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

|           |                   | 
|---------- | ----------------- | 
|(Mark One) | FORM 10-K/A       | 
|           | (Amendment No. 2) | 

|                                                       |                                                                                                  
|------------------------------------------------------ | -------------------------------------------------------------------------------------------------
|þ                                                      | ANNUAL
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934            
|                                                       | For the
 fiscal year ended December 31, 2009                                                     
|                                                      
|or                                                    
|                                                      
|o                                                      | TRANSITION
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934        
|                                                       | For the
 transition period from ______________________________ to
 ______________________________
|                                                      
|Commission file number: 000-50140                     
|                                                      
|ACL Semiconductors Inc.                               
|(Exact name of Registrant as specified in its charter)

|                                                             |  |                                        
|------------------------------------------------------------ |  | ---------------------------------------
|Delaware                                                     |  | 16-1642709                             
|                                                             |  |                                        
|State or other jurisdiction of incorporation or organization |  | (I.R.S. Employer Identification Number)

|                                                                                                    |           
|--------------------------------------------------------------------------------------------------- | ----------
|Room 1701, 17/F., Tower 1, Enterprise Square, 9 Sheung Yuet Road,
 Kowloon Bay, Kowloon, Hong Kong. |           
|                                                                                                   
|(Address of
 principal executive offices)                                                           | (Zip Code)
|                                                                                                    |           
|Registrants
 telephone number including area code: 011-852-3666-9939                               |           
|                                                                                                    |           
|Securities
 registered pursuant to Section 12(b) of the Act:                                        |           

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.                    
                      
                      
                          
                          
                       
                      
                           
     þ Yes o No

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post
such files.)                     
                     
                            
                       
                         
                      
 o Yes o No

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

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

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

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-5 of the Act).
                   
                       
                      

o Yes þ No

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

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

|                                   
|-----------------------------------
|DOCUMENTS INCORPORATED BY REFERENCE
|                                   
|NONE                               
|                                   
|                                   

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Table of Contents

Form 10-K Index

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

---



EXPLANATORY NOTE

This is the
Amendment No. 2 to the Registrants Annual Report on Form 10-K/A for the year
ended December 31, 2009 dated April 22, 2010 (the Annual Report). The purpose
of this amendment is to make certain immaterial changes that were not reflected
in the as-filed version of the Annual Report. Except for such changes, this
amendment does not update, modify, or amend any disclosure set forth in the
Annual Report.

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

1

---



FORWARD LOOKING
STATEMENTS

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

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

PART I

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

General

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

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

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

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

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

Business

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

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

2

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

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

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

The
Distribution Agreement has a one-year term. The Distribution Agreement has been
renewed more than ten times, most recently on March 1, 2009 and expired on
February 28, 2010. As of March 1, 2010, Samsung has confirmed the annual
renewal of such agreement for one year.

Products

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

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

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

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

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

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

Industry Background

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

3

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Customers

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

Sales and Marketing

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

Market Research

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

Suppliers

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

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

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

Competition

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

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

Regulation

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

4

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Employees

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

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

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

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

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

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

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

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

5

---



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

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

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

In
addition, Samsung has the right to increase the number of distributors of its
memory products in Hong Kong and the Southern China markets without consulting
us. If Samsung significantly increases the number of authorized distributors of
its memory products, competition among Samsung distributors would increase and
we may not be able to operate profitably.

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

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

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

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

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

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

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

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

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

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

6

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The memory product industry is highly
competitive.

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

Current economic and political conditions may
harm our business.

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

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

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

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

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

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

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

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

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

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

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

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

7

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

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

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

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

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

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

8

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

9

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PART II

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

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

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

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

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

Dividend Policy

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

Equity Compensation
Plan Information

2006 STOCK
OPTION PLAN

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

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

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

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

10

---



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

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

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

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

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

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

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

Overview

Corporate
Background

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

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

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

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

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

Plan
of Operations

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

11

---



Net sales

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

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

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

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

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

Cost of Sales

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

Operating Expenses

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

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

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

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

Critical Accounting Policies

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

Revenue Recognition

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

12

---



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

Inventory Valuation

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

Allowance for Doubtful Accounts

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

Results of Operations

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

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

13

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

Net Sales

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

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

Cost of Sales

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

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

Gross Profit

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

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

Sales and Marketing

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

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

General and Administrative

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

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

14

---



Income from Operations

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

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

Interest Expense

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

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

Loss on Dispositions of Marketable Securities

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

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

Net Income on Cash Flow Hedge

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

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

Interest Income

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

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

Income Tax Provision (reversal)

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

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

15

---



Net Income

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

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

Liquidity and capital resources

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

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

Our ability
to draw down under our various credit and loan facilities is, in each case,
subject to the prior consent of the relevant lending institution to make
advances at the time of the requested advance and each facility (other than
with respect to certain long term mortgage loans) is payable within 90 days of
drawdown. Accordingly, on a case by case basis, we may elect to terminate or
not renew several of our credit facilities if significant reduction in our
available short term borrowings that we do not deem it is commercially
reasonable. The Company has obtained a $20 million purchase credit from
Samsung. The Company plans to obtain an additional $30 million line of credit
from various lenders.

We will
continue to seek additional sources of available financing on acceptable terms;
however, 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
addition, if the results are negatively impacted and delayed as a result of
political and economic factors beyond managements control, our capital
requirements may increase.

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

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

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

Net Cash Provided by Operating Activities

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

Net Cash Used for Investing Activities

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

16

---



Net Cash Provided by Financing Activities

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

Contractual
Obligations

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

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

Off-Balance Sheet
Arrangements

None.

Related Party
Transactions

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

Dependence of Samsung

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

Impact of Inflation

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

Seasonality

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

New Accounting
Pronouncements

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

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

17

---



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

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

ASC
810, Consolidation (ASC 810) includes new guidance issued by the FASB in
December 2007 governing the accounting for and reporting of noncontrolling
interests (previously referred to as minority interests). This guidance
established reporting requirements which include, among other things, that
noncontrolling interests be reflected as a separate component of equity, not as
a liability. It also requires that the interests of the parent and the
noncontrolling interest be clearly identifiable. Additionally, increases and
decreases in a parents ownership interest that leave control intact shall be
reflected as equity transactions, rather than step acquisitions or dilution
gains or losses. This guidance also requires changes to the presentation of
information in the financial statements and provides for additional disclosure
requirements. ASC 810 was effective for fiscal years beginning on or after
December 15, 2008. The Company implemented this guidance as of January 1, 2010
and made necessary changes accordingly including but not limited to filing
amendments for the prior periods to comply with all applicable requirements.

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

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

18

---



transaction is orderly and clarifies the
valuation of securities in markets that are not active. This guidance includes
information related to a companys use of judgment, in addition to market
information, in certain circumstances to value assets which have inactive
markets.

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

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

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

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

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

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

19

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

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

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

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

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

None.

20

---



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

(a) Disclosure Controls and Procedures

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

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

Evaluation
of Disclosure Controls and Procedures. The Companys CEO and CFO have
evaluated the effectiveness of the design and operation of the Companys
disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e) as of December 31, 2009, and based on this evaluation, the
Companys principal executive and financial officers have concluded that the
Companys disclosure controls and procedures were not effective to ensure that
material information is recorded, processed, summarized and reported by
management of the Company on a timely basis in order to comply with the
Companys disclosure obligations under the Exchange Act and the rules and
regulations promulgated thereunder. The Companys principal executive and
financial officers conclusion regarding the Companys disclosure controls and
procedures is based on managements conclusion that the Companys internal
control over financial reporting are ineffective, as described below.

(b) Management Report on Internal Control
over Financial Reporting

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

In making
its assessment of internal control over financial reporting management used the
criteria issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework. Because of the
material weakness described in the following paragraphs, management believes
that, as of December 31, 2009, the companys internal control over financial
reporting was not effective based on those criteria.

Managements
evaluation was retrospective and conducted as of December 31, 2009, the last
day of the fiscal year covered by this Form 10-K. Based upon managements
evaluation, our CEO and CFO have concluded that our internal controls over
financial reporting were not effective as of December 31, 2009 because we have
not completed the remediation discussed elsewhere in this below for the fiscal
year ended December 31, 2009 due to the following material weaknesses:

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

|  |                                                                                                                                                                                                                                                                         |                                                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our
 control environment did not sufficiently promote effective internal control over
 financial reporting throughout our organizational structure, and this
 material weakness was a contributing factor to the other material weaknesses
 described in this Item 9AT;
|  |                                                                                                                                                                                                                                                                        
| | Our
 board of directors has not established adequate financial reporting
 monitoring activities to mitigate the risk of management override,
 specifically:                                                                                                            
|  |                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                        | none
 of our board of directors is independent;                                                                                                                         
|  |                                                                                                                                                                                                                                                                         |                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                        | no
 financial expert on our board of directors has been designated;                                                                                                     
|  |                                                                                                                                                                                                                                                                         |                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                        | no
 formally documented financial analysis is presented to our board of
 directors, specifically fluctuation, variance, trend analysis or business
 performance reviews;
|  |                                                                                                                                                                                                                                                                         |                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                        | an
 effective whistleblower program has not been established;                                                                                                           
|  |                                                                                                                                                                                                                                                                         |                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                        | there
 is insufficient oversight of external audit specifically related to fees,
 scope of activities, executive sessions, and monitoring of results;                   

21

---



|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                 | there
 is insufficient oversight of accounting principle implementation;
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                 | there
 is insufficient review of related party transactions; and        
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                 | there
 is insufficient review of recording of stock transactions.       
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
| | We
 have not maintained sufficient competent evidence to support the effective
 operation of our internal controls over financial reporting, specifically
 related to our board of directors oversight of quarterly and annual SEC
 filings; and managements review of SEC filings, journal entries, account
 analyses and reconciliations, and critical spreadsheet controls;
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
| | We
 had inadequate risk assessment controls, including inadequate mechanisms for
 anticipating and identifying financial reporting risks; and for reacting to
 changes in the operating environment that could have a material effect on
 financial reporting;                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
| | There
 was inadequate communication from management to employees regarding the
 general importance of controls and employees duties and control
 responsibilities;                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
| | We
 had inadequate monitoring controls, including inadequate staffing and
 procedures to ensure periodic evaluations of internal controls to ensure that
 appropriate personnel regularly obtain evidence that controls are functioning
 effectively and that identified control deficiencies are remediated timely;                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
| | We
 had an inadequate number of trained finance and accounting personnel with
 appropriate expertise in U.S. generally accepted accounting principles.
 Accordingly, in certain circumstances, an effective secondary review of
 technical accounting matters was not performed;                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
| | We
 had inadequate controls over our management information systems related to
 program changes, segregation of duties, and access controls;                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
| | We
 had inadequate access and change controls over end-user computing
 spreadsheets. Specifically, our controls over the completeness, accuracy,
 validity and restricted access and review of certain spreadsheets used in the
 period-end financial statement preparation and reporting process were not
 designed appropriately or did not operate as designed; and          
|  |                                                                                                                                                                                                                                                                                                                                                                                  |                                                                         
| | We were unable to assess
 effectiveness of our internal control over financial reporting in a timely
 matter.                                                                                                                                                                                                                                                                   

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

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

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

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

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

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

22

---



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

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

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

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

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

Changes in Internal Control over Financial
Reporting

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

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

None.

23

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PART III

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

Directors and Executive Officers

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

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

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

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

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

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

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

Board Meetings

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

Committees of the Board

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

Board Leadership Structure and Risk Oversight
Role

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

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

24

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Code of Business Conduct and Ethics

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

Stockholder Communications

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

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

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

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

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

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

COMPENSATION DISCUSSION AND ANALYSIS

Summary

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

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

Named Executive Officers

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

OUR EXECUTIVE COMPENSATION PROGRAM

Overview

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

25

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

ELEMENTS OF OUR EXECUTIVE COMPENSATION
PROGRAM

Base Salary

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

Bonuses

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

Stock Options

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

Retirement and Deferred Compensation Benefits

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

Perquisites

There
were no perquisites provided to the Named Executive Officers.

Post-Termination/Change of Control
Compensation

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

Tax Implications of Executive Compensation

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

Hedging Policy

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

Option Exercises and Stock Vested

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

Pension Benefits

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

26

---



All contributions to the MPF scheme are fully and immediately vested
with the employees accounts. The contributions must be invested and
accumulated until the employees retirement.

Nonqualified Deferred Compensation

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

Employment Agreements

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

Executive Officer Compensation

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

Summary Compensation Table

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

Outstanding equity awards at fiscal year-end

None.

Compensation of Directors

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

27

---



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

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

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

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

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

28

---



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

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

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

CERTAIN RELATED PERSON TRANSACTIONS

Transactions
with Aristo Technologies Limited / Mr. Yang

As of
December 31, 2009 and 2008, we had an outstanding receivable from Mr. Yang, the
President and Chairman of our Board of Directors, totaling $11,233,839 and
$7,900,404 respectively. Because the Companys business is distributing
computer components and is heavily dependant on Samsung, Mr. Yang took a loan
from the Company and used it to invest in other companies to create new
business platforms. These business platforms include manufacturing, research
and development, which Mr. Yang believes can help improve the Companys
business in the long term. These advances bear no interest and are payable on
demand. The receivable due from Mr. Yang to the Company is derived from the
consolidation of the financial statements of Aristo, a variable interest entity,
with the Company.

