|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|Washington,
 D.C. 20549           
|FORM 10-K/A                       
|(Amendment
 No. 1)                

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

|                                   |                                                         | 
|---------------------------------- | ------------------------------------------------------- | 
|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)   
|                                                                      |  |                                            
|B24-B27,
 1/F., Block B, Proficient Industrial Centre,                |  |                                            
|6 Wang Kwun Road, Kowloon, Hong Kong                                  |  |                                            
|(Address
 of principal executive offices)                             |  | (Zip
 code)                                
|                                                                     
|Registrants
 telephone number including area code: 011-852-2799-1996
|                                                                     
|Securities
 registered pursuant to Section 12(b) of the Act:         
|Title of
 each class:                                                 |  | Name of
 each exchange on which registered:
|                                                                      |  |                                            
|Common
 Stock, $0.001 par value                                       |  | Over-the-Counter
 Bulletin Board           
|                                                                      |  |                                            
|Securities registered pursuant to Section 12(g) of the Act:          
|NONE                                                                 

|                                                                                                                                                                                                                                                                                                                                                               |        |      
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------ | -----
|Indicate by
 check mark whether the registrant is a well-known seasoned issuer, as defined
 in Rule 405 of the Securities Act.                                                                                                                                                                                                                                 | Yes
 o | No
 þ
|                                                                                                                                                                                                                                                                                                                                                               |        |      
|Indicate by check
 mark if the registrant is not required to file reports pursuant to Section 13
 or 15(d) of the Act.                                                                                                                                                                                                                                         | Yes
 o | No
 þ
|                                                                                                                                                                                                                                                                                                                                                               |        |      
|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. | Yes
 þ | No
 o
|                                                                                                                                                                                                                                                                                                                                                               |        |      
|Indicate by
 check mark if disclosure of delinquent filers pursuant to Item 405 of
 Regulation S-K is not contained herein, and will not be contained, to the
 best of Registrants knowledge, in definitive proxy or information statements
 incorporated by reference in Part III of this Form 10-K, or any amendment to
 this Form 10-K.                    |        | þ    
|                                                                                                                                                                                                                                                                                                                                                               |        |      
|Indicate by
 check mark whether the registrant is large accelerated filer, an accelerated
 filer, or a non-accelerated filer, or 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                       | Smaller
 reporting company þ
|                           |                     | (Do
 not check if a smaller reporting company) |                             

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

The aggregate market value
of the voting common equity held by non-affiliates of the registrant as of June
30, 2008 was approximately $1,427,985 based upon the closing price of $0.24 of
the registrants common stock on the OTC Bulletin Board. (For purposes of
determining this amount, only directors, executive officers, and 10% or greater
stockholders have been deemed affiliates).

The number of
shares of Registrants Common Stock outstanding as of April 13, 2009 was
28,729,936.

DOCUMENTS
INCORPORATED BY REFERENCE

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                                                                                         |  | 7   
|Item 2.                                     |  | Properties                                                                                                         |  | 8   
|Item 3.                                     |  | Legal
 Proceedings                                                                                                 |  | 8   
|Item 4.                                     |  | Submission
 of Matters to a Vote of Security Holders                                                               |  | 8   
|                                            |  |                                                                                                                    |  |     
|                                            |  | PART II                                                                                                            |  |     
|                                            |  |                                                                                                                    |  |     
|Item 5.                                     |  | Market for
 the Registrants Common Equity, Related Stockholder Matters and Issuer
 Purchases of Equity Securities |  | 9   
|Item 6.                                     |  | Selected
 Financial Data                                                                                           |  | 10  
|Item 7.                                     |  | Managements
 Discussion and Analysis of Financial Condition and Results of Operations                             |  | 10  
|Item 7A.                                    |  | Quantitative
 and Qualitative Disclosures About Market Risk                                                        |  | 19  
|Item 8.                                     |  | Financial
 Statements and Supplementary Data                                                                       |  | 19  
|Item 9.                                     |  | Changes in
 and Disagreements with Accountants on Accounting and Financial Disclosure                              |  | 19  
|Item 9A(T).                                 |  | Controls
 and Procedures                                                                                           |  | 19  
|Item 9B.                                    |  | Other
 Information                                                                                                 |  | 21  
|                                            |  |                                                                                                                    |  |     
|                                            |  | PART III                                                                                                           |  |     
|                                            |  |                                                                                                                    |  |     
|Item 10.                                    |  | Directors,
 Executive Officers and Corporate Governance                                                            |  | 22  
|Item 11.                                    |  | Executive
 Compensation                                                                                            |  | 23  
|Item 12.                                    |  | Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters                   |  | 26  
|Item 13.                                    |  | Certain
 Relationships and Related Transactions, and Director Independence                                         |  | 27  
|Item 14.                                    |  | Principal
 Accounting Fees and Services                                                                            |  | 29  
|                                            |  |                                                                                                                    |  |     
|                                            |  | PART IV                                                                                                            |  |     
|                                            |  |                                                                                                                    |  |     
|Item 15.                                    |  | Exhibits
 and Financial Statement Schedules                                                                        |  | 30  
|Signatures                                  |  | 34                                                                                                                
|Index to
 Consolidated Financial Statements |  | F-1                                                                                                               

---



EXPLANATORY NOTE

This
Amendment No. 1 to ACL Semiconductors, Inc.s (the Company) Annual Report on Form 10-K/A for the year ended December 31, 2008 is being made to respond to certain comments received from the Staff
of the Securities and Exchange Commission (SEC).

This
Form 10-K/A amends and restates
Item 1, Item 1A and Item 2 of Part I, Item 5, Item 6, Item 7 and Item 9AT of
    Part II, Item 10, Item 11 and Item 13 of Part III, Report of Independent Registered
    Public Accounting Firm, Consolidated Statements of Operations, Consolidated
    Statements of Stockholders Equity (Deficit), Consolidated Statements
    of Cash Flows, and the Notes to Consolidated Financial Statements. No other
    information included in the original Form 10-K is amended hereby.

For
convenience and ease of reference, the Company is filing the Annual Report in
its entirety with applicable changes. Unless otherwise stated, all information
contained in this amendment is as of April 14, 2009, the filing date of
the original Annual Report. Except as stated herein, this Form 10-K/A does not
    reflect events or transactions occurring after such filing date or modify
    or update those disclosures in the Annual Report that may have been affected
    by events or transactions occurring subsequent to such filing date. No information
    in the Annual Report other than as set forth above is amended hereby. Currently-dated
certifications from our Chief Executive Officer and our Chief Financial Officer
have been included as exhibits to this amendment.

1

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FORWARD LOOKING STATEMENTS

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

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

PART I

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

General

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

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

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

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

Business

The
Company 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.

2

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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.

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

Approximately
80% of the Companys revenues are derived from sales of Samsung memory
products. As of December 31, 2008, pricing for the Samsung memory products
ranged from approximately $0.17 to $750 per product depending on the product
specifications.

The
Distribution Agreement has a one-year term and contains certain sales quotas to
be met by the Company. The Distribution Agreement has been renewed more than
ten times, most recently on March 1, 2008. The Company has never failed to meet
the sales quotas set forth in the Distribution Agreement.

Products

Synchronous
Dynamic Random Access Memory (SDRAMs), or mobile SDRAM, are the most widely
used semiconductor memory component in computer peripheral (HDD), DSC (digital
still camera), Modems, ADSL Applications, DVD player, STB (set-top box),
Digital TV, High Definition TV, PMP (Portable Multimedia Player).

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, Digital Still Cameras, 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 could gradually dominate the traditional hard
disk for notebook markets. Samsung is a major supplier in the world of FLASH
products. In 2008, Samsung NAND Flash revenue was approximately US$4,614
million, representing 40.4% of Flashs (NAND + NOR) market share.

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

Industry Background

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

Customers

As
of December 31, 2008, the Company had over 150 active customers in Hong Kong
and Southern China, the majority of whom are memory product traders and
PC/Servers OEM manufacturers. Sales to Aristo Technologies Ltd. (Aristo), a
related party, accounted for 4% and 11% of the Companys net sales for the
year ended December 31, 2008 and 2007. Other

3

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than the
Companys most significant customer who accounted for 43% of the Companys net
sales for the years ended December 31, 2008, no other customer accounted for
more than 25% of the Companys net sales for 2008 and 2007, respectively. In
order to control the Companys credit risks, the Company does not offer any
credit terms to its customers other than a small number of clients who have
long-established business relationships with the Company.

Sales and Marketing

As
of December 31, 2008, the Company employed a total of 15 sales and marketing personnel, each of
whom has several years experience in the memory products industry. Eight of these salespeople are
stationed in the Companys headquarters in Hong Kong, and seven of them work out of the
Companys representative office in Shenzhen, China as customer liaisons. 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. The Company intends to expand its sales force if levels of business
materially increase in the next twelve months.

Market Research

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

Suppliers

As
of December 31, 2008, a majority of the distributed products are Samsung memory
products. Since 1993, our procurement operations have been supported by Samsung
to ensure there are enough supplies of memory products according to our monthly
sales quota although there is no written long-term distribution agreement in
place with Samsung. Samsung is allocated quantities of its memory products each
year based on anticipated demand for such products by the customers of the
various distributors of Samsung memory products in Hong Kong and in the PRC.
The distributors that are supported by Samsung provide Samsung with their own
annual estimates of product demand. In case of unexpected strong demand in the
market exceeding our monthly sales quota, there is no assurance that Samsung
will be able to supply sufficient memory products to us and other non-exclusive
distributors to meet such demand in excess of Samsungs global allocation
policy to Samsung. In the event of a supply shortage, the market prices of such
memory products will rise and any loss of income attributable to our inability
to fulfill all of our orders would be offset by the increase in income as a
result of any increase in the market prices of such memory products.

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

Competition

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

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

Regulation

As
of December 31, 2008, the Companys business operations were not subject to the
regulations of any jurisdiction other than the Peoples Republic of China.
Although the Company is not formally authorized to do business in the Peoples
Republic of China, it has been permitted by the Chinese authorities to
establish a representative office in Shenzhen, China to carry out liaison works
for its customers in Southern China. The Company executes its sales contracts
and delivers its products in Hong Kong for its Chinese customers and there have
been no restrictions imposed on the Company by the mainland Chinese authorities
with respect to the Companys pursuit of business growth and opportunities in
China.

4

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Employees

As
of December 31, 2008, the Company had 43 employees. Of the 43 employees, 15
employees are in sales and marketing, 13 employees are in administration, 8
employees are in engineering, 7 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.

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 and use the same method of
calculating commission. Our relationship with Samsung is primarily maintained
through our Chairman Mr. Yang Chung Lun, who has verbally agreed to remain with
us. If our relationship with Samsung is terminated or if Mr. Yang terminates
his employment with us, we may be unable to replace or retain Samsung on
favorable terms.

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

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

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

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

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

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

5

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

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

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

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

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

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

The memory product industry is highly
competitive.

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

Current economic and political conditions may
harm our business.

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

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

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

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

One
shareholder, Mr. Yang, our Chief Executive Officer and Chairman of the Board of
Directors, holds approximately 78.9% of our outstanding Common Stock. By virtue
of his stock ownership, Mr. Yang will control all matters submitted to our
board and our stockholders, including the election of directors, and will be
able to exercise control over our business, policies and affairs. Since he has
substantial voting power, he could cause us to take actions that we would not
otherwise consider, or could delay, deter or prevent a change of control or
other business combination that might otherwise be beneficial to our
stockholders.

6

---



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

There
has been significant volatility in the market prices for publicly traded shares
of computer related companies, including ours. From September 30, 2003, the
effective date of the reverse-acquisition of Atlantic, to March 31, 2009, the
closing price of our Common Stock fluctuated from a per share high of $2.95 to
a low of $0.06 per share. The per share price of our Common Stock may not
remain at or exceed current levels. The market price for our Common Stock, and
for the stock of electronic companies generally, has been highly volatile. The
market price of our Common Stock may be affected by: (1) incidental level of
demand and supply of the stock; (2) daily trading volume of the stock; (3)
number of public stockholders in our stock; (4) fundamental results announced
by ACL; and (5) any other unpredictable and uncontrollable factors.

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

We
are authorized to issue 50,000,000 shares of Common Stock. As of December 31,
2008, there were 28,329,936 shares of our Common Stock issued and outstanding.

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

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

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

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

7

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

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

We
lease a warehouse unit of approximately 1,846 square feet that is located at
B14-15, 1/F., Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon
Bay, Kowloon, Hong Kong. The lease is for two years, from May 23, 2007 to May
22, 2009, from Lin Chin Hsiung with monthly lease payments of HK$16,800
(approximately US$2,154).

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

We
lease a warehouse unit of approximately 968 square feet that is located at B10,
1/F., Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon Bay,
Kowloon, Hong Kong. The lease was for two years with Solution Semiconductor
(China) Ltd. and expired on March 31, 2009, with monthly rentals of HK$8,500
(approximately US$1,090). The lease continues on a month-to-month basis and the
Company expects to renew it. Mr. Ben Wong, one of our directors, is also a 99%
shareholder of Solution Semiconductor (China) Ltd.

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

We
lease an office unit of approximately 2,682.9 square feet that is located at
Room 2208, 22/F., Building A, United Plaza, No.5022 Binhe Road, Futian Centre,
Shenzhen, China. The lease is from August 24, 2007 to August 23, 2010 with
monthly lease payments of RMB20,122 (approximately US$2,719).

We
own an investment property of approximately 3,000 square feet located at No.
76, 5th Street, Hong Lok Yuen, Tai Po, New Territories, Hong Kong, which is
leased to Macdermid Hong Kong Limited from August 1, 2007 to August 31, 2009
with monthly lease income of HK$58,000 (approximately US$7,436).

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

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

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

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

|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders

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

8

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PART II

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

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

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

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

As
of April 6, 2009, there were approximately 209 holders of record of our Common
Stock.

Dividend Policy

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

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.

9

---



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

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

As
of December 31, 2008, there were no options outstanding under the Plan.

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

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

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

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

Overview

Corporate Background

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

As
of December 31, 2008, we had over 150 active customers in Hong Kong and
Southern China.

Depending
on the product specifications, pricing for the Samsung memory products range
from approximately $0.17 to $750. We sell our products in Hong Kong and
Southern China and do not anticipate selling our products outside of these
regions in the foreseeable future.

For
the years ended December 31, 2008 and 2007, the largest 5 customers accounted
for 64% and 61% of our net sales, respectively. As of December 31, 2008, we had
net current liabilities of $31,152,455 and an accumulated deficit of
$2,560,216. We generated net sales of $206,082,770 for the year ended December
31, 2008 and recorded a net loss of $922,039. In addition, during the year
ended December 31, 2008, net cash provided by operating activities amounted to
$174,125.

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.

10

---



Net sales

Net
sales are recognized upon the transfer of legal title of the electronic
components to customers. As of December 31, 2008 we had over 150 active
customers.

Net
sales for fiscal year 2008 were $206,082,770, which increased by 28% or
$45,677,846 compared to fiscal year 2007. The major sales increase came from
the first half of 2008 due to expansion in China market share and the reduction
in production capacities by Samsungs rival, Hynix, and other memory makers,
which led to larger demand for Samsungs products. The net sales for the
quarter ended December 31, 2008 (2008 4th Quarter) was
$56,609,629, representing an increase of 7% compared to $52,743,506 for the
quarter ended December 31, 2007 (2007 4th Quarter). The sales
increase is clearly smaller due to the impact on market demand, financial
support and cash flow due to recent economic conditions. More memory makers
such as Qimonda, Elpida and Micron reported strong cutbacks in production
capacities to clear up excess supply. With large amounts of supplies pouring
into the market, the prices of memory components have dropped significantly.
Through the Companys expanded network, sales volume has increased
significantly to maintain high sales turnover during recent economic
conditions.

The
Companys gross profit for fiscal year 2008 was $4,201,977, representing a 9%
increase compared to $3,871,289 for fiscal year 2007. The growth was due to the
successful promotional campaign with Samsung in the second quarter and the high
demand for consumer electronics from the Olympic Games in the third quarter. The
gross profit for 2008 4th Quarter was $595,905, as compared to
$831,161 for 2007 4thQuarter, representing a 28% decrease. The
gross profit margin for the Company for 2008 4th Quarter was 1.05%,
compared to 1.58% for the corresponding quarter in 2007. The decrease in gross
profit margin was mainly due to low unit prices caused by oversupply of
products. Even though manufacturers reduced their production capacities, recent
economic conditions still have a strong impact on market demand. This has led
to inventory consumption problems and caused manufacturers to dump excess
inventories at very low prices. Due to slow price adjustments from Samsung, the
Company had to bear the difference between the contract prices and market
prices, which caused the gross profit margin to decrease. Furthermore, it has
also affected the Companys commission income.

The
Company reported income from operations of $26,656 and loss before income tax
of $955,910 for fiscal year 2008. The results
were adversely affected mainly due to losses in book value of non-cash items,
such as a decrease in the value of the Companys real property assets of
$883,117 and adjustments due to unrealized gains on securities of $227,781. The
adjustment of unrealized gains on securities is due to sales of investment
securities at a lower value on June 20, 2008 compared to December 31, 2007. The
unrealized loss on revaluation of the Companys real property assets was
due to the property market downturn caused by recent economic conditions and
the determination of the unrealized loss on revaluation was made by the Companys
Board of Directors based on its direct comparison of the Companys book
value of such real properties against the quoted market prices of comparable
properties in Hong Kong. The Company engaged an independent professional
surveyor to inform its analysis, but management of the Company assumes full
responsibility for such determination. The real properties which the Company
owns are exclusively properties in Hong Kong.

