UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(MARK ONE)

              |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED - December 31, 2004

                                       OR

            |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE TRANSITION PERIOD FROM ______ TO ______

                        Commission File Number: 000-50140

                             ACL SEMICONDUCTORS INC.
             (Exact name of registrant as specified in its charter)

                  DELAWARE                               16-1642709
                  --------                               ----------
        (State or other jurisdiction                   (IRS Employer
              of incorporation)                      Identification No.)

              B24-B27,1/F., Block B, Proficient Industrial Centre,
                      6 Wang Kwun Road, Kowloon, Hong Kong
                      ------------------------------------
                    (Address of principal executive offices)

                                 (852) 2799-1996
                                 ---------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to                 Common Stock - $.001 par value
Section 12(b) of the Act:                     The Common Stock is listed on the
                                              Over-the-Counter Bulletin Board

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

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 registrant was required
to file such reports) and (2) has been subject to such filing  requirements  for
at least the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K 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. [_]

<PAGE>

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).      Yes [_]      No [X]

The aggregate market value of the voting common equity held by non-affiliates of
the registrant as of March 31, 2005 was approximately  $1,525,982 based upon the
closing  price of $0.28 of the  registrant's  common  stock on the OTC  Bulletin
Board,  as of the last business day of the most recently  completed first fiscal
quarter  (March 31,  2005).  (For  purposes of  determining  this  amount,  only
directors,  executive officers, and 10% or greater stockholders have been deemed
affiliates).

Registrant  had 27,829,936  shares of common stock,  par value $0.001 per share,
outstanding as of April 13, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K  (e.g.,  Part I, Part II,  etc.)  into  which the  document  is
incorporated:  (1) Any  annual  report  to  security  holders;  (2) Any proxy or
information  statement;  and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the  Securities Act of 1933.  The listed  documents  should be clearly
described for identification  purposes (e.g.,  annual report to security holders
for fiscal year ended December 24, 1980). N/A

<PAGE>

                           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.

<PAGE>

                                TABLE OF CONTENTS

                                 Form 10-K Index

<TABLE>
<CAPTION>
                                                   PART I

                                                                                                         PAGE
<S>         <C>                                                                                           <C>
Item 1.     Business.......................................................................................2
Item 2.     Properties....................................................................................12
Item 3.     Legal Proceedings.............................................................................13
Item 4.     Submission of Matters to a Vote of Security Holders...........................................13

                                                   PART II

Item 5.     Market for the Registrant's Common Equity and Related Stockholder
              Matters.....................................................................................14
Item 6.     Selected Financial Data.......................................................................14
Item 7.     Management's Discussion and Analysis of Financial Condition and
              Results of Operations.......................................................................16
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk....................................27
Item 8.     Financial Statements and Supplementary Data...................................................27
Item 9.     Changes in and Disagreements with Accountants on Accounting and
              Financial Disclosure........................................................................27
Item 9A.    Controls and Procedures.......................................................................27

                                                  PART III

Item 10.    Directors and Executive Officers of the Registrant............................................28
Item 11.    Executive Compensation........................................................................29
Item 12.    Security Ownership of Certain Beneficial Owners and Management and
              Related Stockholder Matters.................................................................31
Item 13.    Certain Relationships and Related Transactions................................................32
Item 14.    Principal Accounting Fees and Services........................................................36

                                                   PART IV

Item 15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................36
Signatures    ............................................................................................40
</TABLE>

                                       1
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

         We were  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. In September 2001, Historic Print Data merged with Odyssey Capital
Group,  Ltd., a Nevada  Corporation  ("Odyssey"),  whereby all of the issued and
outstanding  shares of  Historic  Print Data stock were  acquired  by means of a
merger of  Historic  Print Data into  Odyssey,  with  Odyssey  as the  surviving
corporation. Historic Print Data effectively disappeared.

         In  connection  with the  merger,  Articles  of  Merger  were  filed in
September 2001 with the Nevada Department of State;  however,  due to oversight,
the  Certificate  of Merger was not filed until  August  2002 with the  Delaware
Department of State.  Odyssey's Nevada certificate of incorporation  remained as
the surviving  corporation's  certificate of  incorporation,  and as part of the
merger  transaction,  Odyssey amended its certificate of incorporation to change
its name to Print Data Corp. For accounting purposes the acquisition was treated
as a  recapitalization  of Historic  Print Data with Historic  Print Data as the
acquirer (reverse acquisition).  At the time of the merger transaction,  Odyssey
was a shell corporation  conducting virtually no business operation,  other than
its  efforts  to  seek   merger   partners  or   acquisition   candidates.   Its
capitalization  consisted  of  1,818,532  shares  of  common  stock  issued  and
outstanding.  Shareholders of Historic Print Data received  7,500,000  shares of
Odyssey common stock and 642,576 shares of Odyssey preferred stock  (convertible
into 3,212,880  shares of common  stock).  Concurrently,  an additional  790,000
shares of preferred stock  (convertible  into 3,950,000  shares of common stock)
was issued to certain advisors and consultants as part of the plan of merger.

         Odyssey was originally incorporated as Dayton Filmcorp.  under the laws
of the  State of  Nevada  in June  1987.  In August  1987,  World  Energy  Solar
Technology  Corp.,  a Utah  corporation,  merged into Dayton  Filmcorp,  whereby
Dayton Filmcorp was the surviving corporation.  In 1994, Dayton Filmcorp changed
its name to Universal  Marketing  and  Entertainment,  Inc. In 1998,  it reverse
split its stock 1 for 20. In May 2001,  Universal  Marketing and  Entertainment,
Inc.  changed its name to Odyssey  Capital  Group,  Ltd.,  and reverse split its
stock 1 for 5. In  September  2001,  Odyssey  merged with  Historic  Print Data,
whereby Odyssey was the surviving  corporation;  and Odyssey changed its name to
Print Data Corp., a Nevada  corporation  ("Print Data  Nevada").  On October 11,
2002,  Print Data Nevada  restructured its entire capital  structure  whereby it
reverse split its common stock 1 for 20 and its preferred  stock 1 for 500; and,
in order to change its state of  incorporation  from Nevada to  Delaware,  Print
Data  Nevada,  merged  into its newly  formed  subsidiary  Print Data  Corp.,  a
Delaware  corporation.  Pursuant  to the plan of  merger,  all of the issued and
outstanding shares of Print Data Nevada stock were acquired by means of a merger
of Print  Data  Nevada  into the  Company,  with the  Company  as the  surviving
corporation.   Print  Data  Nevada   effectively   disappeared.   The  Company's
certificate of incorporation remained as the surviving corporation's certificate
of incorporation.  Pursuant to the plan of merger, each share of common stock of
Print Data Nevada was  converted  into one share of common  stock of the Company
and each share of  preferred  stock of Print Data  Nevada was  converted  into 5
shares of common stock of Print Data Corp.

         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

                                       2
<PAGE>

Company to Mr. Yang and certain  financial  advisors of an aggregate twenty five
million  (25,000,000)  shares of common  stock,  par value $0.001 per share (the
"Common  Stock"),  of 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.

         On September 9, 2003, in contemplation of the Closing and the resultant
change in control of the Board of Directors,  the Company  filed an  Information
Statement on Schedule  14f-1 with the Securities  and Exchange  Commission  (the
"SEC").

         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 become the sole 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.

         In  connection  with  the  Transaction,  the  Company  entered  into  a
Conveyance  Agreement  dated as of  September  30,  2003,  pursuant to which the
Company  conveyed  its  historic  operations  of  providing  supplies  used in a
computer  or  office  environment  to  New  Print  Data  Corp,  a  newly-formed,
wholly-owned  subsidiary  of the  Company,  by  assigning  all of the assets and
liabilities  relating to such  operations  to such  subsidiary  which,  in turn,
accepted the  assignment and assumed all such  liabilities.  On October 1, 2003,
subsequent  to the  Closing  of the  Transaction,  the  Company  entered  into a
Securities  Purchase Agreement with Jeffrey I. Green,  Phyllis S. Green and Joel
Green (collectively,  the "Series A Holders"),  pursuant to which it sold all of
the issued and outstanding capital stock of New Print Data Corp. to the Series A
Holders in consideration  for their surrender to the Company for cancellation of
all of their  outstanding  shares of Series A Preferred  Stock, par value $0.001
per share, of the Company.

         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.

         The  address  of the  Company's  principal  executive  offices  and its
telephone and facsimile numbers at that address are:

         ACL  Semiconductors  Inc.,  B24-B27,  1st  Floor,  Block B,  Proficient
Industrial  Centre, 6 Wang Kwun Road,  Kowloon,  Hong Kong; Phone Number:  (852)
2799-1996.

         The  Company  files  registration  statements,   periodic  and  current
reports,  proxy  statements and other materials with the Securities and Exchange
Commission  (the "SEC").  You may read and copy any  materials the Company files
with  the SEC at the  SEC's  Public  Reference  Room at 450  Fifth  Street,  NW,
Washington,  DC 20549. You may obtain information on the operation of the Public
Reference  Room by calling the SEC at  1-800-SEC-0330.  The SEC  maintains a web
site at www.sec.gov that contains reports,  proxy and information statements and
other  information  regarding  issuers  that file  electronically  with the SEC,
including the Company's filings.

                                       3
<PAGE>

GENERAL

         The Company is a  non-exclusive  distributor in the Hong Kong and South
China markets of memory products of Samsung  Electronics Co., Ltd.  ("Samsung"),
the world's  largest  producer of memory  chips and a global  producer of memory
products  pursuant to a distribution  agreement with Samsung (the  "Distribution
Agreement").  Atlantic  Components Ltd.  ("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,  Atlantic  became an  authorized
distributor  and  marketer of Samsung's  memory  products in Hong Kong and other
overseas markets and entered into the Distribution Agreement. Beginning in 2001,
Atlantic  established  a  representative  office  in  Shenzhen,  China and began
concentrating  its distribution and marketing  efforts in the southern region of
the People's Republic of China. Since 1993, Atlantic has diversified its product
portfolio to include all Samsung's memory products  marketed under the "Samsung"
brandname which comprise  Dynamic Random Access Memory  ("DRAM"),  Static Random
Access  Memory  ("SRAM"),  Double Data Rate RAM ("DDR"),  Graphic  Random Access
Memory  ("Graphic  RAM"),  NAND FLASH,  NOR FLASH,  MASK Read Only Memory ("MASK
ROM") and  Multi-Chip  Packing  ("MCP").  Atlantic  believes  it is the  largest
distributor of Samsung memory products in Hong Kong and Southern China.

         The  Company's   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,  the Company  works 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 for the
coming six months.  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 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 of approximately 5% of products sold in
form of sales rebate payable by Samsung.

         Approximately  80% of the  Company's  evenues are derived from sales of
Samsung memory products. As of December 31, 2004, 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 and contains  certain
sales  quotas to be met by the  Company.  The  Distribution  Agreement  has been
renewed  more than ten times,  most  recently on March 1, 2004.  The Company has
never failed to meet the sales quotas set forth in the  Distribution  Agreement.
As of April 13, 2005, the Company is in negotiation  with Samsung  regarding the
annual renewal of the Distribution Agreement.

         PRODUCTS

         DRAMs  are  high  density,   low-cost-per-bit,   random  access  memory
components  that store digital  information and provide  high-speed  storage and
retrieval of data. DRAMs are the most widely used semiconductor memory component
in computer systems,  DVD player,  DVB (settop box), Digital TV, High Definition
TV, PMP (Portable Multimedia Player).

                                       4
<PAGE>

         SRAMs are  semiconductor  devices that perform memory functions similar
to DRAMs. SRAMs utilize a more complex memory cell and do not require the memory
array to be periodically  refreshed.  This  simplifies  system design for memory
applications  utilizing  SRAM and  allows  SRAM to  operate  faster  than  DRAM,
although SRAM has a higher cost-per-bit than DRAM.

         DDRs (DDR1,  DDR2) 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 DRAM or SRAM.

         Graphic  RAM is a special  purpose  DDR (DDR1,  DDR2,  DDR3) as graphic
products  request  high-speed  3-Dimensional  calculation  performance and large
memory size as data  storage  buffer for  VCD/DVD  display.  The current  market
consumption on graphic products is mainly for DDR 128Mb IC and DDR 256Mb IC with
clockspeed up to 500MHz.

         FLASH.  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,  Digital  Still  Cameras,  Digital  Voice
Recorders, PDAs, USB Disks, Flash Cards, etc. Samsung is a major supplier in the
world of FLASH  products.  In July 2003,  Samsung  announced  its  intention  to
significantly   increase  its   production   capacity  for  FLASH   products  in
anticipation of future growth of global demand.

         MASK ROM is a kind of ROM in which the memory  contents are  determined
by one of the masks used to manufacture  the integrated  circuit.  MROM can give
high storage  density (bits per millimeter  squared)  making it a cheap solution
for high volume applications.  Due to the constant growth of consumer electronic
products  such as games,  toys and PDAs,  the  worldwide  demand for MASK ROM is
expected to increase significantly in the coming year.

         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,  DVB (settop box),  HDTV and PMP, among others.  Market trends,  such as
increased  emphasis  on  high-throughput  applications,   including  networking,
graphics, multimedia,  computer, consumer, and telecommunications products, have
created opportunities for high performance memory products.  Based upon a market
study by iSuppli, Taiwan Digitimes March 2004 report, the market for DRAM memory
products  worldwide was estimated to be  approximately  US$24.6 billion in 2005.
The  Company  expects  the  worldwide  demand  for DRAM  products  to  remain at
approximately  the same  level in 2006.  Samsung  is among the  world's  largest
developers and manufacturers of memory products.

     Set forth below is a table  forecast  on  World-Wide  Semiconductors  Sales
Turnover from Gartner Dataquest quote in February 2004.

                                       5
<PAGE>

(THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE)

----------------------------------------------------
  Forecast On World Semi-Conductors Sales Turnover

                               USD
             Year          (In Billion)
             ----          ------------
             2004              21.7
             2005              24.6
             2006              24.0
             2007              26.5
             2008              29.4

  Information from Taiwan's Electronics Newspaper
----------------------------------------------------

         As the largest memory chip manufacturer in the world,  Samsung recorded
sales of its DRAM  memory  products  of  approximately  US$4.9  billion  in 2003
(approximately  28.3%  of the  overall  DRAM  market).  Like  many of the  major
manufacturers of memory products, Samsung markets and sells its products through
a network of  non-exclusive  distributors  who are granted rights to sell within
specific territories. There are over 200 distributors of Samsung memory products
worldwide of which six are  authorized  distributors  in Hong Kong who serve the
Hong Kong and southern China markets.

----------- -------------------------------- -----------------------
Rating      Manufacturer                     Market Share
----------- -------------------------------- -----------------------
1           Samsung                          28.5%
----------- -------------------------------- -----------------------
2           Hynix                            16.2%
----------- -------------------------------- -----------------------
3           Micron                           15.9%
----------- -------------------------------- -----------------------
4           Infineon                         13.9%
----------- -------------------------------- -----------------------
5           Elpida                           6.8%
----------- -------------------------------- -----------------------

     (Source: iSuppli March 8, 2005)


         CUSTOMERS

         As of December 31, 2004,  the Company had over 200 active  customers in
Hong Kong and Southern  China,  the majority of whom are memory product  traders
and PC/Servers OEM  manufacturers.  Sales to Classic  Electronic Ltd., a related
party,  accounted  for 31%, 21% and 12% of the Company's net sales for the years
ended December 31, 2004,  2003 and 2002. No other  customers  accounted for more
than 25% of the Company's net sales for 2004, 2003 and 2002. 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,  2004,  the  Company   employed  a  total  of  13
salespeople,  each of whom has several years  experience in the memory  products
industry.  Nine of these salespeople are stationed in the Company's headquarters
offices in Hong Kong; and four work out of the Company's  representative  office
in Shenzhen,  China as customer liaisons.  These sales personnel co-operate with
key memory

                                       6
<PAGE>

product  retailers and PC/Servers OEM  manufacturers  to ensure that clients are
supplied  promptly with Samsung memory  products.  The Company intends to expand
its sales  force if levels of  business  materially  increase in the next twelve
months.

         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
weekly or on demand  basis to  Samsung in order to assist  Samsung's  production
planning and products  allocation  functions and  maintains  the close  business
relationship accordingly.

         SUPPLIERS

         As of December 31, 2004, the distributed mostly Samsung memory products
and relied  heavily  on  Samsung  to supply  these  products.  Since  1993,  our
procurement operations have been supported by Samsung Electronics H.K. Co., Ltd.
("SAMSUNG HK"), a wholly-owned subsidiary of 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 HK. Samsung
HK is  allocated  quantities  of  Samsung  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. The distributors  that are
supported  by Samsung HK provide  Samsung HK 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 HK 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 HK.
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.  The most  recent  instance of a
supply shortage of memory product (FLASH)  occurred in early 2004 as a result of
unexpectedly strong demand in Hong Kong and Southern China. The Company believes
that this shortage of FLASH supply was unusual and has not had an adverse effect
on its reputation  insofar as the Company  explained to its customers the reason
for its  inability  to fill their  orders and the  Company  believes  that other
suppliers of Samsung memory products in Hong Kong and Southern China experienced
similar  shortages.  However,  no assurance can be given that any such shortages
will not  recur or that  such  shortages  won't  have a  negative  impact on the
Company's business.

         Atlantic  relies  solely on Samsung to provide 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,  who is
verbally  contracted to remain with the Company as Chief  Executive  Officer for
the next two years. If the Company's  relationship with Samsung is terminated or
if Mr. Yang terminates his employment  with Atlantic,  Atlantic may be unable to
renew the Distribution  Agreement with Samsung or may not be able to continue as
a distributor of Samsung memory products on favorable terms if at all.

         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 brandname recognition in
the retail and PC/Server  OEM & Consumer  segments.  The Company,  as one of the
largest distributors of Samsung's memory products for the Hong Kong and Southern
China

                                       7
<PAGE>

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 at 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, 2004,  the Company's  business  operations  were not
subject to the regulations of any  jurisdiction  other than 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
deliver 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.

         EMPLOYEES

         As of  December  31,  2004,  the Company  had 40  employees.  Of the 40
employees,  13  employees  are in  sales  and  marketing,  13  employees  are in
administration,  8 employees  are in  engineering,  6 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 brandname memory products.  The Company attracts talent from
numerous sources, including higher learning institutions, colleges and industry.
Competition for these employees is intense.