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

Transactions
with Classic Electronic Limited

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

Transactions
with Solution Semiconductor (China) Limited

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

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

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

Transactions
with Systematic Information Limited

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

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

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

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

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

29

---



Transactions
with Global Mega Development Limited

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

Transactions
with Systematic Semiconductor Limited

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

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

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

Transactions
with Aristo Components Limited

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

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

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

Transactions
with Atlantic Storage Devices Limited

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

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

Transactions
with Rambo Technologies Limited

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

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

Transactions
with Usmart Electronic Products Limited

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

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

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

Transactions
with Imax Technology Limited

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

30

---



Transactions
with City Royal Limited

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

Transactions
with Kadatco Company Limited

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

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

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

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

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

31

---



PART IV

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

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

|            |  |                                                                                                                                                                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                            
|3.1         |  | Certificate of incorporation of the Company, together with all
 amendments thereto, as filed with the Secretary of State of the State of
 Delaware, incorporated by reference to Exhibit 3.1 to the Form 8-K filed with
 the Securities and Exchange Commission on December 19, 2003.                  
|            |  |                                                                                                                                                                                                                                                                                                        
|3.2         |  | By-Laws of the Company, as amended, incorporated by reference to
 Exhibit 3.2 to the Companys Registration Statement.                                                                                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                        
|4.1(a)      |  | Form of specimen certificate for common stock
     of the Company incorporated by reference to Exhibit 4.1(a) to the Form 10-K
     filed April 14, 2004.                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                        
|10.1        |  | Share Exchange and Reorganization Agreement, dated as of September 8,
 2003, among Print Data Corp., Atlantic Components Limited and Mr. Chung-Lun
 Yang, incorporated by reference to Exhibit 10.1 to the Form 8-K filed with
 the Securities and Exchange Commission on October 16, 2003.            
|            |  |                                                                                                                                                                                                                                                                                                        
|10.2        |  | Conveyance Agreement, dated as of September 30, 2003, between Print Data
 Corp. and New Print Data Corp., incorporated by reference to Exhibit 10.2 to
 the Form 8-K filed with the Securities and Exchange Commission on October 16,
 2003.                                                           
|            |  |                                                                                                                                                                                                                                                                                                        
|10.3        |  | Securities Purchase Agreement, dated October 1, 2003, among Print
 Data Corp, Jeffery Green, Phyllis Green and Joel Green, incorporated by
 reference to Exhibit 10.3 to the Form 8-K filed with the Securities and
 Exchange Commission on October 16, 2003.                                          
|            |  |                                                                                                                                                                                                                                                                                                        
|10.4        |  | Sales Restriction Agreement, dated September 30, 2003, between Print
 Data Corp. and Phyllis Green, incorporated by reference to Exhibit 10.4 to
 the Form 8-K filed with the Securities and Exchange Commission on October 16,
 2003.                                                                 
|            |  |                                                                                                                                                                                                                                                                                                        
|10.5        |  | Sales Restriction Agreement, dated September 30, 2003, between Print
 Data Corp. and Jeffery Green, incorporated by reference to Exhibit 10.5 to
 the Form 8-K filed with the Securities and Exchange Commission on October 16,
 2003.                                                                 
|            |  |                                                                                                                                                                                                                                                                                                        
|10.6        |  | Distribution Agreement, dated May 1, 1993, by and between Samsung
 Electronics Co., Ltd. and Atlantic Components Limited, incorporated by
 reference to Exhibit 10.6 to the Form 8-K filed with the Securities and
 Exchange Commission on October 16, 2003.                                           
|            |  |                                                                                                                                                                                                                                                                                                        
|10.7        |  | Renewal of Distributorship Agreement, dated March 1, 2002, by and
 between Samsung Electronics Co., Ltd. and Atlantic Components Limited,
 incorporated by reference to Exhibit 10.7 to the Form 8-K filed with the
 Securities and Exchange Commission on October 16, 2003.                           
|            |  |                                                                                                                                                                                                                                                                                                        
|10.8        |  | Form of Note Subscription, dated as of December 31, 2003, by and
 between the Company and Professional Traders Fund LLC, a New York limited
 liability company (PTF), incorporated by reference to Exhibit 10.1 to the
 Form 8-K filed with the Securities and Exchange Commission on March 24, 2004.
|            |  |                                                                                                                                                                                                                                                                                                        
|10.9        |  | Form of 12% Senior Subordinated Convertible Note due December 31,
 2004 in the aggregate principal amount of $250,000 issued by the Company to
 PTF, incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the
 Securities and Exchange Commission on March 24, 2004.                   

32

---



|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10 |  | Form of Limited Guaranty and Security Agreement, dated as of December
 31, 2003, by and among, the Company, PTF, Orient Financial Services Limited,
 Mr. Li Wing-Kei and Emerging Growth Partners, Inc., incorporated by reference
 to Exhibit 10.3 to the Form 8-K filed with the Securities and Exchange
 Commission on March 24, 2004.                                               
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.11 |  | Form of Stock Purchase and Escrow Agreement, dated as of December 31,
 2003, by and among, PTF, Orient Financial Services Limited, Mr. Li Wing-Kei
 and Emerging Growth Partners, Inc., and the law firm of Sullivan &
 Worcester LLP, as escrow agent, incorporated by reference to Exhibit 10.4 to
 the Form 8-K filed with the Securities and Exchange Commission on March 24,
 2004.
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.12 |  | Form of Letter Agreement, dated as of December 31, 2003, by and
 between the Company and PTF, incorporated by reference to Exhibit 10.5 to the
 Form 8-K filed with the Securities and Exchange Commission on March 24, 2004.                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.13 |  | Letter of Intent, dated December 29, 2003, between the Company and
 Classic Electronics, Ltd., incorporated by reference to Exhibit 10.1 to the
 Form 8-K filed with the Securities and Exchange Commission on March 25, 2004.                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.14 |  | Note Subscription, dated as of December 31, 2003, by and between the
 Company and Professional Traders Fund LLC, a New York limited liability
 company (PTF), incorporated by reference to Exhibit 10.6 to the Form 8-K/A
 filed with the Securities and Exchange Commission on April 13, 2004.                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.15 |  | 12% Senior Subordinated Convertible Note due December 31, 2004 in the
 aggregate principal amount of $250,000 issued by the Company to PTF,
 incorporated by reference to Exhibit 10.7 to the Form 8-K/A filed with the
 Securities and Exchange Commission on April 13, 2004.                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.16 |  | Limited Guaranty and Security Agreement, dated as of December 31,
 2003, by and among, the Company, PTF, Orient Financial Services Limited, Mr.
 Li Wing-Kei and Emerging Growth Partners, Inc., incorporated by reference to
 Exhibit 10.8 to the Form 8-K/A filed with the Securities and Exchange
 Commission on April 13, 2004.                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.17 |  | Stock Purchase and Escrow Agreement, dated as of December 31, 2003,
 by and among, PTF, Orient Financial Services Limited, Mr. Li Wing-Kei and
 Emerging Growth Partners, Inc., and the law firm of Sullivan & Worcester
 LLP, as escrow agent, incorporated by reference to Exhibit 10.9 to the Form
 8-K/A filed with the Securities and Exchange Commission on April 13, 2004.       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.18 |  | Letter Agreement, dated as of December 31, 2003, by and between the
 Company and PTF, incorporated by reference to Exhibit 10.10 to the Form 8-K/A
 filed with the Securities and Exchange Commission on April 13, 2004.                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.19 |  | Stock Purchase Agreement, dated as of December 30, 2005, by and among
 the Company, Classic Electronics, Ltd. (Classic) and the shareholders of
 Classic, incorporated by reference to Exhibit 10.1 to the Form 8-K filed with
 the Securities and Exchange Commission on January 6, 2006.                                                                                            
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.20 |  | 2006 Incentive Equity Stock Plan, incorporated by reference to Exhibit
 4.1 to the Form S-8 filed with the Securities and Exchange Commission on
 April 27, 2006.                                                                                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|14    |  | Code of Business Conduct and Ethics of the Company incorporated by
 reference to Exhibit 14 to the Form 10-K for the period ended December 31,
 2003.                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|16.1  |  | Letter dated March 19, 2008 from Jeffrey Tsang & Co.,
 incorporated by reference to Exhibit 16.1 to the Form 8-K filed with the
 Securities and Exchange Commission on March 24, 2008.                                                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|21.1  |  | Subsidiaries of the Company, incorporated by reference to Exhibit
 21.1 to the Form 10-K/A filed with the Securities and Exchange Commission on
 April 22, 2010.                                                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|23.1  |  | Consent of Albert Wong & Co. incorporated by reference to Exhibit
 23.1 to the Form 10-K/A filed with the Securities and Exchange Commission on
 April 22, 2010.                                                                                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|31.1  |  | Certification of Principal Executive Officer required by Rule
 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                              
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|31.2  |  | Certification of Principal Financial Officer required by Rule
 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                              
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|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.*                                                                                                                                                                                                                                   

33

---



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

* Filed herewith

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

34

---



SIGNATURES

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

| |                           |                          | 
| | ------------------------- | ------------------------ | 
| | ACL
 SEMICONDUCTORS INC. 
| |                          
| | By: /s/                   | Chung-Lun Yang           | 
| |                           |                          | 
| |                           | Chung-Lun Yang          
| |                           | Chief
 Executive Officer
| |                          
| | Dated: September 20, 2010

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

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

35

---



|                                                            
|------------------------------------------------------------
|ACL
 Semiconductors Inc. and Subsidiaries                   
|Consolidated Financial Statements                           
|As of
 December 31, 2009 and December 31, 2008 and          
|the Years
 Ended December 31, 2009 and 20078                
|With Report of Independent Registered Public Accounting Firm



---



Index to
Consolidated Financial Statements

|                                                         |  |     
|-------------------------------------------------------- |  | ----
|                                                         |  | Page
|                                                         |  |     
|                                                         |  |     
|Report of Independent Registered Public
 Accounting Firm |  | F-2 
|                                                         |  |     
|Financial Statements:                                    |  |     
|Consolidated
 Balance Sheets                             |  | F-3 
|Consolidated
 Statements of Operations                   |  | F-5 
|Consolidated
 Statements of Stockholders Equity         |  | F-6 
|Consolidated
 Statements of Cash Flows                   |  | F-7 
|Notes to
 Consolidated Financial Statements              |  | F-9 
|                                                         |  |     
|Schedule II 
 Valuation and Qualifying Accounts         |  | S-2 
|                                                         |  |     
|Schedule III 
 Quarterly Information                    |  | S-2 

F-1

---



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

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

Report of
Independent Registered Public Accounting Firm

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

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

In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2009 and 2008 and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

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

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

F-2

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Stated in US Dollars)

CONSOLIDATED BALANCE SHEETS

|                                                                                    |  |  |       |  |      |            |      |            |            | 
|----------------------------------------------------------------------------------- |  |  | ----- |  | ---- | ---------- | ---- | ---------- | ---------- | 
|                                                                                    |  |  | Notes |  | 2009 |            | 2008 |           
|                                                                                    |  |  |       |  |      |            |      | (RESTATED) |           
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|ASSETS                                                                              |  |  |       |  |      |            |      |            |            | 
|Current assets                                                                      |  |  |       |  |      |            |      |            |            | 
|Cash and cash equivalents                                                           |  |  |       |  | $    | 2,001,805  |      | $          | 1,943,463  | 
|Restricted cash                                                                     |  |  |       |  |      | 2,086,504  |      |            | 5,169,753  | 
|Accounts receivable, net of allowance for doubtful accounts of $0 for 2009 and 2008 |  |  |       |  |      | 12,434,386 |      |            | 10,342,453 | 
|Accounts receivable, related parties                                                |  |  |       |  |      |           |      |            | 1,717,320  | 
|Inventories, net                                                                    |  |  |       |  |      | 6,048,116  |      |            | 3,668,568  | 
|Restricted marketable securities                                                    |  |  |       |  |      |           |      |            | 500,000    | 
|Other current assets                                                                |  |  |       |  |      | 274,351    |      |            | 525,918    | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|Total current assets                                                                |  |  |       |  | $    | 22,845,162 |      | $          | 23,867,475 | 
|Property, plant and equipment, net                                                  |  |  | 3     |  |      | 8,179,765  |      |            | 6,922,623  | 
|Other deposits                                                                      |  |  |       |  |      | 213,535    |      |            | 396,900    | 
|Amounts due from Aristo / Mr. Yang                                                  |  |  |       |  |      | 11,233,839 |      |            | 7,900,404  | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|TOTAL ASSETS                                                                        |  |  |       |  | $    | 42,472,301 |      | $          | 39,087,402 | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                |  |  |       |  |      |            |      |            |            | 
|Current liabilities                                                                 |  |  |       |  |      |            |      |            |            | 
|Accounts payable                                                                    |  |  |       |  | $    | 23,838,753 |      | $          | 17,318,949 | 
|Accruals                                                                            |  |  |       |  |      | 527,582    |      |            | 409,367    | 
|Lines of credit and loan facilities                                                 |  |  | 4     |  |      | 9,013,813  |      |            | 16,447,742 | 
|Current portion of long-term debt                                                   |  |  | 5     |  |      | 318,972    |      |            | 160,447    | 
|Current portion of capital lease                                                    |  |  | 6     |  |      | 318,135    |      |            | 58,683     | 
|Income tax payable                                                                  |  |  |       |  |      | 505,078    |      |            | 5,588      | 
|Due to shareholders for converted pledged collateral                                |  |  |       |  |      | 112,385    |      |            | 112,385    | 
|Other current liabilities                                                           |  |  |       |  |      | 282,475    |      |            | 508,073    | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|Total current liabilities                                                           |  |  |       |  | $    | 34,917,193 |      | $          | 35,021,234 | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 
|                                                                                    |  |  |       |  |      |            |      |            |            | 

