                |  |  |   | (6,207      | )
|Income tax refundable                                                        |  |                | (49,375    | )                |  | 49,375           |   |                |  |  |   |            |  
|Other current assets                                                         |  |                | (42,124    | )                |  | (6,122           | ) |                |  |  |   | (48,246     | )
|Other assets                                                                 |  |                | (6,207     | )                |  | 6,207            |   |                |  |  |   |            |  
|Accounts payable                                                             |  |                | 7,582,962  |                  |  | 277,515          |   |                |  |  |   | 7,860,477   |  
|Accrued expenses                                                             |  |                | (127,486   | )                |  | 9,218            |   |                |  |  |   | (118,268    | )
|Income tax payable                                                           |  |                | (74,839    | )                |  | (49,375          | ) |                |  |  |   | (124,214    | )
|Other current liabilities                                                    |  |                | (25,044    | )                |  | (8,814           | ) |                |  |  |   | (33,858     | )
|Deferred tax                                                                 |  |                | 6,658      |                  |  | 8,813            |   |                |  |  |   | 15,471      |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Net cash
 provided by (used in) operating activities                         |  | $              | 1,125,907  |                  |  | 6,044,872        |   |                |  |  | $ | 7,170,779   |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Cash flows
 from investing activities                                        |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Advanced from Aristo / Mr. Yang                                              |  | $              |            |                  |  | 11,153,115       |   |                |  |  | $ | 11,153,115  |  
|Advanced to Aristo / Mr. Yang                                                |  |                | (989,461   | )                |  | (17,134,605      | ) |                |  |  |   | (18,124,066 | )
|Increase in restricted cash                                                  |  |                | (1,494,480 | )                |  |                 |   |                |  |  |   | (1,494,480  | )
|Increase in restricted marketable
 securities                                |  |                | (769,231   | )                |  |                 |   |                |  |  |   | (769,231    | )
|Cash proceeds from sales of equipment                                        |  |                | 385        |                  |  |                 |   |                |  |  |   | 385         |  
|Purchase of property, plant and equipment                                    |  |                | (3,159,760 | )                |  |                 |   |                |  |  |   | (3,159,760  | )
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Net cash
 used in investing activities                                       |  | $              | (6,412,547 | )                |  | (5,981,490       | ) |                |  |  |   | (12,394,037 | )
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Cash flows
 from financing activities                                        |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Net borrowings on lines of credit and notes
 payable                         |  | $              | 4,772,021  |                  |  |                 |   |                |  |  | $ | 4,772,021   |  
|Borrowing under long-term debt                                               |  |                | 801,723    |                  |  |                 |   |                |  |  |   | 801,723     |  
|Principal payments under long-term debt                                      |  |                | (91,625    | )                |  |                 |   |                |  |  |   | (91,625     | )
|Principal payments under capital lease
 obligation                           |  |                | (45,291    | )                |  |                 |   |                |  |  |   | (45,291     | )
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Net cash
 provided by financing activities                                   |  | $              | 5,436,828  |                  |  |                 |   |                |  |  | $ | 5,436,828   |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Net cash and
 cash equivalents sourced (used)                                |  | $              | 150,188    |                  |  | 63,382           |   |                |  |  | $ | 213,570     |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Cash and
 cash equivalentsbeginning of year                                 |  |                | 1,447,486  |                  |  |                 |   |                |  |  |   | 1,447,486   |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  
|Cash and
 cash equivalentsend of year                                       |  | $              | 1,597,674  |                  |  | 63,382           |   |                |  |  | $ | 1,661,056   |  
|                                                                             |  |                |            |                  |  |                  |   |                |  |  |   |             |  

F-41

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ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)

Note 15.           RESTATEMENTS (Continued)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

|                                                                                         |  |                |              |  |                  |       |                  |  |                |        |           | 
|---------------------------------------------------------------------------------------- |  | -------------- | ------------ |  | ---------------- | ----- | ---------------- |  | -------------- | ------ | --------- | 
|                                                                                         |  |                | December 31, | 
|                                                                                         |  | 2007
 Original |              |  | ASC 810
 changes |       | ASC 820
 changes |  | 2007
 Restated |       
|                                                                                         |  |                |              |  |                  |       |                  |  |                |       
|                                                                                         |  |                |              |  |                  |       |                  |  |                |        |           | 
|Supplementary
 cash flow information:                                                    |  |                |              |  |                  |       |                  |  |                |        |           | 
|Interest paid                                                                            |  | $              | 1,009,006    |  |                  |       | 4                |  |                | $      | 1,009,010 | 
|Income tax paid                                                                          |  |                | 305,389      |  |                  |       |                 |  |                |        | 305,389   | 
|                                                                                         |  |                |              |  |                  |       |                  |  |                |        |           | 
|                                                                                         |  |                |              |  |                  |       |                  |  |                |        |           | 
|Supplementary schedule of non-cash
 investing and financing activities:                  |  |                |              |  |                  |       |                  |  |                |        |           | 
|Capital lease obligations incurred when
 capital leases were entered for new automobiles |  | $              | 91,752       |  |                  | 4,146 |                  |  | $              | 95,898 |          
|                                                                                         |  |                |              |  |                  |       |                  |  |                |        |          

As a result of the restatement, the net cash provided by operating
activities for the year ended December 31, 2007 increased by $6,044,872 from
$1,125,907 as originally reported, to $7,170,779; net cash used in investing
activities increased by $5,981,490 from $6,412,547 as originally reported, to
$12,394,037. The cash and cash equivalents at end of year were increased by $63,382
from $1,597,674 as originally reported, to $1,661,056.

F-42

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ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES

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.

SCHEDULE III

QUARTERLY INFORMATION (UNAUDITED)

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.

S-1

---