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 June 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 o No 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
August 13, 2010, there were 17,049,000 shares of the issuer’s common stock, par
value $0.001 per share, outstanding.








PART
      I. FINANCIAL INFORMATION
              
              2Item
      1.
              Condensed
      Consolidated Financial Statements
              
              2Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              16Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              
              22Item
      4.
              Controls
      and Procedures
              
              22PART
      II. OTHER INFORMATION
              
              23Item
      1.
              Legal
      Proceedings
              
              23Item
      1A.
              Risk
      Factors
              
              23Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              
              23Item
      3.
              Defaults
      Upon Senior Securities
              
              23Item
      4.
              Removed
      and reserved
              
              23Item
      5.
              Other
      Information
              
              23Item
      6.
              Exhibits
              
              23


1




PART
I.




FINANCIAL
INFORMATION




Item
      1. Condensed Consolidated Financial StatementsCondensed
      Consolidated Balance Sheets
              
              3Condensed
      Consolidated Statements of Income and Comprehensive Income
              
              4Condensed
      Consolidated Statements of Cash Flows
              
              5Notes
      to Condensed Consolidated Financial Statements
              
              6




2




Jingwei
International Limited and Subsidiaries


Condensed
Consolidated Balance Sheets


(in
US dollars thousands, except par value)




June
      30,
                2010
              
              
              December
      31, 2009(Unaudited)ASSETSCurrent
      assetsCash
      and equivalents
              
              $
              7,933
              
              
              $
              10,239Accounts
      receivable, less allowance of doubtful accounts of $1,154 and $1,266,
      respectively
              
              
              28,974
              
              
              
              23,457Other
      receivables, prepayments and deposits, less allowance for doubtful
      accounts of $198 and $176, respectively
              
              
              2,147
              
              
              
              3,219Inventories
              
              
              4,281
              
              
              
              2,316Deferred
      tax assets
              
              
              245
              
              
              
              258Total
      current assets
              
              
              43,580
              
              
              
              39,489Non-current
      assetsProperty,
      plant and equipment, net
              
              
              1,371
              
              
              
              1,385Intangible
      assets, net
              
              
              16,047
              
              
              
              17,451Long-term
      investment
              
              
              1,745
              
              
              
              1,737Total
      assets
              
              $
              62,743
              
              
              $
              60,062LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesAccounts
      payable
              
              $
              2,591
              
              
              $
              4,154Accruals
      and other payable
              
              
              1,606
              
              
              
              1,279Income
      tax payable
              
              
              1,510
              
              
              
              1,719Loan
      from a stockholder
              
              
              369
              
              
              
              369Total
      current liabilities
              
              
              6,076
              
              
              
              7,521Non-current
      liabilitiesDeferred
      tax liabilities
              
              
              807
              
              
              
              803Total
      liabilities
              
              
              6,883
              
              
              
              8,324EquityCommon
      stock, $0.001 par value; 75,000 shares authorized, 17,049 shares issued
      and outstanding
              
              
              17
              
              
              
              17Additional
      paid-in capital
              
              
              19,334
              
              
              
              18,931Statutory
      and other reserves
              
              
              2,916
              
              
              
              2,916Retained
      earnings
              
              
              23,237
              
              
              
              19,738Accumulated
      other comprehensive income
              
              
              2,846
              
              
              
              2,658Total
      Company’s stockholders’ equity
              
              
              48,350
              
              
              
              44,260Noncontrolling
      interest
              
              
              7,510
              
              
              
              7,478Total
      equity
              
              
              55,860
              
              
              
              51,738Total
      liabilities and equity
              
              $
              62,743
              
              
              $
              60,062





See notes
to condensed consolidated financial statements.




3





Jingwei
International Limited and Subsidiaries


Condensed
Consolidated Statements of Income and Comprehensive Income


(in
US dollars thousands, except per share data)





Six
      Months Ended
              June
      30
            
            
            Three
      Months Ended
              June
      302010
            
            
            2009
            
            
            2010
            
            
            2009(Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)Sales
            
            $
            13,349
            
            
            $
            8,031
            
            
            $
            8,230
            
            
            $
            4,087Cost
      of sales
            
            
            6,095
            
            
            
            5,034
            
            
            
            3,615
            
            
            
            2,611Gross
      profit
            
            
            7,254
            
            
            
            2,997
            
            
            
