UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K/A

(MARK ONE)

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

FOR THE FISCAL YEAR ENDED – December 31, 2007

OR

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

FOR THE TRANSITION PERIOD FROM ______ TO ______

Commission File Number: 000-50140

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

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

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

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

|Securities registered pursuant to Section 12(b) of the | Common Stock - $.001 par value   
|------------------------------------------------------ | ---------------------------------
|Act:                                                   | The Common Stock is listed on the
|                                                       | Over-the-Counter Bulletin Board  
|                                                      
|Securities registered pursuant to Section 12(g) of the | None                             
|Act:                                                   |                                  
|                                                       |                                  

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


Yes [   ]           No [X]


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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.


Yes [   ]           No [X]


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that
registrant was required to file such reports) and (2) has been subject to such filing requirements for at least the past 90 days.


Yes [X]           No [   ]


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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated file and larger accelerated filer” in Rule 12b-2 of
the Exchange Act.

|Large accelerated filer [   ] |  | Accelerated filer [   ] |  | Non-accelerated filer [X]
|----------------------------- |  | ----------------------- |  | -------------------------

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [   ]           No [X]

The aggregate market value of the voting common equity held by non-affiliates of the registrant as of April 11, 2008 was approximately $–1,076,089 based upon the closing price of $0.10 of the registrant’s common
stock on the OTC Bulletin Board, as of the last business day of the most recently completed first fiscal quarter (March 31, 2008). (For purposes of determining this amount, only directors, executive officers, and 10% or greater stockholders have
been deemed affiliates).

Registrant had 28,329,936 shares of common stock, par value $0.001 per share, outstanding as of April 1, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

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

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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.







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Table of Contents

Form 10-K Index

|PART I    
|----------
|          
|Item 1.   
|Item 1A.  
|Item 1B.  
|Item 2.   
|Item 3.   
|Item 4.   
|          
|PART II   
|          
|Item 5.   
|          
|          
|Item 6.   
|Item 7.   
|          
|Item 7A.  
|Item 8.   
|Item 9.   
|          
|Item 9A.  
|Item 9B.  
|          
|PART III  
|          
|Item 10.  
|          
|Item 11.  
|Item 12.  
|          
|Item 13.  
|          
|Item 14.  
|          
|PART IV   
|          
|Item 15.  
|Signatures

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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 twenty five million (25,000,000) shares of common stock, par value $0.001 per share (the
“Common Stock”), of Company (the “Transaction”). Pursuant to the Exchange Agreement, the Company and Atlantic agreed,inter alia, to elect Mr. Yang and
Mr. Ben Wong to the board of directors ("Board of Directors") of the Company upon the closing of the Transaction (the “Closing”), effective as of that date (the “Closing Date”), at which time, all of the Company's existing
directors resigned.

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.

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

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

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Business

The Company is one of 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, the world's largest producer of memory chips and a global producer of memory products pursuant to a distributorship agreement with Samsung (the
“Distribution Agreement”) since 1993. Atlantic was established as a Hong Kong corporation in May 1991 by Mr. Yang as a regional distributor of memory products of various manufacturers. In 1993, Samsung appointed Atlantic as its
authorized distributor and marketer of Samsung’s memory products in Hong Kong and overseas markets. In 2001, Atlantic established a representative office in Shenzhen, China and began concentrating its distribution and marketing efforts in
Southern China

Since 1993, Atlantic has diversified its product portfolio to include all 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, 2007, 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) 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.

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Currently, the market has been dominated by DDR2 and DDR3 are also starting topentrate into the mainstream in PCs and Graphic Card markets. 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. Besides, Solid State Disk hard
disk (SSD) will be the next arena that NAND FLASH is going to penetrate into the market. The SSD hard disk will gradually dominate the traditional hard disk for notebook markets. Samsung is a major supplier in the world of FLASH products. In 2005,
Samsung NAND Flash revenue was approximately USD 6,580 millions representing 35% 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 is the fastest graphic memory in volume production nowadays.

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, 2007, the Company had over 120 active customers in Hong Kong and Southern China, the majority of whom are memory product traders and PC/Servers OEM manufacturers. Sales to
Classic Electronic Ltd. (“Classic”), a related party, accounted for 0%, 0% and 17% of the Company’s net sales for the years ended December 31, 2007, 2006 and 2005. Sales to Aristo Technologies Ltd. (“Aristo”), a related
party, accounted for 11%, 11% and 2% of the Company’s net sales for the year ended December 31, 2007, 2006 and 2005. Other than the Company’s most significant customer who accounted for 32% of the Company’s net sales for the year
ended December 31, 2007, no other customer accounted for more than 25% of the Company’s net sales for 2007, 2006 and 2005, 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, 2007, the Company employed a total of 12 salespeople, each of whom has several years experience in the memory products industry. Seven of these salespeople are stationed in
the Company’s headquarters in Hong Kong; and five 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

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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 researchfor its own account to provide prompt and accurate market intelligence and feedback on
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, 2007, 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 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 brandname 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, 2007, 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

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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.

Employees

As of December 31, 2007, 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 brandname 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.







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ITEM 1A.          RISK FACTORS

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

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

We rely ultimately on Samsung to provide us with memory products for distribution to our clientsthough 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 Chief Executive Officer Mr. Yang, who has verbally agreed to remain with
us. If our relationship with Samsung is terminated or if Mr. Yang terminates his employment with us, we may be unable to replace or retain Samsung on favorable terms.

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

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

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

We are dependent on the computer 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 n 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

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specific memory solutions. Samsung currently offers
customers a variety of memory products including DDR, Graphic RAM and FLASH.

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

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

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

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

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adversely affected. In addition, our ability to raise capital for working capital purposes and ongoing operations is dependent upon ready access to capital markets. During times of adverse global economic and political
conditions, accessibility to capital markets could decrease. If we are unable to access the capital markets over an extended period of time, we may be unable to fund operations, which could materially adversely affect our results of operations, cash
flows and financial condition.

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

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

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

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

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

There has been significant volatility in the market prices for publicly traded shares of computer related companies, including ours. From September 30, 2003, the effective date of the
reverse-acquisition of Atlantic, to March 31, 2008, 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 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, 2007, 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

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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.

Not applicable.

ITEM 2.           PROPERTIES.

Our principal offices occupy approximately 4,989 square feet area 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 10 – Related Party 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 area located at B14-15, 1/F., Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon Bay, Kowloon, Hong Kong. The lease is
for one year from May 23, 2007 to May 22, 2009 from Lin Chin Hsiung with monthly lease payments of HK$16,800 (approximately US$2,154).

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We lease a warehouse unit of approximately 873 square feet area 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, 2008, 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 area located at B10, 1/F., Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon Bay, Kowloon, Hong Kong.The lease is for
two years with Solution Semiconductor (China) Ltd. which expiring on March 31, 2009, with monthly rentals of HK$8,500 (approximately US$1,090).  Mr. Ben Wong, one of our directors, is also a 99% shareholder of Solution Semiconductor (China) Ltd.

We lease an office unit of approximately 2,682.9 square feet area 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 a property approximately 3,000 square feet gross floor area located at No. 76, 5th Street, Hong Lok Yuen, Tai Po, New Territories, Hong Kong, 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 approximately 3,000 square feet gross floor area for Mr. Yang’s personal residence 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, 2007.





11

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PART II

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

|Quarters ended                       |  | High  |  | Low  
|------------------------------------ |  | ----- |  | -----
|                                    
|Quarter ended March 31, 2008         |  |       |  |      
|Quarter ended March 31, 2008         |  | $0.12 |  | $0.12
|                                    
|Fiscal Year ended December 31, 2007: |  |       |  |      
|Quarter ended December 31, 2007      |  | $0.09 |  | $0.08
|Quarter ended September 30, 2007     |  | $0.12 |  | $0.12
|Quarter ended June 30, 2007          |  | $0.12 |  | $0.10
|Quarter ended March 31, 2007         |  | $0.10 |  | $0.10
|                                    
|                                    
|Fiscal Year ended December 31, 2006  |  |       |  |      
|Quarter ended December 31, 2006      |  | $0.18 |  | $0.07
|Quarter ended September 30, 2006     |  | $0.13 |  | $0.08
|Quarter ended June 30, 2006          |  | $0.24 |  | $0.11
|Quarter ended March 31, 2006         |  | $0.27 |  | $0.12

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 11, 2008, the last reported sale price of our common stock, as reported by the OTC Bulletin Board, was $0.17 per share.

As of April 11, 2008, there were approximately 211 holders of record of our common stock.

Dividend Policy

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

Equity Compensation Plan Information

The following table sets forth certain information regarding the Company’s equity compensation plans as of December 31, 2007.

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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 us to grant both incentive stock options (Incentive
Stock Options or ISOs)
within the meaning of Section 422 of 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’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.

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.

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ITEM 6.           SELECTED FINANCIAL DATA.

The following consolidated selected financial data, at the end of and for the last three fiscal years, should be read in conjunction with our Consolidated Financial Statements and related Notes
thereto appearing elsewhere in this Annual Report on Form 10-K. The consolidated selected financial data are derived from our consolidated financial statements that have been audited by JTC Fair Song CPA Firm, our independent registered public
accounting firm, as indicated in their report included herein. The selected financial data provided below is not necessarily indicative of our future results of operations or financial performance.

|                               |  |   | 2007        |  |   | 2006        |  |   | 2005        |  |   | 2004        |   |  |   | 2003       |  
|------------------------------ |  | - | ----------- |  | - | ----------- |  | - | ----------- |  | - | ----------- | - |  | - | ---------- | -
|                               |  |   |             |  |   |             |  |   |             |  |   |             |   |  |   |            |  
|Net Sales                      |  | $ | 160,404,924 |  | $ | 105,642,123 |  | $ | 110,207,743 |  | $ | 133,243,690 |   |  | $ | 72,672,797 |  
|Net income (loss)              |  | $ | 436,092     |  | $ | 450,404     |  | $ | 259,515     |  | $ | (454,006    | ) |  | $ | (1,437,670 | )
|                               |  |   |             |  |   |             |  |   |             |  |   |             |   |  |   |            |  
|Earnings (loss) per common     |  |   |             |  |   |             |  |   |             |  |   |             |   |  |   |            |  
|share                          |  | $ | 0.01        |  | $ | 0.02        |  | $ | 0.01        |  | $ | (0.02       | ) |  | $ | (0.06      | )
|                               |  |   |             |  |   |             |  |   |             |  |   |             |   |  |   |            |  
|Total Assets                   |  | $ | 33,462,963  |  | $ | 21,121,354  |  | $ | 8,832,457   |  | $ | 10,265,983  |   |  | $ | 9,570,808  |  
|                               |  |   |             |  |   |             |  |   |             |  |   |             |   |  |   |            |  
|Long-term Debt                 |  | $ | 2,589,213   |  | $ | 1,900,997   |  | $ | -           |  | $ | 65,522      |   |  | $ | 194,703    |  
|                               |  |   |             |  |   |             |  |   |             |  |   |             |   |  |   |            |  
|Weighted average number of     |  |   |             |  |   |             |  |   |             |  |   |             |   |  |   |            |  
|shares outstanding – basic and |  |   | 28,329,936  |  |   | 28,145,004  |  |   | 27,829,936  |  |   | 27,829,936  |   |  |   | 23,753,682 |  
|diluted                        |  |   |             |  |   |             |  |   |             |  |   |             |   |  |   |            |  







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|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 “Samsung” brandname which comprise DRAM and Graphic RAM and FLASH for the Hong Kong and Southern
China markets.

As of December 31, 2007, we had over 120 active customers in Hong Kong and Southern China.

Pricing for the Samsung memory products range from approximately $0.17 to $750 depending on the product specifications.  We also 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, 2007, 2006, and 2005, the largest 5 customers accounted
for 61%, 41% and 43% of our net sales, respectively. As of December 31, 2007,
we had net current liabilities of $28,966,568 and accumulated deficit of $1,638,177.
We generated net sales of $160,404,924 for the year ended December 31, 2007 and
recorded a net income of $436,092. In addition, during the year ended December
31, 2007, net cash provided by operating activities amounted to $1,125,907.

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.

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Accounting Principles; Anticipated Effect of Growth

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

Net sales

Net Sales are recognized upon the transfer of legal title of the electronic components to the customers. As of December 31, 2007 we had over 120 active customers.

Sales turnover for fiscal year 2007 was $160,404,924 and it increased by 52% or $54,762,801 compared to fiscal year 2006. The turnover has met the Company’s expectation for 2007 in
general.

The memory unit price kept decreasing through a product’s life cycle and as a result the actual units sold increased in proportion to the decrease in unit price. The Company’s gross
profit margin had decreased from an average 3.8% to 2.41% year-on-year base.

The Company experienced a strong demand in China in FLASH products which it is mostly used in the consumer electronics market like mobile phone; PDA and MP3 players. The market is moving
towards higher capacity of FLASH component usage. The Flash component trading contributed to the increase in sales of the Company. This occurred because of a fall in the unit price of Flash component which resulted in an increase in its application
and demand.  The market is sensitive to any price change and it was profitable for any Flash card manufacturer entering a mature market where Flash component price contributed to most of the cost. We are expecting shortage of high capacity FLASH
components as APPLE will launch new version of “I-Phone” and “I-Pod” during second half of 2008.

The DRAM business also obtained a strong demand as there was a large consumer electronic market with key applications being HDTV, DVD player GPS System and set-top boxes. On the PC front, the
overall VGA RAM sales increased as the newly launched Vista required VGA card with higher speed and larger capacity.

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 97.6% for the year ended December 31, 2007 and approximately 96.1% for the year ended December 31, 2006.

Operating Expenses

Our operating expenses for the years ended December 31, 2007 and 2006 were comprised of sales and marketing, general and administrative expenses.

