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

(MARK ONE)

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

FOR THE FISCAL YEAR ENDED  December 31, 2008

OR

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

FOR THE TRANSITION PERIOD FROM ______
TO______

Commission File Number: 000-50140

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

|                                                |  |                                   
|----------------------------------------------- |  | ----------------------------------
|Delaware                                        |  | 16-1642709                        
|                                                |  |                                   
|(State or other jurisdiction
 of incorporation) |  | (IRS Employer
 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 Act: |  | Common Stock - $.001 par value
 The Common Stock is listed on the Over-the-
 Counter Bulletin Board | 
|                                                             |  |                                                                                                     | 
|Securities
 registered pursuant to Section 12(g) of the Act: |  | None                                                                                                | 

|                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------
|Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
|Yes o          No
x                                                                                                    
|                                                                                                                       
|Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Act.   
|Yes o          No
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

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|                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------
|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
o                                                                                                                          

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

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 o | Accelerated
 filer o | 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 o
          No x

The aggregate market value of the voting common equity held by
non-affiliates of the registrant as of April 13, 2009 was approximately
$5,665,987 based upon the closing price of $0.20 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, 2009). (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 13, 2009.

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                                                                                                               |  |     
|           |                                                                                                                      |  |     
|           |                                                                                                                      |  | PAGE
|Item
 1.   | Business                                                                                                             |  | 2   
|Item
 1A.  | Risk Factors                                                                                                         |  | 7   
|Item
 1B.  | Unresolved Staff Comments                                                                                            |  | 10  
|Item
 2.   | Properties                                                                                                           |  | 10  
|Item
 3.   | Legal Proceedings                                                                                                    |  | 11  
|Item
 4.   | Submission of Matters to a Vote of Security
 Holders                                                                 |  | 11  
|           |                                                                                                                      |  |     
|           | PART
 II                                                                                                             |  |     
|           |                                                                                                                      |  |     
|Item
 5.   | Market for the Registrants Common Equity, 
 Related Stockholder Matters and Issuer Purchases of Equity 
 Securities |  | 12  
|Item 6.    | Selected Financial Data                                                                                              |  | 14  
|Item 7.    | Managements Discussion and Analysis of
 Financial 
 Condition and Results of Operations                             |  | 15  
|Item 7A.   | Quantitative and Qualitative Disclosures
 About Market Risk                                                          |  | 27  
|Item 8.    | Financial Statements and Supplementary
Data                                                                          |  | 27  
|Item 9.    | Changes in and Disagreements with
 Accountants on 
 Accounting and Financial Disclosure                              |  | 27  
|Item 9A.   | Controls and Procedures                                                                                              |  | 27  
|Item 9B.   | Other Information                                                                                                    |  | 28  
|           |                                                                                                                      |  |     
|           | PART III                                                                                                             |  |     
|           |                                                                                                                      |  |     
|Item 10.   | Directors and Executive Officers of the
 Company and 
 Corporate Governance                                          |  | 29  
|Item 11.   | Executive Compensation                                                                                               |  | 30  
|Item 12.   | Security Ownership of Certain Beneficial
 Owners and 
 Management and Related Stockholder Matters                    |  | 34  
|Item 13.   | Certain Relationships and Related
 Transactions, and Director 
 Independence                                         |  | 35  
|Item 14.   | Principal Accounting Fees and Services                                                                               |  | 39  
|           |                                                                                                                      |  |     
|           | PART IV                                                                                                              |  |     
|           |                                                                                                                      |  |     
|Item 15.   | Exhibits, Financial Statement
Schedules                                                                              |  | 39  
|Signatures |                                                                                                                      |  | 43  

1

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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 the Company (the Transaction).
Pursuant to the Exchange Agreement, the Company and Atlantic agreed, inter alia, to elect Mr. Yang and Mr. Ben
Wong to the board of directors (Board of Directors) of the Company upon the
closing of the Transaction (the Closing), effective as of that date (the Closing
Date), at which time, all of the Companys existing directors resigned.

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

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

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

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

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Business

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

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

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

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

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

Products

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

3

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

Flash
memory is a specialized type of memory component used to store user data and
program code; it retains this information even when the power is off. Although
flash memory is currently used predominantly in mobile phones and PDAs, it is
commonly used in multi-media digital storage applications for products such as
MP3 players, Digital Still Cameras, Digital Voice Recorders, USB Disks, Flash
Cards, etc. In addition,
Solid State Disk hard disks (SSD) will be the next arena that NAND FLASH is
expected by the Company to penetrate in the marketplace. The SSD hard disk could
gradually dominate the traditional hard disk for notebook markets. Samsung
is a major supplier in the world of FLASH products. In 2008, Samsung NAND Flash revenue was
approximately US$4,614 million,
representing 40.4% of Flashs
(NAND + NOR) market share.

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

Industry
Background

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

Customers

As
of December 31, 2008, the Company had over 150 active customers in Hong Kong
and Southern China, the majority of whom are memory product traders and
PC/Servers OEM manufacturers. Sales to Aristo Technologies Ltd. (Aristo), a
related party, accounted for 4%, 11% and 11% of the Companys net sales for the
year ended December 31, 2008, 2007 and 2006. Other than the Companys most
significant customer who accounted for 43% of the Companys net sales for the
years ended December 31, 2008, no other customer accounted for more than 25% of
the Companys net sales for 2008, 2007 and 2006, respectively. In order to
control the Companys credit risks, the Company does not offer any credit terms
to its customers other than a small number of clients who have long-established
business relationships with the Company.

Sales
and Marketing

As of December 31, 2008, the Company employed a total
of 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

4

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office in Shenzhen, China as customer liaisons. These
sales personnel co-operate with key memory product retailers and PC/Servers OEM
manufacturers to ensure that clients are supplied promptly with Samsung memory
products. The Company intends to expand its sales force if levels of business
materially increase in the next twelve months.

Market
Research

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

Suppliers

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

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

Competition

The
memory products industry in the Hong Kong and Southern China markets is very
competitive. However, as one of the worlds largest memory products
manufacturers, Samsungs memory products are competitively priced and have an
established reputation for product quality and 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.

5

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Regulation

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

Employees

As
of December 31, 2008, the Company had 43 employees. Of the 43 employees, 15 employees are in sales and marketing, 13 employees are in
administration, 8 employees are in engineering, 7 employees are in customer service and liaison. None of the
Company employees are represented by labor unions.

The
Companys primary hiring sources for its employees include referrals from
existing employees, print and Internet advertising and direct recruiting. All
of the Companys employees are highly skilled and educated and subject to
rigorous recruiting standards appropriate for a company involved in the
distribution of 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.

6

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

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

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

7

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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 products to meet all of our customer orders, this would have
a negative impact on our sales and could result in our loss of customers. However, such shortages are
infrequent. On the other hand, no assurance can
be given that such shortages will not occur in the future.

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

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

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

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

The
memory product industry is highly competitive.

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

Current
economic and political conditions may harm our business.

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

8

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capital markets over an extended period of time, we
may be unable to fund operations, which could materially adversely affect our
results of operations, cash flows and financial condition.

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

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

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

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

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

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

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

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

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

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

The
SEC has adopted regulations that generally define a penny stock to be an
equity security that has a market price of less than $5.00 per share or an
exercise price of less than $5.00 per share subject to certain exceptions.
Exceptions include equity securities issued by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has been in continuous
operation for more than three years, or (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years, or (iii) average revenue of at least $6,000,000 for the preceding three
years. Unless

9

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

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

We
lease a warehouse unit of approximately 873 square feet that is located at B9,
1/F., Block B, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon Bay,
Kowloon, Hong Kong. The lease is for

10

---



two years from Systematic Information Limited expiring
on August 31, 2010, with monthly rental payments of HK$5,000 (approximately
US$641). Mr. Ben Wong, one of our directors, is also a director of Systematic
Information Limited.

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

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

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

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

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

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

|        |                   
|------- | ------------------
|ITEM 3. | LEGAL PROCEEDINGS.

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

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

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

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

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

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

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

Dividend Policy

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

Equity Compensation
Plan Information

The
following table sets forth certain information regarding the Companys equity
compensation plans as of December 31, 2008.

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

12

---



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.

13

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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.

|                                                                   |  |      |             |      |   |             |  |      |             |      |   |             |  |   |             |  
|------------------------------------------------------------------ |  | ---- | ----------- | ---- | - | ----------- |  | ---- | ----------- | ---- | - | ----------- |  | - | ----------- | -
|                                                                   |  | 2008 |             | 2007 |   | 2006        |  | 2005 |             | 2004 |  
|                                                                   |  |      |             |      |   |             |  |      |             |      |  
|                                                                  
|Net Sales                                                          |  | $    | 206,082,770 |      | $ | 160,404,924 |  | $    | 105,642,123 |      | $ | 110,207,743 |  | $ | 133,243,690 |  
|                                                                  
|Net income (loss)                                                  |  | $    | (922,039    | )    | $ | 436,092     |  | $    | 450,404     |      | $ | 259,515     |  | $ | (454,006    | )
|                                                                  
|Earnings (loss) per common
 share                                  |  | $    | (0.03       | )    | $ | 0.01        |  | $    | 0.02        |      | $ | 0.01        |  | $ | (0.02       | )
|                                                                  
|Total Assets                                                       |  | $    | 34,587,072  |      | $ | 33,462,963  |  | $    | 21,121,354  |      | $ | 8,832,457   |  | $ | 10,265,983  |  
|                                                                  
|Long-term Debt                                                     |  | $    | 2,404,766   |      | $ | 2,589,213   |  | $    | 1,900,997   |      | $ | -           |  | $ | 65,522      |  
|                                                                  
|Weighted average number of
 shares outstanding  basic and diluted |  |      | 28,329,936  |      |   | 28,329,936  |  |      | 28,145,004  |      |   | 27,829,936  |  |   | 27,829,936  |  

14

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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 the
Samsung brandname which comprise DRAM, Graphic RAM and FLASH for the Hong Kong and Southern China markets.

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

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, 2008, 2007 and 2006, the largest 5 customers accounted
for 64%, 61% and 41% of our net sales, respectively. As of December 31, 2008,
we had net current liabilities of $31,152,455 and an accumulated deficit of
$2,560,216. We generated net sales of $206,082,770 for the year ended December
31, 2008 and recorded a net loss of $922,039. In addition, during the year
ended December 31, 2008, net cash provided by operating activities amounted to
$174,125.

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

Plan
of Operations

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

15

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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 customers. As of December 31, 2008 we had over 150 active
customers.

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

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

The Company
reported earnings from operations of $154,988. However, the Companys earnings
before income tax for fiscal year 2008 were a loss of $955,910. This loss is
mainly due to losses in book value of non-cash items, such as a decrease in the
value of the Companys real property assets of $883,117 and adjustments due to
unrealized gains on securities of $227,781. The adjustment of unrealized gains
on securities is due to sales of investment securities at a lower value on June
20, 2008 compared to December 31, 2007. The unrealized loss on revaluation of
the Companys real property assets was due to the property market downturn
caused by recent economic conditions. The real properties which the Company
owns are exclusively properties in Hong Kong. The Company believes that losses
in values of its real property assets may be recovered in 2009.

The Company
predicts that the demand for memory components will start to increase as
supplies decrease due to the reduction in production capacities and as excess
inventory levels decrease. The Company forecasts that the unit price of memory
components will increase in the first quarter of 2009. Moreover, the Company
believes that Samsung will further strengthen its cost competitiveness by

16

---



increasing its 56nm DRAM market share, and its 35nm and 42nm NAND flash
market share. This would greatly increase the Companys gross profit margin.
Furthermore, the Company believes that the current situation may present
opportunities for Samsung to further increase its market share while the other
memory makers are reducing their production capacities or restructuring. The
Company believes its sales turnover and gross profit margin will increase by a
sufficient amount in 2009.

Cost of Sales

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

Operating Expenses

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

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

General and
administrative expenses include all corporate and administrative functions that
serve to support our current and future operations and provide an
infrastructure to support future growth. Major items in this category include
management and staff salaries, rent/leases, professional services, and travel
and entertainment. We expect these expenses to remain at approximately the same
level in 2009. Sales and marketing costs are expected to fluctuate due to the
addition of sales personnel and various marketing activities planned throughout
the year.

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

Results of Operations

The
following table sets forth audited consolidated statements of operations data
for the years ended December 31, 2008, 2007, and 2006 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.

