UNITED
STATES
  SECURITIES
AND EXCHANGE COMMISSION
  WASHINGTON,
D.C. 20549
  FORM
10-Q
 x
              Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended September 30,
2010.
 or
  ̈
              Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the transition period
from  to.
  Commission
File Number: 000-51725
  JINGWEI
INTERNATIONAL LIMITED
 (Exact
name of registrant as specified in its charter)
 Nevada
              
              20-1970137(State
      or Other Jurisdiction of
              
              (I.R.S.
      EmployerIncorporation
      or Organization)
              
              Identification
      No.)
  Room
701-702, Building14, Keji C. Rd.,2nd,Software
Park,
  Nanshan
District,
  Shenzhen, PRC
518057
 (Address
of Principal Executive Offices including Zip Code)
  +86
1085251198
 (Registrant’s
Telephone Number, Including Area Code)
  Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes xNo
 ̈
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).*  Yes oNo o *The registrant has not
yet been phased into the interactive data requirements.
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange. (Check
one):
  Large
      Accelerated Filer  ̈
              Accelerated
      Filer  ̈
              Non-Accelerated
      Filer  ̈
              Smaller
      Reporting Company x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈No x
  As of
November 12, 2010, there were 20,336,167 shares of the issuer’s common stock,
par value $0.001 per share, outstanding.
 
  
 
 PART
      I. FINANCIAL INFORMATIONItem
      1.
                      Consolidated
      Financial Statements
                      
                      1Item
      2.
                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      
                      14Item
      3.
                      Quantitative
      and Qualitative Disclosures About Market Risk
                      
                      20Item
      4.
                      Controls
      and Procedures
                      
                      20PART
      II. OTHER INFORMATIONItem
      1.
                      Legal
      Proceedings
                      
                      22Item
      1A.
                      Risk
      Factors
                      
                      22Item
      2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      
                      22Item
      3.
                      Defaults
      Upon Senior Securities
                      
                      22Item
      4.
                      Removed
      and reserved
                      
                      22Item
      5.
                      Other
      Information
                      
                      22Item
      6.
                      Exhibits
                      
                      22
  
 
 
  PART
I.
  FINANCIAL
INFORMATION
 
 Item
      1. Consolidated Financial StatementsConsolidated
      Balance Sheets
                  1Consolidated
      Statements of Income and Comprehensive Income
                  2Consolidated
      Statements of Cash Flows
                  3Notes
      to Consolidated Financial Statements
                  4





Jingwei
International Limited and Subsidiaries


Condensed
Consolidated Balance Sheets


(in
US dollars thousands, except share and par value)


September 30, 2010
                      
                      
                      December 31, 2009(Unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                      
                      $
                      10,103
                      
                      
                      $
                      10,239Accounts
      receivable, less allowance of doubtful accounts of $1,379 and $1,266,
      respectively
                      
                      
                      32,272
                      
                      
                      
                      23,457Other
      receivables, prepayments and deposits, less allowance for doubtful
      accounts of $441 and $176, respectively
                      
                      
                      2,252
                      
                      
                      
                      3,219Inventories
                      
                      
                      4,606
                      
                      
                      
                      2,316Deferred
      tax assets
                      
                      
                      285
                      
                      
                      
                      258Total
      current assets
                      
                      
                      49,518
                      
                      
                      
                      39,489Non-current
      assetsProperty,
      plant and equipment, net
                      
                      
                      1,334
                      
                      
                      
                      1,385Intangible
      assets, net
                      
                      
                      15,453
                      
                      
                      
                      17,451Long-term
      investment
                      
                      
                      1,774
                      
                      
                      
                      1,737Total
      assets
                      
                      $
                      68,079
                      
                      
                      $
                      60,062LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable
                      
                      $
                      4,122
                      
                      
                      $
                      4,154Accruals
      and other payable
                      
                      
                      1,514
                      
                      
                      
                      1,279Income
      tax payable
                      
                      
                      1,688
                      
                      
                      
                      1,719Loan
      from a stockholder
                      
                      
                      369
                      
                      
                      
                      369Total
      current liabilities
                      
                      
                      7,693
                      
                      
                      
                      7,521Non-current
      liabilitiesDeferred
      tax liabilities
                      
                      
                      820
                      
                      
                      
                      803Total
      liabilities
                      
                      
                      8,513
                      
                      
                      
                      8,324Commitments
      and contingencies
                      
                      
                      -
                      
                      
                      
                      -EquityCommon
      stock, ($0.001 par value; 75,000,000 shares authorized, 17,049,000 shares
      issued and outstanding)
                      
                      
                      17
                      
                      
                      
                      17Additional
      paid-in capital
                      
                      
                      19,426
                      
                      
                      
                      18,931Statutory
      and other reserves
                      
                      
                      2,916
                      
                      
                      
                      2,916Retained
      earnings
                      
                      
                      25,980
                      
                      
                      
                      19,738Accumulated
      other comprehensive income
                      
                      
                      3,593
                      
                      
                      
                      2,658Total
      Company’s stockholders' equity
                      
                      
                      51,932
                      
                      
                      
                      44,260Noncontrolling
      interest
                      
                      
                      7,634
                      
                      
                      
                      7,478Total
      equity
                      
                      
                      59,566
                      
                      
                      
                      51,738Total
      liabilities and equity
                      
                      $
                      68,079
                      
                      
                      $
                      60,062





See notes
to condensed consolidated financial statements.


1


Jingwei
International Limited and Subsidiaries


Condensed
Consolidated Statements of Income and Comprehensive Income


(in
US dollars thousands, except share and per share data)





Nine Months Ended
                        September 30
                      
                      
                      Three Months Ended
                        September 302010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009(Unaudited)
                      
                      
                      (Unaudited)
                      
                      
                      (Unaudited)
                      
                      
                      (Unaudited)Sales
                      
                      $
                      23,749
                      
                      
                      $
                      16,794
                      
                      
                      $
                      10,410
                      
                      
                      $
                      8,763Cost
      of sales
                      
                      
                      11,660
                      
                      
                      
                      10,461
                      
                      
                      
                      5,570
                      
                      
                      
                      5,428Gross
      profit
                      
                      
                      12,089
                      
                      
                      
                      6,333
                      
                      
                      
                      4,840
                      
                      
                      
                      3,335Operating
      expensesSelling,
      general and administrative expenses
                      
                      
                      4,023
                      
                      
                      
                      2,758
                      
                      
                      
                      1,462
                      
                      
                      
                      1,640Research
      and development costs
                      
                      
                      1,867
                      
                      
                      
                      836
                      
                      
                      
                      536
                      
                      
                      
                      3935,890
                      
                      
                      
                      3,594
                      
                      
                      
                      1,998
                      
                      
                      
                      2,033Income
      from operations
                      
                      
                      6,199
                      
                      
                      
                      2,739
                      
                      
                      
                      2,842
                      
                      
                      
                      1,302Other
      income (expenses)Subsidy
      income
                      
                      
                      392
                      
                      
                      
                      552
                      
                      
                      
                      71
                      
                      
                      
                      197Interest
      income
                      
                      
                      46
                      
                      
                      
                      175
                      
                      
                      
                      13
                      
                      
                      
                      167Interest
      expense
                      
                      
                      (5
                      )
                      
                      
                      -
                      
                      
                      
                      (1
                      )
                      
                      
                      -Other
      expense
                      
                      
                      (74
                      )
                      
                      
                      (42
                      )
                      
                      
                      (14
                      )
                      
                      
                      (15
                      )359
                      
                      
                      
                      685
                      
                      
                      
                      69
                      
                      
                      
                      349Income
      before income taxes
                      
                      
                      6,558
                      
                      
                      
                      3,424
                      
                      
                      
                      2,911
                      
                      
                      
                      1,652Income
      tax expense
                      
                      
                      316
                      
                      
                      
                      614
                      
                      
                      
                      167
                      
                      
                      
                      250Net
      income
                      
                      
                      6,242
                      
                      
                      
                      2,810
                      
                      
                      
                      2,744
                      
                      
                      
                      1,402Less:
      Net income attributable to noncontrolling interest
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Net
      income attributable to the Company’s stockholders
                      
                      
                      6,242
                      
                      
                      
                      2,810
                      
                      
                      
                      2,744
                      
                      
                      
                      1,402Foreign
      currency translation adjustment
                      
                      
                      936
                      
                      
                      
                      89
                      
                      
                      
                      748
                      
                      
                      
                      41Comprehensive
      income
                      
                      $
                      7,178
                      
                      
                      $
                      2,899
                      
                      
                      $
                      3,492
                      
                      
                      $
                      1,443Comprehensive income
      attributable to noncontrolling interest
                      
                      
                      156
                      
                      
                      
                      18
                      
                      
                      
                      124
                      
                      
                      
                      8Comprehensive income attributable
      to the Company’s stockholders
                      
                      
                      7,022
                      
                      
                      
                      2,881
                      
                      
                      
                      3,368
                      
                      
                      
                      1,435Basic
      earnings per share
                      
                      $
                      0.34
                      
                      
                      $
                      0.16
                      
                      
                      $
                      0.13
                      
                      
                      $
                      0.08Diluted
      earnings per share
                      
                      $
                      0.31
                      
                      
                      $
                      0.16
                      
                      
                      $
                      0.13
                      
                      
                      $
                      0.08Weighted
      average common shares outstandingBasic
                      
                      
                      18,156,763
                      
                      
                      
                      17,049,000
                      
                      
                      
                      20,336,167
                      
                      
                      
                      17,049,000Diluted
                      
                      
                      20,015,271
                      
                      
                      
                      17,049,000
                      
                      
                      
                      20,642,134
                      
                      
                      
                      17,049,000


See notes
to condensed consolidated financial statements.