16

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Selling and marketing expenses consisted primarily of commissions paid to outside sales agent and salary expenses to customer service personnel and costs associated with advertising and
marketing activities.

General and administrative expenses include all corporate and administrative functions that serve to support our current and future operations and provide an infrastructure to support future
growth. Major items in this category include management and staff salaries, rent/leases, professional services, and travel and entertainment. We expect these expenses to remain at approximately the same level in 2008. 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.

Results of Operations

The following table sets forth audited consolidated statements of operations data for the years ended December 31, 2007, 2006, and 2005 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$)                 
|                    |  | 2007                  
|                   
|Net sales           |  | 160,404,924           
|Cost of sales       |  | 156,553,635           
|Gross profit        |  | 3,871,289             
|                   
|Operating expenses: |  |                       
|Sales and marketing |  | 69,260                
|General and         |  |                       
|administrative      |  | 3,047,542             
|Total operating     |  |                       
|expenses            |  | 3,011,802             
|                   
|Income (loss) from  |  |                       
|operations          |  | 859,487               
|Interest expense    |  | 1,009,006             
|Net income          |  | 436,092               

Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006

Net Sales

Sales increased by $54,762,801 or 51.8% from $105,642,123 for year ended December 31, 2006 to $160,404,924 for the year ended December 31, 2007. The increase was mainly due to increased sales
to OEM factories in Hong Kong and South China areas, resulting in a higher turnover when compared to the year ended December 31, 2006.

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Cost of Sales

Cost of sales increased $54,989,537 or 54.1%, from $101,544,098 for the year ended December 31, 2006 to $156,533,635 for the year ended December 31, 2007. The cost of sales increased in
proportion to the increase of net sales and reduction of commission by Samsung from 2.4% to 1.8% .

Gross Profit

Gross profit decreased by $226,736 or 5.5% from $4,098,025 for the year ended December 31, 2006 to $3,871,289 for the year ended December 31, 2007. The gross profit percentage decreased to 2.4%
of revenue for the year ended December 31, 2007 compared to 3.9% of revenue for the year ended December 31, 2006, as a result of reduction of commission by Samsung from 2.4% to 1.8% and special marketing effort of Samsung products to several
1sttier manufacturers in China which occurred during the year. We expect the gross profit for the year ended December 31, 2008 to remain at approximately the same level as
the year ended December 31, 2007.

Operating Expenses

Sales and marketing expenses decreased by $722,107, or 91.2%, from $791,367 for the year ended December 31, 2006 to $69,260 for the year ended December 31, 2007. The decrease was principally
attributable to the decreased sales commission expenses incurred for the year 2007. We expect the sales and marketing expenses for the year ended December 31, 2008 to remain at approximately the same level as the year ended December 31, 2007.

General
and administrative expenses increased $670,485 or 29.5% from $2,272,057 for the
year ended December 31, 2006 to $2,942,542 for the year ended December 31, 2007.
This increase was primarily attributable to an increase in depreciation, director’s
remuneration and salary expenses during the year 2007. We will continue to keep
general and administrative expenses for the year ended December 31, 2008 at approximately
the  same level as the year ended December 31, 2007.

Income
from operations was $859,487 for the year ended December 31, 2007 compared to
$1,034,601 for the year ended December 31, 2006, a decrease of income of $175,114.
The decrease was mainly due to decrease in Samsung Commission and increase of
operating expenses.

Other income (expenses)

Interest expense increased $320,313, or 46.5% from interest expense of $688,693 in the year ended December 31, 2006, to $1,009,006 in the year ended December 31, 2007. The increase was mainly
due to an increase in the Company’s need to open and draw down on letters of credits to obtain goods from its suppliers. We expect we will increase the interest expense for the year ended December 31, 2008 because of an increase in bank lines
of credit and loan facilities.

Unrealized gain on pledged marketable securities increased by $404,780 from $0 in the year ended December 31, 2006, to $404,780 in the year ended December 31, 2007.  The increase was mainly
attributable to the increase in the market value as of December 31, 2007 over the cost of purchase of certain securities pledged by the Company in favor of Hang Seng Bank Limited (see Note 3 in the Financial Statements).

Our
net income decreased by $14,312 from the $450,440 for the year ended December
31, 2006 compared to $436,092 for the year ended December 31, 2007. The decrease
was mainly due to the decrease in profit margin.

18

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Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005

Net Sales

Sales decreased by $4,565,620 or 4.1% from $110,207,743 for year ended December 31, 2005 to $105,642,123 for the year ended December 31, 2006. The decrease was mainly due to the decrease in
demand and shortage of supplies of Samsung products.

Cost of Sales

Cost of sales decreased $5,460,393 or 5.1%, from $107,004,491 for the year ended December 31, 2005 to $101,544,098 for the year ended December 31, 2006. The cost of sales decreased in
proportion to the decrease of net sales.

Gross Profit

Gross profit increased by $894,773, or 27.9% from $3,203,252 for the year ended December 31, 2005 to $4,098,025 for the year ended December 31, 2006. The gross profit percentage increased to
3.9% of revenue for the year ended December 31, 2006 compared to 2.9% of revenue for the year ended December 31, 2005 mainly due to shortage of supplies of Samsung products.

Operating Expenses

Sales and marketing expenses increased by $45,612, or 6.1%, from $745,755 for the year ended December 31, 2005 to $791,367 for the year ended December 31, 2006. The increase was principally
attributable to the sales commission expenses incurred during the year. As a percentage of sales, sales and marketing expenses increased to 0.75% of sales for the year 2006 as compared to 0.68% of sales for the year of 2005.

General
and administrative expenses increased $212,907 or 10.3% from $2,059,150 for the
year ended December 31, 2005 to $2,272,057 for the year ended December 31, 2006.
This increase was primarily attributable to the fair value of options granted
to certain employees and increase in certain expenses, such as depreciation and
staff salaries during the year 2006.

Income
from operations was $1,034,601 for the year ended December 31, 2006 compared
to $398,347 for the year ended December 31, 2005, an increase of income of $636,254.
The increase was mainly due to increase in gross profit of our products caused
by the shortage of memory products in the market during the year.

Other income (expenses)

Interest expense increased $485,501, or 238.9% from interest expense of $203,192 in the year ended December 31, 2005, to $688,693 in the year ended December 31, 2006. The increase was mainly
due to increase of the use of short-term borrowings from the bank and increase in interest rates during the year. We expect the interest expense for the year ended December 31, 2007 to increase significantly because of increase in the interest rate.

Our
net income increased by $190,889 from the $259,515 for the year ended December
31, 2005 compared to $450,404 for the year ended December 31, 2006. This increase
was mainly due to increase in profit margin. We expect the net income to be adversely
affected by the increase in the interest rate.

19

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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.

The short-term borrowings from banks to finance the cash flow required to finance the purchase of Samsung memory products from Samsung must be made a day in advance of the release of goods from
Samsung’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. In certain limited instances, customers of
Atlantic are permitted up to thirty (30) days to make payment for purchased memory products.  As the anticipated cash generated by the Company’s operations are insufficient to fund our growth requirements, we will need to obtain additional
funds. There can be no assurance that the Company’s will be able to obtain the necessary additional capital on a timely basis or on acceptable terms, if at all.  The Company’s business growth and prospects would be materially and
adversely affected. If it is an equity financing, the holders of our common stock may experience substantial dilution.  In addition, if our results are negatively impacted and delayed as a result of political and economic factors beyond
management’s control, our capital requirements may increase.

The following factors, among others, could cause actual results to differ from those indicated in the above forward-looking statements: pricing pressures in the industry; a continued downturn
in the economy in general or in the memory products sector; an unexpected decrease in demand for Samsung’s memory products; our ability to attract new customers; an increase in competition in the memory products market; and the ability of some
of our customers to obtain financing. These factors or additional risks and uncertainties not known to us or that we currently deems immaterial may impair business operations and may cause our actual results to differ materially from any
forward-looking statement.

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

In the year ended December 31, 2007, net cash provided by operating activities amounted to $1,125,907 while in the year ended December 31, 2006, net cash used for operating activities amounted
to $6,287,126, an increase of $7,413,033. This increase was primarily due to increase of accounts payable and accounts receivables at the end of 2007.

In the year ended December 31, 2006, net cash used in operating activities amounted to $6,287,126 while in the year ended December 31, 2005, net cash provided by operating activities amounted
to $2,992,320, an increase of $9,279,446. This increase was primarily due to increase of inventory value and receivables due from related and unrelated parties at the end of 2006.

In the year ended December 31, 2005, net cash provided by operating activities amounted to $2,992,320 while in the year ended December 31, 2004, net cash used in operating activities amounted
to $416,876, an increase of $2,575,444. This increase was caused, in part, by increase in the amount of trade receivables due from related and unrelated parties at the end of 2006.

In the year ended December 31, 2007, net cash used for investing activities amounted to $6,508,445 while in the year ended December 31, 2006, net cash provided by investing activities amounted
to $4,808,105, an increase in cash used $1,700,340. Increase was primarily due to the increase of purchases of fixed assets, restricted cash deposited and restricted marketable securities with the bank as part of the terms of bank borrowings during
the year 2007.

20

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In the year ended December 31, 2006, net cash used for investing activities amounted to $4,808,105 while in the year ended December 31, 2005, net cash provided by investing activities amounted
to $85,744, an increase in cash used $4,893,849. Increase was primarily due to the increase of purchases of fixed assets and restricted cash deposited with the bank as part of the terms of bank borrowings during the year 2006.

In the year ended December 31, 2005, net cash provided by investing activities amounted to $85,744 while in the year ended December 31, 2004, we used net cash of $954,770 in investing
activities, an increase of cash provided for investing activities of 1,040,514.  The increase was mainly due to repayments from related parties. We do not expect a significant amount of cash flows in respect of investing activities incurred in year
2006 as there is no significant plan of acquisition or disposal of property, equipment and improvements at this moment.

In the year ended December 31, 2007, net cash provided by financing activities amounted to $5,532,726 while in the year ended December 31, 2006, net cash used for financing activities was
$10,004,918, a decrease of $4,472,192. Decrease was primarily due to increase of advance on long-term debt and borrowings on the lines of credit and loan facilities.

In the year ended December 31, 2006, net cash provided by financing activities amounted to $10,004,918, while in the year ended December 31, 2005, net cash used for financing activities was
$1,052,813, an increase of $11,057,731. Increase was primarily due to increase of advance on long-term debt and borrowings on the lines of credit and loan facilities.

In the year ended December 31, 2005, net cash used for financing activities amounted to $1,052,813, while in the year ended December 31, 2004, we had net cash of $583,368 provided by financing
activities, an decrease of cash provided by financing activities of $1,636,181. This decrease was caused by decrease in lines-of-credit and repayment of the balance of long-term debt in the year 2005. We do not expect significant cash to be used for
financing activities in the year 2006.

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

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.

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

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Quantitative And Qualitative Disclosures About Market Risk

We are exposed to market risk in changes in interest rates as our bank borrowings accrue interest at floating rates of 0.25% to 0.5% over the Best Lending Rate (currently at the range of 6.75%
to 7% per annum) prevailing in Hong Kong. For the three years ended December 31, 2007, 2006 and 2005 we did not generate any material interest incomes. Accordingly, we believe that changes in interest rates may have a material effect on our
liquidity, financial condition or results of operations.

Impact of Inflation

We believe that our results of operations are not dependent upon moderate changes in inflation rates as we expect 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 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115”
(“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value option established by this Statement permits all entities to choose to measure eligible items
at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report
earnings) at each subsequent reporting date. A not-for-profit organization shall report unrealized gains and losses in its statement of activities or similar statement. SFAS 159 applies to all entities, including not-for-profit organizations. Most
of the provisions of this Statement apply only to entities that elect the fair value option. However, the amendment to FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, applies to all entities
with available-for-sale and trading securities. Some requirements apply differently to entities that do not report net income. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15,
2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, “Fair Value
Measurements”.The Company does not anticipate that this new SFAS will have any material impact upon its financial condition or results of operations.

In February 2007, the FASB issued FSP FAS 158-1, “Conforming Amendments to the Illustrations in FASB Statements No. 87, No. 88, and No. 106 and to the Related Staff Implementation Guides”. This FSP updates the
illustrations contained in Appendix B of FASB Statement No. 87, “Employers’ Accounting for Pensions”, Appendix B of FASB Statement No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits”, and Appendix C of FASB Statement No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”, to reflect the provisions of FASB Statement No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”. This FSP also amends the questions and answers contained in FASB Special Reports, “A Guide to Implementation of Statement 87 on
Employers’ Accounting for Pensions, A Guide to Implementation of Statement 88 on Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and A Guide to Implementation of
Statement 106 on Employers’ Accounting for Postretirement Benefits Other Than Pensions”, and incorporates them into Statements 87, 88, and 106 as Appendixes E, C, and F, respectively. This FSP supersedes those FASB Special Reports.
Finally, this FSP makes conforming changes to other guidance and technical corrections to Statement 158.This FSP does not provide additional implementation

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guidance for Statement 158 beyond the conforming changes, nor does it change any of the provisions of Statement 158. The conforming amendments made by this FSP are effective as of the effective dates of Statement 158. The
Company does not anticipate that this new FSP will have any material impact upon its financial condition or results of operations.

In April 2007, the FASB issued FSP FIN 39-1, “Amendment of FASB Interpretation No. 39” to certain modifications to FASB Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts”
and whether a reporting entity that is party to a master netting arrangement can offset fair value amounts recognized for the right to reclaim cash collateral (a
receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments that have been offset under the same
master netting arrangement in accordance with paragraph 10 of Interpretation 39. The guidance in this FSP is effective for fiscal years beginning after November 15, 2007, with early application permitted. The Company does not anticipate that the
guidance in this new FSP will have any material impact upon its financial condition or results of operations.