17

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|                                  |  |                         |             |      |  |             |  |  |             | 
|--------------------------------- |  | ----------------------- | ----------- | ---- |  | ----------- |  |  | ----------- | 
|                                  |  | Year Ended December 31, |            
|                                  |  | (US$)                   |            
|                                  |  | 2008                    |             | 2007 |  | 2006        | 
|                                  |  |                         |             |      |  |             | 
|                                  |  |                         |             |      |  |             |  |  |             | 
|Net sales                         |  |                         | 206,082,770 |      |  | 160,404,924 |  |  | 105,642,123 | 
|Cost of sales                     |  |                         | 201,820,793 |      |  | 156,553,635 |  |  | 101,544,098 | 
|Gross profit                      |  |                         | 4,201,977   |      |  | 3,871,289   |  |  | 4,098,025   | 
|                                  |  |                         |             |      |  |             |  |  |             | 
|Operating expenses:               |  |                         |             |      |  |             |  |  |             | 
|Sales and marketing               |  |                         | 76,072      |      |  | 69,260      |  |  | 791,367     | 
|General and administrative        |  |                         | 3,216,132   |      |  | 2,942,542   |  |  | 2,272,057   | 
|Total operating expenses          |  |                         | 3,292,204   |      |  | 3,116,802   |  |  | 3,063,424   | 
|                                  |  |                         |             |      |  |             |  |  |             | 
|Income from operations            |  |                         | 909,773     |      |  | 859,487     |  |  | 1,034,601   | 
|Interest expense                  |  |                         | 1,073,795   |      |  | 1,009,006   |  |  | 688,693     | 
|Loss on revaluation of properties |  |                         | 883,117     |      |  | -           |  |  | -           | 
|Net (loss) income                 |  |                         | (922,039    | )    |  | 436,092     |  |  | 450,404     | 

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

Net
Sales

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

Cost
of Sales

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

Gross
Profit

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

Operating Expenses

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

General and
administrative expenses increased $273,590 or 9.3% from $2,942,542 for the year
ended December 31, 2007 to $3,216,132 for the year ended December 31, 2008.
This increase was primarily attributable to an increase in Shenzhen office
expenses during the year 2008. We will continue

18

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to keep general and administrative expenses for the year ended December
31, 2009 at approximately the same level as the year ended December 31, 2008.

Income from
operations was $909,773 for the year ended December 31, 2008 compared to
$859,487 for the year ended December 31, 2007, an increase of $50,286. This
increase was mainly due to increase in gross profit.

Other
income (expenses)

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

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

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

Unrealized
losses on values of the Companys real property assets increased by $883,117
from $0 in the year ended December 31, 2007, to $883,117 in the year ended December
31, 2008. This increase was due to the valuations of the Companys real
properties by a professional surveyor, based on the fair value at the year
ended December 31, 2008 versus their book values; accordingly, the Company
determined to write down their values by $883,117.

Income
Tax expense (income)

Income tax
expense decreased by $221,704 from $187,833 for the year ended December 31,
2007 compared to income tax credits of $33,871 for the year ended December 31,
2008. This decrease was mainly due to reverse overprovisions made in the last
year.

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

19

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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.

Cost
of Sales

Cost of
sales increased by $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 commissions 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 commissions by Samsung from 2.4% to 1.8% and special
marketing efforts of Samsung products to several first tier manufacturers in
China which occurred during the year.

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. This
decrease was principally attributable to the decreased sales commission
expenses incurred for the year 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.

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. This decrease was mainly due to a decrease in Samsung commissions and an increase
in 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. This 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.

Unrealized
gains 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.
This increase was mainly attributable to the increase in market value as of
December 31, 2007 over the amount paid to purchase 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 $450,404 for the year ended December 31, 2006
compared to $436,092 for the year ended December 31, 2007. This decrease was
mainly due to the decrease in profit margin.

20

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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 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
such additional capital could not be so obtained. In the event of 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, 2008, net cash provided by operating activities amounted to
$174,125 while in the year ended December 31, 2007, it amounted to $1,125,907,
a decrease of $951,782. This decrease was primarily due to decrease of inventory
value at the end of 2008.

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

21

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In the year
ended December 31, 2007, net cash used for investing activities amounted to
$6,412,547 while in the year ended December 31, 2006, net cash provided by
investing activities amounted to $4,756,596, for an increase in cash used of $1,655,951. The 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.

In the year
ended December 31, 2006, net cash used for investing activities amounted to
$4,756,596 while in the year ended December 31, 2005, net cash provided by
investing activities amounted to $85,744, an increase in cash used of $4,842,340. The 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, 2008, net cash provided by financing activities amounted to
$629,171 while in the year ended December 31, 2007, it amounted to $5,436,828,
a decrease of $4,807,657. This decrease was primarily due to slow down in the
increase of bank borrowings on the lines of credit and loan facilities.

In the year
ended December 31, 2007, net cash provided by financing activities amounted to
$5,436,828 while in the year ended December 31, 2006, net cash used for
financing activities was $9,953,409, a decrease of $4,516,581. The decrease was
primarily due to increase of advances on long-term debt and borrowings on lines
of credit and loan facilities.

In the year
ended December 31, 2006, net cash provided by financing activities amounted to
$9,953,409, while in the year ended December 31, 2005, net cash used for
financing activities was $1,052,813, an increase of $11,006,222. The increase
was primarily due to increase of advance on long-term debt and borrowings on
the lines of credit and loan facilities.

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.

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 5.25% to 5.5% per annum) prevailing in Hong Kong.
For the three years ended December 31, 2008, 2007 and 2006 we

22

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

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

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

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

23

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

In April
2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of
Intangible Assets. This FSP amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement No. 142, Goodwill and
Other Intangible Assets. The intent of this FSP is to improve the consistency
between the useful life of a recognized intangible asset under Statement 142
and the period of expected cash flows used to measure the fair value of the
asset under FASB Statement No. 141 (revised 2007), Business Combinations, and
other U.S. generally accepted accounting principles (GAAP). This FSP shall be
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early
adoption is prohibited. The Company does not anticipate that this new FSP will
have any material impact upon its preparation of its financial statements.

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

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

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

24

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

In
June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities. The guidance in this FSP applies to the
calculation of EPS under Statement 128 for share-based payment awards with
rights to dividends or dividend equivalents. Unvested share-based payment awards that contain nonforfeitable rights
to dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included in the computation of EPS pursuant to the
two-class method. This FSP shall be effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those years. Early application is not permitted.
The Company does not anticipate that this
FSP will have any material impact upon its preparation of its financial
statements. In December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, Disclosures
by Public Entities (Enterprises) about Transfers of Financial Assets and
Interests in Variable Interest Entities. This FSP amends FASB Statement No.
140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, to require public entities to provide
additional disclosures about transfer of financial assets. It also amends FASB
Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities, to require public enterprises, including sponsors that have
a variable interest in a variable interest entity, to provide additional
disclosures about their involvement with variable interest entities. This FSP
will be applied to the first reporting period (interim or annual) ending after
December 15, 2008. The Company does not anticipate that this FSP will have any
material impact upon its preparation of its financial statements.

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

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

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

25

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

Contractual
Obligations

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

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

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

26

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for doubtful accounts is based on our assessment of the collectibility
of specific customer accounts, the aging of accounts receivable, our history of
bad debts, and the general condition of the industry. If a major customers
credit worthiness deteriorates, or our customers actual defaults exceed our
historical experience, our estimates could change and impact our reported
results.

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

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 are our
Consolidated Financial Statements, beginning on page F-1.

|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH
 ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

|          |                        
|--------- | -----------------------
|ITEM 9AT. | CONTROLS AND PROCEDURES

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.

27

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Changes in Internal Control over Financial
Reporting

The term internal control over financial
reporting
is defined as a process designed by, or under the supervision of, our Chief
Executive Officer and Principal Financial Officer, and effected by our board of
directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting principles
generally accepted in the United States. Except as noted below in that
subsection captioned Significant
Deficiencies In Disclosure Controls And Procedures Or Internal Controls,
there were no changes in our internal control over financial reporting
identified in connection with our evaluation of these controls as of the end of
the period covered by this annual report that could have significantly affected
those controls subsequent to the date of the evaluation referred to in the
previous paragraph, including any correction action with regard to significant
deficiencies and material weakness.

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, 2008, 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 SEC in April 2006.

28

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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, 2008, and their biographical
information are set forth below:

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

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

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

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

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

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

BOARD MEETINGS

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

COMMITTEES OF THE BOARD

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

Code of Business Conduct and Ethics

We have
adopted a written code of business conduct and ethics, known as our Code of
Business Conduct and Ethics which applies to all of our directors, officers,
and employees, including our principal

29

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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.

STOCKHOLDER COMMUNICATIONS

Stockholders
and other interested parties may contact the Board of Directors or the
non-management directors as a group at the following address: Board of
Directors or Outside Directors, ACL Semiconductor, Inc., B24-B27,1/F., Block B,
Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon, Hong Kong. All
communications received at the above address will be relayed to the Board of
Directors or the non-management directors, respectively. Communications
regarding accounting, internal accounting controls or auditing matters may also
be reported to the Board of Directors using the above address.

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

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

COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934

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

|         |                        
|-------- | -----------------------
|ITEM 11. | EXECUTIVE COMPENSATION.

COMPENSATION DISCUSSION AND ANALYSIS

SUMMARY

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

Our plan to
obtain and retain highly skilled employees is to provide significant market
competitive salaries and also incentive awards. Our approach is to link
individual employee objectives with overall company strategies and results, and
to reward executive officers and significant employees for their individual
contributions to those strategies and results. We use compensation and
performance

30

---



data from comparable companies in the electronics distribution industry
to establish market competitive compensation and performance standards for our
employees. Furthermore, we believe that equity awards serve to align the
interests of our executives with those of our stockholders. As such, we intend
for equity to become a key component of our compensation program.

NAMED EXECUTIVE OFFICERS

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

31

---



ELEMENTS OF OUR EXECUTIVE COMPENSATION
PROGRAM

BASE SALARY

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

BONUSES

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

STOCK OPTIONS

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

RETIREMENT AND DEFERRED COMPENSATION BENEFITS

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

PERQUISITES

There
were no perquisites provided to the Named Executive Officers.

POST-TERMINATION/ CHANGE OF CONTROL
COMPENSATION

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

TAX IMPLICATIONS OF EXECUTIVE COMPENSATION

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

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.

32

---



OPTION EXERCISES AND STOCK VESTED

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

PENSION BENEFITS

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

NONQUALIFIED DEFERRED COMPENSATION

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

Employment Agreements

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

Executive Officer Compensation

The following table sets forth the annual and long-term compensation of
our Named Executive Officers for services in all capacities to the Company for
the last three fiscal years ended December 31, 2008, December 31, 2007 and
December 31, 2006.

Summary
Compensation Table

|                   |  |      |  |        |         |       |     |             |     |              |     |                                      |     |                                                                               |     |                       |     |       |     |    |  |   |        |  |  |  |  | 
|------------------ |  | ---- |  | ------ | ------- | ----- | --- | ----------- | --- | ------------ | --- | ------------------------------------ | --- | ----------------------------------------------------------------------------- | --- | --------------------- | --- | ----- | --- | -- |  | - | ------ |  |  |  |  | 
|                   |  | Year |  | Salary |         | Bonus |     | StockAwards |     | OptionAwards |     | Non-EquityIncentive PlanCompensation |     | Change in
 Pension Value
 and
 Nonqualified
 Deferred
 Compensation
 Earnings |     | All OtherCompensation |     | Total |    
|Name and           |  | (1)  |  |        |         | (2)   |     | (3)         |     | (4)          |     |                                      |     |                                                                               |     |                       |     |       |    
|Principal Position |  |      |  |        | ($)     |       | ($) |             | ($) |              | ($) |                                      | ($) |                                                                               | ($) |                       | ($) |       | ($) |   
|                   |  |      |  |        |         |       |     |             |     |              |     |                                      |     |                                                                               |     |                       |     |       |    
|Chung-Lun          |  | 2008 |  | $      | 735,026 |       |     | --          |     |              | --  |                                      |     | --                                                                            |     |                       | --  |       |     | -- |  |   | --     |  |  |  | 
|Yang,              |  | 2007 |  | $      | 812,821 |       |     | --          |     |              | --  |                                      |     | --                                                                            |     |                       | --  |       |     | -- |  | $ | 17,521 |  |  |  | 
|Chief              |  | 2006 |  | $      | 200,000 |       |     | --          |     |              | --  |                                      |     | --                                                                            |     |                       | --  |       |     | -- |  | $ | 68,280 |  |  |  | 
|Executive          |  |      |  |        |         |       |     |             |     |              |     |                                      |     |                                                                               |     |                       |     |       |     |    |  |   |        |  |  |  |  | 
|Officer and        |  |      |  |        |         |       |     |             |     |              |     |                                      |     |                                                                               |     |                       |     |       |     |    |  |   |        |  |  |  |  | 
|Chairman of        |  |      |  |        |         |       |     |             |     |              |     |                                      |     |                                                                               |     |                       |     |       |     |    |  |   |        |  |  |  |  | 
|the Board          |  |      |  |        |         |       |     |             |     |              |     |                                      |     |                                                                               |     |                       |     |       |     |    |  |   |        |  |  |  |  | 
|                   |  |      |  |        |         |       |     |             |     |              |     |                                      |     |                                                                               |     |                       |     |       |     |    |  |   |        |  |  |  |  | 
|Ben Wong,          |  | 2008 |  | $      | 64,615  |       |     | --          |     |              | --  |                                      |     | --                                                                            |     |                       | --  |       |     | -- |  | $ | 64,615 |  |  |  | 
|Director           |  | 2007 |  | $      | 72,435  |       |     | --          |     |              | --  |                                      |     | --                                                                            |     |                       | --  |       |     | -- |  | $ | 72,435 |  |  |  | 
|                   |  | 2006 |  | $      | 39,102  |       |     | --          |     |              | --  |                                      |     | --                                                                            |     |                       | --  |       |     | -- |  | $ | 39,102 |  |  |  | 
|                   |  |      |  |        |         |       |     |             |     |              |     |                                      |     |                                                                               |     |                       |     |       |     |    |  |   |        |  |  |  |  | 
|Kenneth Lap        |  | 2008 |  | $      | 64,615  |       |     | --          |     |              | --  |                                      |     | --                                                                            |     |                       | --  |       |     | -- |  | $ | 64,615 |  |  |  | 
|Yin Chan,          |  | 2007 |  | $      | 72,435  |       |     | --          |     |              | --  |                                      |     | --                                                                            |     |                       | --  |       |     | -- |  | $ | 72,435 |  |  |  | 
|Chief Financial    |  | 2006 |  | $      | 82,564  |       |     | --          |     |              | --  |                                      |     | --                                                                            |     |                       | --  |       |     | -- |  | $ | 82,564 |  |  |  | 
|Officer            |  |      |  |        |         |       |     |             |     |              |     |                                      |     |                                                                               |     |                       |     |       |     |    |  |   |        |  |  |  |  | 

|    |                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Yangs
 other annual compensation includes rent and housing allowance in the amount
 of $0 for the year ended December 31, 2008, $17,521 for the year ended
 December 31, 2007 and in the amount of $68,280 for the for the year ended
 December 31, 2006.