2





Jingwei
International Limited and Subsidiaries


Condensed
Consolidated Statements of Cash Flows


(in
US dollars thousands)


Nine Months Ended September 302010
                
                
                2009(Unaudited)
                
                
                (Unaudited)Cash
      flows from operating activitiesNet
      income
                
                $
                6,242
                
                
                $
                2,810Adjustments
      to reconcile net income to net cash (used in) provided by operating
      activities:Depreciation
      & amortisation
                
                
                2,625
                
                
                
                1,943Share-based
      compensation expense
                
                
                495
                
                
                
                109Changes
      in operating assets and liabilities:Accounts
      receivable, net
                
                
                (8,815
                )
                
                
                (4,707
                )Other
      receivables, prepayments and deposits
                
                
                967
                
                
                
                443Inventories
                
                
                (2,290
                )
                
                
                463Deferred
      tax asset
                
                
                (27
                )
                
                
                154Accounts
      payable
                
                
                (31
                )
                
                
                117Accruals
      and other payables
                
                
                235
                
                
                
                (360
                )Income
      tax payable
                
                
                (31
                )
                
                
                247Net
      cash (used in) provided by operating activities
                
                
                (630
                )
                
                
                1,219Cash
      flows from investing activitiesAcquisition
      of property and equipment
                
                
                (223
                )
                
                
                (344
                )Acquisition
      of intangible assets
                
                
                (187
                )
                
                
                (3,589
                )Net
      cash used in investing activities
                
                
                (410
                )
                
                
                (3,933
                )Cash
      flows from financing activitiesRepayment
      of stockholder loans
                
                
                -
                
                
                
                (72
                )Net
      cash used in financing activities
                
                
                -
                
                
                
                (72
                )Effect
      of foreign currency translation on cash and cash
    equivalents
                
                
                904
                
                
                
                196Net
      decrease in cash and cash equivalents
                
                
                (136
                )
                
                
                (2,590
                )Cash
      and cash equivalents - beginning of period
                
                
                10,239
                
                
                
                5,472Cash
      and cash equivalents - end of period
                
                $
                10,103
                
                
                $
                2,882Supplemental
      Disclosure of Cash Flow InformationIncome
      tax paid
                
                $
                404
                
                
                $
                269Interest
      paid
                
                $
                -
                
                
                $
                -





See notes
to condensed consolidated financial statements.


3


Jingwei
International Limited and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Stated
in US Dollars)


(Unaudited)





Note
1  CORPORATE INFORMATION AND DESCRIPTION OF BUSINESS





Corporation
Information





Jingwei
International Limited (the “Company”) formerly known as Neoview Holdings Inc.
(“Neoview”), was established in Nevada, US on November 17, 2004. In May 2006,
Mr. George (Jianguo) Du, President and Chairman of the board of directors of the
Company, established Jingwei International Investments Limited (“Jingwei BVI”),
a company organized under the laws of the British Virgin Islands (“BVI”) and a
wholly owned subsidiary of the Company. Jingwei BVI has one wholly owned
subsidiary, Jingwei International Investment (HK) Ltd. (“Jingwei HK”), which was
established on October 31, 2006 in HongKong. On February 8, 2007, a wholly owned
subsidiary of Jingwei HK, Jingwei Hengtong Technology (ShenZhen) Co. Ltd
(“Jingwei Hengtong”) was established in People’s Republic of China (“PRC”). On
the same day, Jingwei Hengtong and Shenzhen Jingwei Communication Co., Ltd.
(“Jingwei Communication”), a PRC company, entered into a series of contractual
agreements (“contractual agreements”) for a ten-year term with early termination
in accordance with certain terms of the agreements. Jingwei Hengtong has agreed
to exclusively provide to Jingwei Communication technology consulting services,
and to pay all of the operating costs incurred by Jingwei Communication, in
exchange for all of its income from the business operations. Jingwei Hengtong
also agrees to guarantee Jingwei Communication’s performance of its obligations
under contracts, agreements and transactions between Jingwei Communication and
third party customers. In return, Jingwei Communication had pledged its accounts
receivables and all of its assets to Jingwei Hengtong. The stockholders of
Jingwei Communication have also entered into pledge agreements with Jingwei
Hengtong, pursuant to which they agreed to pledge all their rights and
interests, including voting rights, in favor of Jingwei Hengtong. Finally,
Jingwei Hengtong has the option to acquire the equity interests of the Jingwei
Communication for a purchase price equal to its original purchase price or such
higher price as required under PRC laws at the time of such purchase. Upon the
execution of these agreements, the Company became the primary beneficiary of
Jingwei Communication which was treated as a variable interest entity (“VIE”) of
the Company.





Jingwei
Communication has three subsidiaries, New Yulong Information Technology Co. Ltd.
(“Yulong IT”) of which Jingwei Communication owns 100%, New Yulong Software
Technology Development Co. Ltd. (“Yulong Software”) of which Jingwei
Communication owns 51.89% and Yulong IT owns the other 48.11%, and Jiangsu
Liandong Communication Ltd. ("Jiangsu Liandong") of which Jingwei Communications
owns 100% equity interest. On July 23, 2008, Yulong IT established a 100%-owned
subsidiary, Beijing New Media Advertising Co. Ltd. (“Beijing New Media”). On
April 29, 2009, Yulong IT established a wholly-owned subsidiary, Shenzhen
Xinguochuang Information Technology Company Limited
(“Xinguochuang”).





As the
Company is the primary beneficiary of Jingwei Communication, New Yulong IT, New
Yulong Software, Xinguochuang, Jiangsu Liandong and Beijing New Media which are
qualified as VIEs, the assets and liabilities and revenues and expenses of the
VIEs have been included in the consolidated financial statements. The principal
activities of the VIEs are in the provision of data mining and software
development services. As of September 30, 2010 and for the nine months ended
September 30, 2010, the VIEs had assets of $57.3 million, liabilities of $15.4
million, revenues of $16.4 million, and operating expenses of $4.6 million. For
the three months ended September 30, 2010, the VIEs had revenues of $6.9
million, and operating expenses of 1.7 million.The assets and liabilities
include balances due from and due to the subsidiaries of the Company. These
inter-company receivables and payables are eliminated upon consolidation of the
VIEs with the Company and its subsidiaries. No assets were pledged or given as
collateral against any borrowings.


4


Jingwei
International Limited and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Stated
in US Dollars)


(Unaudited)





On May
16, 2007, Jingwei BVI entered into a share exchange agreement with Neoview, a
public shell company ("Shellco"), Synergy Business Consulting LLC, a principal
stockholder of Neoview, and the stockholder of Jingwei BVI. Pursuant to the
share exchange agreement, Shellco acquired all of Jingwei BVI’s issued and
outstanding shares from Jingwei BVI’s stockholders in exchange for the issuance
to Jingwei BVI’s stockholders of 11,554,000 shares of Shellco common stock,
constituting 86.4% of Shellco’s outstanding shares of common stock on a
fully-diluted basis. As a result of this transaction, Jingwei BVI became a
wholly-owned subsidiary of Shellco. Under accounting principles generally
accepted in the United States (“US GAAP”), the share exchange is considered to
be a capital transaction in substance, and accounted for as a change in capital
structure resulting from a reverse acquisition. Under reverse takeover
accounting, the post reverse acquisition comparative historical financial
statements of the legal acquirer, Shellco, are those of the legal acquiree,
Jingwei BVI, which is considered to be the accounting acquirer.





Immediately
following the closing of the merger, Shellco consummated a private placement of
3,395,000 units, each consisting of one (1) share of common stock and 0.3 of a
warrant to purchase one (1) share of common stock at $6.00, for aggregate gross
proceeds of $16,975,000 or $5.00 per unit. In conjunction with this offering,
the Company paid a placement agent cash of $1,188,250, representing 7% of the
aggregate gross proceeds of the offering, and issued the placement agent
warrants to purchase 441,350 shares of its common stock.