In May 2007, the FASB issued FSP FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48” to amend FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”, to provide
guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The guidance in this FSP shall be applied upon the initial adoption of Interpretation
48. The Company does not anticipate that the guidance in this new FSP will have any material impact upon its financial condition or results of operations.

In May 2007, the FASB issued FSP FIN 46(R)-7, “Application of FASB Interpretation No. 46(R) to Investment Companies” to address the application of FASB Interpretation No. 46 (revised December 2003),
“Consolidation of Variable Interest Entities”, by an entity that accounts for its investments in accordance with the specialized accounting guidance in the AICPA Audit and Accounting Guide, “Investment Companies”. The Company
does not anticipate that this new FSP will have any material impact upon its financial condition or results of operations.

In November 2007, the SEC released Staff Accounting Bulletin No. 109, “Written Loan Commitments Recorded at Fair Value Through Earnings” (“SAB 109”). SAB 109 provides interpretive guidance on the
SEC's views regarding written loan commitments that are accounted for at fair value through earnings under generally accepted accounting principles. This SAB supersedes SAB 105 and expresses the current view of the SEC that, consistent with the
guidance in Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets, and Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, the
expected net future cash flows related to the associated servicing of the loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. This SAB retains that SEC's view and broadens
its application to all written loan commitments that are accounted for at fair value through earnings. SAB 109 shall apply to derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The Company does not
anticipate that this new SAB will have any material impact upon its financial condition or results of operations.

In December 2007, the SEC released Staff Accounting Bulletin No. 110, “Certain Assumptions Used In Valuation Methods” (“SAB 110”). SAB110 provides interpretive guidance on the SEC's views regarding
the use of a “simplified” method, as discussed in SAB No. 107 (“SAB 107”), in developing an estimate of expected term of “plain vanilla” share options in accordance with Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payment”. In particular, SAB 107 will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected
term. At the time SAB 107 was issued, SEC believed that more detailed external information about employee exercise behavior (e.g., employee

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exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, SEC stated in SAB 107 that it would not expect a company to use the simplified method
for share option grants after December 31, 2007. SEC understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, SEC will continue to accept, under certain circumstances,
the use of the simplified method beyond December 31, 2007. The Company does not anticipate that this new SAB will have any material impact upon its financial condition or results of operations.

In December 2007, the FASB revised Statement No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”). The objective of SFAS 141(R) is to improve the relevance,
representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, this Statement establishes principles and requirements
for how the acquirer:

   Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and
any noncontrolling interest in the acquiree

   Recognizes and measures the goodwill acquired in the business combination or a gain from a
  bargain purchase

   Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial
  effects of the business combination.

This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply
it before that date. The Company does not anticipate that this revised SFAS will have any material impact upon its financial condition or results of operations.

In December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51”. The objective of this Statement is to
improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require:

   The ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and
presented in the consolidated statement of financial position within equity, but separate from the parent’s equity.

   The amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly
identified and presented on the face of the consolidated statement of income.

   Changes in a parent’s ownership interest while the parent retains its controlling financial interest in its
subsidiary be accounted for consistently. A parent’s ownership interest in a subsidiary changes if the parent purchases additional ownership interests in its subsidiary or if the parent sells some of its ownership interests in its subsidiary.
It also changes if the subsidiary reacquires some of its ownership interests or the subsidiary issues additional ownership interests. All of those transactions are economically similar, and this Statement requires that they be accounted for
similarly, as equity transactions.

   When a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be
initially measured at fair value. The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any noncontrolling equity investment rather than the carrying amount of that retained investment.

   Entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent
and the interests of the noncontrolling owners.

This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or

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after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this Statement is the same as that of the related Statement 141(R). The Company
does not anticipate that this new SFAS will have any material impact upon its financial condition or results of operations.

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 Taxe”s, 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.







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Contractual Obligations

The following table presents our contractual obligations as of December 31, 2007 over the next five years and thereafter:

|Payments by Period                
|----------------------------------
|                                  
|                                  
|                                  
|                                  
|Operating Leases                  
|Line of credit and notes payable –
|short-term                        
|Short term loans                  
|Long term loans                   
|Total Contractual Obligations     

Critical Accounting Policies

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

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

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

Revenue Recognition.We derive revenues from resale of computer memory products. Revenue for resale of computer memory products is recognized based on
guidance provided in Securities and

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

OFF-BALANCE SHEET ARRANGEMENTS

None.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Attached hereto and filed as a part of this Annual Report on Form 10-K is 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

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

Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are not effective in alerting them in a timely
fashion to all material information required to be included in our periodic filings with the SEC as a result of the significant deficiency described below in that subsection captioned “Significant
Deficiencies In Disclosure Controls And Procedures Or Internal Controls”.

Changes in Internal Control over Financial Reporting

The terminternal control over financial reportingis defined as a process designed by, or under the supervision of, our
Chief Executive Officer and Principal Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States. Except as noted below in that subsection captioned “Significant Deficiencies In Disclosure
Controls And Procedures Or Internal Controls”, there

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were no changes in our internal control over financial reporting identified in connection with our evaluation of these controls as of the end of the period covered by this annual report that could have significantly
affected those controls subsequent to the date of the evaluation referred to in the previous paragraph, including any correction action with regard to significant deficiencies and material weakness.

Significant Deficiencies In Disclosure Controls And Procedures Or Internal Controls

Other Observations

In connection with the audit of our consolidated financial statements for the year ended December 31, 2007, our independent auditors also made several other observations relating to our
disclosure controls and procedures or internal controls. First, our independent auditors observed that the Company did not have adequate segregation of duties due to its size of the Company, and that management had the ability to override any
existing controls. Management acknowledges the existence of this problem, and is developing procedures to address them to the extent possible given the acknowledged limitations. Secondly, our independent auditors observed that we did not have a
comprehensive accounting procedures manual including information as to customized internal control structure, documentation and transaction flow. Our management acknowledges the existence of this problem, and is developing procedures to address them
to the extent possible given limitations in financial and manpower resources. Finally, our independent auditors observed that none of the members of the board of directors demonstrated an in-depth understanding of generally accepted accounting
principles. We acknowledge that while we believe our board of director members are proficient in reading and understanding financial statements, they may not have an in-depth understanding of generally accepted accounting principles.

ITEM 9B.        OTHER INFORMATION.

On May 10, 2006, the Company issued 500,000 shares of common stock to Emerging Growth Partners, Inc. as payment for consulting and advisory services rendered for the year ending 2005. The Shares issued as a grant in
accordance with the company’s Incentive Stock Option Plan as filed with the Securities and Exchange Commission in April 2006.

PART III

ITEM 10.         DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND CORPORATE GOVERNANCE.

Directors and Executive Officers

Our directors and executive officers, as of December 31, 2007, and their biographical information are set forth below:

|NAME                 | AGE |  | POSITION                                                      
|-------------------- | --- |  | --------------------------------------------------------------
|                    
|Chung-Lun Yang       | 46  |  | Chairman of the Board of Directors and Chief Executive Officer
|Ben Wong             | 44  |  | Director                                                      
|Kenneth Lap-Yin Chan | 45  |  | 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

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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, 2007, our Board of Directors held 4 meetings.
No director who served during the fiscal year ended December 31, 2007 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 nor 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 five business days of the amendment or waiver.



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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, 2007 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. 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 fiscal year ended December 31, 2007 are Chung-Lun Yang our Chief Executive Officer and Kenneth Lap-Yin Chan our Chief Financial Officer. These individuals are

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referred to collectively in this Annual Report on Form 10-K as the“NAMED EXECUTIVE OFFICERS.”

OUR EXECUTIVE COMPENSATION PROGRAM

OVERVIEW

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

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

ELEMENTS OF OUR EXECUTIVE COMPENSATION PROGRAM

BASE SALARY

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

BONUSES

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

STOCK OPTIONS

Stock options constitute performance-based compensation because they have value to the recipient only if the price of our common stock increases. We have not granted any stock options to any of
our Named Executive Officers and the grant of stock options to Named Executive Officers is not a material factor in making compensation determinations with respect to our Named Executive Officers. However, we 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.

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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 2006 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
2007.

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 fiscal year ended December 31, 2007.

PENSION BENEFITS

We do not provide pension benefits to the Named Executive Officers.

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.







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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 three fiscal years ended December 31, 2007, December 31, 2006
and December 31, 2005.

|Summary Compensation Table
|--------------------------
|                          
|                          
|                          
|                          
|                          
|                          
|                          
|Name and                  
|Principal Position        
|Chung-Lun Yang,           
|Chief                     
|Executive                 
|Officer and               
|Chairman of               
|the Board                 
|                          
|Kenneth Lap-Yin           
|Chan,                     
|Chief Financial           
|Officer                   

|(1) | Mr. Yang’s other annual compensation includes rent and housing allowance in the amount of $17,521 for the year ended December 31, 2007, $68,280 for the year ended December 31, 2006 and in the amount
of $92,308 for the for the year ended December 31, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The
following table sets forth information concerning stock options and stock awards
held by the Named Executive Officers as of December 31, 2007: None.



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Compensation of Directors

None of our directors who served during the year ended December 31, 2007 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, 2007: (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, 2007. Except as otherwise indicated, the stockholderslisted 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         | 22,380,000             |  | 78.9                 
|as a Group                         |                        |  |                      



|
|
|
|

34

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| | (2) | Executive Officer
| | --- | -----------------
| | (3) | Director         

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

ITEM 13.          CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.

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, 2007 and 2006, we had an outstanding receivable from Mr. Yang, the President and Chairman of our Board of Directors, totaling $75,998 and $0. These advances bear no interest and are payable on
demand.

For the years ended December 31, 2007, 2006, and 2005, we recorded compensation to Mr. Yang of $812,821 $200,000, and $226,922, respectively, and paid $812,821, $200,000, and $226,922, respectively, to Mr. Yang as
compensation to him.

During each of the years ended December 31, 2007, 2006, and 2005, we paid rent of $17,521, $68,280, and $92,308, 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.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $18,780,971 respectively, to Classic. We have not experienced any bad debt from this customer in the past. Pursuant to a written personal
guarantee agreement, Mr. Yang personally guarantees to our lenders up to $10 million of the outstanding accounts receivable from Classic.

During the years ended December 31, 2007, 2006, and 2005, we purchased inventory of $0, $0, and $6,007,185, respectively, from Classic, which offset the outstanding accounts receivable from Classic. As of December 31, 2007
and 2006, we had net outstanding accounts receivable from Classic totaling $1,717,859 and $6,709,495, respectively.

We leased one of our facilities and Mr. Yang’s personal residence from Classic. Lease agreements for those two properties expired and were acquired by Atlantic on July 21, 2006. Monthly lease payments for

35

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these 2 leases totaled $6,684. We incurred and paid rent expense of $0, $44,418, and $83,250 to Classic for the years ended December 31, 2007, 2006, and 2005, respectively.

During the years ended December 31, 2005, certain Classic’s employees performed work on behalf of Atlantic and their salaries were allocated to Atlantic’s operations and charged to expenses in the accompanying
consolidated financial statements. Such expenses approximated $57,820.

On February 21, 2006, a cross corporate guarantee was executed between Classic and Atlantic for banking facilities to be co-utilized with Standard Chartered Bank (Hong Kong) Limited. The maximum amount of facilities that
could be utilized by Atlantic was $1.154 millions (HKD9 millions) and the facility lines was fully covered by collaterals provided by Classic and companies other than Atlantic Subsequently, the cross guarantees were released on December 7,
2006.

On July 6, 2006, a cross corporate guarantee was executed between Classic and Atlantic for banking facilities to be co-utilized with The Bank of East Asia Limited. The cross guarantee was temporarily created due to selling
of properties by Classic to Atlantic.During the period of execution of the assignment of legal title, The Bank of East Asia Limited requested a cross guarantee for both companies. All
facilities and outstanding loan balances were booked under and utilized by Atlantic which will not absorb any losses from Classic. Subsequently, the cross guarantees were released on December 8, 2006.

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

TRANSACTIONS WITH KADATCO COMPANY LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $5,072,858, respectively, to Kadatco Company Ltd. (“Kadatco”). Outstanding accounts receivable totaled $0 as of December 31, 2007 and
2006. We have not experienced any bad debt from this customer in the past.

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

TRANSACTIONS WITH RAMBO TECHNOLOGIES LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $165,225, respectively, to Rambo Technologies Ltd. (“Rambo”). Outstanding accounts receivable totaled $0 as of December 31, 2007 and
2006. We have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2007, 2006, and 2005, we purchased $0, $0, and $874,553, respectively, from Rambo. Outstanding accounts payable due to Rambo totaled $0 as of December 31, 2007 and 2006.

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

TRANSACTIONS WITH ARISTO COMPONENTS LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $71,402, respectively, to Aristo Components Ltd. (“Aristo Components”). Outstanding accounts receivable totaled $0 as of December 31,
2007 and 2006. We have not experienced any bad debt from this customer in the past.

36

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

TRANSACTIONS WITH ATLANTIC NETCOM LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $1,652, respectively, to Atlantic Netcom Ltd. (“Atlantic Netcom”). Outstanding accounts receivable totaled $0 as of December 31, 2007
and 2006, respectively. We have not experienced any bad debt from this customer in the past.

Mr. Yang, the Company’s Chief Executive Officer, majority shareholder and a director, is a 60% shareholder and director of Atlantic Netcom. The remaining 40% of Atlantic Netcom is owned by a non-related
party.

TRANSACTIONS WITH SOLUTION SEMICONDUCTOR (CHINA) LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $55,122, respectively, to Solution Semiconductor (China) Ltd. (“Solution”). Outstanding accounts receivable totaled $0 as of December
31, 2007 and 2006. We have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2007, 2006, and 2005, we purchased $0, $0, and $22,019, respectively, from Solution. There are no outstanding accounts payable due to Solution as of December 31, 2007 and 2006.