            4,615
            
            
            
            1,476Operating
      expensesSelling,
      general and administrative expenses
            
            
            2,563
            
            
            
            1,119
            
            
            
            1,609
            
            
            
            715Research
      and development costs
            
            
            1,331
            
            
            
            443
            
            
            
            598
            
            
            
            1903,894
            
            
            
            1,562
            
            
            
            2,207
            
            
            
            905Income
      from operations
            
            
            3,360
            
            
            
            1,435
            
            
            
            2,408
            
            
            
            571Other
      income (expenses)Subsidy
      income
            
            
            320
            
            
            
            355
            
            
            
            11
            
            
            
            234Interest
      income
            
            
            33
            
            
            
            8
            
            
            
            10
            
            
            
            3Interest
      expense
            
            
            (5
            )
            
            
            -
            
            
            
            (3
            )
            
            
            -Other
      expense
            
            
            (60
            )
            
            
            (26
            )
            
            
            (14
            )
            
            
            (12
            )288
            
            
            
            337
            
            
            
            4
            
            
            
            225Income
      before income taxes
            
            
            3,648
            
            
            
            1,772
            
            
            
            2,412
            
            
            
            796Income
      tax expense
            
            
            149
            
            
            
            364
            
            
            
            (67
            )
            
            
            9Net
      income
            
            
            3,499
            
            
            
            1,408
            
            
            
            2,479
            
            
            
            787Less:
      Net income attributable to noncontrolling interest
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      income attributable to the Company’s stockholders
            
            
            3,499
            
            
            
            1,408
            
            
            
            2,479
            
            
            
            787Foreign
      currency translation adjustment
            
            
            188
            
            
            
            48
            
            
            
            173
            
            
            
            5Comprehensive
      income
            
            $
            3,687
            
            
            $
            1,456
            
            
            $
            2,652
            
            
            $
            792Comprehensive income attributable
      to noncontrolling interest
            
            
            32
            
            
            
            10
            
            
            
            31
            
            
            
            1Comprehensive income attributable
      to the Company’s stockholders
            
            
            3,655
            
            
            
            1,446
            
            
            
            2,621
            
            
            
            791Basic
      earnings per share
            
            $
            0.21
            
            
            $
            0.08
            
            
            $
            0.15
            
            
            $
            0.05Diluted
      earnings per share
            
            $
            0.18
            
            
            $
            0.08
            
            
            $
            0.12
            
            
            $
            0.05Weighted
      average common shares outstandingBasic
            
            
            17,049
            
            
            
            17,049
            
            
            
            17,049
            
            
            
            17,049Diluted
            
            
            19,897
            
            
            
            17,049
            
            
            
            20,788
            
            
            
            17,049




See notes
to condensed consolidated financial statements.




4





Jingwei
International Limited and Subsidiaries


Condensed
Consolidated Statements of Cash Flows


(in
US dollars thousands)




Six
      Months Ended
              June
      302010
            
            
            2009(Unaudited)
            
            
            (Unaudited)Cash
      flows from operating activitiesNet
      income
            
            $
            3,499
            
            
            $
            1,408Adjustments
      to reconcile net income to netcash
      (used in) provided by operating activities:Depreciation
      & amortisation
            
            
            1,731
            
            
            
            1,064Share-based
      compensation expense
            
            
            404
            
            
            
            72Changes
      in operating assets and liabilities:Accounts
      receivable, net
            
            
            (5,518
            )
            
            
            (626
            )Other
      receivables, prepayments and deposits
            
            
            1,050
            
            
            
            191Inventories
            
            
            (1,965
            )
            
            
            463Deferred
      tax asset
            
            
            13
            
            
            
            -Accounts
      payable
            
            
            (1,562
            )
            
            
            320Accruals
      and other payables
            
            
            326
            
            
            
            (480
            )Income
      tax payable
            
            
            (208
            )
            
            
            163Net
      cash (used in) provided by operating activities
            
            
            (2,230
            )
            
            
            2,575Cash
      flows from investing activitiesAcquisition
      of property and equipment
            
            
            (174
            )
            
            
            (360
            )Acquisition
      of intangible assets
            
            
            -
            
            
            
            (270
            )Long
      term Investment
            
            
            -
            
            
            
            (50
            )Net
      cash used in investing activities
            
            
            (174
            )
            