Following
the completion of the merger and the offering, the surviving Shellco changed its
name from Neoview to Jingwei International Limited, and had 17,049,000 shares of
common stock outstanding.





Description
of Business





The
Company, its subsidiaries and VIEs are collectively referred to as the
“Group”.





The Group
is one of the leading providers of data mining and interactive marketing and
software services in PRC. The Group's services include market segmentation,
customer trend and churn analysis, fraud detection and direct marketing services
such as telemarketing, direct mailing and wireless value added services. The
Group also operates a software services business, which provides a broad range
of billing systems, provisioning solutions, decision support and customer
relationship management systems for PRC’s leading mobile telecommunication
carriers.





Note
2   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





a)
Basis of presentation and consolidation





The
accompanying unaudited interim condensed consolidated financial statements have
been prepared in accordance with the accounting policies described in the
Group’s Form 10-K/A filed on October 28, 2010 (“2009 Form 10-K/A”), and
requirements of Article 8 of Regulation S-X. Accordingly, certain information
and note disclosures normally included in the Group’s annual consolidated
financial statements prepared in accordance with US GAAP have been condensed or
omitted. These consolidated financial statements should be read in conjunction
with the consolidated financial statements included in the Group’s 2009 Form
10-K/A.


5


Jingwei
International Limited and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Stated
in US Dollars)


(Unaudited)





In the
opinion of management, all adjustments (which include normal recurring
adjustments) necessary to present a fair statement of condensed consolidated
balance sheet as of September 30, 2010, and condensed consolidated statements of
income and comprehensive income, and condensed consolidated statements of cash
flows for the nine month and three month periods ended September 30, 2010 and
2009, as applicable, have been made. The interim results of operations are not
necessarily indicative of the operating results for the full fiscal year or any
future periods.





The
Financial Accounting Standards Board (“FASB”) establishes the Accounting
Standards Codification (“ASC”).





ASC 810
Consolidation addresses
financial reporting for entities over which control is achieved through means
other than voting rights. According to the requirements, the Company evaluated
its relationship with Jingwei Communication and concluded that Jingwei
Communication is a VIE for accounting purpose, as a result of the contractual
arrangements, which enable the Company to control and to be the primary
beneficiary of Jingwei Communication. Accordingly, the Company adopted the
provisions of ASC 810 Consolidation and
consolidated Jingwei Communication. All significant inter-company accounts and
transactions have been eliminated in consolidation.





The
Company used the purchase method to consolidate Jingwei Communication, with the
current assets and liabilities recorded at fair value which approximated their
historic book value on January 31, 2007, the effective date (“effective date”)
of the contractual agreements. The fair value of the acquired net assets of
Jingwei Communication was $6.6 million on the effective date, after eliminated
all the intercompany transaction and balances, and was recognized as
noncontrolling interest on the consolidated balance sheet. The noncontrolling
interest changes only for translation adjustments since 100% of all income and
losses are allocated to the Company in accordance with the contractual
agreements and there are no dividend distributions to noncontrolling interest.
The noncontrolling interest amounted to $7.6 million and $7.5 million as of
September 30, 2010 and December 31, 2009, respectively.





b)
            Use
      of estimates





In
preparing financial statements in conformity with US GAAP, management makes
estimates and assumptions that affect the amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the financial
statements, as well as the amounts of revenues and expenses during the period
ended September 30, 2010 and 2009. Actual results could differ from those
estimates.





c)
            Fair
      value of financial instruments





The
carrying values of the Group’s financial instruments, including cash and cash
equivalents, accounts receivable, other receivables, prepayments and deposits,
account payable, accruals and other payables, and loan from a stockholder
approximate their fair values due to the short-term maturity of such
instruments.





d)
            Business
      combination





For a
business combination, the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree were recognized at the acquisition date,
measured at their fair values as of that date. In a business combination
achieved in stages, the identifiable assets and liabilities, as well as the
noncontrolling interest in the acquiree, were recognized at the full amounts of
their fair values. In a bargain purchase in which the total acquisition-date
fair value of the identifiable net assets acquired exceeds the fair value of the
consideration transferred plus any noncontrolling interest in the acquiree, that
excess in earnings was recognized as a gain attributable to the
Group.





Deferred
tax liability and asset were recognized for the deferred tax consequences of
differences between the tax bases and the recognized values of assets acquired
and liabilities assumed in a business combination in accordance with Accounting
Standard Codification (“ASC”) Topic 740-10.




Goodwill
represents the excess of the purchase price over the fair value of the net
assets acquired in business combinations. Goodwill is not amortized; rather,
impairment tests are performed at least annually or more frequently if
circumstances indicate impairment may have occurred. If impairment exists,
goodwill is immediately written off to its fair value and the best estimate of
that loss is recognized in those financial statements.





e)
            Recently
      enacted accounting standards





InApril 2010, the FASB
issued ASU 2010-13, Compensation-Stock Compensation
(Topic 718): Effect of
Denominating the Exercise Price of a Share-Based Payment Award in the Currency
of the Market in Which the Underlying Equity Security
Trades.  The ASU clarifies that a share-based payment award
with an exercise price denominated in the currency of a market in which a
substantial portion of the entity's equity securities trades should not be
considered to contain a condition that is not a market, performance, or service
condition. Therefore, such an award should not be classified as a liability if
it otherwise qualifies as equity. The amendments in this Update are effective
for fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2010.  Earlier application is
permitted.  The Company has early applied the accounting treatment and
the provisions of ASU 2010-13 does not have any effect on the financial
position, results of operations or cash flows of the Company for the periods
presented.





The FASB
issued ASU 2010-17, Revenue
Recognition - Milestone Method (Topic 605): Milestone Method of Revenue
Recognition.  This ASU codifies the consensus reached in EITF Issue
No. 08-9, “Milestone Method of Revenue Recognition.” The amendments to the
Codification provide guidance on defining a milestone and determining when it
may be appropriate to apply the milestone method of revenue recognition for
research or development transactions. Consideration that is contingent on
achievement of a milestone in its entirety may be recognized as revenue in the
period in which the milestone is achieved only if the milestone is judged to
meet certain criteria to be considered substantive. Milestones should be
considered substantive in their entirety and may not be bifurcated. An
arrangement may contain both substantive and nonsubstantive milestones, and each
milestone should be evaluated individually to determine if it is substantive.
 ASU 2010-17 is effective on a prospective basis for milestones achieved in
fiscal years, and interim periods within those years, beginning on or after June
15, 2010. Early adoption is permitted.  The Company will adopt ASU 2010-17
from January 1, 2011 and does not expect the provisions of ASU 2010-17 to have a
material effect on the financial position, results of operations or cash flows
of the Company.





Since the
filing of 2009 Form 10-K, the FASB issued ASU No. 2010-12 through No. 2010-26.
These ASUs, except for ASU 2010-13 and ASU 2010-17 discussed above, entail
technical corrections to existing guidance or affect guidance related to
specialized industries or entities and therefore have minimal, if any, impact on
the Group.


6


Jingwei
International Limited and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Stated
in US Dollars)


(Unaudited)





Note
3     ACCOUNTS RECEIVABLE, NET


At
September 30, 2010 and December 31, 2009, accounts receivable include the
following (in thousands):





September 30, 2010
                      (Unaudited)
                    
                    
                    December 31, 2009Accounts
      receivable
                    
                    $
                    33,651
                    
                    
                    $
                    24,723Less:
      allowance for doubtful debts
                    
                    
                    1,379
                    
                    
                    
                    1,266$
                    32,272
                    
                    
                    $
                    23,457





Note
4     INVENTORIES





At
September 30, 2010 and December 31, 2009, inventories consist of the following
(in thousands):





September 30,2010
                      (Unaudited)
                    
                    
                    December 31, 2009Project
      costs
                    
                    $
                    4,350
                    
                    
                    $
                    2,272Others
                    
                    
                    256
                    
                    
                    
                    44$
                    4,606
                    
                    
                    $
                    2,316





Note
5     INTANGIBLE ASSETS, NET





The
breakdown of the intangible asset balance as of September 30, 2010 and December
31, 2009 as well as related amortization period for each asset class is as
follows (in thousands):





Cost
                      
                      September 30, 2010
                        (Unaudited)
                      
                      
                      December 31, 2009
                      
                      Amortization
                        PeriodDatabases
                      
                      $
                      14,697
                      
                      
                      $
                      14,493
                      
                      8
      yearsStrategic
      alliance
                      
                      
                      7,195
                      
                      
                      
                      7,068
                      
                      5.5
      yearsNon-compete
      agreement
                      
                      
                      323
                      
                      
                      
                      316
                      
                      2
      yearsSoftware
                      
                      
                      393
                      
                      
                      
                      202
                      
                      8
      years22,608
                      
                      
                      
                      22,079Less:
      accumulated amortization
                      
                      
                      7,155
                      
                      
                      
                      4,628Net
                      
                      $
                      15,453
                      
                      
                      $
                      17,451





Intangible
assets represent acquired databases, strategic alliance, non-compete agreement
and software. Amortization expense for the nine months ended September 30, 2010
and 2009 was $2.5 million and $1.7 million respectively. Amortization expense
for the three months ended September 30, 2010 and 2009 was $0.9 million and $0.8
million respectively.