On April 01, 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. Monthly lease payment for this lease is $1,090. We
incurred and paid an aggregate rent expense of $12,385, $3,436 and $0 to Solution during the year ended December 31, 2007, 2006 and 2005.

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

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

TRANSACTIONS WITH SYSTEMATIC INFORMATION LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $61,910, respectively, to Systematic Information Ltd. (“Systematic Information”). There are no outstanding accounts receivable due
from Systematic Information as of December 31, 2007 and 2006. We have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2007, 2006, and 2005, we received service charges $11,538, $6,410, and $0, respectively, from Systematic Information. As of December 31, 2007 and 2006, there was no outstanding accounts
receivable from Systematic Information.

On August 31, 2006, 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, 2008. Monthly lease payment for this
lease totaled $641. Upon expiration of the lease on August 31, 2008, ACL acquired this residential property from Systematic Information. We incurred and paid an aggregate rent expense of $7,692, $2,564 and $0 to Systematic Information during the
year ended December 31, 2007, 2006 and 2005.

37

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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 $17,521, $38,462 and $38,462 to Systematic Information during the year ended December 31, 2007, 2006 and
2005.

A workshop located in Hong Kong owned by Systematic Information was used by the Company as collateral for loans from Standard Chartered Bank (Hong Kong) Limited.

Mr. Yang, the Company’s Chief Executive Officer, majority shareholder and a director, is a director and shareholder of Systematic with a total of 100% interest.

TRANSACTIONS WITH ARISTO TECHNOLOGIES LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $17,165,728, $11,986,047, and $2,544,995, respectively, to Aristo. Outstanding accounts receivable totaled $6,237,905 and $662,972 as of December 31, 2007
and 2006, respectively. We have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2007, 2006, and 2005, we purchased inventories of $3,633,424, $1,584,985 and $100,822, respectively, from Aristo. As of December 31, 2007 and 2006, there was no outstanding accounts
payable to Aristo.

Mr. Yang, the Company’s Chief Executive Officer, majority shareholder and a director, is a director and the sole beneficial owner of Aristo.

TRANSACTIONS WITH GLOBAL MEGA DEVELOPMENT LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0 and $19,074, respectively, to Global Mega Development Ltd. (“Global”). Outstanding accounts receivable totaled $0 as of December 31, 2007
and 2006, respectively. We have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2007, 2006, and 2005, we received management fee of $5,769, $7,692, and $2,564, respectively, from Global.  As of December 31, 2007 and 2006, there was no outstanding accounts receivable
from Global.

Mr. Yang, the Company’s Chief Executive Officer, majority shareholder and a director, is the sole beneficial owner of the equity interest of Global.

TRANSACTIONS WITH TFT TECHNOLOGIES LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $1,460, respectively, to TFT Technologies Ltd. (“TFT”). Outstanding accounts receivable totaled $0 as of December 31, 2007 and 2006,
respectively. We have not experienced any bad debt from this customer in the past.

Mr. Yang the Company’s Chief Executive Officer, majority shareholder and a director, is a director and 51% shareholder of TFT. The remaining 49% of TFT is owned by a non-related party.

TRANSACTIONS WITH INTELLIGENT NETWORK TECHNOLOGY LTD.

During the years ended December 31, 2007, 2006, and 2005, we received management fee $0, $7,692, and

38

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$2,564, respectively, from Intelligent Network Technology Ltd. (“Intelligent”). As of December 31, 2007 and 2006, there was no outstanding accounts receivable from Intelligent.

Mr. Yang the Company’s Chief Executive Officer, majority shareholder and a director, is a director and 80% shareholder of Intelligent. The remaining 20% of Intelligent is owned by a non-related party.

TRANSACTIONS WITH SYSTEMATIC SEMICONDUCTOR LTD.

During the years ended December 31, 2007, 2006, and 2005, we received a management fee of $16,026, $15,384, and $2,564, respectively, from Systematic Semiconductor Ltd. (“Systematic”). As of December 31, 2007
and 2006, there was no outstanding accounts receivable from Systematic.

Mr. Alan Yang the Company’s Chief Executive Officer, majority shareholder and a director, is the sole beneficial owner of the equity interest of Systematic.

TRANSACTIONS WITH FIRST WORLD LOGISTICS LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $7,720,975, and $0, respectively, to First World Logistic Ltd. (“First”). Outstanding accounts receivable totaled $0 as of December 31, 2007
and 2006, respectively. We have not experienced any bad debt from this customer in the past

During the years ended December 31, 2007, 2006, and 2005, we purchased inventories for $0, $825,900 and $306,432, respectively, from First. As of December 31, 2007 and 2006, there was no outstanding accounts receivable from
First.

Mr. Yang the Company’s Chief Executive Officer, majority shareholder and a director, is the sole beneficial owner of the equity interest of First.

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 and Jeffrey Tsang & Co for the audits of our
annual financial statements and interim reviews of our quarterly financial statements for the years ended December 31, 2007 and December 31, 2006 and fees billed for other services rendered by JTC Fair Song CPA Firm and Jeffrey Tsang & Co during
those periods.

|                       |  |   | Fiscal 2007 |  |   | Fiscal 2006
|---------------------- |  | - | ----------- |  | - | -----------
|Audit Fees (1)         |  | $ | 35,000      |  | $ | 35,000     
|Audit Related Fees (2) |  | $ | --          |  | $ | --         
|                       |  |   |             |  |   |            
|Tax Fees (3)           |  | $ | --          |  | $ | --         
|                       |  |   |             |  |   |            
|All Other Fees (4)     |  | $ | --          |  | $ | --         
|                       |  |   |             |  |   |            
|Total                  |  | $ | --          |  | $ | --         



|
|
|
|

39

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| | (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 2007 or 2006.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (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 2007 or 2006.                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                    
| | (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 2007 or 2006.                                                                                                                                              

PART IV

ITEM 15.            EXHIBITS,
FINANCIAL STATEMENTS AND SCHEDULES.

(a)         Documents
filed as part of this Report

(1) The financial statements listed in the Index to Consolidated Financial Statements are filed as part of this report

(2) The financial statements listed in the Index are filed a part of this report.

Schedule II – Valuation and Qualifying Accounts and Reserves. Schedule II on page S-1 is filed as part of this report.

(3) List of Exhibits

See Index to Exhibits in paragraph (b) below.

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

(c)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.                                               
|       

40

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|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.                                                                                                  
|     
|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.                                                                                     
|     

41

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|10.15 | 12% Senior Subordinated Convertible Note due December 31, 2004 in the aggregate principal amount of $250,000 issued by the Company to PTF, incorporated by reference to Exhibit 10.7 to the Form 8-K/A filed
with the Securities and Exchange Commission on April 13, 2004.                                                                                                  
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|10.16 | Limited Guaranty and Security Agreement, dated as of December 31, 2003, by and among, the Company, PTF, Orient Financial Services Limited, Mr. Li Wing-Kei and Emerging Growth Partners, Inc., incorporated
by reference to Exhibit 10.8 to the Form 8-K/A filed with the Securities and Exchange Commission on April 13, 2004.                                              
|     
|10.17 | Stock Purchase and Escrow Agreement, dated as of December 31, 2003, by and among, PTF, Orient Financial Services Limited, Mr. Li Wing-Kei and Emerging Growth Partners, Inc., and the law firm of Sullivan
& Worcester LLP, as escrow agent, incorporated by reference to Exhibit 10.9 to the Form 8-K/A filed with the Securities and Exchange Commission on April 13, 2004.
|     
|10.18 | Letter Agreement, dated as of December 31, 2003, by and between the Company and PTF, incorporated by reference to Exhibit 10.10 to the Form 8-K/A filed with the Securities and Exchange Commission on April
13, 2004.                                                                                                                                                       
|     
|10.19 | Stock Purchase Agreement, dated as of December 30, 2005, by and among the Company, Classic Electronics, Ltd. (“Classic”) and the shareholders of Classic, incorporated by reference to Exhibit
10.1 to the Form 8-K filed with the Securities and Exchange Commission on January 6, 2006.                                                                                    
|     
|10.20 | 2006 Incentive Equity Stock Plan, incorporated by reference to Exhibit 4.1 to the Form S-8 filed with the Securities and Exchange Commission on April 27, 2006.                                                                                                                                                                                                              
|     
|14    | Code of Business Conduct and Ethics of the Company incorporated by reference to Exhibit 14 to the Form 10-K for the period ended December 31, 2003.                                                                                                                                                                                                                          
|     
|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).

42

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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:                    
| |                        
| |                        
| |                        
| | Dated: April 16, 2008  

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

|Signature                |  | Title                               |  | Date          
|------------------------ |  | ----------------------------------- |  | --------------
|                        
|                         |  | Chief Executive                     |  |               
|/s/ Chung-Lun Yang       |  | Officer and Chairman of the         |  | April 16, 2008
|Chung-Lun Yang           |  | Board of Directors                  |  |               
|                         |  | (Principal Executive                |  |               
|                         |  | Officer)                            |  |               
|                        
|                        
|                         |  | Chief Financial Officer,            |  |               
|/s/ Kenneth Lap-Yin Chan |  | (Principal Financial and Accounting |  | April 16, 2008
|Kenneth Lap-Yin Chan     |  | Officer)                            |  |               
|                        
|                        
|                         |  | Director                            |  | April 16, 2008
|/s/ Ben Wong             |  |                                     |  |               
|Ben Wong                 |  |                                     |  |               

43

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Schedule IIACL SEMICONDUCTORS INC. AND SUBSDIARIESValuation and Qualifying Accounts and ReservesYears Ended December 31, 2007, 2006 and 2005

|                                 |  | Balance          |         | Charged      |   |            |  |             | Balance   
|-------------------------------- |  | ---------------- | ------- | ------------ | - | ---------- |  | ----------- | ----------
|                                 |  | at the Beginning |         | to Costs     |   |            |  |             | at the End
|                                 |  | of the Year      |         | and Expenses |   | Deductions |  | of the Year
|Allowance for Doubtful Accounts: |  |                  |         |              |   |            |  |             |           
|                                
|Year ended December 31, 2005     |  | $                | -       |              | $ | 6,200      |  | $           | 6,200     
|Year ended December 31, 2006     |  | $                | -       |              | $ | -          |  | $           | -         
|Year ended December 31, 2007     |  | $                | -       |              | $ | -          |  | $           | -         
|                                
|                                
|Inventory Obsolescence Reserve:  |  |                  |         |              |   |            |  |             |           
|                                
|Year ended December 31, 2005     |  | $                | 153,846 |              | $ |            |  | $           | 12,820    
|                                
|Year ended December 31, 2006     |  | $                | 141,026 |              | $ | 100,000    |  | $           | -         
|                                
|Year ended December 31, 2007     |  | $                | 241,026 |              | $ | 323,077    |  | $           | -         
|                                
|Valuation Allowance for Deferred |  |                  |         |              |   |            |  |             |           
|Tax Assets:                      |  |                  |         |              |   |            |  |             |           
|Year ended December 31, 2005     |  | $                | 805,453 |              | $ | 109,293    |  | $           | -         
|Year ended December 31, 2006     |  | $                | 914,746 |              | $ | 73,094     |  | $           | -         
|Year ended December 31, 2007     |  | $                | 987,840 |              | $ | 69,152     |  | $           | -         

44

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ACL Semiconductors Inc. and Subsidiaries

Consolidated Financial Statements

As of December 31, 2007 and December 31, 2006 and

the Years Ended December 31, 2007, 2006 and 2005

With Report of Independent Registered Public Accounting Firm



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Contents

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|------------------------------------------------------- |  | ---------- | 
|                                                       
|Report of Independent Registered Public Accounting Firm |  | F-1        | 
|                                                       
|Financial Statements:                                   |  |            | 
|Consolidated Balance Sheets                             |  | F-2 – F-3  | 
|Consolidated Statements of Operations                   |  | F-4        | 
|Consolidated Statements of Stockholders’ Equity         |  | F-5        | 
|Consolidated Statements of Cash Flows                   |  | F-6 – F-8  | 
|Notes to Consolidated Financial Statements              |  | F-9 – F-35 | 





---



Report of Independent Registered Public Accounting Firm

Board of DirectorsACL 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, 2007, and the related consolidated statements of operations,
stockholders’ equity, cash flows and financial statement schedule of the year ended December 31, 2007, as listed in the index appearing in this Annual Report on Form 10-K. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We did not audit the financial statements of the Company for the
years ended December 31, 2006 and December 31, 2005, which are showed as comparative figures in the accompanying financial statements. The financial statements of the Company for the year ended December 31, 2006 were audited by the predecessor
principal auditors, Jeferry Tsang & Co. Certified Public Accountants, whose report was dated April 17, 2007. In addition, the financial statements of the Company for the year ended December 31, 2005 were audited by Stonefield Josephson, Inc.
Certified Public Accountants, whose report was dated April 12, 2006. Both reports did not contain any adverse opinion or disclaimer of opinion, or were qualified or modified as to uncertainty, audit scope, or accounting principles, except for the
explanatory paragraph regarding the substantial doubt on the Company’s numerous significant transactions with its related parties and its dependence on one single vendor to supply its inventories relating to the reports for the years
presented. In connection with our audit nothing has come to our attention that in our judgment would indicate that there have been any events, transactions, or changes in accounting principles subsequent to December 31, 2006 that would have a
material effect upon, or require mention with respect to, the financial statements referred to above covered by the predecessor principal auditors’ opinion dated April 17, 2007.

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. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for 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 position of the Company as of December 31, 2007, and the results of its operations and its cash
flows for the year ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial

---



statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

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

In addition, as discussed in Note 7 to the consolidated financial statements, the Company is dependent on one single vendor to supply its inventories and this single vendor provided the majority of the Company’s
inventory purchases during the year ended December 31, 2007.