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

Cost of Sales

Cost
of revenues consists of costs of goods purchased from our principal supplier,
Samsung and purchases from other Samsung authorized distributors. Many factors
affect our gross margin, including, but not limited to, the volume of
production orders placed on behalf of our customers, the competitiveness of the
memory products industry and the availability of cheaper Samsung memory
products from overseas Samsung distributors due to regional demand and supply
situation. Nevertheless, our procurement operations are supported by Samsung,
although there is no written long-term supply agreement in place between us and
Samsung. Our cost of goods, as a percentage of total revenues, amounted to
approximately 97.9% for the year ended December 31, 2008 and approximately
97.6% for the year ended December 31, 2007.

Operating Expenses

Our
operating expenses for the years ended December 31, 2008 and 2007 were
comprised of sales and marketing, general and administrative expenses.

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

General
and administrative expenses include all corporate and administrative functions
that serve to support our current and future operations and provide an
infrastructure to support future growth. Major items in this category include
management and staff salaries, rent/leases, professional services, and travel
and entertainment. We expect these expenses to remain at approximately the same

11

---



level in 2009.
Sales and marketing costs are expected to fluctuate due to the addition of
sales personnel and various marketing activities planned throughout the year.

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

Critical Accounting Policies

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

Revenue Recognition

The
Company derives revenues from resale of computer memory products. The Company
recognizes revenue in accordance with the SEC Staff Accounting Bulletin No.
104, Revenue Recognition (SAB 104). Under SAB 104, revenue is recognized when
there is persuasive evidence of an arrangement, delivery has occurred or
services are rendered, the sales price is determinable, and collectability is
reasonably assured. Revenue typically is recognized at time of shipment. Sales
are recorded net of discounts, rebates, and returns, which historically were
not material.

Inventory Valuation

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

Allowance for Doubtful Accounts

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

Results of Operations

The
following table sets forth audited consolidated statements of operations data
for the years ended December 31, 2008 and 2007 and should be read in
conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations and our
financial statements and the related notes appearing elsewhere in this
document.

|                                             |  |                                |             |      |  |             |  
|-------------------------------------------- |  | ------------------------------ | ----------- | ---- |  | ----------- | -
|                                             |  | Year Ended December 31,
 (US$) |            
|                                             |  | 2008                           |             | 2007 | 
|                                             |  |                                |             |      | 
|                                             |  |                                |             |      |  |             |  
|Net sales                                    |  |                                | 206,082,770 |      |  | 160,404,924 |  
|Cost of sales                                |  |                                | 201,820,793 |      |  | 156,553,635 |  
|Gross profit                                 |  |                                | 4,201,977   |      |  | 3,871,289   |  
|                                             |  |                                |             |      |  |             |  
|Operating expenses:                          |  |                                |             |      |  |             |  
|Sales and marketing                          |  |                                | 76,072      |      |  | 69,260      |  
|General and administrative                   |  |                                | 4,099,299   |      |  | 2,942,542   |  
|Total operating expenses                     |  |                                | 4,175,321   |      |  | 3,011,802   |  
|                                             |  |                                |             |      |  |             |  
|Income from operations                       |  |                                | 26,656      |      |  | 859,487     |  
|Other income (expenses)                      |  |                                | (982,566    | )    |  | (235,562    | )
|(Loss) income before income
 taxes provision |  |                                | (955,910    | )    |  | 623,925     |  
|Income taxes (reversal) provision            |  |                                | (33,871     | )    |  | 187,833     |  
|Net (loss) income                            |  |                                | (922,039    | )    |  | 436,092     |  

12

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

Net Sales

|                        |             |      |   |             |  |  |       | 
|----------------------- | ----------- | ---- | - | ----------- |  |  | ----- | 
|Year Ended December 31, |             |      |  
|2008                    |             | 2007 |   | % Change    | 
|                        |             |      |   |             | 
|                        |             |      |   |             |  |  |       | 
|$                       | 206,082,770 |      | $ | 160,404,924 |  |  | 28.5% | 

Sales
increased by $45,677,846 or 28.5% from $160,404,924 for the year ended December
31, 2007 to $206,082,770 for the year ended December 31, 2008. The increase was
mainly due to expansion in South China market share and the reduction in
production capacities by Samsung, resulting in a higher turnover when compared
to the year ended December 31, 2007.

Cost of Sales

|                        |             |      |   |             |  |  |       | 
|----------------------- | ----------- | ---- | - | ----------- |  |  | ----- | 
|Year Ended December 31, |             |      |  
|2008                    |             | 2007 |   | % Change    | 
|                        |             |      |   |             | 
|                        |             |      |   |             |  |  |       | 
|$                       | 201,880,793 |      | $ | 156,533,635 |  |  | 29.0% | 

Cost
of sales increased $45,347,158 or 29%, from $156,533,635 for the year ended
December 31, 2007 to $201,880,793 for the year ended December 31, 2008. The
cost of sales increased in proportion to the increase of net sales and
reduction of commission by Samsung.

Gross Profit

|                        |           |      |   |           |  |  |      | 
|----------------------- | --------- | ---- | - | --------- |  |  | ---- | 
|Year Ended December 31, |           |      |   |          
|2008                    |           | 2007 |   | % Change  | 
|                        |           |      |   |           | 
|                        |           |      |   |           |  |  |      | 
|$                       | 4,201,977 |      | $ | 3,871,289 |  |  | 8.5% | 

Gross
profit increased by $330,688 or 8.5% from $3,871,289 for the year ended
December 31, 2007 to $4,201,977 for the year ended December 31, 2008. The
slight increase in gross profit amount is mainly due to the increase in net
sales. The gross profit percentage decreased to 2% of revenue for the year
ended December 31, 2008 compared to 2.4% of revenue for the year ended December
31, 2007, as a result of recent economic conditions that have had a strong
impact on market demand and low unit prices caused by oversupply. We expect the
gross profit for the year ended December 31, 2009 to remain at approximately
the same level as in the year ended December 31, 2008.

Sales and Marketing

|                        |        |      |   |          |  |  |      | 
|----------------------- | ------ | ---- | - | -------- |  |  | ---- | 
|Year Ended December 31, |        |      |  
|2008                    |        | 2007 |   | % Change | 
|                        |        |      |   |          | 
|                        |        |      |   |          |  |  |      | 
|$                       | 76,072 |      | $ | 69,260   |  |  | 9.8% | 

Sales
and marketing expenses increased by $6,812, or 9.8%, from $69,260 for the year
ended December 31, 2007 to $76,072 for the year ended December 31, 2008. The
increase was in proportion to the increase in net sales for the year 2008. We
expect the sales and marketing expenses for the year ended December 31, 2009 to
remain at approximately the same level as the year ended December 31, 2008.

General and Administrative

|                        |           |      |   |           |  |  |       | 
|----------------------- | --------- | ---- | - | --------- |  |  | ----- | 
|Year Ended December 31, |           |      |  
|2008                    |           | 2007 |   | % Change  | 
|                        |           |      |   |           | 
|                        |           |      |   |           |  |  |       | 
|$                       | 4,099,249 |      | $ | 2,942,542 |  |  | 39.3% | 

General
and administrative expenses increased $1,156,707 or 39.3% from $2,942,542 for
the year ended December 31, 2007 to $4,099,249 for the year ended December 31,
2008. This increase was primarily attributable to an increase in Shenzhen
office expenses during the year 2008 and an unrealized loss on values of our
real property assets in the aggregate amount of $883,117. We intend to continue
to keep general and administrative expenses for the year ended December 31,
2009 at approximately the same level as the year ended December 31, 2008. The
loss on value of our real property assets in the aggregate amount of $883,117 was
determined by the Board of Directors of the Company based on the fair value of
such properties as of December 31, 2008 as compared to the book

13

---



value of such
properties prior thereto. In valuing our property assets, we used a direct
comparison methodology and assumed vacant possession on existing use and that
general economic and market conditions would not materially change in the
foreseeable future. The Company engaged an independent professional surveyor to
inform its analysis, but management of the Company assumes full responsibility
for such determination.

Income from Operations

|                        |        |      |   |          |  |  |        | 
|----------------------- | ------ | ---- | - | -------- |  |  | ------ | 
|Year Ended December 31, |        |      |  
|2008                    |        | 2007 |   | % Change | 
|                        |        |      |   |          | 
|                        |        |      |   |          |  |  |        | 
|$                       | 26,656 |      | $ | 859,487  |  |  | -96.9% | 

Income
from operations was $26,656 for the year ended December 31, 2008 compared to
$859,487 for the year ended December 31, 2007, a decrease of $832,831. This
increase was mainly due to unrealized losses on values of the Companys
real property assets of $883,117 net of increase in gross profit.

Interest Expense

|                        |           |      |   |           |  |  |      | 
|----------------------- | --------- | ---- | - | --------- |  |  | ---- | 
|Year Ended December 31, |           |      |  
|2008                    |           | 2007 |   | % Change  | 
|                        |           |      |   |           | 
|                        |           |      |   |           |  |  |      | 
|$                       | 1,073,795 |      | $ | 1,009,006 |  |  | 6.4% | 

Interest
expense increased $64,789, or 6.4%, from interest expense of $1,009,006 in the
year ended December 31, 2007, to $1,073,795 in the year ended December 31,
2008. This increase was mainly due to an increase in the Companys need to open
and draw down on letters of credit to obtain goods from its suppliers. We
expect to keep interest expenses for the year ended December 31, 2009 at
approximately the same level as in the year ended December 31, 2008.

Unrealized Gains on Pledged Marketable
Securities

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

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

Loss on Disposal of Marketable Securities

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

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

14

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Net Income on Cash Flow Hedge

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

Net
income on cash flow hedge increased by $96,698 from $64,590 in the year ended
December 31, 2007 to $161,288 in the year ended December 31, 2008. This
increase was due to the Company entering into more currency hedging contracts
through its banks in 2008. Details of the currency hedging contracts can be
found in Note 11 on page F-21.

Interest Income

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

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

Income Tax Provision (reversal)

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

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

Net Income

|                        |          |      |   |          |  |  |         | 
|----------------------- | -------- | ---- | - | -------- |  |  | ------- | 
|Year Ended December 31, |          |      |   |         
|2008                    |          | 2007 |   | % Change | 
|                        |          |      |   |          | 
|                        |          |      |   |          |  |  |         | 
|$                       | (922,039 | )    | $ | 436,092  |  |  | -311.4% | 

Our
net income decreased by $1,358,131 from $436,092 for the year ended December
31, 2007 compared to a net loss of $922,039 for the year ended December 31,
2008. This decrease was mainly due to the decrease in profit margin and other
income and the increase in the provision for impairment loss on valuation of
the Companys real property assets.

Liquidity and capital resources

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

As
of December 31, 2008, the Company had revolving lines of credit and loan
facilities in the aggregate amount of $30,943,589, of which $11,334,309 was
available for drawdown as short-term loans repayable within 90 days. Detailed
disclosures regarding our outstanding credit facilities are set forth in Notes
3 and 4 of the Notes to Consolidated Financial Statements on pages F-15 to
F-18, including the amounts of the facilities, outstanding balances, interest
rates, maturity periods (for long term loans) and pledge of assets.

Our
ability to draw down under our various credit and loan facilities is, in each
case, subject to the ongoing willingness of the relevant lending institution to
make advances thereunder, and security coverage ratios as required from time to
time. No assurance can be given that we will continue to have access to these
or other lines of credit in the same amount or at all. Subsequent to December
31, 2008, the Company terminated two credit lines with the banks in an
aggregate amount of $2,884,616 or 9.3% of the Companys total credit and loan
facilities. In connection therewith, $1,597,436 of restricted bank deposits
which were previously used to secure such lines of credit were released to the
Company. As a result of the general tightening of credit markets in Hong Kong
and Asia, many lenders have revised the terms of their revolving credit lines
to levels the Company did not deem commercially reasonable. Accordingly,
on a case by case basis, the Company has elected to terminate or not renew several of its credit facilities
resulting in a significant reduction in the Companys available short term borrowings.

15

---



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

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

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

The
following factors, among others, could have negative impacts 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, 2008, net cash provided by operating activities
amounted to $174,125 while in the year ended December 31, 2007, it amounted to
$1,125,907, a decrease of $951,782. This decrease was primarily due to a
$3,092,645 increase in accounts receivable, which was partially offset by a
$1,613,799 decrease in inventory, and increases of $1,077,494 in accounts
payable and $210,017 of accrued expenses.

Net Cash Used for Investing Activities

In
the year ended December 31, 2008, net cash used for investing activities amounted
to $616,615 while in the year ended December 31, 2007, it amounted to
$6,412,547, a decrease of $5,795,932. This decrease was primarily due to sales
of investments in marketable securities and no real property acquisition
activity during the year 2008.

Net Cash Provided by Financing Activities

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

Contractual
Obligations

The following
table presents our contractual obligations as of December 31, 2008 over the
next five years and thereafter:

|                                               |  |        |            |                    |   |            |  |            |         |                |   |         |  |   |           | 
|---------------------------------------------- |  | ------ | ---------- | ------------------ | - | ---------- |  | ---------- | ------- | -------------- | - | ------- |  | - | --------- | 
|Payments by Period                             | 
|                                               | 
|                                               |  | Amount |            | Less
 Than
 1 Year |   | 1-3
 Years |  | 4-5
 Years |         | After 5
 Years |  
|                                               |  |        |            |                    |   |            |  |            |         |                |  
|Operating Leases                               |  |        | 78,433     |                    |   | 53,333     |  |            | 25,100  |                |   |        |  |   |          | 
|Line of credit and notes payable 
 short-term |  |        | 16,447,742 |                    |   | 16,447,742 |  |            |        |                |   |        |  |   |          | 
|Short term loans                               |  |        | 10,016     |                    |   | 10,016     |  |            |        |                |   |        |  |   |          | 
|Long term loans                                |  |        | 2,613,994  |                    |   | 209,114    |  |            | 359,232 |                |   | 257,789 |  |   | 1,787,859 | 
|                                               |  |        |            |                    |   |            |  |            |         |                |   |         |  |   |           | 
|Total Contractual Obligations                  |  | $      | 19,150,185 |                    | $ | 16,720,205 |  | $          | 384,332 |                | $ | 257,789 |  | $ | 1,787,859 | 
|                                               |  |        |            |                    |   |            |  |            |         |                |   |         |  |   |           | 

Off-Balance
Sheet Arrangements

None.

16

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Related Party
Transactions

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

Dependence of Samsung

We
are highly dependent on the product supplies from Samsung. If the relationship
with Samsung is terminated, we may not be able to continue our business. We
have been taking necessary steps to reduce our dependence on Samsung, including
looking into the potential acquisition of a company.

Impact of Inflation

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

Seasonality

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

New Accounting
Pronouncements

In
February 2008, the FASB issued FSP FIN 48-2, Effective Date of FASB
Interpretation No. 48 for Certain Nonpublic Enterprises. This FASB Staff
Position (FSP) defers the effective date of FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, for certain nonpublic enterprises
as defined in paragraph 289, as amended, of FASB Statement No. 109, Accounting
for Income Taxes, including nonpublic not-for-profit organizations. This FSP
shall be effective upon issuance. The Company does not anticipate that this new
FSP will have any material impact upon its financial condition or results of
operations.

In
February 2008, the FASB issued FSP FAS 140-3, Accounting for Transfers of
Financial Assets and Repurchase Financing Transactions. This FSP applies to a
repurchase financing, which is a repurchase agreement that relates to a
previously transferred financial asset between the same counterparties (or
consolidated affiliates of either counterparty), that is entered into
contemporaneously with, or in contemplation of, the initial transfer. This FSP shall
be effective for financial statements issued for fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years. Earlier
application is not permitted. The Company does not anticipate that this new FSP
will have any material impact upon its financial condition or results of
operations.

In
February 2008, the FASB issued FSP FAS 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That
Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13. This FSP amends SFAS No. 157, Fair Value
Measurements, to exclude FASB Statement No. 13, Accounting for Leases, and
other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under Statement 13. However,
this scope exception does not apply to assets acquired and liabilities assumed
in a business combination that are required to be measured at fair value under
FASB Statement No. 141, Business Combinations, or No. 141 (revised 2007),
Business Combinations, regardless of whether those assets and liabilities are
related to leases. This FSP shall be effective upon the initial adoption of
Statement 157. The Company does not anticipate that this new FSP will have any
material impact upon its financial condition or results of operations.

In
February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement
No. 157. This FASB Staff Position (FSP) delays the effective date of FASB
Statement No. 157, Fair Value Measurements, for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least
annually). This FSP shall be effective upon issuance. The Company does not
anticipate that this new FSP will have any material impact upon its financial
condition or results of operations.

In
April 2008, the FASB issued FSP SOP 90-7-1, An Amendment of AICPA Statement of
Position 90-7. This FSP resolves the conflict between the guidance requiring
early adoption of new accounting standards for entities required to follow
fresh-start reporting under AICPA Statement of Position 90-7, Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code, and other
authoritative accounting standards that expressly prohibit early adoption. This
FSP shall be effective for financial statements issued subsequent to the date
of issuance of this FSP. The Company does not anticipate that this new FSP will
have any material impact upon its preparation of its financial statements.