As of
September 30, 2010, estimated amortization expenses for future periods are
expected as follows:




Fiscal
      Year
              
              Amount2010
              
              $
              8442011
              
              
              3,2972012
              
              
              3,2172013
              
              
              3,1622014
              
              
              3,166Thereafter
              
              
              1,767$
              15,453




Note
6     INCOME TAX EXPENSE





United
States





Jingwei
International Limited is subject to the United States of America Tax law at tax
rate of 34%. No provision for the US federal income taxes has been made as the
Company had no US taxable income for the periods presented, and believes that
its earnings are permanently invested in PRC.


7


Jingwei
International Limited and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Stated
in US Dollars)


(Unaudited)


BVI





Jingwei
BVI was incorporated in the BVI and, under the current laws of the BVI, it is
not subject to income tax.





Hong
Kong





Jingwei
HK was incorporated in Hong Kong and is subject to Hong Kong profits tax.
The Company is subject to Hong Kong taxation on its activities conducted in Hong
Kong and income arising in or derived from Hong Kong. The applicable
statutory tax rate is 16.5%.





PRC





The
applicable income tax rate for the Group’s PRC operating companies, Yulong IT,
Yulong Software, Jingwei Hengtong, Jingwei Communication, Beijing New Media,
Xinguochuang and Jiangsu Liandong, are described as follows: Yulong IT is
qualified as high-tech software enterprises and entitled to a preferential
income tax rate of 15%. Yulong Software, Jingwei Hengtong, Jingwei Communication
are all entitled to a preferential income tax rate of 22% in 2010. Jiangsu
Liandong is subject to 25% income tax rate in 2010. Beijing New Media as a small
business taxpayer and taxed on a deemed basis, i.e. 2.5% of its reported total
revenue, due to its small business status. In April 2010, State Tax Bureau
approved Xinguochuang for its application for preferential enterprise income tax
treatment, which exempted the entity from income tax for two years beginning
with 2009, its first year of profitable operations, and entitled it to a 50% tax
reduction to 12.5% for the subsequent three years and 25%
thereafter.





For the
nine months ended September 30, 2010, the Group recognized an income tax expense
of $0.32 million on income before income taxes of $6.6 million, representing an
effective income tax rate of 4.8%, as compared to an income tax expense of $0.61
million on a income before income taxes of $3.4 million, representing an
effective income tax rate of 17.9% for the same period in 2009. For the three
months ended September 30, 2010, the Group recognized an income tax expense of
$0.17 million on income before income taxes of $2.9 million, representing an
effective income tax rate of 5.9%, as compared to an income tax expense of $0.25
million on a income before income taxes of $1.6 million, representing an
effective income tax rate of 15.6% for the same period in 2009.





InJune2010,
Xinguochuang reversed its estimated enterprise income tax of 2009, which
amounted to$0.4
million,upon the
approval of Xinguochuang’s
applicationfor tax
holiday. That
resulted in theunusually
low effective tax rate in thefirstthree
quartersof
2010.





Note
7     SHARE-BASED COMPENSATION





On May
21, 2008, The Company adopted Jingwei International Limited 2008 Omnibus
Securities and IncentivePlan(the “Plan”). The Plan
provides for the granting of Distribution Equivalent Rights, Incentive Stock
Options, Non-Qualified Stock Options, Performance Share Awards, Restricted Stock
Awards, Stock Appreciation Rights, Tandem Stock Appreciation Rights,
Unrestricted Stock Awards or any combination of the foregoing, as may be best
suited to the circumstances of the particular employee, director or consultant
as provided herein. The Company values the fair value of the options based on
Black-Scholes option pricing model.





On April
16, 2008 the Company granted a total of 63 key employees of the Company, options
to purchase a total of 301,100 shares of the Company’s common stock at a strike
price equal to $4.95 and vested equally in four years. The contractual term is
10 years and it is non-transferable. The options were valued at $2.278 on the
grant date.


8


Jingwei
International Limited and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Stated
in US Dollars)


(Unaudited)





On June
12, 2008 the Company granted to Strategic Growth International, Inc (“SGI”)
options to purchase a total of 150,000 shares of the Company’s common stock at a
premium strike price of $7.00 per share as part of the compensation for investor
relations service (the “Service”). The contractual term is 5 years and it is
non-transferable; however, hedging is not prohibited. The options were valued at
$2.669 per unit on the grant date. These options vest in 4 quarterly
installments in equal amount of 25,000 beginning with the date of the grant and
the balance of 50,000 vesting on June 5, 2009. The consulting expense for the
Service is recognized on a straight-line basis over the one year period of the
related consulting contract. On October 5, 2008 the company terminated the
Service of SGI. Upon the termination of the Service, pursuant to Section 4 of
the option agreement, the Company rescinded 117,000 options granted to SGI
pursuant to the terms of the Agreement. Correspondingly, pursuant to Section 5
of the option agreement and Section 6.3 of the Plan, the Option Agreement
hereinafter represents the right to purchase 33,000 Shares on the terms and
conditions contained therein.





On
September 29, 2009 the Company granted to Rick Luk, the CEO of the Company,
options to purchase a total of 200,000 shares of the Company’s common stock at a
strike price equal to $1.64. The contractual term is 10 years. The options were
valued at $0.883 per unit on the grant date. On June 29, 2010 the Company
entered into an amended stock option agreement with Rick Luk to shorten the
vesting period from three years in the original agreement to two
years.





On
November 5, 2009 the Company granted ToneTat Investment Limited (“ToneTat”)
options to purchase a total of 500,000 shares of the Company’s common stock at a
strike price of $2.10 per share as compensation for investor relations and
financial advisory services. The contractual term is 3 years and it is
non-transferable. The first batch of options to purchase 100,000 shares of
common stock were vested on November 5, 2009, and were valued at $0.76 per unit
on the grant date. The second batch of options to purchase 100,000 shares of
common stock were vested on May 5, 2010, and were valued at $2.72 per unit on
the. On May 7, 2010, the Company executed an amendment with ToneTat to extend
the service term to March 31, 2011, and to modify the vesting conditions of the
last 300,000 options to require satisfactory completion of duties until
then.





On
February 23, 2010 the Company granted to Yong Xu, the CFO of the Company,
options to purchase a total of 150,000 shares of the Company’s common stock at a
strike price equal to $2.05 to be vested over two years. The contractual term is
10 years. The options were valued at $1.21 per unit on the grant
date.





On
September 7, 2010, the Company granted a total of 43 key employees of the
Company, under the Company’s 2008 Omnibus Securities and Incentive Plan, options
to purchase a total of 500,000 shares of the Company’s common stock at a strike
price equal to $4.10 and vested equally in four years. The contractual term is 5
years and it is non-transferable. The options were valued at $2.02 per unit on
the grant date.





The
Company has accounted for employee share-based compensation expense based on the
grant date fair values of the awards. Estimates of fair value are not intended
to predict actual future events or the value that ultimately will be realized by
employees who receive equity awards, and subsequent events are not indicative of
the reasonableness of the original estimates of fair value made by the Company
for accounting purposes.