/s/ JTC Fairsong CPA Firm

CERTIFIED PUBLIC ACCOUNTANTS

Shenzhen, ChinaApril 15, 2008

F-1

---



|JEFFREY TSANG & CO.                                                                     
|----------------------------------------------------------------------------------------
|CERTIFIED PUBLIC ACCOUNTANTS                                                            
|Units 1205-6, 12/F, Cheuk Nang Centre, 9 Hillwood Road, Tsimshatsui, Kowloon,
Hong Kong.
|Tel: (852) 2781 1606     Fax: (852) 2783 0752      E-mail: info@hkjtc.com               

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of DirectorsACL Semiconductors Inc.Kowloon, Hong Kong

We have audited the accompanying consolidated balance
sheet of ACL Semiconductors Inc. and subsidiaries as of December 31,
2006, and the related consolidated  statements of operations, stockholders' equity
(deficit), cash flows and financial statement schedule of the year ended December
31, 2006. These financial statements and financial statement schedule are thc responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
 whether the financial statements are free of material misstatement. We were
not engaged to perform an audit of the Company's internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as  a basis for 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 financial statements, assessing
the accounting principles used and  significant estimates made by management,
as well as evaluating thc
overall financial statement presentation. We believe that our audits provide
a reasonable basis of our opinion.

In our opinion, thc consolidated financial statements
referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2006, and
the results of its operations and its cash flows for the year ended December 31,
2006, in conformity with U.S. generally accepted accounting principles. Also
in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole, presents
fairly, in all
material respects, the information set forth therein.

As discussed in Note 10 to theconsolidatedfinancial 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.

|/s/ JEFFREY TSANG & CO.     
|----------------------------
|                            
|JEFFREY TSANG & CO.         
|CERTIFIED PUBLIC ACCOUNTANTS
|                            
|Hong Kong                   
|April 17, 2007              



---



Report of Independent Registered Public Accounting Firm(Stonefield Josephson, Inc.)

Board of DirectorsACL Semiconductors Inc.Kowloon, Hong Kong

We have audited the accompanying consolidated statements of operations, stockholders' equity (deficit), cash flows and financial statement schedule for the year ended December 31, 2005, as listed in the index appearing
under Item 15 of this Annual Report on Form 10-K. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audit.

We conducted our audit 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. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2005, in conformity with
U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

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

/s/ STONEFIELD JOSEPHSON, INC.

Wanchai, Hong KongApril 12, 2006

---



ACL SEMICONDUCTORS AND SUBSDIARIESCONSOLIDATED BALANCE SHEETS

|ASSETS                                        |  |              |            |  |   |           
|--------------------------------------------- |  | ------------ | ---------- |  | - | ----------
|                                              |  | December 31,
|                                              |  |              | 2007       |  |   | 2006      
|                                             
|Current assets:                               |  |              |            |  |   |           
|Cash and cash equivalents                     |  | $            | 1,597,674  |  | $ | 1,447,486 
|                                             
|Restricted cash                               |  |              | 4,203,057  |  |   | 2,708,577 
|Accounts receivable, net of allowance         |  |              |            |  |   |           
|for doubtful accounts of $0 for 2007 and 2006 |  |              | 7,594,784  |  |   | 2,008,474 
|                                             
|Accounts receivable, related parties          |  |              | 7,955,764  |  |   | 7,372,467 
|Loans receivable, related parties             |  |              | -          |  |   | -         
|Inventories, net                              |  |              | 3,483,994  |  |   | 3,253,255 
|Restricted marketable securities              |  |              | 769,231    |  |   | -         
|Marketable securities                         |  |              | 404,780    |  |   | -         
|Income tax refundable                         |  |              | 49,375     |  |   | -         
|Other current assets                          |  |              | 83,061     |  |   | 40,937    
|                                             
|Total current assets                          |  |              | 26,141,720 |  |   | 16,831,196
|                                             
|Property, equipment and improvements,net of   |  |              |            |  |   |           
|                                             
|accumulated depreciation and amortization     |  |              | 6,933,998  |  |   | 3,909,121 
|                                             
|Other deposits                                |  |              | 387,245    |  |   | 381,038   
|                                             
|                                              |  | $            | 33,462,963 |  | $ | 21,121,355

F-2

---



ACL SEMICONDUCTORS AND SUBSDIARIESCONSOLIDATED BALANCE SHEETS

|                                                     |  |   | December 31, |  
|---------------------------------------------------- |  | - | ------------ | -
|                                                     |  |   | 2007         |  
|                                                    
|LIABILITIES AND STOCKHOLDERS' EQUITY                 |  |   |              |  
|                                                    
|Current liabilities:                                 |  |   |              |  
|Accounts payable                                     |  | $ | 12,592,685   |  
|Accrued expenses                                     |  |   | 186,738      |  
|                                                    
|Lines of credit and loan facilities                  |  |   | 15,610,488   |  
|Current portion of long-term debt                    |  |   | 180,228      |  
|Income tax payable                                   |  |   | -            |  
|Due to shareholders for converted pledged collateral |  |   | 112,385      |  
|Other current liabilities                            |  |   | 268,573      |  
|                                                    
|                                                    
|Total current liabilities                            |  |   | 28,951,097   |  
|                                                    
|Long-term debt, less current portion                 |  |   | 2,589,213    |  
|Deferred tax                                         |  |   | 15,471       |  
|                                                    
|Total liabilities                                    |  |   | 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       |  
|                                                    
|Additional paid-in capital                           |  |   | 3,593,027    |  
|Amount due (from) to stockholder/director            |  |   | (75,998      | )
|                                                    
|Accumulated deficit                                  |  |   | (1,638,177   | )
|                                                    
|Total stockholders' equity                           |  |   | 1,907,182    |  
|                                                     |  |   |              |  
|                                                    
|                                                     |  | $ | 33,462,963   |  

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

F-3

---



ACL SEMICONDUCTORS AND SUBSDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS

|                                         |  |   | December 31, |  
|---------------------------------------- |  | - | ------------ | -
|                                         |  |   | 2007         |  
|                                        
|Net sales:                               |  |   |              |  
|Related parties                          |  | $ | 17,165,728   |  
|Other                                    |  |   | 143,321,689  |  
|Less discounts to customers              |  |   | (82,493      | )
|                                        
|                                         |  |   | 160,404,924  |  
|                                        
|Cost of sales                            |  |   | 156,533,635  |  
|                                        
|Gross profit                             |  |   | 3,871,289    |  
|                                        
|Operating expenses:                      |  |   |              |  
|Selling                                  |  |   | 69,260       |  
|General and administrative               |  |   | 2,942,542    |  
|                                        
|                                        
|Income from operations                   |  |   | 859,487      |  
|                                        
|Other income (expenses):                 |  |   |              |  
|Rental income                            |  |   | 37,179       |  
|Interest expense                         |  |   | (1,009,006   | )
|Unrealized gain on marketable securities |  |   |              |  
|(pledged)                                |  |   | 404,780      |  
|Provision for taxation written back      |  |   | -            |  
|Miscellaneous                            |  |   | 331,485      |  
|                                        
|Income before income taxes               |  |   | 623,925      |  
|                                        
|Income taxes                             |  |   | 187,833      |  
|                                        
|Net income                               |  | $ | 436,092      |  
|                                        
|Earnings per share - basic and diluted   |  | $ | 0.01         |  
|                                        
|Weighted average number of shares -      |  |   |              |  
|basic and diluted                        |  |   | 28,329,936   |  

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

F-4

---



ACLSEMICONDUCTORSANDSUBSDIARIESCONSOLIDATEDSTATEMENTSOFSTOCKHOLDERS’EQUITY(DEFICIT)FOR THEYEARSENDEDDECEMBER31, 2007, 2006 AND 2005

|                                          |  |                  |  |   |            |  |   |              |  |   | Due       |             |  |   |            |               |  |   | Total     |  
|----------------------------------------- |  | ---------------- |  | - | ---------- |  | - | ------------ |  | - | --------- | ----------- |  | - | ---------- | ------------- |  | - | --------- | -
|                                          |  |                  |  |   | Additional |  |   | (from)/to    |  |   |           |             |  |   |            | stockholders' | 
|                                          |  | Common
    stock |  |   | paid-in    |  |   | stockholder/ |  |   |           | Accumulated |  |   |            | Equity        | 
|                                          |  | Shares           |  |   | Amount     |  |   | capital      |  |   | Director  |             |  |   | deficit    |               |  |   | (deficit) |  
|Balance at December 31, 2004              |  | 27,829,936       |  | $ | 27,830     |  | $ | 3,360,405    |  | $ | (102,936  | )           |  | $ | (2,784,188 | )             |  | $ | 501,111   |  
|                                         
|                                         
|Net income                                |  | -                |  |   | -          |  |   | -            |  |   | -         |             |  |   | 259,515    |               |  |   | 259,515   |  
|                                         
|Balance at December 31, 2005              |  | 27,829,936       |  |   | 27,830     |  |   | 3,360,405    |  |   | (102,936  | )           |  |   | (2,524,673 | )             |  |   | 760,626   |  
|                                         
|Issuance of common stock for
      option |  | 500,000          |  |   | 500        |  |   | 104,500      |  |   |           |             |  |   |            |               |  |   | 105,000   |  
|issued to consultant (as adjusted)        |  |                  |  |   |            |  |   |              |  |   |           |             |  |   |            |               |  |   |           |  
|                                         
|                                         
|Issuance of common stock for option       |  | -                |  |   | -          |  |   | 128,122      |  |   | -         |             |  |   | -          |               |  |   | 128,122   |  
|issued to employees                       |  |                  |  |   |            |  |   |              |  |   |           |             |  |   |            |               |  |   |           |  
|                                         
|Net increase in due (from)/to             |  | -                |  |   | -          |  |   | -            |  |   | 1,016,399 |             |  |   | -          |               |  |   | 1,016,399 |  
|                                         
|                                         
|Net income                                |  |                  |  |   |            |  |   |              |  |   |           |             |  |   | 450,404    |               |  |   | 450,404   |  
|                                         
|                                         
|Balance at December 31, 2006              |  | 27,829,936       |  |   | 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 |  

Theaccompanyingnotes form anintegralpart of theseconsolidatedfinancialstatements

F-5

---



ACLSEMICONDUCTORSANDSUBSDIARIESCONSOLIDATEDSTATEMENTSOF CASHFLOWSINCREASE(DECREASE)IN CASH AND CASHEQUIVALENTS

|                                                        |  | Years ended December 31, |           
|------------------------------------------------------- |  | ------------------------ | ----------
|                                                        |  |                          | 2007      
|Cash flows provided by (used for) operating activities: |  |                          |           
|Net income                                              |  | $                        | 436,092   
|                                                       
|Adjustments to reconcile net income to net              |  |                          |           
|cash provided by (used for) operating activities:       |  |                          |           
|Depreciation and amortization                           |  |                          | 230,614   
|Bad debt                                                |  |                          | -         
|Change in inventory reserve                             |  |                          | 323,077   
|Gain on disposal of equipment                           |  |                          | (218      
|Unrealized gain on marketable securities                |  |                          | (404,780  
|Fair value of options issued to employees               |  |                          | -         
|Issuance of common stocks to consultant as              |  |                          |           
|professional fee under share option scheme              |  |                          |           
|Changes in assets and liabilities:                      |  |                          |           
|(Increase) decrease in assets                           |  |                          |           
|Accounts receivable – other                             |  |                          | (5,586,310
|Accounts receivable - related parties                   |  |                          | (583,297  
|Inventories                                             |  |                          | (553,816  
|Refundable deposits                                     |  |                          | -         
|Income tax refundable                                   |  |                          | (49,375   
|Other current assets                                    |  |                          | (42,124   
|Other asssets                                           |  |                          | (6,207    
|Increase (decrease) in liabilities                      |  |                          |           
|Accounts payable                                        |  |                          | 7,582,962 
|Accrued expenses                                        |  |                          | (127,486  
|Payable related to debt settlement                      |  |                          | -         
|Income tax payable                                      |  |                          | (74,839   
|                                                        |  |                          | (18,386   
|Deferred
    tax                                        |  |                          | 6,658     
|Total adjustments                                       |  |                          | 689,815   
|                                                       
|Net cash provided by (used for)                         |  |                          |           
|operating activities                                    |  |                          | 1,125,907 

F-6

---



ACLSEMICONDUCTORSANDSUBSDIARIESCONSOLIDATEDSTATEMENTSOF CASHFLOWSINCREASE(DECREASE)IN CASH AND CASHEQUIVALENTS

|                                                        |  |   | Years ended December 31, |  
|------------------------------------------------------- |  | - | ------------------------ | -
|                                                        |  |   | 2007                     |  
|                                                       
|Cash flows provided by (used for) investing activities: |  |   |                          |  
|Advanced (to) from stockholders                         |  |   | (989,461                 | )
|Increase in restricted cash                             |  |   | (1,494,480               | )
|Increase in restricted marketable securities            |  |   | 769,231                  |  
|Repayments from related party                           |  |   | -                        |  
|Cash Proceeds from sales of equipment                   |  |   | 385                      |  
|Purchases of property, equipment and improvements       |  |   | (3,255,658               | )
|                                                       
|Net cash provided by (used for)                         |  |   |                          |  
|investing activities                                    |  |   | (6,508,445               | )
|                                                       
|Cash flows provided by (used for) financing activities: |  |   |                          |  
|Proceeds (repayments) on lines of credit and            |  |   |                          |  
|notes payable                                           |  |   | 4,772,021                |  
|Payments related to debt settlement                     |  |   | -                        |  
|Principal loan (payments) on long-term debt             |  |   | 760,705                  |  
|                                                       
|Net cash provided by (used for) financing activities    |  |   | 5,532,726                |  
|                                                       
|Net increase (decrease) in cash and cash equivalents    |  |   | 150,188                  |  
|                                                       
|Cash and cash equivalents,beginning of year             |  |   | 1,447,486                |  
|                                                       
|Cash and cash equivalents,end of year                   |  | $ | 1,597,674                |  

F-7

---



ACLSEMICONDUCTORSANDSUBSDIARIESCONSOLIDATEDSTATEMENTSOF CASHFLOWSINCREASE(DECREASE)IN CASH AND CASHEQUIVALENTS

|                                                             |  |   | Years ended December 31,
|------------------------------------------------------------ |  | - | ------------------------
|                                                             |  |   | 2007                    
|Supplemental disclosure of cash flow information:            |  |   |                         
|Interest paid                                                |  | $ | 1,009,006               
|Income tax paid                                              |  | $ | 305,389                 
|Non-Cash Activities:                                         |  |   |                         
|Reclassification of convertible debenture to payable related |  |   |                         
|to debt settlement                                           |  | $ | -                       

Theaccompanyingnotes form anintegralpart of theseconsolidatedfinancialstatements

F-8

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(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.


