UNITED
STATES
  SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
  FORM
10-Q/A
 Amendment
No. 1
 
 x
                Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended September 30,
2009.
 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 x   No  ̈
  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   ̈ No   ̈ *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 16, 2009, there were 17,049,000 shares of the issuer’s common stock,
par value $0.001 per share, outstanding.
  
 
 Explanatory
Note
  This
Amendment No. 1 (this “Amendment”) on Form 10-Q/A, which amends and restates
items identified below with respect to the Quarterly Report on Form 10-Q for the
three and nine months ended September 30, 2009 filed by  Jingwei
International Limited (the “Company”) with the Securities and Exchange
Commission (the “SEC”) on November 16, 2009 (the “Original Form 10-Q”), is being
filed to reflect revisions to Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations.
 
 Effective on
July 1, 2009, the Company and its wholly owned subsidiary, Shenzhen
Xinguochuang Information Technology Co., Ltd. (“Xinguo Chuang”) acquired the
value-added service related sales channel, product know-how and technological
achievements from Shenzhen Newway Digital S&T Co., Ltd.(“Newway”). In
exchange, the Company agreed to pay Newway an acquisition fee of $6.6 million
(RMB 45.0 million) in the forms of both cash and shares. Due to
difficulties in interpreting the original agreement, the financial staff
misinterpreted several provisions in relation to consideration. After an
internal review and a confirmation with Newway, management has identified the
following errors related to accounting for this acquisition:
 
 a.
              Initial measurement of intangible
      assets
 
 The
intangible assets are now measured to be $7.4 million (RMB 50.5 million) by the
amount of cash paid, the cost of total equity interests to be issued, and the
assigned asset value of $0.8 million (RMB 5.5 million) based on the assessment
that it is more likely than not that the tax basis of the intangible assets
acquired is zero. Instead, the initial value of the intangible assets was
improperly measured to be $6.1 million (RMB 41.7 million).  As a part
of the purchase consideration, the contingently issuable shares were believed to
have a fixed monetary value of $3.3 million (RMB 22.5 million) with the number
of shares determined by dividing the total amount into market price at the time
of distribution of the shares. As a result, these shares were classified as a
non-current liability and a discount for the time value of two years had been
applied, thus understating the value of intangible assets.
 
 b.
              Classification of equity
      interests paid
 
 As
discussed above, a fixed number of shares determinable on the acquisition date
will be issued at one year anniversary, as compared to the misunderstanding that
a fixed moneratry value of obligation would have to be settled at a variable
number of shares.  The monetary benefits that the Newway parties will
receive therefore vary predominantly with the share price of the
Company. The Company meant to bring in an industry player like Newway as a
significant shareholder, and align Newway’s long term interest with the existing
shareholders.  In conclusion, the contingently issuable shares should
be recorded under equity.
 
 For
purposes of this Form 10-Q/A, and in accordance with Rule 12b-15 under the
Securities Exchange Act of 1934, as amended, each item of the Original Form 10-Q
that was affected by the restatement has been amended and restated in its
entirety. No material changes have been made in this Form 10-Q/A to update other
disclosures presented in the Original Form 10-Q, except as required to reflect
the effects of the restatement. This Form 10-Q/A does not reflect events
occurring after the filing of the Original Form 10-Q or modify or update those
disclosures, including the exhibits to the Original Form 10-Q affected by
subsequent events. The following sections of this Form 10-Q/A have been amended
to reflect the restatement:
   Part
I—Item 1—Consolidated Financial Statements, and
  Part
I—Item 2—Management's Discussion and Analysis or Plan of Operation
  
 This Form
10-Q/A is dated as of a current date and includes as exhibits 31.1, 31.2, and 32
new certifications
by the Company’s Chief Executive Officer and Chief Financial Officer as required
by Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as
amended. Accordingly, this Form 10-Q/A should be read in conjunction with our
filings made with the SEC subsequent to the filing of the Original Form
10-Q.
  2
  PART
      I. FINANCIAL INFORMATIONItem
      1.
                Consolidated
      Financial Statements
                4Item
      2.
                Management’s
      Discussion and Analysis or Plan of Operation
                33Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                44Item
      4T.
                Controls
      and Procedures
                44PART
      II. OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                45Item
      1A.
                Risk
      Factors
                45Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                45Item
      3.
                Defaults
      Upon Senior Securities
                45Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                45Item
      5.
                Other
      Information
                45Item
      6.
                Exhibits
                45
  3
  PART
I. FINANCIAL INFORMATION
 
 Item
1. Consolidated Financial Statements
 
 Jingwei
International Limited
 
 and
 
 Subsidiaries
 
 Consolidated
Financial Statements
 
 September
30, 2009
  4
  Jingwei
International Limited
 and
 Subsidiaries
 
 CONTENTS
 
 PageConsolidated
      Balance Sheets
                6Consolidated
      Statements of Operations and Comprehensive Income
                7Consolidated
      Statements of Cash  Flows
                8Notes
      to Consolidated Financial Statements
                9-32
  5
  Jingwei
International Limited and Subsidiaries
 Consolidated
Balance Sheets
 (Stated
in US Dollars)
 September 30,
                      
                      
                      December 31,2009
                      
                      
                      2008(Unaudited)
                        (Restated)
                      
                      
                      (Audited)ASSETSCurrent
      assetsCash
      and equivalents
                      
                      $
                      2,882,340
                      
                      
                      $
                      5,472,408Inventories
                      
                      
                      2,338,740
                      
                      
                      
                      2,802,037Trade
      receivables, less allowance for doubtful   accounts of
      $907,409 and $135,422, respectively
                      
                      
                      24,000,277
                      
                      
                      
                      19,371,524Other
      receivables, prepayments and deposits, less allowance for doubtful
      accounts of $175,701 and $117,787, respectively
                      
                      
                      3,247,783
                      
                      
                      
                      3,749,169Total
      Current Assets
                      
                      
                      32,469,140
                      
                      
                      
                      31,395,138Non-current
      assetsProperty,
      plant and equipment, net
                      
                      
                      1,442,624
                      
                      
                      
                      1,305,917Intangible
      assets, net
                      
                      
                      18,225,932
                      
                      
                      
                      12,238,501Long
      term investment
                      
                      
                      1,737,452
                      
                      
                      
                      1,733,244$
                      53,875,148
                      
                      
                      $
                      46,672,800LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesTrade
      payables
                      
                      $
                      2,082,215
                      
                      
                      $
                      1,965,619Accruals
      and other payables
                      
                      
                      1,105,479
                      
                      
                      
                      1,465,571Income
      tax payable
                      
                      
                      604,770
                      
                      
                      
                      358,168Deferred
      tax
                      
                      
                      347,004
                      
                      
                      
                      192,930Loan
      from a stockholder
                      
                      
                      488,006
                      
                      
                      
                      559,286Total
      Current Liabilities
                      
                      
                      4,627,474
                      
                      
                      
                      4,541,574Deferred
      tax, non-current
                      
                      
                      803,194
                      
                      
                      
                      -EquityCommon
      stock, $.001 par value; 75,000,000 shares authorized, 17,049,000 shares
      issued and outstanding
                      
                      
                      17,049
                      
                      
                      
                      17,049Additional
      paid-in capital
                      
                      
                      18,799,572
                      
                      
                      
                      15,403,411Statutory
      and other reserves
                      
                      
                      883,936
                      
                      
                      
                      883,936Retained
      earnings
                      
                      
                      18,612,896
                      
                      
                      
                      15,803,104Accumulated
      other comprehensive income
                      
                      
                      2,653,260
                      
                      
                      
                      2,564,066Total
      Jingwei International Stockholders' Equity
                      
                      
                      40,966,713
                      
                      
                      
                      34,671,566Noncontrolling
      interest
                      
                      
                      7,477,767
                      
                      
                      
                      7,459,660Total
      Equity
                      
                      
                      48,444,480
                      
                      
                      
                      42,131,226$
                      53,875,148
                      
                      
                      $
                      46,672,800
 
 See notes
to consolidated financial statements
  6
 
 Jingwei
International Limited and Subsidiaries
 Consolidated
Statements of Operations and Comprehensive Income
 (Stated
in US Dollars)
 Three months Ended September 30,
                    
                    
                    Nine months Ended September 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008(Unaudited)
                      (Restated)
                    
                    
                    (Unaudited)
                    
                    
                    (Unaudited)
                      (Restated)
                    
                    
                    (Unaudited)Sales
                    
                    $
                    8,763,167
                    
                    
                    $
                    8,568,360
                    
                    
                    $
                    16,793,680
                    
                    
                    $
                    23,110,226Cost
      of sales
                    
                    
                    (5,427,567
                    )
                    
                    
                    (5,127,216
                    )
                    
                    
                    (10,461,258
                    )
                    
                    
                    (11,065,735
                    )Gross
      Margin
                    
                    
                    3,335,600
                    
                    
                    
                    3,441,144
                    
                    
                    
                    6,332,422
                    
                    
                    
                    12,044,491ExpensesSelling,
      General and Administrative expenses
                    
                    
                    (1,639,683
                    )
                    
                    
                    (1,278,613
                    )
                    
                    
                    (2,758,172
                    )
                    
                    
                    (2,988,800
                    )Research
      and development costs
                    
                    
                    (392,855
                    )
                    
                    
                    (202,503
                    )
                    
                    
                    (836,242
                    )
                    
                    
                    (718,646
                    )(2,032,538
                    )
                    
                    
                    (1,481,116
                    )
                    
                    
                    (3,594,414
                    )
                    
                    
                    (3,707,446
                    )Income
      from operations
                    
                    
                    1,303,062
                    
                    
                    