For the
nine months ended September 30, 2010 and 2009, total share-based compensation
expense recognized for options under the Plan was $0.5 million and $0.1 million
respectively. For the three months ended September 30, 2010 and 2009, total
share-based compensation expense recognized for options under the Plan was $0.09
million and $0.03 million respectively





The
following table summarizes all Company stock option and warrant transactions for
the nine months ended September 30, 2010:


9


Jingwei
International Limited and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Stated
in US Dollars)


(Unaudited)





Number of
                    options and
                    warrants
                  
                  
                  Weighted-
                    average
                    exercise price
                  
                  
                  Weighted-average
                    remaining contractual
                    life (Years)Outstanding,
      January 1, 2010
                  
                  
                  2,053,250
                  
                  
                  $
                  5.27
                  
                  
                  
                  3.21Granted
                  
                  
                  750,000
                  
                  
                  $
                  3.42
                  
                  
                  
                  5.49Forfeited
                  
                  
                  (132,800
                  )
                  
                  $
                  4.95
                  
                  
                  
                  7.58Outstanding,
      September 30, 2010
                  
                  
                  2,670,450
                  
                  
                  $
                  4.77
                  
                  
                  
                  3.07





Exercisable
options and warrants as of September 30, 2010:





Range of exercise
                                    prices
                                  
                                  
                                  Number outstanding
                                    currently exercisable as
                                    of September 30, 2010
                                  
                                  
                                  Weighted-average
                                    remaining
                                    contractual life
                                    (years)
                                  
                                  
                                  Weighted-average
                                    exercise price of
                                    options currently
                                    exercisable$1.64-$7.00
                                  
                                  
                                  
                                  1,977,600
                                  
                                  
                                  
                                  2.0
                                  
                                  
                                  $
                                  5.14





Note
8 BASIC AND DILUTED EARNINGS PER SHARE





Basic net
income per share is computed using the weighted average number of common shares
outstanding during the period. The contingently issuable 3,287,167 shares
associated with the purchase of intangible assets from Shenzen Newway Digital
S&T Co., Ltd. (the “Purchase”) were included in computation of basic EPS
since as of July 1, 2010, all the performance targets associated with the
Purchase had been met and there was no circumstance under which those shares
would not be issued. Diluted net income per share is computed using the
weighted average number of common shares and, if dilutive, potential common
shares outstanding during the period. Potential common shares comprise shares
issuable upon the exercise of share based awards, using the treasury stock
method. The reconciliation of the numerators and denominators of the basic and
diluted EPS computations for income from continuing operations is shown as
follows (in thousands, except share and per share data):





Nine Months Ended
                                    September 30,
                                  
                                  
                                  Three Months Ended September 30,2010
                                    (Unaudited)
                                  
                                  
                                  2009
                                    (Unaudited)
                                  
                                  
                                  2010
                                    (Unaudited)
                                  
                                  
                                  2009
                                    (Unaudited)Numerator
      forbasic
      and dilutedearnings
      pershare:Net
      income
                                  
                                  $
                                  6,242
                                  
                                  
                                  
                                  2,810
                                  
                                  
                                  $
                                  2,744
                                  
                                  
                                  $
                                  1,402Denominator
      for basic earnings per share—weighted average shares outstanding
                                  
                                  
                                  18,156,763
                                  
                                  
                                  
                                  17,049,000
                                  
                                  
                                  
                                  20,336,167
                                  
                                  
                                  
                                  17,049,000Dilutive
      effect of stock-based compensation plan
                                  
                                  
                                  214,924
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  305,967
                                  
                                  
                                  
                                  -Dilutive
      effect of contingently issuable shares
                                  
                                  
                                  1,643,584
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Denominator
      for diluted earnings per share
                                  
                                  
                                  20,015,071
                                  
                                  
                                  
                                  17,049,000
                                  
                                  
                                  
                                  20,642,134
                                  
                                  
                                  
                                  17,049,000Basic
      earnings per share
                                  
                                  $
                                  0.34
                                  
                                  
                                  $
                                  0.16
                                  
                                  
                                  $
                                  0.13
                                  
                                  
                                  $
                                  0.08Diluted
      earnings per share
                                  
                                  $
                                  0.31
                                  
                                  
                                  $
                                  0.16
                                  
                                  
                                  $
                                  0.13
                                  
                                  
                                  $
                                  0.08





Options
and warrants to purchase 2.7 million shares of common stock at an average price
$4.77 per share were outstanding during the three months ended September 30,
2010, but options and warrants to acquire 2.1 million shares of common stock
were not included in the computation of diluted EPS because there was no
incremental share through calculation to cause a dilutive effect. These options
and warrants were still outstanding as of September 30, 2010.


10


Jingwei
International Limited and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Stated
in US Dollars)


(Unaudited)





Note
9     SEGMENT INFORMATION





The
Company has two reportable segments based on the type of services provided, i.e.
data mining services, and software and system services. Information for the
segments for the three and nine months ended September 30, 2010 and 2009 in
accordance with ASC 280 Segment Reporting is shown
separately as follows (in thousands):




Three Months Ended September
    302010
                                
                                
                                2009Datamining
                                  Services
                                
                                
                                Software
                                  Services
                                
                                
                                Total
                                
                                
                                Datamining
                                  Services
                                
                                
                                Software
                                  Services
                                
                                
                                TotalNet
      Revenue
                                
                                $
                                5,306
                                
                                
                                
                                5,104
                                
                                
                                $
                                10,410
                                
                                
                                $
                                5,452
                                
                                
                                $
                                3,311
                                
                                
                                $
                                8,763Gross
      profit
                                
                                
                                1,770
                                
                                
                                
                                3,070
                                
                                
                                
                                4,840
                                
                                
                                
                                2,213
                                
                                
                                
                                1,122
                                
                                
                                
                                3,335Net
      Income
                                
                                
                                1,003
                                
                                
                                
                                1,741
                                
                                
                                
                                2,744
                                
                                
                                
                                919
                                
                                
                                
                                483
                                
                                
                                
                                1,402Segment
      Assets
                                
                                
                                46,816
                                
                                
                                
                                21,263
                                
                                
                                
                                68,079
                                
                                
                                
                                41,908
                                
                                
                                
                                11,967
                                
                                
                                
                                53,875Depreciation&
      Amortization
                                
                                
                                897
                                
                                
                                
                                65
                                
                                
                                
                                962
                                
                                
                                
                                843
                                
                                
                                
                                35
                                
                                
                                
                                878Expenditure
      for segment assets
                                
                                $
                                38
                                
                                
                                
                                187
                                
                                
                                $
                                225
                                
                                
                                $
                                3,303
                                
                                
                                $
                                -
                                
                                
                                $
                                3,303





Nine Months Ended September
    302010
                                
                                
                                2009Datamining
                                  Services
                                
                                
                                Software
                                  Services
                                
                                
                                Total
                                
                                
                                Datamining
                                  Services
                                
                                
                                Software
                                  Services
                                
                                
                                TotalNet
      Revenue
                                
                                $
                                12,805
                                
                                
                                $
                                10,944
                                
                                
                                $
                                23,749
                                
                                
                                $
                                10,222
                                
                                
                                $
                                6,572
                                
                                
                                $
                                16,794Gross
      Profit
                                
                                
                                4,974
                                
                                
                                
                                7,115
                                
                                
                                
                                12,089
                                
                                
                                
                                4,172
                                
                                
                                
                                2,161
                                
                                
                                
                                6,333Net
      Income
                                
                                
                                2,568
                                
                                
                                
                                3,674
                                
                                
                                
                                6,242
                                
                                
                                
                                1,840
                                
                                
                                
                                970
                                
                                
                                
                                2,810Segment
      Assets
                                
                                
                                46,816
                                
                                
                                
                                21,263
                                
                                
                                
                                68,079
                                
                                
                                
                                41,908
                                
                                
                                
                                11,967
                                
                                
                                
                                53,875Depreciation&
      Amortization
                                
                                
                                2,517
                                
                                
                                
                                108
                                
                                
                                
                                2,625
                                
                                
                                
                                1,837
                                
                                
                                
                                106
                                
                                
                                
                                1,943Expenditure
      for segment assets
                                
                                $
                                223
                                
                                
                                $
                                187
                                
                                
                                $
                                410
                                
                                
                                $
                                3,933
                                
                                
                                $
                                -
                                
                                
                                $
                                3,933





There is
no inter-segment revenue. Segment assets include property and equipment and
intangible assets.


11


Jingwei
International Limited and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Stated
in US Dollars)


(Unaudited)





Note
10   COMMITMENT AND CONTINGENCY





Lease
Commitment





Future
minimum lease payments under non-cancellable operating leases as of September
30, 2010 are as follows (in thousands):





Within
      1 year
                  
                  $
                  190Within
      1-2 years
                  
                  
                  146Within
      2-3 years
                  
                  
                  78Thereafter
                  
                  
                  -$
                  414





Legal
matter





On
September 5, 2008, Beijing New Media provided a short-term loan of RMB2.0
million ($292,255) at zero interest rate to Shanghai Jujun Infotech Limited
(“Jujun”), with its majority shareholder and Chairman Jerry Yu (the “Defendant”)
providing personal guarantee, for its general business development. In 2009,
Jujun paid back only RMB300,000 ($43,988) but defaulted on the rest. On November
10, 2009, the Company submitted the dispute over RMB1.7 million ($249,267) to
Shenzhen Arbitration Commission for arbitration against Jujun and Jerry Yu. On
April 19, 2010, Shenzhen Arbitration Commission provided arbitration results
requesting the Defendent to pay the Company in full the amount in dispute. On
June 28, 2010, the Company applied for legal enforcement with Shanghai No. 1
Intermediate People’s Court. Though the Court has ordered a legal enforcement to
collect oustanding loan balance and interests from the Defendent early on, it
suspended the process upon an appeal from Jerry Yu on September 17, 2010. In the
third quarter in 2010, based on an internal legal evaluation, the Company deems
the chance of collecting the majority of the amount owed in the near future
slim, and decides to write off the balance of the loan, which has been
outstanding for two years, fully as a bad debt.