F-9

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(1)     Organization and Summary of Significant Accounting Policies, Continued:

Business Activity:

ACL Semiconductors Inc. (“Company” or “ACL”) was incorporated under the State of Delaware on September 17, 2002. Through a reverse-acquisition of Atlantic Components Ltd., a Hong Kong based company,
effective September 30, 2003, the Company’s principal activities are distribution of electronic components under the “Samsung” brandname which comprise DRAM and graphic RAM, FLASH, SRAM and MASK ROM for the Hong Kong and Southern
China markets.  Atlantic Components Ltd., its wholly owned subsidiary, was incorporated in Hong Kong on May 30, 1991 with limited liability. On October 2, 2003, the Company set up a wholly-owned subsidiary, Alpha Perform Technology Limited
(“Alpha”), a British Virgin Islands company, to provide services on behalf of the Company in jurisdictions outside of Hong Kong.  Effective January 1, 2004, the Company has ceased the operations of Alpha and all the related activities
are consolidated with those of Atlantic.

Currency Reporting:

Amounts reported in the accompanying consolidated financial statements and disclosures are stated in U.S. Dollars, unless stated otherwise. The functional currency of the Company, which accounted for most of the
Company’s operations, is reported in Hong Kong dollars (“HKD”).  Foreign currency transactions (outside Hong Kong) during the years ended December 31, 2007, 2006, and 2005 are translated into HKD according to the prevailing
exchange rate at the transaction dates. Assets and liabilities denominated in foreign currencies at the balance sheet dates are translated into HKD at year-end exchange rates.

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

Consolidation Policy:

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

Revenue Recognition:

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

F-10

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

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.

F-11

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(1)     Organization and Summary of Significant Accounting Policies, Continued:

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, 2007 and 2006.

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 increase by
$323,077 for 2007 and $100,000 for 2006. Inventory obsolescence reserve totaled $564,102 and $241,025 as of December 31, 2007 and 2006, respectively.

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 live



F-12

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(1)     Organization and Summary of Significant Accounting Policies, Continued:

Long-Lived Assets:

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets to be held and used are analyzed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS No. 144 relates to assets that can be amortized and the life can be determinable. The Company evaluates at each balance
sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in
measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are
reported at the lower of carrying amount or fair value of asset less the cost to sell. The Company determined that there was no impairment of long-lived assets as of December 31, 2007 and 2006.

Advertising:

The Company expenses advertising costs when incurred. Advertising expense totaled $7,060, $7,617 and $2,164 for the years ended December 31, 2007, 2006, and 2005, respectively.

Income Taxes:

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax
assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Realization of the deferred tax asset is dependent on generating
sufficient taxable income in future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

F-13

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(1)     Organization and Summary of Significant Accounting Policies, Continued:

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, 2007,
2006, and 2005, 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 2006 consolidated financial statements to conform to the 2007 presentation.

F-14

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(1)     Organization and Summary of Significant Accounting Policies, Continued:

New Accounting
  Pronouncements:

In February 2007, the FASB issued
    SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115”
  (“SFAS 159”). SFAS 159 permits entities to choose to measure many
  financial instruments and certain other items at fair value. The fair value
  option established by this Statement permits all entities to choose to measure
  eligible items at fair value at specified election dates. A business entity
  shall report unrealized gains and losses on items for which the fair value
  option has been elected in earnings (or another performance indicator if the
  business entity does not report earnings) at each subsequent reporting date.
  A not-for-profit organization shall report unrealized gains and losses in its
  statement of activities or similar statement. SFAS
  159 applies to all entities, including not-for-profit organizations. Most of
  the provisions of this Statement apply only to entities that elect the fair
  value option. However, the amendment to FASB Statement No. 115,
“Accounting for Certain Investments in Debt and Equity Securities”, applies to all entities with available-for-sale and trading securities. Some requirements apply differently to entities that do not report net income. This Statement is
effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to
apply the provisions of FASB Statement No. 157, “Fair Value Measurements”. The Company does not anticipate that this new SFAS will have any material impact upon its
financial condition or results of operations. In February 2007, the FASB issued FSP FAS 158-1, “Conforming Amendments to the Illustrations in FASB Statements No. 87, No. 88, and No. 106 and to the Related Staff Implementation Guides”. This FSP updates the
illustrations contained in Appendix B of FASB Statement No. 87, “Employers’ Accounting for Pensions”, Appendix B of FASB Statement
No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits”, and Appendix C of FASB Statement No. 106, “Employers’
Accounting for Postretirement Benefits Other Than Pensions”, to reflect the provisions of FASB Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”. This FSP also amends the
questions and answers contained in FASB Special Reports, “A Guide to Implementation of Statement 87 on Employers’ Accounting for Pensions, A Guide to Implementation of Statement 88 on Employers’ Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and A Guide to Implementation of Statement 106 on Employers’ Accounting for Postretirement Benefits Other Than Pensions”,
and incorporates them into Statements 87, 88, and 106 as Appendixes E, C, and
F, respectively. This FSP supersedes those FASB Special Reports. Finally, this
FSP makes conforming changes to other guidance and technical corrections to Statement
158.This FSP does not provide additional implementation guidance for Statement
158 beyond the conforming changes, nor does it change any of the provisions of


F-15

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Statement 158. The conforming amendments made by this FSP are effective as of the effective dates of Statement 158. The Company does not anticipate that this new FSP will have any material impact upon its financial
  condition or results of operations. In April 2007, the FASB issued FSP FIN 39-1, “Amendment of FASB Interpretation No. 39” to certain modifications to FASB Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts”
and whether a reporting entity that is party to a master netting arrangement can offset fair value amounts recognized for the right to reclaim cash collateral (a
receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments that have been offset under the same
master netting arrangement in accordance with paragraph 10 of Interpretation 39. The guidance in this FSP is effective for fiscal years beginning after November 15, 2007, with early application permitted. The Company does not anticipate that the
guidance in this new FSP will have any material impact upon its financial condition or results of operations. In May 2007, the FASB issued FSP FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48” to amend FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”, to provide
guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The guidance in this FSP shall be applied upon the initial adoption of Interpretation
48. The Company does not anticipate that the guidance in this new FSP will have any material impact upon its financial condition or results of operations. In May 2007, the FASB issued FSP FIN 46(R)-7, “Application of FASB Interpretation No. 46(R) to Investment Companies” to address the application of FASB Interpretation No. 46 (revised December 2003),
“Consolidation of Variable Interest Entities”, by an entity that accounts for its investments in accordance with the specialized accounting guidance in the AICPA Audit and Accounting Guide, “Investment Companies”. The Company
does not anticipate that this new FSP will have any material impact upon its financial condition or results of operations.


F-16

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(1)     Organization and Summary of Significant Accounting Policies, Continued:

New Accounting Pronouncements, Continued: In November 2007, the SEC released Staff Accounting Bulletin No. 109, “Written Loan Commitments Recorded at Fair Value Through Earnings” (“SAB 109”). SAB 109 provides interpretive guidance on the
SEC's views regarding written loan commitments that are accounted for at fair value through earnings under generally accepted accounting principles. This SAB supersedes SAB 105 and expresses the current view of the SEC that, consistent with the
guidance in Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets, and Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, the
expected net future cash flows related to the associated servicing of the loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. This SAB retains that SEC's view and broadens
its application to all written loan commitments that are accounted for at fair value through earnings. SAB 109 shall apply to derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The Company does not
anticipate that this new SAB will have any material impact upon its financial condition or results of operations. In December 2007, the SEC released Staff Accounting Bulletin No. 110, “Certain Assumptions Used In Valuation Methods” (“SAB 110”). SAB110 provides interpretive guidance on the SEC's views regarding
the use of a “simplified” method, as discussed in SAB No. 107 (“SAB 107”), in developing an estimate of expected term of “plain vanilla” share options in accordance with Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payment”. In particular, SAB 107 will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected
term. At the time SAB 107 was issued, SEC believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily
available to companies. Therefore, SEC stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. SEC understands that such detailed information about employee exercise behavior
may not be widely available by December 31, 2007. Accordingly, SEC will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company does not anticipate that this new SAB will have any
material impact upon its financial condition or results of operations. In December 2007, the FASB revised Statement No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”). The objective of SFAS 141(R) is to improve the relevance, representational faithfulness,
and comparability of the


F-17

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, this Statement establishes principles and requirements for how the acquirer:

- Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree
- Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase
- Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business
combination.

This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply
it before that date. The Company does not anticipate that this revised SFAS will have any material impact upon its financial condition or results of operations.

In December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51”. The objective of this Statement is to
improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require:

- The ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial
position within equity, but separate from the parent’s equity.
- The amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated
statement of income.
- Changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently. A
parent’s ownership interest in a subsidiary changes if the parent purchases additional ownership interests in its subsidiary or if the parent sells some of its ownership interests in its subsidiary. It also changes if the subsidiary reacquires some of its ownership interests or the subsidiary issues additional ownership interests. All of those transactions are economically
similar, and this Statement requires that they be accounted for similarly, as equity transactions.
- When a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value. The gain or loss on the
deconsolidation of the subsidiary is measured using the fair value of any noncontrolling equity investment rather than the carrying amount of that retained investment.

F-18

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

- Entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling
owners.

This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is
prohibited. The effective date of this Statement is the same as that of the related Statement 141(R). The Company does not anticipate that this new SFAS will have any material impact upon its financial condition or results of operations.

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 Taxe”s, 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.

F-19

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

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.


(2)      Prior Year Adjustments:

The financial statements for the year ended December 31, 2006 was restated to reflect the omission of the issuance of 500,000 common shares of the Company to a consultant as the consulting and advisory service fee in May
16, 2006 under the Company's share option scheme. The following financial statement line items for the year ended December 31, 2006 were affected by the omission.

As Originally
	
	
	
	As
	
	
	
	Effect ofReported
	
	
	
	Adjusted
	
	
	
	OmissionConsolidated Statement of Operationsfor the year ended December 31, 2006General and administrative expenses
	
	$
	2,167,057
	
	
	$
	2,272,057
	
	
	$
	105,000Income from operations
	
	
	1,139,601
	
	
	
	1,034,601
	
	
	
	(105,000
	)Income before income taxes
	
	
	718,819
	
	
	
	613,819
	
	
	
	(105,000
	)Net profit
	
	
	555,404
	
	
	
	450,404
	
	
	
	(105,000
	)Earnings per share - basic and diluted
	
	$
	0.02
	
	
	$
	0.02
	
	
	$
	-Weighted average number of shares
	
	
	27,829,936
	
	
	
	28,154,004
	
	
	
	324,068Consolidated Balance Sheet as of December 31, 2006Common Stock
	
	$
	27,830
	
	
	$
	28,330
	
	
	$
	500Additional paid in capital
	
	
	3,488,527
	
	
	
	3,593,027
	
	
	
	104,500Accumulated deficit
	
	
	(1,969,269
	)
	
	
	(2,074,269
	)
	
	
	(105,000
	)Total stockholders' equity
	
	$
	2,460,551
	
	
	$
	2,460,551
	
	
	$
	-Consolidated Statement of Cash FlowsFor the year ended December 31, 2006Cash flows provided by/(used for) operating activities:Net income
	
	$
	555,404
	
	
	$
	450,404
	
	
	$
	(105,000
	)Adjustments to reconcile net income to net cashprovided by/(used for) operating activities:Issuance of common stocks to a consultant asconsulting and advisory service fee under share option scheme
	
	
	-
	
	
	
	105,000
	
	
	
	105,000Total Adjustments to reconcile net income to net cash providedby/(used for) operating activities:
	
	
	(6,842,530
	)
	
	
	(6,737,530
	)
	
	
	105,000Net cash provided by/(used for) operating activities
	
	$
	(6,287,126
	)
	
	$
	(6,287,126
	)
	
	$
	-As Originally
    
    
    
    As
    
    
    
    Effect ofReported
    
    
    
    Adjusted
    
    
    
    OmissionConsolidated
            Statement of Stockholder's Equityfor the
            year ended December 31, 2006Common stock:Balance at December
        31, 2005 (27,829,936 shares)
    
    $
    27,830
    
    
    $
    27,830
    
    
    $
    -Issuance of common
        stock to a consultant as consulting andservicing fee
        (500,000 shares)
    
    
    -
    
    
    
    500
    
    
    
    500Balance at December
        31, 2006 (28,329,936 shares)
    
    $
    27,830
    
    
    $
    28,330
    
    
    $
    500Additional
          paid-in capital:Balance at December
        31, 2005
    
    $
    3,360,405
    
    
    $
    3,360,405
    
    
    $
    -Issuance of common
        stock to a consultant as consulting andservicing fee
    
    
    -
    
    
    
    104,500
    
    
    
    104,500Issuance of common
        stock for option issued to employees
    
    
    128,122
    
    
    