         EMPLOYEE COMPENSATION

         For the year ended  December 31, 2004,  Mr. Yang,  the Company's  chief
executive officer and director,  had annual compensation  exceeding $100,000. No
long-term compensation was awarded or paid to him in 2004.

         As of  December  31,  2004,  the  Company  did not have any  employment
agreements  with its  directors,  executives  or staff and the  Company  had not
issued any stock options or stock appreciation  rights to any executive officers
(or  any  other  persons).   The  Company  may  grant  stock  options  or  stock
appreciation rights to these or other executive officers or other persons in the
future at the discretion of our Board of Directors.

                                       8
<PAGE>

RISK FACTORS

         In addition to the other  information  contained  in this  report,  the
following  risk  factors  should  be  considered   carefully  in  evaluating  an
investment  in  the  Company  and in  analyzing  the  Company's  forward-looking
statements.

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  even though we, with the consent  from Samsung HK,
can purchase the required memory products from other Samsung  distributors under
the same mode in calculation of commission income  receivable from Samsung.  Our
relationship  with Samsung is primarily  maintained  through our Chief Executive
Officer Mr. Yang, who is verbally  contracted to remain with us for the next two
years. If our relationship  with Samsung is terminated or if Mr. Yang terminates
his  employment  with us, we may be unable to replace  Samsung as distributor of
memory products on favorable terms if at all.

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

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

IF THE GROWTH RATE OF EITHER  MEMORY  PRODUCTS SOLD OR THE AMOUNT OF MEMORY USED
IN EACH PRODUCT DECREASES, SALES OF OUR PRODUCTS COULD DECREASE.

         We are dependent on the computer  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. In recent years, the growth rate of
PCs sold has slowed or declined. If there is a sustained 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.

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.

                                       9
<PAGE>

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.

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, RAM, FLASH, SRAM and MASK ROM.

         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 HK not having
sufficient  supplies of memory product to meet all of our customer orders,  this
would  have a  negative  impact on our  sales  and  could  result in our loss of
customers.  Although such  shortages are  infrequent,  there was such a shortage
during the three months ended March 31, 2004 and no assurance  can be given that
such shortages will not occur in the future.  Currently, due to increased demand
in FLASH memory,  ACL also  experiences  insufficient  supplies of such products
from Samsung and loss of sales.

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  damage  to  customer
relationships.

WE  BELIEVE  THAT WE WILL  REQUIRE  ADDITIONAL  EQUITY  FINANCING  TO REDUCE OUR
LONG-TERM DEBTS AND IMPLEMENT OUR BUSINESS PLAN.

         We  anticipates  that we will require  additional  equity  financing in
order  to  reduce  our  long-term  debts  and  implement  our  business  plan of
increasing sales into the Southern China markets. There can be

                                       10
<PAGE>

no assurance that we will be able to obtain the necessary  additional capital on
a timely basis or on acceptable terms, if at all. As a result of such financing,
the holders of our common stock may experience substantial dilution.

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 and have  experienced in the past, and are likely to
experience  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 its  business,  prospects,  financial
condition and results of operations.

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  80.4% 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.  Through his  concentration  of voting power, he could cause us to take
actions that we would not consider absent his influence,  or could delay,  deter
or prevent a change of control of us 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 Components Ltd.,
to March 31, 2005, the closing price of our common stock  fluctuated  from a per
share  high of $2.95 to a low of $0.22 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 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, 2004,  there were 27,829,936  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.

                                       11
<PAGE>

IF PENNY STOCK  REGULATIONS  IMPOSE  RESTRICTIONS  ON THE  MARKETABILITY  OF OUR
COMMON STOCK,  THE ABILITY OF OUR STOCKHOLDERS TO SELL SHARES OF OUR STOCK COULD
BE IMPAIRED.

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

You should be aware that,  according to the SEC, the market for penny stocks has
suffered  in recent  years  from  patterns  of fraud and  abuse.  Such  patterns
include:

     o   Control of the market for the security by one or a few broker-dealers;

     o   "Boiler room" practices involving high-pressure sales tactics;

     o   Manipulation  of prices through  prearranged  matching of purchases and
         sales;

     o   The release of misleading information;

     o   Excessive and undisclosed bid-ask  differentials and markups by selling
         broker-dealers; and

     o   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 2.  PROPERTIES

         Our  principal  offices  occupy  approximately  4,989 square feet gross
floor area located at B24-B27,  1/F., Block B, Proficient  Industrial  Centre, 6
Wang Kwun Road,  Kowloon Bay,  Kowloon,  Hong Kong, which is leased from Classic
Electronic Ltd., a related party,  covering a lease period from December 1, 2004
to November 30, 2006 at monthly rental of HK$17,137 (approximately US$2,197).

                                       12
<PAGE>

         We lease a warehouse unit of approximately  825 square feet gross floor
area located at B34, 2/F.,  Block B, Proficient  Industrial  Centre, 6 Wang Kwun
Road, Kowloon Bay, Kowloon,  Hong Kong pursuant to a one-year lease with Classic
Electronics  Ltd.  which  covers a period from  December 1, 2004 to November 30,
2006 with monthly lease payments of HK$5,363 (approximately US$687).

         We lease  approximately  3,000  square  feet  gross  floor area for its
directors'  offices  located at No. 78, 5th Street,  Hong Lok Yuen,  Tai Po, New
Territories,  Hong Kong for Mr.  Yang  which is covered by a one year lease with
Classic Electronics Limited which expired on March 31, 2005, and was extended to
March 31, 2006 with monthly rentals of HK$35,000  (approximately  US$4,487). Mr.
Ben Wong, a director, is also a director of Classic Electronics Limited.

         We lease  approximately  3,000  square  feet  gross  floor area for its
directors'  offices  located at No. 76, 5th Street,  Hong Lok Yuen,  Tai Po, New
Territories,  Hong Kong for Mr.  Yang  which is covered by a one year lease with
Systematic Information Limited which expired on March 31, 2005, and was extended
to March 31, 2006 with monthly  rentals of HK$25,000  (approximately  US$3,205).
Mr. Ben Wong, a director, is also a director of Systematic Information Limited.

         We lease an office  unit of  approximately  1,273.8  square  feet gross
floor area located at Room 2307, 23/F.,  Building A, United Plaza, No.5022 Binhe
Road, Futian Centre, Shenzhen, China pursuant to an original lease dated June 1,
2002 and an  extended  lease  dated  May 27,  2004 with  Shenzhen  Jing Tian Wei
Investment  Development  Co. Ltd. which expired on May 31, 2005 and was extended
to March  31,  2006 with  monthly  lease  payments  of  RMB7,643  (approximately
US$920).

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

ITEM 3.  LEGAL PROCEEDINGS

         In the ordinary course of business we may be subject to litigation from
time to  time.  There is no  past,  pending  or,  to our  knowledge,  threatened
litigation or administrative  action  (including  litigation or action involving
the our officers,  directors or other key  personnel)  which in our opinion has,
had, or is  expected  to have,  a material  adverse  effect  upon our  business,
prospects  financial  condition or  operations.  Professional  Traders Fund, LLC
("PTF") filed a complaint,  dated  February 8, 2005,  against us in the Southern
District of New York  alleging  breach of contract for the  nonpayment  of a 12%
subordinated  convertible  note  from  us to  PTF  in the  principal  amount  of
$250,000. PTF seeks $239,850 plus default interest, costs and attorneys fees. We
have not filed an answer to such  action by PTF.  PTF has moved in the action to
hold us in default.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were  submitted to a vote of security  holders in the fourth
quarter of 2004.

                                       13
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common stock is quoted on the OTC  Bulletin  Board under the symbol
"ACLO". The following table shows, for the periods  indicated,  the high and low
closing  prices per share of our common  stock as reported  by the OTC  Bulletin
Board.

                                      COMMON STOCK

         QUARTERS ENDED                                            HIGH     LOW

         FISCAL YEAR
         ENDED DECEMBER 31, 2004 and quarter ended December 31, 2003:
         Quarter ended December 31, 2003...........................$2.95   $1.50
         Quarter ended March 31, 2004..............................$3.00   $1.50
         Quarter ended June 30, 2004...............................$1.70   $0.70
         Quarter ended September 30, 2004..........................$1.13   $0.65
         Quarter ended December 31, 2004...........................$0.88   $0.23

         As of April 12, 2005, the last reported sale price of our common stock,
as reported by the OTC Bulletin Board, was $0.36 per share.

         As of April 12, 2005,  there were  approximately  208 holders of record
(and  approximately 700 beneficial  owners) of our common stock. We are informed
and believe that as of April 12, 2005,  Cede & Co. held 2,896,299  shares of our
common stock as nominee for Depository Trust Company, 55 Water Street, New York,
New York 10004.  It is our  understanding  that Cede & Co. and Depository  Trust
Company both disclaim any beneficial  ownership therein and that such shares are
held for the account of numerous other persons.

         Since our  reverse-acquisition  of Atlantic Components Ltd.,  effective
September 30, 2003, we have never paid cash dividends on our capital  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

         We  do  not  have  any   compensation   plans   (including   individual
compensation  arrangements) under which our equity securities are authorized for
issuance to employees or non-employees  (such as directors and consultants),  as
of December 31, 2004.

ITEM 6.  SELECTED FINANCIAL DATA

         The following  consolidated  selected financial data, at the end of and
for the  last  three  fiscal  years,  should  be read in  conjunction  with  our
Consolidated  Financial Statements and related Notes thereto appearing elsewhere
in this Annual Report on Form 10-K. The consolidated selected financial data are
derived from our  consolidated  financial  statements  that have been audited by
Stonefield Josephson,  Inc., our independent  registered public accounting firm,
as indicated in their  report  included

                                       14
<PAGE>

herein. The selected financial data provided below is not necessarily indicative
of our future results of operations or financial performance.

                                  2004                2003              2002
                                  ----                ----              ----

Net Sales                     $133,243,690        $72,672,797       $85,343,249

Net income (loss)             $   (454,006)       $(1,437,670)      $   986,876

Earnings (loss) per common
share                               $(0.02)       $     (0.06)      $      0.04

Total Assets                  $ 10,265,983        $ 9,570,808       $ 7,215,169

Long-term Debt                $     65,522        $   194,703       $ 1,071,503

Weighted average number of
shares outstanding - basic
and diluted                     27,829,936         23,753,682        22,380,000

                                       15
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION

         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  "Samsung"  brandname which comprise DRAM and Graphic RAM, FLASH,
SRAM and MASK ROM for the Hong Kong and Southern China markets.

         As of December 31, 2004, we had over 200 active  customers in Hong Kong
and Southern China.

         Pricing for the Samsung memory products ranges from approximately $0.17
to $750  depending on the product  specifications.  We also sell our products in
Hong  Kong and  Southern  China and does not  anticipate  selling  its  products
outside of these regions in the foreseeable future.

         For the years ended  December 31, 2004,  2003,  and 2002, the largest 5
customers accounted for 48%, 31% and 43% of our net sales,  respectively.  As of
December 31, 2004, we had a working  capital deficit of $839,186 and accumulated
deficit of $2,784,188. We generated net sales of $133,243,690 for the year ended
December 31, 2004 and recorded a net loss of $454,006.  In addition,  during the
year ended December 31, 2004, net cash provided by operating activities amounted
to $416,876.

         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 for the coming six months. 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

                                       16
<PAGE>

addition,  our  established  distribution  channels  covering retail outlets and
major corporate users in the region allows 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 of  approximately  5% of  products  sold in form of sales  rebate
payable by Samsung.

ACCOUNTING PRINCIPLES; ANTICIPATED EFFECT OF GROWTH

         Below is a brief  description of basic  accounting  principles which we
adopt in  determining  our  recognition  of revenues and expenses,  as well as a
brief  description  of  the  effects  that  the  management   believe  that  its
anticipated  growth  will have on our  revenues  and  expenses  in the future 12
months.

NET SALES

         Net  Sales  are  recognized  upon the  transfer  of legal  title of the
 electronic  components to the  customers.  At December 31, 2004 we had over 200
 active customers.

         The  quantities of memory  products we sell  fluctuate  with changes in
demand  from our  customers.  The prices set by Samsung  that we must charge its
customers  are  expected  to  fluctuate  as  a  result  of  prevailing  economic
conditions  and their impact on the market.  Since the second half of year 2003,
we have experienced  increased demand for Samsung memory products among personal
and  corporate  users  in the Hong  Kong and  Southern  China  regions  due to a
recovery  of their  economies,  in  particular  for the first  quarter  of 2004.
Although there was an unexpected  world-wide pricing pressure of memory products
during May 2004 to July 2004 among  major  memory  products  manufacturers,  the
market is now  stabilized  and  results in  stimulated  strong  demand of memory
products in the Hong Kong and Southern China markets.

         The  essential  element of our growth in the future,  will be to obtain
adequate  financial  resources as  additional  working  capital to cope with the
strong market needs from the China PCs' personal and business users.

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 HK, a wholly-owned subsidiary of Samsung, although there is
no written  long-term  supply  agreement in place between us and Samsung HK. Our
cost of goods,  as a percentage  of total  revenues,  amounted to  approximately
97.7% for the year ended  December  31,  2004 and  approximately  93.9% the year
ended December 31, 2003.

OPERATING EXPENSES

         Our  operating  expenses  for the year ended  December 31, 2004 and the
year ended December 31, 2003 were comprised of sales and marketing,  general and
administrative expenses, and merger cost.

                                       17
<PAGE>

         Selling and marketing expenses consisted  primarily of commissions paid
to outside  sales agent and salary  expenses to customer  service  personnel and
costs associated with advertising 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 2005. Sales and marketing costs are expected to
fluctuate as a percentage of revenue due to the addition of sales  personnel and
various marketing activities planned throughout the year.

         Merger  cost  includes  the fair  value of  shares  issued  to  certain
consultants  related  to  the   reverse-acquisition   between  us  and  Atlantic
Components Ltd.

         Interest expense,  including finance charges,  relates primarily to our
short-term  and  long-term  bank  borrowings,  which we intend to reduce and the
amortization of discount related to the convertible note payable.

RESULTS OF OPERATIONS

         The  following  table sets forth  audited  consolidated  statements  of
operations  data for the years ended years ended  December 31, 2004,  2003,  and
2002  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.

<TABLE>
<CAPTION>
                                                               Year Ended December 31
                                           ---------------------------------------------------------
                                                                      (US$)
                                                2004                   2003                2002
                                                ----                   ----                ----

         <S>                                 <C>                     <C>                <C>
         Net sales                           133,243,690             72,672,797         85,343,249
         Cost of sales                       130,130,674             68,214,587         81,591,046
         Gross profit                          3,113,016              4,458,210          3,752,203

         Operating expenses:
           Sales and marketing                   453,862                149,364            204,837
           General and administrative          2,618,810              2,571,147          2,225,205
           Merger cost                                --              2,753,620                 --
           Total operating expenses            3,072,672              5,474,131          2,430,042

         Income (loss) from operations            40,344            (1,015,921)          1,322,161
         Interest expense                        402,412                166,509            213,589
         Net income (loss)                      (454,006)           (1,437,670)            986,876
</TABLE>

                                       18
<PAGE>

YEAR ENDED DECEMBER 31, 2004 COMPARED TO THE YEAR ENDED DECEMBER 31, 2003

         NET SALES

         Sales  increased by $60,570,893 or 83% from  $72,672,797 for year ended
December 31, 2003 to  $133,243,690  for the year ended  December 31, 2004.  This
increase resulted  primarily from the unexpected  world-wide pricing pressure on
memory  products  during  May 2004 to July  2004  among  major  memory  products
manufacturers  which stimulated the strong demand of memory products in the Hong
Kong and Southern China markets. We expect our sales in the year ending December
31, 2005 to  increase  to more than $130  million  given the  stimulated  strong
demand for Samsung memory products.

         COST OF SALES

         Cost of sales increased  $61,916,087 or 90.8%, from $68,214,587 for the
year ended  December 31, 2003 to  $130,130,674  for the year ended  December 31,
2004.  The  increase  in cost of sales  resulted  from the  increase in sales of
Samsung's  memory  products and strong demand of Samsung memory  products.  As a
percentage  of net sales,  cost of sales  increased  slightly  from 93.8% of net
sales in the year  ended  December  31,  2003 to 97.7% of net  sales in the year
ended December 31, 2004.

         GROSS PROFIT

         Gross profit decreased by $1,345,194,  or 30.2% from $4,458,210 for the
year ended December 31, 2003 to $3,113,016 for the year ended December 31, 2004.
The gross  profit  percentage  decreased  to 2.3% of revenue  for the year ended
December  31, 2004  compared to 6.2% of revenue for the year ended  December 31,
2003 as a result of  aggressive  pricing  strategy  imposed by Samsung  with our
assistance for newly launched 1 Gigabyte  memory  products during August 2004 to
September  2004  to  prevent  the  entrance  of  other  major  memory   products
manufacturers  in the  Hong  Kong  and  Southern  China  markets  which  in turn
stimulated a strong demand of such newly launched memory products. However, such
pricing  strategry  reduces  the  gross  margin  significantly  compared  to the
historical margin on selling the Samsung products.

         OPERATING EXPENSES

         Sales and  marketing  expenses  increased  by $304,498,  or 204%,  from
$149,364  for the year ended  December  31, 2003 to $453,862  for the year ended
December 31, 2004 due to increase of sales commission to ACL Technology Pte Ltd.
as a result of more than 70 new and active  customers with more than $42 million
revenues  introduced by this sales agent. We expect sales and marketing expenses
to increase in fiscal  2004 due to an expected  increase in sales and  potential
consolidation  of selling  expenses  of  Classic  upon our  acquisition  therein
expected to occur in the second quarter of 2005.

         General  and  administrative  expenses  increased  $47,663 or 1.9% from
$2,571,147 for the year ended December 31, 2003 to $2,618,810 for the year ended
December 31, 2004. We expect the general and  administrative  expenses remain at
the current level until the consolidation of Classic takes place.

         Merger cost of $2,753,620 in 2003  represents  the fair value of common
stock issued to consultants and advisors  related to the acquisition of Atlantic
by us, which took place on September 30, 2003. No such cost was incurred  during
the year ended December 31, 2004. We do not expect  reoccurrence of such cost in
year 2005. We don't expect any significant merger cost to be incurred related to
the acquisition of Classic  Electronic  Ltd.  occurring in 2005 to be as much as
that related to those incurred in 2003.