33

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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, 2008.

|             |  |                                                    |  |                                                    |  |                                                                                  |  |                     |         |                  |  |                                                   |  |                                                        |               |                                                                                                                  |  |                                                                                                                                   |  |  |  |  |  |  |  |  |  | 
|------------ |  | -------------------------------------------------- |  | -------------------------------------------------- |  | -------------------------------------------------------------------------------- |  | ------------------- | ------- | ---------------- |  | ------------------------------------------------- |  | ------------------------------------------------------ | ------------- | ---------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  |  |  | 
|             |  | OPTION
 AWARDS                                     |  | STOCK
 AWARDS                                      | 
|             |  |                                                    |  |                                                    | 
|             |  | NUMBER OFSECURITIESUNDERLYINGUNEXERCISEDOPTIONS(#) |  | NUMBER OFSECURITIESUNDERLYINGUNEXERCISEDOPTIONS(#) |  | EQUITYINCENTIVEPLANAWARDSNUMBER OFSECURITIESUNDERLYINGUNEXERCISEDUNEARNEDOPTIONS |  | OPTIONEXERCISEPRICE |         | OPTIONEXPIRATION |  | NUMBEROFSHARESORUNITSOFSTOCKHELDTHATHAVENOTVESTED |  | MARKETVALUEOFSHARESORUNITSOFSTOCKHELDTHATHAVENOTVESTED |               | EQUITY
 INCENTIVE
 PLAN
 AWARDS:
 NUMBER
 OF
 UNEARNED
 SHARES,
 UNITS
 OR OTHER
 RIGHTS
 THAT
 HAVE NOT
 VESTED |  | EQUITY
 INCENTIVE
 PLAN
 AWARDS:
 MARKET OR
 PAYOUT
 VALUE OF
 UNEARNED
 SHARES,
 UNITS
 OR OTHER
 RIGHTS
 THAT
 HAVE NOT
 VESTED | 
|NAME         |  | EXERCISABLE                                        |  | UNEXERCISABLE                                      |  | (#)                                                                              |  | ($)                 |         | DATE             |  | (#)                                               |  | ($)                                                    |               | (#)                                                                                                              |  | ($)                                                                                                                               | 
|             |  |                                                    |  |                                                    |  |                                                                                  |  |                     |         |                  |  |                                                   |  |                                                        |               |                                                                                                                  | 
|Chan Kenneth |  |                                                    |  |                                                    |  |                                                                                  |  |                     | 500,000 |                  |  | 0.22                                              |  |                                                        | May
 15, 2016 |                                                                                                                  |  |                                                                                                                                   |  |  |  |  |  |  |  |  |  | 

Compensation of Directors

None
of our directors who served during the year ended December 31, 2008 received
compensation for serving as such, other than reimbursement for out of pocket
expenses incurred in attending director meetings.

|         |                                                                                               
|-------- | ----------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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

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

34

---



|                                    |  |                        |            |                       |  |      |  
|----------------------------------- |  | ---------------------- | ---------- | --------------------- |  | ---- | -
|                                    |  |                        |            |                       |  |      |  
|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                          |  |                        |            |                       |  |      |  

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

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

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

35

---



CERTAIN
RELATED PERSON TRANSACTIONS

TRANSACTIONS WITH MR.
YANG

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

For the years ended December 31, 2008, 2007 and 2006,
we recorded compensation to Mr. Yang of $735,026, $812,821, and $200,000,
respectively, and paid $735,026, $812,821, and $200,000, respectively, to Mr.
Yang as compensation to him.

During each of the years ended December 31, 2008, 2007
and 2006, we paid rent of $0, $17,521, and $68,280, 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.

As of December 31, 2008 and 2007, the Company had
outstanding accounts receivable from Classic Electronics Ltd. (Classic)
totaling $1,717,320 and $1,717,859, respectively. The Company has not
experienced any bad debt from this customer in the past. Pursuant to a written
personal guarantee agreement, Mr. Yang has personally guaranteed up to $10
million of the outstanding accounts receivable from Classic.

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 two leases totaled $6,684. We incurred and paid rent expense of $0,
$0 and $44,418 to Classic for the years ended December 31, 2008, 2007, and
2006, respectively.

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
millions) and the facility lines were fully covered by 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
SOLUTION SEMICONDUCTOR (CHINA) LTD.

On April 1, 2007, we entered into a lease agreement
with Solution Semiconductor (China) Ltd. (Solution) pursuant to which we
lease one facility. The lease agreement for this facility expires on March 31,
2009. The monthly lease payment for this lease is $1,090. We incurred and paid
an aggregate rent expense of $13,077, $12,385 and $3,436 to Solution during the
year ended December 31, 2008, 2007 and 2006.

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.

36

---



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, 2008, 2007 and
2006, we received service charges of $0, $11,538 and $6,410, respectively, from
Systematic Information Ltd. (Systematic Information). As of December 31, 2008
and 2007, there were no outstanding accounts receivable from Systematic
Information. The service fee was charged for back office support for Systematic
Information.

On September 1, 2008, we entered into a lease
agreement with Systematic Information pursuant to which we lease one facility.
The lease agreement for this facility expires on August 31, 2010. The monthly
lease payment for this lease totals $641. We incurred and paid an aggregate
rent expense of $7,692, $7,692 and $2,564 to Systematic Information during the
years ended December 31, 2008, 2007 and 2006.

On April 1, 2005, we entered into a lease agreement
with Systematic Information pursuant to which we lease one residential property
for Mr. Yangs personal use for a monthly lease payment of $3,205. Upon
expiration of the lease on June 15, 2007, ACL acquired this residential
property from Systematic Information. We incurred and paid an aggregate rent
expense of $0, $17,521 and $38,462 to Systematic Information during the years
ended December 31, 2008, 2007 and 2006.

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, 2008, 2007 and
2006, we sold products for $9,076,034, $17,165,728 and $11,986,047
respectively, to Aristo Technologies Ltd. (Aristo). Outstanding accounts
receivable totaled $6,695,409 and $6,237,905 as of December 31, 2008 and 2007,
respectively. We have not experienced any bad debt from this customer in the
past.

During the years ended December 31, 2008, 2007 and
2006, we purchased inventories of $7,393,957, $3,633,424 and $1,584,985,
respectively, from Aristo. As of December 31, 2008 and 2007, there were no
outstanding accounts payable to or from 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, 2008, 2007 and
2006, we received management fees of $0, $5,769 and $7,692, respectively, from
Global Mega Development Ltd. (Global). As of December 31, 2008 and 2007,
there were no outstanding accounts receivable from Global. The management fees
were charged for back office support for 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.

37

---



TRANSACTIONS WITH
INTELLIGENT NETWORK TECHNOLOGY LTD.

During the years ended December 31, 2008, 2007 and
2006, we received management fees of $0, $0 and $7,692, respectively, from
Intelligent Network Technology Ltd. (Intelligent). As of December 31, 2008
and 2007, there were no outstanding accounts receivable from Intelligent. The
management fee was charged as back office support for 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, 2008, 2007, and
2006, we received a management fee of $15,384, $16,026 and $15,384,
respectively, from Systematic Semiconductor Ltd. (Systematic). As of December
31, 2008 and 2007, there were no outstanding accounts receivable from
Systematic. The management fee was charged for back office support for
Systematic.

Mr. 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, 2008, 2007 and
2006, we sold products for $0, $0 and $7,720,975, respectively, to First World
Logistic Ltd. (First). As of December 31,2008 and 2007, there were no
outstanding accounts receivable from First.

During the years ended December 31, 2008, 2007, and
2006, we purchased inventories for $0, $0, and $825,900, respectively, from First.
As of December 31, 2008 and 2007, there were no outstanding accounts payable to
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.

TRANSACTIONS WITH ARISTO
COMPONENTS LTD.

During the years ended December 31, 2008, 2007 and
2006, we received a management fee of $8,077, $0 and $0, respectively, from
Aristo Components Ltd. (Aristo Comp). As of December 31, 2008 and 2007, there
were no outstanding accounts receivable from Aristo Comp. The management fee
was charged for back office support for Aristo Comp.

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

TRANSACTIONS CITY ROYAL
LIMITED.

A residential property located in Hong Kong owned by
City Royal Limited (City) was used by the Company as collateral for loans
from DBS Bank (Hong Kong) Limited.

Mr. Yang, the Companys Chief Executive Officer,
majority shareholder and a director, is a 50% shareholder of City. The
remaining 50% of City is owned by the wife of Mr. Yang.

38

---



|          |                                         
|--------- | ----------------------------------------
|ITEM
 14. | PRINCIPAL
 ACCOUNTING FEES AND SERVICES.

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

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

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

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.

39

---



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.                                                            
|              |  |                                                                                                                                                                                                                                                                                                         
|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.                    

40

---



|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10 |  | Form of Limited Guaranty and Security Agreement,
 dated as of December 31, 2003, by and among, the Company, PTF, Orient
 Financial Services Limited, Mr. Li Wing-Kei and Emerging Growth Partners,
 Inc., incorporated by reference to Exhibit 10.3 to the Form 8-K filed with
 the Securities and Exchange Commission on March 24, 2004.                                               
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.11 |  | Form of Stock Purchase and Escrow Agreement, dated
 as of December 31, 2003, by and among, PTF, Orient Financial Services
 Limited, Mr. Li Wing-Kei and Emerging Growth Partners, Inc., and the law firm
 of Sullivan & Worcester LLP, as escrow agent, incorporated by reference
 to Exhibit 10.4 to the Form 8-K filed with the Securities and Exchange
 Commission on March 24, 2004.
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.12 |  | Form of Letter Agreement, dated as of December 31,
 2003, by and between the Company and PTF, incorporated by reference to
 Exhibit 10.5 to the Form 8-K filed with the Securities and Exchange
 Commission on March 24, 2004.                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.13 |  | Letter of Intent, dated December 29, 2003, between
 the Company and Classic Electronics, Ltd., incorporated by reference to
 Exhibit 10.1 to the Form 8-K filed with the Securities and Exchange
 Commission on March 25, 2004.                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.14 |  | Note Subscription, dated as of December 31, 2003, by
 and between the Company and Professional Traders Fund LLC, a New York limited
 liability company (PTF), incorporated by reference to Exhibit 10.6 to the
 Form 8-K/A filed with the Securities and Exchange Commission on April 13,
 2004.                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.15 |  | 12% Senior Subordinated Convertible Note due
 December 31, 2004 in the aggregate principal amount of $250,000 issued by the
 Company to PTF, incorporated by reference to Exhibit 10.7 to the Form 8-K/A
 filed with the Securities and Exchange Commission on April 13, 2004.                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.16 |  | Limited Guaranty and Security Agreement, dated as of
 December 31, 2003, by and among, the Company, PTF, Orient Financial Services
 Limited, Mr. Li Wing-Kei and Emerging Growth Partners, Inc., incorporated by
 reference to Exhibit 10.8 to the Form 8-K/A filed with the Securities and
 Exchange Commission on April 13, 2004.                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.17 |  | Stock Purchase and Escrow Agreement, dated as of
 December 31, 2003, by and among, PTF, Orient Financial Services Limited, Mr.
 Li Wing-Kei and Emerging Growth Partners, Inc., and the law firm of Sullivan
 & Worcester LLP, as escrow agent, incorporated by reference to Exhibit
 10.9 to the Form 8-K/A filed with the Securities and Exchange Commission on
 April 13, 2004.      
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.18 |  | Letter Agreement, dated as of December 31, 2003, by
 and between the Company and PTF, incorporated by reference to Exhibit 10.10
 to the Form 8-K/A filed with the Securities and Exchange Commission on April
 13, 2004.                                                                                                                                                               
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         
|10.19 |  | Stock Purchase Agreement, dated as of December 30,
 2005, by and among the Company, Classic Electronics, Ltd. (Classic) and the
 shareholders of Classic, incorporated by reference to Exhibit 10.1 to the
 Form 8-K filed with the Securities and Exchange Commission on January 6,
 2006.                                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                                                                         