                    1,960,028
                    
                    
                    
                    2,738,008
                    
                    
                    
                    8,337,045Other
      income (expense)Subsidy
      income
                    
                    
                    196,655
                    
                    
                    
                    -
                    
                    
                    
                    552,041
                    
                    
                    
                    543,690Interest
      income
                    
                    
                    167,154
                    
                    
                    
                    224,673
                    
                    
                    
                    174,918
                    
                    
                    
                    233,433Finance
      costs
                    
                    
                    -
                    
                    
                    
                    (3,940
                    )
                    
                    
                    -
                    
                    
                    
                    (11,979
                    )Other
      expenses
                    
                    
                    (15,290
                    )
                    
                    
                    (13,733
                    )
                    
                    
                    (41,585
                    )
                    
                    
                    (38,183
                    )348,519
                    
                    
                    
                    207,000
                    
                    
                    
                    685,374
                    
                    
                    
                    726,961Income
      before income taxes
                    
                    
                    1,651,581
                    
                    
                    
                    2,167,028
                    
                    
                    
                    3,423,382
                    
                    
                    
                    9,064,006Income
      tax expense
                    
                    
                    (249,973
                    )
                    
                    
                    (265,229
                    )
                    
                    
                    (613,590
                    )
                    
                    
                    (1,345,854
                    )Net
      income
                    
                    
                    1,401,608
                    
                    
                    
                    1,901,799
                    
                    
                    
                    2,809,792
                    
                    
                    
                    7,718,152Less:
      Net income attributalbe to the noncontrolling interest
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      Income attributable to Jingwei International Limited and
      Subsidiaries
                    
                    $
                    1,401,608
                    
                    
                    $
                    1,901,799
                    
                    
                    $
                    2,809,792
                    
                    
                    $
                    7,718,152Foreign
      currency translation adjustment
                    
                    
                    40,842
                    
                    
                    
                    77,559
                    
                    
                    
                    89,194
                    
                    
                    
                    1,338,993Comprehensive
      Income
                    
                    $
                    1,442,450
                    
                    
                    $
                    1,979,358
                    
                    
                    $
                    2,898,986
                    
                    
                    $
                    9,057,145Earnings
      per shareBasic
      and diluted
                    
                    $
                    0.08
                    
                    
                    $
                    0.11
                    
                    
                    $
                    0.16
                    
                    
                    $
                    0.45Weighted
      Average Common Shares OutstandingBasic
      and diluted
                    
                    
                    17,049,000
                    
                    
                    
                    17,049,000
                    
                    
                    
                    17,049,000
                    
                    
                    
                    17,049,000
 
 See notes
to consolidated financial statements.
  7
 
 Jingwei
International Limited and Subsidiaries
 Consolidated
Statements of Cash Flows
 (Stated
in US Dollars)
 Nine Months Ended September 30,2009
                      
                      
                      2008(Unaudited)
                        (Restated)
                      
                      
                      (Unaudited)Cash
      flows from operating activities:Net
      income
                      
                      $
                      2,809,792
                      
                      
                      $
                      7,718,152Adjustments
      to reconcile net income to netcash
      provided by (used in) operating activities:Depreciation
      & amortization
                      
                      
                      1,942,677
                      
                      
                      
                      1,230,667Allowance
      for doubful accounts
                      
                      
                      829,901
                      
                      
                      
                      31,821Amortization
      of stock options issued for services
                      
                      
                      108,994
                      
                      
                      
                      300,127Changes
      in operating assets and liabilities:Trade
      receivables
                      
                      
                      (5,536,162
                      )
                      
                      
                      (10,031,166
                      )Other
      receivables, prepayments and deposits
                      
                      
                      443,472
                      
                      
                      
                      (1,275,529
                      )Inventories
                      
                      
                      463,297
                      
                      
                      
                      (592,805
                      )Trade
      payables
                      
                      
                      116,596
                      
                      
                      
                      78,592Other
      payables and accrued expenses
                      
                      
                      (360,092
                      )
                      
                      
                      (438,628
                      )Deferred
      tax
                      
                      
                      154,074
                      
                      
                      
                      -Income
      tax payable
                      
                      
                      246,602
                      
                      
                      
                      289,598Net
      cash flows provided by (used in) operating activities
                      
                      
                      1,219,151
                      
                      
                      
                      (2,689,171
                      )Cash
      flows from investing activities:Acquisition
      of property and equipment
                      
                      
                      (343,536
                      )
                      
                      
                      -Acquisition
      of intangible assets
                      
                      
                      (3,589,934
                      )
                      
                      
                      (494,498
                      )Long
      term Investment
                      
                      
                      -
                      
                      
                      
                      (893,918
                      )Net
      cash flows used in investing activities
                      
                      
                      (3,933,470
                      )
                      
                      
                      (1,388,416
                      )Cash
      flows from financing activities:Repayment
      to loan from a stockholder
                      
                      
                      (71,579
                      )
                      
                      
                      -Net
      cash flows used in financing activities
                      
                      
                      (71,579
                      )
                      
                      
                      -Effect
      of foreign currency translation on cash and cash
    equivalents
                      
                      
                      195,830
                      
                      
                      
                      452,349Net
      decrease in cash and equivalents
                      
                      
                      (2,590,068
                      )
                      
                      
                      (3,625,238
                      )Cash
      and cash equivalents-beginning of period
                      
                      
                      5,472,408
                      
                      
                      
                      10,760,020Cash
      and cash equivalents-end of period
                      
                      $
                      2,882,340
                      
                      
                      $
                      7,134,782Supplemental
      disclosure of cash flow informationIncome
      tax paid
                      
                      $
                      268,536
                      
                      
                      $
                      1,101,020Supplemental
      disclosure of non-cash investing activitiesTransfer
      of prepayment to intangible assets
                      
                      $
                      -
                      
                      
                      $
                      5,557,110
 See notes
to consolidated financial statements.
  8
  NOTE
1  CORPORATE INFORMATION AND DESCRIPTION OF BUSINESS
 
 Corporation
Information
 
 Jingwei
International Limited ("the Company" or "Jingwei International") and its
consolidated subsidiaries and variable interest entities (the “Group”, “we” or
“us”) are a technology services provider in China specializing in software and
data mining services. In May 2006, Mr. George (Jianguo) Du, our President and
Chairman of the board of directors, established Jingwei International
Investments Limited, a company organized under the laws of the British Virgin
Islands (“Jingwei BVI”) and a wholly owned subsidiary of Jingwei International
Limited. Jingwei BVI has one wholly owned subsidiary, Jingwei International
Investment (HK) Limited (“Jingwei HK”), which was established on October 31,
2006 in Hong Kong. On February 8, 2007, a wholly owned subsidiary of Jingwei HK,
Jingwei Hengtong Technology (ShenZhen) Company Limited (“Jingwei Hengtong”) was
established in People’s Republic of China (“PRC’). On the same day, Jingwei
Hengtong and Shenzhen Jingwei Communication Company, Limited (Jingwei
Communication), a PRC company, entered into various agreements. 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. These agreements with Jingwei Communicaiton are for a ten year term
with early termination in accordance with certain terms of the agreements.
Jingwei Communication has two subsidiaries, New Yulong Information Technology
Company Limited (“Yulong IT”) of which Jingwei Communication owns 100% and New
Yulong Software Technology Development Company Limited. (“Yulong Software”) of
which Jingwei Communication owns 51.89% and Yulong IT owns the remaining 48.11%.
On July 23, 2008, Yulong IT established a 100%-owned subsidiary, Beijing Media
Advertising Company Limited (“Beijing Media”). On April 29, 2009, Yulong IT
established a 100%-owned subsidiary, Shenzhen Xinguo Chuang Information
Technology Company Limited (“Xinguo Chuang”).
 
 On May
16, 2007, Jingwei BVI entered into a share exchange agreement with Neoview,
Synergy Business Consulting LLC, a principal shareholder of Neoview, and the
shareholders of Jingwei BVI. Neoview is a public Shell Company (“Shellco”)
organized under the law of Nevada. Pursuant to the share exchange agreement,
Shellco acquired all of Jingwei BVI’s issued and outstanding shares from Jingwei
BVI’s shareholders in exchange for the issuance to Jingwei BVI’s shareholders 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 will become a wholly-owned subsidiary of
Shellco. Under accounting principles generally accepted in the United States,
the share exchange is considered to be a capital transaction in substance,
rather than a business combination.  That is, the share exchange is
equivalent to the issuance of stock by Jingwei BVI for the net monetary assets
of Shellco, accompanied by a recapitalization, and is accounted for as a change
in capital structure.  Accordingly, the accounting for the share
exchange will be identical to that resulting from a reverse acquisition, except
no goodwill will be recorded.  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. Shares and per share amounts stated
have been adjusted to reflect the merger.
 
 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, including the warrants to purchase
1,018,500 shares of the Company’s common stock. The warrants to purchase 441,350
shares were recorded as a non-cash offering expense.
  9
  In
connection with the Offering, the Company also entered into a registration
rights agreement (the “Registration Rights Agreement”) with the Investors, in
which the Company agreed to file a registration statement (the “Registration
Statement”) with the Securities and Exchange Commission (the “SEC”) to register
for resale of the shares of common stock issued as part of the Units and the
1,018,500 shares of Common Stock underlying the Warrants (the “Warrant Shares”),
within 60 calendar days of the Closing Date of the Offering, and use the
Company’s best efforts to have the registration statement declared effective
within 120 calendar days of the Closing Date of the Offering, or 180 calendar
days following the Closing Date of the Offering, if the registration statement
is subject to review and comment by the SEC. The Company will pay liquidated
damages of 1% of the dollar amount of the Units sold in the Offering per month,
payable in cash, up to a maximum of 10%, if each of the events occurs as the
registration statement is not filed and/or declared effective within the
foregoing time periods, until such event is cured.
 