                                       19
<PAGE>

         Income from  operations  for the Company was $40,344 for the year ended
December 31, 2004 compared to the loss of $1,015,921 for the year ended December
31,  2003,  an  increase  of  income of  $1,056,265.  The  decrease  of loss was
primarily due to merger cost of $2,753,620 incurred in September 2003 related to
the acquisition of Atlantic.  Excluding the merger cost,  income from operations
decreased by 98% for the year ended  December 31, 2004,  compared to  $1,737,699
for the year ended December 31, 2003. This decrease was the result of decreasing
gross profits during the year 2004,  together with increased sales and marketing
expenses.

         OTHER INCOME (EXPENSES)

         Interest expense increased  $235,903,  or 142% from interest expense of
$166,509  in the year ended  December  31,  2003,  to $402,412 in the year ended
December 31, 2004.  Excluding $250,000 non-cash interest expense incurred in the
year ended December 31, 2004 relating to amortization of discount on convertible
note payable, interest expense was $152,412 in the year ended December 31, 2004.
Excluding  the  above-mentioned  amortization  of discount on  convertible  note
payable,  our  interest  expense  decreased  to 0.1% of sales for the year ended
December  31,  2004  from 0.2% for the year  ended  December  31,  2003 due to a
reduction by us of our long-term bank borrowings during the year 2004. We expect
our  interest  expense  continue  to  decrease  as we repay our  long-term  bank
borrowings,  which  decrease is expected  to be offset by  consolidation  of the
line-of-credit  and long-term bank  borrowings of Classic after our  acquisition
anticipated in the second quarter of 2005.

         Gain on disposal of property and equipment decreased by $7,100, to $128
in the year ended  December 31, 2004 from $7,228 in the year ended  December 31,
2003, due to certain  automobile  being disposed during 2003, which was replaced
with new purchases of automobile. We do not expect there will be any significant
gain or loss on disposal of property and equipment in year 2005.

         Our net loss  decreased by $983,664 from  $1,437,670 for the year ended
December 31, 2003  compared to the loss of $454,006 for the year ended  December
31, 2004.  This decrease was the result of merger cost incurred  during the year
ended  December 31, 2003. We expect our net profit margin for the year 2005 will
increase  back to  similar  level  as in year  2003 as a result  of the  pricing
strategy of 1 Gigabyte memory  products which already led to significant  profit
margins  recorded  by us  during  October  2004  together  with  the  effect  of
acquisition of Classic  Electronics Limited as our 100% subsidiary in the second
quarter of 2005.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO THE YEAR ENDED DECEMBER 31, 2002

         NET SALES

         Sales decreased by $12,670,452 or 14.8% from $85,343,249 for year ended
December 31, 2002 to  $72,672,797  for the year ended  December  31, 2003.  This
decrease  resulted  primarily from the impact of the US/Iraq War and SARS on the
economies of Hong Kong and Southern  China during the first and second  quarters
of 2003.

         COST OF SALES

         Cost of sales decreased  $13,376,459 or 16.4%, from $81,591,046 for the
year ended  December  31, 2002 to  $68,214,587  for the year ended  December 31,
2003.  The  decrease  in cost of sales  resulted  from the  decrease in sales of
Samsung's  memory  products and  availability of cheaper Samsung memory products
from overseas Samsung  distributors due to regional demand and supply situation.
As a

                                       20
<PAGE>

percentage  of net sales,  cost of sales  decreased  slightly  from 95.6% of net
sales in the year  ended  December  31,  2002 to 93.9% of net  sales in the year
ended December 31, 2003.

         GROSS PROFIT

         Gross profit  increased by $706,007,  or 18.8% from  $3,752,203 for the
year ended December 31, 2002 to $4,458,210 for the year ended December 31, 2003.
The increase in gross profit was  primarily due to the decrease of cost of sales
of the company.  The gross profit improved  accordingly to 6.1% of net sales for
the year ended  December  31,  2003  compared  to 4.4% of net sales for the year
ended December 31, 2002.

         OPERATING EXPENSES

         Sales and  marketing  expenses  decreased  by $55,473,  or 27.1%,  from
$204,837  for the year ended  December  31, 2002 to $149,364  for the year ended
December  31, 2003 due to a decrease of sales as a result of the US/Iraq War and
SARS during the first and second  quarters of 2003.  As a  percentage  of sales,
sales and  marketing  expense  maintained  at 0.2% of revenue for both the years
ended December 31, 2003 and December 31, 2002.

         General and  administrative  expenses  increased $345,942 or 15.5% from
$2,225,205 for the year ended December 31, 2002 to $2,571,147 for the year ended
December 31, 2003. The increase was primarily  attributable to the  professional
charges incurred in connection with the reverse merger by us occurred during the
year ended December 31, 2003.

         Merger cost of  $2,753,620  represents  the fair value of common  stock
issued to consultants and advisors related to the acquisition of Atlantic by us,
which took place on  September  30, 2003.  No such cost was incurred  during the
year ended December 31, 2002.

         Loss from  operations for the Company was $1,015,921 for the year ended
December  31,  2003  compared  to an income  of  $1,322,161  for the year  ended
December 31, 2002, a decrease of income or increase of loss by  $2,338,082.  The
increase  of loss or  decrease  of income was  primarily  due to merger  cost of
$2,753,620  incurred in September  2003 related to the  acquisition of Atlantic.
Excluding the merger cost, income from operations  increased  $415,538 or 31% to
$1,737,699 for the year ended December 31, 2003,  compared to $1,322,161 for the
year ended December 31, 2002.  This increase was the result of increasing  gross
profits  during the year 2003,  offset by increased  general and  administrative
expenses.

         OTHER INCOME (EXPENSES)

         Interest expense decreased by $47,080, or 22%, from interest expense of
$213,589  in the year ended  December  31,  2002,  to $166,509 in the year ended
December 31, 2003. As a percentage of sales, interest expense decreased slightly
to 0.2% in the year ended  December  31, 2003 when  compared to 0.3% in the year
ended  December 31, 2002 due to lower  interest rate  throughout  2003 and lower
average loan  balances.  In the year ended December 31, 2003,  interest  expense
related  primarily to  Atlantic's  bank charges and interest  incurred  from its
short-term and long-term bank borrowings.

         Gain on disposal of property and equipment increased by $7,228, from $0
in the year ended  December  31, 2002 to $7,228 in the year ended  December  31,
2003, due to certain  automobile  being disposed during 2003, which was replaced
with new purchases of automobile.

                                       21
<PAGE>

         Our net loss  increased by $2,424,546 to $1,437,670  for the year ended
December 31, 2003 compared to an income of $986,876 for the year ended  December
31, 2002.  Excluding the merger cost of $2,753,620,  our net profit increased by
$329,074 which represents an increase of 33% over the profit of 2002.

LIQUIDITY AND CAPITAL RESOURCES

         Our  principal   sources  of  liquidity  have  been  cash  provided  by
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.

         We may  require  additional  financing  in order to finance our growing
business and implement our business  plan. In order to meet  anticipated  demand
for  Samsung's  memory  products in the  Southern  China market over the next 12
months,  we anticipate an  additional  need of working  capital of at least $2.0
million  through  short-term  borrowings from the banks to finance the cash flow
required to finance the purchase of Samsung memory  products from Samsung HK one
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,  takes approximately two days from such delivery.
In certain limited instances, our customers are permitted up to thirty (30) days
to make payment for purchased memory products. As the anticipated cash generated
by our operations are insufficient to fund our growth requirements, we will need
to obtain  additional  equity funds.  There can be no assurance  that we will be
able to  obtain  the  necessary  additional  capital  on a  timely  basis  or on
acceptable  terms,  if at all. In any of such events,  our  business  growth and
prospects  would be materially and adversely  affected.  As a result of any such
financing,  if it is an equity  financing,  the holders of our common  stock may
experience  substantial  dilution. In addition, as our results may be negatively
impacted and thus delayed as a result of political and economic  factors  beyond
the management's control, our capital requirements may increase.

         The  following  factors,  among others,  could cause actual  results to
differ from those  indicated in the above  forward-looking  statements:  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;  its  ability  to  attract  new  customers;   an  increase  in
competition  in the  memory  products  market;  and the  ability  of some of our
customers  to  obtain   financing.   These  factors  or  additional   risks  and
uncertainties  not known to us or that we currently deems  immaterial may impair
business  operations and may cause our actual results to differ  materially from
any forward-looking statement.


         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 its expectations.

         In the year ended  December  31, 2004,  net cash  provided by operating
activities  amounted to $416,876  while in the year ended December 31, 2003, net
cash used in operating activities amounted to $216,151, an increase of $633,027.
This increase was caused, in part, by a strengthened  control in inventory level
during year 2004.

         In the year ended  December  31, 2003,  net cash  provided by investing
activities  amounted to $790,641  while in the year ended  December 31, 2004, we
used net cash of $954,770 in investing  activities,  a decrease of cash used for
investing activities of $1,745,411.  In August 2004, we were in

                                       22
<PAGE>

negotiation with DahSing Bank for an additional  amount of its available line of
credit. As a condition to the extension of additional credit to us, DahSing Bank
requested  additional  collateral to secure the increased amount on the line. In
order to meet the increased  security  requirement,  we loaned  $611,446 to City
Royal Limited to pay off the mortgage loan on a  residential  property  owned by
City Royal  Limited.  In exchange for such loan,  City Royal  Limited  agreed to
pledge  this  residential  property  as  collateral  to  secure  our  additional
borrowings of HK$10 million (approximately  US$1,282,000) from DahSing Bank. The
primary purpose of the loan, from our  perspective,  was to advance our business
by enabling us to secure  additional  lines of  financing  in excess of the loan
amount from DahSing Bank. This loan had been fully settled on February 14, 2005.
We  believe  that  the  above-referenced  loan  does  not  violate  the  general
prohibition against loans made by publicly-traded companies to its directors and
executive officers set forth in Section 402 of the Sarbanes-Oxley Act of 2002 as
its primary  purpose was to advance our business.  However,  no assurance can be
given that the SEC or U.S. federal  government will agree with our position and,
in the event such loan is  determined  to be a  violation  of Section  402,  the
criminal  penalties of the  Securities  Exchange Act of 1934, as amended,  could
apply.  Mr. Yang's wife and Mr. Yang's  mother-in-law  are  shareholders of City
Royal  Limited  with a total of 100%  interest.  We do not expect a  significant
amount  of cash  used for  investing  activities  incurred  in year  2005 as the
acquisition  of Classic  Electronics  Limited will be  principally by relieve of
outstanding  accounts  receivable  and  issuance  of our  common  stock  with no
additional cash outflows to be recorded.

         In the year ended  December  31, 2004,  net cash  provided by financing
activities  amounted to $583,368  while in the year ended  December 31, 2003, we
used net cash of $286,353 in financing activities,  an increase of cash provided
by financing  activities  of $869,721.  This  increase was caused by  additional
proceeds on  lines-of-credit  of $1.3 million in the year 2004. We do not expect
significant cash will be provided by financing activities in year 2005.

         In the year  ended  December  31,  2003,  net cash  used for  operating
activities  amounted to $216,151  while in the year ended  December 31, 2002, we
generated  net  cash of  $1,629,294  in  operating  activities,  a  decrease  of
$1,845,445.  This  decrease  was  primarily  due to an increase of the  accounts
receivable from Classic by such amount.

         In the year ended  December  31, 2003,  net cash  provided by investing
activities  amounted to $790,461  while in the year ended  December 31, 2002, we
used net cash of $595,845 in investing activities,  an increase of cash provided
by investing  activities or a decrease of cash used for investing  activities of
$1,386,486.  This  increase  was caused,  in part,  by  repayment  of loans from
stockholder  of  $807,724  in the year ended  December  31, 2003 and in the year
ended  December  31,  2002,  there was a net cash of  $584,838  advanced  to the
stockholder.

         In the year  ended  December  31,  2003,  net cash  used for  financing
activities  amounted to $286,353  while in the year ended  December 31, 2002, we
used net cash of $909,049 in financing  activities,  a decrease of cash used for
financing activities of $622,696. This decrease was caused, in part, by proceeds
of  line-of-credit  and  issuance of  convertible  note  payable of $166,410 and
$250,000  respectively in the year ended December 31, 2003 and in the year ended
December 31, 2002, there was a net repayment of line-of-credit of $269,317.

         An  essential  element of our growth in the  future,  will be to obtain
adequate  additional  working capital to meet anticipated  market demand from PC
users (business and personal) in the southern part of China.

                                       23
<PAGE>

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to market risk for changes in interest rates as our bank
borrowings accrue interest at floating rates of 0% to 0.5% over the Best Lending
Rate  (currently at 5.5% per annum)  prevailing in Hong Kong.  For the two years
ended  December 31, 2004 and 2003,  we did not  generate  any material  interest
incomes.  Accordingly,  we believe  that  changes in  interest  rates may have a
material effect on our liquidity, financial condition or results of operations.

IMPACT OF INFLATION

         We  believe  that our  results of  operations  are not  dependent  upon
moderate  changes in inflation  rates as we expect we will 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

         In March 2004, the FASB approved the consensus  reached on the Emerging
Issues Task Force (EITF) Issue No.  03-1,  "The Meaning of  Other-Than-Temporary
Impairment and Its  Application to Certain  Investments."  The objective of this
Issue is to provide  guidance for identifying  impaired  investments.  EITF 03-1
also provides new disclosure  requirements for investments that are deemed to be
temporarily  impaired.  In September 2004, the FASB issued a FASB Staff Position
(FSP)  EITF  03-1-1  that  delays  the  effective  date of the  measurement  and
recognition guidance in EITF 03-1 until after further deliberations by the FASB.
The disclosure  requirements  are effective only for annual periods ending after
June 15,  2004.  The Company  has  evaluated  the impact of the  adoption of the
disclosure  requirements  of EITF 03-1 and does not  believe  the impact will be
significant  to  the  Company's  overall  results  of  operations  or  financial
position.

         In November  2004, the FASB issued SFAS No. 151  "Inventory  Costs,  an
amendment  of ARB No. 43,  Chapter  4.' The  amendments  made by  Statement  151
clarify that abnormal amounts of idle facility expense, freight, handling costs,
and wasted materials  (spoilage) should be recognized as current-period  charges
and require the allocation of fixed  production  overheads to inventory based on
the normal capacity of the production facilities.  The guidance is effective for
inventory  costs  incurred  during fiscal years  beginning  after June 15, 2005.
Earlier  application  is permitted for inventory  costs  incurred  during fiscal
years beginning after November 23, 2004. The Company has evaluated the impact of
the adoption of SFAS 151, and does not believe the impact will be significant to
the Company's overall results of operations or financial position.

         In December  2004,  the FASB issued SFAS No.152,  "Accounting  for Real
Estate Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67"
("SFAS 152").  The amendments made by Statement 152 amend FASB Statement No. 66,
Accounting for Sales of Real Estate,  to reference the financial  accounting and
reporting guidance for real estate time-sharing transactions that is provided in
AICPA Statement of Position (SOP) 04-2, "Accounting for Real Estate Time-Sharing
Transactions."  This Statement also amends FASB Statement No. 67, Accounting for
Costs and Initial Rental  Operations of Real Estate Projects,  to state that the
guidance  for (a)  incidental  operations  and (b) costs  incurred  to sell real
estate  projects does not apply to real estate  time-sharing  transactions.  The
accounting  for those

                                       24
<PAGE>

operations  and costs is subject to the guidance in SOP 04-2.  This Statement is
effective for financial  statements  for fiscal years  beginning  after June 15,
2005 with earlier application  encouraged.  The Company has evaluated the impact
of the adoption of SFAS 152, and does not believe the impact will be significant
to the Company's overall results of operations or financial position.

         In  December  2004,   the  FASB  issued  SFAS  No.153,   "Exchanges  of
Nonmonetary  Assets,  an  amendment  of  APB  Opinion  No.  29,  Accounting  for
Nonmonetary Transactions." The amendments made by Statement 153 are based on the
principle that  exchanges of nonmonetary  assets should be measured based on the
fair value of the assets exchanged. Further, the amendments eliminate the narrow
exception for nonmonetary  exchanges of similar productive assets and replace it
with a broader  exception for exchanges of  nonmonetary  assets that do not have
commercial substance. Previously, Opinion 29 required that the accounting for an
exchange of a productive  asset for a similar  productive asset or an equivalent
interest in the same or similar productive asset should be based on the recorded
amount of the asset relinquished.  Opinion 29 provided an exception to its basic
measurement  principle (fair value) for exchanges of similar  productive assets.
The Board  believes that  exception  required that some  nonmonetary  exchanges,
although commercially substantive, be recorded on a carryover basis. By focusing
the exception on exchanges that lack  commercial  substance,  the Board believes
this Statement produces financial reporting that more faithfully  represents the
economics of the transactions.  The Statement is effective for nonmonetary asset
exchanges  occurring in fiscal periods  beginning  after June 15, 2005.  Earlier
application is permitted for  nonmonetary  asset  exchanges  occurring in fiscal
periods  beginning after the date of issuance.  The provisions of this Statement
shall be applied  prospectively.  The  Company has  evaluated  the impact of the
adoption of SFAS 153, and does not believe the impact will be significant to the
Company's overall results of operations or financial position.

         In  December  2004,  the  FASB  issued  SFAS  No.123   (revised  2004),
"Share-Based  Payment."  Statement 123(R) will provide investors and other users
of financial statements with more complete and neutral financial  information by
requiring  that  the   compensation   cost  relating  to   share-based   payment
transactions be recognized in financial  statements.  That cost will be measured
based on the fair value of the equity or liability instruments issued. Statement
123(R) covers a wide range of share-based  compensation  arrangements  including
share  options,   restricted  share  plans,   performance-based   awards,  share
appreciation  rights,  and  employee  share  purchase  plans.  Statement  123(R)
replaces FASB Statement No. 123, "Accounting for Stock-Based  Compensation," and
supersedes  APB  Opinion No. 25,  "Accounting  for Stock  Issued to  Employees."
Statement  123,  as  originally  issued in 1995,  established  as  preferable  a
fair-value-based  method of accounting for share-based payment transactions with
employees.  However,  that Statement permitted entities the option of continuing
to apply the  guidance  in Opinion  25, as long as the  footnotes  to  financial
statements  disclosed  what  net  income  would  have  been  had the  preferable
fair-value-based  method been used.  Public entities (other than those filing as
small  business  issuers) will be required to apply  Statement  123(R) as of the
first interim or annual  reporting  period that begins after  December 15, 2005.
The Company is currently evaluating the impact of the adoption of this Statement
on its results of operations and financial position.