F-3

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Stated in US Dollars)

|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | - |  | - | ---------- |  | - | ---------- | -
|Long-term liabilities                                                                                                                                              |  |  |   |  |   |            |  |   |            |  
|Long-term debt, less current portion                                                                                                                               |  |  | 5 |  | $ | 2,747,981  |  | $ | 2,361,711  |  
|Capital lease, less current portion                                                                                                                                |  |  | 6 |  |   | 146,117    |  |   | 43,055     |  
|Deferred tax liabilities                                                                                                                                           |  |  |   |  |   | 19,468     |  |   | 8,343      |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|Total long-term liabilities                                                                                                                                        |  |  |   |  |   | 2,913,566  |  |   | 2,413,109  |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|TOTAL LIABILITIES                                                                                                                                                  |  |  |   |  | $ | 37,830,759 |  | $ | 37,434,343 |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|Commitments and contingencies                                                                                                                                      |  |  |   |  | $ |           |  | $ |           |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|STOCKHOLDERS EQUITY                                                                                                                                               |  |  |   |  |   |            |  |   |            |  
|Common stock, $.001 par value; 50,000,000 shares authorized;
28,729,936 and 28,329,936 shares issued and outstanding as of December 31,
2009 and 2008 respectively |  |  |   |  |   | 28,730     |  |   | 28,330     |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|Additional paid in capital                                                                                                                                         |  |  |   |  |   | 3,658,627  |  |   | 3,593,027  |  
|Retained earnings/accumulated losses                                                                                                                               |  |  |   |  |   | 954,185    |  |   | (1,968,298 | )
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|                                                                                                                                                                   |  |  |   |  | $ | 4,641,542  |  | $ | 1,653,059  |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                         |  |  |   |  | $ | 42,472,301 |  | $ | 39,087,402 |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  
|                                                                                                                                                                   |  |  |   |  |   |            |  |   |            |  

See accompanying notes to the consolidated financial statements

F-4

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Stated in US Dollars)

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME

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

F-5

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY AND
ACCUMULATED OTHER COMPREHENSIVE INCOME

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

See accompanying notes to the consolidated
financial statements

F-6

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

CONSOLIDATED
STATEMENTS OF CASH FLOWS

|                                                                                        |  |      |            |                  |   |             |  
|--------------------------------------------------------------------------------------- |  | ---- | ---------- | ---------------- | - | ----------- | -
|                                                                                        |  | 2009 |            | 2008
 (RESTATED) |  
|                                                                                        |  |      |            |                  |   |             |  
|Cash flows
 from operating activities                                                   |  |      |            |                  |   |             |  
|Net income (loss)                                                                       |  | $    | 2,922,483  |                  | $ | (172,872    | )
|Depreciation and amortization                                                           |  |      | 291,968    |                  |   | 238,477     |  
|Bad debts                                                                               |  |      | 697,803    |                  |   |            |  
|Change in inventory reserve                                                             |  |      | (26,970    | )                |   | (190,000    | )
|Issuance of common stocks to consultant as
 professional fee under share option scheme  |  |      | 66,000     |                  |   |            |  
|Gain on disposal of equipment                                                           |  |      | (18,946    | )                |   |            |  
|Loss on disposal of marketable securities                                               |  |      |           |                  |   | 227,781     |  
|                                                                                        |  |      |            |                  |   |             |  
|Adjustments
 to reconcile net loss to net cash used in operating activities:            |  |      |            |                  |   |             |  
|Accounts receivable  other                                                             |  |      | (2,789,737 | )                |   | (2,715,435  | )
|Accounts receivable  related parties                                                   |  |      | 1,717,320  |                  |   | 539         |  
|Inventories                                                                             |  |      | (2,352,579 | )                |   | 289,588     |  
|Other assets                                                                            |  |      | 183,365    |                  |   | (9,656      | )
|Income tax refundable                                                                   |  |      |           |                  |   | 49,375      |  
|Other current assets                                                                    |  |      | 251,566    |                  |   | (436,734    | )
|Accounts payable                                                                        |  |      | 6,519,804  |                  |   | 4,448,749   |  
|Accrued expenses                                                                        |  |      | 118,215    |                  |   | 213,411     |  
|Income tax payable                                                                      |  |      | 499,490    |                  |   | 5,588       |  
|Other current liabilities                                                               |  |      | (225,598   | )                |   | 239,501     |  
|Deferred tax                                                                            |  |      | 11,125     |                  |   | (7,128      | )
|                                                                                        |  |      |            |                  |   |             |  
|Net cash
 provided by operating activities                                              |  | $    | 7,865,309  |                  | $ | 2,181,184   |  
|                                                                                        |  |      |            |                  |   |             |  
|                                                                                        |  |      |            |                  |   |             |  
|Cash flows
 from investing activities                                                   |  |      |            |                  |   |             |  
|Advanced from Aristo / Mr. Yang                                                         |  | $    | 6,414,900  |                  | $ | 11,453,796  |  
|Advanced to Aristo / Mr. Yang                                                           |  |      | (9,748,335 | )                |   | (13,296,712 | )
|Increase in restricted cash                                                             |  |      | 3,083,249  |                  |   | (966,696    | )
|Increase in restricted marketable
 securities                                           |  |      | 500,000    |                  |   | (500,000    | )
|Cash proceeds from sales of marketable
 securities and restricted marketable securities |  |      |           |                  |   | 946,229     |  
|Cash proceeds from sales of automobiles                                                 |  |      | 48,077     |                  |   |            |  
|Purchase of property, plant and equipment                                               |  |      | (994,124   | )                |   | (164,565    | )
|                                                                                        |  |      |            |                  |   |             |  
|Net cash
 used in investing activities                                                  |  | $    | (696,233   | )                | $ | (2,527,948  | )
|                                                                                        |  |      |            |                  |   |             |  

F-7

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|                                                                                           |  |   |            |   |   |           |  
|------------------------------------------------------------------------------------------ |  | - | ---------- | - | - | --------- | -
|Cash flows
 from financing activities                                                      |  |   |            |   |   |           |  
|Net borrowings on lines of credit and notes
 payable                                       |  | $ | (7,433,929 | ) | $ | 837,254   |  
|Borrowing under long-term debt                                                             |  |   | 937,180    |   |   |          |  
|Principal payments under long-term debt                                                    |  |   | (392,384   | ) |   | (152,321  | )
|Principal payments under capital lease
 obligation                                         |  |   | (221,602   | ) |   | (55,762   | )
|                                                                                           |  |   |            |   |   |           |  
|Net cash
 provided by financing activities                                                 |  | $ | (7,110,735 | ) | $ | 629,171   |  
|                                                                                           |  |   |            |   |   |           |  
|Net cash and
 cash equivalents sourced                                                     |  | $ | 58,341     |   | $ | 282,407   |  
|                                                                                           |  |   |            |   |   |           |  
|Cash and
 cash equivalentsbeginning of year                                               |  |   | 1,943,463  |   |   | 1,661,056 |  
|                                                                                           |  |   |            |   |   |           |  
|Cash and
 cash equivalentsend of year                                                     |  | $ | 2,001,805  |   | $ | 1,943,463 |  
|                                                                                           |  |   |            |   |   |           |  
|Supplementary
 cash flow information:                                                      |  |   |            |   |   |           |  
|Interest paid                                                                              |  | $ | 460,329    |   | $ | 1,073,798 |  
|Income tax paid                                                                            |  |   | 140,775    |   |   | 57,582    |  
|Income tax refund                                                                          |  |   |           |   |   | 139,289   |  
|Compensation
 received from insurance company related to bad debt under factoring coverage |  |   | 719,711    |   |   |          |  
|                                                                                           |  |   |            |   |   |           |  
|Supplementary
 schedule of non-cash investing and financing activities:                    |  |   |            |   |   |           |  
|Income tax provision                                                                       |  | $ | 651,390    |   | $ | 17,411    |  
|                                                                                           |  |   |            |   |   |           |  
|Capital lease obligations incurred when
 capital leases were entered for new automobiles   |  | $ | 584,117    |   | $ | 62,538    |  
|                                                                                           |  |   |            |   |   |           |  

See accompanying notes to the consolidated
financial statements

F-8

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | ORGANIZATION AND PRINCIPAL ACTIVITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Organization and Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On September 8, 2003, ACL Semiconductors Inc. (formerly Print Data
 Corp.) (ACL) entered into a Share Exchange and Reorganization Agreement
 with Atlantic Components Ltd. (Atlantic), a Hong Kong based company, and
 Mr. Chung-Lun Yang (Mr. Yang), the then sole beneficial stockholder of
 Atlantic. Under the terms of the agreement, ACL issued 22,380,000 of its
 shares to Mr. Chung-Lun Yang and 2,620,000 of its shares to certain financial
 advisors in exchange for 100% of the issued and outstanding shares of
 Atlantics capital stock. The Company recorded an expense of $2,753,620
 related to the issuance of 2,620,000 shares of its common stock to these
 advisors, which was computed based on the quoted market price of $1.05 on
 September 30, 2003, the effective date of the merger and was classified as
 merger cost in the accompanying consolidated statements of operations for the
 year ended December 31, 2003.                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The share exchange agreement closed and became effective on September
 30, 2003. Upon the completion of this transaction, Atlantic became the wholly
 owned subsidiary of ACL, and Mr. Yang became the owner of approximately 80%
 of ACLs issued and outstanding shares of common stock. In addition, ACLs
 directors and officers resigned and were replaced by directors and officers
 of Atlantic. For accounting purposes, the acquisition was accounted for as a
 reverse-acquisition, whereby Atlantic was deemed to have acquired ACL.
 Because the acquisition was accounted for as a purchase of ACL, the
 historical financial statements of Atlantic became the historical financial
 statements of ACL after this transaction.                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | In connection with this transaction, ACL entered into a Conveyance
 Agreement on September 30, 2003 with New Print Data Corp. (NewCo). Under
 the terms of this agreement, effective September 30, 2003, ACL conveyed its
 historic operations of providing supplies used in a computer or office
 environment to NewCo, by assigning all of the assets and liabilities related
 to such operations to NewCo which accepted the assignment and assumed all
 such liabilities in exchange for 1,000,000 shares of common stock of NewCo.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On October 1, 2003, Print Data Corp. entered into a Securities
 Purchase Agreement with the holders of Print Data Corp.s Series A Preferred
 Stock. Under the terms of this agreement, Print Data Corp. sold its 1,000,000
 shares of NewCo common stock in exchange for the cancellation of the issued
 and outstanding 500,400 shares of ACLs Series A Preferred Stock
 (representing 100% of Print Data Corp.s issued and outstanding preferred
 stock previously held by three preferred stockholders).                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On December 16, 2003, Print Data Corp. filed a Certificate of
 Amendment with the Secretary of State of the State of Delaware changing its
 name from Print Data Corp. to ACL Semiconductors Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Business Activity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | ACL Semiconductors Inc. (Company or ACL) was incorporated in the
 State of Delaware on September 17, 2002. Through a reverse-acquisition of
 Atlantic Components Ltd., a Hong Kong based company, effective September 30,
 2003, the Companys principal activities are distribution of electronic
 components under the Samsung brand-name which comprise DRAM and graphic
 RAM, Flash, SRAM and MASK ROM for the Hong Kong and Southern China markets.
 Atlantic Components Ltd., its wholly owned subsidiary, was incorporated in
 Hong Kong on May 30, 1991 with limited liability. On October 2, 2003, the
 Company set up a wholly-owned subsidiary, Alpha Perform Technology Limited
 (Alpha), a British Virgin Islands company, to provide services on behalf of
 the Company in jurisdictions outside of Hong Kong. Effective January 1, 2004,
 the Company ceased the operations of Alpha and all the related activities are
 consolidated with those of Atlantic.