 The
Company did not meet the July 16, 2007 filing deadline (60 days from the Closing
Date of the Offering) and November 12, 2007 effective deadline (180 days from
the Closing Date of the Offering) and therefore incurred liquidated damages of
$341,975 on that date. The Company is also incurring interest expense of 18% per
annum rate of the liquidated damages.
 
 The
Company also entered into an escrow agreement with CRT Capital Group, LLC, a
representative of the Investors (“CRT”), Continental Stock Transfer & Trust
Company (the “Escrow Agent”) and certain of the Shareholders (the “Escrow
Agreement”), in which 2,000,000 of the Shares (the “Escrow Shares”) were
delivered to the Escrow Agent. The Escrow Shares are being held as security for
the achievement of $6,827,000 in net income for the year ended December 31, 2007
(the “Net Income Threshold”).  If the Company achieves the Net Income
Threshold, the Escrow Shares will be released back to such Shareholders. If the
Net Income Threshold is not achieved, an aggregate number of Escrow Shares (such
number to be determined by a formula included in the Escrow Agreement) will be
distributed pro-rata to the Investors, based on the actual net income for the
year ended December 31, 2007.
 
 As of
December 31 2007, the Company achieved the Net Income Threshold. The 2,000,000
shares were released by the Escrow Agent.
 
 Following
the completion of the merger and the Offering, Shellco had 17,049,000 shares of
Common Stock outstanding on a fully-diluted basis.
  10
  Description
of Business
 The
Company, through its subsidiaries and VIEs, is one of the leading providers of
data mining and customer relationship marketing services in the PRC. With a
customer database of about 400 million Chinese consumers, we enable leading
multinational and Chinese companies to reach their target audience. Our 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. We also operate a software services business, which
provides a broad range of billing systems, provisioning solutions, decision
support and customer relationship management systems for China’s leading mobile
telecommunication carriers. The software services business strengthens sales
opportunities for our high margin data mining platform, and allows us to enhance
our customer database. In addition, it allows us to leverage the telecom
resources to provide comprehensive marketing and advertising delivery channels
to reach the target consumers for our corporate customers.
 
 NOTE
2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
 Basis
of presentation and consolidation
 
 1.
              The
      accompanying consolidated financial statements of Jingwei International,
      its subsidiaries, namely, Jingwei BVI, Jingwei HK, Jingwei Hengtong, and
      its variable interest entities, namely Jingwei Communication, Yulong IT,
      Yulong Software, Beijing Media and Xingguo Chuang have been prepared in
      accordance with accounting principles generally accepted in the United
      States of America (“GAAP”). These statements include all adjustments
      (consisting only of their normal recurring adjustments) which management
      believes necessary for a fair presentation of the statements and have been
      prepared on a consistent basis using the accounting policies described in
      the Form 10-K/A for the year ended December 31, 2008 (“2008 Form 10-K/A”).
      The Company believes that the accompanying disclosures are adequate to
      make the information presented not misleading.  The Notes to
      Financial Statements included in the 2008 Form 10-K/A should be read in
      conjunction with the accompanying interim financial statements. The
      interim operating results for the three months and nine months ended
      September 30, 2009 may not be indicative of operating results to be
      expected for the full year.
 
 The
consolidated financial statements include the accounts of Jingwei International,
its subsidiaries and variable interest entities. All significant inter-company
accounts and transactions have been eliminated in consolidation.
 
 On
January 17, 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46: Consolidation of Variable Interest Entities, an
interpretation of ARB 51 (“FIN 46”), which was superseded by a revised
interpretation (“ASC Topic 810”). These interpretations address financial
reporting for entities over which control is achieved through means other than
voting rights. According to the requirements of ASC Topic 810, Jingwei
International has evaluated its relationships with Jingwei Communication.
Jingwei International has concluded that, Jingwei Communication is a “variable
interest entity” for accounting purposes, since as a result of the contractual
arrangements, which enable Jingwei International to control Jingwei
Communication, Jingwei International is the primary beneficiary of Jingwei
Communication. Accordingly, Jingwei International adopted the provisions of ASC
Topic 810 and consolidates Jingwei Communication. Jingwei Communication’s
original capital contribution is recorded as “Noncontrolling interest” on the
Company’s consolidated balance sheet.
 As
Jingwei International is the primary beneficiary of Jingwei Communication, New
Yulong IT, New Yulong Software, and Beijing New Media, those entities are
qualified as VIEs. The assets and liabilities and revenues and expenses of the
VIE have been included in the accompanying consolidated financial statements.
The principal activities of the VIE are in the provision of datamining and
software development services. As of September 30, 2009, the VIE had assets of
$47,126,482, liabilities of $19,947,363, revenues of $14,582,682, and operating
expenses of $3,055,787. No assets were pledged or given as collateral against
any borrowings.
  11
 
 Pursuant to the operating
agreement among Jingwei Hengtong, Jingwei Communication and the shareholders of
Jingwei Communication signed on February 8, 2007, Jingwei Hengtong 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
receivable and all of its assets to Jingwei Hengtong.
 
 2.
              Restatement
      of previously issued financial
statements
 
 On June
11, 2010, the Audit Committee of the Board of Directors of Jingwei International
Limited (the “Company”) concluded, based on recommendation from management, that
the Company’s consolidated interim financial statements for the periods ended
September 30, 2009 contained in the Company’s Quarterly Report on Form 10-Q
for the periods ended September 30, 2009, as filed with the Securities and
Exchange Commission, should no longer be relied upon by investors. The
restatement relates only to the Company’s accounting for the intangibles
acquired from Shenzhen Newway Digital S&T Co., LTD (“Newway”), as well as
the classification of contingently issuable shares as a part of the
consideration paid in the same transaction.
 
 Effective on
July 1, 2009, the Company and its wholly owned subsidiary, Shenzhen
Xinguochuang Information Technology Co., Ltd. (“Xinguo Chuang”) acquired the
value-added service related sales channel, product know-how and technological
achievements from Shenzhen Newway Digital S&T Co., Ltd.(“Newway”). In
exchange, the Company agreed to pay Newway an acquisition fee of $6.6 million
(RMB 45.0 million) in the forms of both cash and shares. After an initial
cash payment of $3.3 million (RMB 22.5 million) in the third quarter of 2009, a
fixed number of shares worth $3.3 million (RMB 22.5 million) with fair value of
$1 each on acquisition date are to be granted to Newway upon satisfaction of
meeting net income targets at the one year anniversary. Due to difficulties in
interpreting the original agreement, the financial staff misinterpreted several
provisions relating to consideration. After an internal review and a
confirmation with Newway, management has identified the following errors related
to accounting for this acquisition:
 
 a.
              Initial measurement of intangible
      assets
 
 i.
              The intangible assets are now
      measured to be $6.6 million (RMB 45 million) by the amount of cash paid,
      plus the cost of total equity interests to be issued based on their fair
      value on acquisition date, as defined in FASB Accounting Standards
      Codification (“ASC”)
350-30-30-2.
 
 In the
Company’s consolidated interim financial statements for the periods ended
September 30, 2009 contained in the Company’s Quarterly Report on Form 10-Q
for the periods ended September 30, 2009, the initial value of the intangible
assets was improperly measured to be $6.1 million (RMB 41.7
million).  As a part of the purchase consideration, the contingently
issuable shares were believed to have a fixed monetary value of $3.3 million
(RMB 22.5 million) with the number of shares determined by dividing the total
amount into market price at the time of distribution of the shares. As a result,
these shares were classified as a non-current liability and a discount for the
time value of two years had been applied, thus understating the value of
intangible assets.
 
 ii.
              Management has also assessed that
      it is more likely than not that the tax basis of the intangible assets
      acquired is zero, with supporting documents gathered on hand at present,
      therefore determined to apply the simultaneous equations method to record
      the assigned value of the asset and the related deferred tax liability to
      be $0.8 million (RMB 5.5
million).
 
 iii.
              Therefore the total value of the
      intangible assets acquired is measured to be $7.4 million (RMB 50.5
      million).
  12
  Accordingly,
the periodic amortization of the intangible assets acquired must also be
adjusted higher.
 
 b.
              Classification of equity
      interests paid
 
 As
discussed above, a fixed number of shares determinable on the acquisition date
will be issued at one year anniversary, as compared to the misunderstanding that
a fixed moneratry value of obligation would have to be settled at a variable
number of shares.  As an industry insider, the Company believed that the
performance target in the first year after acquisition would be achieved without
much difficulty.  Even so, the contingent share payment arrangement was
made partly to ensure that Newway would abide by the terms of the agreement
including the non-compete clause and not harm the business results. In case
of underperformance by the acquired assets, shares to be granted will be cut by
half or completely as a penalty.  Therefore, the monetary benefits that the
Newway parties will receive vary predominantly with the share price of
the Company. The Company meant to bring in an industry player like Newway as a
significant shareholder, and align Newway’s long term interest with the existing
shareholders.  In conclusion, the contingently issuable shares should
be recorded under equity.
 