41

---



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

* Filed herewith

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

42

---



SIGNATURES

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

| |                         |                         
| | ----------------------- | ------------------------
| | ACL SEMICONDUCTORS INC.
| |                        
| | By:                     | /s/ Chung -Lun Yang     
| |                         |                         
| |                         | Chung-Lun Yang          
| |                         | Chief Executive
 Officer
| |                        
| | Dated: April 13, 2009  

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 13, 2009
|                         |  |                                     |  |               
|Chung-Lun Yang           |  | Board of Directors                  |  |               
|                         |  | (Principal ExecutiveOfficer)        |  |               
|                         |  |                                     |  |               
|                         |  | Chief Financial Officer,            |  |               
|/s/ Kenneth Lap-Yin Chan |  | (Principal Financial and Accounting |  | April 13, 2009
|                         |  |                                     |  |               
|Kenneth Lap-Yin Chan     |  | Officer)                            |  |               
|                         |  |                                     |  |               
|                         |  |                                     |  |               
|/s/ Ben Wong             |  | Director                            |  | April 13, 2009
|                         |  |                                     |  |               
|Ben Wong                 |  |                                     |  |               

43

---



Schedule II
ACL SEMICONDUCTORS INC. AND SUBSDIARIESValuation and Qualifying Accounts
and Reserves

Years Ended
December 31, 2008, 2007 and 2006

|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|--------------------------------------------- |  | -------------------------------------- | --------- | ------------------------------- | - | ---------- |  | -------------------------------- | ------- |  | - | --------- | 
|                                              |  | Balance
 at the Beginning
 of the Year |           | Charged
 to Costs
 and Expenses |   | Deductions |  | Balance
 At the End
 of the Year |        
|                                              |  |                                        |           |                                 |   |            |  |                                  |        
|Allowance for Doubtful Accounts:              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Year ended December 31, 2006                  |  | $                                      | -         |                                 | $ | -          |  | $                                | -       |  | $ | -         | 
|Year ended December 31, 2007                  |  | $                                      | -         |                                 | $ | -          |  | $                                | -       |  | $ | -         | 
|Year ended December 31, 2008                  |  | $                                      | -         |                                 | $ | -          |  | $                                | -       |  | $ | -         | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Inventory Obsolescence Reserve:               |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Year ended December 31, 2006                  |  | $                                      | 141,026   |                                 | $ | 100,000    |  | $                                | -       |  | $ | 241,026   | 
|Year ended December 31, 2007                  |  | $                                      | 241,026   |                                 | $ | 323,077    |  | $                                | -       |  | $ | 564,103   | 
|Year ended December 31, 2008                  |  | $                                      | 564,103   |                                 | $ | -          |  | $                                | 190,000 |  | $ | 374,103   | 
|                                              |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Valuation Allowance for Deferred Tax
 Assets: |  |                                        |           |                                 |   |            |  |                                  |         |  |   |           | 
|Year ended December 31, 2006                  |  | $                                      | 914,746   |                                 | $ | 73,094     |  | $                                | -       |  | $ | 987,840   | 
|Year ended December 31, 2007                  |  | $                                      | 987,840   |                                 | $ | 69,152     |  | $                                | -       |  | $ | 1,056,992 | 
|Year ended December 31, 2008                  |  | $                                      | 1,056,992 |                                 | $ | 65,734     |  | $                                | -       |  | $ | 1,122,726 | 

44

---



ACL Semiconductors Inc. and
Subsidiaries

Consolidated Financial Statements

As of December 31, 2008 and
December 31, 2007 and

the Years Ended December 31,
2008, 2007 and 2006

With Report of Independent Registered Public Accounting Firm

---



Contents

|                                                         |  |           
|-------------------------------------------------------- |  | ----------
|                                                         |  | Page      
|                                                         |  |           
|                                                         |  |           
|Report of Independent Registered
 Public Accounting Firm |  | F-1       
|                                                         |  |           
|Financial Statements:                                    |  |           
|Consolidated Balance
Sheets                              |  | F-2
  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
Directors 
ACL Semiconductors Inc. 
Kowloon, Hong Kong

We have
audited the accompanying consolidated balance sheet of ACL Semiconductors Inc.
and subsidiaries (the Company) as of December 31, 2008, and the related
consolidated statements of operations, stockholders equity, cash flows and
financial statement schedule of the year ended December 31, 2008, 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, 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, Jeffrey
Tsang & Co. Certified Public Accountants, whose report was dated April 17,
2007. Their reports did not contain any adverse opinion or disclaimer of
opinion, or was 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 year presented. The consolidated
financial statements for the year ended December 31, 2006 have been restated by
prior year adjustments made during the year ended December 31, 2007. We
reviewed the adjustments that were applied to restate the consolidated
financial statements for the year ended December 31, 2006 during our audit in
respect of the consolidated financial statements for the year ended December
31, 2007. In our opinion, such adjustments are appropriate and have been
properly applied. However, we were not engaged to audit, review or apply any
procedures to the consolidated financial statements for the year ended December
31, 2006 and accordingly, we do not express an opinion or any other form of
assurance on the consolidated financial statements for the year ended December
31, 2006. 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

F-1

---



management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2008, and the results of its operations and its cash flows for the
year ended December 31, 2008, 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 12 to the consolidated financial statements, the Company has had
numerous significant transactions with businesses and affiliates controlled by,
and with persons who are related to, the officers and directors of the Company.

In addition, as
discussed in Note 9 to the consolidated financial statements, the Company is
dependent on one single vendor and its authorized agent to supply its
inventories and this single vendor provided the majority of the Companys
inventory purchases during the year ended December 31, 2008.

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

---



ACL SEMICONDUCTORS AND SUBSDIARIESCONSOLIDATED BALANCE SHEETS

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

F-2

---



ACL SEMICONDUCTORS AND SUBSDIARIES
CONSOLIDATED BALANCE SHEETS

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

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

F-3

---



ACL SEMICONDUCTORS AND SUBSDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS

|                                                       |  |              |             |      |   |             |   |   |             |  
|------------------------------------------------------ |  | ------------ | ----------- | ---- | - | ----------- | - | - | ----------- | -
|                                                       |  | December 31, |            
|                                                       |  | 2008         |             | 2007 |   | 2006        |  
|                                                       |  |              |             |      |   |             |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|Net sales:                                             |  |              |             |      |   |             |   |   |             |  
|Related parties                                        |  | $            | 9,076,034   |      | $ | 17,165,728  |   | $ | 19,707,023  |  
|Other                                                  |  |              | 197,020,614 |      |   | 143,321,689 |   |   | 85,976,817  |  
|Less discounts to customers                            |  |              | (13,878     | )    |   | (82,493     | ) |   | (41,717     | )
|                                                       |  |              |             |      |   |             |   |   |             |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|                                                       |  |              | 206,082,770 |      |   | 160,404,924 |   |   | 105,642,123 |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|Cost of sales                                          |  |              | 201,880,793 |      |   | 156,533,635 |   |   | 101,544,098 |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|Gross profit                                           |  |              | 4,201,977   |      |   | 3,871,289   |   |   | 4,098,025   |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|Operating expenses:                                    |  |              |             |      |   |             |   |   |             |  
|Selling                                                |  |              | 76,072      |      |   | 69,260      |   |   | 791,367     |  
|General and administrative                             |  |              | 3,216,132   |      |   | 2,942,542   |   |   | 2,272,057   |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|Income from operations                                 |  |              | 909,773     |      |   | 859,487     |   |   | 1,034,601   |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|Other income (expenses):                               |  |              |             |      |   |             |   |   |             |  
|Rental income                                          |  |              | 89,231      |      |   | 37,179      |   |   | -           |  
|Interest expense                                       |  |              | (1,073,795  | )    |   | (1,009,006  | ) |   | (688,693    | )
|Provision for taxation written back                    |  |              | -           |      |   | -           |   |   | 150,000     |  
|Loss on disposal of marketable securities              |  |              | (227,781    | )    |   | -           |   |   | -           |  
|Unrealized gain on marketable securities               |  |              | -           |      |   | 404,780     |   |   | -           |  
|Unrealized loss on revaluation of properties           |  |              | (883,117    | )    |   | -           |   |   | -           |  
|Miscellaneous                                          |  |              | 229,779     |      |   | 331,485     |   |   | 117,911     |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|(Loss) income before income taxes                      |  |              | (955,910    | )    |   | 623,925     |   |   | 613,819     |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|Income taxes (refund) paid                             |  |              | (33,871     | )    |   | 187,833     |   |   | 163,415     |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|Net (loss) income                                      |  | $            | (922,039    | )    | $ | 436,092     |   | $ | 450,404     |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|(Loss) earnings per share - basic and diluted          |  | $            | (0.03       | )    | $ | 0.02        |   | $ | 0.02        |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|                                                       |  |              |             |      |   |             |   |   |             |  
|Weighted average number of shares - basic and
 diluted |  |              | 28,329,936  |      |   | 28,329,936  |   |   | 28,153,224  |  
|                                                       |  |              |             |      |   |             |   |   |             |  

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

F-4

---



ACL SEMICONDUCTORS AND SUBSDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|--------------------------------------------------------- |  | ------------ | ---------- | ------ |  | - | ---------------------------- |  | -------------------------------------- | -------------------- | --------- | --------------------------------------- |  | - | --------- | - |  | - | ---------- | - |  | - | --------- | -
|                                                          |  |              |            |        |  |   |                              |  | Due
 (from)/to
 stockholder/
 Director |                      |           |                                         |  |  
|                                                          |  |              |            |        |  |   | Additional
 paid-in
 capital |  |                                        | Accumulated
 deficit |           | Total
 stockholders
 Equity
 (deficit) | 
|                                                          |  | Common stock |            |        |  |   |                             
|                                                          |  |              |            |        |  |   |                             
|                                                          |  | Shares       |            | Amount |  |   |                              |  |                                       
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         | 
|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 issued
 to consultant |  |              | 500,000    |        |  |   | 500                          |  |                                        |                      | 104,500   |                                         |  |   | -         |   |  |   | -          |   |  |   | 105,000   |  
|Issuance of common stock for option issued
 to employees  |  |              | -          |        |  |   | -                            |  |                                        |                      | 128,122   |                                         |  |   | -         |   |  |   | -          |   |  |   | 128,122   |  
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|Net increase in due (from)/to                             |  |              | -          |        |  |   | -                            |  |                                        |                      | -         |                                         |  |   | 1,016,399 |   |  |   | -          |   |  |   | 1,016,399 |  
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|Net income                                                |  |              | -          |        |  |   | -                            |  |                                        |                      | -         |                                         |  |   | -         |   |  |   | 450,404    |   |  |   | 450,404   |  
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|Balance at December 31, 2006                              |  |              | 28,329,936 |        |  |   | 28,330                       |  |                                        |                      | 3,593,027 |                                         |  |   | 913,463   |   |  |   | (2,074,269 | ) |  |   | 2,460,551 |  
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|Net increase in due (from)/to                             |  |              | -          |        |  |   | -                            |  |                                        |                      | -         |                                         |  |   | (989,461  | ) |  |   | -          |   |  |   | (989,461  | )
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|Net income                                                |  |              | -          |        |  |   | -                            |  |                                        |                      | -         |                                         |  |   | -         |   |  |   | 436,092    |   |  |   | 436,092   |  
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|Balance at December 31, 2007                              |  |              | 28,329,936 |        |  |   | 28,330                       |  |                                        |                      | 3,593,027 |                                         |  |   | (75,998   | ) |  |   | (1,638,177 | ) |  |   | 1,907,182 |  
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|Net increase in due (from)/to                             |  |              | -          |        |  |   | -                            |  |                                        |                      | -         |                                         |  |   | 36,365    |   |  |   | -          |   |  |   | 36,365    |  
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|Net loss                                                  |  |              | -          |        |  |   | -                            |  |                                        |                      | -         |                                         |  |   | -         |   |  |   | (922,039   | ) |  |   | (922,039  | )
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  
|Balance at December 31, 2008                              |  |              | 28,329,936 |        |  | $ | 28,330                       |  |                                        | $                    | 3,593,027 |                                         |  | $ | (39,633   | ) |  | $ | (2,560,216 | ) |  | $ | 1,021,508 |  
|                                                          |  |              |            |        |  |   |                              |  |                                        |                      |           |                                         |  |   |           |   |  |   |            |   |  |   |           |  