F-9

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(a) | Method of Accounting                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company maintains its general ledger and journals with the
 accrual method accounting for financial reporting purposes. The consolidated
 financial statements and notes are representations of management. Accounting
 policies adopted by the Company conform to generally accepted accounting
 principles in the United States of America and have been consistently applied
 in the presentation of consolidated financial statements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b) | Principles of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The consolidated financial statements are presented in US Dollars and
 include the accounts of the Company and its subsidiary. All significant
 inter-company balances and transactions are eliminated in consolidation.                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company owned its subsidiary soon after its inception and
 continued to own the equitys interests through December 31, 2009. The
 following table depicts the identity of the subsidiary:                                                                                                                                                                                                                                                

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

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Variable
 Interests Entities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | According to ASC 810-10-25 which codified FASB Interpretation No. 46
 (Revised December 2003), Consolidation of Variable Interest Entities  an
 interpretation of ARB No. 51 (FIN 46R), an entity that has one or more of the
 three characteristics set forth therein is considered a variable interest
 entity. One of such characteristics is that the equity investment at risk in
 the relevant entity is not sufficient to permit the entity to finance its
 activities without additional subordinated financial support provided by any
 parties, including the equity holders.                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ASC 810-05-08A specifies the two characteristics of a controlling
financial interest in a variable interest entity (VIE): (1) the power to
direct the activities of a VIE that most significantly impact the VIEs
economic performance; and (2) the obligation to absorb losses of the VIE that
could potentially be significant to the VIE or the right to receive benefits
from the VIE that could potentially be significant to the VIE. The Company is
the primary beneficiary of Aristo because the Company can direct the
activities of Aristo through the common director and major shareholder, Also,
the Company extended substantial account receivable to Aristo and created an
obligation to absorb losts if Aristo failed. Moreover, ASC 810-25-42 & 43
provides guidance on related parties treatment of VIE and specifies the
relationship of de-facto agent and principal. Those guidance will help to
determine whether the Company will consolidate Aristo.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Owing to the extent of outstanding large amounts of accounts
 receivable since 2007 together with the nominal amount of paid-up capital
 contributed by Mr. Yang when Aristo was formed, it has been determined that
 Aristo cannot finance its operations without subordinated financial support
 from ACL and accordingly, ACL is considered to be the de facto principal of
 Aristo, Aristo is considered to be the de facto subsidiary of the Company and
 Mr. Yang is considered to be the related party of both the Company and
 Aristo.                                                                                                                                                                                                                                                                                                                                                                                                                                  

F-10

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) | Principles of consolidation (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | By virtue of the above analysis, it has been determined that the
 Company is the primary beneficiary of Aristo.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Aristo Technologies Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company sells Samsung memory chips to Aristo and allows long
 grace periods for Aristo to repay the open accounts receivable. Being the
 biggest creditor, the Company does not require Aristo to pledge assets or
 enter into any agreements to bind Aristo to specific repayment terms. The
 Company does not provide any bad debt provision or experience derived from
 Aristo. Although, the Company is not involved in Aristos daily operation, it
 believes that there will not be significant additional risk derived from the
 trading relationship and transactions with Aristo.                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Aristo is engaged in the marketing, selling and servicing of computer
 products and accessories including semiconductors, LCD products, mass storage
 devices, consumer electronics, computer peripherals and electronic components
 for various brands such as Samsung, Hynix, Micron, Elpida, Qimonda, Lexar,
 Dane-Elec, Elixir, SanDisk and Winbond. Aristo 2009 and 2008 sales was around
 30 million and 20 million; it was only a small distributor that accommodated
 special requirements for specific customers.                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company sells to Aristo in order to fulfill Aristos periodic
 need for Samsung memory products based on prevailing market prices, which
 Aristo, in turn, sells to its customers. For fiscal year 2009, sales to
 Aristo were $13,160,521 with accounts receivable of $10,315,388 as of
 December 31, 2009. For fiscal year 2008, sales to Aristo were $9,076,034 with
 accounts receivable of $6,695,409 as of December 31, 2008. For fiscal year
 2007, sales to Aristo were $17,165,728 with accounts receivable of $6,237,905
 as of December 31, 2007.                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company purchases from Aristo, from time to time, LCD panels,
 Samsung memory chips, DRAM, Flash memory, central processing units, external
 hard disks, DVD readers and writers that the Company cannot obtain from
 Samsung directly due to supply limitations.                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(c) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The preparation of the consolidated financial statements in
 conformity with generally accepted accounting principles in the United States
 of America requires management to make estimates and assumptions that affect
 the reported amounts of assets and liabilities and disclosure of contingent
 assets and liabilities at the date of the consolidated financial statements
 and the reported amounts of revenues and expenses during the reporting
 periods. Management makes these estimates using the best information
 available at the time the estimates are made; however actual results could
 differ materially from those estimates.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(d) | Economic and political risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Companys operation is conducted in Hong Kong. Accordingly, the
 Companys business, financial condition and results of operations may be
 influenced by the political, economic and legal environment in Hong Kong, and
 by the general state of Hong Kong economy.                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Companys operations in Hong Kong are subject to special
 considerations and significant risks not typically associated with companies
 in North America and Western Europe. These include risks associated with,
 among others, the political, economic and legal environment and foreign
 currency exchange. The Companys results may be adversely affected by changes
 in the political and social conditions in Hong Kong, and by changes in
 governmental policies with respect to laws and regulations, anti-inflationary
 measures, currency conversion, remittances abroad, and rates and methods of
 taxation, among other things.     

F-11

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                        
|(e) | Property, plant and equipment                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                        
|    | Plant and equipment are carried at cost less accumulated
 depreciation. Depreciation is provided over their estimated useful lives,
 using the straight-line method. Estimated useful lives of the plant and
 equipment are as follows:

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

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

F-12

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(j) | Lease assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Leases that substantially transfer all the benefits and risks of
 ownership of assets to the company are accounted for as capital leases. At
 the inception of a capital lease, the asset is recorded together with its
 long term obligation (excluding interest element) to reflect the purchase and
 the financing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Leases which do not transfer substantially all the risks and rewards
 of ownership to the company are classified as operating leases. Payments made
 under operating leases are charged to income statement in equal instalments
 over the accounting periods covered by the lease term. Lease incentives
 received are recognized in income statement as an integral part of the
 aggregate net lease payments made. Contingent rentals are charged to income
 statement in the accounting period which they are incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(k) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Deferred tax assets and liabilities are recognized for the future tax
 consequences attributable to differences between the financial statement
 carrying amounts of existing assets and liabilities and their respective tax
 bases. Deferred tax assets, including tax loss and credit carry forwards, and
 liabilities are measured using enacted tax rates expected to apply to taxable
 income in the years in which those temporary differences are expected to be
 recovered or settled. The effect on deferred tax assets and liabilities of a
 change in tax rates is recognized in income in the period that includes the
 enactment date. Deferred income tax expense represents the change during the
 period in the deferred tax assets and deferred tax liabilities. The
 components of the deferred tax assets and liabilities are individually
 classified as current and non-current based on their characteristics. Realization
 of the deferred tax asset is dependent on generating sufficient taxable
 income in future years. Deferred tax assets are reduced by a valuation
 allowance when, in the opinion of management, it is more likely than not that
 some portion or all of the deferred tax assets will not be realized.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(l) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The accompanying consolidated financial statements are presented in
 United States dollars. The functional currency of the Company is the Hong
 Kong Dollar (HK$). The consolidated financial statements are translated into
 United States dollars from HK$US$1.00=HKD7.80, a fixed exchange rate
 maintained between Hong Kong and United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(m) | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company derives revenues from resale of computer memory products.
 The Company recognizes revenue in accordance with the SEC Staff Accounting
 Bulletin No. 104, Revenue Recognition (SAB 104). Under SAB 104, revenue
 is recognized when there is persuasive evidence of an arrangement, delivery
 has occurred or services are rendered, the sales price is determinable, and
 collectability is reasonably assured. Revenue typically is recognized at time
 of shipment. Sales are recorded net of discounts, rebates, and returns, which
 historically were not material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(n) | Advertising                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Group expensed all advertising costs as incurred. Advertising
 expenses included in selling expenses were $5,377 and $7,118 for the years
 ended December 31, 2009 and 2008, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(o) | Segment reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Companys sales are generated from Hong Kong and the rest of
 China and substantially all of its assets are located in Hong Kong.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

F-13

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(p) | Fair value of financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The carrying amount of the Companys cash and cash equivalents,
 accounts receivable, lines of credit, convertible debt, accounts payable,
 accrued expenses, and long-term debt approximates their estimated fair values
 due to the short-term maturities of those financial instruments.                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(q) | Comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Comprehensive income is defined to include all changes in equity
 except those resulting from investments by owners and distributions to
 owners. Among other disclosures, all items that are required to be recognized
 under current accounting standards as components of comprehensive income are
 required to be reported in a financial statement that is presented with the
 same prominence as other consolidated financial statements. The Company has
 no items that represent other comprehensive income and, therefore, has not
 included a schedule of comprehensive income in the consolidated financial
 statements.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(r) | Basic and diluted earnings (loss) per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | In accordance with ASC No. 260 (formerly SFAS No. 128), Earnings Per
 Share, the basic earnings (loss) per common share is computed by dividing
 net earnings (loss) available to common stockholders by the weighted average
 number of common shares outstanding. Diluted earnings (loss) per common share
 is computed similarly to basic earnings (loss) per common share, except that
 the denominator is increased to include the number of additional common
 shares that would have been outstanding if the potential common shares had
 been issued and if the additional common shares were dilutive.                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(s) | Reclassification                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Certain amounts in the prior year have been reclassified to conform
 to the current years presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-14

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(t) | Recently implemented standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | ASC 105, Generally Accepted Accounting Principles (ASC 105)
 (formerly Statement of Financial Accounting Standards No. 168, The FASB
 Accounting Standards Codification and the Hierarchy of Generally Accepted
 Accounting Principles a replacement of FASB Statement No. 162) reorganized by
 topic existing accounting and reporting guidance issued by the Financial
 Accounting Standards Board (FASB) into a single source of authoritative
 generally accepted accounting principles (GAAP) to be applied by
 nongovernmental entities. All guidance contained in the Accounting Standards
 Codification (ASC) carries an equal level of authority. Rules and
 interpretive releases of the Securities and Exchange Commission (SEC) under
 authority of federal securities laws are also sources of authoritative GAAP
 for SEC registrants. Accordingly, all other accounting literature will be
 deemed non-authoritative. ASC 105 is effective on a prospective basis for
 financial statements issued for interim and annual periods ending after
 September 15, 2009. The Company has implemented the guidance included in ASC
 105 as of July 1, 2009. The implementation of this guidance changed the
 Companys references to GAAP authoritative guidance but did not impact the
 Companys financial position or results of operations.                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | ASC 855, Subsequent Events (ASC 855) (formerly Statement of
 Financial Accounting Standards No. 165, Subsequent Events) includes guidance
 that was issued by the FASB in May 2009, and is consistent with current
 auditing standards in defining a subsequent event. Additionally, the guidance
 provides for disclosure regarding the existence and timing of a companys
 evaluation of its subsequent events. ASC 855 defines two types of subsequent
 events, recognized and non-recognized. Recognized subsequent events
 provide additional evidence about conditions that existed at the date of the
 balance sheet and are required to be reflected in the financial statements.
 Non-recognized subsequent events provide evidence about conditions that did
 not exist at the date of the balance sheet but arose after that date and,
 therefore; are not required to be reflected in the financial statements.
 However, certain non-recognized subsequent events may require disclosure to
 prevent the financial statements from being misleading. This guidance was
 effective prospectively for interim or annual financial periods ending after
 June 15, 2009. The Company implemented the guidance included in ASC 855 as of
 April 1, 2009. The effect of implementing this guidance was not material to
 the Companys financial position or results of operations.                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | ASC 944, Financial Services  Insurance (ASC 944) contains guidance
 that was previously issued by the FASB in May 2008 as Statement of Financial
 Accounting Standards No. 163, Accounting for Financial Guarantee Insurance
 Contracts  an interpretation of FASB Statement No. 60 that provides for
 changes to both the recognition and measurement of premium revenues and claim
 liabilities for financial guarantee insurance contracts that do not qualify
 as a derivative instrument in accordance with ASC 815, Derivatives and
 Hedging (formerly included under Statement of Financial Accounting Standards
 No. 133, Accounting for Derivative Instruments and Hedging Activities). This
 financial guarantee insurance contract guidance also expands the disclosure
 requirements related to these contracts to include such items as a companys
 method of tracking insured financial obligations with credit deterioration,
 financial information about the insured financial obligations, and
 managements policies for placing and monitoring the insured financial
 obligations. ASC 944, as it relates to financial guarantee insurance
 contracts, was effective for fiscal years beginning after December 15, 2008,
 except for certain disclosures related to the insured financial obligations,
 which were effective for the third quarter of 2008. The Company does not have
 financial guarantee insurance products, and, accordingly, the implementation
 of this portion of ASC 944 did not have an effect on the Companys results of
 operations or financial position.