            
            (680
            )Cash
      flows from financing activitiesRepayment
      of stockholder loans
            
            
            -
            
            
            
            (71
            )Net
      cash used in financing activities
            
            
            -
            
            
            
            (71
            )Effect
      of foreign currency translation on cash and cash
    equivalents
            
            
            98
            
            
            
            7Net
      (decrease) increase in cash and cash equivalents
            
            
            (2,306
            )
            
            
            1,831Cash
      and cash equivalents - beginning of period
            
            
            10,239
            
            
            
            5,472Cash
      and cash equivalents - end of period
            
            $
            7,933
            
            
            $
            7,303Supplemental
      Disclosure of Cash Flow InformationIncome
      tax paid
            
            $
            351
            
            
            $
            197Interest
      paid
            
            $
            -
            
            
            $
            -





See notes
to condensed consolidated financial statements.




5




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 June 30, 2010 and for the six months ended June 30,
2010, the VIEs had assets of $54.2 million, liabilities of $15.5 million,
revenues of $9.6 million, and operating expenses of $2.9 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.





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.





6
 
 Jingwei
International Limited and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Stated
in US Dollars)
 (Unaudited)


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, 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, representing 10% of the total
number of shares sold in the offering, and the warrants to purchase 1,018,500
shares of the Company’s common stock (“Warrant Shares”).





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 the 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 for the year ended December 31, 2009 filed on July
      13, 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 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.




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 June 30, 2010, and condensed consolidated statements of
income and comprehensive income , and condensed consolidated statements of cash
flows for the six month periods ended June 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 its 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.





7
 
 Jingwei
International Limited and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Stated
in US Dollars)
 (Unaudited)


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 eliminating
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 $7.5 million and $7.5 million as of June
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 June 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,
accounts payable, accruals and other payables, and loan from a stockholder
approximate their fair values due to the short-term maturity of such
instruments.





d)      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 - a
consensus of the FASB Emerging Issues Task Force.  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 does not expect the provisions
of ASU 2010-13 to have a material effect on its financial position, results of
operations or cash flows.





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.





8
 
 Jingwei
International Limited and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Stated
in US Dollars)
 (Unaudited)


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. If a vendor elects early adoption and the
period of adoption is not the beginning of the entity’s fiscal year, the entity
should apply 2010-17 retrospectively from the beginning of the year of adoption.
Vendors may also elect to adopt the amendments in this ASU retrospectively for
all prior periods. The Company does not expect the provisions of ASU 2010-19 to
have a material effect on its financial position, results of operations or cash
flows.





In May
2010, the FASB issued ASU 2010-19, Foreign Currency (Topic 830):
Foreign Currency Issues: Multiple Foreign Currency Exchange
Rates.  The amendments in this Update are effective as of the
announcement date of March 18, 2010. The Company does not expect the provisions
of ASU 2010-19 to have a material effect on its financial position, results of
operations or cash flows.





Since the
filing of 2009 Form 10-K, the FASB issued ASU No. 2010-12 through No. 2010-21.
These ASUs, except for No. 2010-13, 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.





Note
3     ACCOUNTS RECEIVABLE, NET




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





June
      30,2010
              (Unaudited)
            
            
            December 31,
              2009Accounts
      receivable
            
            $
            30,128
            
            
            $
            24,723Less:
      allowance for doubtful debts
            
            
            1,154
            
            
            
            1,266$
            28,974
            
            
            $
            23,457




Note
4     INVENTORIES





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





June
      30, 2010
              (Unaudited)
            
            
            December 31,
              2009Project
      costs
            
            $
            3,551
            
            
            $
            2,272Others
            
            
            730
            
            
            
            44$
            4,281
            
            
            $
            2,316





Note
5     INTANGIBLE ASSETS, NET





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





June
      30, 2010
              (Unaudited)
            
            
            December 31,
              2009
            
            Amortization
              PeriodCostDatabase
            
            $
            14,536
            
            
            $
            14,493
            
            8
      yearsStrategic
      alliance
            
            
            7,090
            
            
            
            7,068
            
            5.5
      yearsNon-compete
      agreement
            
            
            317
            
            
            
            316
            
            2
      yearsSoftware
            
            
            389
            
            
            
            202
            
            8
      years22,332
            
            
            
            22,079Less:
      accumulated amortization
            
            
            6,285
            
            
            
            4,628Net
            
            $
            16,047
            
            
            $
            17,451




9


Jingwei
International Limited and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Stated
in US Dollars)
 (Unaudited)


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





Note
6     INCOME TAX EXPENSE





United
States





Jingwei
International Limited is subject to the US federal tax at a tax rate of 34%. No
provision for US federal income taxes has been made as the Company had no US
taxable income for the quarter ended June 30, 2010 and 2009, and believes that
its earnings are permanently invested in the PRC.