 The
following table sets forth the financial impacts of the restatement on the
Company.
  13
  Consolidated
      Balance Sheet
                    
                    As
      of September 30, 2009(in
      $)
                    
                    As
      Previously
                      Reported
                    
                    
                    Adjustment
                    
                    
                    As
      RestatedASSETSCurrent
      assetsCash
      and equivalents
                    
                    $
                    2,882,340
                    
                    
                    
                    
                    
                    $
                    2,882,340Inventories
                    
                    
                    2,338,740
                    
                    
                    
                    
                    
                    
                    2,338,740Trade
      receivables, less allowance for doubtful   accounts of
      $907,409 and $135,422, respectively
                    
                    
                    24,000,277
                    
                    
                    
                    
                    
                    
                    24,000,277Other
      receivables, prepayments and deposits, less allowance for doubtful
      accounts of $175,701 and $117,787, respectively
                    
                    
                    3,247,783
                    
                    
                    
                    
                    
                    
                    3,247,783Total
      Current Assets
                    
                    
                    32,469,140
                    
                    
                    
                    
                    
                    
                    32,469,140Non-current
      assetsProperty,
      plant and equipment, net
                    
                    
                    1,442,624
                    
                    
                    
                    
                    
                    
                    1,442,624Intangible
      assets, net
                    
                    
                    17,000,373
                    
                    
                    
                    1,225,559
                    
                    
                    
                    18,225,932Long
      term investment
                    
                    
                    1,737,452
                    
                    
                    
                    
                    
                    
                    
                    1,737,452$
                    52,649,589
                    
                    
                    $
                    1,225,559
                    
                    
                    $
                    53,875,148LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesTrade
      payables
                    
                    $
                    2,082,215
                    
                    
                    
                    
                    
                    
                    $
                    2,082,215Accruals
      and other payables
                    
                    
                    1,105,479
                    
                    
                    
                    
                    
                    
                    
                    1,105,479Income
      tax payable
                    
                    
                    604,770
                    
                    
                    
                    -
                    
                    
                    
                    604,770Deferred
      tax
                    
                    
                    347,004
                    
                    
                    
                    
                    
                    
                    
                    347,004Loan
      from a stockholder
                    
                    
                    488,006
                    
                    
                    
                    
                    
                    
                    
                    488,006Total
      Current Liabilities
                    
                    
                    4,627,474
                    
                    
                    
                    -
                    
                    
                    
                    4,627,474Other
      liabilities
                    
                    
                    2,809,904
                    
                    
                    
                    (2,809,904
                    )
                    
                    
                    -Deferred
      tax, non-current
                    
                    
                    
                    
                    
                    
                    803,194
                    
                    
                    
                    803,194EquityCommon
      stock, $.001 par value; 75,000,000 shares authorized, 17,049,000 shares
      issued and outstanding
                    
                    
                    17,049
                    
                    
                    
                    
                    
                    
                    
                    17,049Additional
      paid-in capital
                    
                    
                    15,512,405
                    
                    
                    
                    3,287,167
                    
                    
                    
                    18,799,572Statutory
      and other reserves
                    
                    
                    883,936
                    
                    
                    
                    
                    
                    
                    
                    883,936Retained
      earnings
                    
                    
                    18,671,214
                    
                    
                    
                    (58,318
                    )
                    
                    
                    18,612,896Accumulated
      other comprehensive income
                    
                    
                    2,649,840
                    
                    
                    
                    3,420
                    
                    
                    
                    2,653,260Total
      Jingwei International Stockholders' Equity
                    
                    
                    37,734,444
                    
                    
                    
                    3,232,269
                    
                    
                    
                    40,966,713Noncontrolling
      interest
                    
                    
                    7,477,767
                    
                    
                    
                    
                    
                    
                    
                    7,477,767Total
      Equity
                    
                    
                    45,212,211
                    
                    
                    
                    3,232,269
                    
                    
                    
                    48,444,480$
                    52,649,589
                    
                    
                    $
                    1,225,559
                    
                    
                    $
                    53,875,148
  14
  Consolidated
      Statements of Operations
                      and
      Comprehensive Income
                    
                    Three
      Months ended September 30, 2009(in
      $)
                    
                    As
      Previously
                      Reported
                    
                    
                    Adjustment
                    
                    
                    As
      RestatedSales
                    
                    $
                    8,763,167
                    
                    
                    
                    
                    
                    $
                    8,763,167Cost
      of sales
                    
                    
                    (5,369,243
                    )
                    
                    (58,324
                    )
                    
                    
                    (5,427,567
                    )Gross
      Margin
                    
                    
                    3,393,924
                    
                    
                    
                    (58,324
                    )
                    
                    
                    3,335,600ExpensesSelling,
      General and Administrative expenses
                    
                    
                    (1,639,683
                    )
                    
                    
                    
                    
                    
                    
                    (1,639,683
                    )Research
      and development costs
                    
                    
                    (392,855
                    )
                    
                    
                    
                    
                    
                    
                    (392,855
                    )(2,032,538
                    )
                    
                    
                    
                    
                    
                    
                    (2,032,538
                    )Income
      from operations
                    
                    
                    1,361,386
                    
                    
                    
                    (58,324
                    )
                    
                    
                    1,303,062Other
      income (expense)Subsidy
      income
                    
                    
                    196,655
                    
                    
                    
                    
                    
                    
                    
                    196,655Interest
      income
                    
                    
                    167,154
                    
                    
                    
                    
                    
                    
                    
                    167,154Finance
      costs
                    
                    
                    -Other
      expenses
                    
                    
                    (15,290
                    )
                    
                    
                    
                    
                    
                    
                    (15,290
                    )348,519
                    
                    
                    
                    
                    
                    
                    
                    348,519Income
      before income taxes
                    
                    
                    1,709,905
                    
                    
                    
                    (58,324
                    )
                    
                    
                    1,651,581Income
      tax expense
                    
                    
                    (249,973
                    )
                    
                    
                    
                    
                    
                    
                    (249,973
                    )Net
      income
                    
                    
                    1,459,932
                    
                    
                    
                    (58,324
                    )
                    
                    
                    1,401,608Less:
      Net income attributalbe to the noncontrolling interest
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    
                    -Net
      Income attributalbe to Jingwei International Limited and
      Subsidiaries
                    
                    $
                    1,459,932
                    
                    
                    $
                    (58,324
                    )
                    
                    $
                    1,401,608Foreign
      currency translation adjustment
                    
                    
                    37,417
                    
                    
                    
                    3,425
                    
                    
                    
                    40,842Comprehensive
      Income
                    
                    $
                    1,497,349
                    
                    
                    $
                    (54,899
                    )
                    
                    $
                    1,442,450Earnings
      per shareBasic
      and diluted
                    
                    $
                    0.09
                    
                    
                    $
                    (0.01
                    )
                    
                    $
                    0.08Weighted
      Average Common Shares OutstandingBasic
      and diluted
                    
                    
                    17,049,000
                    
                    
                    
                    
                    
                    
                    
                    17,049,000
  15
  Consolidated
      Statements of
                      Operations
      and Comprehensive
                      Income
                    
                    Nine months Ended September 30,(in
      $)
                    
                    As
      Previously
                      Reported
                    
                    
                    Adjustment
                    
                    
                    As
      RestatedSales
                    
                    $
                    16,793,680
                    
                    
                    
                    
                    
                    $
                    16,793,680Cost
      of sales
                    
                    
                    (10,402,940
                    )
                    
                    
                    (58,318
                    )
                    
                    
                    (10,461,258
                    )Gross
      Margin
                    
                    
                    6,390,740
                    
                    
                    
                    (58,318
                    )
                    
                    
                    6,332,422ExpensesSelling,
      General and Administrative expenses
                    
                    
                    (2,758,172
                    )
                    
                    
                    
                    
                    
                    
                    (2,758,172
                    )Research
      and development costs
                    
                    
                    (836,242
                    )
                    
                    
                    
                    
                    
                    
                    (836,242
                    )(3,594,414
                    )
                    
                    
                    
                    
                    
                    
                    (3,594,414
                    )Income
      from operations
                    
                    
                    2,796,326
                    
                    
                    
                    (58,318
                    )
                    
                    
                    2,738,008Other
      income (expense)Subsidy
      income
                    
                    
                    552,041
                    
                    
                    
                    
                    
                    
                    
                    552,041Interest
      income
                    
                    
                    174,918
                    
                    
                    
                    
                    
                    
                    
                    174,918Finance
      costs
                    
                    
                    -Other
      expenses
                    
                    
                    (41,585
                    )
                    
                    
                    
                    
                    
                    
                    (41,585
                    )685,374
                    
                    
                    
                    
                    
                    
                    
                    685,374Income
      before income taxes
                    
                    
                    3,481,700
                    
                    
                    
                    (58,318
                    )
                    
                    
                    3,423,382Income
      tax expense
                    
                    
                    (613,590
                    )
                    
                    
                    
                    
                    
                    
                    (613,590
                    )Net
      income
                    
                    
                    2,868,110
                    
                    
                    
                    (58,318
                    )
                    
                    
                    2,809,792Less:
      Net income attributable to the noncontrolling interest
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    -Net
      Income attributalbe to Jingwei International Limited and
      Subsidiaries
                    
                    $
                    2,868,110
                    
                    
                    $
                    (58,318
                    )
                    
                    $
                    2,809,792Foreign
      currency translation adjustment
                    
                    
                    85,774
                    
                    
                    
                    3,420
                    
                    
                    
                    89,194Comprehensive
      Income
                    
                    $
                    2,953,884
                    
                    
                    $
                    (54,898
                    )
                    
                    $
                    2,898,986Earnings
      per shareBasic
      and diluted
                    
                    $
                    0.17
                    
                    
                    $
                    (0.01
                    )
                    
                    $
                    0.16Weighted
      Average Common Shares OutstandingBasic
      and diluted
                    
                    
                    17,049,000
                    
                    
                    
                    
                    
                    
                    