F-15

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(t) | Recently implemented standards (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | ASC 805, Business Combinations (ASC 805) (formerly included under
 Statement of Financial Accounting Standards No. 141 (revised 2007), Business
 Combinations) contains guidance that was issued by the FASB in December 2007.
 It requires the acquiring entity in a business combination to recognize all
 assets acquired and liabilities assumed in a transaction at the
 acquisition-date fair value, with certain exceptions. Additionally, the
 guidance requires changes to the accounting treatment of acquisition related
 items, including, among other items, transaction costs, contingent
 consideration, restructuring costs, indemnification assets and tax benefits.
 ASC 805 also provides for a substantial number of new disclosure
 requirements. ASC 805 also contains guidance that was formerly issued as FSP
 FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a
 Business Combination That Arise from Contingencies which was intended to
 provide additional guidance clarifying application issues regarding initial
 recognition and measurement, subsequent measurement and accounting, and
 disclosure of assets and liabilities arising from contingencies in a business
 combination. ASC 805 was effective for business combinations initiated on or
 after the first annual reporting period beginning after December 15, 2008.
 The Company implemented this guidance effective January 1, 2009. Implementing
 this guidance did not have an effect on the Companys financial position or
 results of operations; however it will likely have an impact on the Companys
 accounting for future business combinations, but the effect is dependent upon
 acquisitions, if any, that are made in the future.                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | ASC 810, Consolidation (ASC 810) includes new guidance issued by
 the FASB in December 2007 governing the accounting for and reporting of
 noncontrolling interests (previously referred to as minority interests). This
 guidance established reporting requirements which include, among other
 things, that noncontrolling interests be reflected as a separate component of
 equity, not as a liability. It also requires that the interests of the parent
 and the noncontrolling interest be clearly identifiable. Additionally,
 increases and decreases in a parents ownership interest that leave control
 intact shall be reflected as equity transactions, rather than step
 acquisitions or dilution gains or losses. This guidance also requires changes
 to the presentation of information in the financial statements and provides
 for additional disclosure requirements. ASC 810 was effective for fiscal
 years beginning on or after December 15, 2008. The Company implemented this
 guidance as of January 1, 2010 and made necessary changes accordingly
 including but not limited to filing amendments for the prior period to comply
 with all applicable requirements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | ASC 825, Financial Instruments (ASC 825) includes guidance which
 was issued in February 2007 by the FASB and was previously included under
 Statement of Financial Accounting Standards No. 159, The Fair Value Option
 for Financial Assets and Financial Liabilities Including an amendment of FASB
 Statement No. 115. The related sections within ASC 825 permit a company to
 choose, at specified election dates, to measure at fair value certain
 eligible financial assets and liabilities that are not currently required to
 be measured at fair value. The specified election dates include, but are not
 limited to, the date when an entity first recognizes the item, when an entity
 enters into a firm commitment or when changes in the financial instrument
 causes it to no longer qualify for fair value accounting under a different
 accounting standard. An entity may elect the fair value option for eligible
 items that exist at the effective date. At that date, the difference between
 the carrying amounts and the fair values of eligible items for which the fair
 value option is elected should be recognized as a cumulative effect
 adjustment to the opening balance of retained earnings. The fair value option
 may be elected for each entire financial instrument, but need not be applied
 to all similar instruments. Once the fair value option has been elected, it
 is irrevocable. Unrealized gains and losses on items for which the fair value
 option has been elected will be reported in earnings. This guidance was
 effective as of the beginning of fiscal years that began after November 15,
 2007. The Company does not have eligible financial assets and liabilities,
 and, accordingly, the implementation of ASC 825 did not have an effect on the
 Companys results of operations or financial position.

F-16

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(t) | Recently implemented standards (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | ASC 820, Fair Value Measurements and Disclosures (ASC 820)
 (formerly included under Statement of Financial Accounting Standards No. 157,
 Fair Value Measurements) includes guidance that was issued by the FASB in
 September 2006 that created a common definition of fair value to be used
 throughout generally accepted accounting principles. ASC 820 applies whenever
 other standards require or permit assets or liabilities to be measured at
 fair value, with certain exceptions. This guidance established a hierarchy
 for determining fair value which emphasizes the use of observable market data
 whenever available. It also required expanded disclosures which include the
 extent to which assets and liabilities are measured at fair value, the
 methods and assumptions used to measure fair value and the effect of fair value
 measures on earnings. ASC 820 also provides additional guidance for
 estimating fair value when the volume and level of activity for the asset or
 liability have significantly decreased. The emphasis of ASC 820 is that fair
 value is the price that would be received to sell an asset or paid to
 transfer a liability in an orderly transaction between willing market
 participants, under current market conditions. ASC 820 also further clarifies
 the guidance to be considered when determining whether or not a transaction
 is orderly and clarifies the valuation of securities in markets that are not
 active. This guidance includes information related to a companys use of
 judgment, in addition to market information, in certain circumstances to
 value assets which have inactive markets.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Fair value guidance in ASC 820 was initially effective for fiscal
 years beginning after November 15, 2007 and for interim periods within those
 fiscal years for financial assets and liabilities. The effective date of ASC
 820 for all non-recurring fair value measurements of nonfinancial assets and
 nonfinancial liabilities was fiscal years beginning after November 15, 2008.
 Guidance related to fair value measurements in an inactive market was
 effective in October 2008 and guidance related to orderly transactions under
 current market conditions was effective for interim and annual reporting
 periods ending after June 15, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company applied the provisions of ASC 820 to its financial assets
 and liabilities upon adoption at January 1, 2008 and adopted the remaining
 provisions relating to certain nonfinancial assets and liabilities on January
 1, 2009. The difference between the carrying amounts and fair values of those
 financial instruments held upon initial adoption, on January 1, 2008, was
 recognized as a cumulative effect adjustment to the opening balance of
 retained earnings and was not material to the Companys financial position or
 results of operations. The Company implemented the guidance related to
 orderly transactions under current market conditions as of April 1, 2009,
 which also was not material to the Companys financial position or results of
 operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | In August 2009, the FASB issued ASC Update No. 2009-05, Fair Value
 Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value
 (ASC Update No. 2009-05). This update amends ASC 820, Fair Value
 Measurements and Disclosures and provides further guidance on measuring the
 fair value of a liability. The guidance establishes the types of valuation
 techniques to be used to value a liability when a quoted market price in an
 active market for the identical liability is not available, such as the use
 of an identical or similar liability when traded as an asset. The guidance
 also further clarifies that a quoted price in an active market for the
 identical liability at the measurement date and the quoted price for the
 identical liability when traded as an asset in an active market when no
 adjustments to the quoted price of the asset are required are both Level 1
 fair value measurements. If adjustments are required to be applied to the
 quoted price, it results in a level 2 or 3 fair value measurement. The
 guidance provided in the update is effective for the first reporting period
 (including interim periods) beginning after issuance. The Company does not
 expect that the implementation of ASC Update No. 2009-05 will have a material
 effect on its financial position or results of operations.                                                                                                                                                                                                                                                                                                 

F-17

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(t) | Recently implemented standards (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In September 2009, the FASB issued ASC Update No. 2009-12, Fair Value
 Measurements and Disclosures (Topic 820): Investments in Certain Entities
 that Calculate Net Asset Value per Share (or Its Equivalent) (ASC Update No.
 2009-12). This update sets forth guidance on using the net asset value per
 share provided by an investee to estimate the fair value of an alternative
 investment. Specifically, the update permits a reporting entity to measure
 the fair value of this type of investment on the basis of the net asset value
 per share of the investment (or its equivalent) if all or substantially all
 of the underlying investments used in the calculation of the net asset value
 is consistent with ASC 820. The update also requires additional disclosures
 by each major category of investment, including, but not limited to, fair
 value of underlying investments in the major category, significant investment
 strategies, redemption restrictions, and unfunded commitments related to
 investments in the major category. The amendments in this update are
 effective for interim and annual periods ending after December 15, 2009 with
 early application permitted. The Company does not expect that the
 implementation of ASC Update No. 2009-12 will have a material effect on its
 financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In June 2009, FASB issued Statement of Financial Accounting Standards
 No. 167, Amendments to FASB Interpretation No. 46(R) (Statement No. 167).
 Statement No. 167 amends FASB Interpretation No. 46R, Consolidation of
 Variable Interest Entities an interpretation of ARB No. 51 (FIN 46R) to
 require an analysis to determine whether a company has a controlling
 financial interest in a variable interest entity. This analysis identifies
 the primary beneficiary of a variable interest entity as the enterprise that
 has a) the power to direct the activities of a variable interest entity that
 most significantly impact the entitys economic performance and b) the
 obligation to absorb losses of the entity that could potentially be
 significant to the variable interest entity or the right to receive benefits
 from the entity that could potentially be significant to the variable
 interest entity. The statement requires an ongoing assessment of whether a
 company is the primary beneficiary of a variable interest entity when the
 holders of the entity, as a group, lose power, through voting or similar
 rights, to direct the actions that most significantly affect the entitys
 economic performance. This statement also enhances disclosures about a
 companys involvement in variable interest entities. Statement No. 167 is
 effective as of the beginning of the first annual reporting period that
 begins after November 15, 2009. Although Statement No. 167 has not been
 incorporated into the Codification, in accordance with ASC 105, the standard
 shall remain authoritative until it is integrated. The Company is in the
 process of evaluating Statement No. 167 and will make necessary changes if
 required.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In June 2009, the FASB issued Statement of Financial Accounting
 Standards No. 166, Accounting for Transfers of Financial Assets an amendment
 of FASB Statement No. 140 (Statement No. 166). Statement No. 166 revises
 FASB Statement of Financial Accounting Standards No. 140, Accounting for
 Transfers and Extinguishment of Liabilities a replacement of FASB Statement
 125 (Statement No. 140) and requires additional disclosures about transfers
 of financial assets, including securitization transactions, and any
 continuing exposure to the risks related to transferred financial assets. It
 also eliminates the concept of a qualifying special-purpose entity, changes
 the requirements for derecognizing financial assets, and enhances disclosure
 requirements. Statement No. 166 is effective prospectively, for annual
 periods beginning after November 15, 2009, and interim and annual periods
 thereafter. Although Statement No. 166 has not been incorporated into the
 Codification, in accordance with ASC 105, the standard shall remain
 authoritative until it is integrated. The Company does not expect the
 adoption of Statement No. 166 will have a material impact on its financial
 position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-18

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|   |                                                            
|-- | -----------------------------------------------------------
|3. | PROPERTY, PLANT AND EQUIPMENT, NET                         
|   |                                                            
|   | Property,
 plant and equipment, net comprise the following:

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

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Depreciation expenses included in the general and administrative
 expenses for the years ended December 31, 2009 and 2008 were $291,968 and
 $238,477 respectively.                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4. | REVOLVING LINES OF CREDIT AND LOAN FACILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company has available to it a $5,128,205 revolving line of credit
 with DBS Bank with an outstanding balance of $5,378,000 at December 31, 2009
 and $4,722,616 at December 31, 2008. The line of credit bears interest at the
 banks standard bills rate less 1% for HKD borrowings and at the banks
 standard bills rate less 0.50% for other currency borrowings as of December
 31, 2009. The weighted average interest rate approximated 4.5% for 2009 and
 4.4% for 2008.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company has available to it a $641,026 factoring facility without
 recourse with DBS Bank without any outstanding balance at December 31, 2009.
 The factoring facility bears a discounting charge at the banks standard
 bills rate less 1% for advance in HKD or the banks standard bills rate less
 0.50% for advance in other currency as of December 31, 2009. The weighted
 average interest rate approximated 4.5% for 2009 and 4.5% for 2008.                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company has available to it a $384,615 letter of guarantee with
 DBS Bank with an outstanding balance of $384,615 at December 31, 2009 and the
 letter of guarantee will expire on October 31, 2010. The line of credit bears
 a commission of 1.5% per annum which will be refunded on a pro-rata basis
 upon return and cancellation of the letter of guarantee.                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company has available to it a $3,846,154 factoring facility with
 SCB with an outstanding balance of $888,000 at December 31, 2009. The
 factoring facility bears discounting charges at the banks standard bills
 rate less 0.75% rate for advances in HKD or the banks standard bills rates
 less 0.75% for advances in other currency as of December 31, 2009. The
 weighted average interest rate approximated 4.75% for 2009 and 4.9% for 2008.                           