BVI





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





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 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.





10
 
 Jingwei
International Limited and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Stated
in US Dollars)
 (Unaudited)


During
the six months ended June 30, 2010, the Group recognized an income tax expense
of $0.05 million on pretax income of $3.6 million, representing an effective
income tax rate of 1.5%, as compared to an income tax expense of $0.4 million on
a pretax income of $1.8 million, representing an effective income tax rate of
20.5% for the same period in 2009. The unusually low effective tax rate in the
first half year of 2010 was primarily the result of an adjustment in income tax
expense in the current period to reverse estimated enterprise income tax of
2009, upon the approval of Xinguochuang’s application for tax
holiday.





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.





On April
16, 2008 the Company granted 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 US$4.95 and vested equally in four years. The contractual term is
10 years and it is non-transferable. Based on the Black-Scholes option pricing
model, the options were valued at $2.278 per unit with an assumed 80.20%
volatility, 6.25 years term for the options, a risk free rate of 3.27% and a
dividend yield of 0%.  As of June 30, 2010, a total of 146,600 options
have been forfeited.





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 US$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 using the Black-Scholes option-pricing model with an
assumed 70.10% volatility, a five year term for the options, a risk free rate of
3.715% and a dividend yield of 0%. 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 the greater of fair market value of the stock at grant
date or US$1.64. The contractual term is 10 years. Based on the Black-Scholes
option pricing model, the options were valued at $0.883 per unit. 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 using the Black-Scholes
option-pricing model. 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 using
the Black-Scholes option-pricing model. 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.





11
 
 Jingwei
International Limited and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Stated
in US Dollars)
 (Unaudited)


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 the greater of fair market value of the stock at grant
date or $2.05 to be vested over two years. The contractual term is 10 years.
Based on the Black-Scholes option pricing model, the options were valued at
$1.21 per unit.





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
six months ended June 30, 2010 and 2009, total share-based compensation expense
recognized for options under the Plan was $0.4 million and $0.07 million,
respectively.





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





Number of
              options and
              warrants
            
            
            Weight
              average
              exercise price
            
            
            Weight average
              remaining contractual
              life (Years)Outstanding,
      January 1, 2010
            
            
            2,053,250
            
            
            $
            5.27
            
            
            
            3.21Granted
            
            
            250,000
            
            
            $
            2.07
            
            
            
            6.73Forfeited
            
            
            (103,300
            )
            
            $
            4.95
            
            
            
            8.08Outstanding,
      June 30, 2010
            
            
            2,199,850
            
            
            $
            4.92
            
            
            
            2.92





Exercisable
options and warrants as of June 30, 2010:





Range of exercise
              prices
            
            Number outstanding
              currently exercisable as
              of June
      30, 2010
            
            
            Weighted average
              remaining
              contractual life
              (years)
            
            
            Weighted average
              exercise price of
              options currently
              exercisable$1.64-$7.00
            
            
            1,931,219
            
            
            
            2.1
            
            
            $
            5.24





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. 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 per share data):





Six
      Months Ended
                  June
      30,
                
                
                Three Months Ended
                  June
      30,2010
                  (Unaudited)
                
                
                2009
                  (Unaudited)
                
                
                2010
                  (Unaudited)
                
                
                2009
                  (Unaudited)Numerator
      for basic and diluted earnings per share:Net
      income
                
                $
                3,499
                
                
                
                1,408
                
                
                $
                2,479
                
                
                $
                787Denominator
      for basic earnings pershare—weighted
      average shares outstanding
                
                
                17,049
                
                
                
                17,049
                
                
                
                17,049
                
                
                
                17,049Dilutive
      effect of stock-based compensation Plan
                
                
                383
                
                
                
                -
                
                
                
                452
                
                
                
                -Dilutive
      effect of contingently issuable shares
                
                
                2,465
                
                
                
                -
                
                
                