                    17,049,000
  16
  Consolidated
      Statements of Cash Flow
                          
                          Nine
      Months ended September 30, 2009(in
      $)
                          
                          As
      Previously
                            Reported
                          
                          
                          Adjustment
                          
                          
                          As
      RestatedCash
      flows from operating activities:Net
      income
                          
                          $
                          2,868,110
                          
                          
                          $
                          (58,318
                          )
                          
                          $
                          2,809,792Adjustments
      to reconcile net income to net cash provided by (used in) operating
      activities:Depreciation
      & amortization
                          
                          
                          1,884,359
                          
                          
                          
                          58,318
                          
                          
                          
                          1,942,677Allowance
      for doubful accounts
                          
                          
                          829,901
                          
                          
                          
                          
                          
                          
                          
                          829,901Amortization
      of stock options issued for services
                          
                          
                          108,994
                          
                          
                          
                          
                          
                          
                          
                          108,994Changes
      in operating assets and liabilities:Trade
      receivables
                          
                          
                          (5,536,162
                          )
                          
                          
                          
                          
                          
                          
                          (5,536,162
                          )Other
      receivables, prepayments and deposits
                          
                          
                          443,472
                          
                          
                          
                          
                          
                          
                          
                          443,472Inventories
                          
                          
                          463,297
                          
                          
                          
                          
                          
                          
                          
                          463,297Trade
      payables
                          
                          
                          116,596
                          
                          
                          
                          
                          
                          
                          
                          116,596Other
      payables and accrued expenses
                          
                          
                          (360,092
                          )
                          
                          
                          
                          
                          
                          
                          (360,092
                          )Deferred
      tax
                          
                          
                          154,074
                          
                          
                          
                          
                          
                          
                          
                          154,074Income
      tax payable
                          
                          
                          246,602
                          
                          
                          
                          
                          
                          
                          
                          246,602Net
      cash flows provided by (used in) operating activities
                          
                          
                          1,219,151
                          
                          
                          
                          -
                          
                          
                          
                          1,219,151Cash
      flows from investing activities:Acquisition
      of property and equipment
                          
                          
                          (343,536
                          )
                          
                          
                          
                          
                          
                          
                          (343,536
                          )Acquisition
      of intangible assets
                          
                          
                          (3,589,934
                          )
                          
                          
                          
                          
                          
                          
                          (3,589,934
                          )Long
      term Investment
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          -Net
      cash flows used in investing activities
                          
                          
                          (3,933,470
                          )
                          
                          
                          
                          
                          
                          
                          (3,933,470
                          )Cash
      flows from financing activities:Repayment
      to loan from a stockholder
                          
                          
                          (71,579
                          )
                          
                          
                          
                          
                          
                          
                          (71,579
                          )Net
      cash flows used in financing activities
                          
                          
                          (71,579
                          )
                          
                          
                          
                          
                          
                          
                          (71,579
                          )Effect
      of foreign currency translation on cash and cash
    equivalents
                          
                          
                          195,830
                          
                          
                          
                          
                          
                          
                          
                          195,830Net
      decrease in cash and equivalents
                          
                          
                          (2,590,068
                          )
                          
                          
                          -
                          
                          
                          
                          (2,590,068
                          )Cash
      and cash equivalents-beginning of period
                          
                          
                          5,472,408
                          
                          
                          
                          
                          
                          
                          
                          5,472,408Cash
      and cash equivalents-end of period
                          
                          $
                          2,882,340
                          
                          
                          
                          
                          
                          
                          $
                          2,882,340Supplemental
      disclosure of cash flow informationIncome
      tax paid
                          
                          $
                          268,536
                          
                          
                          
                          
                          
                          
                          $
                          268,536Supplemental
      disclosure of non-cash investing activitiesTransfer
      of prepayment to intangible assets
                          
                          $
                          -
                          
                          
                          
                          
                          
                          
                          $
                          -
  17
  Use
of estimates
 
 In
preparing financial statements in conformity with GAAP, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting periods.  These accounts and estimates
include, but are not limited to, the valuation of trade receivables and other
receivables, inventories, and the estimation on useful lives of property, plant
and equipment and intangible assets.  Actual results could differ from
those estimates.
 
 Concentrations
of credit risk
 
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash,cash equivalents
and trade and other receivables.  As of September 30, 2009,
substantially all of the Company’s cash and cash equivalents were held by major
financial institutions located in the PRC. With respect to trade and other
receivables, the Company extends credit based on an evaluation of the customer’s
and other debtor’s financial condition.  The Company generally does
not require collateral for trade and other receivables and maintains an
allowance for doubtful accounts of trade and other receivables.
 
 Fair
value of financial instruments
 
 The
carrying values of the Company’s financial instruments, including cash and cash
equivalents, trade receivables, other receivables, prepayments and deposits,
trade and other payables, and loan from a stockholder approximate their fair
values due to the short-term maturity of such instruments.
 
 It is
management’s opinion that the Company is not exposed to significant interest,
price or credit risks arising from these financial instruments. In respect of
foreign currency risk, the Company is not exposed to this risk as the majority
of its trading transactions are denominated in its functional
currency.
 
 Comprehensive
income
 
 The
Company follows the Statement of Financial Accounting Standard (“SFAS”) No. 130,
Reporting Comprehensive Income (“ASC Topic 220-10”). Comprehensive income is
defined as the change in equity of a company during a period from transactions
and other events and circumstances excluding transactions resulting from
investments from owners and distributions to owners. For the Company,
comprehensive income for the periods presented includes foreign currency
translation adjustments.
  18
  Cash
and cash equivalents
 
 Cash and
cash equivalents include all cash on hand, deposits in banks, and highly liquid
investments with original maturity of three months or less.
 
 Trade
and other receivables and allowance of doubtful accounts
 
 Trade
receivables are carried at original invoiced amounts less an allowance for
doubtful accounts. The Company establishes an allowance for doubtful accounts
based on management’s assessment of the collectibility of trade and other
receivables. A considerable amount of judgment is required in assessing the
amount of the allowance and the Company considers the historical level of credit
losses and applies percentages to aged receivable categories. The Company makes
judgments about the credit worthiness of each customer based on ongoing credit
evaluations, and monitors current economic trends that might impact the level of
credit losses in the future. If the financial condition of the customers is to
deteriorate, resulting in their inability to make payments, a larger allowance
may be required.
 
 Based on
the above assessment, during the reporting years, management establishes the
provisioning policy to make allowances according to the aging of trade and other
receivables as follows:
 
 % of generalTrade and other receivables due:
                        
                        provisionWithin
      one year
                        
                        
                        0.3After
      one year but within two years
                        
                        
                        5.0After
      two years but within three years
                        
                        
                        20.0Over
      three years
                        
                        
                        100.0
 
 Additional
specific provision is made against trade and other receivables when collection
appears doubtful.
 
 Bad debts
are written off when identified.
 
 The
Company does not accrue interest on trade and other receivables.
 
 Property
and equipment, net
 
 Property
and equipment are stated at cost less accumulated depreciation. Cost represents
the purchase price of the asset and other costs incurred to bring the asset into
its existing use.
 
 Depreciation
is provided on straight-line basis over the assets’ estimated useful lives. The
principal depreciation rates are as follows:
  Annual rate
                    
                    
                    Residual valueSoftware
                    
                    
                    20
                    %
                    
                    
                    0
                    %Motor
      vehicles
                    
                    
                    19
                    %
                    
                    
                    5
                    %Office
      equipment and computers
                    
                    
                    19
                    %
                    
                    
                    5
                    %
 
 Maintenance
or repairs are charged to expense as incurred. Upon sale or disposition, the
applicable amounts of asset cost and accumulated depreciation are removed from
the accounts and the net amount less proceeds from disposal is charged or
credited to income.
 
 19
  Intangible
assets, net
 
 Intangible
assets consist of the database, software, strategic alliance and non-compete
agreement acquired which are valued at acquisition cost less accumulated
amortization. Amortization of database, strategic alliance and non-compete
agreement is calculated using the straight-line method over its expected useful
lives of 8 years, 5.5 years and 2 years, respectively.
 
 Impairment
of long-lived assets
 
 The
Company follows SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets(“ASC Topic 360-10”). The Statement
requires that long-lived assets and certain identifiable intangible assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. Long-lived assets
and intangible assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable.  The Company recognizes impairment of long-lived assets
and intangible assets in the event that the net book values of such assets
exceed the future undiscounted cash flows attributable to such assets. The
Company is not aware of any events or circumstances which indicate the existence
of an impairment which would be material to the Company’s financial
statements.
 
 Revenue
recognition
 
 The
Company recognizes revenue when the amount of revenue can be reliably measured,
it is probable that future economic benefits will flow to the entity and
specific criteria have been met for each of the Company’s activities as
described below.
 
 Software
and system services
 
 Revenues
from software and system were internally developed and recognized in accordance
with Statement of Position No. 97-2,Software Revenue
Recognition, when: a) a contract has been signed by the customers, b) the
Company has delivered software and system services to the customers as defined
by the customers receiving the work product, c) the project milestone delivered
is assigned a fixed price, d) the customer acceptance of the project is
reasonably assured, e) when collectability is probable. There is no multiple
deliverable in software revenue.
 
 Datamining
services
 Revenue
from datamining services is recognized when the services are
rendered.
 
 Subsidy
income
 
 Government
subsidies that compensate the Company for general expenses incurred and research
and development activities are recognized as income at the time when the
approval documents are obtained from the relevant government authorities and
when they are received.
 
 Included in subsidy income
for the nine months ended September 30, 2009 of $552,041, $277,755 was granted
by the Shenzhen Technology and Information Bureau for technology research and
development and $274,286 by the Shenzhen tax authority as VAT
refund.
 