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

F-5

---



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

|                                                                                              |                                                                                        |                          |          |            |   |      |         |            |   |   |         |            |  
|--------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | ------------------------ | -------- | ---------- | - | ---- | ------- | ---------- | - | - | ------- | ---------- | -
|                                                                                              |                                                                                        | Years ended December 31, |         
|                                                                                              |                                                                                        |                          |         
|                                                                                              |                                                                                        | 2008                     |          | 2007       |   | 2006 |        
|                                                                                              |                                                                                        |                          |          |            |   |      |        
|Cash flows provided by (used for) operating
 activities:                                      |                                                                                        |                          |          |            |   |      |         |            |   |   |         |           
|Net (loss) income                                                                             |                                                                                        | $                        | (922,039 | )          |   | $    | 436,092 |            |   | $ | 450,404 |           
|                                                                                              |                                                                                        |                          |          |            |   |      |         |            |   |   |         |           
|                                                                                              |                                                                                        |                          |          |            |   |      |         |            |   |   |         |           
|Adjustments to reconcile net income to net cash
 provided by (used for) operating activities: |                                                                                        |                          |          |            |   |      |         |            |   |   |         |           
|                                                                                              | Depreciation
 and amortization                                                         |                          |          | 238,477    |   |      |         | 230,614    |   |   |         | 78,074     |  
|                                                                                              | Change
 in inventory reserve                                                           |                          |          | (190,000   | ) |      |         | 323,077    |   |   |         | 100,000    |  
|                                                                                              | Gain
 on disposal of equipment                                                         |                          |          | -          |   |      |         | (218       | ) |   |         | -          |  
|                                                                                              | Loss
 (Gain) on disposal of marketable securities                                      |                          |          | 227,782    |   |      |         | (404,780   | ) |   |         | -          |  
|                                                                                              | Fair value of options issued to employees                                              |                          |          | -          |   |      |         | -          |   |   |         | 128,122    |  
|                                                                                              | Issuance of common stocks to consultant as
professional fee under share
 option scheme |                          |          | -          |   |      |         | -          |   |   |         | 105,000    |  
|                                                                                              | Loss on revaluation of properties                                                      |                          |          | 883,116    |   |      |         | -          |   |   |         | -          |  
|Changes in assets and liabilities:                                                            |                                                                                        |                          |          |            |   |      |         |            |   |   |         |           
|(Increase) decrease in assets                                                                 |                                                                                        |                          |          |            |   |      |         |            |   |   |         |           
|                                                                                              | Accounts receivable  other                                                            |                          |          | (2,635,680 | ) |      |         | (5,586,310 | ) |   |         | (1,492,917 | )
|                                                                                              | Accounts receivable - related parties                                                  |                          |          | (456,965   | ) |      |         | (583,297   | ) |   |         | (5,196,730 | )
|                                                                                              | Inventories                                                                            |                          |          | 1,613,799  |   |      |         | (553,816   | ) |   |         | (2,265,503 | )
|                                                                                              | Refundable deposits                                                                    |                          |          | -          |   |      |         | -          |   |   |         | 1,000,000  |  
|                                                                                              | Income tax refundable                                                                  |                          |          | 49,375     |   |      |         | (49,375    | ) |   |         | -          |  
|                                                                                              | Other current assets                                                                   |                          |          | 53,010     |   |      |         | (42,124    | ) |   |         | 222,363    |  
|                                                                                              | Other assets                                                                           |                          |          | (4,824     | ) |      |         | (6,207     | ) |   |         | 6          |  
|Increase (decrease) in liabilities                                                            |                                                                                        |                          |          |            |   |      |         |            |   |   |         |           
|                                                                                              | Accounts payable                                                                       |                          |          | 1,077,094  |   |      |         | 7,582,962  |   |   |         | 513,904    |  
|                                                                                              | Accrued expenses                                                                       |                          |          | 210,017    |   |      |         | (127,486   | ) |   |         | 41,442     |  
|                                                                                              | Payable related to debt settlement                                                     |                          |          | -          |   |      |         | -          |   |   |         | (76,088    | )
|                                                                                              | Income tax payable                                                                     |                          |          | 5,588      |   |      |         | (74,839    | ) |   |         | (142,614   | )
|                                                                                              | Other current liabilities                                                              |                          |          | 32,503     |   |      |         | (25,044    | ) |   |         | 238,598    |  
|                                                                                              | Deferred tax                                                                           |                          |          | (7,128     | ) |      |         | 6,658      |   |   |         | 8,813      |  
|                                                                                              |                                                                                        |                          |          |            |   |      |         |            |   |   |         |            |  
|                                                                                              | Total adjustments                                                                      |                          |          | 1,096,164  |   |      |         | 689,815    |   |   |         | (6,737,530 | )
|                                                                                              |                                                                                        |                          |          |            |   |      |         |            |   |   |         |            |  
|                                                                                              |                                                                                        |                          |          |            |   |      |         |            |   |   |         |            |  
|                                                                                              | Net cash provided by (used for) operating
activities                                   |                          |          | 174,125    |   |      |         | 1,125,907  |   |   |         | (6,287,126 | )
|                                                                                              |                                                                                        |                          |          |            |   |      |         |            |   |   |         |            |  

F-6

---



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

|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|----------------------------------------------------- | --------------------------------------------------------------------------------------- | - | ------------------------ | -------- | ---- | - | --------- | ---------- | - | - | ---------- | ---------- | -
|                                                      |                                                                                         |   | Years ended December 31,
|                                                      |                                                                                         |   |                         
|                                                      |                                                                                         |   | 2008                     |          | 2007 |   | 2006     
|                                                      |                                                                                         |   |                          |          |      |   |          
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|Cash flows used for investing activities:             |                                                                                         |   |                          |          |      |   |           |            |   |   |            |           
|                                                      | Advanced (to) from stockholders                                                         |   |                          | 36,365   |      |   |           | (989,461   | ) |   |            | 1,016,399  |  
|                                                      | Increase in restricted cash                                                             |   |                          | (966,696 | )    |   |           | (1,494,480 | ) |   |            | (1,939,346 | )
|                                                      | Increase in restricted marketable
 securities                                           |   |                          | (500,000 | )    |   |           | (769,231   | ) |   |            | -          |  
|                                                      | Cash Proceeds from sales of marketable
 securities and restricted marketable securities |   |                          | 946,229  |      |   |           | -          |   |   |            | -          |  
|                                                      | Cash Proceeds from sales of equipment                                                   |   |                          | -        |      |   |           | 385        |   |   |            | -          |  
|                                                      | Purchases of property, equipment and
 improvements                                      |   |                          | (132,513 | )    |   |           | (3,159,760 | ) |   |            | (3,833,649 | )
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|                                                      | Net cash used for investing activities                                                  |   |                          | (616,615 | )    |   |           | (6,412,547 | ) |   |            | (4,756,596 | )
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|Cash flows provided by financing
 activities:         |                                                                                         |   |                          |          |      |   |           |            |   |   |            |           
|                                                      | Net borrowings on lines of credit and notes
 payable                                    |   |                          | 837,254  |      |   |           | 4,772,021  |   |   |            | 7,996,182  |  
|                                                      | Net borrowing under long-term debt                                                      |   |                          | (152,321 | )    |   |           | 710,098    |   |   |            | 1,964,381  |  
|                                                      | Principal payments under capital lease
 obligation                                      |   |                          | (55,762  | )    |   |           | (45,291    | ) |   |            | (7,154     | )
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|                                                      | Net cash provided by financing activities                                               |   |                          | 629,171  |      |   |           | 5,436,828  |   |   |            | 9,953,409  |  
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|Net increase (decrease) in cash and cash
 equivalents |                                                                                         |   | 186,681                  |          |      |   | 150,188   |            |   |   | (1,090,313 | )         
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|Cash and cash equivalents,beginning
 of year          |                                                                                         |   | 1,597,674                |          |      |   | 1,447,486 |            |   |   | 2,537,799  |           
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |           
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |            |  
|Cash and cash equivalents,end
 of year                |                                                                                         | $ | 1,784,355                |          |      | $ | 1,597,674 |            |   | $ | 1,447,486  |           
|                                                      |                                                                                         |   |                          |          |      |   |           |            |   |   |            |           

F-7

---



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

|                                                                                         |  |                          |           |  |      |   |           |      |  |   |         | 
|---------------------------------------------------------------------------------------- |  | ------------------------ | --------- |  | ---- | - | --------- | ---- |  | - | ------- | 
|                                                                                         |  | Years ended December 31, |          
|                                                                                         |  |                          |          
|                                                                                         |  | 2008                     |           |  | 2007 |   |           | 2006 | 
|                                                                                         |  |                          |           |  |      |   |           |      | 
|                                                                                        
|Supplemental disclosure of cash flow
 information:                                       |  |                          |           |  |      |   |           |      |  |   |         | 
|                                                                                         |  |                          |           |  |      |   |           |      |  |   |         | 
|Interest paid                                                                            |  | $                        | 1,073,795 |  |      | $ | 1,009,006 |      |  | $ | 688,693 | 
|                                                                                         |  |                          |           |  |      |   |           |      |  |   |         | 
|Income tax paid                                                                          |  | $                        | 57,582    |  |      | $ | 305,389   |      |  | $ | 147,217 | 
|                                                                                         |  |                          |           |  |      |   |           |      |  |   |         | 
|Income tax refund                                                                        |  | $                        | 139,289   |  |      | $ | -         |      |  | $ | -       | 
|                                                                                         |  |                          |           |  |      |   |           |      |  |   |         | 
|                                                                                         |  |                          |           |  |      |   |           |      |  |   |         | 
|Supplement schedule of non-cash investing
 and financing activities:                     |  |                          |           |  |      |   |           |      |  |   |         | 
|Capital lease obligations incurred when
 capital leases were entered for new automobiles |  | $                        | 62,538    |  |      | $ | 95,898    |      |  | $ | 51,509  | 
|                                                                                         |  |                          |           |  |      |   |           |      |  |   |         | 

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

F-8

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|    |                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Organization and Summary of Significant Accounting Policies,
 Continued:
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Business Activity:                                                      
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                          | ACL Semiconductors Inc. (Company or ACL) was incorporated in the
 State of Delaware on September 17, 2002. Through a reverse-acquisition of
 Atlantic Components Ltd., a Hong Kong based company, effective September 30,
 2003, the Companys principal activities are distribution of electronic
 components under the Samsung brandname which comprise DRAM and graphic RAM,
 FLASH, SRAM and MASK ROM for the Hong Kong and Southern China markets.
 Atlantic Components Ltd., its wholly owned subsidiary, was incorporated in
 Hong Kong on May 30, 1991 with limited liability. On October 2, 2003, the
 Company set up a wholly-owned subsidiary, Alpha Perform Technology Limited
 (Alpha), a British Virgin Islands company, to provide services on behalf of
 the Company in jurisdictions outside of Hong Kong. Effective January 1, 2004,
 the Company 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, 2008, 2007 and 2006 are translated into HKD according to the
 prevailing exchange rate at the transaction dates. Assets and liabilities
 denominated in foreign currencies at the balance sheet dates are translated
 into HKD at year-end exchange rates.                                                                                                                                                                                                                                                                                                                                              
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                          | For the purpose of preparing these consolidated financial statements,
 the financial statements of Atlantic reported in HKD have been translated
 into United States dollars (USD or US$) at US$1.00=HKD7.8, a fixed
 exchange rate maintained between the two countries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Consolidation Policy:                                                   
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                          | The consolidated financial statements include the financial
 statements of ACL Semiconductors Inc. and its wholly owned subsidiaries,
 Atlantic Components Ltd., and Alpha Perform Technology Limited. All
 significant intercompany accounts and transactions have been eliminated in
 preparation of the consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-10