12


Jingwei
International Limited and Subsidiaries


Notes
to Condensed Consolidated Financial Statements


(Stated
in US Dollars)


(Unaudited)





NOTE
11  SUBSEQUENT EVENTS




On
October 8, 2010, the Company and Xinguochuang entered into a Framework Agreement
(the “Agreement”) with Shanghai Haicom Limited, a corporation
registered in Shanghai, China ("Haicom"), pursuant to which Xinguochuang will
acquire all of the outstanding equity interests of Haicom and as a result of
which Haicom shall become a wholly owned subsidiary of Xinguochuang. Founded in
1992, Haicom is an Internet and mobile value added service platform provider
based in Shanghai with business operations covering over ten provinces in China.
Haicom develops 3G system solutions and provides interactive marketing services
to financial institutions and major telecom carriers in China.






Under
terms of the Agreement, the Company will pay Haicom shareholders total cash
consideration of RMB 35 million, or $5.2 million, payable in phases.  The
Company will also issue a maximum 667,802 common shares to Haicom shareholders,
contingent upon the achievement of a minimum level of revenue and earnings
targets by Haicom for the fiscal year ending December 31, 2011. Currently the
Company is assessing the accounting impact of the acquisition.




In
accordance with the terms of Framework Agreement, the Company paid Haicom
shareholders the first phase of cash consideration of RMB 10 million, or $1.5
million, on October 14, 2010. On November 9, 2010, the Company
received a notice of approval from the State Administration for Industry & Commerce
of the People's Republic of China for registration changes in Articles of
Incorporation, legal representative and business license of Haicom,
indicating completion of the business acquisition with changes of
control in place. Afterwards,the Company will pay Haicom
shareholders the second phase of cash consideration of RMB 20 million, or $3.0
million, no later than November 16, 2010.





The Group
did not have any other significant subsequent event.


13


Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations.





The
following Management’s Discussion and Analysis (“MD&A”) is intended to help
the reader understand the results of operations and financial conditions of
Jingwei International Limited (the “Company”). Throughout this document,
references to “we,” “our,” the “Group” or “Jingwei” refer to Jingwei
International Limited and its subsidiaries and variable
interest entities (“VIEs”). MD&A should be read in conjunction with
our interim consolidated financial statements and the accompanying notes, and
the other financial information included in this report.





NOTE
REGARDING FORWARD-LOOKING STATEMENTS





This
filing contains forward-looking statements. The words “anticipated,” “believe,”
“expect, “plan,” “intend,” “seek,” “estimate,” “project,” “could,” “may” and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including the matters
set forth in this report or other reports or documents we file with the
Securities and Exchange Commission (“SEC”) from time to time, which could cause
actual results or outcomes to differ materially from those projected. Undue
reliance should not be placed on these forward-looking statements, which speak
only as of the date hereof. We undertake no obligation to update these
forward-looking statements.





Business
Overview





Jingwei
has evolved from the conventional data mining and software services business to
become a leading provider of data mining and interactive marketing and software
services in the People’s Republic of China (the “PRC” or “China”). With a
customer database of over 400 million consumers, we help companies to reach
their target audience. Currently, we operate two business segments in China:
data mining and software services.





In the
data mining segment, we offer a rich portfolio of business intelligence and
interactive marketing services powered by our proprietary consumer database and
the software tools we developed over the years. Our services include market
segmentation, customer trend and churn analysis, fraud detection and a range of
interactive marketing and advertising services such as telemarketing, direct
mailing, mobile advertising, mobile value-added services (“MVAS”) and mobile
application solutions. In the Software Services segment, we provide a broad
range of billing systems, provisioning solutions, decision support and customer
relationship management systems for China’s leading telecom operators and power
companies. The software services business complements and strengthens sales
opportunities for our data mining and interactive marketing services platform,
which not only allows us to enhance our customer database, it also provides
useful tools to allow us to leverage the telecom resources to provide
comprehensive multi-media marketing and advertising delivery channels to reach
the target consumers for our clients.





We have
been investing heavily in research and development in data mining tools to
enable the Group to cross reference different sources for its vast data. We
continue to expand our product offerings as well as create innovative data
mining software tools to enhance our service offerings to support database
marketing and interactive marketing for our clients. In addition, to capitalize
on the rapid growth of mobile applications and consumers spending, we are
developing smart interactive mobile value-added services as well as enhancing
our interactive marketing platform to support mobile internet marketing and
application solutions for our clients to provide high value services to business
enterprises and the consumers.





The
primary geographic focus of our operations is in China including Hong Kong
Special Administrative Region (“Hong Kong” or “HK”), where we derive all of our
sales. We conduct our business operations through Jingwei Hengtong Technology
(ShenZhen) Co. Ltd (“Jingwei Hengtong”), a wholly-owned subsidiary company that
became the primary beneficiary of Shenzhen Jingwei Communication Co., Ltd.
(“Jingwei Communication”) via various contractual agreements. Jingwei
Communication has three subsidiaries: New Yulong Information Technology Co. Ltd
(“Yulong IT”), New Yulong Software Technology Development Co. Ltd (“Yulong
Software”) and Jiangsu Liandong Communication Ltd. ("Jiangsu Liandong"). In
addition, Yulong IT wholly owns two subsidiaries: Beijing New Media Advertising
Co. Ltd. (“Beijing New Media”) and Shenzhen Xinguochuang Information Technology
Company Limited (“Xinguochuang”).


14


We
believe our future growth is in the broad adoption of our data mining and
interactive marketing service as well as mobile Internet solutions across
various business segments by leveraging our resourceful consumer database to
provide target marketing for domestic and multinational companies who want to
carve out a burgeoning consumer market in China. In order to cement our
leadership position in data mining and interactive marketing, we will need to
continuously refresh, update and increase the number of profiles of our consumer
database, enhance our data mining and interactive marketing infrastructure
including the addition of new hardware and software capabilities as well as
expanding our web-enabled call center operations to multiple
cities.





Business
Outlook and Other Recent Developments





The
Company has delivered strong performance in the first nine months of 2010 in
both sales and earnings compared to the same period last year.  In
data mining, the strategic agreement with Newway in 2009 has helped the Group
expand its product offering into 3G related value-added services (“VAS”) and
there was strong demand in the last nine months for its bundled mobile VAS
solutions.





In
software services segment, we have seen a surge in demand for our software and
system integration solutions in the telecom and cable sector as operators
continue to expand their deployment of internet protocol TV (“IPTV”) and digital
TV (“DTV”) network nationwide. In addition, the Company has successfully
developed and deployed an APP Store platform for a major telecom carrier for
commercial launch later this year. In the third quarter, as we continued to
replicate and deploy similar BSS solutions to support IPTV and DTV in different
provinces and cities, we continued to achieve a relatively high margin in the
software services segment in the range of 60%. We expect this trend to continue
to contribute to the sales and earnings growth of the software service through
2010.





In the
data mining segment, the Group has completed implementation of the call center
operation in Jiangsu Province in the first quarter of 2010.  This is
deployed as an outsourced “e-Contact” center with integrated telemarketing and
customer support capabilities to support the business promotion and customer
care programs for the telecom operators nationwide. To support the growth of our
business in interactive marketing, we plan to make major capital investment in
capability enhancement as well as extending geographic reach of our call centers
across the country later this year.




In line
with our strategic direction to strengthen our capabilities to expand and grow
our data mining business, on October 8, 2010, the Company entered into
a Framework Agreement with Shanghai Haicom Limited (“Haicom”), to acquire all of
the outstanding equity interests of Haicom through its subsidiary, Xinguochuang;
and as a result of which Haicom shall become a wholly owned subsidiary of
Xinguochuang. Founded in 1992, Haicom is an Internet and mobile value added
service platform provider based in Shanghai with business operations covering
over ten provinces in China. Haicom develops 3G system solutions and provides
interactive marketing services to financial institutions and major telecom
carriers in China.




RESULTS
OF OPERATIONS





Sales





Three Months Ended September 302010
                    
                    
                    2009
                    
                    
                    % Change(In thousands, except percentages)(Unaudited)
                    
                    
                    % of sales
                    
                    
                    (Unaudited)
                    
                    
                    % of salesSales:Data
      mining
                    
                    $
                    5,306
                    
                    
                    
                    51
                    %
                    
                    $
                    5,452
                    
                    
                    
                    62
                    %
                    
                    
                    -3
                    %Software
      services
                    
                    
                    5,104
                    
                    
                    
                    49
                    %
                    
                    
                    3,311
                    
                    
                    
                    38
                    %
                    
                    
                    54
                    %Total
      sales
                    
                    $
                    10,410
                    
                    
                    
                    100
                    %
                    
                    $
                    8,763
                    
                    
                    
                    100
                    %
                    
                    
                    19
                    %





Total net
revenue increased 19% for the third quarter year over year, due to robust growth
in the Software services segment.