                3,287
                
                
                
                -Denominator
      for diluted earnings per share
                
                
                19,897
                
                
                
                17,049
                
                
                
                20,788
                
                
                
                17,049Basic
      earnings per share
                
                $
                0.21
                
                
                
                0.08
                
                
                $
                0.15
                
                
                $
                0.05Diluted
      earnings per share
                
                $
                0.18
                
                
                
                0.08
                
                
                $
                0.12
                
                
                $
                0.05




Options
and warrants to purchase 2.2 million shares of common stock at an average price
$4.92 per share were outstanding during the three months ended June 30, 2010,
but options and warrants to acquire 1,649,850 shares of common stock were not
included in the computation of diluted EPS because the options’ exercise price
was greater than the average market price of the common shares. These options
and warrants were still outstanding as of June 30, 2010.




12


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, data
mining services, and software and system services. Information for the segments
for the three and six months ended June 30, 2010 and 2009 in accordance with ASC
280 Segment Reporting
is shown separately as follows (in thousands):




Three
      Months Ended June 302010
              
              
              2009Datamining
      Services
              
              
              Software
                Services
              
              
              Total
              
              
              Datamining
      Services
              
              
              Software
                Services
              
              
              TotalNet
      Revenue
              
              $
              4,428
              
              
              $
              3,802
              
              
              $
              8,230
              
              
              $
              2,580
              
              
              $
              1,507
              
              
              $
              4,087Gross
      profit
              
              
              1,934
              
              
              
              2,681
              
              
              
              4,615
              
              
              
              970
              
              
              
              505
              
              
              
              1,475Net
      Income
              
              
              1,039
              
              
              
              1,440
              
              
              
              2,479
              
              
              
              517
              
              
              
              270
              
              
              
              787Segment
      Assets
              
              
              43,879
              
              
              
              18,864
              
              
              
              62,743
              
              
              
              35,777
              
              
              
              11,879
              
              
              
              47,656Depreciation&
      Amortization
              
              
              840
              
              
              
              36
              
              
              
              876
              
              
              
              502
              
              
              
              35
              
              
              
              537Expenditure
      for segment assets
              
              $
              21
              
              
              $
              -
              
              
              $
              21
              
              
              $
              617
              
              
              $
              -
              
              
              $
              617




Six
      Months Ended June 302010
              
              
              2009Datamining
      Services
              
              
              Software
                Services
              
              
              Total
              
              
              Datamining
      Services
              
              
              Software
                Services
              
              
              TotalNet
      Revenue
              
              $
              7,498
              
              
              $
              5,851
              
              
              $
              13,349
              
              
              $
              4,770
              
              
              $
              3,261
              
              
              $
              8,031Gross
      Profit
              
              
              3,204
              
              
              
              4,050
              
              
              
              7,254
              
              
              
              1,959
              
              
              
              1,038
              
              
              
              2,997Net
      Income
              
              
              1,559
              
              
              
              1,940
              
              
              
              3,499
              
              
              
              921
              
              
              
              487
              
              
              
              1,408Segment
      Assets
              
              
              43,879
              
              
              
              18,864
              
              
              
              62,743
              
              
              
              35,777
              
              
              
              11,879
              
              
              
              47,656Depreciation&
      Amortization
              
              
              1,660
              
              
              
              71
              
              
              
              1,731
              
              
              
              993
              
              
              
              71
              
              
              
              1,064Expenditure
      for segment assets
              
              $
              174
              
              
              $
              -
              
              
              $
              174
              
              
              $
              630
              
              
              $
              -
              
              
              $
              630





13


Jingwei
International Limited and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Stated
in US Dollars)
 (Unaudited)


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





Note
10   COMMITMENT AND CONTINGENCY





Lease
Commitment





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





Within
      1 year
            
            $
            166Within
      1-2 years
            
            
            151Within
      2-3 years
            
            
            110Thereafter
            
            
            -$
            427





Other
contractual obligations





On
February 29, 2008, New Yulong IT engaged the Research Institute of Tsinghua
University (“Research Institute”) to conduct a multi-year research and
development joint project for a total consideration of RMB7.0 million
($1,023,811). However, due to key personnel changes at the Research Institute,
there had been little to no progress in 2009 and the project had been on hold
and the agreement was effectively cancelled in accordance with the default
clause in the agreement. As of June 30, 2010, RMB500,000 ($73,129) has been
paid, and there is no further payment obligation to the Research Institute in
accordance with the default clause for project termination in the original
agreement.