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

| |                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Revenue Recognition:      
| |                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                            | Product sales are recognized when products are shipped to customers,
 title passes and collection is reasonably assured. Provisions for discounts
 to customers, estimated returns and allowances and other price adjustments
 are provided for in the same periods the related revenue is recorded which
 are deducted from the gross sales.                                                                                                                                                                                                                                                 
| |                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Use of Estimates:         
| |                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                            | The preparation of consolidated financial statements in conformity
 with generally accepted accounting principles requires management to make
 estimates and assumptions that affect the reported amounts of assets and
 liabilities, revenue recognition, allowance for doubtful accounts, long lived
 assets impairment, inventories, and disclosure of contingent assets and
 liabilities, at the date of the consolidated financial statements, as well as
 the reported amounts of revenues and expenses during the reporting periods.
 Actual results could differ from these estimates.
| |                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Cash and Cash Equivalents:
| |                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                            | For purposes of the consolidated statements of cash flows, cash equivalents
 include all highly liquid debt instruments with original maturities of three
 months or less which are not securing any corporate obligations.                                                                                                                                                                                                                                                                                                                                                                   
| |                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 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 SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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,
 2008 and 2007.                                             
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Inventories:                                                            
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                          | Inventories are stated at the lower of cost or market and are
 comprised of purchased computer technology resale products. Cost is
 determined using the first-in, first-out method. The reserve for obsolescence
 was decreased by $190,000 for 2008 and increased by $323,077 for 2007.
 Inventory obsolescence reserves totaled $374,103 and $564,103 as of December
 31, 2008 and 2007, respectively.                                                                                                                  
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Lease assets                                                            
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                          | Leases that substantially transfer all the benefits and risks of
 ownership of assets to the company are accounted for as capital leases. At
 the inception of a capital lease, the asset is recorded together with its
 long term obligation (excluding interest element) to reflect the purchase and
 the financing.                                                                                                                                                                                                     
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                          | Leases which do not transfer substantially all the risks and rewards
 of ownership to the company are classified as operating leases. Payments made
 under operating leases are charged to income statement in equal instalments
 over the accounting periods covered by the lease term. Lease incentives
 received are recognized in income statement as an integral part of the
 aggregate net lease payments made. Contingent rentals are charged to income
 statement in the accounting period which they are incurred.
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Property, Equipment and Improvements:                                   
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                          | Property and equipment are valued at cost. Depreciation and
 amortization are provided over the estimated useful lives of three to five
 years using the straight-line method. Leasehold improvements are amortized on
 a straight-line basis over the shorter of the economic lives or the lease
 terms.                                                                                                                                                                                                                  
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                          | The estimated service lives of property, equipment and improvements
 are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                       

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

F-12

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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. According to
 the year end valuation report, the Company determined that there was a loss
 due to revaluation of its real property assets of $883,116 and $0 as of
 December 31, 2008 and 2007.
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Advertising:                                                            
|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                          | The Company expenses advertising costs when incurred. Advertising
 expense totaled $5,618, $7,060 and $7,617 for the years ended December 31,
 2008, 2007, and 2006, 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 SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|    |                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2008, 2007, and
 2006, 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 and 2007
 consolidated financial statements to conform to the 2008 presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F-14

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Organization and Summary of Significant Accounting Policies,
 Continued:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | New Accounting Pronouncements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | In
 February 2008, the FASB issued FSP FIN 48-2, Effective Date of FASB
 Interpretation No. 48 for Certain Nonpublic Enterprises. This FASB Staff
 Position (FSP) defers the effective date of FASB Interpretation No. 48,
 Accounting for Uncertainty in Income Taxes, for certain nonpublic
 enterprises as defined in paragraph 289, as amended, of FASB Statement No.
 109, Accounting for Income 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | In April
 2008, the FASB issued FSP SOP 90-7-1, An Amendment of AICPA Statement of
 Position 90-7. This FSP resolves the conflict between the guidance requiring
 early adoption of new accounting standards for entities required to follow
 fresh-start reporting under AICPA Statement of Position 90-7, Financial
 Reporting by Entities in Reorganization Under the Bankruptcy Code, and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-15

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | other authoritative accounting standards that expressly prohibit
 early adoption. This FSP shall be effective for financial statements issued
 subsequent to the date of issuance of this FSP. The Company does not
 anticipate that this new FSP will have any material impact upon its
 preparation of its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | In April
 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of
 Intangible Assets. This FSP amends the factors that should be considered in
 developing renewal or extension assumptions used to determine the useful life
 of a recognized intangible asset under FASB Statement No. 142, Goodwill and
 Other Intangible Assets. The intent of this FSP is to improve the
 consistency between the useful life of a recognized intangible asset under
 Statement 142 and the period of expected cash flows used to measure the fair
 value of the asset under FASB Statement No. 141 (revised 2007), Business
 Combinations, and other U.S. generally accepted accounting principles
 (GAAP). This FSP shall be effective for financial statements issued for
 fiscal years beginning after December 15, 2008, and interim periods within
 those fiscal years. Early adoption is prohibited. The Company does not
 anticipate that this new FSP will have any material impact upon its
 preparation of its financial statements.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | In May
 2008, the FASB issued Statement of Financial Accounting Standards No. 162,
 The Hierarchy of Generally Accepted Accounting Principles (SFAS No.162).
 SFAS No. 162 identifies the sources of accounting principles and the
 framework for selecting the principles used in the preparation of financial
 statements of nongovernmental entities that are presented in conformity with
 generally accepted accounting principles (GAAP) in the United States (the
 GAAP hierarchy). This Statement shall be effective 60 days following the
 SECs approval of the Public Company Accounting Oversight Board (PCAOB)
 amendments to AU Section 411, The Meaning of Present Fairly in Conformity
 With General Accepted Accounting Principles. The Company does not anticipate
 that SFAS No. 162 will have any material impact upon its preparation of its
 financial statements.                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | In May
 2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt
 Instruments That May Be Settled in Cash upon Conversion (Including Partial
 Cash Settlement). This FSP clarifies that convertible debt instruments that
 may be settled in cash upon conversion (including partial cash settlement)
 are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for
 Convertible Debt and Debt issued with Stock Purchase Warrants. Additionally,
 this FSP specifies that issuers of such instruments should separately account
 for the liability and equity components in a manner that will reflect the
 entitys nonconvertible debt borrowing rate when interest cost is recognized
 in subsequent periods. This FSP is effective for financial statements issued
 for fiscal years beginning after December 15, 2008, and interim periods
 within those fiscal years. The Company does not anticipate that this new FSP
 will have any material impact upon its financial condition or results of
 operations.            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | In May
 2008, the FASB issued Statement of Financial Accounting Standards No. 163,
 Accounting for Financial Guarantee Insurance Contractsan interpretation of
 FASB Statement No. 60 (SFAS No.163). SFAS No. 163 requires that an
 insurance enterprise recognize a claim liability prior to an event of default
 (insured event) when there is evidence that credit deterioration has occurred
 in an insured financial obligation. SFAS No. 163 also clarifies how Statement
 60 applies to financial guarantee insurance contracts, including the
 recognition and measurement to be used to account for premium revenue and
 claim liabilities. SFAS No. 163 is effective for financial statements issued
 for fiscal years beginning after December 15, 2008, and all interim periods
 within those fiscal years, except for some                                                                                                                                                                                                               

F-16

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | disclosures
 about the insurance enterprises risk-management activities. The Company does
 not anticipate that SFAS No. 163 will have any material impact upon its
 preparation of its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | In May
 2008, the FASB issued FSP SOP 94-3-1 and AAG HCO-1, Omnibus Changes to
 Consolidation and Equity Method Guidance for Not-for-Profit Organizations.
 This FSP makes several changes to the guidance on consolidation and the
 equity method of accounting in AICPA Statement of Position 94-3, Reporting
 of Related Entities by Not-for-Profit Organizations, and the AICPA Audit and
 Accounting Guide, Health Care Organizations. The guidance in this FSP shall
 be applied to fiscal years beginning after June 15, 2008, and to interim
 periods therein. The Company does not anticipate that this FSP will have any
 material impact upon its preparation of its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | In June
 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
 Granted in Share-Based Payment Transactions Are Participating Securities.
 The guidance in this FSP applies to the calculation of EPS under Statement
 128 for share-based payment awards with rights to dividends or dividend
 equivalents. Unvested share-based payment awards that contain nonforfeitable rights
 to dividends or dividend equivalents (whether paid or unpaid) are
 participating securities and shall be included in the computation of EPS
 pursuant to the two-class method. This FSP shall be effective for financial
 statements issued for fiscal years beginning after December 15, 2008, and
 interim periods within those years. Early application is not permitted. The
 Company does not anticipate that this FSP will have any material impact upon
 its preparation of its financial statements. In December 2008, the FASB
 issued FSP FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities
 (Enterprises) about Transfers of Financial Assets and Interests in Variable
 Interest Entities. This FSP amends FASB Statement No. 140, Accounting for
 Transfers and Servicing of Financial Assets and Extinguishments of
 Liabilities, to require public entities to provide additional disclosures
 about transfer of financial assets. It also amends FASB Interpretation No. 46
 (revised December 2003), Consolidation of Variable Interest Entities, to
 require public enterprises, including sponsors that have a variable interest
 in a variable interest entity, to provide additional disclosures about their
 involvement with variable interest entities. This FSP will be applied to the
 first reporting period (interim or annual) ending after December 15, 2008.
 The Company does not anticipate that this FSP will have any material impact
 upon its preparation of its financial statements.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | In August
 2008, the FASB issued FSP FSA 117-1, Endowments of Not-for Profit
 Organizations: Net Asset Classification of Funds Subject to an Enacted
 Version of the Uniform Prudent Management of Institutional Funds Act and
 Enhanced Disclosures for All Endowment Funds. This FSP provides guidance on
 the net asset classification of donor-restricted endowment funds for a
 not-for-profit organization that is subject to an enacted version of the
 Uniform Prudent Management of Institutional Funds Act of 2006. This FSP will
 be effective for fiscal years ending after December 15, 2008. The Company
 does not anticipate that this FSP will have any material impact upon its
 preparation of its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | In
 September 2008, the FASB issued FSP FAS 133-1 and FIN 45-4, Disclosures
 about Credit Derivatives and Certain Guarantees: An Amendment of FASB
 Statement No. 133 and FASB Interpretation No. 45; and Clarification of the
 Effective Date of FASB Statement No. 161. This FSP applies to credit
 derivatives within the scope of Statement 133, hybrid instruments that have
 embedded                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

F-17

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | credit
 derivatives, and guarantees within the scope of Interpretation 45. This FSP
 shall be effective for reporting periods (annual or interim) ending after
 November 15, 2008. The Company does not anticipate that this FSP will have
 any material impact upon its preparation of its financial statements.                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | In
 December 2008, the FASB issued FSP FAS 132 (R)-1, Employers Disclosures
 about Postretirement Benefit Plan Assets. This FSP amends FASB Statement No.
 132 (revised 2003), Employers Disclosures about Pensions and Other
 Postretirement Benefits, to provide guidance on an employers disclosures
 about plan assets of a defined benefit pension or other postretirement plan.
 This FSP shall be applied to fiscal years ending after December 15, 2009. The
 Company does not anticipate that this FSP will have any material impact upon its
 preparation of its financial statements.                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | In
 December 2008, the FASB issued FSP FIN 48-3, Effective Date of FASB
 Interpretation No. 48 for Certain Nonpublic Enterprises. This FSP defers the
 effective date of FASB Interpretation No. 48, Accounting for Uncertainty in
 Income Taxes, for certain nonpublic enterprises as defined in paragraph 289,
 as amended, of FASB Statement No. 109, Accounting for Income Taxes,
 including nonpublic not-for-profit organizations. This FSP will be effective
 upon issuance. The Company does not anticipate that this FSP will have any
 material impact upon its preparation of its financial statements.

(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 on May 10, 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.

F-18

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|                                                                                                            |  |                          |            |              |   |                      |   |   |          |  
|----------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ------------ | - | -------------------- | - | - | -------- | -
|                                                                                                            |  | As
 Originally
 Reported |            | As
 Adjusted |   | Effect
 of
 Omission |  
|                                                                                                            |  |                          |            |              |   |                      |  
|Consolidated
 Statement of Operations
 for the year ended December 31, 2006                                 |  |                          |            |              |   |                      |   |   |          |  
|                                                                                                            |  |                          |            |              |   |                      |   |   |          |  
|General and administrative expenses                                                                         |  | $                        | 2,167,057  |              | $ | 2,272,057            |   | $ | 105,000  |  
|                                                                                                           
|Income 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 |              |   | 28,153,224           |   |   | 324,068  |  
|                                                                                                            |  |                          |            |              |   |                      |   |   |          |  
|                                                                                                            |  |                          |            |              |   |                      |   |   |          |  
|Consolidated
 Balance Sheet as of December 31, 2006                                                         |  |                          |            |              |   |                      |   |   |          |  
|                                                                                                            |  |                          |            |              |   |                      |   |   |          |  
|Common Stock                                                                                                |  | $                        | 27,830     |              | $ | 28,330               |   | $ | 500      |  
|                                                                                                           
|Additional paid in capital                                                                                  |  |                          | 3,488,527  |              |   | 3,593,027            |   |   | 104,500  |  
|                                                                                                           
|Accumulated deficit                                                                                         |  |                          | (1,969,269 | )            |   | (2,074,269           | ) |   | (105,000 | )
|                                                                                                           
|Total stockholders equity                                                                                  |  |                          | 2,460,551  |              |   | 2,460,551            |   |   | -        |  
|                                                                                                            |  |                          |            |              |   |                      |   |   |          |  
|                                                                                                            |  |                          |            |              |   |                      |   |   |          |  
|Consolidated
 Statement of Cash Flows
 For the year ended December 31, 2006                                 |  |                          |            |              |   |                      |   |   |          |  
|                                                                                                            |  |                          |            |              |   |                      |   |   |          |  
|Cash
 flows provided by/(used for) operating activities:                                                    |  |                          |            |              |   |                      |   |   |          |  
|                                                                                                            |  |                          |            |              |   |                      |   |   |          |  
|Net income                                                                                                  |  | $                        | 555,404    |              | $ | 450,404              |   | $ | (105,000 | )
|                                                                                                           
|Adjustments to reconcile net income to net cash
 provided by/(used for) operating activities:               |  |                          |            |              |   |                      |   |   |          |  
|                                                                                                           
|Issuance of common stocks to a consultant as consulting and advisory
 service fee under share option scheme |  |                          | -          |              |   | 105,000              |   |   | 105,000  |  
|                                                                                                           
|Total Adjustments to
 reconcile net income to net cash provided by/(used for) operating activities          |  |                          | (6,842,530 | )            |   | (6,737,530           | ) |   | 105,000  |  
|                                                                                                           
|Net cash provided by/(used for) operating
activities                                                        |  |                          | (6,287,126 | )            |   | (6,287,126           | ) |   | -        |  
|                                                                                                            |  |                          |            |              |   |                      |   |   |          |  