In
April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of
Intangible Assets. This FSP amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement No. 142, Goodwill and
Other Intangible Assets. The intent of this FSP is to improve the consistency
between the useful life of a recognized intangible asset under Statement 142
and the period of expected cash flows used to measure the fair value of the
asset under FASB Statement No. 141 (revised 2007), Business Combinations, and
other U.S. generally accepted accounting principles (GAAP). This FSP shall be
effective for financial statements issued for fiscal years beginning after

17

---



December 15,
2008, and interim periods within those fiscal years. Early adoption is
prohibited. The Company does not anticipate that this new FSP will have any
material impact upon its preparation of its financial statements.

In
May 2008, the FASB issued Statement of Financial Accounting Standards No. 162,
The Hierarchy of Generally Accepted Accounting Principles (SFAS No.162).
SFAS No. 162 identifies the sources of accounting principles and the framework
for selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles (GAAP) in the United States (the GAAP
hierarchy). This Statement shall be effective 60 days following the SECs
approval of the Public Company Accounting Oversight Board (PCAOB) amendments to
AU Section 411, The Meaning of Present Fairly in Conformity With General
Accepted Accounting Principles. The Company does not anticipate that SFAS No.
162 will have any material impact upon its preparation of its financial
statements.

In
May 2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement). This FSP clarifies that convertible debt instruments that may be
settled in cash upon conversion (including partial cash settlement) are not
addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible
Debt and Debt issued with Stock Purchase Warrants. Additionally, this FSP
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entitys
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. This FSP is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. The Company does not anticipate that this new FSP will have
any material impact upon its financial condition or results of operations.

In
May 2008, the FASB issued Statement of Financial Accounting Standards No. 163,
Accounting for Financial Guarantee Insurance Contractsan interpretation of
FASB Statement No. 60 (SFAS No.163). SFAS No. 163 requires that an insurance
enterprise recognize a claim liability prior to an event of default (insured
event) when there is evidence that credit deterioration has occurred in an
insured financial obligation. SFAS No. 163 also clarifies how Statement 60
applies to financial guarantee insurance contracts, including the recognition
and measurement to be used to account for premium revenue and claim
liabilities. SFAS No. 163 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and all interim periods within
those fiscal years, except for some disclosures about the insurance
enterprises risk-management activities. The Company does not anticipate that
SFAS No. 163 will have any material impact upon its preparation of its
financial statements.

In
May 2008, the FASB issued FSP SOP 94-3-1 and AAG HCO-1, Omnibus Changes to
Consolidation and Equity Method Guidance for Not-for-Profit Organizations.
This FSP makes several changes to the guidance on consolidation and the equity
method of accounting in AICPA Statement of Position 94-3, Reporting of Related
Entities by Not-for-Profit Organizations, and the AICPA Audit and Accounting
Guide, Health Care Organizations. The guidance in this FSP shall be applied
to fiscal years beginning after June 15, 2008, and to interim periods therein.
The Company does not anticipate that this FSP will have any material impact
upon its preparation of its financial statements.

In
June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities.
The guidance in this FSP applies to the calculation of EPS under Statement 128
for share-based payment awards with rights to dividends or dividend equivalents.
Unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included in the computation of EPS pursuant to the
two-class method. This FSP shall be effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those years. Early application is not permitted. The Company does not
anticipate that this FSP will have any material impact upon its preparation of
its financial statements.

In
August 2008, the FASB issued FSP FSA 117-1, Endowments of Not-for Profit
Organizations: Net Asset Classification of Funds Subject to an Enacted Version
of the Uniform Prudent Management of Institutional Funds Act and Enhanced
Disclosures for All Endowment Funds. This FSP provides guidance on the net
asset classification of donor-restricted endowment funds for a not-for-profit
organization that is subject to an enacted version of the Uniform Prudent
Management of Institutional Funds Act of 2006. This FSP will be effective for
fiscal years ending after December 15, 2008. The Company does not anticipate
that this FSP will have any material impact upon its preparation of its
financial statements.

18

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In
September 2008, the FASB issued FSP FAS 133-1 and FIN 45-4, Disclosures about
Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No.
133 and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161. This FSP applies to credit derivatives within the
scope of Statement 133, hybrid instruments that have embedded credit
derivatives, and guarantees within the scope of Interpretation 45. This FSP
shall be effective for reporting periods (annual or interim) ending after
November 15, 2008. The Company does not anticipate that this FSP will have any
material impact upon its preparation of its financial statements.

In December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, Disclosures
    by Public Entities (Enterprises) about Transfers of Financial Assets and
    Interests in Variable Interest Entities. This FSP amends FASB Statement
    No. 140, Accounting for Transfers and Servicing of Financial Assets
    and Extinguishments of Liabilities, to require public entities to provide
    additional disclosures about transfer of financial assets. It also amends
    FASB Interpretation No. 46 (revised December 2003), Consolidation of
    Variable Interest Entities, to require public enterprises, including
    sponsors that have a variable interest in a variable interest entity, to
    provide additional disclosures about their involvement with variable interest
    entities. This FSP will be applied to the first reporting period (interim
    or annual) ending after December 15, 2008. The Company does not anticipate
    that this FSP will have any material impact upon its preparation of its financial
statements.

In
December 2008, the FASB issued FSP FAS 132 (R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets. This FSP amends FASB Statement No. 132
(revised 2003), Employers Disclosures about Pensions and Other Postretirement
Benefits, to provide guidance on an employers disclosures about plan assets
of a defined benefit pension or other postretirement plan. This FSP shall be
applied to fiscal years ending after December 15, 2009. The Company does not
anticipate that this FSP will have any material impact upon its preparation of
its financial statements.

In
December 2008, the FASB issued FSP FIN 48-3, Effective Date of FASB
Interpretation No. 48 for Certain Nonpublic Enterprises. This FSP defers the
effective date of FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, for certain nonpublic enterprises as defined in paragraph 289,
as amended, of FASB Statement No. 109, Accounting for Income Taxes, including
nonpublic not-for-profit organizations. This FSP will be effective upon
issuance. The Company does not anticipate that this FSP will have any material
impact upon its preparation of its financial statements.

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

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

Management Report on Internal Control over Financial Reporting

In
connection with the preparation of this Form 10-Q, we carried out an evaluation
under the supervision and with the participation of our management, including
the CEO and CFO, of the effectiveness of the design and operation of our
disclosure controls and procedures, as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act. This evaluation was retrospective and
conducted as of December 31, 2008, the last day of the fiscal year covered by
this Form 10-K. Based upon that evaluation, our CEO and CFO have concluded that
our disclosure controls and procedures were not effective as of December 31,
2008 because we have not completed the remediation discussed elsewhere in this
Item 9AT of our Annual Report on Form 10-K for the fiscal year ended December
31, 2008.

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

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

19

---



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

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,

20

---



|                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                         | 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, 2008, we had not completed the remediation of any of these
 material weaknesses. In addition, although we are including our management report
     in this Annual Report on Form 10K/A, our failure to file a management report
     for the periods ended December 31, 2008 and December 31, 2007 in a timely
    manner renders our disclosure controls and procedures ineffective.
|                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|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.
We likely will not have sufficient time to implement our remediation plan
before testing our internal control over financial reporting for our current
fiscal year that will end December 31, 2009.

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

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

Changes in Internal Control over Financial
Reporting

Except
as described above, there have been no changes in our internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fourth quarter ended December 31, 2008 that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

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

None.

21

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PART III

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

Directors and Executive Officers

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

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

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

Ben
Wong, Director. Mr. Wong became a Director on
September 30, 2003. Since 1992, Mr. Wong has been the vice-president of
Atlantic and is responsible for the purchasing, sales and marketing of Atlantics
products. Mr. Wong graduated from the Chinese Culture University of Taiwan in
1986 with a Bachelors Degree of Science in Mechanical Engineering.

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

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

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

Board Meetings

During
the fiscal year ended December 31, 2008, our Board of Directors held 4
meetings. No director who served during the fiscal year ended December 31, 2008
attended fewer than 75% of the meetings of the Board of Directors during that
year.

Committees of The Board

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

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., B24-B27,1/F., Block B, Proficient Industrial Centre, 6
Wang Kwun Road, 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.

22

---



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., B24-B27,1/F., Block B,
Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon, Hong Kong. All
communications received at the above address will be relayed to the Board of
Directors or the non-management directors, respectively. Communications
regarding accounting, internal accounting controls or auditing matters may also
be reported to the Board of Directors using the above address.

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

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

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

Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors and executive officers and persons who own more than ten percent of a
registered class of our equity securities (collectively, Reporting Person) to
file with the SEC initial reports of ownership and reports of changes in
ownership of our Common Stock and other equity securities of the Company.
Reporting Persons are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms that they file. To our knowledge, based
solely on a review of the copies of such reports furnished to us, we believe
that during fiscal year ended December 31, 2008 all Reporting Persons complied
with all applicable filing requirements.

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

COMPENSATION DISCUSSION AND ANALYSIS

Summary

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

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

Named Executive Officers

The
named executive officers for the fiscal year ended December 31, 2008 are
Chung-Lun Yang, our Chief Executive Officer, and Kenneth Lap-Yin Chan, our
Chief Financial Officer. These individuals are referred to collectively in this
Annual Report on Form 10-K/A as the Named Executive Officers.

23

---



OUR EXECUTIVE COMPENSATION PROGRAM

Overview

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

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

ELEMENTS OF OUR EXECUTIVE COMPENSATION
PROGRAM

Base Salary

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

Bonuses

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

Stock Options

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

Retirement and Deferred Compensation Benefits

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

Perquisites

There
were no perquisites provided to the Named Executive Officers.

Post-Termination/Change of Control
Compensation

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

Tax Implications of Executive Compensation

Our
aggregate deductions for each Named Executive Officer compensation are
potentially limited by Section 162(m) of the Internal Revenue Code to the
extent the aggregate amount paid to an executive officer exceeds $1 million,
unless it is paid under a predetermined objective performance plan meeting
certain requirements, or satisfies one of various other exceptions specified in
the Internal Revenue Code. At our 2008 Named Executive Officer compensation
levels, we did not believe that Section 162(m) of the Internal Revenue Code
would be applicable, and accordingly, we did not consider its impact in
determining compensation levels for our Named Executive Officers in 2008.

24

---



Hedging Policy

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

Option Exercises and Stock Vested

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

Pension Benefits

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

Nonqualified Deferred Compensation

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

Employment Agreements

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

Executive Officer Compensation

The
following table sets forth the annual and long-term compensation of our Named
Executive Officers for services in all capacities to the Company for the last
two fiscal years ended December 31, 2008 and December 31, 2007.

Summary Compensation Table

|                             |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            |  |   |  |   |        |  |   |         | 
|---------------------------- |  | -------- |  | ----------- | ------- | ------------ |  | -------------------- |  | --------------------- | - | --------------------------------------------- |  | ---------------------------------------------------------------------------------- |  | ---------------------------- | - | ---------- |  | - |  | - | ------ |  | - | ------- | 
|Name and
 Principal Position |  | Year (1) |  | Salary
 ($) |         | Bonus (2)($) |  | Stock
 Awards (3)($) |  | Option
 Awards (4)($) |   | Non-Equity
 Incentive Plan
 Compensation
 ($) |  | Change in
 Pension Value
 and
 Nonqualified
 Deferred
 Compensation
 Earnings
 ($) |  | All Other
 Compensation
 ($) |   | Total
 ($) | 
|                             |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            | 
|                             |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            |  |   |  |   |        |  |   |         | 
|Chung-Lun                    |  | 2008     |  | $           | 735,026 |              |  |                     |  |                       |  |                                               |  |                                                                                   |  |                              |  |            |  |  |  | $ |       |  | $ | 735,026 | 
|Yang,                        |  | 2007     |  | $           | 812,821 |              |  |                     |  |                       |  |                                               |  |                                                                                   |  |                              |  |            |  |  |  | $ | 17,521 |  | $ | 830,342 | 
|Chief                        |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            |  |   |  |   |        |  |   |         | 
|Executive                    |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            |  |   |  |   |        |  |   |         | 
|Officer and                  |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            |  |   |  |   |        |  |   |         | 
|Chairman of                  |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            |  |   |  |   |        |  |   |         | 
|the Board                    |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            |  |   |  |   |        |  |   |         | 
|                             |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            |  |   |  |   |        |  |   |         | 
|Kenneth Lap                  |  | 2008     |  | $           | 64,615  |              |  |                     |  |                       |  |                                               |  |                                                                                   |  |                              |  |            |  |  |  | $ |        |  | $ | 64,615  | 
|Yin Chan,                    |  | 2007     |  | $           | 72,435  |              |  |                     |  |                       |  |                                               |  |                                                                                   |  |                              |  |            |  |  |  | $ |        |  | $ | 72,435  | 
|Chief
 Financial             |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            |  |   |  |   |        |  |   |         | 
|Officer                      |  |          |  |             |         |              |  |                      |  |                       |   |                                               |  |                                                                                    |  |                              |   |            |  |   |  |   |        |  |   |         | 

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

Outstanding equity awards at fiscal year-end

None.

25

---



Compensation of Directors

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

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

The
following table sets forth certain information regarding beneficial ownership
of our Common Stock as of December 31, 2008: (i) by each person who is known by
us to own beneficially more than 5% of the Common Stock, (ii) by each of our
directors, (iii) by each of our executive officers and (iv) by all our
directors and executive officers as a group. On such date, we had we had
28,329,936 shares of Common Stock outstanding.

As
used in the table below, the term beneficial ownership with respect to a
security consists of sole or shared voting power, including the power to vote
or direct the vote, and/or sole or shared investment power, including the power
to dispose or direct the disposition, with respect to the security through any
contract, arrangement, understanding, relationship, or otherwise, including a
right to acquire such power(s) during the 60 days immediately following
December 31, 2008. Except as otherwise indicated, the stockholders listed in
the table have sole voting and investment powers with respect to the shares
indicated

|                                       |  |                        |            |                       |  |      |  
|-------------------------------------- |  | ---------------------- | ---------- | --------------------- |  | ---- | -
|Name and
 Address of                   |  | Shares of Common Stock |            | Percentage of Class   | 
|                                       |  |                        |            |                       | 
|Beneficial
 Owner                      |  | Beneficially Owned     |            | Beneficially Owned(1) | 
|                                       |  |                        |            |                       | 
|Chung-Lun
 Yang (2) (3)                |  |                        | 22,380,000 |                       |  | 78.9 | %
|No. 78, 5th
 Street, Hong Lok Yuen,    |  |                        |            |                       |  |      |  
|Tai Po, New
 Territories, Hong Kong    |  |                        |            |                       |  |      |  
|                                       |  |                        |            |                       |  |      |  
|Ben Wong (3)                           |  |                        | 0          |                       |  | 0.0  | %
|19B, Tower
 8, Bellagio,               |  |                        |            |                       |  |      |  
|33 Castle
 Peak Road, Sham Tseng,      |  |                        |            |                       |  |      |  
|New
 Territories, Hong Kong            |  |                        |            |                       |  |      |  
|                                       |  |                        |            |                       |  |      |  
|Kenneth
 Lap-Yin Chan (2)              |  |                        | 0          |                       |  | 0.0  | %
|Flat B,
 8/F., Block 19,               |  |                        |            |                       |  |      |  
|South
 Horizons,                       |  |                        |            |                       |  |      |  
|Aplei Chau,
 Hong Kong                 |  |                        |            |                       |  |      |  
|                                       |  |                        |            |                       |  |      |  
|All
 Directors and Officers as a Group |  |                        | 22,380,000 |                       |  | 78.9 | %

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Applicable
 percentage of ownership is based on 28,329,936 shares of Common Stock
 outstanding as of December 31, 2008, together with securities exercisable or
 convertible into shares of Common Stock within 60 days of December 31, 2008,
 for each stockholder. Beneficial ownership is determined in accordance with
 the rules of the United States Securities and Exchange Commission and
 generally includes voting or investment power with respect to securities.
 Shares of Common Stock subject to securities exercisable or convertible into
 shares of Common Stock that are currently exercisable or exercisable within
 60 days of December 31, 2008, are deemed to be beneficially owned by the person
 holding such securities for the purpose of computing the percentage of
 ownership of such person, but are not treated as outstanding for the purpose
 of computing the percentage ownership of any other person. The Common Stock
 is the only outstanding class of equity securities of the Company.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(2) | Executive
 Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(3) | Director. Except as otherwise set forth, information on the stock ownership of these
 persons was provided to us by such persons.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

26

---



|         |                                                                           
|-------- | --------------------------------------------------------------------------
|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 Mr. Yang

As of December
31, 2008 and 2007, we had an outstanding receivable from Mr. Yang, the
President and Chairman of our Board of Directors, totaling $39,633 and $75,998.
These advances bear no interest and are payable on demand.

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

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

Transactions with Classic Electronic Ltd.

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

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

Transactions with Solution Semiconductor
(China) Ltd.

Mr. Ben Wong,
one of our directors, is a 99% shareholder of Solution Semiconductor (China)
Ltd. (Solution). The remaining 1% of Solution is owned by a non-related
party. On April 1, 2007, we entered into a lease agreement with Solution
pursuant to which we lease one facility. The lease agreement for this facility
expires on March 31, 2009. The monthly lease payment for this lease is $1,090.
We incurred and paid an aggregate rent expense of $13,077 and $12,385 to
Solution during the years ended December 31, 2008 and 2007.

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

Transactions with Systematic Information Ltd.

Mr. Yang, the
Companys Chief Executive Officer, majority shareholder and a director, is a
director and shareholder of Systematic Information Ltd. (Systematic
Information) with a total of 100% interest. On September 1, 2008, we entered
into a lease agreement with Systematic Information pursuant to which we lease
one facility. The lease agreement for this facility expires on August 31, 2010.
The monthly lease payment for this lease totals $641. We incurred and paid an
aggregate rent expense of $7,692 and $7,692 to Systematic Information during
the years ended December 31, 2008 and 2007.