CONTRACTUAL OBLIGATIONS

The following table presents our contractual obligations as of December 31, 2004
over the next five years and thereafter:

                                       25
<PAGE>

                               Payments by Period

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
                                                         LESS
                                                         THAN        1-3         4-5        AFTER 5
                                            AMOUNT      1 YEAR      YEARS       YEARS        YEARS
                                            ------      ------      -----       -----       -------
<S>                                        <C>         <C>         <C>         <C>         <C>
Operating Leases                            111,601      73,347      38,254         ---         ---
Convertible note payable                    150,000     150,000         ---         ---         ---
Long-term Debt                              351,554     286,032      65,522         ---         ---
                                          ----------  ----------  ----------  ----------  ----------
    Total Contractual Obligations          $613,155    $509,379    $103,776    $    ---    $    ---
                                          ==========  ==========  ==========  ==========  ==========
</TABLE>

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.

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

         ALLOWANCE FOR DOUBTFUL ACCOUNTS.  We maintain an allowance for doubtful
accounts for estimated  losses  resulting from the inability of our customers to
make required  payments.  Our  allowance  for doubtful  accounts is based on our
assessment of the  collectibility  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.

         REVENUE RECOGNITION.  We derive revenues from resale of computer memory
products.  Revenue for resale of computer memory products is recognized based on
guidance  provided in Securities and Exchange  Commission (SEC) Staff Accounting
Bulletin No. 104, "Revenue Recognition in Financial Statements," as amended (SAB
104).  Computer  memory  resale  revenue is  recognized  when products have been
shipped and  collection is probable.  An allowance for returns is recorded based
on the management's estimate of sales returns.

                                       26
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We do not  invest  in or own  any  market  risk  sensitive  instruments
entered into for trading  purposes or for purposes other than trading  purposes.
All loans to us have been made at fixed  interest  rates and;  accordingly,  the
market risk to us prior to maturity is minimal.

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.

ITEM 9A. CONTROLS AND PROCEDURES

         Disclosure   controls  and  procedures  are  designed  to  ensure  that
information required to be disclosed in the reports filed or submitted under the
Exchange Act is recorded,  processed,  summarized and reported,  within the time
period  specified  in  the  SEC's  rules  and  forms.  Disclosure  controls  and
procedures  include,  without  limitation,  controls and procedures  designed to
ensure that information  required to be disclosed in the reports filed under the
Exchange Act is accumulated and communicated to management,  including our Chief
Executive Officer and Chief Financial Officer,  as appropriate,  to allow timely
decisions regarding required  disclosure.  Our Chief Executive Officer and Chief
Financial  Officer,  in  consultation  with our other members of management  and
advisors as appropriate,  carried out an evaluation of the  effectiveness of our
disclosure  controls and  procedures as of the end of the period covered by this
annual report pursuant to Rule 15d-15(b) promulgated under the Exchange Act.

         Based upon that evaluation,  our Chief Executive  Officer and our Chief
Financial Officer concluded that our disclosure  controls and procedures are not
effective  in  alerting  them in a timely  fashion to all  material  information
required to be included in our periodic  filings with the SEC as a result of the
significant deficiency described below in that subsection captioned "SIGNIFICANT
DEFICIENCIES IN DISCLOSURE CONTROLS AND PROCEDURES OR INTERNAL CONTROLS".

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

         The term  iNTERNAL  CONTROL  OVER  FINANCIAL  REPORTING is defined as a
process  designed by, or under the supervision  of, our Chief Executive  Officer
and  Principal  Financial  Officer,  and  effected  by our  board of  directors,
management and other personnel,  to provide reasonable  assurance  regarding the
reliability of financial  reporting and the preparation of financial  statements
for  external  purposes  in  accordance  with  accounting  principles  generally
accepted  in the  United  States.  Except  as  noted  below  in that  subsection
captioned  "SIGNIFICANT  DEFICIENCIES  IN DISCLOSURE  CONTROLS AND PROCEDURES OR
INTERNAL CONTROLS", there were no changes in our internal control over financial
reporting  identified in connection  with our evaluation of these controls as of
the  end  of  the  period   covered  by  this  annual  report  that  could  have
significantly  affected those controls  subsequent to the date of the evaluation
referred to in the previous  paragraph,  including  any  correction  action with
regard to significant deficiencies and material weakness.

                                       27
<PAGE>

SIGNIFICANT  DEFICIENCIES  IN  DISCLOSURE  CONTROLS AND  PROCEDURES  OR INTERNAL
CONTROLS

         Our  independent  auditors  identified  that our  accounting on certain
significant transactions were incorrectly calculated or incorrectly recorded. In
addition, certain related parties were not disclosed to our independent auditors
and transactions  with these related parties were not disclosed in the financial
statements.  During the course of the audit field work, our independent auditors
discovered  these errors and these  related  parties and the  transactions  with
these related parties. Our independent auditors discussed these matters with our
Chief Financial  Officer,  and we subsequently  reevaluated the transactions and
recorded the necessary adjustments.  The auditors believe that these adjustments
reflected significant  deficiencies in our internal controls over accounting and
financial reporting.

OTHER OBSERVATIONS

         In connection with the audit of our consolidated  financial  statements
for the year ended December 31, 2004, our independent auditors also made several
other  observations  relating  to our  disclosure  controls  and  procedures  or
internal  controls.  First, our independent  auditors  observed that ACL did not
have  adequate  segregation  of duties due to the size of the company,  and that
management  had the  ability  to  override  any  existing  controls.  Management
acknowledges  the  existence of this problem,  and is  developing  procedures to
address  them  to  the  extent  possible  given  the  acknowledged  limitations.
Secondly, our independent auditors observed that we did not have a comprehensive
accounting  procedures  manual including  information as to customized  internal
control   structure,   documentation   and  transaction   flow.  Our  management
acknowledges  the  existence of this problem,  and is  developing  procedures to
address them to the extent possible given  limitations in financial and manpower
resources.  Finally,  our independent auditors observed that none of the members
of the board of directors  demonstrated an in-depth  understanding  of generally
accepted accounting  principles.  We acknowledge that while we believe our board
of  director  members are  proficient  in reading  and  understanding  financial
statements,  they may not have an in-depth  understanding of generally  accepted
accounting principles,  and we are currently evaluating whether we should seek a
person with a professional accounting background to join the board.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

DIRECTORS AND EXECUTIVE OFFICERS

Our  directors  and  executive  officers,  as of December  31,  2004,  and their
biographical information are set forth below:

<TABLE>
<CAPTION>
NAME                            AGE           POSITION

<S>                             <C>           <C>
Chung-Lun Yang                  43            Chairman of the Board of Directors and Chief Executive Officer
Ben Wong                        41            Director
Kenneth Lap-Yin Chan            42            Chief Financial Officer
</TABLE>

         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 was 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

                                       28
<PAGE>

over 15 years' extensive  experience in the electronics  distribution  business.
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.  Mr. Wong was
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.

         Our Board of Directors does not have a Compensation Committee, an Audit
Committee or a Nominating Committee.  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.

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 hereto as Exhibit 14 to the Annual Report on Form
10-K for the period ended December 31, 2003.

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
Persons")  to file with the SEC  initial  reports of  ownership  and  reports of
changes  in  ownership  of our  common  stock and our other  equity  securities.
Reporting  Persons are required by SEC  regulation  to furnish us 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, 2004 all  Reporting  Persons  complied  with all
applicable filing requirements.

ITEM 11.  EXECUTIVE COMPENSATION

EXECUTIVE OFFICER COMPENSATION

The  following  table  sets  forth the annual  and  long-term  compensation  for
services in all  capacities to the Company for the two years ended  December 31,
2004.

                                       29
<PAGE>

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
------------------------------------------------------------------------- ------------------------------------------------------
ANNUAL COMPENSATION                                                       LONG TERM COMPENSATION
------------------------------------------------------------------------- ------------------------------------------------------
<S>                      <C>       <C>          <C>           <C>         <C>         <C>            <C>          <C>
(a)                      (b)       (c)          (d)           (e)         (f)         (g)            (h)          (i)
Name and                 Fiscal    Salary       Bonus         Other       Restricted  Securities     LTIP         All Other
Principal Position       year                                 Annual      Stock       Underlying     Payouts      Compensation
                                                              Compen-     Awards      Options
                                                              sation
------------------------ --------- ------------ ------------- ----------- ----------- -------------- ------------ --------------
Jeffrey I. Green,        2004      N/A          N/A           N/A         N/A         N/A            N/A          N/A
Former Director and      2003      $195,000     0             0           0           0              0            0
President (1)
------------------------ --------- ------------ ------------- ----------- ----------- -------------- ------------ --------------
Phyllis Green, Former    2004      N/A          N/A           N/A         N/A         N/A            N/A          N/A
Director and Executive   2003      $160,367     0             0           0           0              0            0
Administrator(2)
------------------------ --------- ------------ ------------- ----------- ----------- -------------- ------------ --------------
Chung-Lun Yang,          2004      $233,590     0             $95,000     0           0              0            0
Chief Executive          2003      $23,077      $624,462      $16,539     0           0              0            0
Officer and Chairman
of the Board (3)
------------------------ --------- ------------ ------------- ----------- ----------- -------------- ------------ --------------
</TABLE>

     (1) Mr. Green resigned effective  September 9, 2003 upon the closing of the
         reorganization. Compensation includes amount up to September 30, 2003.

     (2) Ms. Green resigned effective  September 9, 2003 upon the closing of the
         reorganization. Compensation includes amount up to September 30, 2003.

     (3) Mr.  Yang was elected to be the Chief  Executive  Office of the Company
         upon   the   resignation   of  Mr.   Jeffrey   I.   Green   after   the
         reverse-acquisition    of   Atlantic   Components   Ltd.   Compensation
         information  indicated above covers the salaries of $23,077 to Mr. Yang
         for the period from October 1 to December  31,  2003.  Salaries for the
         full year totaled  $92,308 for the year ended  December  31, 2003.  The
         Company  accrued bonus of $624,462 and payable to Mr. Yang on September
         30,  2003,  effective  date of the  reverse-acquisition.  Other  annual
         compensation  includes  rent and  housing  allowance  in the  amount of
         $95,000  for the year  ended  December  31,  2004 and in the  amount of
         $16,539 for the period from October 1 to December 31, 2004.

OPTION GRANTS TO EXECUTIVE OFFICERS IN LAST FISCAL YEAR

         No options were  granted to our  executive  officers  during the fiscal
year ended  December  31,  2004.  We do not have any stock  option,  retirement,
pension or  profit-sharing  plans for the benefit of the directors,  officers or
other employees, but our board of directors may recommend the adoption of one or
more such plans in the future.

<TABLE>
<CAPTION>
              Shares        Value       Number of shares Underlying       Value of Unexercised In-the-Money
Name          Exercised     Realized   Unexercised Options at Year-End    Options at Year-End (1)
----          ---------     --------   -------------------------------    -----------------------
<S>            <C>          <C>        <C>             <C>                <C>              <C>
N/A            N/A          N/A        N/A             N/A                N/A              N/A
</TABLE>

                                       30
<PAGE>

COMPENSATION OF DIRECTORS

         None of the  current  directors  who  served  during  the  years  ended
December  31,  2004  received  compensation  for  serving  as such,  other  than
reimbursement  for  out  of  pocket  expenses  incurred  in  attending  director
meetings.

OPTIONS TO DIRECTORSS

         No options  were  granted  to  directors  during the fiscal  year ended
December  31,  2004.  We do not have any stock  option,  retirement,  pension or
profit-sharing  plans  for the  benefit  of the  directors,  officers  or  other
employees,  but our board of directors may recommend the adoption of one or more
such plans in the future.

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, 2004 (i) each person known by
us to own  beneficially  more than 5% of the  outstanding  shares of our  common
stock  (ii) each  director,  named  executive  officer  and (iii) all  executive
officers and  directors as a group.  On such date, we had  27,829,936  shares of
common stock outstanding.  Shares not outstanding but deemed  beneficially owned
by virtue of the right of any  individual  to acquire  shares within 60 days are
treated as outstanding only when determining the amount and percentage of common
stock owned by such individual. Each person has sole voting and investment power
with respect to the shares shown, except as noted.

Name and Address of               Shares of Common Stock    Percentage of Class
Beneficial Owner                    Beneficially Owned     Beneficially Owned(1)
----------------                    ------------------     ---------------------

Chung-Lun Yang                          22,380,000                 78.9%
No.78,5th Street, Hong Lok Yuen,
Tai Po, New Territories, Hong Kong

Ben Wong                                0                           0.0%
19B, Tower 8, Bellagio,
33 Castle Peak Road, Sham Tseng,
New Territories, Hong Kong

Kenneth Lap-Yin Chan                    0                           0.0%
Flat B, 8/F., Block 19,
South Horizons,
Aplei Chau, Hong Kong

All Directors and Officers              22,380,000                 78.9%
as a Group

------------------------------

(1) Applicable  percentage of ownership is based on 27,829,936  shares of common
stock outstanding as of March 31, 2005, together with securities  exercisable or
convertible  into shares of common stock  within 60 days of March 31, 2005,  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

                                       31
<PAGE>

that are currently  exercisable or exercisable within 60 days of March 31, 2005,
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.

         Except as otherwise set forth,  information  on the stock  ownership of
these persons was provided to us by the persons.

         We do not  have  any  compensation  plans  or  arrangements  benefiting
employees or non-employees  under which our equity securities are authorized for
issuance in exchange for consideration in the form of good services.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

TRANSACTIONS WITH MR. YANG

As of December  31, 2004 and 2003,  we had an  outstanding  receivable  from Mr.
Yang, the President and Chairman of our Board of Directors,  totaling  $102,936,
and $102,936,  respectively.  These advances bear no interest and are payable on
demand.

For the years ended December 31, 2004, 2003, and 2002, we recorded  compensation
to Mr.  Yang  of  $233,590,  $716,770,  and  $732,280,  respectively,  and  paid
$233,590,  $92,308,  and $92,308,  respectively,  to Mr. Yang as compensation to
him.  The  respective  unpaid  amounts  are  included  in the  amount  due  from
stockholder/director as of December 31, 2004 and 2003.

During each of the years ended  December 31, 2004,  2003, and 2002, we paid rent
of  $82,692,  $53,846,  and  $53,846,  respectively,  for  Mr.  Yang's  personal
residency as fringe  benefits to him,  and paid housing  allowance to him in the
amount of $12,308,  $12,308,  and $2,052,  respectively.  All such payments have
been recorded as compensation expense in the accompanying financial statements.

TRANSACTIONS WITH CLASSIC ELECTRONIC LTD.

During the years ended December 31, 2004,  2003, and 2002, we sold  $40,885,565,
$15,224,745,   and  $10,007,267,   respectively,   to  Classic  Electronic  Ltd.
("Classic").  We have not  experienced  any bad debt from this  customer  in the
past.  Pursuant to a written personal guarantee  agreement,  Mr. Yang personally
guarantees to our lenders up to $10 million outstanding accounts receivable from
Classic.

During the years ended December 31, 2004, 2003, and 2002, we purchased inventory
of $5,867,150, $4,159,300, $3,266,005,  respectively, from Classic, which offset
the outstanding  accounts  receivable from Classic.  As of December 31, 2004 and
2003,  we  had  net  outstanding   accounts  receivable  from  Classic  totaling
$4,714,057 and $5,289,626, respectively.

We leased two of our facilities and Mr. Yang's personal  residency from Classic.
Lease  agreements for the two  facilities  expire on November 30, 2006 while the
lease agreement for Mr. Yang's personal  residency expired on March 31, 2005 and
was subsequently  extended to March 31, 2006. Monthly lease payments for these 3
leases totaled  $7,372.  We incurred and paid rent expense of $88,462,  $56,731,
and $53,846 to Classic for the years ended  December 31, 2004,  2003,  and 2002,
respectively.

During the years ended December 31, 2003 and 2002,  certain Classic's  employees
performed  work on behalf of  Atlantic  and their  salaries  were  allocated  to
Atlantic's  operations and charged to expenses in

                                       32
<PAGE>

the accompanying  consolidated financial statements.  Such expenses approximated
$0 for 2004, $248,000 for 2003, and $310,000 for 2002.

In  December  2003,  we  relieved  our  account   receivable   from  Classic  by
transferring    $1,048,604   of    outstanding    amounts   we   owed   to   its
stockholder/director.

Mr. Ben Wong,  one of our  directors,  is a 99.9%  shareholder  of Classic.  The
remaining 0.1% of Classic is owned by a non-related party.

TRANSACTIONS WITH ACL TECHNOLOGY PTE LTD.

During the years ended December 31, 2004,  2003, and 2002, we sold $0, $901,430,
$616,305,  respectively, to ACL Technology Pte Ltd. ("ACLT. Outstanding accounts
receivable   totaled  $0  and  $191,566  as  of  December  31,  2004  and  2003,
respectively.  We have not  experienced  any bad debt from this  customer in the
past.

During  the  years  ended  December  31,  2004,  2003,  and 2002,  we  purchased
inventories of $2,049,474,  $700,126, and $401,676,  respectively, from ACLT. As
of December 31, 2004 and 2003,  there were no  outstanding  accounts  payable to
ACLT.

During 2002, we sold inventory previously reserved for obsolescence to ACLT. The
inventory had an original cost of approximately $300,000 and was sold to ACLT at
a substantial discount.

In December 2003, we relieved our account  receivable  from ACLT by transferring
$374,988 of outstanding amounts it owed to its stockholder/director.

In 2004, we paid a commission of $392,434 to ACLT related to sales brought in by
this entity.

In 2004, we loaned  $318,983 to ACLT,  which is  classified as loans  receivable
from related parties in the accompanying consolidated balance sheet. The loan is
unsecured, bears no interest and is expected to be repaid in 2005.

Mr. Ben Wong, one of our directors,  is a 99% shareholder of ACLT. The remaining
1% of ACLT is owned by a non-related party.

TRANSACTIONS WITH KADATCO COMPANY LTD.

During the years ended December 31, 2004, 2003, and 2002, we sold $166,152,  $0,
and $20,736,  respectively,  to Kadatco  Company Ltd.  ("Kadatco").  Outstanding
accounts  receivable  totaled $0 as of December  31, 2004 and 2003.  We have not
experienced any bad debt from this customer in the past.