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 providing
personal guarantee, for its general business development. In 2009, Jujun paid
back only RMB300,000 ($43,988) but defaulted on the remaining balance. On
November 10, 2009, the Company submitted the dispute over RMB1.7 million
($249,267) to the Shenzhen Arbitration Commission for arbitration against Jujun
and Jerry Yu. On April 19, 2010, the Shenzhen Arbitration Commission provided
its arbitration decision, requesting Jerry Yu 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. At present, the
Court has already ordered the seizure of an apartment property owned by Jerry Yu
in Shanghai.





14
 
 Jingwei
International Limited and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 (Stated
in US Dollars)
 (Unaudited)


NOTE
11  SUBSEQUENT EVENTS





As of
August 15, 2010, the Group did not have significant subsequent
event.




15




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 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 and the negatives of such words 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 customer relationship
marketing 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 about 400 million Chinese
consumers, we enable leading multinational and Chinese 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 telecommunication carriers.
The software services business complements and strengthens sales opportunities
for our high margin 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 corporate customers.





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 burgeoning 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”).





16


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 half year 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 six months for its bundled mobile VAS
solutions.





In
software services, we have seen a surge in demand for our software solutions in
the telecom 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. As the Company
built up its core product portfolios for general deployment to our business
clients in the first half year of 2010, we greatly improve the gross profit
margin of this segment to 71%. 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. We expect to see more
significant sales contributions from this business area in the second half of
2010. 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.





RESULTS
OF OPERATIONS





Sales





Three Months Ended June
      302010
            
            
            2009
            
            
            % Change(In thousands, except percentages)(Unaudited)
            
            
            %
      of sales
            
            
            (Unaudited)
            
            
            %
      of salesSales:Data
      mining
            
            $
            4,428
            
            
            
            54
            %
            
            $
            2,580
            
            
            
            63
            %
            
            
            72
            %Software
      services
            
            
            3,802
            
            
            
            46
            %
            
            
            1,507
            
            
            
            37
            %
            
            
            152
            %Total
      sales
            
            $
            8,230
            
            
            
            100
            %
            
            $
            4,087
            
            
            
            100
            %
            
            
            101
            %





Total net
revenue increased 101% for the second quarter year over year, due to robust
growths in both business segments.




Data mining. Revenue increased by 72% for the second quarter compared to the
same period in 2009.  This increase was mainly due to a continuing
growth in demand for our services in the existing market sector.  At
the same time, the strategic agreement with Newway Technology completed in July,
2009 has provided the platform to leverage our datamining capability to broaden
our services in WAP, IVR, SMS and mobile communication areas which generated new
revenue for this segment in the quarter.




17


Software
Services. The increase in revenue by 152% for the second quarter
compared to the same period in 2009 was mainly related to the Company’s
development of APP Store platform for one of the major telecome
operators.





Six Months Ended June
      302010
            
            
            2009
            
            
            % Change(In thousands, except percentages)(Unaudited)
            
            
            %
      of sales
            
            
            (Unaudited)
            
            
            %
      of salesSales:Data
      mining
            
            $
            7,498
            
            
            
            56%
            
            
            $
            4,770
            
            
            
            59
            %
            
            
            57
            %Software
      services
            
            
            5,851
            
            
            
            44%
            
            
            
            3,261
            
            
            
            41
            %
            
            
            79
            %Total
      sales
            
            $
            13,349
            
            
            
            100%
            
            
            $
            8,031
            
            
            
            100
            %
            
            
            66
            %





Total
sales were $13.3 million for the six months ended June 30, 2010, compared to
$8.0 million for the six months ended June 30, 2009. The year-on-year increase
in total sales was $5.3 million or 66% for the first half year of 2010, with
robust revenue growth from both business segments.





Data mining.Data mining sales increased 57% for the six months ended June 30, 2010,
as the demand for the Group’s data mining service including bundled mobile VAS
solutions continued to grow.





Software
services.  Software services sales increased 79% for the six
months ended June 30, 2010. 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 a successful
development of an APP Store platform for a major telecom operator.