During the
years ended December 31, 2008 and 2007, we received service charges of $0 and
$11,538 respectively from Systematic Information. As of December 31, 2008 and
2007, there were no outstanding accounts receivables from Systematic
Information. The service fee was charged for back office support for Systematic
Information.

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

27

---



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

Transactions with Aristo Technologies Ltd.

Mr. Yang is
the sole beneficial owner of the equity interests of Aristo Technologies Ltd.
(Aristo). During the years ended December 31, 2008 and 2007, we sold products
for $9,076,034 and $17,165,728 respectively, to Aristo. As of December 31, 2008
and 2007, outstanding accounts receivable totaled $6,695,409 and $6,237,905
respectively. We have not experienced any bad debt from this customer in the
past.

During the
years ended December 31, 2008 and 2007, we purchased inventories of $7,393,957
and $3,633,424 respectively from Aristo. As of December 31, 2008 and 2007,
there were no outstanding accounts payable to or from Aristo.

Aristo has
historically met its payment obligations to the Company and the Company has no
reason to believe that Aristos receivables are not collectible. In addition,
as discussed in Note 14, the Company entered into a payment plan with Aristo
according to which the outstanding balance of accounts receivable will be paid
over the course of 2010 which payment plan contains a due on demand clause.

Transactions with Global Mega Development
Ltd.

Mr. Yang, the
Companys Chief Executive Officer, majority shareholder and a director, is the
sole beneficial owner of the equity interest of Global Mega Development Ltd.
(Global). During the years ended December 31, 2008 and 2007, we received
management fees of $0 and $5,769 respectively from Global. As of December 31,
2008 and 2007, there were no outstanding accounts receivables from Global. The
management fees were charged for back office support for Global.

Transactions with Systematic Semiconductor
Ltd.

Mr. Yang, the
Companys Chief Executive Officer, majority shareholder and a director, is the
sole beneficial owner of the equity interest of Systematic Semiconductor Ltd.
(Systematic). During the years ended December 31, 2008 and 2007, we received
a management fee of $15,384 and $16,026 respectively from Systematic. As of
December 31, 2008 and 2007, there were no outstanding accounts receivables from
Systematic. The management fee was charged for back office support for Systematic.

Transactions with Aristo Components Ltd.

Mr. Ben Wong,
one of our directors, is a 90% shareholder of Aristo Components Ltd. (Aristo
Comp). The remaining 10% of Aristo Comp is owned by a non-related party.
During the years ended December 31, 2008 and 2007, we received a management fee
of $8,077 and $0 respectively from Aristo Comp. As of December 31, 2008 and
2007, there were no outstanding accounts receivable from Aristo Comp. The
management fee was charged for back office support for Aristo Comp.

Transactions City Royal Limited

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

28

---



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

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

|                        |  |             |        |             |   |        | 
|----------------------- |  | ----------- | ------ | ----------- | - | ------ | 
|                        |  | Fiscal 2008 |        | Fiscal 2007 |  
|Audit Fees
 (1)         |  | $           | 35,000 |             | $ | 35,000 | 
|Audit
 Related Fees (2) |  | $           |       |             | $ |       | 
|                        |  |             |        |             |   |        | 
|Tax Fees (3)            |  | $           |       |             | $ |       | 
|                        |  |             |        |             |   |        | 
|All Other
 Fees (4)     |  | $           |       |             | $ |       | 
|                        |  |             |        |             |   |        | 
|Total                   |  | $           |       |             | $ |       | 

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

29

---



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.                                                                          

30

---



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

|    |                                                  
|--- | -------------------------------------------------
|(b) | Exhibits
 required by Item 601 of Regulation S-K.

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

31

---



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

32

---



|      |  |                                                                                                                                                                                                            
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.20 |  | 2006
 Incentive Equity Stock Plan, incorporated by reference to Exhibit 4.1 to the
 Form S-8 filed with the Securities and Exchange Commission on April 27, 2006.                                          
|      |  |                                                                                                                                                                                                            
|14    |  | Code of
 Business Conduct and Ethics of the Company incorporated by reference to
 Exhibit 14 to the Form 10-K for the period ended December 31, 2003.                                                      
|      |  |                                                                                                                                                                                                            
|16.1  |  | Letter dated
 March 19, 2008 from Jeffrey Tsang & Co., incorporated by reference to
 Exhibit 16.1 to the Form 8-K filed with the Securities and Exchange
 Commission on March 24, 2008.                    
|      |  |                                                                                                                                                                                                            
|21    |  | Subsidiaries
 of the Company                                                                                                                                                                               
|      |  | Atlantic
 Components Limited, a Hong Kong corporation                                                                                                                                                      
|      |  | Alpha
 Perform Technologies Limited, a British Virgin Islands corporation                                                                                                                                  
|      |  |                                                                                                                                                                                                            
|31.1  |  | Certification
 of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of
 the Sarbanes-Oxley Act of 2002.*
|      |  |                                                                                                                                                                                                            
|31.2  |  | Certification
 of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of
 the Sarbanes-Oxley Act of 2002.*
|      |  |                                                                                                                                                                                                            
|32.1  |  | Certification
 of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                      
|      |  |                                                                                                                                                                                                            
|32.2  |  | Certification
 of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                      

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

33

---



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:
 January 6, 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 Officer and Chairman of the Board of Directors (Principal Executive
 Officer) |  | January 6, 2010
|                          |  |                                                                                                | 
|Chung-Lun Yang            |  |                                                                                                | 
|                          |  |                                                                                                | 
|                          |  |                                                                                                |  |                
|/s/ Kenneth
 Lap-Yin Chan |  | Chief
 Financial Officer (Principal Financial and Accounting Officer)                          |  | January 6, 2010
|                          |  |                                                                                                | 
|Kenneth
 Lap-Yin Chan     |  |                                                                                                | 
|                          |  |                                                                                                |  |                
|/s/ Ben Wong              |  | Director                                                                                       |  | January 6, 2010
|                          |  |                                                                                                |  |                
|Ben Wong                  |  |                                                                                                |  |                

34

---



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

---



Index to Consolidated
Financial Statements

|                                                         |     
|-------------------------------------------------------- | ----
|                                                         | Page
|                                                         |     
|                                                         |     
|Report of Independent Registered Public
 Accounting Firm | F-2 
|                                                         |     
|Financial Statements:                                    |     
|Consolidated Balance Sheets                              | F-3 
|Consolidated Statements of 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         | F-26

F-1

---



Report
      of Independent Registered Public Accounting Firm



Board
    of Directors of ACL Semiconductors Inc.

Kowloon,
    Hong Kong



We
    have audited the accompanying consolidated balance sheet of ACL Semiconductors
    Inc. and subsidiaries (the Company) as of December 31, 2008 and
    2007, and the related consolidated statements of operations, stockholders equity,
    and cash flows for the years then ended. These 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
    audits.



We
    conducted our audits in accordance with the standards of the Public Company
    Accounting Oversight Board (United States).  Those standards require
    that we plan and perform the audit to obtain reasonable assurance about whether
    the consolidated financial statements are free of material misstatement.  The
    Company is not required to have, nor were we engaged to perform, an audit
    of its internal control over financial reporting.  Our audits included
    consideration of internal control over financial reporting as a basis of
    designing audit procedures that are appropriate in the circumstances, but
    not for the purpose of expressing an opinion on the effectiveness of the
    Companys internal control over financial reporting.  Accordingly,
    we express no such opinion.  An audit also includes examining,
    on a test basis, evidence supporting the amounts and disclosures in the consolidated
    financial statements, 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 positions of the Company
    as of December 31, 2008 and 2007, and the results of their operations and
    their cash flows for the years then ended, in conformity with United States
    generally accepted accounting principles.



As
    discussed in Note 12 to the consolidated financial statements, the Company
    has had numerous significant transactions with businesses and affiliates
    controlled by, and with persons who are related to, the officers and directors
of the Company.

In
    addition, as discussed in Note 8 to the consolidated financial statements,
    the Company is dependent on one single vendor and its authorized agent to
    supply its inventories and this single vendor provided the majority of the
    Companys inventory purchases during the year ended December 31, 2008.





|                                       | 
|-------------------------------------- | 
|/s/
          JTC Fair Song CPA Firm   | 
|JTC
          Fair Song CPA Firm       | 
|CERTIFIED
          PUBLIC ACCOUNTANTS | 
|                                       | 
|Shenzhen,
          China              | 
|April
          14, 2009               | 
|                                       | 



F-2

---



ACL SEMICONDUCTORS AND SUBSDIARIES

CONSOLIDATED BALANCE SHEETS
ASSETS

|                                                                                        |  |              |            |      |   |            | 
|--------------------------------------------------------------------------------------- |  | ------------ | ---------- | ---- | - | ---------- | 
|                                                                                        |  | December 31, |           
|                                                                                        |  | 2008         |            | 2007 |  
|                                                                                        |  |              |            |      |  
|                                                                                        |  |              |            |      |   |            | 
|Current assets:                                                                         |  |              |            |      |   |            | 
|Cash and cash equivalents                                                               |  | $            | 1,784,355  |      | $ | 1,597,674  | 
|                                                                                        |  |              |            |      |   |            | 
|Restricted cash                                                                         |  |              | 5,169,753  |      |   | 4,203,057  | 
|                                                                                        |  |              |            |      |   |            | 
|Accounts receivable, net of allowance for
 doubtful accounts of $0 for 2008 and 2007    |  |              | 10,230,464 |      |   | 7,594,784  | 
|                                                                                        |  |              |            |      |   |            | 
|Accounts receivable, related parties                                                    |  |              | 8,412,729  |      |   | 7,955,764  | 
|                                                                                        |  |              |            |      |   |            | 
|Inventories, net                                                                        |  |              | 2,060,195  |      |   | 3,483,994  | 
|Restricted marketable securities                                                        |  |              | 500,000    |      |   | 769,231    | 
|Marketable securities                                                                   |  |              |           |      |   | 404,780    | 
|Income tax refundable                                                                   |  |              |           |      |   | 49,375     | 
|Other current assets                                                                    |  |              | 30,051     |      |   | 83,061     | 
|                                                                                        |  |              |            |      |   |            | 
|                                                                                        |  |              |            |      |   |            | 
|Total current assets                                                                    |  |              | 28,187,547 |      |   | 26,141,720 | 
|                                                                                        |  |              |            |      |   |            | 
|Property, equipment and improvements, net
 of accumulated depreciation and amortization |  |              | 6,007,456  |      |   | 6,933,998  | 
|                                                                                        |  |              |            |      |   |            | 
|Other deposits                                                                          |  |              | 392,069    |      |   | 387,245    | 
|                                                                                        |  |              |            |      |   |            | 
|                                                                                        |  |              |            |      |   |            | 
|Total Assets                                                                            |  | $            | 34,587,072 |      | $ | 33,462,963 | 
|                                                                                        |  |              |            |      |   |            | 

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

F-3

---



ACL SEMICONDUCTORS AND SUBSDIARIES

CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS EQUITY

|                                                                                                  |  |              |            |      |   |            |  
|------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | ---- | - | ---------- | -
|                                                                                                  |  | December 31, |           
|                                                                                                  |  | 2008         |            | 2007 |  
|                                                                                                  |  |              |            |      |  
|                                                                                                  |  |              |            |      |   |            |  
|Current liabilities:                                                                              |  |              |            |      |   |            |  
|Accounts payable                                                                                  |  | $            | 13,669,779 |      | $ | 12,592,685 |  
|Accrued expenses                                                                                  |  |              | 396,755    |      |   | 186,738    |  
|                                                                                                  |  |              |            |      |   |            |  
|Lines of credit and loan facilities                                                               |  |              | 16,447,742 |      |   | 15,610,488 |  
|                                                                                                  |  |              |            |      |   |            |  
|Current portion of long-term debt                                                                 |  |              | 160,447    |      |   | 135,237    |  
|Current portion of capital lease                                                                  |  |              | 58,683     |      |   | 44,991     |  
|                                                                                                  |  |              |            |      |   |            |  
|Income tax payable                                                                                |  |              | 5,588      |      |   |           |  
|                                                                                                  |  |              |            |      |   |            |  
|Due to shareholders for converted pledged
 collateral                                             |  |              | 112,385    |      |   | 112,385    |  
|Other current liabilities                                                                         |  |              | 301,076    |      |   | 268,573    |  
|                                                                                                  |  |              |            |      |   |            |  
|                                                                                                  |  |              |            |      |   |            |  
|Total current liabilities                                                                         |  |              | 31,152,455 |      |   | 28,951,097 |  
|                                                                                                  |  |              |            |      |   |            |  
|Long-term liabilities                                                                             |  |              |            |      |   |            |  
|Long-term debt, less current portion                                                              |  |              | 2,361,711  |      |   | 2,539,242  |  
|Capital lease, less current portion                                                               |  |              | 43,055     |      |   | 49,971     |  
|                                                                                                  |  |              |            |      |   |            |  
|Total long-term liabilities                                                                       |  |              | 2,404,766  |      |   | 2,589,213  |  
|                                                                                                  |  |              |            |      |   |            |  
|Deferred tax                                                                                      |  |              | 8,343      |      |   | 15,471     |  
|                                                                                                  |  |              |            |      |   |            |  
|                                                                                                  |  |              |            |      |   |            |  
|Total liabilities                                                                                 |  |              | 33,565,564 |      |   | 31,555,781 |  
|                                                                                                  |  |              |            |      |   |            |  
|Commitments and contingencies                                                                     |  |              |           |      |   |           |  
|                                                                                                  |  |              |            |      |   |            |  
|Stockholders equity (deficit):                                                                   |  |              |            |      |   |            |  
|Common stock - $0.001 par value, 50,000,000
 shares authorized, 28,329,936 issued and outstanding |  |              | 28,330     |      |   | 28,330     |  
|                                                                                                  |  |              |            |      |   |            |  
|Additional paid-in capital                                                                        |  |              | 3,593,027  |      |   | 3,593,027  |  
|                                                                                                  |  |              |            |      |   |            |  
|Amount due (from) to stockholder/director                                                         |  |              | (39,633    | )    |   | (75,998    | )
|                                                                                                  |  |              |            |      |   |            |  
|Accumulated deficit                                                                               |  |              | (2,560,216 | )    |   | (1,638,177 | )
|                                                                                                  |  |              |            |      |   |            |  
|                                                                                                  |  |              |            |      |   |            |  
|Total stockholders equity                                                                        |  |              | 1,021,508  |      |   | 1,907,182  |  
|                                                                                                  |  |              |            |      |   |            |  
|                                                                                                  |  |              |            |      |   |            |  
|                                                                                                  |  | $            | 34,587,072 |      | $ | 33,462,963 |  
|                                                                                                  |  |              |            |      |   |            |  

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

F-4

---



ACL SEMICONDUCTORS AND SUBSDIARIES

CONSOLIDATED
STATEMENTS OF OPERATIONS

|                                                       |  |                    |             |                    |   |             |  
|------------------------------------------------------ |  | ------------------ | ----------- | ------------------ | - | ----------- | -
|                                                       |  | December 31,
 2008 |             | December 31,
 2007 |  
|                                                       |  |                    |             |                    |  
|Net sales:                                             |  |                    |             |                    |   |             |  
|Related parties                                        |  | $                  | 9,076,034   |                    | $ | 17,165,728  |  
|Other                                                  |  |                    | 197,020,614 |                    |   | 143,321,689 |  
|Less discounts to customers                            |  |                    | (13,878     | )                  |   | (82,493     | )
|                                                       |  |                    |             |                    |   |             |  
|                                                       |  |                    |             |                    |   |             |  
|                                                       |  |                    | 206,082,770 |                    |   | 160,404,924 |  
|                                                       |  |                    |             |                    |   |             |  
|Cost of sales                                          |  |                    | 201,880,793 |                    |   | 156,533,635 |  
|                                                       |  |                    |             |                    |   |             |  
|                                                       |  |                    |             |                    |   |             |  
|Gross profit                                           |  |                    | 4,201,977   |                    |   | 3,871,289   |  
|                                                       |  |                    |             |                    |   |             |  
|Operating expenses:                                    |  |                    |             |                    |   |             |  
|Selling                                                |  |                    | 76,072      |                    |   | 69,260      |  
|General and administrative                             |  |                    | 4,099,249   |                    |   | 2,942,542   |  
|                                                       |  |                    |             |                    |   |             |  
|                                                       |  |                    |             |                    |   |             |  
|Income from operations                                 |  |                    | 26,656      |                    |   | 859,487     |  
|                                                       |  |                    |             |                    |   |             |  
|Other income (expenses):                               |  |                    |             |                    |   |             |  
|Rental income                                          |  |                    | 89,231      |                    |   | 37,179      |  
|Interest expense                                       |  |                    | (1,073,795  | )                  |   | (1,009,006  | )
|Provision for taxation written back                    |  |                    |            |                    |   |            |  
|Loss on disposal of marketable securities              |  |                    | (227,781    | )                  |   |            |  
|Unrealized gain on marketable securities               |  |                    |            |                    |   | 404,780     |  
|Management and service income                          |  |                    | 23,462      |                    |   | 33,333      |  
|Net income on cashflow hedge                           |  |                    | 161,288     |                    |   | 64,590      |  
|Interest income                                        |  |                    | 90,706      |                    |   | 169,055     |  
|Director life insurance policy refund                  |  |                    |            |                    |   | 29,617      |  
|Exchange differences                                   |  |                    | (48,677     | )                  |   | 34,672      |  
|                                                       |  |                    |             |                    |   |             |  
|Miscellaneous:                                         |  |                    | 3,000       |                    |   | 218         |  
|                                                       |  |                    |             |                    |   |             |  
|                                                       |  |                    |             |                    |   |             |  
|(Loss) income before income taxes
 [provision]         |  |                    | (955,910    | )                  |   | 623,925     |  
|                                                       |  |                    |             |                    |   |             |  
|Income taxes provision (reversal)                      |  |                    | (33,871     | )                  |   | 187,833     |  
|                                                       |  |                    |             |                    |   |             |  
|                                                       |  |                    |             |                    |   |             |  
|Net (loss) income                                      |  | $                  | (922,039    | )                  | $ | 436,092     |  
|                                                       |  |                    |             |                    |   |             |  
|                                                       |  |                    |             |                    |   |             |  
|(Loss) earnings per share - basic and
 diluted         |  | $                  | (0.03       | )                  | $ | 0.02        |  
|                                                       |  |                    |             |                    |   |             |  
|                                                       |  |                    |             |                    |   |             |  
|Weighted average number of shares - basic
 and diluted |  |                    | 28,329,936  |                    |   | 28,329,936  |  
|                                                       |  |                    |             |                    |   |             |  