15


Data mining. Revenue decreased by 3% for the third quarter
of 2010 compared to the same period in 2009.  This decrease
was mainly due to seasonal adjustment.





Software
services. The increase in revenue by 54% for the third quarter
compared to the same period in 2009 was mainly due to continued sales
growth in business support system (“BSS”) products supporting nationwide IPTV
and DTV deployment and early successes resulting in new orders from the
fast growing Smart Grid sector.





Nine Months Ended September 302010
                    
                    
                    2009
                    
                    
                    % Change(In thousands, except percentages)(Unaudited)
                    
                    
                    % of sales
                    
                    
                    (Unaudited)
                    
                    
                    % of salesSales:Data
      mining
                    
                    $
                    12,805
                    
                    
                    
                    54
                    %
                    
                    $
                    10,222
                    
                    
                    
                    61
                    %
                    
                    
                    25
                    %Software
      services
                    
                    
                    10,944
                    
                    
                    
                    46
                    %
                    
                    
                    6,572
                    
                    
                    
                    39
                    %
                    
                    
                    67
                    %Total
      sales
                    
                    $
                    23,749
                    
                    
                    
                    100
                    %
                    
                    $
                    16,794
                    
                    
                    
                    100
                    %
                    
                    
                    41
                    %





Total
sales were $23.7 million for the nine months ended September 30, 2010, compared
to $16.8 million for the nine months ended September 30, 2009. The year-on-year
increase in total sales was $6.9 million or 41% for the first three quarters of
2010, with robust revenue growth from both business segments.





Data mining.Data mining sales increased 25% for the nine months ended September 30,
2010 compared to the same period in 2009, as the demand for the Group’s data
mining service including bundled mobile VAS solutions continued to
grow.





Software
services.  Software services sales increased 67% for the nine
months ended September 30, 2010 compared to the same period in 2009. The
increase was mainly due to an increase in demand for the Company’s software
services to support the expanding deployment of IPTV and DTV by major
telecommunication operators in China, as well as successful development of
an APP Store platform for a major telecom operator.





Cost
of Sales




Three Months Ended September 302010
                      (Unaudited)
                    
                    
                    2009
                      (Unaudited)
                    
                    
                    % Change(In thousands, except percentages)Cost
      of sales:Data
      mining
                    
                    $
                    3,536
                    
                    
                    $
                    3,239
                    
                    
                    
                    9
                    %Software
      services
                    
                    
                    2,034
                    
                    
                    
                    2,189
                    
                    
                    
                    -7
                    %Total
      cost of sales
                    
                    $
                    5,570
                    
                    
                    $
                    5,428
                    
                    
                    
                    3
                    %





Total
cost of sales was $5.6 million for the three months ended September 30, 2010,
increasing by 3% from $5.4 million for the same period in 2009.





Data mining.Cost of data mining increased 9% for the three months ended September 30,
2010 compared to the same period in 2009 mainly due to an unfavorable
change in product mix.





Software
services.  Cost of software services decreased 7% for the three
months ended September 30, 2010 compared to the same period in 2009. This
improvement in cost control was mainly because the Company continued to
increase sales of off-the-shelf software products as a percentage of total
sales, including its popular BSS products in support of the nationwide
deployment of IPTV and DTV by major telecom operators in China.


16





Nine Months Ended September 302010
                      (Unaudited)
                    
                    
                    2009
                      (Unaudited)
                    
                    
                    % Change(In thousands, except percentages)Cost
      of sales:Data
      mining
                    
                    $
                    7,831
                    
                    
                    $
                    6,050
                    
                    
                    
                    29
                    %Software
      services
                    
                    
                    3,829
                    
                    
                    
                    4,411
                    
                    
                    
                    -13
                    %Total
      cost of sales
                    
                    $
                    11,660
                    
                    
                    $
                    10,461
                    
                    
                    
                    11
                    %





For the
nine months ended September 30, 2010, total cost of sales increased by 11%
compared to the same period in 2009. The increase in cost of sales was mainly
due to the 29% increase in cost of sales from the Data mining segment,
offset by the 13% decrease from the Software services segment. The increase
in cost of sales from Data mining segment was generally in line with the 25%
sales growth in this business segment. The decrease from Software services
segment was attributed to an improvement in product mix, as a larger group of
off-the-shelf software products were delivered such as BSS products in support
of the nationwide deployment of IPTV and DTV by major telecom operators in
China.





Gross
margin




Three Months Ended September 302010
                  
                  
                  2009
                  
                  
                  % ChangeGross
      margin:Data
      mining
                  
                  
                  33
                  %
                  
                  
                  41
                  %
                  
                  
                  -8
                  %Software
      services
                  
                  
                  60
                  %
                  
                  
                  34
                  %
                  
                  
                  26
                  %Total
      sales
                  
                  
                  46
                  %
                  
                  
                  38
                  %
                  
                  
                  8
                  %





Overall
gross margin increased by 8% year over year for the three months ended September
30, 2010 compared to the same period in 2009, which was primarily due to a
favorable change in product mix in software services resulting in a 26% margin
improvement in that business segment.





Data mining.The gross margin of data mining decreased by 8% year over year for the
three months ended September 30, 2010 compared to the same period in 2009, due
to an unfavorable product mix change. A higher percentage of sales came from the
bundled mobile VAS solutions product line, which tends to have a lower
margin.





Software
services.  The gross margin of software services sales
increased 26% for the three months ended September 30, 2010 compared to the same
period in 2009. The increase was mainly due to a favorable change in product
mix, as the Company continued to increase the sales of off-the-shelf software
products as a percentage of total sales, such as its popular BSS products for
the deployment of IPTV and DTV system.





Nine Months Ended September 302010
                  
                  
                  2009
                  
                  
                  % ChangeGross
      profit:Data
      mining
                  
                  
                  39
                  %
                  
                  
                  41
                  %
                  
                  
                  -2
                  %Software
      services
                  
                  
                  65
                  %
                  
                  
                  33
                  %
                  
                  
                  32
                  %Total
      sales
                  
                  
                  51
                  %
                  
                  
                  38
                  %
                  
                  
                  13
                  %





Overall
gross margin increased by 13% year over year for the nine months ended September
30, 2010 compared to the same period in 2009, for the same reasons as discussed
above for the gross margin improvement year over year for the three months ended
September 30, 2010


17


Operating
expenses




Three Months Ended September 302010
                    
                    
                    2009(In thousands, except percentages)(Unaudited)
                    
                    
                    % of
                      total
                      sales
                    
                    
                    (Unaudited)
                    
                    
                    % of
                      total
                      sales
                    
                    
                    % of ChangesSelling,
      general and administrative expenses
                    
                    $
                    1,462
                    
                    
                    
                    14
                    %
                    
                    $
                    1,640
                    
                    
                    
                    19
                    %
                    
                    
                    -11
                    %Research
      and development costs
                    
                    
                    536
                    
                    
                    
                    5
                    %
                    
                    
                    393
                    
                    
                    
                    4
                    %
                    
                    
                    36
                    %Total
      expenses
                    
                    $
                    1,998
                    
                    
                    
                    19
                    %
                    
                    $
                    2,033
                    
                    
                    
                    23
                    %
                    
                    
                    -2
                    %





Selling, General
and Administrative Expenses.  Selling, general and
administrative expenses consist primarily of salary and bonus, share based
compensation, marketing expenses, fees for professional services, traveling and
transportation expenses, bad debt provision, depreciation and amortization and
office expenses. The total selling, general and administrative expenses were
$1.5 million for the three months ended September 30, 2010, compared to $1.6
million for the three months ended September 30, 2009. The year-on-year decrease
in total expenses for the third quarter of 2010 was $0.1 million. The decrease
was mainly due to a decrease of $0.3 million in bad debt provision, offset by an
increase of $0.2 million in salary and share based compensation
expenses.





Research and
Development Costs.  Research and development costs consist
primarily of personnel-related expenses and amortization of acquired intangibles
for the development of software and maintenance of our database. The total
R&D costs were $0.6 million for the three months ended September 30, 2010,
compared to $0.4 million for the three months ended September 30, 2009. The
year-on-year increase in total R&D costs for the third quarter of 2010 was
$0.2 million. The increase was mainly due to an increase in amortization of
acquired intangibles used in research and development activities.