F-19

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008 
(Stated in US Dollars)

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. | REVOLVING LINES OF CREDIT AND LOAN FACILITIES (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company has available to it a $3,076,923 revolving line of credit
 with The Bank of East Asia, Limited (BEA) with an outstanding balance of
 $2,747,813 at December 31, 2009 and $2,303,868 at December 31, 2008. The line
 of credit bears interest at the higher of Hong Kong prime rate plus 0.25% or
 HIBOR plus 2% for HKD facilities and LIBOR plus 2% for other currency
 facilities as of December 31, 2009. The weighted average interest rate
 approximated 5.5% for 2009 and 5.9% for 2008.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company has available to it a $576,923 revolving line of credit
 with Fubon Bank (Hong Kong) Limited (Fubon) with an outstanding balance of
 $308,947 at December 31, 2009 and $0 at December 31, 2008. The line of credit
 bears interest at the Hong Kong prime rate plus 0.5% as of December 31, 2009.
 The weighted average interest rate approximated 5.75% for 2009.                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The summary of banking facilities at December 31, 2009 is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                                    |  |                    |            |                     |   |                          |  |   |           | 
|----------------------------------- |  | ------------------ | ---------- | ------------------- | - | ------------------------ |  | - | --------- | 
|                                    |  | Granted facilities |            | Utilized facilities |   | Not Utilized
 Facilities | 
|                                    |  |                    |            |                     |   |                          | 
|                                    |  |                    |            |                     |   |                          |  |   |           | 
|Lines of credit and loan facilities |  |                    |            |                     |   |                          |  |   |           | 
|Factoring Loan                      |  | $                  | 4,487,179  |                     | $ | 888,000                  |  | $ | 3,599,179 | 
|Import/Export Loan                  |  |                    | 8,205,128  |                     |   | 8,125,813                |  |   | 79,315    | 
|                                    |  |                    |            |                     |   |                          |  |   |           | 
|                                    |  | $                  | 12,692,307 |                     | $ | 9,013,813                |  | $ | 3,678,494 | 
|                                    |  |                    |            |                     |   |                          |  |   |           | 
|Term Loan - short term              |  | $                  | 153,953    | (a)                 | $ | 153,953                  |  | $ | 0         | 
|Instalment/Term Loan                |  |                    | 3,066,953  | (b)                 |   | 3,066,953                |  |   | 0         | 
|Overdraft                           |  |                    | 602,564    | (c)                 |   | 308,947                  |  |   | 293,617   | 
|Letter of Guarantee                 |  |                    | 384,615    | (d)                 |   | 384,615                  |  |   | 0         | 
|                                    |  |                    |            |                     |   |                          |  |   |           | 
|                                    |  |                    |            |                     |   |                          |  |   |           | 
|                                    |  | $                  | 16,900,393 |                     | $ | 12,928,281               |  | $ | 3,972,111 | 
|                                    |  |                    |            |                     |   |                          |  |   |           | 

| |                                                                                                                                                                                                                                                                                            |                                                                        
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------
| | (a)                                                                                                                                                                                                                                                                                        | Loan
 repayment within one year, including on other current liabilities
| | (b)                                                                                                                                                                                                                                                                                        | Per summary
 of Note (5)                                               
| | (c)                                                                                                                                                                                                                                                                                        | Including on
 cash and cash equivalents                                
| | (d)                                                                                                                                                                                                                                                                                        | Guarantee
 granted to a supplier, no entry make on the book            
| |                                                                                                                                                                                                                                                                                            |                                                                        
| | With the exception of the $384,615 letter of guarantee issued by DBS
 Bank, which will expire on 31 October, 2009, amounts borrowed by the Company
 under the revolving lines of credit and loan facilities described above are
 repayable within a period of three (3) months of drawdown

F-20

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|   |                                                                   
|-- | ------------------------------------------------------------------
|5. | LONG-TERM DEBTS                                                   
|   |                                                                   
|   | Long-term debts were comprised of the following as of December 31:

|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | -
|                                                                                                                                                                                                                                                                                                           |  | 2009 |           | 2008 |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|Installment loan having a
 maturity date in July 2026 and carrying an interest rate of 2.75% below the
 Hong Kong dollar Prime Rate (5.25% at December 31, 2009) to DBS Bank payable
 in monthly installments of $9,663 including interest through December 2009
 without any balloon payment requirements |  | $    | 1,572,720 |      | $ | 1,648,222 |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|Installment
 loan having a maturity date in July 2011 and carrying an interest rate of 2%
 below the Hong Kong dollar Prime Rate (5.25% at December 31, 2009) to DBS
 Bank payable in monthly installments of $3,782 including interest through
 December 2009 without any balloon payment requirements    |  |      | 69,949    |      |   | 112,312   |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|Installment
 loan having a maturity date in July 2023 and carrying an interest rate of
 2.5% below the Hong Kong dollar Prime Rate (5.25% at December 31, 2009) to
 DBS Bank payable in monthly installments of $5,240 including interest through
 December 2009 without any balloon payment requirements  |  |      | 719,156   |      |   | 761,624   |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|Installment loan having a maturity date in
 July 2014 and carrying an interest rate of 0.25% plus the Hong
 Kong dollar Prime Rate (5.25% at December 31, 2009) to BEA Bank payable in
 monthly installments of $16,111 including interest through December 2009 without any
 balloon payment requirements |  |      | 705,128   |      |   |          |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                           |  | $    | 3,066,953 |      | $ | 2,522,158 |  
|Less:
 current maturities                                                                                                                                                                                                                                                                                  |  |      | (318,972  | )    |   | (160,447  | )
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                           |  | $    | 2,747,981 |      | $ | 2,361,711 |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|An analysis of long-term debt as of December 31 is as follows:                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                           |  | 2009 |           | 2008 |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|Current portion                                                                                                                                                                                                                                                                                            |  | $    | 318,972   |      | $ | 160,447   |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |  
|After 1
 year, but within 2 years                                                                                                                                                                                                                                                                          |  | $    | 586,013   |      | $ | 316,063   |  
|After 2
 years, but within 5 years                                                                                                                                                                                                                                                                         |  |      | 508,050   |      |   | 257,789   |  
|After 5
 years                                                                                                                                                                                                                                                                                             |  |      | 1,653,918 |      |   | 1,787,859 |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                           |  | $    | 2,747,981 |      | $ | 2,361,711 |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  
|                                                                                                                                                                                                                                                                                                           |  | $    | 3,066,953 |      | $ | 2,522,158 |  
|                                                                                                                                                                                                                                                                                                           |  |      |           |      |   |           |  

F-21

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|   |                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | LONG-TERM DEBTS (Continued)                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                           
|   | With respect to all of the
 above referenced debt and credit arrangements in Note 4, the Company pledged
 its assets as collateral collectively to a bank group in Hong Kong comprised
 of DBS (formerly Overseas Trust Bank Limited), BEA and Fubon for all current
 and future borrowings from the bank group by the Company. In addition to the
 above pledged collateral, the debt is also secured by:
|   |                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | 1.                                                                                                                                                                                                                                                                                                                                                                                                         | a fixed cash deposit of $703,974 (HK$5,491,000), a security interest
 on two residential properties and a workshop located in Hong Kong owned by
 Atlantic, a wholly owned subsidiary of ACL, a security interest on a
 residential property located in Hong Kong owned by City, a related party, a
 workshop located in Hong Kong owned by Solution, a related party, plus a
 personal guarantee by Mr. Yang as collateral for loans from DBS Bank;
|   |                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | 2.                                                                                                                                                                                                                                                                                                                                                                                                         | a fixed cash deposit of $1,382,662 (HK$10,784,762), a workshop
 located in Hong Kong owned by Systematic Information, a related party, a
 workshop located in Hong Kong owned by Solution, a related party, plus an
 unlimited personal guarantee by Mr. Yang, as collateral for loans from BEA;                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | 3.                                                                                                                                                                                                                                                                                                                                                                                                         | a security interest on residential properties located in Hong Kong
 owned by Aristo, a wholly owned company by Mr. Yang plus a personal guarantee
 by Mr. Yang as collateral for loans from Fubon.                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                           
|6. | CAPITAL LEASE OBLIGATIONS                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company has several non-cancellable capital leases relating to
 automobiles:                                                                                                                                                                                                                                                                                                                          

|                                                                                        |  |      |          |      |   |         |  
|--------------------------------------------------------------------------------------- |  | ---- | -------- | ---- | - | ------- | -
|                                                                                        |  | 2009 |          | 2008 |  
|                                                                                        |  |      |          |      |  
|Current portion                                                                         |  | $    | 318,135  |      | $ | 58,683  |  
|Non-current
 portion                                                                    |  |      | 146,117  |      |   | 43,055  |  
|                                                                                        |  |      |          |      |   |         |  
|                                                                                        |  | $    | 464,252  |      | $ | 101,738 |  
|                                                                                        |  |      |          |      |   |         |  
|                                                                                        |  |      |          |      |   |         |  
|At December 31, the value of automobiles under capital leases as
 follows:              |  |      |          |      |   |         |  
|                                                                                        |  |      |          |      |   |         |  
|                                                                                        |  | 2009 |          | 2008 |  
|                                                                                        |  |      |          |      |  
|Cost                                                                                    |  | $    | 716,855  |      | $ | 193,514 |  
|Less:
 accumulated depreciation                                                         |  |      | (106,393 | )    |   | (51,463 | )
|                                                                                        |  |      |          |      |   |         |  
|                                                                                        |  | $    | 610,462  |      | $ | 142,051 |  
|                                                                                        |  |      |          |      |   |         |  
|                                                                                        |  |      |          |      |   |         |  
|At December
 31, the Company had obligations under capital leases repayable as follows: |  |      |          |      |   |         |  
|                                                                                        |  |      |          |      |   |         |  
|                                                                                        |  | 2009 |          | 2008 |  
|                                                                                        |  |      |          |      |  
|Total minimum lease payments                                                            |  |      |          |      |   |         |  
|- Within one year                                                                       |  | $    | 338,502  |      | $ | 65,055  |  
|- After
 one year but within 5 years                                                    |  |      | 156,078  |      |   | 47,329  |  
|                                                                                        |  |      |          |      |   |         |  
|                                                                                        |  | $    | 494,580  |      | $ | 112,384 |  
|Interest
 expenses relating to future periods                                           |  |      | (30,328  | )    |   | (10,646 | )
|                                                                                        |  |      |          |      |   |         |  
|Present
 value of the minimum lease payments                                            |  | $    | 464,252  |      | $ | 101,738 |  
|                                                                                        |  |      |          |      |   |         |  

F-22

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|   |                                                                                                                                                                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|7. | INCOME TAXES                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                           
|   | Income tax (refund) expense
 amounted to $651,390 for 2009 and $(33,871) for 2008 (an effective rate of 18%
 for 2009 and 0% for 2008). A reconciliation of the provision for income taxes
 with amounts determined by applying the statutory federal income tax rate of
 34% to income before income taxes is as follows:

|                                                                                              |  |      |            |      |   |            |  
|--------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                                              |  | 2009 |            | 2008 |  
|                                                                                              |  |      |            |      |  
|                                                                                              |  |      |            |      |   |            |  
|Computed tax at federal
 statutory rate                                                       |  | $    | 1,215,117  |      | $ | (70,292    | )
|Tax rate
 differential on foreign earnings of Atlantic and Aristo, Hong Kong based
 companies |  |      | (826,464   | )    |   | (121,297   | )
|Expenses
 not deductible for tax                                                              |  |      |           |      |   | 166,477    |  
|Unrecognized
 timing difference                                                               |  |      |           |      |   | 23,480     |  
|Tax
 under/(over) provision for Atlantic                                                      |  |      | 125,749    |      |   | (97,973    | )
|Net
 operating loss carry forward                                                             |  |      | 136,988    |      |   | 65,734     |  
|                                                                                              |  |      |            |      |   |            |  
|                                                                                              |  | $    | 651,390    |      | $ | (33,871    | )
|                                                                                              |  |      |            |      |   |            |  
|                                                                                              |  |      |            |      |   |            |  
|The income tax provision
 consists of the following components:                               |  |      |            |      |   |            |  
|                                                                                              |  |      |            |      |   |            |  
|                                                                                              |  | 2009 |            | 2008 |  
|                                                                                              |  |      |            |      |  
|                                                                                              |  |      |            |      |   |            |  
|Federal                                                                                       |  | $    |           |      | $ |           |  
|Foreign                                                                                       |  |      | 651,390    |      |   | (33,871    | )
|                                                                                              |  |      |            |      |   |            |  
|                                                                                              |  | $    | 651,390    |      | $ | (33,871    | )
|                                                                                              |  |      |            |      |   |            |  
|                                                                                              |  |      |            |      |   |            |  
|The Components of the deferred
 tax assets and liabilities are as follows:                    |  |      |            |      |   |            |  
|                                                                                              |  |      |            |      |   |            |  
|                                                                                              |  | 2009 |            | 2008 |  
|                                                                                              |  |      |            |      |   |            |  
|Net operating losses                                                                          |  | $    | 1,259,714  |      | $ | 1,122,726  |  
|                                                                                              |  |      |            |      |   |            |  
|Total
 deferred tax assets                                                                    |  | $    | 1,259,714  |      | $ | 1,122,726  |  
|Less:
 valuation allowance                                                                    |  |      | (1,259,714 | )    |   | (1,122,726 | )
|                                                                                              |  |      |            |      |   |            |  
|                                                                                              |  | $    |           |      | $ |           |  
|                                                                                              |  |      |            |      |   |            |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company did not have any interest and penalty recognized in the
 income statements for the year ended December 31, 2009 and 2008 or balance
 sheet as of December 31, 2009 and 2008. The Company did not have uncertainty
 tax positions or events leading to uncertainty tax position within the next
 12 months. The Companys 2007, 2008 and 2009 U.S. Corporation Income Tax
 Return are subject to U.S. Internal Revenue Service examination and the
 Companys 2003/4, 2004/5, 2005/6, 2006/7, 2007/8, 2008/9, 2009/2010 Hong Kong
 Corporations Profits Tax Return filing are subject to Hong Kong Inland
 Revenue Department examination.