During the years ended  December 31, 2004,  2003, and 2002, we purchased $0, $0,
$11,340,  respectively,  from Kadatco.  As of December 31, 2004 and 2003,  there
were no outstanding accounts payable to Kadatco.

Mr. Yang is the sole beneficial owner of the equity interest of Kadatco.

                                       33
<PAGE>

TRANSACTIONS WITH RAMBO TECHNOLOGIES LTD.

During the years ended December 31, 2004,  2003,  and 2002, we sold  $7,682,072,
$5,134,160,  and $254,161,  respectively,  to Rambo Technologies Ltd. ("Rambo").
Outstanding  accounts receivable totaled $0 as of December 31, 2004 and 2003. We
have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2004, 2003, and 2002, we purchased $339,605,
$229,781, and $163,812,  respectively,  from Rambo. Outstanding accounts payable
due to Rambo totaled $61,360 and $0 as of December 31, 2004 and 2003.

Mr. Ben Wong, one of our directors, is a 60% shareholder of Rambo. The remaining
40% of Rambo is owned by a non-related party. Mr. Yang is a director of Rambo.

TRANSACTIONS WITH ARISTO COMPONENTS LTD.

During the years ended December 31, 2004, 2003, and 2002, we sold $90,  $62,268,
and $1,132,998,  respectively, to Aristo Components Ltd. ("Aristo"). Outstanding
accounts  receivable  totaled $0 as of December  31, 2004 and 2003.  We have not
experienced any bad debt from this customer in the past.

During the years ended  December 31, 2004,  2003,  and 2002, we purchased  $500,
$28,053,  and  $394,821,  respectively,  from Aristo.  There are no  outstanding
accounts payable due to Aristo as of December 31, 2004 and 2003.

Mr.  Ben  Wong,  one of our  directors,  is a 90%  shareholder  of  Aristo.  The
remaining 10% of Aristo is owned by a non-related  party. Mr. Yang is a director
of Aristo.

TRANSACTIONS WITH ATLANTIC NETCOM LTD.

During the years ended December 31, 2004,  2003, and 2002, we sold $14,985,  $0,
and $0, respectively,  to Atlantic Netcom Ltd. ("Atlantic Netcom").  Outstanding
accounts  receivable  totaled  $13,460 and $0 as of December  31, 2004 and 2003,
respectively.  We have not  experienced  any bad debt from this  customer in the
past.

Mr. Ben Wong, one of our directors, is a 60% shareholder of Atlantic Netcom. The
remaining 40% of Atlantic Netcom is owned by a non-related  party. Mr. Chung Lun
Yang is a director of Atlantic Netcom.

TRANSACTIONS WITH SOLUTION SEMICONDUCTOR (CHINA) LTD.

During the years ended  December 31, 2004,  2003,  and 2002,  we sold  $513,698,
$523,809,   and  $0,  respectively,   to  Solution  Semiconductor  (China)  Ltd.
("Solution").  Outstanding  accounts  receivable  totaled  $0 and  $5,260  as of
December  31,  2004 and  2003.  We have not  experienced  any bad debt from this
customer in the past.

During the years ended December 31, 2004,  2003, and 2002, we purchased  $8,387,
$0, and $0,  respectively,  from  Solution.  There are no  outstanding  accounts
payable due to Solution as of December 31, 2004 and 2003.

Mr. Ben Wong,  one of our  directors,  is a 99%  shareholder  of  Solution.  The
remaining 1% of Solution is owned by a non-related party.

                                       34
<PAGE>

TRANSACTIONS WITH SYSTEMATIC INFORMATION LTD.

During the years ended December 31, 2004,  2003,  and 2002, we sold  $1,941,298,
$137,482, and $0, respectively,  to Systematic Information Ltd.  ("Systematic").
There are no outstanding  accounts receivable due from Systematic as of December
31, 2004 and 2003.  We have not  experienced  any bad debt from this customer in
the past.

During the years ended December 31, 2004, 2003, and 2002, we purchased $154,460,
$0, and $0,  respectively,  from Systematic.  There are no outstanding  accounts
payable due to Systematic as of December 31, 2004 and 2003.

On April 1, 2004, we entered into a lease agreement with Systematic  pursuant to
which we lease  one  residential  property  for Mr.  Yang's  personal  use for a
monthly  lease  payment  of  $3,205  per  month.  The lease  agreement  for this
residency  expired on March 31, 2005 and was subsequently  extended to March 31,
2006.  Monthly lease payment for this lease totaled $3,205. We incurred and paid
an  aggregate  rent  expense  of  $28,846  to  Systematic  during the year ended
December 31, 2004.

Mr. Ben Wong and the wife of Mr.  Yang are the  directors  and  shareholders  of
Systematic with a total of 100% interest.

TRANSACTIONS WITH CITY ROYAL LTD.

In August  2004,  we were in  negotiation  with The DahSing  Bank  Limited  (the
"DahSing Bank") for an additional  amount of its available line of credit.  As a
condition to the extension of additional  credit to us,  DahSing Bank  requested
additional  collateral to secure the  increased  amount on the line. In order to
meet the  increased  security  requirement,  we loaned  $611,446  to City  Royal
Limited to pay off the mortgage  loan on a  residential  property  owned by City
Royal Limited and pledged to DahSing Bank as collateral to secure our borrowings
from  DaSing  Bank.  In  consideration  thereof,  DahSing  Bank  made  available
additional borrowings of HK$10 million (approximately US$1,282,000). The loan is
unsecured and bears no interest.  In February 2005,  City Royal Limited sold the
residential  property  and has repaid the loan through  transferring  the entire
proceeds from the sale of  HK$8,000,000  (approximately  $1,025,641)  to DahSing
Bank as collateral for the Company's line.

The loan to City Royal Limited is  non-interest  bearing,  in  consideration  of
which City Royal Limited did not charge an  arrangement  fee to us in respect of
the security  pledge in favor of Dah Sing Bank. The primary purpose of the loan,
from our  perspective,  was to advance  our  business  by  enabling us to secure
additional lines of financing in excess of the loan amount from DahSing Bank. We
settled this loan in February 2005. We believe that the above-referenc loan does
not  violate  the  general  prohibition  against  loans  made by  publicly-trade
companies to its directors  and  executive  officers set forth in Section 402 of
the  Sarbanes-Oxley  Act of 2002 ("Section  402") as its primary  purpose was to
advance our business. However, no assurance can be given that the Securities and
Exchange Commission or U.S. federal government will agree with our position and,
in the event such loan is  determined  to be a  violation  of Section  402,  the
criminal  penalties of the  Securities  Exchange Act of 1934, as amended,  could
apply.

Mr.  Yang's wife and Mr. Yang's  mother-in-law  are  shareholders  of City Royal
Limited with a total of 100% interest.

                                       35
<PAGE>

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES

         The  following  table  presents  fees,  including   reimbursements  for
expenses, for professional audit services rendered by Stonefield Josephson, Inc.
for the audit of our annual  financial  statements  for the years ended December
31, 2004 and  December 31, 2003 and fees billed for other  services  rendered by
Stonefield Josephson, Inc. during those periods.

                                                    FISCAL 2004      FISCAL 2003
Audit Fees (1)                                      $   221,047      $    71,050
Audit Related Fees (2)                              $        --      $        --

Tax Fees (3)                                        $        --      $        --

All Other Fees (4)                                  $        --      $        --

Total                                               $        --      $        --

-------------------------

     (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 Stonefield
         Josephson,  Inc. 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
         2004 or 2003.


     (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 2004 or 2003.


     (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 2004 or
         2003.

                                     PART IV

ITEM 15:  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(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) Schedule II - Valuation and Qualifying Accounts and Reserves

              The Schedule on page S-1 is filed as part of this report.

          (3)  List of Exhibits

          See Index to Exhibits in paragraph (c) below.

                                       36
<PAGE>

         The  Exhibits  are filed  with or  incorporated  by  reference  in this
report.

(b)  REPORTS ON FORM 8-K.  We filed the  following  current  reports on Form 8-K
during the last  quarter of our fiscal year ended  December 31, 2004 and for the
period from January 1, 2005 through April 15, 2005:

     1.  Form 8-K/A  filed  February  9, 2004 to the Form 8-K filed  October 16,
         2003 relating to item 7.

     2.  Form 8-K filed March 5, 2004 relating to item 12.

     3.  Form 8-K filed March 24, 2004 relating to items 5 and 7.

     4.  Form 8-K filed March 25, 2004 relating to items 5 and 7.

     5.  Form 8-K/A  filed  April 13,  2004 to the Form 8-K filed March 24, 2004
         relating to items 7.

     6.  Form 8-K filed January 19, 2005 relating to items 1.01, 2.01 and 9.01.

     7.  Form 8-K/A filed April 12, 2005 to the Form 8-K filed  January 19, 2005
         relating to items 1.02 and 2.01.

(c)  EXHIBITS  REQUIRED BY ITEM 601 OF  REGULATION  S-K. We will  furnish to our
stockholders a copy of any of the exhibits listed below upon payment of $.25 per
page to cover the costs of the Company of furnishing the exhibits.

Exhibit
No.      Description

3.1      Certificate  of  incorporation  of  the  Company,   together  with  all
         amendments  thereto,  as filed with the Secretary of State of the State
         of Delaware,  incorporated  by reference to Exhibit 3.1 to the Form 8-K
         filed with the Securities and Exchange Commission on December 19, 2003.

3.2      By-Laws of the  Company,  as  amended,  incorporated  by  reference  to
         Exhibit 3.2 to the Company's Registration Statement.

4.1(a)   Form of specimen certificate for common stock of the Company.*

10.1     Share Exchange and Reorganization  Agreement,  dated as of September 8,
         2003,  among  Print Data  Corp.,  Atlantic  Components  Limited and Mr.
         Chung-Lun  Yang,  incorporated by reference to Exhibit 10.1 to the Form
         8-K filed with the  Securities  and Exchange  Commission on October 16,
         2003.


10.2     Conveyance  Agreement,  dated as of September  30, 2003,  between Print
         Data Corp.  and New Print Data  Corp.,  incorporated  by  reference  to
         Exhibit  10.2 to the Form 8-K filed with the  Securities  and  Exchange
         Commission on October 16, 2003.

10.3     Securities  Purchase  Agreement  dated October 1, 2003 among Print Data
         Corp,  Jeffery  Green,  Phyllis Green and Joel Green,  incorporated  by
         reference to Exhibit 10.3 to the Form 8-K filed with the Securities and
         Exchange Commission on October 16, 2003.

10.4     Sales Restriction Agreement dated September 30, 2003 between Print Data
         Corp. and Phyllis Green,  incorporated  by reference to Exhibit 10.4 to
         the Form 8-K filed  with the  Securities  and  Exchange  Commission  on
         October 16, 2003.

                                       37
<PAGE>

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.

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.

                                       38
<PAGE>

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.

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.

21       Subsidiaries of the Company
         Atlantic Components Limited, a Hong Kong corporation
         Alpha  Perform   Technologies   Limited,   a  British   Virgin  Islands
         corporation

31.1     Certification of Principal Executive Officer required by Rule 13a-14(a)
         or Rule  15d-14(a) of the  Securities  Exchange Act of 1934, as adopted
         pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2     Certification of Principal Financial Officer required by Rule 13a-14(a)
         or Rule  15d-14(a) of the  Securities  Exchange Act of 1934, as adopted
         pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

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

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

** As contemplated by SEC Release No. 33-8212, these exhibits are furnished with
this Annual Report on Form 10-K and are not deemed filed with the Securities and
Exchange  Commission and are not  incorporated by reference in any filing of ACL
Semiconductors  Inc. under the Securities Act of 1933 or the Securities Exchange
Act of 1934,  whether made before or after the date hereof and  irrespective  of
any general incorporation language in any such filings.

                                       39
<PAGE>

                                   SIGNATURES

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

                                         ACL SEMICONDUCTORS INC.

                                         By: /s/ CHUNG-LUN YANG
                                            ------------------------------------
                                                 Chung-Lun Yang
                                                 Chief Executive Officer

                                         Dated: April 14, 2005

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

<TABLE>
<CAPTION>
Signature                                   Title                                       Date
---------                                   -----                                       ----

<S>                                         <C>                                         <C>
 /s/  CHUNG-LUN YANG                        Chief Executive                             April 14, 2005
------------------------------------        Officer and Chairman of the
Chung-Lun Yang                              Board of Directors
                                            (Principal Executive
                                            Officer)


 /s/  KENNETH LAP-YIN CHIN                  Chief Financial Officer,                    April 14, 2005
------------------------------------        (Principal Financial and Accounting
Kenneth Lap-Yin Chin                        Officer)


 /s/  BEN WONG                              Director                                    April 14, 2005
------------------------------------
Ben Wong
</TABLE>

                                       40
<PAGE>

                                   SCHEDULE II
                     ACL SEMICONDUCTORS INC. AND SUBSDIARIES


                 Valuation and Qualifying Accounts and Reserves

                  Years Ended December 31, 2004, 2003 and 2002


<TABLE>
<CAPTION>
                                                   Balance             Charged                           Balance
                                              at the Beginning        to Costs                         at the End
                                                 of the Year        and Expenses       Deductions      of the Year
                                             -------------------- ------------------ --------------- ----------------
<S>                                                      <C>                <C>           <C>                <C>
Allowance for Doubtful Accounts:
Year ended December 31, 2002                             205,166                 --       (205,166)               --
Year ended December 31, 2003                                  --            128,598       (128,598)               --
Year ended December 31, 2004                                  --                 --              --               --


Inventory Obsolescence Reserve:
Year ended December 31, 2002                             512,821                 --       (412,821)          100,000
Year ended December 31, 2003                             100,000             50,590              --          150,590
Year ended December 31, 2004                             150,590              3,256              --          153,846
</TABLE>

                                      S-1
<PAGE>

ACL Semiconductors Inc. and Subsidiaries

CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2004 and December 31, 2003 and

The Three-Year Period Ended December 31, 2004

WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




CONTENTS

                                                                        Page
                                                                        ----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                  F-1

FINANCIAL STATEMENTS:

  Consolidated Balance Sheets                                            F-2
  Consolidated Statements of Operations                                  F-3
  Consolidated Statements of Stockholders' Equity (Deficit)              F-4
  Consolidated Statements of Cash Flows                               F-5 - F-6
  Notes to Consolidated Financial Statements                          F-7 - F-28

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
ACL Semiconductors Inc.
Kowloon, Hong Kong

We  have  audited  the   accompanying   consolidated   balance   sheets  of  ACL
Semiconductors  Inc. and  subsidiaries as of December 31, 2004 and 2003, and the
related consolidated  statements of operations,  stockholders' equity (deficit),
cash flows and financial  statement  schedule for each of the three years in the
period  ended  December 31, 2004,  as listed in the index  appearing  under Item
15(a)(1) and (2) of this Annual Report on Form 10-K. These financial  statements
and  financial  statement  schedule  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as of
December 31, 2004 and 2003, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2004, in conformity
with U.S. generally accepted  accounting  principles.  Also in our opinion,  the
related financial statement  schedule,  when considered in relation to the basic
consolidated  financial  statements taken as a whole,  presents  fairly,  in all
material respects, the information set forth therein.

As discussed in Note 10 to the consolidated  financial  statements,  the Company
has  had  numerous  significant  transactions  with  businesses  and  affiliates
controlled  by, and with persons who are related to, the officers and  directors
of the Company.

As discussed in Note 7 to the consolidated financial statements,  the Company is
dependent on one single vendor to supply its  inventories and this single vendor
provided  the majority of the  Company's  inventory  purchases  during the years
ended  December  31,  2004,   2003,   and  2002.  The  Company's   non-exclusive
distributorship  agreement  with this  supplier  expired on March 1,  2005.  The
Company is still in negotiation with the supplier regarding the renewal terms of
the  agreement,  and such an agreement has not yet been renewed.  Termination of
such  distributorship  agreement by the supplier  would have a material  adverse
effect on the operations of the Company.

/s/ STONEFIELD JOSEPHSON, INC.