Nine Months Ended September 302010
                    
                    
                    2009(In thousands, except percentages)(Unaudited)
                    
                    
                    % of
                      total
                      sales
                    
                    
                    (Unaudited)
                    
                    
                    % of
                      total
                      sales
                    
                    
                    % of ChangesSelling,
      general and administrative expenses
                    
                    $
                    4,023
                    
                    
                    
                    17
                    %
                    
                    $
                    2,758
                    
                    
                    
                    16%
                    
                    
                    
                    46%Research
      and development costs
                    
                    
                    1,867
                    
                    
                    
                    8
                    %
                    
                    
                    836
                    
                    
                    
                    5%
                    
                    
                    
                    123%Total
      expenses
                    
                    $
                    5,890
                    
                    
                    
                    25
                    %
                    
                    $
                    3,594
                    
                    
                    
                    21%
                    
                    
                    
                    64%





Selling, General
and Administrative Expenses.  Selling, general and
administrative expenses consist primarily of salary and bonus, share based
compensation, entertaining and marketing expenses, fees for professional
services, traveling and transportation expenses, bad debt provision,
depreciation and amortization and office expenses. The total selling, general
and administrative expenses were $4.0 million for the nine months ended
September 30, 2010, compared to $2.8 million for the nine months ended September
30, 2009. The year-on-year increase in total expenses for the nine months of
2010 was $1.2 million. The increase was mainly due to an increase of $0.4
million in annual bonus, an increase of $0.4 million in share based
compensation, an increase of $0.8 million in amortization expense, offset by a
decrease of $0.3 million in bad debt provision.


18


Research and
Development Costs.  Research and development costs consist
primarily of personnel-related expenses and amortization of acquired intangibles
for the development of software and maintenance of our database. The total
R&D costs were $1.9 million for the nine months ended September 30, 2010,
compared to $0.8 million for the nine months ended September 30, 2009. The
year-on-year increase in total R&D costs for the first half year of 2010 was
$1.1 million. The increase was mainly due to an increase of $0.8 million in
amortization of acquired intangibles used in research and development
activities, and an increase of $0.3 million in R&D payroll.





LIQUIDITY AND CAPITAL
RESOURCES





September 30, 2010
                    (Unaudited)
                  
                  
                  December 31, 2009(In thousands)Cash
      and cash equivalents
                  
                  $
                  10,103
                  
                  
                  $
                  10,239Working
      capital
                  
                  
                  41,825
                  
                  
                  
                  31,968Stockholder’s
      equity
                  
                  $
                  51,932
                  
                  
                  $
                  44,260





As of
September 30, 2010, we had $10.1 million in cash and cash equivalents. We
believe that our ability to generate strong cash flow from our operating
activities, along with our available cash will be sufficient to fund our
operating activities, capital expenditures and other obligations through 2010
and beyond.





The
following tables set forth the movements of our cash and cash equivalents for
the periods presented:





Nine Months Ended September 302010
                    (Unaudited)
                  
                  
                  2009
                    (Unaudited)(In
      thousands)Net
      cash (used in) provided by operating activities
                  
                  $
                  (630)
                  
                  
                  $
                  1,219Net
      cash used in investing activities
                  
                  
                  (410)
                  
                  
                  
                  (3,933
                  )Net
      cash used in financing activities
                  
                  
                  0
                  
                  
                  
                  (72
                  )Effect
      of foreign currency translation on cash and cash
    equivalents
                  
                  
                  904
                  
                  
                  
                  196Net
      decrease in cash and cash equivalents
                  
                  
                  (136)
                  
                  
                  
                  (2,590)Cash
      and cash equivalents - beginning of period
                  
                  
                  10,239
                  
                  
                  
                  5,472Cash
      and cash equivalents - end of period
                  
                  $
                  10,103
                  
                  
                  $
                  2,882





Operating
activities


Net cash
used in operating activities for the nine months ended September 30, 2010 was
$0.6 million. This was primarily attributable to the net income of $6.2 million,
adjusted by non-cash items of share-based compensation expense of $0.5 million,
and depreciation and amortization of $2.6 million, offset by a net decrease in
cash from working capital items of $10.0 million.





Investing
activities


Net cash
used in investing activities for the nine months ended September 30, 2010 was
$0.4 million, which was attributable to acquisition of properties and equipment
and intangible assets.





Financing
activities





No cash
has been used in or provided by financing activities for the nine months ended
September 30, 2010.





OFF-BALANCE
SHEET ARRANGEMENTS





None.


19


Item
3.     Quantitative and Qualitative Disclosures About
Market Risk





Not
applicable.





Item
4.     Controls and Procedures





Disclosure
Controls and Procedures





Disclosure
controls and procedures (as defined in Rules 13(a)-15(e) and
15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) are designed to ensure that (1) information required to be
disclosed in reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms; and (2) that such information is accumulated and
communicated to management, including the principal executive officer and
principal financial officer, to allow timely decisions regarding required
disclosures.  There are inherent limitations to the effectiveness of any
system of disclosure controls and procedures, including the possibility of human
error, the circumvention or overriding of controls and procedures and collusion
to circumvent and conceal the overriding of controls and procedures. 
Accordingly, even effective disclosure controls and procedures can only provide
reasonable assurance of achieving their control objectives.





Under the
supervision and with the participation of our management, including our chief
executive officer and the chief financial officer, we conducted an evaluation of
the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended, as of September 30, 2010, the end of the
period covered by this report (the “Evaluation Date”). Based on this evaluation,
our chief executive officer and chief financial officer concluded as of the
Evaluation Date that our disclosure controls and procedures were effective such
that the material information required to be included in our SEC reports is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms relating to us and our consolidated subsidiaries, and
communicated to our management (including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
required disclosure.





Changes
in internal controls over financial reporting





In the
Amendment No. 2 on Form 10-K/A filed with the SEC on October 28,
2010, management identified the following material weaknesses in
our operations as of December 31, 2009:





Lack of qualified legal
resources in special
transactions. In the process of negotiating and drafting
a significant acquisition agreement, the Company did not engage or seek
support from qualified legal resources.  Consequently, several key
terms in the agreement including the contignent share issuance were poorly
written and ambiguous.





Inadequate internal communication
across business units. Though the applicable accounting treatments in
relation to the asset acquisition agreement were reviewed and approved by the
Company's chief financial officer, the accounting staff applied their own
interpretation of the terms without directly communicating, or seeking
clarification of the contract terms with the business team who led the
negotiation of the acquisition
agreement.  Consequently, management did not detect the method of
accounting for contingent shares was not in comformity with generally accepted
accounting principles.





Management
has been actively engaged in developing remediation plans to address the above
material weaknesses. The remediation efforts that have taken place in the third
quarter of 2010 include the following:





1.
            Implementing procedures to
      improve the review, approval, and recording of all merger and acquisition
      transactions, including review of agreements by high quality external
      legal counsel and timely confirmation of key contract
      terms;


2.
            Establishing top level reviews
      procedures that include the chief financial officer, chief executive
      officer and the Board in relation to merger and acquisition
      transactions.


20


The Audit
Committee has monitored the implementation of the above control procedures. In
addition, under the direction of the Audit Committee, management will continue
to review and make necessary changes to the overall design of the Company’s
internal control environment, as well as to policies and procedures to improve
the overall effectiveness of internal control over financial
reporting.





Other
than the changes discussed above, there were no other changes in our internal
controls over financial reporting (as defined in Rules 13a-15 and 15d-15 under
the Securities Act) during the three months ended September 30, 2010 that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.




21




PART
II.
 OTHER
INFORMATION
  Item
1. Legal
Proceedings
  There has
been no material developments in the legal proceedings reported in our Annual
Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on
March 31, 2010
 Item
1A. Risk
Factors
  We are
not required to respond to this item because we are a smaller reporting
company.
  Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
  Not
applicable.
  Item
3. Defaults
Upon Senior Securities
  Not
applicable.
  Item
4. Removed
and reserved
  Item
5. Other
Information
  None.
  Item
6. Exhibits
  The
following exhibits are furnished as part of the Quarterly Report on Form
10-Q:
  Exhibit
              Description
  31.1
              Certification
      of the Chief Executive Officer (Principal Executive Officer) pursuant to
      Section 302 of the Sarbanes-Oxley Act of
2002.
  31.2
              Certification
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.
  32
              Certifications
      of the Chief Executive Officer (Principal Executive Officer) and the Chief
      Financial Officer pursuant to Section  906 of the Sarbanes-Oxley
      Act of 2002.
  22
 SIGNATURES
  In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
  Dated:
November 12, 2010
  JINGWEI
      INTERNATIONAL LIMITEDBy:
                /s/ Rick
      LukName:
      Rick LukTitle:
      Chief Executive Officer(Principal
      Executive Officer)By:
                /s/ Yong
      XuName:
      Yong XuTitle:
      Chief Financial Officer(Principal
      Accounting and Financial Officer)
 
 23