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

F-5

---



ACL SEMICONDUCTORS AND SUBSDIARIES

CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007

|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |   |   |            |   |   |           |  
|----------------------------- |  | ------------ | ---------- | ------------------------ | - | -------------------------------- |  | ------------------ | --------- | --------------------------------- | - | -------- | - | - | ---------- | - | - | --------- | -
|                              |  | Common stock |            | Additionalpaid-incapital |   | Due(from)/tostockholder/Director |  | Accumulateddeficit |           | TotalstockholdersEquity(deficit) |  
|                              |  |              |            |                          |   |                                  | 
|                              |  | Shares       |            | Amount                   |   |                                  |  |                    |          
|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |  
|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |   |   |            |   |   |           |  
|Balance at December 31, 2006  |  |              | 28,329,936 |                          |   | 28,330                           |  |                    | 3,593,027 |                                   |   | 913,463  |   |   | (2,074,269 | ) |   | 2,460,551 |  
|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |   |   |            |   |   |           |  
|Net increase in due (from)/to |  |              |           |                          |   |                                 |  |                    |          |                                   |   | (989,461 | ) |   |           |   |   | (989,461  | )
|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |   |   |            |   |   |           |  
|Net income                    |  |              |           |                          |   |                                 |  |                    |          |                                   |   |         |   |   | 436,092    |   |   | 436,092   |  
|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |   |   |            |   |   |           |  
|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |   |   |            |   |   |           |  
|Balance at December 31, 2007  |  |              | 28,329,936 |                          |   | 28,330                           |  |                    | 3,593,027 |                                   |   | (75,998  | ) |   | (1,638,177 | ) |   | 1,907,182 |  
|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |   |   |            |   |   |           |  
|Net increase in due (from)/to |  |              |           |                          |   |                                 |  |                    |          |                                   |   | 36,365   |   |   |           |   |   | 36,365    |  
|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |   |   |            |   |   |           |  
|Net loss                      |  |              |           |                          |   |                                 |  |                    |          |                                   |   |         |   |   | (922,039   | ) |   | (922,039  | )
|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |   |   |            |   |   |           |  
|Balance at December 31, 2008  |  |              | 28,329,936 |                          | $ | 28,330                           |  | $                  | 3,593,027 |                                   | $ | (39,633  | ) | $ | (2,560,216 | ) | $ | 1,021,508 |  
|                              |  |              |            |                          |   |                                  |  |                    |           |                                   |   |          |   |   |            |   |   |           |  

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

F-6

---



ACL SEMICONDUCTORS AND SUBSDIARIES

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

|                                                                                              |  |                          |            |      |   |            |  
|--------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ---- | - | ---------- | -
|                                                                                              |  | Years ended December 31, |           
|                                                                                              |  |                          |           
|                                                                                              |  | 2008                     |            | 2007 |  
|                                                                                              |  |                          |            |      |  
|Cash flows provided by (used for) operating
 activities:                                      |  |                          |            |      |   |            |  
|Net (loss) income                                                                             |  | $                        | (922,039   | )    | $ | 436,092    |  
|                                                                                              |  |                          |            |      |   |            |  
|                                                                                              |  |                          |            |      |   |            |  
|Adjustments to reconcile net income to net
 cash provided by (used for) operating activities: |  |                          |            |      |   |            |  
|Depreciation and amortization                                                                 |  |                          | 238,477    |      |   | 230,614    |  
|Change in inventory reserve                                                                   |  |                          | (190,000   | )    |   | 323,077    |  
|Gain on disposal of equipment                                                                 |  |                          |           |      |   | (218       | )
|Loss (Gain) on disposal of marketable
 securities                                             |  |                          | 227,782    |      |   | (404,780   | )
|Fair value of options issued to employees                                                     |  |                          |           |      |   |           |  
|Loss on revaluation of properties                                                             |  |                          | 883,116    |      |   |           |  
|Changes in assets and liabilities:                                                            |  |                          |            |      |   |            |  
|(Increase) decrease in assets                                                                 |  |                          |            |      |   |            |  
|Accounts receivable  other                                                                   |  |                          | (2,635,680 | )    |   | (5,586,310 | )
|Accounts receivable  related parties                                                         |  |                          | (456,965   | )    |   | (583,297   | )
|Inventories                                                                                   |  |                          | 1,613,799  |      |   | (553,816   | )
|Refundable deposits                                                                           |  |                          |           |      |   |           |  
|Income tax refundable                                                                         |  |                          | 49,375     |      |   | (49,375    | )
|Other current assets                                                                          |  |                          | 53,010     |      |   | (42,124    | )
|Other assets                                                                                  |  |                          | (4,824     | )    |   | (6,207     | )
|Increase (decrease) in liabilities                                                            |  |                          |            |      |   |            |  
|Accounts payable                                                                              |  |                          | 1,077,094  |      |   | 7,582,962  |  
|Accrued expenses                                                                              |  |                          | 210,017    |      |   | (127,486   | )
|Income tax payable                                                                            |  |                          | 5,588      |      |   | (74,839    | )
|Other current liabilities                                                                     |  |                          | 32,503     |      |   | (25,044    | )
|Deferred tax                                                                                  |  |                          | (7,128     | )    |   | 6,658      |  
|                                                                                              |  |                          |            |      |   |            |  
|Total adjustments                                                                             |  |                          | 1,096,164  |      |   | 689,815    |  
|                                                                                              |  |                          |            |      |   |            |  
|                                                                                              |  |                          |            |      |   |            |  
|Net cash provided by operating activities                                                     |  |                          | 174,125    |      |   | 1,125,907  |  
|                                                                                              |  |                          |            |      |   |            |  
|                                                                                              |  |                          |            |      |   |            |  
|Cash flows used for investing activities:                                                     |  |                          |            |      |   |            |  
|Advanced (to) from stockholders                                                               |  |                          | 36,365     |      |   | (989,461   | )
|Increase in restricted cash                                                                   |  |                          | (966,696   | )    |   | (1,494,480 | )
|Increase in restricted marketable
 securities                                                 |  |                          | (500,000   | )    |   | (769,231   | )
|Cash Proceeds from sales of marketable
 securities and restricted marketable securities       |  |                          | 946,229    |      |   |           |  
|Cash Proceeds from sales of equipment                                                         |  |                          |           |      |   | 385        |  
|Purchases of property, equipment and
 improvements                                            |  |                          | (132,513   | )    |   | (3,159,760 | )
|                                                                                              |  |                          |            |      |   |            |  
|                                                                                              |  |                          |            |      |   |            |  
|Net cash used for investing activities                                                        |  |                          | (616,615   | )    |   | (6,412,547 | )
|                                                                                              |  |                          |            |      |   |            |  
|                                                                                              |  |                          |            |      |   |            |  
|Cash flows provided by financing
 activities:                                                 |  |                          |            |      |   |            |  
|Net borrowings on lines of credit and notes
 payable                                          |  |                          | 837,254    |      |   | 4,772,021  |  
|Borrowing under long-term debt                                                                |  |                          |           |      |   | 801,723    |  
|Principal payments under long-term debt                                                       |  |                          | (152,321   | )    |   | (91,625    | )
|Principal payments under capital lease
 obligation                                            |  |                          | (55,762    | )    |   | (45,291    | )
|                                                                                              |  |                          |            |      |   |            |  
|                                                                                              |  |                          |            |      |   |            |  
|Net cash provided by financing activities                                                     |  |                          | 629,171    |      |   | 5,436,828  |  
|                                                                                              |  |                          |            |      |   |            |  
|                                                                                              |  |                          |            |      |   |            |  
|Net increase (decrease) in cash and cash
 equivalents                                         |  |                          | 186,681    |      |   | 150,188    |  
|                                                                                              |  |                          |            |      |   |            |  
|Cash and cash equivalents,
 beginning of year                                                 |  |                          | 1,597,674  |      |   | 1,447,486  |  
|                                                                                              |  |                          |            |      |   |            |  
|                                                                                              |  |                          |            |      |   |            |  
|Cash and cash equivalents,
 end of year                                                       |  | $                        | 1,784,355  |      | $ | 1,597,674  |  
|                                                                                              |  |                          |            |      |   |            |  

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

F-7

---



ACL SEMICONDUCTORS AND SUBSDIARIES

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

|                                                                                         |  |   |           |  |   |           | 
|---------------------------------------------------------------------------------------- |  | - | --------- |  | - | --------- | 
|Supplemental disclosure of cash flow information:                                        |  |   |           |  |   |           | 
|                                                                                         |  |   |           |  |   |           | 
|Interest paid                                                                            |  | $ | 1,073,795 |  | $ | 1,009,006 | 
|                                                                                         |  |   |           |  |   |           | 
|Income tax paid                                                                          |  | $ | 57,582    |  | $ | 305,389   | 
|                                                                                         |  |   |           |  |   |           | 
|Income tax refund                                                                        |  | $ | 139,289   |  | $ |          | 
|                                                                                         |  |   |           |  |   |           | 
|                                                                                         |  |   |           |  |   |           | 
|Supplement schedule of non-cash investing and financing activities:                      |  |   |           |  |   |           | 
|Capital lease obligations incurred when
 capital leases were entered for new automobiles |  | $ | 62,538    |  | $ | 95,898    | 
|                                                                                         |  |   |           |  |   |           | 

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

F-8

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 1. | Organization and Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | Organization and Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | On September
 8, 2003, ACL Semiconductors Inc. (formerly Print Data Corp.) (ACL) entered
 into a Share Exchange and Reorganization Agreement with Atlantic Components
 Ltd. (Atlantic), a Hong Kong based company, and Mr. Chung-Lun Yang (Mr.
 Yang), the then sole beneficial stockholder of Atlantic. Under the terms of
 the agreement, ACL issued 22,380,000 of its shares to Mr. Chung-Lun Yang and
 2,620,000 of its shares to certain financial advisors in exchange for 100% of
 the issued and outstanding shares of Atlantics capital stock. The Company
 recorded an expense of $2,753,620 related to the issuance of 2,620,000 shares
 of its common stock to these advisors, which was computed based on the quoted
 market price of $1.05 on September 30, 2003, the effective date of the merger
 and was classified as merger cost in the accompanying consolidated statements
 of operations for the year ended December 31, 2003.                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | The share
 exchange agreement closed and became effective on September 30, 2003. Upon
 the completion of this transaction, Atlantic became the wholly owned
 subsidiary of ACL, and Mr. Yang became the owner of approximately 80% of
 ACLs issued and outstanding shares of common stock. In addition, ACLs
 directors and officers resigned and were replaced by directors and officers
 of Atlantic. For accounting purposes, the acquisition was accounted for as a
 reverse-acquisition, whereby Atlantic was deemed to have acquired ACL.
 Because the acquisition was accounted for as a purchase of ACL, the
 historical financial statements of Atlantic became the historical financial
 statements of ACL after this transaction.                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 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 brandname which comprise DRAM and graphic RAM, FLASH,
 SRAM and MASK ROM for the Hong Kong and Southern China markets. Atlantic
 Components Ltd., its wholly owned subsidiary, was incorporated in Hong Kong
 on May 30, 1991 with limited liability. On October 2, 2003, the Company set
 up a wholly-owned subsidiary, Alpha Perform Technology Limited (Alpha), a
 British Virgin Islands company, to provide services on behalf of the Company
 in jurisdictions outside of Hong Kong. Effective January 1, 2004, the Company
 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

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 1. | Organization
and Summary of Significant Accounting Policies, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Currency Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Amounts
 reported in the accompanying consolidated financial statements and
 disclosures are stated in U.S. Dollars, unless stated otherwise. The
 functional currency of the Company, which accounted for most of the Companys
 operations, is reported in Hong Kong dollars (HKD). Foreign currency
 transactions (outside Hong Kong) during the years ended December 31, 2008 and
 2007 are translated into HKD according to the prevailing exchange rate at the
 transaction dates. Assets and liabilities denominated in foreign currencies
 at the balance sheet dates are translated into HKD at year-end exchange rates.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | For the
 purpose of preparing these consolidated financial statements, the financial
 statements of Atlantic reported in HKD have been translated into United
 States dollars (USD or US$) at US$1.00=HKD7.8, a fixed exchange rate
 maintained between the two countries.                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Consolidation Policy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | The
 consolidated financial statements include the financial statements of ACL
 Semiconductors Inc. and its wholly owned subsidiaries, Atlantic Components
 Ltd., and Alpha Perform Technology Limited. All significant intercompany
 accounts and transactions have been eliminated in preparation of the
 consolidated financial statements.                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 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.                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | The
 preparation of consolidated financial statements in conformity with generally
 accepted accounting principles requires management to make estimates and
 assumptions that affect the reported amounts of assets and liabilities,
 revenue recognition, allowance for doubtful accounts, long lived assets
 impairment, inventories, and disclosure of contingent assets and liabilities,
 at the date of the consolidated financial statements, as well as the reported
 amounts of revenues and expenses during the reporting periods. Actual results
 could differ from these estimates.                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | For purposes
 of the consolidated statements of cash flows, cash equivalents include all
 highly liquid debt instruments with original maturities of three months or
 less which are not securing any corporate obligations.                                                                                                                                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Accounts Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | The Company
 provides an allowance for doubtful accounts equal to the estimated
 uncollectible amounts. The Companys estimate is based on historical
 collection experience and a review of the current status of trade accounts
 receivable. It is reasonably possible that the Companys estimate of the
 allowance for doubtful accounts will change in the near future. The Company
 did not provide an allowance for doubtful accounts as of December 31, 2008
 and 2007.                                                                                                                                                    

F-10

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 1. | Organization and Summary of Significant Accounting Policies, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | Inventories
 are stated at the lower of cost or market and are comprised of purchased
 computer technology resale products. Cost is determined using the first-in,
 first-out method. The reserve for obsolescence was decreased by $190,000 for
 2008 and increased by $323,077 for 2007. Inventory obsolescence reserves
 totaled $374,103 and $564,103 as of December 31, 2008 and 2007, respectively.                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 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 installments 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.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | Property, Equipment and Improvements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | Property and
 equipment are valued at cost. Depreciation and amortization are provided over
 the estimated useful lives of three to five years using the straight-line
 method. Leasehold improvements are amortized on a straight-line basis over
 the shorter of the economic lives or the lease terms.                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | The
 estimated service lives of property, equipment and improvements are as
 follows:                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                         |  |                                    
| | ----------------------- |  | -----------------------------------
| | Automobile              |  | 3 1/3 years                        
| | Office
 equipment       |  | 5 years                            
| | Leasehold
 improvements |  | 5 years                            
| | Computers               |  | 5 years                            
| | Land and
 Building      |  | amortized by
 estimated useful life

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Long-Lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | In
 accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
 Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived
 assets to be held and used are analyzed for impairment whenever events or
 changes in circumstances indicate that the carrying amount of an asset may
 not be recoverable. SFAS No. 144 relates to assets that can be amortized and
 the life can be determinable. The Company evaluates at each balance sheet
 date whether events and circumstances have occurred that indicate possible
 impairment. If there are indications of impairment, the Company uses future
 undiscounted cash flows of the related asset or asset grouping over the
 remaining life in measuring whether the assets are recoverable. In the event
 such cash flows are not expected to be sufficient to recover the recorded
 asset values, the assets are written down to their estimated fair value.
 Long-lived assets to be disposed of are reported at the lower of carrying
 amount or fair value of asset less the cost to sell. As of December 31, 2008,
 the Company determined that the fair value of certain of its real property
 assets comprised of an apartment used as office premises and as Directors
 quarters by Mr. Yang, the Companys CEO and Director, had decreased from its
 previous book value by $883,116. The unrealized loss on revaluation of the Companys real
 property assets was due to the property market downturn caused by recent
 economic conditions and the determination of the unrealized loss on
 revaluation was made by the Companys Board of Directors based on its direct
 comparison of the Companys book value of such real properties against the
 quoted market prices of comparable properties in Hong Kong. The Company
 engaged an independent professional surveyor to inform its analysis, but
 management of the Company assumes full responsibility for such determination.
 The real properties which the Company owns are exclusively properties in Hong
 Kong.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Advertising                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company
 expenses advertising costs when incurred. Advertising expense totaled $5,618
 and $7,060 for the years ended December 31, 2008 and 2007, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-11