CERTIFIED PUBLIC ACCOUNTANTS

Irvine, California
April 8, 2005

                                      F-1

<PAGE>

                       ACL SEMICONDUCTORS AND SUBSDIARIES
                           CONSOLIDATED BALANCE SHEETS

                     ASSETS

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                            2004                   2003
                                                                     ------------------     ------------------
<S>                                                                     <C>                    <C>
CURRENT ASSETS:
     Cash and cash equivalents                                          $    512,548           $    467,074
     Accounts receivable, net of allowance
        for doubtful accounts of $0 for 2004 and 2003                      1,088,751                875,101
     Accounts receivable, related parties                                  4,727,517              5,486,452
     Loans receivable, related parties                                       930,429                     --
     Inventories, net                                                      1,520,117              1,327,120
     Other current assets                                                     80,802                 10,679
                                                                     ------------------     ------------------
           Total current assets                                            8,860,164              8,166,426

PROPERTY, EQUIPMENT AND IMPROVEMENTS, net of accumulated
   depreciation and amortization                                              55,819                 54,382

ACQUISITION DEPOSITS                                                       1,000,000              1,000,000
OTHER DEPOSITS                                                               350,000                350,000
                                                                     ------------------     ------------------
                                                                        $ 10,265,983           $  9,570,808
                                                                     ==================     ==================
       LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable                                                   $  5,065,965           $  5,037,304
     Accrued expenses                                                        456,676                140,369
     Lines of credit and loan facilities                                   3,469,632              2,158,984
     Current portion of long-term debt                                       286,032                884,131
     Convertible note payable, net of unamortized discount of $0
     for 2004 and $250,000 for 2003                                          150,000                     --
     Income tax payable                                                      145,050                177,645
     Due to shareholders for converted pledged collateral                    112,385                     --
     Other current liabilities                                                13,610                 22,555
                                                                     ------------------     ------------------
           Total current liabilities                                       9,699,350              8,420,988

Long-term debt, less current portion                                          65,522                194,703
                                                                     ------------------     ------------------
           Total liabilities                                               9,764,872              8,615,691
                                                                     ------------------     ------------------

COMMITMENTS AND CONTINGENCIES                                                     --                     --

STOCKHOLDERS' EQUITY (DEFICIT):
     Common stock - $0.001 par value, 50,000,000 shares
        authorized, 27,829,936 issued and outstanding                         27,830                 27,830
     Additional paid-in capital                                            3,360,405              3,360,405
     Amount due from stockholder/director                                   (102,936)              (102,936)
     Accumulated deficit                                                  (2,784,188)            (2,330,182)
                                                                     ------------------     ------------------

           Total stockholders' equity                                        501,111                955,117
                                                                     ------------------     ------------------

                                                                        $ 10,265,983           $   9,570,808
                                                                     ==================     ==================
</TABLE>

                                      F-2

The  accompanying  notes form an integral part of these  consolidated  financial
statements
<PAGE>

                       ACL SEMICONDUCTORS AND SUBSDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                December 31,
                                                               2004                  2003                  2002
                                                        ------------------    ------------------    ------------------
<S>                                                        <C>                   <C>                   <C>
NET SALES:
      Related parties                                      $ 51,203,860          $ 21,983,894          $ 12,031,467
      Other                                                  82,158,559            50,840,352           73,543,213
      Less discounts to customers                              (118,729)             (151,449)             (231,431)
                                                        ------------------    ------------------    ------------------

                                                            133,243,690            72,672,797            85,343,249

COST OF SALES                                               130,130,674            68,214,587            81,591,046
                                                        ------------------    ------------------    ------------------

GROSS PROFIT                                                  3,113,016             4,458,210            3,752,203

OPERATING EXPENSES:
      Selling                                                   453,862               149,364               204,837
      General and administrative                              2,618,810             2,571,147             2,225,205
      Merger cost                                                    --             2,753,620                    --
                                                        ------------------    ------------------    ------------------

INCOME (LOSS) FROM OPERATIONS                                    40,344            (1,015,921)            1,322,161

OTHER INCOME (EXPENSES):
      Interest expense                                         (402,412)             (166,509)             (213,589)
      Gain on disposal of property and equipment                    128                 7,228                    --
      Miscellaneous                                              (6,252)                3,398               (10,640)
                                                        ------------------    ------------------    ------------------

INCOME (LOSS) BEFORE INCOME TAXES                              (368,192)           (1,171,804)            1,097,932

INCOME TAXES                                                     85,814                265,866              111,056
                                                        ------------------    ------------------    ------------------

NET INCOME (LOSS)                                          $   (454,006)         $ (1,437,670)         $    986,876
                                                        ==================    ==================    ==================

EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED              $      (0.02)         $      (0.06)         $       0.04
                                                        ==================    ==================    ==================

WEIGHTED AVERAGE NUMBER OF SHARES -
   BASIC AND DILUTED                                         27,829,936            23,753,682            22,380,000
                                                        ==================    ==================    ==================
</TABLE>

                                      F-3

The  accompanying  notes form an integral part of these  consolidated  financial
statements
<PAGE>

                       ACL SEMICONDUCTORS AND SUBSDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
              FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                                               Total
                                           Common stock         Additional       Due from                   stockholders'
                                    -------------------------     paid-in      stockholder/   Accumulated      equity
                                      Shares        Amount        capital        Director       deficit       (deficit)
                                    -----------   -----------   -----------    ------------   -----------   -------------

<S>                 <C> <C>          <C>          <C>           <C>            <C>            <C>            <C>
Balance at December 31, 2001         22,380,000   $    22,380   $   362,235    $  (679,485)   $(1,366,567)   $(1,661,437)

Net decrease in due from
     stockholder/ director                   --            --            --         55,134             --         55,134

Net income                                   --            --            --             --        986,876        986,876
                                    -----------   -----------   -----------    -----------    -----------    -----------

Balance at December 31, 2002         22,380,000   $    22,380   $   362,235    $  (624,351)   $  (379,691)   $  (619,427)

Reverse acquisition between
     ACL Semiconductors Inc.
     (formerly Print Data Corp.)
     and Atlantic Components Ltd.     2,829,936         2,830        (2,830)            --             --             --

Issuance of common stock to
     consultants related to
     reverse-acquisition              2,620,000         2,620     2,751,000             --             --      2,753,620

Dividend declared                            --            --            --             --       (512,821)      (512,821)

Intrinsic value for beneficial
     conversion feature on
     convertible  note payable               --            --       250,000             --             --        250,000

Net decrease in due from
     stockholder/director                    --            --            --        521,415             --        521,415

Net loss                                     --            --            --             --     (1,437,670)    (1,437,670)
                                    -----------   -----------   -----------    -----------    -----------    -----------

Balance at December 31, 2003         27,829,936   $    27,830   $ 3,360,405    $  (102,936)   $(2,330,182)   $   955,117

Net loss                                     --            --            --             --       (454,006)      (454,006)
                                    -----------   -----------   -----------    -----------    -----------    -----------
Balance at December 31, 2004         27,829,936   $    27,830   $ 3,360,405    $  (102,936)   $(2,784,188)   $   501,111
                                    ===========   ===========   ===========    ===========    ===========    ===========
</TABLE>

                                      F-4

The  accompanying  notes form an integral part of these  consolidated  financial
statements
<PAGE>

                       ACL SEMICONDUCTORS AND SUBSDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


<TABLE>
<CAPTION>
                                                                                  Years ended December 31,
                                                                       ---------------------------------------------
                                                                          2004             2003             2002
                                                                       -----------      -----------      -----------
<S>                                                                    <C>              <C>              <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
      Net income (loss)                                                $  (454,006)      (1,437,670)     $   986,876
                                                                       -----------      -----------      -----------

      ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
        CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
             Depreciation and amortization                                  23,032           15,230           23,571
             Bad debt                                                                       128,598               --
             Change in inventory reserve                                     3,256           50,590         (412,821)
             Gain on disposal of property and equipment                       (128)          (7,228)              --
             Merger cost                                                        --        2,753,620               --
             Amortization of convertible note payable discount             250,000               --               --
             Reduction of receivable due from stockholder/
               director as additional compensation                              --          624,462          639,972

      CHANGES IN ASSETS AND LIABILITIES:
          (INCREASE) DECREASE IN ASSETS
             Accounts receivable - other                                  (208,390)          75,157          320,412
             Accounts receivable - related parties                         753,675       (2,661,158)        (177,044)
             Inventories                                                   196,253)      (1,075,621)         663,905
             Recoverable income taxes                                           --               --          280,903
             Other current assets                                          (70,123)             421              700
             Deposits                                                           --               --         (350,000)

          INCREASE (DECREASE) IN LIABILITIES
             Accounts payable                                               28,661        1,221,659         (452,519)
             Accrued expenses                                              328,692          (18,780)          46,820
             Income tax payable                                            (32,595)         118,707           58,938
             Other current liabilities                                      (8,945)          (4,138)            (419)
                                                                       -----------      -----------      -----------
                Total adjustments                                          870,882        1,221,519          642,418
                                                                       -----------      -----------      -----------

                Net cash provided by (used for)
                  operating activities                                     416,876         (216,151)       1,629,294
                                                                       -----------      -----------      -----------

CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
      (Loans) to/repayments from stockholders                                   --          807,724         (584,838)
      Loan to related party                                               (930,429)              --               --
      Proceeds received from sale of fixed assets                              128           25,641               --
      Purchases of property, equipment and improvements                    (24,469)         (42,724)         (11,007)
                                                                       -----------      -----------      -----------

                Net cash provided by (used for)
                  investing activities                                    (954,770)         790,641         (595,845)
                                                                       -----------      -----------      -----------
</TABLE>

                                      F-5

The  accompanying  notes form an integral part of these  consolidated  financial
statements
<PAGE>

<TABLE>
<CAPTION>
                                                                                  Years ended December 31,
                                                                       ---------------------------------------------
                                                                          2004             2003             2002
                                                                       -----------      -----------      -----------
<S>                                                                    <C>              <C>              <C>
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
      Proceeds (repayments) on lines of credit and
         notes payable                                                   1,310,648          166,410         (269,317)
      Cash proceeds from issuance of convertible note payable                   --          250,000               --
      Principal payments on long-term debt                                (727,280)        (702,763)        (639,732)
                                                                       -----------      -----------      -----------

              Net cash provided by (used for) financing activities         583,368         (286,353)        (909,049)
                                                                       -----------      -----------      -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                   45,474          288,137          124,400

CASH AND CASH EQUIVALENTS, beginning of year                               467,074          178,937           54,537
                                                                       -----------      -----------      -----------

CASH AND CASH EQUIVALENTS, end of year                                 $   512,548      $   467,074      $   178,937
                                                                       ===========      ===========      ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

      Interest paid                                                    $   152,412      $   166,509      $   213,589
                                                                       ===========      ===========      ===========

      Income tax paid                                                  $   118,409      $   147,159      $    67,418
                                                                       ===========      ===========      ===========


NON-CASH ACTIVITIES:

      Reduction of accounts receivable from related party as
         acquisition deposit                                           $        --      $ 1,000,000      $        --
                                                                       ===========      ===========      ===========

      Reduction of accounts receivable from related parties
         for assumed liability due stockholder/director                $        --      $ 1,423,592      $        --
                                                                       ===========      ===========      ===========

      Dividend to stockholder of Atlantic Components Ltd.
         prior to reverse-acquisition to increase payable to
         stockholder/director                                          $        --      $   512,821      $        --
                                                                       ===========      ===========      ===========
</TABLE>

                                      F-6

The  accompanying  notes form an integral part of these  consolidated  financial
statements
<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         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.
                  The accompanying consolidated statements of operations for the
                  year ended December 31, 2003 include the operating  results of
                  Atlantic up to  September  30,  2003,  the closing date of the
                  acquisition,  and the operating results of ACL from October 1,
                  2003 to December 31, 2003. In accounting for this transaction:

                  o   Atlantic  is  deemed  to be the  purchaser  and  surviving
                      company for accounting purposes.  Accordingly,  due to the
                      acquisition,  its net  assets  have been  included  in the
                      consolidated  balance  sheets  at  their  historical  book
                      values and the results of operations of Atlantic have been
                      presented for the  comparative  prior years ended December
                      31, 2002.

                  o   Control  of the  net  assets  and  operations  of ACL  was
                      acquired   effective   September  30,  2003.  The  Company
                      accounted for this transaction as a purchase of the assets
                      and  liabilities  of ACL. The  historical  cost of the net
                      assets assumed was $0.

                                      F-7

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

         ORGANIZATION AND BASIS OF PRESENTATION, CONTINUED:

                  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).   This   transaction   was   reflected  in  the
                  accompanying  consolidated balance sheet as if the transaction
                  took place on September 30, 2003.

                  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.

                  On  December  31,  2004,  ACL  entered  into a Stock  Purchase
                  Agreement   with  Classic   Electronics   Ltd.,  a  Hong  Kong
                  corporation  ("Classic")  and  the  stockholders  of  Classic,
                  pursuant to which ACL would  purchase  all of the  outstanding
                  shares  of  capital  stock of  Classic  from  its two  selling
                  stockholders  (the  "Selling  Stockholders")  for an aggregate
                  purchase price of 12,000,000 shares of common stock, par value
                  $0.001 per share, of the Company,  to be issued to the Selling
                  Stockholders pro rata based on their ownership  percentages of
                  Classic, the cancellation of $4.0 million of indebtedness owed
                  by the Selling Stockholders to Classic, which consideration is
                  in  addition  to the $1.0  million  paid to  Classic by ACL in
                  December   2003  as  an   irrevocable   deposit   towards  the
                  acquisition  through the  cancellation of accounts  receivable
                  then owing by Classic to ACL. Mr. Ben Wong, a director of ACL,
                  is a 99.9%  shareholder  of  Classic.  The  remaining  0.1% of
                  Classic is owned by a non-related party.

                  As of April 8, 2005, the due diligence procedures have not yet
                  been  completed  by both  entities and the closing date of the
                  acquisition  has  been  postponed  to a  date  when  such  due
                  diligence procedures are completed and the related results are
                  satisfactory for both parties.  Accordingly,  the accompanying
                  consolidated financial statements do not include the financial
                  statements  of  Classic  as  the   transaction  has  not  been
                  effectively  consummated  because the considerations  have not
                  yet been  exchanged  between the two  entities  and  effective
                  control of Classic has not transferred to the Company.

                                      F-8

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

         BUSINESS ACTIVITY:

                  ACL Semiconductors  Inc. ("Company" or "ACL") was incorporated
                  under 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"  brandname 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 has ceased
                  the  operations  of Alpha and all the related  activities  are
                  consolidated with those of Atlantic.

         CURRENCY REPORTING:

                  Amounts  reported in the accompanying  consolidated  financial
                  statements and disclosures are stated in U.S. Dollars,  unless
                  stated  otherwise.  The  functional  currency of the  Company,
                  which  accounted  for  most of the  Company's  operations,  is
                  reported  in  Hong  Kong  dollars  ("HKD").  Foreign  currency
                  transactions  (outside  Hong  Kong)  during  the  years  ended
                  December  31, 2004,  2003,  and 2002 are  translated  into HKD
                  according to the prevailing  exchange rate at the  transaction
                  dates.   Assets  and   liabilities   denominated   in  foreign
                  currencies at the balance sheet dates are translated  into HKD
                  at year-end exchange rates.

                  For the  purpose of  preparing  these  consolidated  financial
                  statements,  the financial  statements of Atlantic reported in
                  HKD  have  been  translated  into  United  States  Dollars  at
                  US$1.00=HKD7.8,  a fixed exchange rate maintained  between the
                  two countries.

         CONSOLIDATION POLICY:

                  The consolidated  financial  statements  include the financial
                  statements  of ACL  Semiconductors  Inc.  and its wholly owned
                  subsidiaries,  Atlantic  Components  Ltd.,  and Alpha  Perform
                  Technology Limited. All significant  intercompany accounts and
                  transactions  have  been  eliminated  in  preparation  of  the
                  consolidated financial statements.

                                      F-9

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

         REVENUE RECOGNITION:

                  Product  sales are  recognized  when  products  are shipped to
                  customers,  title passes and collection is reasonably assured.
                  Provisions for discounts to customers,  estimated  returns and
                  allowances and other price adjustments are provided for in the
                  same  periods  the  related  revenue  is  recorded  which  are
                  deducted from the gross sales.

         USE OF ESTIMATES:

                  The  preparation  of  consolidated   financial  statements  in
                  conformity  with  generally  accepted  accounting   principles
                  requires  management to make  estimates and  assumptions  that
                  affect the reported amounts of assets and liabilities, revenue
                  recognition,  allowance  for  doubtful  accounts,  long  lived
                  assets impairment,  inventories,  and disclosure of contingent
                  assets  and  liabilities,  at the  date  of  the  consolidated
                  financial  statements,  as well  as the  reported  amounts  of
                  revenues and expenses  during the  reporting  periods.  Actual
                  results could differ from these estimates.

         CASH AND CASH EQUIVALENTS:

                  For  purposes of the  consolidated  statements  of cash flows,
                  cash  equivalents  include all highly liquid debt  instruments
                  with original maturities of three months or less which are not
                  securing any  corporate  obligations.  The Company had no cash
                  equivalents at December 31, 2004 or 2003.

         ACCOUNTS RECEIVABLE:

                  The Company provides an allowance for doubtful  accounts equal
                  to the estimated uncollectible amounts. The Company's estimate
                  is based on historical  collection  experience and a review of
                  the  current  status  of  trade  accounts  receivable.  It  is
                  reasonably   possible  that  the  Company's  estimate  of  the
                  allowance for doubtful  accounts will change.  The Company did
                  not provide an allowance for doubtful  accounts as of December
                  31, 2004 and 2003.

         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 increased by $3,256 for 2004 and
                  $50,590  for  2003.  Inventory  obsolescence  reserve  totaled
                  $153,846  and  $150,590  as of  December  31,  2004 and  2003,
                  respectively.

                                      F-10

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

         PROPERTY, EQUIPMENT AND IMPROVEMENTS:

                  Property and  equipment are valued at cost.  Depreciation  and
                  amortization  are provided over the estimated  useful lives of
                  three to five years using the straight-line method.  Leasehold
                  improvements  are amortized on a straight-line  basis over the
                  shorter of the economic lives or the lease terms.

                  The  estimated  service  lives  of  property,   equipment  and
                  improvements are as follows:

                           Automobile                    3 1/3 years
                           Office equipment              5 years
                           Leasehold improvements        5 years
                           Computers                     5 years

         LONG-LIVED ASSETS:

                  In accordance with Statement of Financial Accounting Standards
                  ("SFAS") No. 144,  "Accounting  for the Impairment or Disposal
                  of Long-Lived  Assets,"  long-lived assets to be held and used
                  are  analyzed  for  impairment  whenever  events or changes in
                  circumstances  indicate  that the carrying  amount of an asset
                  may not be  recoverable.  SFAS No. 144  relates to assets that
                  can be amortized and the life can be determinable. The Company
                  evaluates  at each  balance  sheet  date  whether  events  and
                  circumstances have occurred that indicate possible impairment.
                  If there are  indications  of  impairment,  the  Company  uses
                  future  undiscounted  cash flows of the related asset or asset
                  grouping  over the  remaining  life in  measuring  whether the
                  assets are  recoverable.  In the event such cash flows are not
                  expected  to be  sufficient  to  recover  the  recorded  asset
                  values,  the assets are written down to their  estimated  fair
                  value. Long-lived assets to be disposed of are reported at the
                  lower of carrying  amount or fair value of asset less the cost
                  to sell. The Company  determined  that there was no impairment
                  of long-lived assets as of December 31, 2004 and 2003.

         ADVERTISING:

                  The  Company   expenses   advertising   costs  when  incurred.
                  Advertising  expense totaled $8,851,  $3,567,  and $24,580 for
                  the  years  ended   December   31,  2004,   2003,   and  2002,
                  respectively.

                                      F-11

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004



(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

         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  carryforwards,  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.

         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.

         COMPREHENSIVE INCOME:

                  SFAS No. 130, "Reporting  Comprehensive  Income,"  establishes
                  standards  for the  reporting  and  display  of  comprehensive
                  income and its components in the financial statements. For the
                  years ended December 31, 2004, 2003, and 2002, 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.

         SEGMENT REPORTING:

                  Based on the Company's integration and management  strategies,
                  the Company  operated in a single  business  segment.  For the
                  years ended December 31, 2004,  2003, and 2002, all sales have
                  been derived from Hong Kong and the South East Asia region.