    128,122
    
    
    
    -Balance at December
        31, 2006
    
    $
    3,488,527
    
    
    $
    3,593,027
    
    
    $
    104,500  F-20   ACL SEMICONDUCTORS INC. AND
      SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007
      AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006
  AND 2005

Notes to Consolidated Financial StatementFor the year ended December 31, 2006Income taxes for the year ended December 31, 2006:Computed tax at federal statutory rate
	
	$
	244,398
	
	
	$
	244,398
	
	
	$
	-Tax rate differential on foreign earnings ofAtlantic Components Ltd., a Hong Kong based company
	
	
	(154,077
	)
	
	
	(189,777
	)
	
	
	(35,700
	)Net operating loss carry forward
	
	
	73,094
	
	
	
	108,794
	
	
	
	35,700Other
	
	
	-
	
	
	
	-
	
	
	
	-$
	163,415
	
	
	$
	163,415
	
	
	$
	-The Components of the deferred tax assets and liabilitiesas at December 31, 2006 are as follows:Net operating losses
	
	$
	987,840
	
	
	$
	1,023,540
	
	
	$
	35,700Total deferred tax assets
	
	$
	987,840
	
	
	$
	1,023,540
	
	
	$
	35,700Less: valuation allowance
	
	
	(987,840
	)
	
	
	(1,023,540
	)
	
	
	(35,700
	)$
	-
	
	
	$
	-
	
	
	$
	-


(3)     Property, Equipment and
Improvements:A summary is as follows:

2007
  
  
  2006Land and buildings
  
  $
  6,794,629
  
  $
  3,797,760Office equipment
  
  
  147,530
  
  
  132,721Leasehold improvements
  
  
  143,553
  
  
  46,015Furniture and fixtures
  
  
  13,273
  
  
  10,690Automobile
  
  
  226,056
  
  
  83,3267,325,041
  
  
  4,070,512Less: accumulated depreciation and amortization
  
  
  391,043
  
  
  161,391$
  6,933,998
  
  $
  3,909,121  Depreciation and amortization expense for property, equipment, and improvements amounted to $230,614, $78,074, and $29,236, for the years ended December 31, 2007, 2006, and 2005, respectively.


F-21

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(4)     Revolving Lines of Credit
and Loan Facilities:

The line of credit granted by Dah
    Sing Bank, Limited to the Company matured on September 30, 2007. The outstanding
    balances with Dah Sing Bank, Limited were $0 at December 31, 2007and $1,641,000
    at December 31, 2006. For borrowings in Hong Kong dollars (“HKD” ), the line of credit bore interest at the greater of (1) Hong Kong prime rate or (2) 1% over the Hong Kong Inter-bank Offer Rate (“HIBOR”)
    as of December 31, 2006. Weighted average interest rate approximated 7.9%
    for 2007 and 8.1% for 2006. For borrowings in foreign currency, the line
    of credit carries interest at the Base Rate. The Company has available to it a $5,128,205 revolving line of credit with DBS Bank (Hong Kong) Limited with an outstanding balance of $5,635,176 at December 31, 2007 and $4,228,396 at December 31, 2006. 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, 2007. Weighted average interest rate approximated 6.7% for
2007 and 6.9% for 2006. The Company has available to it a $5,769,231 factoring facility with recourse/without recourse with DBS Bank without any outstanding balance at December 31, 2007. The factoring facility bears 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, 2007. Weighted average interest rate approximated 6.7% for 2007 and 6.9% for 2006. 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, 2006 and the letter of guarantee was expired on December 17, 2007. The line of credit
bears commission 1.5% per annum which will be refunded on pro-rata basis upon return and cancellation of the letter of guarantee. The Company has available to it a $3,076,923 revolving line of credit with Standard Chartered Bank (Hong Kong) Limited with an outstanding balance of $3,709,379 at December 31, 2007 and $1,015,825 at December 31, 2006. 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 foreign currency facilities as of December 31, 2007. Weighted average
interest rate approximated 7.4% for 2007 and 7.6% for 2006.


F-22

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

The Company has available to it $1,025,641 factory facilities with SCB without any outstanding balance at December 31,2007. The factoring facility bears discounting charges at the bank’s standard bills rate less 0.75%
rate for advanced in HKD or the banks standard bills rates less 0.75% for advance in other currency as of December 31, 2007. Weighted average interest rate approximated 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 with an outstanding balance of $2,303,868 at December 31, 2007 and $2,307,150 at December 31, 2006. The line of
credit bears interest at the higher of Hong Kong prime rate or HIBOR for HKD facilities and at other currencies’ LIBOR plus 1.75% for other currencies facilities as of December 31, 2007. Weighted average interest rate approximated 7.9% for
2007 and 8.1% for 2006. The Company has available to it a $275,749 tax loan with The Bank of East Asia, Limited with an outstanding balance of $252,770 at December 31, 2007. The line of credit bears interest at the higher of Hong Kong prime rate
less 2% or HIBOR and will be repayable by 11 monthly installments as of December 31, 2007. Weighted average interest rate approximated 7.9% for 2007. The Company has available to it a $2,307,692 revolving line of credit with Citic Ka Wah Bank Limited with an outstanding balance of $2,297,061 at December 31, 2007 and $1,646,096 at December 31, 2006. The line of credit
bears interest at the higher of Hong Kong prime rate less 0.5% or 1 month HIBOR plus 3% as of December 31, 2007. Weighted average interest rate approximated 7.4% for 2007 and 8.1% for 2006. The Company has available to it a $1,923,077 revolving line of credit and factoring facilities with Hang Seng Bank Limited with an outstanding balance of $1,665,003 at December 31, 2007. The line of credit bears interest at
a rate of Hong Kong prime rate less 0.5% for HKD facilities and at a rate of the bank’s board rate less 0.25% for United States Dollar facilities as of December 31, 2007. Weighted average interest rate approximated 7.4% for 2007 and 8.1% for
2006.


F-23

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(5)     Long-Term Debt:

A summary is as follows as of December 31: 2007
  
  
  2006Installment loan carrying an interest of 2.75% below Hong Kongdollar Prime Rate (7.25% at December 31, 2007) to DBS Bankpayable in monthly installments of $11,397 including interestthrough December 2007
  
  $
  1,719,704
  
  $
  1,774,020Installment loan carrying an interest of 2% below Hong Kong dollarPrime Rate (7.25% at December 31,2007) to DBS Bank payable inmonthly installments of $3,913 including interest through December2007
  
  
  153,052
  
  
  190,361Installment loan carrying an interest on 3.95% per annum to InchroyCredit Corporation Limited payable in monthly installments of$1,600 including interest through December 2007
  
  
  27,185
  
  
  44,355Installment loan carrying an interest of 2.5% below Hong Kongdollar Prime Rate (7.25% at December 31, 2007) to DBS Bankpayable in monthly installments of $6,034 including interest throughDecember 2007
  
  
  801,723
  
  
  -Installment loan carrying an interest on 3.5% per annum to AIGFinance (Hong Kong) Limited payable in monthly installments of$1,181 including interest through December 2007
  
  
  33,162
  
  
  -Installment loan carrying an interest on 3.5% per annum to Dah SingBank Limited payable in monthly installments of $1,417 includinginterest through December 2007
  
  
  34,615
  
  
  -2,769,441
  
  
  2,008,736Less: current maturities
  
  
  180,228
  
  
  107,739$
  2,589,213
  
  $
  1,900,997


F-24

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(5)     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 (Hong
      Kong) Ltd. (formerly Overseas Trust Bank Limited), Standard Chartered Bank
      (Hong Kong) Limited, The Bank of East Asia Ltd., Citic Ka Wah Bank Limited
      and Hang Seng Bank Limited for all current and future borrowings from the
      bank group by the Company. In addition to the above pledged collateral,
    the debt is also secured by:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 1. | a 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 plus personal guarantee by Mr. Yang as collateral for loans from DBS Bank (Hong Kong) Ltd;                                                                                                                                                                                                                                                                   
|
| | 2. | a fixed cash deposit of $1,323,569 (HK$10,323,842) plus unlimited personal guarantee by Mr. Yang, as collateral for loans from The Bank of East Asia, Limited;                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | 3. | a cash deposit/securities not less than $1,282,051 (HK$10,000,000), a security interest on workshop located in Hong Kong owned by Systematic Information, a related party, a security interest on workshop
located in Hong Kong owned by Solution, a related party, plus unlimited personal guarantee by Mr. Yang as collateral for loans from Standard Chartered Bank (Hong Kong) Limited;                                                                                                                                                                                         
|
| | 4. | a cash deposit not less than $700,000, a security interest on workshop located in Hong Kong owned by Solution, a related party plus personal guarantee by Mr. Yang as collateral for loans from Citic Ka Wah
Bank Limited.                                                                                                                                                                                                                                                                                                                                                          
|
| | 5. | marketable securities of $769,231 (HK$6,000,000) plus unlimited personal guarantee by Mr. Yang as collateral for loans from Hang Seng Bank Limited.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|

(6)     Income Before Income
Taxes:

The consolidated income before income taxes is arrived
at after crediting/(charging): 2007
	
	
	2006
	
	
	2005Interest income
	
	$
	169,055
	
	$
	79,838
	
	$
	24,621Gain on disposal of property, equipment and improvements


	218
	
	
	-
	
	
	-Foreign exchange gain/(loss)
	
	
	99,262
	
	
	2,114
	
	
	(5,046
	)


(7)     Income Taxes:

Income tax expense amounted to $187,833 for 2007, $163,415 for 2006, and $123,235 for 2005 (an effective rate of 30% for 2007, 23% for 2006, and 32% for 2005). A reconciliation of the provision for income taxes with amounts
  determined by applying the statutory federal income tax rate of 34% to income before income taxes is as follows:

F-25

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(7)     Income Taxes, Continued:

2007
  
  
  
  2006
  
  
  
  2005Computed tax at federal statutory rate
  
  $
  213,733
  
  
  $
  244,398
  
  
  $
  130,135Tax rate differential on foreign earnings ofAtlantic Components Ltd. (“Atlantic”), aHong Kong based company
  
  
  (95,052
  )
  
  
  (154,077
  )
  
  
  (116,193
  )Net operating loss carry forward
  
  
  69,152
  
  
  
  73,094
  
  
  
  109,293Other
  
  
  -
  
  
  
  -
  
  
  
  -$
  187,833
  
  
  $
  163,415
  
  
  $
  123,235The income tax provision consists of the following components:2007
  
  
  
  2006
  
  
  
  2005Federal
  
  $
  -
  
  
  $
  -
  
  
  $
  -Foreign
  
  
  187,833
  
  
  
  163,415
  
  
  
  123,235$
  187,833
  
  
  $
  163,415
  
  
  $
  123,235The Components of the deferred tax assets and liabilities are as follows:2007
  
  
  
  2006
  
  
  
  2005Net operating losses
  
  $
  1,056,992
  
  
  $
  987,840
  
  
  $
  914,746Total deferred tax assets
  
  $
  1,056,992
  
  
  $
  987,840
  
  
  $
  914,746Less: valuation allowance
  
  (1,056,992
  )
  
  
  (987,840
  )
  
  
  (914,746
  )$
  -
  
  
  $
  -
  
  
  $
  -


(7)     Income Taxes, Continued:

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

F-26

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

2003. The Company has not paid any of this tax up to December 31, 2006 and the provision had been written back in the year ended December 31, 2006.

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

(8)     Weighted Average Number
of Shares:

The Company has a 2006 Inventive Equity Stock Plan,
under which the Company may grant options to its employees for up to 5 million
shares of common stock. In May 2006, the Company granted options to a consultant
to acquire 500,000 shares of common stock of the Company as the consulting and
advisory service fee and the consultant exercised all of the options during the
year ended December 31, 2006. In May 2006, the Company granted options to purchase
an aggregate 2,000,000 shares of common stock of the Company to three employees.
These options were fully vested upon grant, had an exercise price of $0.22 per
share and expired in December 2006. There was no dilutive effect to the weighted
average number of shares for the years ended December 31, 2007 and 2006 since
there were no outstanding options at December 31, 2007 and 2006.

(9)     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 will expire on March
1, 2009.

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 69%, 75%, and 76% of materials from Samsung for the years
  ended December 31, 2007, 2006, and 2005, respectively. However, there is no written
  supply contract between the Company and Samsung and, accordingly, there is no
  assurance that Samsung will continue to supply sufficient electronic components
  to the Company on terms and prices acceptable to the Company or in volumes sufficient
  to meet the Company's current and anticipated demand, nor can assurance be given
  that the Company would be able to secure sufficient products from other third
  party supplier(s) on acceptable terms.

In addition, the Company's operations and business viability are to a large extent dependent on the provision of management services and financial support by Mr. Yang. See Note 5 for details for Mr. Yang's

F-27

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

support of the Company's banking facilities.  At December 31, 2007 and 2006, included in accounts payable were $9,562,199 and $2,476,635, 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, 2007, 2006, and 2005, 0%, 0%, and 17%, respectively,
  of the Company’s sales were generated from Classic Electronic Ltd. (“Classic”),
  a related party (see Note 10 for additional discussion of related party transactions).
  As of December 31, 2007 and 2006, accounts receivable, related parties included
  $1,717,859 and $6,709,945, respectively, due from Classic, which represented
  11% and 72%, respectively, of the total accounts receivable due from related
  and unrelated parties.

During the years ended
  December 31, 2007, 2006, and 2005, 11%, 11%, and 2%, respectively, of the Company’s sales were generated from Aristo Technologies Ltd. (“Aristo”),
  a related party (see Note 10 for additional discussion of related party transactions).
  As of December 31, 2007 and 2006, accounts receivable, related parties included
  $6,237,905 and $662,972, respectively, due from Aristo, which represented 40%
  and 7%, respectively, of the total accounts receivable due from related and
unrelated parties.