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 1. | Organization and Summary of Significant Accounting Policies, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | Deferred tax
 assets and liabilities are recognized for the future tax consequences
 attributable to differences between the financial statement carrying amounts
 of existing assets and liabilities and their respective tax bases. Deferred
 tax assets, including tax loss and credit 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.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | The carrying
 amount of the Companys cash and cash equivalents, accounts receivable, lines
 of credit, convertible debt, accounts payable, accrued expenses, and long-term
 debt approximates their estimated fair values due to the short-term
 maturities of those financial instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | Comprehensive Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | SFAS No.
 130, Reporting Comprehensive Income, establishes standards for the
 reporting and display of comprehensive income and its components in the
 financial statements. For the years ended December 31, 2008 and 2007, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | Basic and Diluted Earnings (Loss) Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | In
 accordance with SFAS No. 128, Earnings Per Share, the basic earnings (loss)
 per common share is computed by dividing net earnings (loss) available to
 common stockholders by the weighted average number of common shares
 outstanding. Diluted earnings (loss) per common share is computed similarly
 to basic earnings (loss) per common share, except that the denominator is
 increased to include the number of additional common shares that would have
 been outstanding if the potential common shares had been issued and if the
 additional common shares were dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | Certain
 reclassifications have been made to the 2007 consolidated financial
 statements to conform to the 2008 presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | In February
 2008, the FASB issued FSP FIN 48-2, Effective Date of FASB Interpretation
 No. 48 for Certain Nonpublic Enterprises. This FASB Staff Position (FSP)
 defers the effective date of FASB Interpretation No. 48, Accounting for
 Uncertainty in Income Taxes, for certain nonpublic enterprises as defined
 in paragraph 289, as amended, of FASB Statement No. 109, Accounting for
 Income Taxes, including nonpublic not-for-profit organizations. This
 FSP shall be effective upon issuance. The Company does not anticipate that this
 new FSP will have any material impact upon its financial condition or results
 of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | In February
 2008, the FASB issued FSP FAS 140-3, Accounting for Transfers of Financial
 Assets and Repurchase Financing Transactions. This FSP applies to a
 repurchase financing, which is a repurchase agreement that relates to a
 previously transferred financial asset between the same counterparties (or
 consolidated affiliates of either counterparty), that is entered into
 contemporaneously with, or in contemplation of, the initial transfer. This
 FSP shall be effective for financial statements issued for fiscal years
 beginning after November 15, 2008, and interim periods within those fiscal
 years. Earlier application is not permitted. The Company does not anticipate
 that this new FSP will have any material impact upon its financial condition
 or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-12

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 1. | Organization and Summary of Significant Accounting Policies, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In February
 2008, the FASB issued FSP FAS 157-1, Application of FASB Statement No. 157
 to FASB Statement No. 13 and Other Accounting Pronouncements That Address
 Fair Value Measurements for Purposes of Lease Classification or Measurement
 under Statement 13. This FSP amends SFAS No. 157, Fair Value Measurements,
 to exclude FASB Statement No. 13, Accounting for Leases, and other
 accounting pronouncements that address fair value measurements for purposes
 of lease classification or measurement under Statement 13. However, this
 scope exception does not apply to assets acquired and liabilities assumed in
 a business combination that are required to be measured at fair value under
 FASB Statement No. 141, Business Combinations, or No. 141 (revised 2007),
 Business Combinations, regardless of whether those assets and liabilities
 are related to leases. This FSP shall be effective upon the initial adoption
 of Statement 157. The Company does not anticipate that this new FSP will have
 any material impact upon its financial condition or results of operations.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In February
 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No.
 157. This FASB Staff Position (FSP) delays the effective date of FASB
 Statement No. 157, Fair Value Measurements, for nonfinancial assets and
 nonfinancial liabilities, except for items that are recognized or disclosed
 at fair value in the financial statements on a recurring basis (at least
 annually). This FSP shall be effective upon issuance. The Company does not
 anticipate that this new FSP will have any material impact upon its financial
 condition or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In April
 2008, the FASB issued FSP SOP 90-7-1, An Amendment of AICPA Statement of
 Position 90-7. This FSP resolves the conflict between the guidance requiring
 early adoption of new accounting standards for entities required to follow
 fresh-start reporting under AICPA Statement of Position 90-7, Financial
 Reporting by Entities in Reorganization Under the Bankruptcy Code, and other
 authoritative accounting standards that expressly prohibit early adoption.
 This FSP shall be effective for financial statements issued subsequent to the
 date of issuance of this FSP. The Company does not anticipate that this new
 FSP will have any material impact upon its preparation of its financial
 statements.                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In April
 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of
 Intangible Assets. This FSP amends the factors that should be considered in
 developing renewal or extension assumptions used to determine the useful life
 of a recognized intangible asset under FASB Statement No. 142, Goodwill and
 Other Intangible Assets. The intent of this FSP is to improve the
 consistency between the useful life of a recognized intangible asset under
 Statement 142 and the period of expected cash flows used to measure the fair
 value of the asset under FASB Statement No. 141 (revised 2007), Business
 Combinations, and other U.S. generally accepted accounting principles
 (GAAP). This FSP shall be effective for financial statements issued for
 fiscal years beginning after December 15, 2008, and interim periods within
 those fiscal years. Early adoption is prohibited. The Company does not
 anticipate that this new FSP will have any material impact upon its
 preparation of its financial statements.                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In May 2008,
 the FASB issued Statement of Financial Accounting Standards No. 162, The
 Hierarchy of Generally Accepted Accounting Principles (SFAS No.162). SFAS
 No. 162 identifies the sources of accounting principles and the framework for
 selecting the principles used in the preparation of financial statements of
 nongovernmental entities that are presented in conformity with generally
 accepted accounting principles (GAAP) in the United States (the GAAP
 hierarchy). This Statement shall be effective 60 days following the SECs
 approval of the Public Company Accounting Oversight Board (PCAOB) amendments
 to AU Section 411, The Meaning of Present Fairly in Conformity With General
 Accepted Accounting Principles. The Company does not anticipate that SFAS
 No. 162 will have any material impact upon its preparation of its financial
 statements.                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In May 2008,
 the FASB issued FSP APB 14-1, Accounting for Convertible Debt Instruments
 That May Be Settled in Cash upon Conversion (Including Partial Cash
 Settlement). This FSP clarifies that convertible debt instruments that may
 be settled in cash upon conversion (including partial cash settlement) are
 not addressed by paragraph 12 of APB Opinion No. 14, Accounting for
 Convertible Debt and Debt issued with Stock Purchase Warrants. Additionally,
 this FSP specifies that issuers of such instruments should separately account
 for the liability and equity components in a manner that will reflect the
 entitys nonconvertible debt borrowing rate when interest cost is recognized
 in subsequent periods. This FSP is effective for financial statements issued
 for fiscal years beginning after December 15, 2008, and interim periods
 within those fiscal years. The Company does not anticipate that this new FSP
 will have any material impact upon its financial condition or results of
 operations.                                                                           

F-13

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 1. | Organization and Summary of Significant Accounting Policies, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In May 2008,
 the FASB issued Statement of Financial Accounting Standards No. 163,
 Accounting for Financial Guarantee Insurance Contractsan interpretation of
 FASB Statement No. 60 (SFAS No.163). SFAS No. 163 requires that an
 insurance enterprise recognize a claim liability prior to an event of default
 (insured event) when there is evidence that credit deterioration has occurred
 in an insured financial obligation. SFAS No. 163 also clarifies how Statement
 60 applies to financial guarantee insurance contracts, including the
 recognition and measurement to be used to account for premium revenue and
 claim liabilities. SFAS No. 163 is effective for financial statements issued
 for fiscal years beginning after December 15, 2008, and all interim periods
 within those fiscal years, except for some disclosures about the insurance
 enterprises risk-management activities. The Company does not anticipate that
 SFAS No. 163 will have any material impact upon its preparation of its
 financial statements.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In May 2008,
 the FASB issued FSP SOP 94-3-1 and AAG HCO-1, Omnibus Changes to
 Consolidation and Equity Method Guidance for Not-for-Profit Organizations.
 This FSP makes several changes to the guidance on consolidation and the
 equity method of accounting in AICPA Statement of Position 94-3, Reporting
 of Related Entities by Not-for-Profit Organizations, and the AICPA Audit and
 Accounting Guide, Health Care Organizations. The guidance in this FSP shall
 be applied to fiscal years beginning after June 15, 2008, and to interim
 periods therein. The Company does not anticipate that this FSP will have any
 material impact upon its preparation of its financial statements.                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether
 Instruments Granted in Share-Based Payment Transactions Are Participating
 Securities. The guidance in this FSP applies to the calculation of EPS
 under Statement 128 for share-based payment awards with rights to dividends
 or dividend equivalents. Unvested share-based payment awards that contain
 nonforfeitable rights to dividends or dividend equivalents (whether paid or
 unpaid) are participating securities and shall be included in the computation
 of EPS pursuant to the two-class method. This FSP shall be effective for
 financial statements issued for fiscal years beginning after December 15,
 2008, and interim periods within those years. Early application is not
 permitted. The Company does not anticipate that this FSP will have any material
 impact upon its preparation of its financial statements.                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In August
 2008, the FASB issued FSP FSA 117-1, Endowments of Not-for Profit
 Organizations: Net Asset Classification of Funds Subject to an Enacted
 Version of the Uniform Prudent Management of Institutional Funds Act and
 Enhanced Disclosures for All Endowment Funds. This FSP provides guidance on
 the net asset classification of donor-restricted endowment funds for a
 not-for-profit organization that is subject to an enacted version of the
 Uniform Prudent Management of Institutional Funds Act of 2006. This FSP will
 be effective for fiscal years ending after December 15, 2008. The Company
 does not anticipate that this FSP will have any material impact upon its
 preparation of its financial statements.                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In September
 2008, the FASB issued FSP FAS 133-1 and FIN 45-4, Disclosures about Credit
 Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133
 and FASB Interpretation No. 45; and Clarification of the Effective Date of
 FASB Statement No. 161. This FSP applies to credit derivatives within the
 scope of Statement 133, hybrid instruments that have embedded credit
 derivatives, and guarantees within the scope of Interpretation 45. This FSP
 shall be effective for reporting periods (annual or interim) ending after
 November 15, 2008. The Company does not anticipate that this FSP will have
 any material impact upon its preparation of its financial statements.                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | In December
 2008, the FASB issued FSP FAS 132 (R)-1, Employers Disclosures about
 Postretirement Benefit Plan Assets. This FSP amends FASB Statement No. 132
 (revised 2003), Employers Disclosures about Pensions and Other
 Postretirement Benefits, to provide guidance on an employers disclosures
 about plan assets of a defined benefit pension or other postretirement plan.
 This FSP shall be applied to fiscal years ending after December 15, 2009. The
 Company does not anticipate that this FSP will have any material impact upon
 its preparation of its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-14

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 1. | Organization and Summary of Significant Accounting Policies, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | In December
 2008, the FASB issued FSP FIN 48-3, Effective Date of FASB Interpretation
 No. 48 for Certain Nonpublic Enterprises. This FSP defers the effective date
 of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
 for certain nonpublic enterprises as defined in paragraph 289, as amended, of
 FASB Statement No. 109, Accounting for Income Taxes, including nonpublic
 not-for-profit organizations. This FSP will be effective upon issuance. The
 Company does not anticipate that this FSP will have any material impact upon
 its preparation of its financial statements.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Note 2. | Property, Equipment and Improvements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | A summary is
 as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                                                 |  |      |           |      |   |           | 
|------------------------------------------------ |  | ---- | --------- | ---- | - | --------- | 
|                                                 |  | 2008 |           | 2007 |  
|                                                 |  |      |           |      |  
|Land and
 buildings                              |  | $    | 5,672,672 |      | $ | 6,794,629 | 
|Office
 equipment                                |  |      | 151,147   |      |   | 147,530   | 
|Leasehold
 improvements                          |  |      | 187,627   |      |   | 143,553   | 
|Furniture
 and fixtures                          |  |      | 13,273    |      |   | 13,273    | 
|Automobiles                                      |  |      | 373,416   |      |   | 226,056   | 
|                                                 |  |      |           |      |   |           | 
|                                                 |  |      |           |      |   |           | 
|                                                 |  |      | 6,398,135 |      |   | 7,325,041 | 
|Less:
 accumulated depreciation and amortization |  |      | 390,679   |      |   | 391,043   | 
|                                                 |  |      |           |      |   |           | 
|                                                 |  |      |           |      |   |           | 
|                                                 |  | $    | 6,007,456 |      | $ | 6,933,998 | 
|                                                 |  |      |           |      |   |           | 

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | Depreciation
 and amortization expense for property, equipment, and improvements amounted
 to $238,477 and $230,614 for the years ended December 31, 2008 and 2007 respectively.                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Note 3. | Revolving Lines of Credit and Loan Facilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | The Company
 has available to it a $5,128,205 revolving line of credit with DBS Bank with
 an outstanding balance of $4,722,616 at December 31, 2008 and $5,635,176 at
 December 31, 2007. The line of credit bears interest at the banks standard
 bills rate less 1.25% for HKD borrowings and at the banks standard bills
 rate less 0.75% for other currency borrowings as of December 31, 2008. The
 weighted average interest rate approximated 4.4% for 2008 and 6.7% for 2007.                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | The Company
 has available to it a $5,769,231 factoring facility with recourse with DBS
 Bank without any outstanding balance at December 31, 2008. The factoring
 facility bears a discounting charge at the banks standard bills rate less
 1.25% for advance in HKD or the banks standard bills rate less 0.75% for
 advance in other currency as of December 31, 2008. The weighted average
 interest rate approximated 4.4% for 2008 and 6.7% for 2007.                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | The Company
 has available to it a $384,615 letter of guarantee with DBS Bank with an
 outstanding balance of $384,615 at December 31, 2008 and the letter of
 guarantee will expire on October 31, 2009. The line of credit bears a
 commission of 1.5% per annum which will be refunded on a pro-rata basis upon return
 and cancellation of the letter of guarantee.                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | The Company
 has available to it a $6,410,256 revolving line of credit with SCB with an
 outstanding balance of $5,742,934 at December 31, 2008 and $3,709,379 at
 December 31, 2007. The line of credit bears interest at a rate of the banks
 standard bills rate less 0.5% for HKD facilities and at a rate of the banks
 standard bills rate plus 1% for other foreign currency facilities as of
 December 31, 2008. The weighted average interest rate approximated 5.1% for
 2008 and 7.4% for 2007. 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | The Company
 has available to it a $5,128,205 factoring facility with SCB with an
 outstanding balance of $1,753,562 at December 31, 2008. The factoring
 facility bears discounting charges at the banks standard bills rate less
 0.75% rate for advances in HKD or the banks standard bills rates less 0.75%
 for advances in other currency as of December 31, 2008. The weighted average
 interest rate approximated 4.9% for 2008 and 7.2% for 2007.                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | The Company
 has available to it a $2,307,692 revolving line of credit with The Bank of
 East Asia, Limited (BEA) with an outstanding balance of $2,060,747
 at December 31, 2008 and $2,303,868 at December 31, 2007. The line of credit
 bears interest at the higher of Hong Kong prime rate plus 0.25% or HIBOR plus
 1% for HKD facilities and LIBOR plus 2% for other currency facilities as of
 December 31, 2008. The weighted average interest rate approximated 5.9% for
 2008 and 7.9% for 2007.