                                      F-12

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

         BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:

                  In  accordance  with 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.  For the years ended December 31,
                  2004 and 2003,  the Company has 517,241 and 346,580  shares of
                  common stock  equivalents  upon  conversion of the convertible
                  note  payable  based on the quoted  market price at the end of
                  each  reporting  years.  These common stock  equivalents  were
                  excluded  from the  computation  of diluted  loss per share as
                  their effect is antidilutive  for 2004 and 2003. There were no
                  common stock equivalents for 2002.

         RECLASSIFICATIONS

                  Certain   reclassifications   have   been  made  to  the  2003
                  consolidated  financial  statements  to  conform  to the  2004
                  presentation.

         NEW ACCOUNTING PRONOUNCEMENTS:

                  In March 2004, the FASB approved the consensus  reached on the
                  Emerging Issues Task Force (EITF) Issue No. 03-1, "The Meaning
                  of  Other-Than-Temporary  Impairment  and Its  Application  to
                  Certain  Investments."  The  objective  of  this  Issue  is to
                  provide guidance for identifying  impaired  investments.  EITF
                  03-1 also provides new disclosure requirements for investments
                  that are deemed to be temporarily impaired. In September 2004,
                  the FASB issued a FASB Staff  Position  (FSP) EITF 03-1-1 that
                  delays the effective date of the  measurement  and recognition
                  guidance in EITF 03-1 until after further deliberations by the
                  FASB.  The  disclosure  requirements  are  effective  only for
                  annual  periods  ending after June 15,  2004.  The Company has
                  evaluated  the  impact  of  the  adoption  of  the  disclosure
                  requirements of EITF 03-1 and does not believe the impact will
                  be significant to the Company's  overall results of operations
                  or financial position.

                  In November  2004,  the FASB  issued  SFAS No. 151  "Inventory
                  Costs,  an amendment of ARB No. 43, Chapter 4.' The amendments
                  made by Statement  151 clarify that  abnormal  amounts of idle
                  facility   expense,   freight,   handling  costs,  and  wasted
                  materials  (spoilage)  should be recognized as  current-period
                  charges  and  require  the  allocation  of  fixed   production
                  overheads  to  inventory  based on the normal  capacity of the
                  production facilities. The guidance is effective for inventory
                  costs incurred  during fiscal years  beginning  after June 15,
                  2005.  Earlier  application  is permitted for inventory  costs
                  incurred

                                      F-13

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

         NEW ACCOUNTING PRONOUNCEMENTS, CONTINUED:

                  during fiscal years  beginning  after  November 23, 2004.  The
                  Company has  evaluated the impact of the adoption of SFAS 151,
                  and does not  believe the impact  will be  significant  to the
                  Company's overall results of operations or financial position.

                  In December 2004, the FASB issued SFAS No.152, "Accounting for
                  Real Estate  Time-Sharing  Transactions--an  amendment of FASB
                  Statements No. 66 and 67" ("SFAS 152"). The amendments made by
                  Statement  152 amend FASB  Statement  No. 66,  Accounting  for
                  Sales of Real Estate,  to reference the  financial  accounting
                  and   reporting   guidance   for  real   estate   time-sharing
                  transactions  that is provided in AICPA  Statement of Position
                  (SOP)  04-2,   "Accounting   for  Real   Estate   Time-Sharing
                  Transactions."  This  Statement also amends FASB Statement No.
                  67, Accounting for Costs and Initial Rental Operations of Real
                  Estate Projects, to state that the guidance for (a) incidental
                  operations and (b) costs incurred to sell real estate projects
                  does not apply to real estate time-sharing  transactions.  The
                  accounting  for those  operations  and costs is subject to the
                  guidance  in  SOP  04-2.   This  Statement  is  effective  for
                  financial statements for fiscal years beginning after June 15,
                  2005 with  earlier  application  encouraged.  The  Company has
                  evaluated the impact of the adoption of SFAS 152, and does not
                  believe  the  impact  will  be  significant  to the  Company's
                  overall  results  of  operations  or  financial  position.

                  In December 2004,  the FASB issued SFAS No.153,  "Exchanges of
                  Nonmonetary  Assets,  an  amendment  of APB  Opinion  No.  29,
                  Accounting for Nonmonetary  Transactions." The amendments made
                  by Statement 153 are based on the principle  that exchanges of
                  nonmonetary  assets should be measured based on the fair value
                  of the assets exchanged. Further, the amendments eliminate the
                  narrow   exception  for   nonmonetary   exchanges  of  similar
                  productive  assets and replace it with a broader exception for
                  exchanges of  nonmonetary  assets that do not have  commercial
                  substance. Previously, Opinion 29 required that the accounting
                  for an exchange of a productive asset for a similar productive
                  asset  or an  equivalent  interest  in  the  same  or  similar
                  productive asset should be based on the recorded amount of the
                  asset  relinquished.  Opinion 29 provided an  exception to its
                  basic  measurement  principle  (fair  value) for  exchanges of
                  similar  productive  assets. The Board believes that exception
                  required   that   some   nonmonetary    exchanges,    although
                  commercially substantive, be recorded on a carryover basis. By
                  focusing  the  exception  on  exchanges  that lack  commercial
                  substance,   the  Board  believes  this   Statement   produces
                  financial  reporting  that  more  faithfully   represents  the
                  economics of the transactions.  The Statement is effective for
                  nonmonetary  asset  exchanges   occurring  in  fiscal  periods
                  beginning  after  June  15,  2005.   Earlier   application  is
                  permitted for nonmonetary asset exchanges  occurring in fiscal
                  periods  beginning after the date of issuance.  The provisions
                  of this Statement shall be applied prospectively.  The Company
                  has evaluated the impact of the adoption of SFAS 153, and does
                  not believe the impact will be  significant  to the  Company's
                  overall results of operations or financial position.

                                      F-14

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

         NEW ACCOUNTING PRONOUNCEMENTS, CONTINUED:

                  In December 2004, the FASB issued SFAS No.123  (revised 2004),
                  "Share-Based Payment." Statement 123(R) will provide investors
                  and other users of financial statements with more complete and
                  neutral   financial   information   by   requiring   that  the
                  compensation cost relating to share-based payment transactions
                  be  recognized  in  financial  statements.  That  cost will be
                  measured  based on the fair value of the  equity or  liability
                  instruments  issued.  Statement  123(R) covers a wide range of
                  share-based compensation arrangements including share options,
                  restricted  share  plans,   performance-based   awards,  share
                  appreciation   rights,  and  employee  share  purchase  plans.
                  Statement 123(R) replaces FASB Statement No. 123,  "Accounting
                  for Stock-Based  Compensation," and supersedes APB Opinion No.
                  25, "Accounting for Stock Issued to Employees." Statement 123,
                  as  originally  issued in 1995,  established  as  preferable a
                  fair-value-based  method of accounting for share-based payment
                  transactions with employees. However, that Statement permitted
                  entities  the option of  continuing  to apply the  guidance in
                  Opinion 25, as long as the  footnotes to financial  statements
                  disclosed  what net income would have been had the  preferable
                  fair-value-based method been used. Public entities (other than
                  those filing as small  business  issuers)  will be required to
                  apply  Statement  123(R)  as of the  first  interim  or annual
                  reporting  period that begins after  December  15,  2005.  The
                  Company is currently  evaluating the impact of the adoption of
                  this  Statement  on its results of  operations  and  financial
                  position.

(2)      PROPERTY, EQUIPMENT AND IMPROVEMENTS:

         A summary is as follows:

<TABLE>
<CAPTION>
                                                                     2004        2003
                                                                     ----        ----

            <S>                                                    <C>         <C>
            Office equipment                                       $ 68,376    $ 45,907
            Leasehold improvements                                    4,346       2,346
            Furniture and fixtures                                    3,843       3,843
            Automobile                                               33,333      53,281
                                                                   --------    --------

                                                                    109,898     105,377
            Less accumulated depreciation and amortization           54,079      50,995
                                                                   --------    --------

                                                                   $ 55,819    $ 54,382
                                                                   ========    ========
</TABLE>

         Depreciation  and  amortization  expense for property,  equipment,  and
         improvements  amounted to $23,032,  $15,230, and $23,571, for the years
         ended December 31, 2004, 2003, and 2002, respectively.


                                      F-15

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004

(3)      REVOLVING LINES OF CREDIT AND LOAN FACILITIES:

         The Company has available to it a $2,051,282  revolving  line of credit
         with Dah  Sing  Bank  with an  outstanding  balance  of  $2,050,000  at
         December 31, 2004 and $737,000 at December 31, 2003.  For borrowings in
         Hong Kong dollars,  the line of credit bears interest at the greater of
         (1) Hong Kong dollar prime rate or (2) 1% over the Hong Kong  Interbank
         Offer  Rate  ("HIBOR".),  or 5% as  of  December  31,  2004  and  2003,
         respectively.  Weighted average interest rate  approximated 5% for 2004
         and 5.5% for 2003.  For  borrowings  in foreign  currency,  the line of
         credit carries interest of 0.5% over the Base Rate. The line matures on
         September 30, 2005.

         The Company has available to it a $256,410 line for overdraft  with Dah
         Sing Bank with an outstanding  balance of $137,632 at December 31, 2004
         and $247,984 at December 31, 2003. The line of credit bears interest at
         the greater of (1) 0.5% over Hong Kong dollar prime rate or (2) 1% over
         HIBOR,  or 5.5% as of  December  31,  2004 and 2003.  Weighted  average
         interest  rate  approximated  5.5% for 2004 and 6% for  2003.  The line
         matures on September 30, 2005.

         The  Company  has  available  to it  import  loan  facilities  totaling
         $1,282,051  with HSBC with an  outstanding  balance  of  $1,282,000  at
         December 31, 2004 and  $1,174,000 at December 31, 2003.  For borrowings
         in Hong Kong dollars,  the import loan facilities bear interest at 0.5%
         per annum over the bank's best lending rate and are payable monthly, or
         5.5% as of December 31, 2004 and 2003,  respectively.  Weighted average
         interest rate  approximated 5.5% for 2004 and 6% for 2003. This loan is
         due on demand.

         See Note 5 for the details for the security,  collateral and guarantees
         under the debenture deed dated April 20, 2001.

(4)      CONVERTIBLE NOTE PAYABLE:

         On December 31, 2003, the Company issued a 12% subordinated convertible
         note in the amount of  $250,000  to  Professional  Traders  Fund,  Inc.
         ("PTF").  The borrowing amount is due and payable on December 31, 2004.
         The interest is payable in arrears on March 31, June 30,  September 30,
         and December  31, 2004.  The Company is in default at December 31, 2004
         and accordingly,  interest is accrued at a rate of 15% on and after the
         date of the  default,  and the  Company is  obligated  to pay a default
         penalty  equal to 30% of the  unpaid  principal  and  interest.  At the
         option of the debt holder, such unpaid principal,  interest and default
         penalty  can be paid  with  shares  of the  Company's  common  stock at
         conversion price, which is defined in the following paragraph.

         The holder of this note,  at its option,  can  convert the  outstanding
         balance  of the debt  into  shares of  common  stock at the  conversion
         price,  which is defined  as 40% of the  average  closing  price of the
         stock three trading days immediately  prior to the Notice of Conversion
         date or the  interest  payment  date or the  debt  maturity  date.  The
         conversion price shall not in any case exceed $1 per share.


                                      F-16

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(4)      CONVERTIBLE NOTE PAYABLE, CONTINUED:

         In addition,  since this debt is convertible  into equity at the option
         of  the  note  holder  at  beneficial  conversion  rates,  an  embedded
         beneficial  conversion  feature  was  recorded as a debt  discount  and
         amortized using the effective interest method over the life of the debt
         in accordance with Emerging  Issues Task Force No. 00-27,  "Application
         of Issue  No.  98-5 to  Certain  Convertible  Instruments."  Since  the
         intrinsic  value  of the  beneficial  conversion  feature  exceeds  the
         proceeds of the convertible  debt, the amount of the discount  assigned
         to the  beneficial  conversion  feature is limited to the amount of the
         proceeds of the convertible  debt.  Therefore,  the Company  recorded a
         discount of $250,000,  the face value of the debt in 2003.  The Company
         fully amortized the discount of $250,000 during the year ended December
         31, 2004.

         Pursuant to the terms of a Limited  Guarantee  and Security  Agreement,
         the debt is  guaranteed by 1.2 million  shares of the Company's  common
         stock  beneficially  owned by three  shareholders  of which 700,000 are
         restricted shares and 500,000 are freely traded shares.

         The  Company  has  agreed  to  file a  registration  statement  for the
         conversion  shares within 60 days of the funding of the note and agreed
         to use reasonable  efforts to cause such  registration  statement to be
         declared  effective  within 150 days of the funding of the note. If the
         Company fails to meet either of such timelines,  a 1% penalty per month
         on the funded  amount of the note will be levied  against the  Company.
         Accordingly,  the  Company is  incurring  a 1% penalty per month on the
         funded amount of the note.

         During the year ended December 31, 2004,  PTF converted  principal note
         balance of $100,000 into 222,980 shares of common stock and outstanding
         accrued  interest of $12,385 into 29,579 shares of common stock through
         the shares pledged by three  shareholders.  Accordingly,  the Company's
         shareholders  issued  directly to PTF a total of 252,559 common shares.
         The value of the  converted  principal and accrued  interest,  totaling
         $112,385  at  December,  has  been  recorded  as  a  liability  to  the
         shareholders  in the  accompanying  consolidated  balance sheet.  As of
         December 31, 2004 and 2003, the gross outstanding  balance of this note
         totaled $150,000 and $250,000, respectively.

         The outstanding  balance of the note is convertible into 517,241 shares
         and 346,580  shares of the Company's  common stock based on the closing
         prices as of December 31, 2004 and 2003, respectively.

         In February  2005,  PTF filed a lawsuit  against the Company for unpaid
         note balance of $150,000,  unpaid interest of $4,500,  default interest
         of $938, liquidated damage of $30,000 and default damage of $55,350 and
         the related legal cost.  The Company is in the process of negotiating a
         settlement with PTF and has accrued the maximum  liabilities  including
         all the amounts  being  claimed by PTF as of  December  31,  2004.  The
         accrued  interest and  penalties  totaling  $90,788 are included in the
         accrued expenses in the accompanying  consolidated balance sheet. Also,
         PTF is seeking  reimbursement  for attorneys' fees and costs;  however,
         since  the  attorneys'  fees  and  costs  are  unknown  and  cannot  be
         reasonably estimated, the legal cost was not accrued as of December 31,
         2004.
                                      F-17

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004



(5)      LONG-TERM DEBT:

         A summary is as follows as of December 31:

<TABLE>
<CAPTION>
                                                                                               2004           2003
                                                                                               ----           ----

           <S>                                                                              <C>            <C>
           Installment loan carrying an interest of 0.75% over Hong Kong dollar
           Prime Rate (5.75% at December 31, 2004 and 2003) to Dah Sing Bank
           payable in monthly installments of $4,535 including interest through
           April 2007                                                                       $   114,602    $   160,961

           Installment loan carrying an interest of 1% over Hong Kong dollar
           Prime Rate (6% at December 31, 2004 and 2003) to Dah Sing Bank
           payable in monthly installments of $7,723 including interest through
           June 2004                                                                                 --         45,540

           Term loan carrying an interest of 0.75% over the bank's best lending
           rate (5.75% at December 31, 2004 and 2003) to HSBC payable in monthly
           installments of $35,897 including interest through June 2005                          38,322        453,827

           Accrued interest on previous term loan which was converted to a term loan
           carrying 0% to HSBC, unpaid amount due June 2005                                     156,825        156,825

           Term loan carrying an interest of 0.75% over Hong Kong dollar Prime
           Rate (5.75% at December 31, 2004 and 2003) to DBS Bank payable in
           monthly installments including interest at the following schedule:
           $16,410 from May 2002 to April 2003, $19,103 from May 2003 to April
           2004, $21,923 from May 2004 to March 2005, and the remaining balance
           due April 2005                                                                        41,805        261,681
                                                                                            -----------    -----------
                                                                                                351,554      1,078,834

           Less current maturities                                                              286,032        884,131
                                                                                            -----------    -----------
                                                                                            $    65,522    $   194,703
                                                                                            ===========    ===========
</TABLE>

                                      F-18

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(5)      LONG-TERM DEBT, CONTINUED:

         With  respect  to  all  of  the  above   referenced   debt  and  credit
         arrangements  in Note 3,  pursuant to a debenture  deed dated April 20,
         2001, the Company  pledged its assets as collateral  collectively  to a
         bank group in Hong Kong  comprised of Dah Sing Bank  Limited,  The Hong
         Kong and Shanghai Banking Corporation Limited, and DBS Bank (Hong Kong)
         Ltd.  (formerly Overseas Trust Bank Limited) 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 personal  guarantee  given by Mr.  Alan  Chung-Lun  Yang ("Mr.
                Yang") limited to  approximately  US$6,900,000  to The Hong Kong
                and Shanghai Banking Corporation Limited;

         2.     a security  interest on a residential  property  located in Hong
                Kong owned by City Royal Limited, a related party; and

         3.     a personal  guarantee  given by Mr.  Yang for  unlimited  amount
                together  with a key man life  insurance  policy on Mr. Yang for
                $1,000,000 and a personal guarantee to Dah Sing Bank Limited.

         A summary of the  maturities  of  long-term  debt at December  31, 2004
follows:

              Year ending December 31,
                  2005                                                 $ 286,032
                  2006                                                    52,052
                  2007                                                    13,470
                  Thereafter                                                  --
                                                                       ---------

                                                                       $ 351,554
                                                                       =========

(6)      INCOME TAXES:

         Income tax expense amounted to $85,814 for 2004, $265,866 for 2003, and
         $111,056 for 2002 (an effective rate of 23% for 2004, 23% for 2003, and
         10% for 2002). 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:

                                      F-19

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(6)      INCOME TAXES, CONTINUED:

<TABLE>
<CAPTION>
                                                                2004              2003              2002
                                                                ----              ----              ----

<S>                                                          <C>               <C>               <C>
          Computed tax at federal statutory rate             $(125,185)        $(398,414)        $ 373,297

          Non-deductible merger cost                                --           936,231                --

          Tax  rate differential on foreign earnings of
          Atlantic Components Ltd.("Atlantic"), a Hong Kong
          based company                                        (80,910)          (89,247)         (197,628)

          Earnings on Alpha Perform Technology Limited
          ("Alpha"), a British Virgin Islands ("BVI")
          Company not subject to corporate income tax               --          (353,914)               --

          Net operating loss carryforward                      291,909                --                --

          Provision for tax liabilities on procurement
          service fee income to Alpha                               --           150,000                --

Other                                                               --            21,210           (64,613)
                                                             ---------         ---------         ---------

                                                             $  85,814         $ 265,866         $ 111,056
                                                             =========         =========         =========
</TABLE>

         The income tax provision consists of the following components:

<TABLE>
<CAPTION>
                                                                2004              2003              2002
                                                                ----              ----              ----

         <S>                                                 <C>               <C>               <C>
         Federal                                             $      --         $      --         $      --
         Foreign                                                85,814           265,866           111,056
                                                             ---------         ---------         ---------

                                                             $  85,814         $ 265,866         $ 111,056
                                                             =========         =========         =========
</TABLE>

         As of December 31, 2004, 2003 and 2002,  there are no material  amounts
         of temporary  differences  between the  carrying  amounts of assets and
         liabilities for financial  reporting  purposes and the amounts used for
         income tax purposes.