 Advertising,
transportation, research and development expenses
 
 Advertising
is expensed when incurred or when advertising first takes place. Transportation
and research and development expenses are charged to expense as
incurred.
 
 For the
three months and nine months ended September 30, 2009, there were no advertising
or transportation costs incurred.
  20
 
 Statutory
and other reserves
 
 In
accordance with the relevant PRC regulations and the Articles of Association of
the Company’s PRC entities, allocation from net income to the following reserves
is required:
 
 Statutory
surplus reserve
 In
accordance with the relevant laws and regulations of the PRC and the articles of
association of the Company’s PRC entities, these companies are required to
appropriate 10% of their net income reported in the PRC statutory accounts,
after offsetting any prior years’ losses, to the statutory surplus reserve on an
annual basis.  When the balance of such reserve reaches 50% of the
respective registered capital of the subsidiaries, any further appropriation is
optional.
 
 The
statutory surplus reserve can be used to offset prior years’ losses, if any, and
may be converted into registered capital, provided that the remaining balance of
the reserve after such conversion is not less than 25% of registered capital.
The statutory surplus reserve is non-distributable.
 
 Discretionary
surplus reserve
 In accordance with the
articles of association ofthe Company’s PRC entities, the appropriation of net
income reported in the PRC statutory accounts to the discretionary surplus
reserve and its utilization are subject to the stockholders’ approval at their
general meeting.  None of the Company’s PRC entitieshad appropriated their
earnings to discretionary surplus reserve from their respective dates of
inception to September 30, 2009.
 
 Income
taxes
 
 The
Company uses the asset and liability method of accounting for income taxes
pursuant to SFAS No. 109 “Accounting for Income Taxes”
(“ASC Topic 740”). Under the asset and liability method of ASC Topic 740,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statements carrying amounts of existing assets and liabilities and loss carry
forwards and their respective tax bases.  Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.
 
 Warranty
 
 We
account for product warranties in accordance with SFAS No. 5, Accounting for Contingencies
(“ASC Topic 450”). We provide for the estimated costs of hardware and software
warranties at the time the related revenue is recognized. For hardware warranty,
we estimate the costs based on historical and projected product failure rates,
historical and projected repair costs, and knowledge of specific product
failures (if any). The hardware manufacture generally provides a warranty for
the first year of the life of the component.  For software warranty,
we estimate the costs to provide bug fixes, such as security patches, over the
life of the warranty. We regularly reevaluate our estimates to assess the
adequacy of the recorded warranty liabilities and adjust the amounts as
necessary. In our experience the cost of providing warranties has been
immaterial.
 
 Comprehensive
Income
 
 The
Company follows SFAS No. 130, Reporting Comprehensive Income(“ASC Topic 220-10”). Comprehensive income is a
more inclusive financial reporting methodology, including disclosure of certain
financial information that historically has not been recognized in the
calculation of net income. For the Company, comprehensive income for the periods
presented includes net income and foreign currency translation
adjustments.
  21
 
 Reporting
currency and translation
 
 The
consolidated financial statements have been prepared in accordance with GAAP.
The functional currency of the operating subsidiaries in the PRC is the Chinese
Yuan Renminbi (“RMB”). However, the reporting currency is the United States
dollar (“USD”). Assets and liabilities of these companies have been translated
into dollars using the exchange rate at the balance sheet date. Income and
expense items are translated at average rate for the
period.  Translation adjustments are reported separately and
accumulated in a separate component of equity (accumulated other comprehensive
income).
 
 Foreign
currency transactions
 
 Exchange
differences arising on settlement of monetary items or on translating monetary
items at the balance sheet date are recognized in the income statement except
for exchange differences arising on monetary items that form part of the
Company’s net investment in foreign subsidiaries, which are recognized reported
separately and accumulated in a separate component of equity (accumulated other
comprehensive income).
 
 Foreign
operations
 
 All of
the Company’s operations and assets are located in China. The Company may be
adversely affected by possible political or economic events in this country. The
effect of these factors cannot be accurately predicted.
 
 Stock-based
compensation
 
 The
Company adopted SFAS No. 123(R), Share-Based Payment (“ASC Topic 718-10”),
effective January 1, 2006. Common stock, stock options and common stock warrants
issued to employees, directors and non-employees are recorded on the basis of
their fair value, as required by (“ASC Topic 718-10”). For stock options and
common stock warrants issued to non-employees, they are measured as of the date
required by EITF Issue 96-18, “Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services.” (“ASC Topic 505-50”)
  On
April 16, 2008, the Company granted total of 44 key employees of the Company,
options to purchase a total of 260,400 shares of the Company’s common stock at a
strike price equal to US$4.95 and vested equally in four years with 65,100
shares in each year. The contractual term is 10 years and it is
non-transferable. Based on the Black-Scholes option pricing model, the options
were valued at $593,191 ($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%. There was $37,074 and $nil recognized for the three months ended
September 30, 2009 and 2008, and $111,223 and $74,149 recognized for the nine
months ended September 30, 2009 and 2008
 
 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 and vested in three years with 20,000 shares on
December 31, 2009; 30,000 shares on March 31, 2010; 20,000 shares on June 30,
2010; 30,000 shares on September 30, 2010; 20,000 shares on March 31, 2011;
30,000 shares on September 30, 2011; 20,000 shares on March 31, 2012, and 30,000
shares on September 30, 2012. The options will expire ten years after the date
of grant, on September 30, 2019. The fair value was estimated using the Binomial
Lattice valuation model, with the following weighted-average assumptions and
fair values as follows:
 
 Volatility
                    
                    
                    84.6
                    %Life
      of option(year)
                    
                    
                    10Risk
      free interest rate
                    
                    
                    5.9
                    %Expected
      dividend rate (percent)
                    
                    
                    -Forfeiture
      rate (percent)
                    
                    
                    -Weighted-average
      fair value per option granted
                    
                    
                    0.883
  22
 
 The grant
date fair value of the options was $176,600.
 
 In
accordance with ASC Topic 718-10, the Company has recorded stock-based
compensation expense during the three months ended September 30, 2009 of $37,074
and nine months ended September 30, 2009 and 2008 of $111,223 and $333,488 in
connection with the issuance of these options.
 
 The
following table summarizes all Company stock option transactions between January
1, 2009 and September 30, 2009:
 Options &
                      warrants
                      outstanding
                    
                    
                    Vested
                      shares
                    
                    
                    Range of Exercise
                      price per common
                      shareBalance, January
      1, 2009
                    
                    
                    1,903,250
                    
                    
                    
                    1,542,850
                    
                    
                    $
                    1.00-$7.00Granted/vested
      during the nine months ended September 30, 2009
                    
                    
                    200,000
                    
                    
                    
                    65,100
                    
                    
                    $
                    1.64-$4.95Lapsed/cancelled
      during the nine months ended September 30, 2009
                    
                    
                    (150,000
                    )
                    
                    
                    (50,000
                    )
                    
                    $
                    1.00-$4.95Balance,
      September 30, 2009
                    
                    
                    1,953,250
                    
                    
                    
                    1,557,950
                    
                    
                    $
                    1.00-$7.00
 
 Options
& warrants Outstanding
 Number Outstanding
                  
                  
                  Weighted
                    Average
                    Remaining
                  
                  
                  Weighted AverageRange of
                  
                  Currently Exercisable
                  
                  
                  Contractual Life
                  
                  
                  Exercise Price of OptionsExercise Prices
                  
                  at September 30, 2009
                  
                  
                  (Years)
                  
                  
                  Currently Exercisable$1.00-$7.00
                  
                  
                  1,557,950
                  
                  
                  
                  4.27
                  
                  
                  $
                  5.43
 
 Basic
and diluted earnings per share
 In
accordance with ASC 260, Earnings per Share, basic
earnings per common share is computed using net income divided by the weighted
average number of shares of common stock outstanding for the periods presented.
Diluted earnings per common share assumes that outstanding common shares were
increased by shares issuable upon exercise of those stock options and warrants
for which the market price exceeds the exercise price, less shares that could
have been purchased by the Company with related proceeds. The incremental shares
from assumed conversion of the options and warrants amounted to 41,330 for the
nine months to September 30, 2008. There was no incremental share for the three
months to September 30, 2008 as an assumed conversion was anti-dilutive. For
2009, the basic and diluted earnings per share were the same since assumed
conversion of the options and warrants was anti-dilutive.
 
 In
relation to the asset acquisition from Newway, there is a condition of
attaintaining a specified amount of earnings, before any agreed-upon number of
shares can be issued at one year anniversary. This earnings contingency has no
effect on basic EPS as of September 30, 2009, because it is not certain that the
condition is satisfied until the end of the contingency period, i.e. at the one
year anniversary.
  In
computing diluted EPS for the three months and nine month periods ended
September 30, 2009, as the year-to-date after-tax net income was below RMB 10
million as of September 30, 2009, no contingently issuable shares was included
in the calculation of dilutive outstanding shares.
  23




Recently
Adopted Accounting Pronouncements


FASB
Establishes Accounting Standards Codification TM




In June
2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally Accepted Accounting
Principles” (“ASC Topic 105”) which establishes the FASB Accounting
Standards Codification (“the Codification” or “ASC”) as the official single
source of authoritative U.S. GAAP. All existing accounting standards are
superseded. All other accounting guidance not included in the Codification will
be considered non-authoritative. The Codification also includes all relevant
Securities and Exchange Commission (“SEC”) guidance organized using the same
topical structure in separate sections within the Codification.




Following
the Codification, the Board will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts.
Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to
update the Codification, provide background information about the guidance and
provide the basis for conclusions on the changes to the
Codification.