F-23

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8. | WEIGHTED
 AVERAGE NUMBER OF SHARES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Company has a 2006
 Incentive Equity Stock Plan, under which the Company may grant options to its
 employees for up to 5 million shares of common stock. There was no dilutive
 effect to the weighted average number of shares for the years ended December
 31, 2009 and 2008 since there were no outstanding options at December 31,
 2009 and 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|9. | CONCENTRATIONS
 OF CREDIT RISK AND MAJOR CUSTOMERS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Company has a
 non-exclusive Distributorship Agreement with Samsung Electronics Hong Kong
 Co., Ltd. (Samsung), which was initially entered into in May 1993 and has been
 renewed annually. Under the terms of the agreement, Samsung appointed the
 Company on a non-exclusive basis as Samsungs distributor to distribute and
 market its products in the designated territory. The Company has the right to
 market and sell the products of other manufacturers and render service
 related to such activities, unless such activities result in the Companys
 inability to fulfill its obligations under the Agreement. However, the
 Company shall not purchase to sell any of the same product lines as Samsung
 produces and deals in from any other Korean manufacturer during the term of
 this Agreement. The most recent renewal of the Distributorship Agreement
 expired on February 28, 2010. As of March 1, 2010, Samsung has confirmed the
 annual renewal of such agreement for one year. Official signed agreement
 should be received by the Company in May 2010.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Companys distribution
 operations are dependent on the availability of an adequate supply of
 electronic components under the Samsung brand name which have historically
 been principally supplied to the Company by the Hong Kong office of Samsung.
 The Company purchased 51% and 48%, of materials from Samsung for the years
 ended December 31, 2009 and 2008, respectively. However, there is no written supply
 contract between the Company and Samsung and, accordingly, there is no
 assurance that Samsung will continue to supply sufficient electronic
 components to the Company on terms and prices acceptable to the Company or in
 volumes sufficient to meet the Companys current and anticipated demand, nor
 can assurance be given that the Company would be able to secure sufficient
 products from other third party supplier(s) on acceptable terms.                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | In addition, the Companys
 operations and business viability are to a large extent dependent on the
 provision of management services and financial support by Mr. Yang. See Note
 5 for details for Mr. Yangs support of the Companys banking facilities. At
 December 31, 2009 and 2008, included in accounts payable were $17,406,347 and
 $8,675,069, respectively, to Samsung. Termination of such distributorship by
 Samsung will significantly impair and adversely affect the continuation of
 the Companys business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | As of December 31, 2008,
 Samsung has withheld a total of $350,000 of rebate due to the Company as
 deposits. As agreed with Samsung, the deposits were fully refunded to the
 Company on January 22, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-24

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10. | RETIREMENT PLAN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Under the Mandatory Provident
 Fund (MPF) Scheme Ordinance in Hong Kong, the Company is required to set up
 or participate in an MPF scheme to which both the Company and employees must
 make continuous contributions throughout their employment based on 5% of the
 employees earnings, subject to maximum and minimum level of income. For
 those earning less than the minimum level of income, they are not required to
 contribute but may elect to do so. However, regardless of the employees
 election, their employers must contribute 5% of the employees income.
 Contributions in excess of the maximum level of income are voluntary. All
 contributions to the MPF scheme are fully and immediately vested with the
 employees accounts. The contributions must be invested and accumulated until
 the employees retirement. The Company contributed and expensed $34,099 for
 2009 and $29,650 for 2008.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|11. | COMMITMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company leases its
 facilities. The following is a schedule by years of future minimum rental
 payments required under operating leases that have non-cancellable lease
 terms in excess of one year as of December 31, 2009:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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

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

F-25

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|12. | DERIVATIVE INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | On February 1, 2009, the
 Company adopted ASC 815 (formerly SFAS No. 161) as referenced in Note 2. The
 adoption of ASC 815 requires additional disclosures about Companys
 objectives and strategies for using derivative instruments, the accounting
 for the derivative instruments and related hedged items under ASC 815 (formerly
 SFAS No. 133), Accounting for Derivative Instruments and Hedging
 Activities, and the effect of derivative instruments and related hedged
 items on the financial statements. The adoption had no financial impact on
 the consolidated condensed financial statements.                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Since all of the Company sales
 are done in USD, the bank is exposed to foreign currency exchange rate
 fluctuations in the normal course of its business. As part of its risk
 management strategy, the Company purchases FX forward contracts from the
 banks to secure the exchange rate for a period of time in order to hedge any
 FX exposure between HKD and USD throughout the purchase & sale period.
 The Company applies hedge accounting based upon the criteria established by ASC
 815, whereby the Company designates its derivatives as cash flow hedges. Cash
 flows from the derivative programs were classified as operating activities in
 the Consolidated Statement of Cash Flows.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | As at December 31, 2009 there
 is a participating forward currency option agreement between the Company and
 SCB for the Company to buy US$500,000 from SCB at a contract rate of 7.735 at
 specified dated up to January 7, 2010. According to the terms of the
 agreement, the Company will buy USD in triple amounts if the spot rate is less
 than the contract rate at specified dates. The gain on this forward contract
 during the year ended December 31, 2009 was $12,564.                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | As at December 31, 2009, there
 is a cancellable target redemption forward currency option agreement between
 the Company and SCB for the Company to buy US$1,000,000 from SCB at a lower
 strike contract rate of 7.725 and an upper strike contract rate of 7.75 at
 specified dates up to March 1, 2010. According to the terms of the agreement,
 the Company will buy USD in triple amounts if the spot rate is less than the
 lower strike contract rate or greater than the upper strike contract rate at
 specified dates. The gain on this forward contract during the year ended
 December 31, 2009 was $29,257.                                                                              

F-26

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|    |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|12. | DERIVATIVE INSTRUMENTS (Continued)                                                                                                                 
|    |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | There are three foreign
 currency exchange agreements that matured as of December 31, 2009. These
 agreements are:                                 
|    |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                    | Pivot bonus forward currency
 option agreement between the Company and SCB for the Company to buy
 US$1,000,000 from SCB at a lower strike contract rate of 7.73 and an upper
 strike contract rate 7.749 at specified dates up to July 2, 2009. According
 to the terms of the agreement, the Company will buy in triple amounts if the
 spot rate is less than the lower strike contract rate. The gain on this
 forward contract during the year ended December 31, 2009 was $35,897.                                                                                                                                                                                
|    |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                    | The Company has holdings of
 US$500,000 Commodity Basket Linked Notes which were issued by SCB at
 specified dates up to February 17, 2009. According to the terms of
 agreements, the Company will receive interest at a rate equal to 6% if the
 Basket Return is larger than 0% and 100% redeemed if the Basket Return is
 less than or equal to 0% on the maturity date. The Company fully redeemed the
 securities at cost value on the maturity date of February 17, 2009.                                                                                                                                                                                        
|    |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                    | A target redemption forward
 currency option agreement between the Company and SCB for the Company to buy
 US$750,000 from SCB at a lower strike contract rate of 7.75 and an upper
 strike contract rate of 7.85 at specified dates up to April 29, 2010.
 According to the terms of the agreement, the Company will buy USD in triple
 amounts if the spot rate is less than the lower strike contract rate or
 greater than the upper strike contract rate at specified dates. The gain on
 this forward contract during the year ended December 31, 2009 was $1,260.
 Since the target of the agreement has been met, the agreement is matured on
 January 29, 2010.
|    |                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The gross notional and fair
 values of derivative financial instruments in the Consolidated Balance Sheet
 as of December 31, 2009 were as follows:

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

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

F-27

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|    |                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|12. | DERIVATIVE INSTRUMENTS (Continued)                                                                                                                                   
|    |                                                                                                                                                                      
|    | The before-tax effect of
 derivative instruments in cash flow and net investment hedging relationships
 for the year ended December 31, 2009 and 2008 was as follows:

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

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|13. | RELATED PARTY
 TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Transactions with Aristo Technologies
 Limited / Mr. Yang                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | As of December 31, 2009 and
 2008, we had an outstanding receivable from Mr. Yang, the President and
 Chairman of our Board of Directors, totaling $11,233,839 and $7,900,404
 respectively. Because the Companys business is distributing
 computer components and is heavily dependant on Samsung, Mr. Yang took
 a loan from the Company and used it to invest in other
 companies to create new business platforms. These
 business platforms include manufacturing, research and development,
 which Mr. Yang believes can help improve the Companys business in the
 long term. These
 advances bear no interest and are payable on demand. The receivable due from
 Mr. Yang to the Company is derived from the consolidation of the financial
 statements of Aristo, a variable interest entity, with the Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | For the years ended December
 31, 2009 and 2008, we recorded compensation to Mr. Yang of $1,300,000 and
 $735,026 respectively, and paid $1,300,000 and $735,026 respectively to Mr.
 Yang as compensation to him.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Transactions
 with Classic Electronic Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Mr. Ben Wong, one of our
 directors, is a 99.9% shareholder of Classic Electronics Ltd. (Classic).
 The remaining 0.1% of Classic is owned by a non-related party. As of December
 31, 2009 and 2008, the Company had outstanding accounts receivable from
 Classic totaling $0 and $1,717,320 respectively. This account receivable has
 been outstanding for more than 12 months in 2008 and paid off in 2009.                                                                                                                                                                                                                                                                                                                                                                                                          

F-28

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

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

F-29

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|13. | RELATED PARTY TRANSACTIONS (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Transactions with Systematic Semiconductor Limited                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Mr. Yang, the Companys Chief
 Executive Officer, majority shareholder and a director, is the sole
 beneficial owner of the equity interest of Systematic Semiconductor Ltd.
 (Systematic). During the years ended December 31, 2009 and 2008, we received
 a management fee of $9,615 and $15,384 respectively from Systematic. The
 management fee was charged for back office support for Systematic.                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | During the years ended
 December 31, 2009 and 2008, we sold products for $19,914 and $275,766
 respectively, to Systematic. As of December 31, 2009 and 2008, there were no
 outstanding accounts receivables from Systematic.                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | During the years ended
 December 31, 2009 and 2008, we purchased inventories of $0 and $560,750
 respectively from Systematic. As of December 31, 2009 and 2008, there were no
 outstanding accounts payable to Systematic.                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Transactions with Aristo Components Limited                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Mr. Ben Wong, one of our directors, is a 90% shareholder of Aristo
 Components Ltd. (Aristo Comp). The remaining 10% of Aristo Comp is owned by
 a non-related party. During the years ended December 31, 2009 and 2008, we
 received a management fee of $11,923 and $8,077 respectively from Aristo
 Comp. The management fee was charged for back office support for Aristo Comp.                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | During the years ended December 31, 2009 and 2008, we sold products
 for $12,060 and $67,968 respectively, to Aristo Comp. As of December 31, 2009
 and 2008, there were no outstanding accounts receivables from Aristo Comp.                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | During the years ended December 31, 2009 and 2008, we purchased
 inventories of $241,367 and $37,665 respectively from Aristo Comp. As of
 December 31, 2009 and 2008, there were no outstanding accounts payable to
 Aristo Comp.                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Transactions
 with Atlantic Storage Devices Limited                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Mr. Yang, the Companys Chief
 Executive Officer, majority shareholder and a director, is a 40% shareholder
 of Atlantic Storage Devices Ltd. (Atlantic Storage). The remaining 60% of
 Atlantic Storage is owned by a non-related party. During the years ended
 December 31, 2009 and 2008, we sold products for $337,946 and $575,386
 respectively, to Atlantic Storage. As of December 31, 2009 and 2008, there
 were no outstanding accounts receivables from Atlantic Storage.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | During the years ended
 December 31, 2009 and 2008, we purchased inventories of $0 and $679,048
 respectively, from Atlantic Storage. As of December 31, 2009 and 2008, there
 were no outstanding accounts payable to Atlantic Storage.                                                                                                                                                                                                                                               

F-30

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

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

F-31

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|14. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In
 preparing these financial statements, the Company evaluated the events and
 transactions that occurred from January 1, 2010 through April 15, 2010, the date
 these financial statements are issued. The Company has made the required
 additional disclosures in reporting periods in which subsequent events occur.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | As
 discussed in Note 9 of the consolidated financial statements, the Company is
 dependent on one single vendor to supply its inventories. This vendor
 accounted for the majority of the Companys purchases for 2009. The Companys
 non-exclusive distributorship agreement with this vendor has a one-year term.
 This agreement has been renewed more than ten times, most recently on March
 1, 2009 and expired on February 28, 2010. As of March 1, 2010, this vendor
 has confirmed the annual renewal of such agreement for one year. The Company
 has already signed and received the fully executed renewal agreement from
 Samsung. Termination of such distributorship agreement by this vendor would
 have a material adverse effect on the operations of the Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | On June
 1, 2010, Mr. Ben Wong resigned as a director of the Company. On the same
 date, the Company has appointed several new individuals to the board of
 directors and management. Details please see the 8-K filed by Company on June
 14, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The
 Company is seeking to finalize a loan repayment agreement with Mr. Yang
 whereby Mr. Yang will repay the outstanding loan at an interest rate of 0.5%
 and monthly repayment amounts of $95,706 over a period of ten years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-32