F-19

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(2)     Prior Year Adjustments, Continued:

|                                                                                           |  |                          |           |              |   |                      |  |   |         | 
|------------------------------------------------------------------------------------------ |  | ------------------------ | --------- | ------------ | - | -------------------- |  | - | ------- | 
|                                                                                           |  | As
 Originally
 Reported |           | As
 Adjusted |   | Effect
 of
 Omission | 
|                                                                                           |  |                          |           |              |   |                      | 
|Consolidated
 Statement of Stockholders Equity
 for the year ended December 31, 2006      |  |                          |           |              |   |                      |  |   |         | 
|                                                                                           |  |                          |           |              |   |                      |  |   |         | 
|Common
 stock:                                                                             |  |                          |           |              |   |                      |  |   |         | 
|                                                                                           |  |                          |           |              |   |                      |  |   |         | 
|Balance at December 31,
 2005 (27,829,936 shares)                                          |  | $                        | 27,830    |              | $ | 27,830               |  | $ | -       | 
|Issuance of common stock to a consultant as consulting and servicing
 fee (500,000 shares) |  |                          | -         |              |   | 500                  |  |   | 500     | 
|                                                                                           |  |                          |           |              |   |                      |  |   |         | 
|                                                                                           |  |                          |           |              |   |                      |  |   |         | 
|Balance at December 31, 2006 (28,329,936 shares)                                           |  | $                        | 27,830    |              | $ | 28,330               |  | $ | 500     | 
|                                                                                           |  |                          |           |              |   |                      |  |   |         | 
|                                                                                           |  |                          |           |              |   |                      |  |   |         | 
|Additional paid-in capital:                                                                |  |                          |           |              |   |                      |  |   |         | 
|                                                                                           |  |                          |           |              |   |                      |  |   |         | 
|Balance at December 31, 2005                                                               |  | $                        | 3,360,405 |              | $ | 3,360,405            |  | $ | -       | 
|Issuance of common stock to a consultant as consulting and servicing
 fee                  |  |                          | -         |              |   | 104,500              |  |   | 104,500 | 
|                                                                                           |  |                          |           |              |   |                      |  |   |         | 
|Issuance 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 SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007 AND
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

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

F-21

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(3)     Property, Equipment and Improvements:

A summary is as follows:

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

Depreciation
and amortization expense for property, equipment, and improvements amounted to
$238,477, $230,614, and $78,074, for the years ended December 31, 2008, 2007
and 2006, respectively.

F-22

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Revolving Lines of Credit and Loan Facilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company has available to it a $5,128,205 revolving line of credit
 with DBS Bank (Hong Kong) Limited with an outstanding balance of $4,722,616
 at December 31, 2008 and $5,635,176 at December 31, 2007. The line of credit
 bears interest at the banks standard bills rate less 1.25% for HKD
 borrowings and at the banks standard bills rate less 0.75% for other
 currency borrowings as of December 31, 2008. The weighted average interest
 rate approximated 4.4% for 2008 and 6.7% for 2007.                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company has available to it a $5,769,231 factoring facility with
 recourse with DBS Bank without any outstanding balance at December 31, 2008.
 The factoring facility bears a discounting charge at the banks standard
 bills rate less 1.25% for advance in HKD or the banks standard bills rate
 less 0.75% for advance in other currency as of December 31, 2008. The
 weighted average interest rate approximated 4.4% for 2008 and 6.7% for 2007.                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company has available to it a $384,615 letter of guarantee with
 DBS Bank with an outstanding balance of $384,615 at December 31, 2008 and the
 letter of guarantee will expire on October 31, 2009. The line of credit bears
 a commission of 1.5% per annum which will be refunded on pro-rata basis upon
 return and cancellation of the letter of guarantee.                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company has available to it a $6,410,256 revolving line of credit
 with Standard Chartered Bank (Hong Kong) Limited with an outstanding balance
 of $5,742,934 at December 31, 2008 and $3,709,379 at December 31, 2007. The
 line of credit bears interest at a rate of the banks standard bills rate
 less 0.5% for HKD facilities and at a rate of the banks standard bills rate
 plus 1% for other foreign currency facilities as of December 31, 2008. The
 weighted average interest rate approximated 5.1% for 2008 and 7.4% for 2007.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company has available to it $5,128,205 factoring facility with
 SCB with an outstanding balance of $1,753,562 at December 31, 2008. The
 factoring facility bears discounting charges at the banks standard bills
 rate less 0.75% rate for advances in HKD or the banks standard bills rates
 less 0.75% for advances in other currency as of December 31, 2008. The
 weighted average interest rate approximated 4.9% for 2008 and 7.2% for 2007.                                                                                          

F-23

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 $2,060,747
 at December 31, 2008 and $2,303,868 at December 31, 2007. The line of credit
 bears interest at the higher of Hong Kong prime rate plus 0.25% or HIBOR plus
 1% for HKD facilities and LIBOR plus 2% for other currency facilities as of
 December 31, 2008. The weighted average interest rate approximated 5.9% for
 2008 and 7.9% for 2007.            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company has available to it a $1,153,846 revolving line of credit
 with Citic Ka Wah Bank Limited with an outstanding balance of $1,014,883 at
 December 31, 2008 and $2,297,061 at December 31, 2007. The line of credit
 bears interest at the higher of the Hong Kong prime rate less 1.5% or HIBOR
 plus 2% as of December 31, 2008. The weighted average interest rate
 approximated 4.1% for 2008 and 7.4% for 2007.                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The line of credit granted by Hang Seng Bank Limited to the Company
 matured on September 19, 2008. The outstanding balances with Hang Seng Bank
 Limited were $0 at December 31, 2008 and $1,665,003 at December 31, 2007. The
 line of credit bore interest at a rate of the Hong Kong prime rate less 0.5%
 for HKD facilities and at a rate of the banks board rate less 0.25% for USD
 facilities as of December 31, 2007. The weighted average interest rate
 approximated 5% for 2008 and 7.4% for 2007.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company has available to it a $1,602,564 revolving line of credit
 with the Industrial and Commercial Bank of China (Asia) Limited with and
 outstanding balance of $1,153,000. The line of credit bears interest at the
 higher of the Hong Kong prime rate less 0.5% or HIBOR plus 3% for HKD
 facilities and a rate of the banks board rate less 0.5% for foreign currency
 facilities as of December 31, 2008. The weighted average interest rate
 approximated 5.1% for 2008.                         

F-24

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|    |                                            
|--- | -------------------------------------------
|(5) | Long-Term Debt:                            
|    |                                            
|    | A summary is
 as follows as of December 31:

|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | 
|                                                                                                                                                                                                                        |  | 2008 |           | 2007 |  
|                                                                                                                                                                                                                        |  |      |           |      |  
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|Installment
 loan carrying an interest rate of 2.75% below the Hong Kong dollar Prime Rate
 (5.5% at December 31, 2008) to DBS Bank payable in monthly installments of
 $9,663 including interest through December 2008 |  | $    | 1,648,222 |      | $ | 1,719,704 | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|Installment
 loan carrying an interest rate of 2% below the Hong Kong dollar Prime Rate
 (5.5% at December 31, 2008) to DBS Bank payable in monthly installments of
 $3,782 including interest through December 2008    |  |      | 112,312   |      |   | 153,052   | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|Installment
 loan carrying an interest rate of 2.5% below the Hong Kong dollar Prime Rate
 (5.5% at December 31, 2008) to DBS Bank payable in monthly installments of
 $5,240 including interest through December 2008  |  |      | 761,624   |      |   | 801,723   | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|                                                                                                                                                                                                                        |  |      | 2,522,158 |      |   | 2,674,479 | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|Less:
 current maturities                                                                                                                                                                                               |  |      | 160,447   |      |   | 135,237   | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|                                                                                                                                                                                                                        |  | $    | 2,361,711 |      | $ | 2,539,242 | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|An analysis
 of long-term debt as of December 31 is as follows:                                                                                                                                                         |  |      |           |      |   |           | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|Current
 portion                                                                                                                                                                                                        |  | $    | 160,447   |      | $ | 135,237   | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|After 1
 year, but within 2 years                                                                                                                                                                                       |  |      | 316,063   |      |   | 290,618   | 
|After 2
 years, but within 5 years                                                                                                                                                                                      |  |      | 257,789   |      |   | 247,571   | 
|After 5
 years                                                                                                                                                                                                          |  |      | 1,787,859 |      |   | 2,001,053 | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|                                                                                                                                                                                                                        |  |      | 2,361,711 |      |   | 2,539,242 | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 
|                                                                                                                                                                                                                        |  | $    | 2,522,158 |      | $ | 2,674,479 | 
|                                                                                                                                                                                                                        |  |      |           |      |   |           | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | With respect
 to all of the above referenced debt and credit arrangements in Note 4, the
 Company pledged its assets as collateral collectively to a bank group in Hong
 Kong comprised of DBS Bank (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 Industrial and Commercial Bank of China
 (Asia) 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:

F-25

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

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

|                     |  |      |         |      |   |        | 
|-------------------- |  | ---- | ------- | ---- | - | ------ | 
|                     |  | 2008 |         | 2007 |  
|                     |  |      |         |      |  
|                     |  |      |         |      |  
|Current
 portion     |  | $    | 58,683  |      | $ | 44,991 | 
|                    
|Non-current
 portion |  |      | 43,055  |      |   | 49,971 | 
|                     |  |      |         |      |   |        | 
|                     |  |      |         |      |   |        | 
|                     |  |      | 101,738 |      |   | 94,962 | 
|                     |  |      |         |      |   |        | 

At December
31, the value of motor vehicles under capital leases as follows:

|                    |  |      |         |      |   |        | 
|------------------- |  | ---- | ------- | ---- | - | ------ | 
|                    |  | 2008 |         | 2007 |  
|                    |  |      |         |      |  
|                    |  |      |         |      |  
|Cost                |  | $    | 193,514 |      | $ | 46,154 | 
|                   
|Less:
 depreciation |  |      | 51,463  |      |   | 6,923  | 
|                    |  |      |         |      |   |        | 
|                    |  |      |         |      |   |        | 
|                    |  |      | 142,051 |      |   | 39,231 | 
|                    |  |      |         |      |   |        | 

F-26

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Capital Lease Obligations, Continued:                                                  
| |                                                                                        
| | At December
 31, the company had obligations under capital leases repayable as follows:

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

|    |                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(7) | Income Taxes:                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                              
|    | Income tax
 (refund) expense amounted to $(33,871) for 2008, $187,833 for 2007 and
 $163,415 for 2006 (an effective rate of 0% for 2008, 30% for 2007, and 23%
 for 2006). A reconciliation of the provision for income taxes with amounts
 determined by applying the statutory federal income tax rate of 34% to income
 before income taxes is as follows:
|    |                                                                                                                                                                                                                                                                                                                                                              

| |                                                                                                                |  |      |          |      |   |         |   |   |          |  
| | -------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | ---- | - | ------- | - | - | -------- | -
| |                                                                                                                |  | 2008 |          | 2007 |   | 2006    |  
| |                                                                                                                |  |      |          |      |   |         |  
| | Computed tax at federal statutory rate                                                                         |  | $    | (325,009 | )    | $ | 212,135 |   | $ | 244,398  |  
|
| | Tax rate differential on foreign earnings
 of Atlantic Components Ltd. (Atlantic), a Hong Kong based company |  |      | 225,404  |      |   | (57,754 | ) |   | (189,777 | )
|
| | Net operating loss carry forward                                                                               |  |      | 65,734   |      |   | 33,452  |   |   | 108,794  |  
|
| | Other                                                                                                          |  |      | -        |      |   | -       |   |   | -        |  
| |                                                                                                                |  |      |          |      |   |         |   |   |          |  
|
| |                                                                                                                |  | $    | (33,871  | )    | $ | 187,833 |   | $ | 163,415  |  
| |                                                                                                                |  |      |          |      |   |         |   |   |          |  