The
Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented. The Codification is effective for our third-quarter
2009 financial statements and the principal impact on our financial statements
is limited to disclosures as all future references to authoritative accounting
literature will be referenced in accordance with the Codification. In order to
ease the transition to the Codification, we are providing the Codification
cross-reference alongside the references to the standards issued and adopted
prior to the adoption of the Codification.




Fair
Value Accounting




In 2006,
the FASB issued SFAS No. 157, “Fair Value Measurements”
(“ASC Topic 820”) which defines fair value, establishes a market-based framework
or hierarchy for measuring fair value and expands disclosures about fair value
measurements. This guidance is applicable whenever another accounting
pronouncement requires or permits assets and liabilities to be measured at fair
value. It does not expand or require any new fair value measures; however the
application of this statement may change current practice. We adopted the
statement for nonfinancial assets and nonfinancial liabilities on January 1,
2009. The adoption, which primarily affected the valuation of our derivative
contracts, did not have a material effect on our financial condition or results
of operations.




In April
2009, the FASB issued the following updates that provide additional application
guidance and enhance disclosures regarding fair value measurements and
impairments of securities:




FSP FAS
157-4, “Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly” (“ASC Topic 820-10-65”). This update relates to
determining fair values when there is no active market or where the price inputs
being used represent distressed sales. It reaffirms the need to exercise
judgment to ascertain if a formerly active market has become inactive and in
determining fair values when markets have become inactive.




FSP FAS
115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (“ASC topic 320-10-65”). This update
applies to investments in debt securities for which other-than-temporary
impairments may be recorded. If an entity’s management asserts that it does not
have the intent to sell a debt security and it is more likely than not that it
will not have to sell the security before recovery of its cost basis, then an
entity may separate other-than-temporary impairments into two components: 1) the
amount related to credit losses (recorded in earnings) and 2) all other amounts
(recorded in Other comprehensive income).


24


FSP FAS
107-1 and APB 28-1,“Interim
Disclosures about Fair Value of Financial Instruments”(“ASC Topic
320-10-65”). This update requires fair value disclosures for financial
instruments that are not currently reflected on the balance sheet at fair value
on a quarterly basis.




We
elected to adopt these updates effective for interim and annual reporting
periods ending after June 15, 2009 The adoption did not have a material effect
on our financial condition or results of operations.




In August
2009, FASB issued ASU No. 2009-05 which amends Fair Value Measurements and
Disclosures – Overall (“ASC Topic 820-10”) to provide guidance on the fair value
measurement of liabilities. This update requires clarification for circumstances
in which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using one or
more of the following techniques: 1) a valuation technique that uses either the
quoted price of the identical liability when traded as an asset or quoted prices
for similar liabilities or similar liabilities when traded as an asset; or 2)
another valuation technique that is consistent with the principles in ASC Topic
820 such as the income and market approach to valuation. The amendments in this
update also clarify that when estimating the fair value of a liability, a
reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of the liability. This update further clarifies that if the fair value
of a liability is determined by reference to a quoted price in an active market
for an identical liability, that price would be considered a Level 1 measurement
in the fair value hierarchy. Similarly, if the identical liability has a quoted
price when traded as an asset in an active market, it is also a Level 1 fair
value measurement if no adjustments to the quoted price of the asset are
required. This update is effective for our fourth quarter 2009.




Business
Combinations and Noncontrolling Interests




In 2007,
the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“ASC
Topic 805”). This guidance requires the acquiring entity in a business
combination to recognize the full fair value of assets acquired and liabilities
assumed in the transaction (whether a full or partial acquisition); establishes
the acquisition date fair value as the measurement objective for all assets
acquired and liabilities assumed; requires expensing of most transaction and
restructuring costs; and requires the acquirer to disclose the information
necessary to evaluate and understand the nature and financial effect of the
business combination. We adopted this guidance effective January 1, 2009 and
have applied it to all business combinations prospectively from that date. The
impact of ASC 805 on our consolidated financial statements will depend upon the
nature, terms and size of the acquisitions we consummate in the
future.




In April
2009, the FASB issued Staff Position No. FSP FAS 141(R)-1, “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies” (“ASC Topic 805-20”). This updated guidance amended the
accounting treatment for assets and liabilities arising from contingencies in a
business combination and requires that pre-acquisition contingencies be
recognized at fair value, if fair value can be reasonably determined. If fair
value cannot be reasonably determined, measurement should be based on the best
estimate in accordance with SFAS No. 5, “Accounting for Contingencies”
(“ASC Topic 405”). This updated guidance was effective January 1, 2009. The
Company does not have any assets acquired or liabilities assumed in a business
combination that arise from contingencies.


25


In
December 2007, the FASB issued FAS 160 “Non-controlling Interests in
Consolidated Financial Statements” (“FAS160”), which amends Accounting Research
Bulletin (“ARB 51”), “Consolidated Financial Statements “(ARB 51”). This
statement was adopted effective January 1, 2009. FAS160 provides guidance for
the accounting, reporting and disclosure of non-controlling interests and
requires, among other things, that non-controlling interests be recorded as
equity in the consolidated financial statements. The adoption of this standard
resulted in the reclassification of $7,477,767 in 2009 and $7,459,660 in 2008 of
Minority Interests (now referred to as non-controlling interests) to a separate
component of Stockholders’ Equity on the Consolidated Balance Sheet.
Additionally, net income attributable to non controlling interests is now shown
separately from parent net income in the Consolidated Statement of Income. Prior
periods have been restated to reflect the presentation and disclosure
requirements of FAS 160.




Revenue
Recognition




In
October 2009, the FASB issued the following ASUs:




ASU No.
2009-13, Revenue
Recognition (“ASC Topic 605”) - Multiple-Deliverable Revenue
Arrangements, a consensus of the FASB Emerging Issues Task Force;




ASU No.
2009-14, Software (“ASC Topic 985”) - Certain Revenue Arrangements That
Include Software Elements, a consensus of the FASB Emerging Issues Task
Force.




ASU No.
2009-13: This guidance modifies the fair value requirements of ASC subtopic
605-25 Revenue Recognition-Multiple Element Arrangements by allowing the use of
the “best estimate of selling price” in addition to VSOE and VOE (now referred
to as TPE standing for third-party evidence) for determining the selling price
of a deliverable. A vendor is now required to use its best estimate of the
selling price when VSOE or TPE of the selling price cannot be determined. In
addition, the residual method of allocating arrangement consideration is no
longer permitted.




ASU No.
2009-14: This guidance modifies the scope of ASC subtopic 965-605
Software-Revenue Recognition to exclude from its requirements (a) non-software
components of tangible products and (b) software components of tangible products
that are sold, licensed, or leased with tangible products when the software
components and non-software components of the tangible product function together
to deliver the tangible product’s essential functionality.




These
updates require expanded qualitative and quantitative disclosures and are
effective for fiscal years beginning on or after June 15, 2010. However,
companies may elect to adopt as early as interim periods ended September 30,
2009. These updates may be applied either prospectively from the beginning of
the fiscal year for new or materially modified arrangements or retrospectively.
We are currently evaluating the impact of adopting these updates on our
consolidated financial statements.




Other
Accounting Changes




In June
2009, the FASB issued the following standards:




SFAS No.
167, “Amendments to FASB Interpretation No. 46(R), Consolidation of Variable
Interest Entities” (“ASC Topic 810-10”). This updated guidance requires an
analysis to determine whether a variable interest gives the entity a controlling
financial interest in a variable interest entity. It also requires an ongoing
reassessment and eliminates the quantitative approach previously required for
determining whether an entity is the primary beneficiary. We are currently
evaluating the potential impact the adoption of this Statement will have on its
financial statements.




SFAS No.
166, “Accounting for Transfers of Financial Assets”, (“ASC Topic 810”). This
updated guidance removed the concept of a qualifying special-purpose entity and
removed the exception from applying consolidation guidance to these entities.
This update also clarified the requirements for isolation and limitations on
portions of financial assets that are eligible for sale accounting. ASC Topic
810 is effective for our fiscal year beginning on January 1, 2010. We are
currently evaluating the potential impact the adoption of this Statement will
have on its financial statements.




26


In May
2009, the FASB issued SFAS No. 165, Subsequent Events, which is
effective for interim or annual financial periods ending after June 15, 2009.
SFAS No. 165 establishes general standards of accounting and disclosure of
events that occur after the balance sheet but before financial statements are
issued or are available to be issued. However, since the Company is a public
entity, management is required to evaluate subsequent events through the date
that financial statements are issued and disclose the date through which
subsequent events have been evaluated, as well as the date the financial
statements were issued. SFAS No. 165 was adopted since its interim period ended
June 30, 2009. Subsequent events for the nine months ended September 30, 2009
have been evaluated through November 14, 2009, the date the financial statements
were issued as further discussed in EITF Topic No. D-86.




During
2009, the FASB has issued several ASU’s – ASU No. 2009-02 through ASU No.
2009-15. Except for ASU’s No. 2009-05, 2009-13 and 2009-14 discussed above, the
ASU’s entail technical corrections to existing guidance or affect guidance
related to specialized industries or entities and therefore have minimal, if
any, impact on the Company.




In 2008,
the FASB issued Staff Position No. FAS 132(R)-1, “Employers’ Disclosures about
Postretirement Benefit Plan Assets” (“ASC Topic 715-20-65”). This guidance will
expand disclosure by requiring the following new disclosures: 1) how investment
allocation decisions are made by management; 2) major categories of plan assets;
and 3) significant concentrations of risk. Additionally, ASC 715-20-65 will
require an employer to disclose information about the valuation of plan assets
similar to that required in ASC Topic 820 Fair Value Measurements and
Disclosures. We are currently evaluating the potential impact the adoption of
this Statement will have on its financial statements.