         In  2003,  the  Company's  Hong  Kong  subsidiary,   Atlantic,  paid  a
         procurement  fee  to  the  Company's  subsidiary,  Alpha  in  BVI,  and
         allocated certain expenses incurred outside Hong Kong.  Procurement fee
         income net of such expenses totaled approximately $1,000,000,  which is
         not  subject  to  corporate  tax in Hong  Kong or  BVI.  However,  such
         procurement service fee income or income net of related expenses may be
         subject to  corporate  income tax in the  People's  Republic  of China.
         Based  on  the  analysis  of  its  tax  counsel,  the  Company  accrued
         approximately  $150,000  for  such  potential  tax  liabilities  as  of
         December 31, 2003. The Company has not paid any of this tax in 2004 and
         the amount  remained  to be  included  in the income tax  payable as of
         December 31, 2004.

                                      F-20

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(6)      INCOME TAXES, CONTINUED:

         Effective  January 1, 2004,  the Company has ceased the  operations  of
         Alpha and all the related  activities  are  consolidated  with those of
         Atlantic.

(7)      CONCENTRATIONS:

         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 March 1, 2005. As of April 8, 2005,  the Company is still in
         negotiation with Samsung regarding the terms and such agreement has not
         yet been renewed.

         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 80%,
         84%, and 94% of materials from Samsung for the years ended December 31,
         2004, 2003, and 2002, 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,  2004  and  2003,   included  in  accounts  payable  were
         $2,921,612 and  $2,551,823,  respectively,  to Samsung.  Termination of
         such distributorship by Samsung will significantly impair and adversely
         affect the continuation of the Company's business.

         During the years ended December 31, 2004, 2003, and 2002, 31%, 21%, and
         12%,  respectively,  of the Company's sales were generated from Classic
         Electronic  Ltd.  ("Classic"),   a  related  party  (see  Note  10  for
         additional  discussion of related party  transactions).  As of December
         31,  2004 and  2003,  accounts  receivable,  related  parties  included
         $4,714,057  and  $5,289,626,  respectively,  due  from  Classic,  which
         represented 81% and 83%, respectively, of the total accounts receivable
         due from related and unrelated parties.

                                      F-21

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(7)      CONCENTRATIONS, CONTINUED:

         As of  December  31,  2004 and 2003,  Samsung  has  withheld a total of
         $350,000  commission due to the Company as deposits.  Per a letter sent
         by Samsung on May 1, 2001,  the deposits  will be released upon further
         agreement  between Samsung and the Company.  Subsequent to this letter,
         no further  discussion  regarding  this  matter was made.  The  Company
         believes the amount is fully recoverable.

(8)      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 $14,396 for 2004, $16,129 for 2003 and
         $15,611 for 2002.

(9)      COMMITMENTS:

         The Company leases its facilities. The following is a schedule by years
         of future minimum rental payments  required under operating leases that
         have  noncancellable  lease  terms in excess of one year as of December
         31, 2004:

<TABLE>
<CAPTION>
                                                           Related Party        Other         TOTAL
                                                           -------------        -----
<S>               <C>                                      <C>              <C>               <C>
              Year ending December 31,
                  2005                                     $      57,692    $      15,655     $      73,347
                  2006                                            31,731    $       6,523     $      38,254
                  Thereafter                                          --               --                --
                                                           -------------    -------------     -------------

                             Total                         $      89,423    $      22,178     $     111,601
                                                           =============    =============     =============
</TABLE>

         See Note 10 for  related  party  leases.  All  leases  expire  prior to
         December  31,  2006.  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 2005.  Rent  expense for the years ended  December  31, 2004,
         2003, and 2002 totaled $111,214, $106,612, and $100,229, respectively.

                                      F-22

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(10)     RELATED PARTY TRANSACTIONS:

         TRANSACTIONS WITH MR. YANG

         As of  December  31,  2004 and 2003,  the  Company  had an  outstanding
         receivable  from Mr. Yang,  the  President and Chairman of the Board of
         Directors  of the  Company,  totaling  $102,936  at the  end of each of
         respective  years.  These  advances bear no interest and are payable on
         demand.

         For the years ended  December 31,  2004,  2003,  and 2002,  the Company
         recorded compensation to Mr. Yang of $233,590,  $716,770, and $732,280,
         respectively, and paid $233,590, $92,308, and $92,308, respectively, to
         Mr. Yang as  compensation  to him. The  respective  unpaid  amounts are
         included in the amount due from stockholder/director as of December 31,
         2004 and 2003.

         During each of the years ended  December 31, 2004,  2003, and 2002, the
         Company paid rent of $82,692, $53,846, and $53,846,  respectively,  for
         Mr.  Yang's  personal  residency  as fringe  benefits to him,  and paid
         housing allowance to him in the amount of $12,308, $12,308, and $2,052,
         respectively.  All such  payments  have been  recorded as  compensation
         expense in the accompanying financial statements.

         TRANSACTIONS WITH CLASSIC ELECTRONIC LTD.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         sold  $40,885,565,  $15,224,745,  and  $10,007,267,   respectively,  to
         Classic  Electronic Ltd.  ("Classic").  The Company has not experienced
         any bad debt from this  customer  in the  past.  Pursuant  to a written
         personal  guarantee  agreement,  Mr. Yang personally  guarantees to the
         Company's  lenders up to $10 million  outstanding  accounts  receivable
         from Classic.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         purchased   inventory  of  $5,867,150,   $4,159,300,   and  $3,266,005,
         respectively,  from  Classic,  which  offset the  outstanding  accounts
         receivable from Classic.  As of December 31, 2004 and 2003, the Company
         had  net  outstanding   accounts   receivable  from  Classic   totaling
         $4,714,057 and $5,289,626, respectively.

         The  Company  leased  two of its  facilities  and Mr.  Yang's  personal
         residency from Classic.  Lease agreements for the two facilities expire
         on November 30, 2006 while the lease  agreement for Mr. Yang's personal
         residency expires on March 31, 2005. Monthly lease payments for these 3
         leases totaled  $7,372.  The Company  incurred and paid rent expense of
         $88,462,  $56,731,  and $53,846 to Classic for the years ended December
         31, 2004, 2003, and 2002, respectively.

         During the years ended  December 31, 2003 and 2002,  certain  Classic's
         employees  performed work on behalf of Atlantic and their salaries were
         allocated  to  Atlantic's  operations  and  charged to  expenses in the
         accompanying   consolidated   financial   statements.   Such   expenses
         approximated $0 for 2004, $248,000 for 2003, and $310,000 for 2002.

                                      F-23

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(10)     RELATED PARTY TRANSACTIONS, CONTINUED:

         In December  2003,  the Company  relieved its account  receivable  from
         Classic  by  transferring  $1,048,604  of  outstanding  amounts  to its
         stockholder/director as payment.

         Mr. Ben Wong,  a director of the  Company,  is a 99.9%  shareholder  of
         Classic. The remaining 0.1% of Classic is owned by a non-related party.

         TRANSACTIONS WITH ACL TECHNOLOGY PTE LTD.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         sold $0, $901,430, $616,305,  respectively,  to ACL Technology Pte Ltd.
         ("ACLT"). Outstanding accounts receivable totaled $0 and $191,566 as of
         December  31,  2004  and  2003,  respectively.   The  Company  has  not
         experienced any bad debt from this customer in the past.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         purchased   inventories   of   $2,049,474,   $700,126,   and  $401,676,
         respectively,  from ACLT. As of December 31, 2004 and 2003,  there were
         no outstanding accounts payable to ACLT.

         During  2002,  the  Company  sold  inventory  previously  reserved  for
         obsolescence   to  ACLT.   The   inventory  had  an  original  cost  of
         approximately $300,000 and was sold to ACLT at a substantial discount.

         In December 2003, the Company relieved its account receivable from ACLT
         by  transferring  $374,988  of  outstanding  amounts  it  owed  to  its
         stockholder/director.

         In 2004,  the Company paid a commission  of $392,434 to ACLT related to
         sales brought in by this entity.

         In 2004,  the Company loaned  $318,983 to ACLT,  which is classified as
         loans receivable from related parties in the accompanying  consolidated
         balance sheet. The loan is unsecured, bears no interest and is expected
         to be repaid in 2005.

         Mr. Ben Wong, a director of the Company,  is a 99% shareholder of ACLT.
         The remaining 1% of ACLT is owned by a non-related party.

         TRANSACTIONS WITH KADATCO COMPANY LTD.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         sold $166,152, $0, and $20,736,  respectively,  to Kadatco Company Ltd.
         ("Kadatco").  Outstanding accounts receivable totaled $0 as of December
         31, 2004 and 2003.  The Company has not  experienced  any bad debt from
         this customer in the past.

                                      F-24

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(10)     RELATED PARTY TRANSACTIONS, CONTINUED:

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         purchased $0, $0, $11,340,  respectively,  from Kadatco. As of December
         31,  2004 and 2003,  there  were no  outstanding  accounts  payable  to
         Kadatco.

         Mr.  Yang is the  sole  beneficial  owner  of the  equity  interest  of
         Kadatco.

         TRANSACTIONS WITH RAMBO TECHNOLOGIES LTD.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         sold  $7,682,072,  $5,134,160,  and  $254,161,  respectively,  to Rambo
         Technologies Ltd. ("Rambo"). Outstanding accounts receivable totaled $0
         as of December 31, 2004 and 2003. The Company has not  experienced  any
         bad debt from this customer in the past.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         purchased $339,605, $229,781, and $163,812,  respectively,  from Rambo.
         Outstanding  accounts payable due to Rambo totaled $61,360 and $0 as of
         December 31, 2004 and 2003, respectively.

         Mr. Ben Wong, a director of the Company, is a 60% shareholder of Rambo.
         The remaining 40% of Rambo is owned by a non-related party. Mr. Yang is
         a director of Rambo.

         TRANSACTIONS WITH ARISTO COMPONENTS LTD.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         sold $90, $62,268, and $1,132,998,  respectively,  to Aristo Components
         Ltd.  ("Aristo").  There was no outstanding  accounts  receivable as of
         December  31, 2004 and 2003.  The Company has not  experienced  any bad
         debt from this customer in the past.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         purchased $500, $28,053, and $394,821, respectively, from Aristo. There
         are no  outstanding  accounts  payable due to Aristo as of December 31,
         2004 and 2003, respectively.

         Mr. Ben Wong,  a  director  of the  Company,  is a 90%  shareholder  of
         Aristo.  The remaining  10% of Aristo is owned by a non-related  party.
         Mr. Yang is a director of Aristo.

         TRANSACTIONS WITH ATLANTIC NETCOM LTD.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         sold  $14,985,  $0,  and $0,  respectively,  to  Atlantic  Netcom  Ltd.
         ("Atlantic  Netcom").  Outstanding  accounts receivable totaled $13,460
         and $0 as of December 31, 2004 and 2003, respectively.  The Company has
         not experienced any bad debt from this customer in the past.

         Mr. Ben Wong,  a  director  of the  Company,  is a 60%  shareholder  of
         Atlantic  Netcom.  The remaining  40% of Atlantic  Netcom is owned by a
         non-related party. Mr. Yang is a director of Atlantic Netcom.

                                      F-25

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(10)     RELATED PARTY TRANSACTIONS, CONTINUED:

         TRANSACTIONS WITH SOLUTION SEMICONDUCTOR (CHINA) LTD.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         sold   $513,698,   $523,809,   and  $0,   respectively,   to   Solution
         Semiconductor   (China)   Ltd.   ("Solution").   Outstanding   accounts
         receivable  totaled $0 and $5,260 as of December 31, 2004 and 2003. The
         Company  has not  experienced  any bad debt from this  customer  in the
         past.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         purchased $8,387, $0, and $0, respectively, from Solution. There are no
         outstanding  accounts  payable due to Solution as of December  31, 2004
         and 2003.

         Mr. Ben Wong,  a  director  of the  Company,  is a 99%  shareholder  of
         Solution. The remaining 1% of Solution is owned by a non-related party.

         TRANSACTIONS WITH SYSTEMATIC INFORMATION LTD.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         sold  $1,941,298,   $137,482,  and  $0,  respectively,   to  Systematic
         Information  Ltd.  ("Systematic").  There are no  outstanding  accounts
         receivable  due from  Systematic as of December 31, 2004 and 2003.  The
         Company  has not  experienced  any bad debt from this  customer  in the
         past.

         During the years ended  December 31, 2004,  2003, and 2002, the Company
         purchased $154,460,  $0, and $0, respectively,  from Systematic.  There
         are no  outstanding  accounts  payable due to Systematic as of December
         31, 2004 and 2003.

         On April 1, 2004,  the  Company  entered  into a lease  agreement  with
         Systematic  pursuant  to  which  the  Company  leases  one  residential
         property for Mr.  Yang's  personal use for a monthly  lease  payment of
         $3,205 per month.  The lease  agreement for this  residency  expires on
         March 31, 2005.  Monthly lease  payment for this lease totaled  $3,205.
         The Company  incurred and paid an aggregate  rent expense of $28,846 to
         Systematic during the year ended December 31, 2004.

         Mr.  Ben  Wong  and  the  wife  of  Mr.  Yang  are  the  directors  and
         shareholders of Systematic with a total of 100% interest.

                                      F-26

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(10)     RELATED PARTY TRANSACTIONS, CONTINUED:

         TRANSACTIONS WITH CITY ROYAL LTD.

         In August 2004,  the Company was in  negotiation  with The DahSing Bank
         Limited (the "DahSing Bank") for an additional  amount of its available
         line of credit. As a condition to the extension of additional credit to
         the Company, DahSing Bank requested additional collateral to secure the
         increased  amount on the line. In order to meet the increased  security
         requirement,  the Company loaned  $611,446 to City Royal Limited to pay
         off the mortgage  loan on a  residential  property  owned by City Royal
         Limited  and  pledged  to  DahSing  Bank as  collateral  to secure  the
         Company's  borrowings  from DahSing  Bank.  In  consideration  thereof,
         DahSing Bank made  available  additional  borrowings  of HK$10  million
         (approximately  US$1,282,000).  The  loan is  unsecured  and  bears  no
         interest.  In February  2005,  City Royal Limited sold the  residential
         property  and has  repaid  the loan  through  transferring  the  entire
         proceeds from the sale of  HK$8,000,000  (approximately  $1,025,641) to
         DahSing Bank as collateral for the Company's line.

         The  loan  to  City  Royal   Limited  is   non-interest   bearing,   in
         consideration of which City Royal Limited did not charge an arrangement
         fee to the  Company in respect of the  security  pledge in favor of Dah
         Sing  Bank.  The  primary  purpose  of the  loan,  from  the  Company's
         perspective,  was to advance the business of the Company by enabling it
         to secure  additional  lines of  financing in excess of the loan amount
         from DahSing Bank.  The Company  settled this loan in February 2005 and
         received  payment in the full amount of $611,446.  The Company believes
         that the above-referenced loan does not violate the general prohibition
         against  loans made by  publicly-traded  companies to its directors and
         executive  officers set forth in Section 402 of the  Sarbanes-Oxley Act
         of 2002  ("Section  402") as its  primary  purpose  was to advance  the
         business of the Company.  However,  no assurance  can be given that the
         Securities  and Exchange  Commission or U.S.  federal  government  will
         agree  with the  Company's  position  and,  in the  event  such loan is
         determined to be a violation of Section 402, the criminal  penalties of
         the Securities Exchange Act of 1934, as amended, could apply.

         Mr. Yang's wife and Mr. Yang's  mother-in-law  are shareholders of City
         Royal Limited with a total of 100% interest.

(11)     LOSS ON ROBBERY:

         The Company incurred a loss of $475,592 due to an uninsured  robbery of
         its  products-in-transit  in August 2004.  Such loss is included in the
         general and  administrative  expenses in the accompanying  consolidated
         statements of operations.

                                      F-27

<PAGE>

                    ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                AS OF DECEMBER 31, 2004 AND DECEMBER 31, 2003 AND
                  THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2004


(12)     QUARTERLY INFORMATION (UNAUDITED):

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

<TABLE>
<CAPTION>
                                                   (dollars in thousands except per share data)
                                       ------------------------------------------------------------------
                                          TOTAL         FOURTH         THIRD       SECOND         FIRST
                                          -----         ------         -----       ------         -----

2004
----
<S>                                      <C>            <C>           <C>          <C>           <C>
Total net sales                          $133,244       $35,695       $34,715      $33,284       $29,550
Gross profit                               $3,113          $750          $595         $491        $1,277
Net income (loss)                           $(454)        $(303)        $(361)       $(111)         $321
Net income (loss) per share:
     basic and diluted                     $(0.02)       ($0.01)       $(0.01)      ($0.00)        $0.01

2003
----
Total net sales                           $72,673       $20,212       $20,301      $17,081       $15,079
Gross profit                               $4,458        $1,037        $1,750         $844          $827
Net income (loss)                         $(1,438)         $351       $(2,190)        $217          $184
Net income (loss) per share:
     basic and diluted                     $(0.06)        $0.01        $(0.10)       $0.01         $0.01
</TABLE>

(13)     SUBSEQUENT EVENT (UNAUDITED):

         In April 2005,  the Company,  Classic and the selling  shareholders  of
         Classic  have made the  determination  to  postpone  the closing of the
         acquisition  of  Classic  (see  Note 1) due to delays  of  certain  due
         diligence  procedures.  The  acquisition  is expected to close upon the
         completion of such due diligence procedures and the related results and
         findings are  satisfactory  for both parties.  As of April 8, 2005, the
         due diligence procedures are still in process.

                                      F-28