F-15

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

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

| |                      |  |                    |            |                     |   |                         |  |   |            | 
| | -------------------- |  | ------------------ | ---------- | ------------------- | - | ----------------------- |  | - | ---------- | 
| |                      |  | Granted Facilities |            | Utilized Facilities |   | Not Utilized Facilities | 
| |                      |  |                    |            |                     |   |                         | 
| | Overdraft            |  | $                  | 282,051    |                     | $ |                        |  | $ | 282,051    | 
| | Installment
 Loan    |  |                    | 2,776,923  |                     |   | 2,522,273               |  |   | 254,650    | 
| | Factoring
 Loan      |  |                    | 10,897,436 |                     |   | 1,753,562               |  |   | 9,143,874  | 
| | Import/Export
 Loan  |  |                    | 16,602,564 |                     |   | 14,694,180              |  |   | 1,908,384  | 
| | Letter of
 Guarantee |  |                    | 384,615    |                     |   | 384,615                 |  |   |           | 
| |                      |  |                    |            |                     |   |                         |  |   |            | 
| |                      |  |                    |            |                     |   |                         |  |   |            | 
| |                      |  | $                  | 30,943,589 |                     | $ | 19,354,630              |  | $ | 11,588,959 | 
| |                      |  |                    |            |                     |   |                         |  |   |            | 

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-16

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                            
|------- | -------------------------------------------
|Note 4. | Long-Term Debt                             
|        |                                            
|        | A summary is
 as follows as of December 31:

|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | 
|                                                                                                                                                                                                                                                                                                          |  | 2008 |           | 2007 |  
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |  
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|Installment loan having a maturity date in
 July 2026 and carrying an interest rate of 2.75% below the Hong Kong dollar
 Prime Rate (5.5% at December 31, 2008) to DBS Bank payable in monthly
 installments of $9,663 including interest through December 2008 without any
 balloon payment requirements |  | $    | 1,648,222 |      | $ | 1,719,704 | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|Installment loan having a maturity date in
 July 2011 and carrying an interest rate of 2% below the Hong Kong dollar
 Prime Rate (5.5% at December 31, 2008) to DBS Bank payable in monthly
 installments of $3,782 including interest through December 2008 without any
 balloon payment requirements    |  |      | 112,312   |      |   | 153,052   | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|Installment loan having a maturity date in
 July 2023 and carrying an interest rate of 2.5% below the Hong Kong dollar
 Prime Rate (5.5% at December 31, 2008) to DBS Bank payable in monthly
 installments of $5,240 including interest through December 2008 without any
 balloon payment requirements  |  |      | 761,624   |      |   | 801,723   | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|                                                                                                                                                                                                                                                                                                          |  |      | 2,522,158 |      |   | 2,674,479 | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|Less: current maturities                                                                                                                                                                                                                                                                                  |  |      | 160,447   |      |   | 135,237   | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|                                                                                                                                                                                                                                                                                                          |  | $    | 2,361,711 |      | $ | 2,539,242 | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|An analysis of long-term debt as of
 December 31 is as follows:                                                                                                                                                                                                                                           |  |      |           |      |   |           | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|Current portion                                                                                                                                                                                                                                                                                           |  | $    | 160,447   |      | $ | 135,237   | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|After 1 year, but within 2 years                                                                                                                                                                                                                                                                          |  |      | 316,063   |      |   | 290,618   | 
|After 2 years, but within 5 years                                                                                                                                                                                                                                                                         |  |      | 257,789   |      |   | 247,571   | 
|After 5 years                                                                                                                                                                                                                                                                                             |  |      | 1,787,859 |      |   | 2,001,053 | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|                                                                                                                                                                                                                                                                                                          |  |      | 2,361,711 |      |   | 2,539,242 | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 
|                                                                                                                                                                                                                                                                                                          |  | $    | 2,522,158 |      | $ | 2,674,479 | 
|                                                                                                                                                                                                                                                                                                          |  |      |           |      |   |           | 

F-17

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 4. | Long-Term Debt, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|        | With respect
 to all of the above referenced debt and credit arrangements in Note 3, the
 Company pledged its assets as collateral collectively to a bank group in Hong
 Kong comprised of DBS Bank. (formerly Overseas Trust Bank Limited), SCB, BEA,
 Citic and Industrial and Commercial Bank of China (Asia) Limited (ICBC) for
 all current and future borrowings from the bank group by the Company. In
 addition to the above pledged collateral, the debt is also secured by:
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | a fixed cash
 deposit of $641,025 (HK$5,000,000), a security interest on two residential
 properties and a workshop located in Hong Kong owned by Atlantic Components
 Ltd (Atlantic), a wholly owned subsidiary of ACL, a security interest on a
 residential property located in Hong Kong owned by City, a related party,
 plus a personal guarantee by Mr. Yang as collateral for loans from DBS Bank;
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | a fixed cash
 deposit of $1,380,010 (HK$10,764,075) plus an unlimited personal guarantee by
 Mr. Yang, as collateral for loans from BEA;                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | a cash deposit/securities
 not less than $2,051,282 (HK$16,000,000), a security interest on a workshop
 located in Hong Kong owned by Systematic Information, a related party, a
 security interest on a workshop located in Hong Kong owned by Solution, a
 related party, plus an unlimited personal guarantee by Mr. Yang as collateral
 for loans from SCB;                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 4.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | a cash
 deposit not less than $1,015,407 (US$756,402 plus HK$2,020,236), a security
 interest on a workshop located in Hong Kong owned by Solution, a related
 party, plus a personal guarantee by Mr. Yang as collateral for loans from
 Citic.                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | a cash
 deposit not less than $641,025 (HK$5,000,000) plus an unlimited personal
 guarantee by Mr. Yang as collateral for loans from ICBC.                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                             
|Note 5. | Capital Lease Obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                                                        |                      |  |      |         |      |   |        | 
|--------------------------------------------------------------------------------------- | -------------------- |  | ---- | ------- | ---- | - | ------ | 
|The Company
 has several non-cancelable capital leases relating to automobiles:        
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        |                      |  | 2008 |         | 2007 |  
|                                                                                        |                      |  |      |         |      |  
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        | Current
 portion     |  | $    | 58,683  |      | $ | 44,991 | 
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        | Non-current
 portion |  |      | 43,055  |      |   | 49,971 | 
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        |                      |  |      | 101,738 |      |   | 94,962 | 
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        |                      |  |      |         |      |   |        | 
|At December
 31, the value of automobiles under capital leases as follows:             
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        |                      |  | 2008 |         | 2007 |  
|                                                                                        |                      |  |      |         |      |  
|                                                                                        |                      |  |      |         |      |  
|                                                                                        | Cost                 |  | $    | 193,514 |      | $ | 46,154 | 
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        | Less:
 depreciation  |  |      | 51,463  |      |   | 6,923  | 
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        |                      |  |      | 142,051 |      |   | 39,231 | 
|                                                                                        |                      |  |      |         |      |   |        | 
|                                                                                        |                      |  |      |         |      |   |        | 
|At December
 31, the Company had obligations under capital leases repayable as follows:

|                                              |  |      |         |      |   |         |  
|--------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                              |  | 2008 |         | 2007 |  
|                                              |  |      |         |      |  
|Total minimum lease payments                  |  |      |         |      |   |         |  
|-Within one year                              |  | $    | 65,055  |      | $ | 50,381  |  
|                                              |  |      |         |      |   |         |  
|- After one year but within 5 years           |  |      | 47,329  |      |   | 56,081  |  
|                                              |  |      |         |      |   |         |  
|                                              |  |      |         |      |   |         |  
|                                              |  |      | 112,384 |      |   | 106,462 |  
|                                              |  |      |         |      |   |         |  
|Interest expenses relating to future
 periods |  |      | (10,646 | )    |   | (11,500 | )
|                                              |  |      |         |      |   |         |  
|                                              |  |      |         |      |   |         |  
|Present value of the minimum lease payments   |  | $    | 101,738 |      | $ | 94,962  |  
|                                              |  |      |         |      |   |         |  

F-18

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                                                                                                                                                                                                                                                                                                           
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 6. | Income Taxes                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                           
|        | Income tax (refund)
 expense amounted to $(33,871) for 2008 and $187,833 for 2007 (an effective
 rate of 0% for 2008 and 30% for 2007). A reconciliation of the provision for
 income taxes with amounts determined by applying the statutory federal income
 tax rate of 34% to income before income taxes is as follows:

|                                                                                                               |  |      |          |      |   |          |  
|-------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | ---- | - | -------- | -
|                                                                                                               |  | 2008 |          | 2007 |  
|                                                                                                               |  |      |          |      |  
|Computed tax at federal statutory rate                                                                         |  | $    | (325,009 | )    | $ | 212,135  |  
|                                                                                                               |  |      |          |      |   |          |  
|Tax rate differential on foreign earnings
 of Atlantic Components Ltd. (Atlantic), a Hong Kong based company |  |      | 133,450  |      |   | (119,182 | )
|                                                                                                               |  |      |          |      |   |          |  
|Expenses not deductible for tax                                                                                |  |      | 166,477  |      |   |         |  
|                                                                                                               |  |      |          |      |   |          |  
|Unrecognized timing difference                                                                                 |  |      | 23,480   |      |   |         |  
|                                                                                                               |  |      |          |      |   |          |  
|Tax under/(over) provision for Atlantic                                                                        |  |      | (97,973  | )    |   | 61,428   |  
|                                                                                                               |  |      |          |      |   |          |  
|Prior year adjustments                                                                                         |  |      |         |      |   |         |  
|                                                                                                               |  |      |          |      |   |          |  
|Net operating loss carry forward                                                                               |  |      | 65,734   |      |   | 33,452   |  
|                                                                                                               |  |      |          |      |   |          |  
|                                                                                                               |  |      |          |      |   |          |  
|Other                                                                                                          |  |      |         |      |   |         |  
|                                                                                                               |  |      |          |      |   |          |  
|                                                                                                               |  |      |          |      |   |          |  
|                                                                                                               |  | $    | (33,871  | )    | $ | 187,833  |  
|                                                                                                               |  |      |          |      |   |          |  

|                                                                |  |      |         |      |   |         | 
|--------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | 
|The income tax provision consists of the
 following components: |  |      |         |      |   |         | 
|                                                                |  |      |         |      |   |         | 
|                                                                |  | 2008 |         | 2007 |  
|                                                                |  |      |         |      |  
|                                                                |  |      |         |      |   |         | 
|Federal                                                         |  | $    |        |      | $ |        | 
|Foreign                                                         |  |      | (33,871 | )    |   | 187,833 | 
|                                                                |  |      |         |      |   |         | 
|                                                                |  | $    | (33,871 | )    | $ | 187,833 | 
|                                                                |  |      |         |      |   |         | 

|                                                                           |  |      |            |      |   |            |  
|-------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|The Components of the deferred tax assets
 and liabilities are as follows: |  |      |            |      |   |            |  
|                                                                           |  |      |            |      |   |            |  
|                                                                           |  | 2008 |            | 2007 |  
|                                                                           |  |      |            |      |  
|                                                                           |  |      |            |      |   |            |  
|Net operating losses                                                       |  | $    | 1,122,726  |      | $ | 1,056,992  |  
|                                                                           |  |      |            |      |   |            |  
|                                                                           |  |      |            |      |   |            |  
|Total deferred tax assets                                                  |  | $    | 1,122,726  |      | $ | 1,056,992  |  
|Less: valuation allowance                                                  |  |      | (1,122,726 | )    |   | (1,056,992 | )
|                                                                           |  |      |            |      |   |            |  
|                                                                           |  | $    |           |      | $ |           |  
|                                                                           |  |      |            |      |   |            |  

|        |                                                                                                                                                                                                                                                                                                                                                            
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 7. | Weighted Average Number of Shares                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                            
|        | The Company
 has a 2006 Incentive Equity Stock Plan, under which the Company may grant
 options to its employees for up to 5 million shares of common stock. There
 was no dilutive effect to the weighted average number of shares for the years
 ended December 31, 2008 and 2007 since there were no outstanding options at
 December 31, 2008 and 2007.

F-19

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 8. | Concentrations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | The Company
 has a non-exclusive Distributorship Agreement with Samsung Electronics Hong
 Kong Co., Ltd. (Samsung), which was initially entered into in May 1993 and
 has been renewed annually. Under the terms of the agreement, Samsung
 appointed the Company on a non-exclusive basis as Samsungs distributor to
 distribute and market its products in the designated territory. The Company
 has the right to market and sell the products of other manufacturers and
 render service related to such activities, unless such activities result in
 the Companys inability to fulfill its obligations under the Agreement.
 However, the Company shall not purchase to sell any of the same product lines
 as Samsung produces and deals in from any other Korean manufacturer during
 the term of this Agreement. The most recent renewal of the Distributorship
 Agreement expired on March 1, 2009. As of April 1, 2009, Samsung has
 confirmed the annual renewal of such agreement for one year.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 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 49% and 69%, of materials from
 Samsung for the years ended December 31, 2008 and 2007, respectively.
 However, there is no written supply contract between the Company and Samsung
 and, accordingly, there is no assurance that Samsung will continue to supply
 sufficient electronic components to the Company on terms and prices
 acceptable to the Company or in volumes sufficient to meet the Companys
 current and anticipated demand, nor can assurance be given that the Company
 would be able to secure sufficient products from other third party
 supplier(s) on acceptable terms.                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | In addition,
 the Companys operations and business viability are to a large extent
 dependent on the provision of management services and financial support by
 Mr. Yang. See Note 3 for details for Mr. Yangs support of the Companys
 banking facilities. At December 31, 2008 and 2007, included in accounts
 payable were $8,675,069 and $9,562,199, respectively, to Samsung. Termination
 of such distributorship by Samsung will significantly impair and adversely
 affect the continuation of the Companys business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | During the
 years ended December 31, 2008 and 2007, 4% and 11%, respectively, of the
 Companys sales were generated from Aristo Technologies Ltd. (Aristo), a
 related party (see Note 12 for additional discussion of related party
 transactions). As of December 31, 2008 and 2007, accounts receivable from
 related parties included $6,695,409 and $6,237,905, respectively, due from
 Aristo, which represented 37% and 40%, respectively, of the total accounts
 receivable due from related and unrelated parties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | As of
 December 31, 2008 and 2007, Samsung has withheld a total of $350,000 of
 commission due to the Company as deposits. As agreed with Samsung, the
 commission deposits were fully refunded to the Company on January 22, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Note 9. | 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 $27,950 for 2008 and $28,530 for 2007.                                                                               

F-20

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|         |                                                                                                                                                                                                                                  
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 10. | Commitments                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                  
|         | The Company
 leases its facilities. The following is a schedule by years of future minimum
 rental payments required under operating leases that have non-cancellable
 lease terms in excess of one year as of December 31, 2008:

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

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | See Note 12
 for related party leases. All leases expire prior to December 31, 2010. Real
 estate taxes, insurance, and maintenance expenses are obligations of the
 Company. It is expected that in the normal course of business, leases that
 expire will be renewed or replaced by leases on other properties; thus, it is
 anticipated that future minimum lease commitments will likely be more than
 the amounts shown for 2008. Rent expense for the years ended December 31,
 2008 and 2007 totaled $142,985 and $120,942, respectively.                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Note 11. | Derivative Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | On February
 1, 2009, the Company adopted SFAS 161 as referenced in Note 1. The adoption
 of SFAS 161 requires additional disclosures about Companys objectives and
 strategies for using derivative instruments, the accounting for the
 derivative instruments and related hedged items under SFAS No. 133,
 Accounting for Derivative Instruments and Hedging Activities (SFAS 133),
 and the effect of derivative instruments and related hedged items on the
 financial statements. The adoption had no financial impact on the
 consolidated condensed financial statements.                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | Since all of
 the Company sales are done in USD, the bank is exposed to foreign currency
 exchange rate fluctuations in the normal course of its business. As part of
 its risk management strategy, the Company purchases FX forward contracts from
 the banks to secure the exchange rate for a period of time in order to hedge
 any FX exposure between HKD and USD throughout the purchase & sale period.
 The Company applies hedge accounting based upon the criteria established by
 SFAS 133, whereby the Company designates its derivatives as cash flow hedges.
 Cash flows from the derivative programs were classified as operating
 activities in the Consolidated Statement of Cash Flows.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | As at
 December 31, 2008 there is a participating forward currency option agreement
 between the Company and SCB for the Company to buy US$500,000 from SCB at a
 contract rate of 7.735 at specified dated up to January 7, 2010. According to
 the terms of the agreement, the Company will buy USD in triple amounts if the
 spot rate is less than the contract rate at specified dates. The gain on this
 forward contract during the year ended December 31, 2008 was $36,346.                                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | As at
 December 31, 2008, there is a target redemption forward currency option
 agreement between the Company and SCB for the Company to buy US$750,000 from
 SCB at a lower strike contract rate of 7.75 and an upper strike contract rate
 of 7.85 at specified dates up to April 29, 2010. According to the terms of
 the agreement, the Company will buy USD in triple amounts if the spot rate is
 less than the lower strike contract rate or greater than the upper strike
 contract rate at specified dates. The gain on this forward contract during
 the year ended December 31, 2008 was $56,433.                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | As at
 December 31, 2008, there is a pivot bonus forward currency option agreement
 between the Company and SCB for the Company to buy US$1,000,000 from SCB at a
 lower strike contract rate of 7.73 and an upper strike contract rate 7.749 at
 specified dates up to July 2, 2009. According to the terms of the agreement,
 the Company will buy in triple amounts if the spot rate is less than the
 lower strike contract rate. The gain on this forward contract during the year
 ended December 31, 2008 was $56,410.                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | As at December 31, 2008, the Company has holdings of US$500,000
 Commodity Basket Linked Notes which were issued by SCB at specified dates up
 to February 17, 2009. According to the terms of agreements, the Company will
 receive interest at a rate equal to 6% if the Basket Return is larger than 0%
 and 100% redeemed if the Basket Return is less than or equal to 0% on the
 maturity date. The
 Company fully redeemed the securities at cost value on the maturity date of
 February 17, 2009                                                                                                                                                                                                