As of December 31, 2007 and 2006, Samsung has withheld a total of $350,000 commission due to the Company as deposits. Per a letter sent by Samsung on May 1, 2001, the deposits will be released upon further agreement between
  Samsung and the Company. Subsequent to this letter, no further discussion regarding this matter was made. The Company believes the amount is fully recoverable.

(10)     Retirement Plan:

Under the Mandatory Provident Fund (“MPF”) Scheme Ordinance in Hong Kong, the Company is required to set up or participate in an MPF scheme to which both the Company and employees must make continuous
contributions throughout their employment based on 5% of the employees’ earnings, subject to maximum and minimum level of income. For those earning less than the minimum level of income, they are not required to contribute but may elect to do
so. However, regardless of the employees’ election, their employers must contribute 5% of the employees’ income. Contributions in excess of the maximum level of income are voluntary. All contributions to the MPF scheme are fully and
immediately vested with the employees’ accounts. The contributions must be invested and accumulated until the employees' retirement. The Company contributed and expensed $28,530 for 2007, $21,475 for 2006 and $18,385 for 2005.

F-28

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(11)     Commitments:

The Company leases its facilities. The following is a schedule by years of future minimum rental payments required under operating leases that have noncancellable lease terms in excess of one year as of December 31, 2007: Related Party
  
  
  Other
  
  
  TotalYear ending December 31,2008
  
  $
  18,205
  
  $
  76,495
  
  $
  94,7002009
  
  
  3,269
  
  $
  48,833
  
  $
  52,102Thereafter
  
  
  -
  
  $
  19,972
  
  $
  19,972Total
  
  $
  21,474
  
  $
  145,300
  
  $
  166,774  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 2007. Rent expense for the years ended December
31, 2007, 2006, and 2005 totaled $120,942 $116,321, and $135,063, respectively. As at December 31, 2007, there is a ratio par forward agreement between the Company and DBS for the Company to buy USD500,000 from DBS at a contract forward rate of 7.735 at specified dates up to March 18, 2008. According
to the terms of the agreements, the Company will buy USD in double amount if the spot rate is less than the contract forward rate. The gain on this forward contract during the year ended December 31, 2007 was $37,244. As at 31 December 2007, there is a callable ratio par forward agreement between the Company and DBS for the Company to buy USD500,000 from DBS at a contract forward rate of 7.74 at specified dates up to March 20, 2009.
According to the terms of the agreements, the Company will buy USD in double amount if the spot rate is less than the contract forward rate. There is no gain or loss on this forward contract during the year ended December 31, 2007. As at December 31, 2007 there is a participating forward currency option agreement between the Company and SCB for the Company to buy USD200,000 from SCB at a contract rate of 7.725 at specified dated up to July 03, 2008.
According to the terms of the agreements, the Company will buy USD in double amount 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, 2007 was $20,897. As at December 31, 2007, there is a participating knock-out forward currency option agreement between the Company and SCB for the Company to buy USD500,000 from SCB at a contract rate of 7.739 at specified dates up to April
23, 2009. According to the terms of the agreements, the Company will buy USD


F-29

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

in triple amount if the spot rate is less than the contract rate at specified dates and the agreement will be terminated whenever the spot rate is higher than a rate of 7.809 during the contract period. The gain on this
forward contract during the year ended December 31, 2007 was $6,449. The agreement was terminated in January 3, 2008.

(12)     Related Party Transactions:

TRANSACTIONS WITH MR. YANG

As of December 31, 2007 and 2006, we had an outstanding receivable from Mr. Yang, the President and Chairman of our Board of Directors, totaling $75,998 and $0. These advances bear no interest and are payable on
demand.

For the years ended December 31, 2007, 2006, and 2005, we recorded compensation to Mr. Yang of $812,821 $200,000, and $226,922, respectively, and paid $812,821, $200,000, and $226,922, respectively, to Mr. Yang as
compensation to him.

During each of the years ended December 31, 2007, 2006, and 2005, we paid rent of $17,521, $68,280, and $92,308, 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.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $18,780,971 respectively, to Classic. We have not experienced any bad debt from this customer in the past. Pursuant to a written personal
guarantee agreement, Mr. Yang personally guarantees to our lenders up to $10 million of the outstanding accounts receivable from Classic.

During the years ended December 31, 2007, 2006, and 2005, we purchased inventory of $0, $0, and $6,007,185, respectively, from Classic, which offset the outstanding accounts receivable from Classic. As of December 31, 2007
and 2006, we had net outstanding accounts receivable from Classic totaling $1,717,859 and $6,709,495, respectively.

We leased one of our facilities and Mr. Yang’s personal residence from Classic. Lease agreements for those two properties expired and were acquired by Atlantic on July 21, 2006. Monthly lease payments for these 2
leases totaled $6,684. We incurred and paid rent expense of $0, $44,418, and $83,250 to Classic for the years ended December 31, 2007, 2006, and 2005, respectively.

During the years ended December 31, 2005, certain Classic’s employees performed work on behalf of Atlantic and their salaries were allocated to Atlantic’s operations and charged to expenses in the accompanying
consolidated financial statements. Such expenses approximated $57,820.

On February 21, 2006, a cross corporate guarantee was
executed between Classic and Atlantic for banking facilities to be co-utilized
with Standard Chartered Bank (Hong Kong) Limited. The maximum amount of facilities
that could be utilized by Atlantic was $1.154 million (HKD9 million) and the
facility lines were fully covered by

F-30

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

collateral provided by Classic and companies other
than Atlantic Subsequently, the cross guarantees were released on December 7,
2006.

On July 6, 2006, a cross corporate guarantee was executed between Classic and Atlantic for banking facilities to be co-utilized with The Bank of East Asia Limited. The cross guarantee was temporarily created due to selling
of properties by Classic to Atlantic.During the period of execution of the assignment of legal title, The Bank of East Asia Limited requested a cross guarantee for both companies. All
facilities and outstanding loan balances were booked under and utilized by Atlantic which will not absorb any losses from Classic. Subsequently, the cross guarantees were released on December 8, 2006.

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

TRANSACTIONS WITH KADATCO COMPANY LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $5,072,858, respectively, to Kadatco Company Ltd. (“Kadatco”). Outstanding accounts receivable totaled $0 as of December 31, 2007 and
2006. We have not experienced any bad debt from this customer in the past.

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

TRANSACTIONS WITH RAMBO TECHNOLOGIES LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $165,225, respectively, to Rambo Technologies Ltd. (“Rambo”). Outstanding accounts receivable totaled $0 as of December 31, 2007 and
2006. We have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2007, 2006, and 2005, we purchased $0, $0, and $874,553, respectively, from Rambo. Outstanding accounts payable due to Rambo totaled $0 as of December 31, 2007 and 2006.

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

TRANSACTIONS WITH ARISTO COMPONENTS LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $71,402, respectively, to Aristo Components Ltd. (“Aristo Components”). Outstanding accounts receivable totaled $0 as of December 31,
2007 and 2006. We have not experienced any bad debt from this customer in the past.

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

F-31

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

TRANSACTIONS WITH ATLANTIC NETCOM LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $1,652, respectively, to Atlantic Netcom Ltd. (“Atlantic Netcom”). Outstanding accounts receivable totaled $0 as of December 31, 2007
and 2006, respectively. We have not experienced any bad debt from this customer in the past.

Mr. Yang, the Company’s Chief Executive Officer, majority shareholder and a director, is a 60% shareholder and director of Atlantic Netcom. The remaining 40% of Atlantic Netcom is owned by a non-related
party.

TRANSACTIONS WITH SOLUTION SEMICONDUCTOR (CHINA) LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $55,122, respectively, to Solution Semiconductor (China) Ltd. (“Solution”). Outstanding accounts receivable totaled $0 as of December
31, 2007 and 2006. We have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2007, 2006, and 2005, we purchased $0, $0, and $22,019, respectively, from Solution. There are no outstanding accounts payable due to Solution as of December 31, 2007 and 2006.

On April 01, 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. Monthly lease payment for this lease is $1,090. We
incurred and paid an aggregate rent expense of $12,385, $3,436 and $0 to Solution during the year ended December 31, 2007, 2006 and 2005.

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

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

TRANSACTIONS WITH SYSTEMATIC INFORMATION LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $61,910, respectively, to Systematic Information Ltd. (“Systematic Information”). There are no outstanding accounts receivable due
from Systematic Information as of December 31, 2007 and 2006. We have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2007, 2006, and 2005, we received service charges $11,538, $6,410, and $0, respectively, from Systematic Information. As of December 31, 2007 and 2006, there was no outstanding accounts
receivable from Systematic Information.

On August 31, 2006, 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, 2008. Monthly lease payment for this
lease

F-32

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

totaled $641. Upon expiration of the lease on August 31, 2008, ACL acquired this residential property from Systematic Information. We incurred and paid an aggregate rent expense of $7,692, $2,564 and $0 to Systematic
Information during the year ended December 31, 2007, 2006 and 2005.

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 $17,521, $38,462 and $38,462 to Systematic Information during the year ended December 31, 2007, 2006 and
2005.

A workshop located in Hong Kong owned by Systematic Information was used by the Company as collateral for loans from Standard Chartered Bank (Hong Kong) Limited.

Mr. Yang, the Company’s Chief Executive Officer, majority shareholder and a director, is a director and shareholder of Systematic with a total of 100% interest.

TRANSACTIONS WITH ARISTO TECHNOLOGIES LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $17,165,728, $11,986,047, and $2,544,995, respectively, to Aristo. Outstanding accounts receivable totaled $6,237,905 and $662,972 as of December 31, 2007
and 2006, respectively. We have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2007, 2006, and 2005, we purchased inventories of $3,633,424, $1,584,985 and $100,822, respectively, from Aristo. As of December 31, 2007 and 2006, there was no outstanding accounts
payable to Aristo.

Mr. Yang, the Company’s Chief Executive Officer, majority shareholder and a director, is a director and the sole beneficial owner of Aristo.

TRANSACTIONS WITH GLOBAL MEGA DEVELOPMENT LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0 and $19,074, respectively, to Global Mega Development Ltd. (“Global”). Outstanding accounts receivable totaled $0 as of December 31, 2007
and 2006, respectively. We have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2007, 2006, and 2005, we received management fee of $5,769, $7,692, and $2,564, respectively, from Global.  As of December 31, 2007 and 2006, there was no outstanding accounts receivable
from Global.

Mr. Yang, the Company’s Chief Executive Officer, majority shareholder and a director, is the sole beneficial owner of the equity interest of Global.

F-33

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

TRANSACTIONS WITH TFT TECHNOLOGIES LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $0, and $1,460, respectively, to TFT Technologies Ltd. (“TFT”).  Outstanding accounts receivable totaled $0 as of December 31, 2007 and 2006,
respectively. We have not experienced any bad debt from this customer in the past.

Mr. Yang the Company’s Chief Executive Officer, majority shareholder and a director, is a director and 51% shareholder of TFT. The remaining 49% of TFT is owned by a non-related party.

TRANSACTIONS WITH INTELLIGENT NETWORK TECHNOLOGY LTD.

During the years ended December 31, 2007, 2006, and 2005, we received management fee $0, $7,692, and $2,564, respectively, from Intelligent Network Technology Ltd. (“Intelligent”). As of December 31, 2007 and
2006, there was no outstanding accounts receivable from Intelligent.

Mr. Yang the Company’s Chief Executive Officer, majority shareholder and a director, is a director and 80% shareholder of Intelligent. The remaining 20% of Intelligent is owned by a non-related party.

TRANSACTIONS WITH SYSTEMATIC SEMICONDUCTOR LTD.

During the years ended December 31, 2007, 2006, and 2005, we received a management fee of $16,026, $15,384, and $2,564, respectively, from Systematic Semiconductor Ltd. (“Systematic”). As of December 31, 2007
and 2006, there was no outstanding accounts receivable from Systematic.

Mr. Alan Yang the Company’s Chief Executive Officer, majority shareholder and a director, is the sole beneficial owner of the equity interest of Systematic.

TRANSACTIONS WITH FIRST WORLD LOGISTICS LTD.

During the years ended December 31, 2007, 2006, and 2005, we sold $0, $7,720,975, and $0, respectively, to First World Logistic Ltd. (“First”). Outstanding accounts receivable totaled $0 as of December 31, 2007
and 2006, respectively. We have not experienced any bad debt from this customer in the past

During the years ended December 31, 2007, 2006, and 2005, we purchased inventories for $0, $825,900 and $306,432, respectively, from First.  As of December 31, 2007 and 2006, there was no outstanding accounts receivable
from First.

Mr. Yang the Company’s Chief Executive Officer, majority shareholder and a director, is the sole beneficial owner of the equity interest of First.

F-34

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ACL SEMICONDUCTORS INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006 ANDTHE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(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
  
  First2007Total net sales
  
  
  $160,546
  
  $52,885
  
  $43,895
  
  $31,731
  
  $32,035Gross profit
  
  
  $3,871
  
  $831
  
  $1,643
  
  $510
  
  $887Net income (loss)
  
  
  $436
  
  $6
  
  $538
  
  $(174
  )
  $66Net income (loss) per share:basic and diluted
  
  
  $0.01
  
  $0.00
  
  $0.02
  
  ($0.01
  )
  $0.002006Total net sales
  
  
  $105,642
  
  $29,283
  
  $30,139
  
  $21,044
  
  $25,176Gross profit
  
  
  $4,098
  
  $1,228
  
  $1,203
  
  $716
  
  $951Net income (loss)
  
  
  $450
  
  $239
  
  $176
  
  $(79
  )
  $114Net income (loss) per share:basic and diluted
  
  
  $0.02
  
  $0.01
  
  $0.01
  
  ($0.00
  )
  $0.00


(14)    Subsequent Event (Unaudited):

There is no significant subsequent event to be disclosed.

F-35

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