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

|    |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|15. | RESTATEMENTS
|    |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |              | On July, 2010, the Company
 filed the consolidated balance sheets as of December 31, 2009 and 2008, its
 consolidated statements of income, stockholders equity and cash flow for the
 year ended December 31, 2009 and 2008, in Form 10K/A (Amendment No. 1) Part
 IV Item 15 Page F-1- F-26 with the Securities and Exchange Commission (SEC).
 The Company determined to re-do the 2008 audit and restate the financial
 statements. All the changes and related corrections are incurred in
 accordance with the ASC 250 Accounting Change and Error Correction.                   
|    |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |              | There was a change on
 applicable accounting principle according to ASC 810-10 Consolidation of
 Variable Interest and Special-Purpose Entities where Aristo was considered a
 de facto agent of the Company and the Company was the primary beneficiary of
 Aristo and got control of Aristo through the related party, Mr. Yang.
 Therefore, Aristo was a deemed subsidiary and should consolidate with the
 Company. See Note 2(b) for detail analysis. ASC 810 changes are listed in a
 separate column below.                                                                      
|    |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |              | There was a change on estimate
 of the value of the property according to ASC820-10-35 where the properties
 in-use reflected the maximum value for the Company. Therefore,
 the fair value of the Company to obtain the same in-use property should
 include the valuation of land and building and their related improvements
 which render the assets impairment provision on a temporary market over or
 under reaction not applicable in this group of real property assets that is
 being fully in-use by the Company. The ASC 820 changes are listed in a separate
 column below.
|    |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |              | The effects of the
 restatements are shown in the following tables.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

CONSOLIDATED
BALANCE SHEETS

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

F-33

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

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

CONSOLIDATED
BALANCE SHEETS (Continued)

|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|----------------------------------------------------- |  | -------------- | ---------- | ---------------- |  | ---------------- | - | -------------- |  |  | - | ---------- | 
|                                                      |  | December 31,   |           
|                                                      |  | 2008
 Original |            | ASC 810
 Changes |  | ASC 820
 changes |   | 2008
 Restated | 
|                                                      |  |                |            |                  |  |                  |   |                | 
|LIABILITIES AND STOCKHOLDERS EQUITY                  |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Current liabilities                                   |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Accounts payable                                      |  | $              | 13,669,779 |                  |  | 3,649,170        |   |                |  |  |   | 17,318,949 | 
|Accruals                                              |  |                | 396,755    |                  |  | 12,612           |   |                |  |  |   | 409,367    | 
|Lines of credit and loan
 facilities                  |  |                | 16,447,742 |                  |  |                 |   |                |  |  |   | 16,447,742 | 
|Current portion of long-term
 debt                    |  |                | 160,447    |                  |  |                 |   |                |  |  |   | 160,447    | 
|Current portion of capital
 lease                     |  |                | 58,683     |                  |  |                 |   |                |  |  |   | 58,683     | 
|Income tax payable                                    |  |                | 5,588      |                  |  |                 |   |                |  |  |   | 5,588      | 
|Due to shareholders for converted
 pledged collateral |  |                | 112,385    |                  |  |                 |   |                |  |  |   | 112,385    | 
|Other current liabilities                             |  |                | 301,076    |                  |  | 206,997          |   |                |  |  |   | 508,073    | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Total current liabilities                             |  | $              | 31,152,455 |                  |  | 3,868,779        |   |                |  |  | $ | 35,021,234 | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Long-term liabilities                                 |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Long-term debt, less current
 portion                 |  |                | 2,361,711  |                  |  |                 |   |                |  |  |   | 2,361,711  | 
|Capital lease, less current
 portion                  |  |                | 43,055     |                  |  |                 |   |                |  |  |   | 43,055     | 
|Deferred tax liabilities                              |  |                |           |                  |  | 8,343            |   |                |  |  |   | 8,343      | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Total long-term liabilities                           |  |                | 2,404,766  |                  |  | 8,343            |   |                |  |  |   | 2,413,109  | 
|Deferred tax                                          |  |                | 8,343      |                  |  | (8,343           | ) |                |  |  |   |           | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|TOTAL
 LIABILITIES                                    |  |                | 33,565,564 |                  |  | 3,868,779        |   |                |  |  |   | 37,434,343 | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 
|Commitments and contingencies                         |  | $              |           |                  |  |                 |   |                |  |  | $ |           | 
|                                                      |  |                |            |                  |  |                  |   |                |  |  |   |            | 

F-34

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

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

CONSOLIDATED BALANCE SHEETS (Continued)

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

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As a result of restatement of the consolidated balance sheet as of
 December 31, 2008, total assets increased from $34,587,072 as originally
 reported, to $39,087,402, an increase of $4,500,330. The increase of total
 assets was derived from an increase of $159,108 in cash and cash equivalents,
 an increase of $111,989 in accounts receivable, a decrease of $6,695,409 in
 accounts receivables from related parties, an increase of $1,608,373 in
 inventories, an increase of $495,867 in other current assets, an increase of
 $915,167 in property, plant and equipment, an increase of $4,831 in other
 deposits, and an increase of $7,900,404 in amounts due from Aristo/Mr. Yang.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The total liabilities increased from $33,565,564 as originally
 reported, to $37,434,343, an increase of $3,868,779. The increase of total
 liabilities was derived from an increase of $3,649,170 in accounts payable,
 an increase of $12,612 in accruals, and an increase of $206,997 in other
 current liabilities.                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The total stockholders equity was restated from $1,021,508 as
 originally reported, to $1,653,059, an increase of $631,551. The increase of
 total stockholders equity was derived from a decrease of $591,918 in
 accumulated losses, and a reclassification of $39,633 in amount due from
 stockholder/director from stockholders equity.                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The total liabilities and stockholders equity was restated from
 $34,587,072 as originally reported, to $39,087,402, an increase of
 $4,500,330.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-35

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

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

CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME

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

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

F-36

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|--------------------------------------------------------------------------------------- |  | -------------- | ---------- | ---------------- |  | ---------------- | - | -------------- | -------- | - | - | ----------- | -
|                                                                                        |  | December 31,   |           
|                                                                                        |  | 2008
 Original |            | ASC 810
 changes |  | ASC 820
 changes |   | 2008
 Restated |         
|                                                                                        |  |                |            |                  |  |                  |   |                |         
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Cash flows from operating activities Net
 (loss) income                                 |  | $              | (922,039   | )                |  | (133,949         | ) |                | 883,116  |   | $ | (172,872    | )
|Depreciation and amortization                                                           |  |                | 238,477    |                  |  |                 |   |                |          |   |   | 238,477     |  
|Change in inventory reserve                                                             |  |                | (190,000   | )                |  |                 |   |                |          |   |   | (190,000    | )
|Loss (gain) on disposal of marketable
 securities                                       |  |                | 227,782    |                  |  | (1               | ) |                |          |   |   | 227,781     |  
|Loss on revaluation of properties                                                       |  |                | 883,116    |                  |  |                 |   |                | (883,116 | ) |   |            |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Adjustments to reconcile net loss to net
 cash used in operating activities:            |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Accounts receivable  other                                                             |  |                | (2,635,680 | )                |  | (79,755          | ) |                |          |   |   | (2,715,435  | )
|Accounts receivable  related parties                                                   |  |                | (456,965   | )                |  | 457,504          |   |                |          |   |   | 539         |  
|Inventories                                                                             |  |                | 1,613,799  |                  |  | (1,324,211       | ) |                |          |   |   | 289,588     |  
|Refundable deposits                                                                     |  |                |           |                  |  | (9,656           | ) |                |          |   |   | (9,656      | )
|Income tax refundable                                                                   |  |                | 49,375     |                  |  |                 |   |                |          |   |   | 49,375      |  
|Other current assets                                                                    |  |                | 53,010     |                  |  | (489,744         | ) |                |          |   |   | (436,734    | )
|Other assets                                                                            |  |                | (4,824     | )                |  | 4,824            |   |                |          |   |   |            |  
|Accounts payable                                                                        |  |                | 1,077,094  |                  |  | 3,371,655        |   |                |          |   |   | 4,448,749   |  
|Accrued expenses                                                                        |  |                | 210,017    |                  |  | 3,394            |   |                |          |   |   | 213,411     |  
|Income tax payable                                                                      |  |                | 5,588      |                  |  |                 |   |                |          |   |   | 5,588       |  
|Other current liabilities                                                               |  |                | 32,503     |                  |  | 206,998          |   |                |          |   |   | 239,501     |  
|Deferred tax                                                                            |  |                | (7,128     | )                |  |                 |   |                |          |   |   | (7,128      | )
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Net cash provided by operating activities                                               |  | $              | 174,125    |                  |  | 2,007,059        |   |                |         |   | $ | 2,181,184   |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Cash flows from investing activities                                                    |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Advanced from Aristo / Mr. Yang                                                         |  | $              | 36,365     |                  |  | 11,417,431       |   |                |          |   | $ | 11,453,796  |  
|Advanced to Aristo / Mr. Yang                                                           |  |                |           |                  |  | (13,296,712      | ) |                |          |   |   | (13,296,712 | )
|Increase in restricted cash                                                             |  |                | (966,696   | )                |  |                 |   |                |          |   |   | (966,696    | )
|Increase in restricted marketable
 securities                                           |  |                | (500,000   | )                |  |                 |   |                |          |   |   | (500,000    | )
|Cash proceeds from sales of marketable
 securities and restricted marketable securities |  |                | 946,229    |                  |  |                 |   |                |          |   |   | 946,229     |  
|Purchase of property, plant and equipment                                               |  |                | (132,513   | )                |  | (32,052          | ) |                |          |   |   | (164,565    | )
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Net cash used in investing activities                                                   |  | $              | (616,615   | )                |  | (1,911,333       | ) |                |          |   | $ | (2,527,948  | )
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Cash flows from financing activities                                                    |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Net borrowings on lines of credit and notes
 payable                                    |  | $              | 837,254    |                  |  |                 |   |                |          |   | $ | 837,254     |  
|Principal payments under long-term debt                                                 |  |                | (152,321   | )                |  |                 |   |                |          |   |   | (152,321    | )
|Principal payments under capital lease
 obligation                                      |  |                | (55,762    | )                |  |                 |   |                |          |   |   | (55,762     | )
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Net cash provided by financing activities                                               |  | $              | 629,171    |                  |  |                 |   |                |          |   | $ | 629,171     |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Net cash and cash equivalents sourced                                                   |  |                | 186,681    |                  |  | 95,726           |   |                |         |   |   | 282,407     |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Cash and cash equivalentsbeginning of year                                             |  |                | 1,597,674  |                  |  | 63,382           |   |                |          |   |   | 1,661,056   |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  
|Cash and cash equivalentsend of year                                                   |  |                | 1,784,355  |                  |  | 159,108          |   |                |         |   |   | 1,943,463   |  
|                                                                                        |  |                |            |                  |  |                  |   |                |          |   |   |             |  

F-37

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
(Stated in US Dollars)

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

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

|                                                                                         |  |                |           |                  |  |                  |  |                |  |  |   |           | 
|---------------------------------------------------------------------------------------- |  | -------------- | --------- | ---------------- |  | ---------------- |  | -------------- |  |  | - | --------- | 
|                                                                                         |  | December 31,   |          
|                                                                                         |  | 2008
 Original |           | ASC 810
 changes |  | ASC 820
 changes |  | 2008
 Restated | 
|                                                                                         |  |                |           |                  |  |                  |  |                | 
|                                                                                         |  |                |           |                  |  |                  |  |                |  |  |   |           | 
|Supplementary cash flow information:                                                     |  |                |           |                  |  |                  |  |                |  |  |   |           | 
|Interest paid                                                                            |  | $              | 1,073,795 |                  |  | 3                |  |                |  |  | $ | 1,073,798 | 
|Income tax paid                                                                          |  |                | 57,582    |                  |  |                 |  |                |  |  |   | 57,582    | 
|Income tax refund                                                                        |  |                | 139,289   |                  |  |                 |  |                |  |  |   | 139,289   | 
|                                                                                         |  |                |           |                  |  |                  |  |                |  |  |   |           | 
|                                                                                         |  |                |           |                  |  |                  |  |                |  |  |   |           | 
|Supplementary schedule of non-cash
 investing and financing activities:                  |  |                |           |                  |  |                  |  |                |  |  |   |           | 
|Capital lease obligations incurred when
 capital leases were entered for new automobiles |  | $              | 62,538    |                  |  |                 |  |                |  |  | $ | 62,538    | 
|                                                                                         |  |                |           |                  |  |                  |  |                |  |  |   |           | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As a result of the restatement, the net cash provided by operating
 activities for the year ended December 31, 2008 increased by $2,007,059 from
 $174,125 as originally reported, to $2,181,184; net cash used in investing
 activities increased by $1,911,333 from $616,615 as originally reported, to
 $2,527,948; the cash and cash equivalents at beginning of year were increased
 by $63,382 from $1,597,674 as originally reported, to $1,661,056. The cash
 and cash equivalents at end of year were increased by $159,108 from $1,784,355
 as originally reported, to $1,943,463.

F-38

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

SCHEDULE II

VALUATION AND
QUALIFYING ACCOUNTS AND RESERVES

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

SCHEDULE III

QUARTERLY
INFORMATION (UNAUDITED)

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

S-2

---