F-27

---



ACL
SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS
OF DECEMBER 31, 2008 AND 2007 AND
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|    |                                                                
|--- | ---------------------------------------------------------------
|(7) | Income Taxes, Continued:                                       
|    |                                                                
|    | The income
 tax provision consists of the following components:

| |                                                                            |  |      |         |      |   |         |  |   |         | 
| | -------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | 
| |                                                                            |  | 2008 |         | 2007 |   | 2006    | 
| |                                                                            |  |      |         |      |   |         | 
|
| | Federal                                                                    |  | $    | -       |      | $ | -       |  | $ | -       | 
| | Foreign                                                                    |  |      | (33,871 | )    |   | 187,833 |  |   | 163,415 | 
| |                                                                            |  |      |         |      |   |         |  |   |         | 
|
| |                                                                            |  | $    | (33,871 | )    | $ | 187,833 |  | $ | 163,415 | 
| |                                                                            |  |      |         |      |   |         | 
| |                                                                            | 
| | The
 Components of the deferred tax assets and liabilities are as follows: | 

| |                            |  |      |            |      |   |            |   |   |            |  
| | -------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
| |                            |  | 2008 |            | 2007 |   | 2006       |  
| |                            |  |      |            |      |   |            |  
|
| | Net
 operating losses      |  | $    | 1,122,726  |      | $ | 1,056,992  |   | $ | 1,023,540  |  
| |                            |  |      |            |      |   |            |   |   |            |  
|
| | Total
 deferred tax assets |  | $    | 1,122,726  |      | $ | 1,056,992  |   | $ | 1,023,540  |  
| | Less:
 valuation allowance |  |      | (1,122,726 | )    |   | (1,056,992 | ) |   | (1,023,540 | )
| |                            |  |      |            |      |   |            |   |   |            |  
|
| |                            |  | $    | -          |      | $ | -          |   | $ | -          |  
| |                            |  |      |            |      |   |            |   |   |            |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | In 2003, the
 Companys Hong Kong subsidiary, Atlantic, paid a procurement fee to the
 Companys subsidiary, Alpha in BVI, and allocated certain expenses incurred
 outside Hong Kong. Procurement fee income net of such expenses totaled
 approximately $1,000,000, which is not subject to corporate tax in Hong Kong
 or BVI. However, such procurement service fee income or income net of related
 expenses may be subject to corporate income tax in the Peoples Republic of
 China. Based on the analysis of its tax counsel, the Company accrued
 approximately $150,000 for such potential tax liabilities as of December 31,
 2003. The Company has not paid any of this tax up to December 31, 2006 and
 the provision had been written back in the year ended December 31, 2006.                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(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 were no dilutive effect to the
 weighted average number of shares for the years ended December 31, 2008 and
 2007 since there were no outstanding options at December 31, 2008 and 2007.

F-28

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 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 expired on March 1, 2009. As of April 1, 2009,
 Samsung has confirmed the annual renewal of such agreement for one year.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Companys distribution operations are dependent on the
 availability of an adequate supply of electronic components under the
 Samsung brand name which have historically been principally supplied to the
 Company by the Hong Kong office of Samsung. The Company purchased 49%, 69%,
 and 75% of materials from Samsung for the years ended December 31, 2008,
 2007, and 2006, 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 4 for details for Mr. Yangs support of the
 Companys banking facilities. At December 31, 2008 and 2007, included in
 accounts payable were $8,675,069 and $9,562,199, respectively, to Samsung.
 Termination of such distributorship by Samsung will significantly impair and
 adversely affect the continuation of the Companys business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | During the years ended December 31, 2008, 2007, and 2006, 4%, 11%,
 and 11%, respectively, of the Companys sales were generated from Aristo
 Technologies Ltd. (Aristo), a related party (see Note 11 for additional
 discussion of related party transactions). As of December 31, 2008 and 2007,
 accounts receivable from related parties included $6,695,409 and $6,237,905,
 respectively, due from Aristo, which represented 37% and 40%, respectively,
 of the total accounts receivable due from related and unrelated parties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | As of December 31, 2008 and 2007, Samsung has withheld a total of
 $350,000 of commission due to the Company as deposits. As agreed with
 Samsung, the commission deposits were fully refunded to the Company on
 January 22, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-29

---



ACL SEMICONDUCTORS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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
 $27,950 for 2008, $28,530 for 2007 and $21,475 for 2006.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(11) | Commitments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | The
 Company leases its facilities. The following is a schedule by years of future
 minimum rental payments required under operating leases that have non-cancellable
 lease terms in excess of one year as of December 31, 2008:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | See Note 12 for related party leases. All leases expire prior to
 December 31, 2010. Real estate taxes, insurance, and maintenance expenses are
 obligations of the Company. It is expected that in the normal course of
 business, leases that expire will be renewed or replaced by leases on other
 properties; thus, it is anticipated that future minimum lease commitments
 will likely be more than the amounts shown for 2008. Rent expense for the
 years ended December 31, 2008, 2007, and 2006 totaled $142,985, $120,942, and
 $116,321 respectively.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | As at December 31, 2008 there is a
 participating forward currency option agreement between the Company and SCB
 for the Company to buy US$500,000 from SCB at a contract rate of 7.735 at
 specified dated up to January 7, 2010. According to the terms of the
 agreement, the Company will buy USD in triple amounts if the spot rate is
 less than the contract rate at specified dates. The gain on this forward
 contract during the year ended December 31, 2008 was $36,346.                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | As at December 31, 2008, there is a target
 redemption forward currency option agreement between the Company and SCB for
 the Company to buy US$750,000 from SCB at a lower strike contract rate of 7.75
 and an upper strike contract rate of 7.85 at specified dates up to April 29,
 2010. According to the terms of the agreement, the Company will buy USD in
 triple amounts if the spot rate is less than the lower                                                                                                                                        

F-30

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | strike contract rate or greater than the
 upper strike contract rate at specified dates. The gain on this forward
 contract during the year ended December 31, 2008 was $56,433.                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | As at December 31, 2008, there is a pivot
 bonus forward currency option agreement between the Company and SCB for the
 Company to buy US$1,000,000 from SCB at a lower strike contract rate of 7.73
 and an upper strike contract rate 7.749 at specified dates up to July 2,
 2009. According to the terms of the agreement, the Company will buy in triple
 amounts if the spot rate is less than the lower strike contract rate. The
 gain on this forward contract during the year ended December 31, 2008 was
 $56,410.
|    
|     | As at December 31, 2008, the Company has
 holdings of US$500,000 Commodity Basket Linked Notes which were issued by SCB
 at specified dates up to February 17, 2009. According to the terms of
 agreements, the Company will receive interest at a rate equal to 6% if the
 Basket Return is larger than 0% and 100% redeemed if the Basket Return is
 less than or equal to 0% on the maturity date. The Company fully redeemed the
 securities on the maturity date of February 17, 2009 and received profits of
 $17,378. 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(12) | Related Party Transactions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

TRANSACTIONS WITH MR. YANG

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

For the years ended December 31, 2008, 2007 and 2006, we recorded
compensation to Mr. Yang of $735,026, $812,821, and $200,000, respectively, and
paid $735,026, $812,821, and $200,000, respectively, to Mr. Yang as
compensation to him.

During each of the years ended December 31, 2008, 2007 and 2006, we
paid rent of $0, $17,521, and $68,280, 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.

As of December 31, 2008 and 2007, the Company had outstanding accounts
receivable from Classic Electronics Ltd. (Classic) totaling $1,717,320 and
$1,717,859, respectively. The Company has not experienced any bad debt from
this customer in the past. Pursuant to a written personal guarantee agreement,
Mr. Yang has personally guaranteed up to $10 million of the outstanding
accounts receivable from Classic.

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 two leases totaled
$6,684. We incurred and paid rent expense of $0, $0 and $44,418 to Classic for
the years ended December 31, 2008, 2007 and 2006, respectively.

F-31

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

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 millions) and the facility lines were fully covered by 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 SOLUTION SEMICONDUCTOR (CHINA) LTD.

On April 1,
2007, we entered into a lease agreement with Solution Semiconductor (China)
Ltd. (Solution) pursuant to which we lease one facility. The lease agreement
for this facility expires on March 31, 2009. The monthly lease payment for this
lease is $1,090. We incurred and paid an aggregate rent expense of $13,077,
$12,385 and $3,436 to Solution during the year ended December 31, 2008, 2007
and 2006.

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, 2008, 2007 and 2006, we received service charges of
$0, $11,538 and $6,410, respectively, from Systematic Information Ltd. (Systematic
Information). As of December 31, 2008 and 2007, there were no outstanding
accounts receivable from Systematic Information. The service fee was charged
for back office support for Systematic Information.

On September
1, 2008, we entered into a lease agreement with Systematic Information pursuant
to which we lease one facility. The lease agreement for this facility expires
on August 31, 2010. The monthly lease payment for this lease totals $641. We
incurred and paid an aggregate rent expense of $7,692, $7,692 and $2,564 to
Systematic Information during the years ended December 31, 2008, 2007 and 2006.

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

F-32

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

paid an aggregate rent expense of $0, $17,521 and $38,462 to Systematic
Information during the years ended December 31, 2008, 2007 and 2006.

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, 2008, 2007 and 2006, we sold
products for $9,076,034, $17,165,728 and $11,986,047 respectively, to Aristo
Technologies Ltd. (Aristo). Outstanding accounts receivable totaled
$6,695,409 and $6,237,905 as of December 31, 2008 and 2007, respectively. We
have not experienced any bad debt from this customer in the past.

During the years ended December 31, 2008, 2007 and 2006, we purchased
inventories of $7,393,957, $3,633,424 and $1,584,985, respectively, from
Aristo. As of December 31, 2008 and 2007, there were no outstanding accounts
payable to or from 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, 2008, 2007 and 2006, we received
management fees of $0, $5,769 and $7,692, respectively, from Global Mega
Development Ltd. (Global). As of December 31, 2008 and 2007, there were no
outstanding accounts receivable from Global. The management fees were charged
for back office support for 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 INTELLIGENT NETWORK TECHNOLOGY LTD.

During the years ended December 31, 2008, 2007 and 2006, we received
management fees of $0, $0 and $7,692, respectively, from Intelligent Network
Technology Ltd. (Intelligent). As of December 31, 2008 and 2007, there were
no outstanding accounts receivable from Intelligent. The management fee was
charged as back office support for 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.

F-33

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

TRANSACTIONS WITH SYSTEMATIC SEMICONDUCTOR LTD.

During the years ended December 31, 2008, 2007, and 2006, we received a
management fee of $15,384, $16,026, and $15,384, respectively, from Systematic
Semiconductor Ltd. (Systematic). As of December 31, 2008 and 2007, there were
no outstanding accounts receivable from Systematic. The management fee was
charged for back office support for Systematic.

Mr. 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, 2008, 2007 and 2006, we sold
products for $0, $0 and $7,720,975, respectively, to First World Logistic Ltd.
(First). As of December 31, 2008 and 2007, there were no outstanding accounts
receivable from First.

During the years ended December 31, 2008, 2007, and 2006, we purchased
inventories for $0, $0, and $825,900, respectively, from First. As of December
31, 2008 and 2007, there were no outstanding accounts payable to 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.

TRANSACTIONS WITH ARISTO COMPONENTS LTD.

During the years ended December 31, 2008, 2007 and 2006, we received a
management fee of $8,077, $0, and $0, respectively, from Aristo Components Ltd.
(Aristo Comp). As of December 31, 2008 and 2007, there were no outstanding
accounts receivable from Aristo Comp. The management fee was charged for back
office support for Aristo Comp.

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

TRANSACTIONS CITY ROYAL LIMITED.

A residential property located in Hong Kong owned by City Royal Limited
(City) was used by the Company as collateral for loans from DBS Bank (Hong
Kong) Limited.

Mr. Yang, the Companys Chief Executive Officer, majority shareholder
and a director, is a 50% shareholder of City. The remaining 50% of City is
owned by the wife of Mr. Yang.

F-34

---



ACL SEMICONDUCTORS INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007
AND 
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

|     |                                                                                                                                                                                                                                                
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(13) | Quarterly Information (Unaudited):                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                
|     | The
 summarized quarterly financial data presented below reflects all adjustments,
 which in the opinion of management, are of a normal and recurring nature
 necessary to present fairly the results of operations for the periods
 presented.

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

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(14) | Subsequent Events (Unaudited):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | After year
 ended December 31, 2008, two banks canceled the banking facilities granted to
 the Company and restricted bank deposits were released. One bank reduced the
 amount of facilities granted to the Company.                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | After the year
 ended December 31, 2008, one of the customers owing an account receivable in
 the amount of $857,747 as at December 31, 2008 was in liquidation. Since most
 of the debt due from this customer, $799,719, was purchased by a bank under a
 factoring agreement which offered a 90% credit risk coverage and there was a
 deposit $159,944 paid by the customer included in the other current
 liabilities as at December 31, 2008, the directors of the Company believed
 that the amount could be fully recovered and no provision was made for the
 debt due from this customer.

F-35

---