Cost
of Sales




Three
      Months Ended
              June
      302010
              (Unaudited)
            
            
            2009
              (Unaudited)
            
            
            %
      Change(In
      thousands, except percentages)Cost
      of sales:Data
      mining
            
            $
            2,494
            
            
            $
            1,610
            
            
            
            55
            %Software
      services
            
            
            1,121
            
            
            
            1,001
            
            
            
            12
            %Total
      cost of sales
            
            $
            3,615
            
            
            $
            2,611
            
            
            
            38
            %





Total
cost of sales was $3.6 million for the three months ended June 30, 2010,
increasing by 38% from $2.6 million for the same period in 2009.





Data mining.Cost of data mining increased 55% for the three months ended June 30,
2010 and was in line with the increase in sales.





Software
services.  Cost of software services increased 12% for the
three months ended June 30, 2010. The percentage increase was much lower than
the percentage of sales growth in the same period, mainly due to an improvement
in product mix, as a large group of off-the-shelf software products were
delivered this quarter to support the expanding deployment of IPTV and DTV by
major telecommunication operators in China.




18




Six
      Months Ended
              June
      302010
              (Unaudited)
            
            
            2009
              (Unaudited)
            
            
            %
      Change(In
      thousands, except percentages)Cost
      of sales:Data
      mining
            
            $
            4,294
            
            
            $
            2,811
            
            
            
            53
            %Software
      services
            
            
            1,801
            
            
            
            2,223
            
            
            
            -19
            %Total
      cost of sales
            
            $
            6,095
            
            
            $
            5,034
            
            
            
            21
            %





For the six months ended
June 30, 2010, total cost of sales increased by 21% compared to the same period
in 2009. The increase in cost of sales was mainly due to the 53% increase in
cost of sales from Data mining segment, offset by the 19% decrease from Software
Services segment. The decrease from Software Services segment was attributed to
an improvement in product mix, as a large group of off-the-shelf software
products were delivered to support the expanding deployment of IPTV and DTV by
major telecommunication operators in China.





Gross
margin




Three Months Ended
              June
      302010
              (Unaudited)
            
            
            2009
              (Unaudited)
            
            
            % ChangeGross
      margin:Data
      mining
            
            
            44
            %
            
            
            38
            %
            
            
            6
            %Software
      services
            
            
            71
            %
            
            
            34
            %
            
            
            37
            %Total
      sales
            
            
            56
            %
            
            
            36
            %
            
            
            18
            %





Overall
gross margin increased by 18% year over year for the three months ended June 30,
2010, which was primarily due to a favorable change in product mix resulting in
a 37% margin improvement in software services.





Data mining.The gross margin of data mining increased by 6% year over year for the
three months ended June 30, 2010, due to improved pricing in products
offered.





Software
Services.  The gross margin of software services sales
increased 37% for the three months ended June 30, 2010. The increase was mainly
due to a favorable change in product mix, as a large group of off-the-shelf
software products were delivered to support the expanding deployment of IPTV and
DTV by major telecommunication operators in China.





Six Months Ended
              June
      302010
              (Unaudited)
            
            
            2009
              (Unaudited)
            
            
            % ChangeGross
      margin:Data
      mining
            
            
            43
            %
            
            
            41
            %
            
            
            2
            %Software
      services
            
            
            69
            %
            
            
            32
            %
            
            
            37
            %Total
      sales
            
            
            54
            %
            
            
            37
            %
            
            
            17
            %




19




Overall
gross margin increased by 17% year over year for the six months ended June 30,
2010, for the same reasons as discussed above for the gross margin improvement
year over year for the three months ended June 30, 2010





Operating
expenses




Three Months Ended June
      302010
            
            
            2009(In thousands, except percentages)(Unaudited)
            
            
            % of
              total
              sales
            
            
            (Unaudited)
            
            
            % of
              total
              sales
            
            
            % of ChangesSelling,
      general and  administrative expenses
            
            $
            1,609
            
            
            
            20
            %
            
            $
            715
            
            
            
            17
            %
            
            
            125
            %Research
      and development costs
            
            
            598
            
            
            
            7
            %
            
            
            190
            
            
            
            5
            %
            
            
            215
            %Total
      expenses
            
            $
            2,207
            
            
            
            27
            %
            
            $
            905
            
            
            
            22
            %
            
            
            144
            %




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 $1.6 million for the three months ended June
30, 2010, compared to $0.7 million for the three months ended June 30, 2009. The
year-on-year increase in total expenses for the second quarter of 2010 was $0.9
million. The increase was mainly due to an increase of $0.3 million in share
based compensation, an increase of $0.2 million in bad debt provision, an
increase of $0.3 million in amortization expense, and an increase of $0.1
million in professional fees for the NASDAQ listing.