F-21

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|         |                                                                                                              
|-------- | -------------------------------------------------------------------------------------------------------------
|Note 11. | Derivative Instruments, Continued                                                                            
|         |                                                                                                              
|         | There are
 three foreign currency exchange agreements matured as of December 31, 2008.
 These agreements are:

| |                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                   | Ratio par
 forward contract agreement between the Company and DBS Bank for the Company
 to buy US$500,000 from DBS Bank at a contract rate of 7.735 at specified
 dated up to March 18, 2008. According to the terms of the agreement, the
 Company will buy USD in double amounts if the spot rate is less than the
 contract rate at specified dates. The gain on this forward contract during
 the year ended December 31, 2008 was $11,538.
| |                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                   | Ratio par
 forward contract agreement between the Company and DBS Bank for the Company
 to buy US$500,000 from DBS Bank at a contract rate of 7.74 at specified dated
 up to May 27, 2008. According to the terms of the agreement, the Company will
 buy USD in double amounts if the spot rate is less than the contract rate at
 specified dates. The gain on this forward contract during the year ended
 December 31, 2008 was $17,917.   
| |                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                   | Ratio par
 forward contract agreement between the Company and SCB for the Company to buy
 US$200,000 from SCB at a contract rate of 7.725 at specified dated up to July
 3, 2008. According to the terms of the agreement, the Company will buy USD in
 double amounts if the spot rate is less than the contract rate at specified
 dates. The gain on this forward contract during the year ended December 31,
 2008 was $12,644.            
| |                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The gross
 notional and fair value of derivative financial instruments in the
 Consolidated Balance Sheet as of December 31, 2008 were as follows:

|                                                                        |  |                         |            |                          |  |                                                         |  |                               |   |                     |  |   |  |  |   | 
|----------------------------------------------------------------------- |  | ----------------------- | ---------- | ------------------------ |  | ------------------------------------------------------- |  | ----------------------------- | - | ------------------- |  | - |  |  | - | 
|                                                                        |  | As of December 31, 2008 |           
|                                                                        |  |                         |           
|                                                                        |  | Gross 
 Notional(1)     |            | Other 
 Current 
 Assets |  | Long-term 
 Financing
 Receivables 
 and Other 
 Assets |  | Other 
 Accrued 
 Liabilities |   | Other 
 Liabilities | 
|                                                                        |  |                         |            |                          |  |                                                         |  |                               |   |                     | 
|Derivatives designated as
 hedging instruments under SFAS 133           |  |                         |            |                          |  |                                                         |  |                               |   |                     |  |   |  |  |   | 
|Cash flow hedges:                                                       |  |                         |            |                          |  |                                                         |  |                               |   |                     |  |   |  |  |   | 
|Foreign exchange contracts                                              |  | $                       | 2,250,000  |                          |  |                                                        |  |                               |  |                     |  |  |  |  |  | 
|Total derivatives not
 designated as hedging instruments under SFAS 133 |  |                         | 500,000    |                          |  | 500,000-                                                |  |                               |  |                     |  |  |  |  |  | 
|                                                                        |  |                         |            |                          |  |                                                         |  |                               |   |                     |  |   |  |  |   | 
|                                                                        |  |                         |            |                          |  |                                                         |  |                               |   |                     |  |   |  |  |   | 
|Total derivatives                                                       |  | $                       | $2,750,000 |                          |  | 500,000-                                                |  |                               |  |                     |  |  |  |  |  | 
|                                                                        |  |                         |            |                          |  |                                                         |  |                               |   |                     |  |   |  |  |   | 

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

F-22

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|         |                                                                                                                                                                       
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 11. | Derivative Instruments, Continued                                                                                                                                     
|         |                                                                                                                                                                       
|         | The
 before-tax effect of derivative instruments in cash flow and net investment
 hedging relationships for the year ended December 31, 2008 and 2007 was
 as follows:

|                                                   |  |                                                                    |  |                                                                                 |  |                                             |  |                                |  |                                |  |                        |  |                                |          |                                |   |       
|-------------------------------------------------- |  | ------------------------------------------------------------------ |  | ------------------------------------------------------------------------------- |  | ------------------------------------------- |  | ------------------------------ |  | ------------------------------ |  | ---------------------- |  | ------------------------------ | -------- | ------------------------------ | - | ------
|                                                   |  | Gain (Loss)
 Recognized in
 OCI on Derivative
 (Effective Portion) |  | Gain (Loss) Reclassified from
 Accumulated OCI Into Income
 (Effective Portion) |  | Gain Recognized in
 Income on Derivative(1)
|                                                   |  | Year ended 
 December31,
 2008                                     |  | Year ended 
 December31,
 2007                                                  |  | Location                                    |  | Year ended 
 December31,
 2008 |  | Year ended 
 December31,
 2007 |  | Location               |  | Year ended 
 December31,
 2008 |          | Year ended 
 December 31, 2007
|                                                   |  |                                                                    |  |                                                                                 |  |                                             |  |                                |  |                                |  |                        |  |                                |          |                               
|                                                   |  |                                                                    |  |                                                                                 |  |                                             |  |                                |  |                                |  |                        |  |                                |          |                                |   |       
|Cash
 flow hedges:                                 |  |                                                                    |  |                                                                                 |  |                                             |  |                                |  |                                |  |                        |  |                                |          |                                |   |       
|                                                   |  |                                                                    |  |                                                                                 |  |                                             |  |                                |  |                                |  |                        |  |                                |          |                                |   |       
|Foreign exchange contracts US$200,000
 (HKD/USD)   |  |                                                                   |  |                                                                                |  | Interest and other, net                     |  |                               |  |                               |  | Interestand other, net |  | $                              | 12,644   |                                | $ | 20,897
|Foreign exchange contracts USD500,000
 (HKD/USD)   |  |                                                                   |  |                                                                                |  | Interest and other, net                     |  |                               |  |                               |  | Interestand other, net |  |                                | 36,346   |                                |   | 6,449 
|Foreign exchange contracts US$500,000
 (HKD/USD)   |  |                                                                   |  |                                                                                |  | Interest and other, net                     |  |                               |  |                               |  | Interestand other, net |  |                                | 11,538   |                                |   | 37,244
|Foreign exchange contracts USD500,000
 (HKD/USD)   |  |                                                                   |  |                                                                                |  | Interest and other, net                     |  |                               |  |                               |  | Interestand other, net |  |                                | 17,917   |                                |   |      
|Foreign exchange contracts US$2,000,000
 (CNY/USD) |  |                                                                   |  |                                                                                |  | Interest and other, net                     |  |                               |  |                               |  | Interestand other, net |  |                                | (30,000) |                                |   |      
|Foreign exchange contracts USD750,000 (HKD/USD)    |  |                                                                   |  |                                                                                |  | Interest and other, net                     |  |                               |  |                               |  | Interestand other, net |  |                                | 56,433   |                                |   |       
|Foreign exchange contracts US$1,000,000
 (HKD/USD) |  |                                                                   |  |                                                                                |  | Interest and other, net                     |  |                               |  |                               |  | Interestand other, net |  |                                | 56,410   |                                |   |      
|Total cash flow hedges                             |  |                                                                    |  |                                                                                 |  |                                             |  |                                |  |                                |  |                        |  | $                              | 161,288  |                                | $ | 64,590
|                                                   |  |                                                                    |  |                                                                                 |  |                                             |  |                                |  |                                |  |                        |  |                                |          |                               

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 12. | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | Transactions with Mr. Yang                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | As of
 December 31, 2008 and 2007, we had an outstanding receivable from Mr. Yang,
 the President and Chairman of our Board of Directors, totaling $39,633 and
 $75,998. These advances bear no interest and are payable on demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | For the
 years ended December 31, 2008 and 2007, we recorded compensation to Mr. Yang
 of $735,026 and $812,821 respectively, and paid $735,026 and $812,821
 respectively to Mr. Yang as compensation to him.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | During each
 of the years ended December 31, 2008 and 2007, we paid rent of $0 and $17,521
 respectively for Mr. Yangs personal residence as fringe benefits to him. All
 such payments have been recorded as compensation expense in the accompanying
 financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | Transactions with Classic Electronic Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | Mr. Ben
 Wong, one of our directors, is a 99.9% shareholder of Classic. The remaining
 0.1% of Classic Electronics Ltd. (Classic) is owned by a non-related party.
 As of December 31, 2008 and 2007, the Company had outstanding accounts
 receivable from Classic totaling $1,717,320 and $1,717,859 respectively. This
 account receivable has been outstanding for more than 12 months.                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         | Classic has
 historically met its payment obligations to the Company and the Company has
 no reason to believe that Classics receivables are not collectible. Pursuant
 to a written personal guarantee agreement, Mr. Yang has personally guaranteed
 up to $10.0 million of the outstanding accounts receivable from Classic. The
 Company has received verbal assurances from Mr. Yang of his intent and
 ability to perform under the above-referenced guarantee and based on
 information provided by Mr. Yang, his net worth is approximately $17 million.
 In addition, as discussed in Note 14, the Company has entered into a payment
 plan with Classic, which payment plan contains a due on demand clause.

F-23

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 12. | Related Party Transactions, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Transactions with Solution Semiconductor (China) Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Mr. Ben
 Wong, one of our directors, is a 99% shareholder of Solution Semiconductor
 (China) Ltd. (Solution). The remaining 1% of Solution is owned by a
 non-related party. On April 1, 2007, we entered into a lease agreement with
 Solution pursuant to which we lease one facility. The lease agreement for
 this facility expires on March 31, 2009. The monthly lease payment for this
 lease is $1,090. We incurred and paid an aggregate rent expense of $13,077
 and $12,385 to Solution during the year ended December 31, 2008 and 2007.                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Two
 facilities located in Hong Kong owned by Solution were used by the Company as
 collateral for loans from Citic and SCB respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Transactions with Systematic Information Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is a director and shareholder of Systematic Information Ltd. (Systematic
 Information) with a total of 100% interest. On September 1, 2008, we entered
 into a lease agreement with Systematic Information pursuant to which we lease
 one facility. The lease agreement for this facility expires on August 31, 2010.
 The monthly lease payment for this lease totals $641. We incurred and paid an
 aggregate rent expense of $7,692 and $7,692 to Systematic Information during
 the years ended December 31, 2008 and 2007.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | During the
 years ended December 31, 2008 and 2007, we received service charges of $0 and
 $11,538 respectively from Systematic Information. As of December 31, 2008 and
 2007, there were no outstanding accounts receivables from Systematic
 Information. The service fee was charged for back office support for
 Systematic Information.                                                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | On April 1,
 2005, we entered into a lease agreement with Systematic Information pursuant
 to which we lease one residential property for Mr. Yangs personal use for a
 monthly lease payment of $3,205. Upon expiration of the lease on June 15,
 2007, ACL acquired this residential property from Systematic Information. We
 incurred and paid an aggregate rent expense of $0 and $17,521 to Systematic
 Information during the years ended December 31, 2008 and 2007.                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | A workshop
 located in Hong Kong owned by Systematic Information was used by the Company
 as collateral for loans from SCB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Transactions with Aristo Technologies Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Mr. Yang is
 the sole beneficial owner of the equity interests of Aristo Technologies Ltd.
 (Aristo). During the years ended December 31, 2008 and 2007, we sold
 products for $9,076,034 and $17,165,728 respectively, to Aristo. As of
 December 31, 2008 and 2007, outstanding accounts receivable totaled
 $6,695,409 and $6,237,905 respectively. We have not experienced any bad debt
 from this customer in the past.                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | During the
 years ended December 31, 2008 and 2007, we purchased inventories of
 $7,393,957 and $3,633,424 respectively from Aristo. As of December 31, 2008
 and 2007, there were no outstanding accounts payable to or from Aristo.                                                                                                                                                                                                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Aristo has
 historically met its payment obligations to the Company and the Company has
 no reason to believe that Aristos receivables are not collectible. In
 addition, as discussed in Note 14, the Company entered into a payment plan
 with Aristo according to which the outstanding balance of accounts receivable
 will be paid over the course of 2010 which payment plan contains a due on
 demand clause.                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Transactions with Global Mega Development Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is the sole beneficial owner of the equity interest of Global Mega
 Development Ltd. (Global). During the years ended December 31, 2008 and
 2007, we received management fees of $0 and $5,769 respectively from Global.
 As of December 31, 2008 and 2007, there were no outstanding accounts
 receivables from Global. The management fees were charged for back office
 support for Global.                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Transactions with Systematic Semiconductor Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is the sole beneficial owner of the equity interest of Systematic
 Semiconductor Ltd. (Systematic). During the years ended December 31, 2008
 and 2007, we received a management fee of $15,384 and $16,026 respectively
 from Systematic. As of December 31, 2008 and 2007, there were no
 outstanding accounts receivables from Systematic. The management fee was
 charged for back office support for Systematic.                                                                                                           

F-24

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 12. | Related Party Transactions, Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | Transactions with Aristo Components Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | Mr. Ben
 Wong, one of our directors, is a 90% shareholder of Aristo Components Ltd.
 (Aristo Comp). The remaining 10% of Aristo Comp is owned by a non-related
 party. During the years ended December 31, 2008 and 2007, we received a
 management fee of $8,077 and $0 respectively from Aristo Comp. As of December
 31, 2008 and 2007, there were no outstanding accounts receivable from Aristo
 Comp. The management fee was charged for back office support for Aristo Comp.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | Transactions City Royal Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | Mr. Yang,
 the Companys Chief Executive Officer, majority shareholder and a director,
 is a 50% shareholder of City Royal Limited (City). The remaining 50% of
 City is owned by the wife of Mr. Yang. A residential property located in Hong
 Kong owned by City was used by the Company as collateral for loans from DBS
 Bank.                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Note 13. | Quarterly Information (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | The
 summarized quarterly financial data presented below reflects all adjustments,
 which in the opinion of management, are of a normal and recurring nature
 necessary to present fairly the results of operations for the periods
 presented.                                                                                                                                                                                                                                      

|                              |  |                                              |         |        |   |        |   |        |        |       |    |        |   |   |        |  
|----------------------------- |  | -------------------------------------------- | ------- | ------ | - | ------ | - | ------ | ------ | ----- | -- | ------ | - | - | ------ | -
|                              |  | (dollars in thousands except per share data) |        
|                              |  |                                              |        
|                              |  | Total                                        |         | Fourth |   | Third  |   | Second |        | First |   
|                              |  |                                              |         |        |   |        |   |        |        |       |   
|2008                          |  |                                              |         |        |   |        |   |        |        |       |    |        |   |   |        |  
|Total net
 sales              |  | $                                            | 206,083 |        | $ | 56,610 |   | $      | 51,318 |       | $  | 45,246 |   | $ | 52,909 |  
|Gross profit                  |  | $                                            | 4,262   |        | $ | 656    |   | $      | 1,691  |       | $  | 1,395  |   | $ | 520    |  
|Net income
 (loss)            |  | $                                            | (922    | )      | $ | (1,247 | ) | $      | 532    |       | $  | 395    |   | $ | (602   | )
|Net income
 (loss) per share: |  |                                              |         |        |   |        |   |        |        |       |    |        |   |   |        |  
|basic and diluted             |  | $                                            | (0.03   | )      | $ | (0.04  | ) | $      | 0.02   |       | $  | 0.01   |   | $ | (0.02  | )
|                              |  |                                              |         |        |   |        |   |        |        |       |    |        |   |   |        |  
|2007                          |  |                                              |         |        |   |        |   |        |        |       |    |        |   |   |        |  
|Total net
 sales              |  | $                                            | 160,401 |        | $ | 52,740 |   | $      | 43,895 |       | $  | 31,731 |   | $ | 32,035 |  
|Gross profit                  |  | $                                            | 3,871   |        | $ | 831    |   | $      | 1,643  |       | $  | 510    |   | $ | 887    |  
|Net income
 (loss)            |  | $                                            | 436     |        | $ | 6      |   | $      | 538    |       | $  | (174   | ) | $ | 66     |  
|Net income
 (loss) per share: |  |                                              |         |        |   |        |   |        |        |       |    |        |   |   |        |  
|basic and diluted             |  | $                                            | 0.02    |        | $ | 0.00   |   | $      | 0.02   |       | ($ | 0.01   | ) | $ | 0.00   |  

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 14. | Subsequent Events (Unaudited):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | After year
 ended December 31, 2008, two banks canceled the banking facilities granted to
 the Company and restricted bank deposits were released. One bank reduced the
 amount of facilities granted to the Company.                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | Effective as of October 1, 2009, Classic, a related party, and the
 Company agreed to a payment plan for the pay down of accounts receivable from
 Classic of $1,717,320 as of June 30, 2009 according to which Classic has
 agreed to pay to the Company $650,000 before the end of 2009 with the
 remainder of the accounts receivable balance to be paid during 2010. Mr. Alan
 Yang, our Chief Executive Officer, director and majority stockholder has
 personally guaranteed up to $10 million of outstanding accounts receivable of
 Classic.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | Effective as of October 1, 2009, Aristo, a related party, and the
 Company agreed to a payment plan for the pay down of accounts receivable from
 Aristo that have aged more than 90 days according to which Aristo has agreed
 to pay to the Company over the course of 2010. Mr. Alan Yang, our Chief
 Executive Officer, director and majority stockholder is the sole beneficial
 owner of Aristo.                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | On November 2, 2009, the Company entered into two leases for office
 space. The leases expire on November 30, 2014. The monthly lease payments are
 $4,487 and $7,051, respectively.                                                                                                                                                                                                                                                                                                                                                                

F-25

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES
YEARS ENDED DECEMBER 31, 2008 AND 2007

|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|--------------------------------------------- |  | -------------------------------------- | --------- | ------------------------------- | - | ---------- |  | -------------------------------- | ------- |  | - | --------- | 
|                                              |  | Balance
 at the Beginning
 of the Year |           | Charged
 to Costs
 and Expenses |   | Deductions |  | Balance
 At the End
 of the Year |        
|                                              |  |                                        |           |                                 |   |            |  |                                  |        
|Allowance
 for Doubtful Accounts:             |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Year ended
 December 31, 2007                 |  | $                                      |          |                                 | $ |           |  | $                                |        |  | $ |          | 
|Year ended
 December 31, 2008                 |  | $                                      |          |                                 | $ |           |  | $                                |        |  | $ |          | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Inventory
 Obsolescence Reserve:              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Year ended
 December 31, 2007                 |  | $                                      | 241,026   |                                 | $ | 323,077    |  | $                                |        |  | $ | 564,103   | 
|Year ended
 December 31, 2008                 |  | $                                      | 564,103   |                                 | $ |           |  | $                                | 190,000 |  | $ | 374,103   | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Valuation
 Allowance for Deferred Tax Assets: |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Year ended
 December 31, 2007                 |  | $                                      | 987,840   |                                 | $ | 69,152     |  | $                                |        |  | $ | 1,056,992 | 
|Year ended
 December 31, 2008                 |  | $                                      | 1,056,992 |                                 | $ | 65,734     |  | $                                |        |  | $ | 1,122,726 | 

F-26

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