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 June 30, 2010,
compared to $0.2 million for the three months ended June 30, 2009. The
year-on-year increase in total R&D costs for the second quarter of 2010 was
$0.4 million. The increase was mainly due to an increase of $0.3 million in
amortization of acquired intangibles used in research and development
activities, and an increase of $0.1 million in R&D payroll.




Six Months Ended June
      302010
            
            
            2009(In thousands, except percentages)(Unaudited)
            
            
            % of
              total
              sales
            
            
            (Unaudited)
            
            
            % of
              total
              sales
            
            
            % of ChangesSelling,
      general and administrative expenses
            
            $
            2,563
            
            
            
            19
            %
            
            $
            1,119
            
            
            
            14
            %
            
            
            129
            %Research
      and development costs
            
            
            1,331
            
            
            
            10
            %
            
            
            443
            
            
            
            6
            %
            
            
            200
            %Total
      expenses
            
            $
            3,894
            
            
            
            29
            %
            
            $
            1,562
            
            
            
            20
            %
            
            
            149
            %




20




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 $2.6 million for the six months ended June 30,
2010, compared to $1.1 million for the six months ended June 30, 2009. The
year-on-year increase in total expenses for the first half year of 2010 was $1.5
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
$0.1 million in bad debt provision, an increase of $0.3 million in amortization
expense, and an increase of $0.2 million in office 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 $1.3 million for the six months ended June 30, 2010, compared
to $0.4 million for the six months ended June 30, 2009. The year-on-year
increase in total R&D costs for the first half year of 2010 was $0.8
million. The increase was mainly due to an increase of $0.5 million in
amortization of acquired intangibles used in research and development
activities, and an increase of $0.2 million in R&D payroll.





LIQUIDITY
AND CAPITAL RESOURCES





June
      30, 2010
              (Unaudited)
            
            
            December 31,
              2009(In thousands)Cash
      and cash equivalents
            
            $
            7,933
            
            
            $
            10,239Accounts
      receivable, net
            
            
            28,974
            
            
            
            23,457Working
      capital
            
            
            37,504
            
            
            
            31,968Stockholder’s
      equity
            
            $
            48,350
            
            
            $
            44,260





As of
June 30, 2010, we had $7.9 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:





Six
      Months Ended June 302010
              (Unaudited)
            
            
            2009
              (Unaudited)(In
      thousands)Net
      cash (used in) provided by operating activities
            
            $
            (2,230)
            
            
            $
            2,575Net
      cash used in investing activities
            
            
            (174)
            
            
            
            (681
            )Net
      cash used in financing activities
            
            
            (0)
            
            
            
            (72
            )Effect
      of foreign currency translation on cash and cash
    equivalents
            
            
            98
            
            
            
            9Net
      (decrease) increase in cash and cash equivalents
            
            
            (2,306)
            
            
            
            1,831Cash
      and cash equivalents - beginning of period
            
            
            10,239
            
            
            
            5,472Cash
      and cash equivalents - end of period
            
            $
            7,933
            
            
            $
            7,303





Operating
activities




Net cash
used in operating activities for the six months ended June 30, 2010 was $2.2
million. This was primarily attributable to the net income of $3.5 million,
adjusted by non-cash items of share-based compensation expense of $0.4 million,
and depreciation and amortization of $1.7 million, offset by a net decrease in
cash from working capital items of $7.9 million.





21


Investing
activities




Net cash
used in investing activities for the six months ended June 30, 2010 was $0.2
million, which was attributable to acquisition of properties and
equipment.





Financing
activities





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





OFF-BALANCE
SHEET ARRANGEMENTS





None.





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 (the “Security Act”), as of June 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





There
were no 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
June 30, 2010 that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.




22


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




10.1*
            Offer
      Letter dated February 23, 2010 between Jingwei International Limited and
      Mr. Yong Xu




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.





*
Management contract or compensatory plan or arrangement




23


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.




JINGWEI
      INTERNATIONAL LIMITEDDated:
      August 16, 2010
              By:
              /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)




24