In May
2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (“ASC Topic 420-20-25”), which clarifies the accounting for
convertible debt instruments that may be settled in cash upon conversion,
including partial cash settlement. ASC Topic 420-20-25 specifies that an issuer
of such instruments should separately account for the liability and equity
components of the instruments in a manner that reflects the issuer’s
non-convertible debt borrowing rate when interest costs are recognized in
subsequent periods. ASC Topic 420-20-25 is effective for the Company’s fiscal
year beginning January 1, 2009, and retrospective application is required for
all periods presented. ASC Topic 420-20-25 is currently not applicable to the
Company.




In June
2008, the FASB issued EITF Issue No. 07-5, Determining Whether an Instrument
(or Embedded Feature) is Indexed to an Entity’s Own Stock(“ASC Topic
815-40”), which is effective for financial statements for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. The
Issue addresses the determination of whether an instrument (or an embedded
feature) is indexed to an entity’s own stock, which is the first part of the
scope exception in Paragraph 11(a) of ASC Topic 815-10 for the purpose of
determining whether the instrument is classified as an equity instrument or
accounted for as a derivative instrument which would be recognized either as an
asset or liability and measured at fair value. The guidance shall be applied to
outstanding instruments as of the beginning of the fiscal year in which this
Issue is initially applied. Any debt discount that was recognized when the
conversion option was initially bifurcated from the convertible debt instrument
shall continue to be amortized. The cumulative effect of the change in
accounting principles shall be recognized as an adjustment to the opening
balance of retained earnings. The adoption of ASC Topic 815-40 did not have a
material impact on the Company’s financial statements.


In June
2008, the FASB issued FASB Staff Position (FSP) Emerging Issues Task Force
(EITF) 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities(“ASC Topic 260-10”). ASC Topic 260-10 addresses
whether instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore, need to be included in
the earnings allocation in computing earnings per share under the two-class
method as described in ASC Topic 260-10, Earnings Per Share. Under the
guidance of ASC Topic 260-10, unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and must be included in the computation of
earnings per share pursuant to the two-class method. All prior period earnings
per share information must be adjusted retrospectively. The Company adopted ASC
Topic 260-10as of January 1, 2009. Company does not currently have any
share-based awards that would qualify as participating securities.




27


NOTE
3 INVENTORIES


September 30, 2009
                    
                    
                    December 31, 2008Project
      cost
                    
                    $
                    1,867,125
                    
                    
                    $
                    2,225,275Others
                    
                    
                    471,615
                    
                    
                    
                    576,762$
                    2,338,740
                    
                    
                    $
                    2,802,037





NOTE
4 OTHER RECEIVABLES, PREPAYMENTS AND DEPOSITS




The
following table summarizes the components of other receivables, prepayments and
deposits as of September 30, 2009 and December 31, 2008:





September 30, 2009
                  
                  
                  December 31, 2008Prepayment
      for purchase of goods and services
                  
                  $
                  2,313,858
                  
                  
                  $
                  1,082,181Other
      receivables and deposits
                  
                  
                  933,925
                  
                  
                  
                  2,666,988$
                  3,247,783
                  
                  
                  $
                  3,749,169





NOTE
5 INTANGIBLE ASSETS, NET





The
following table summarizes intangible assets as of September 30, 2009 and
December 31, 2008:


September
      30, 2009
                                (Restated)
                              
                              
                              December
      31, 2008CostDatabase
                              
                              $
                              14,525,052
                              
                              
                              $
                              14,322,795Strategic
      alliance
                              
                              
                              7,068,112
                              
                              
                              
                              -Non-compete
      agreement
                              
                              
                              316,339
                              
                              
                              
                              -Software
                              
                              
                              129,422
                              
                              
                              
                              -Less:
      Accumulated amortization
                              
                              
                              3,812,993
                              
                              
                              
                              2,084,294$
                              18,225,932
                              
                              
                              $
                              12,238,501





Intangible
assets represent acquired databases, strategic alliance, non-compete agreement
and software. The addition of intangible assets for strategic alliance and
non-compete agreement was described in detail as follows:




In June
2009, the Company has entered into an agreement with Shenzhen Newway Digital
S&T Company Limited (“Newway”), in which the Company has formed a strategic
alliance with Newway for its telecommunication value-added services (the
“Transaction”). Pursuant to the agreement, Newway will conduct all its
value-added services exclusively with the Company in two fiscal years commencing
the effective date of the agreement, July 1, 2009.




In
exchange, the Company agreed to pay Newway an acquisition fee of $6.6 million
(RMB 45.0 million) in the forms of both cash and shares. After an initial cash
payment of $3.3 million (RMB 22.5 million) in the third quarter of 2009, a fixed
number of shares worth $3.3 million (RMB 22.5 million) with fair value of $1
each on acquisition date are to be granted to Newway upon satisfaction of
meeting net income targets at the one year anniversary. The total amount of
contingent issuable shares has been recorded as additional paid-in capital on
July 1, 2009. The maximum number of shares to be issued is determined to be
3,287,167




28




Therefore,
the Company accounted for the intangible assets to be $6.6 million (RMB 45
million) by the amount of cash paid, plus the cost of total equity interests to
be issued based on their fair value on acquisition date, as defined in FASB
Accounting Standards Codification (“ASC”) 350-30-30-1. Moreover, the carrying
amount of the intangible assets are increased by $0.8 million (RMB 5.5 million)
to account for the difference between the amount paid and the tax basis of the
intangible assets acquired. The management has assessed that it is more likely
than not that the tax basis of the intangible assets acquired is zero, with
supporting documents gathered on hand at present, therefore determined to apply
the simultaneous equations method to record the assigned value of the asset and
the related deferred tax liability.


The
Company has also hired a professional valuation firm to evaluate the fair value
of the acquired intangible assets, including a strategic alliance and a
non-compete agreement. The fair value was estimated using the excess earning
approach and with and without method. The assessed fair values of intangible
assets are generally in line with the fair value of the consideration given. The
assessment also helps the Company allocate costs between strategic alliances and
non-compete agreements as well as decide on respective amortization
periods.




Amortization
expenses related to intangible assets was $821,412 and $406,812 for the three
months ended September 30, 2009 and 2008, and $1,726,203 and $1,062,388 for the
nine months ended September 30, 2009 and 2008 respectively.




NOTE
6 LONG TERM INVESTMENT




In 2008,
one of the Company’s VIEs, Yulong IT, invested in Shanghai Jiuhong Investment
Limited Company (“Shanghai Jiuhong”), which is expected to invest in technology
companies. Yulong IT holds 19.8% of Shanghai Jiuhong’s equity interest, and
accounts for the investment under cost method.




NOTE
7 INCOME TAXES




The
Company utilizes the asset and liability method of accounting for income taxes
in accordance with ASC Topic 740.




The
Company’s effective tax rates for the three months ended September 30, 2009 and
2008 were 14.6% and 12.2%, and for the nine months ended September 30, 2009 and
2008 were 17.6% and 14.8% respectively. These rates in those periods differed
from the statutory PRC rates of 25%, due mainly to the differential tax rates
applicable to New Yulong IT and New Yulong Software, over-provision of tax for
fiscal year ended December 31, 2008 for Yulong IT due to an approved from tax
authority to decrease tax rate from 18% to 15% effective from January 1,
2008.




As of
January 1, 2009 the Company had no unrecognized tax benefits on any related
interest of penalties. There was no change in unrecognized tax benefits and
accrual for uncertain tax positions as of the period ended September 30, 2009.
Tax years from 2006 to 2008 remain subject to examination by major tax
jurisdiction.




United
States




Jingwei
International Limited is subject to US Federal tax at a rate of 34%. No
provision for the US federal income taxes has been made as the Company had no US
taxable income for the years ended December 31, 2008, and 2007 and believes that
its earnings are permanently invested in the PRC. No tax benefit has been
recognized since a valuation allowance has offset the deferred tax
asset.




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 for the nine months ended September 30, 2009 and 2008 is
16.5%.




29


PRC


The
Company generated substantially all of its net income from its PRC operations
for the nine months ended September 30, 2009. New Yulong Software and New Yulong
IT were registered in Shenzhen, a special economic zone in the PRC. The two
companies are entitled to a preferential income tax rate of 10% and 15%
respectively in 2009. According to the pronouncement of the tax bureau, this
rate will increase to 20% in 2009, 22% in 2010, 24% in 2011 and 25% from 2012
onwards. As New Yulong Software is a government certified advanced and new
technology enterprise in Shenzhen, half of its taxable income is exempt income
tax in 2008 and 2009. New Yulong IT applied for government certified advanced
and new technology enterprise in China in 2008 and its income tax rate is
adjusted to 15% effective from January 1, 2008.




30


NOTE
8 SEGMENT INFORMATION





The
Company has two reportable segments based on the type of services provided,
dataming services, and software and system services. Information for the
segments for the three and nine months ended September 30, 2009 and 2008 in
accordance with FAS 131, “Disclosures about Segments of an
Enterprise and Related Information” (“ASC Topic 280-10”) are as
follows:


Three
      Months Ended September 30,2009
                        
                        
                        2008Datamining
                          Services
                          (Restated)
                        
                        
                        Software
                          Services
                          (Restated)
                        
                        
                        Total
                          (Restated)
                        
                        
                        Datamining
                          Services
                        
                        
                        Software
                          Services
                        
                        
                        TotalNet
      Revenue
                        
                        $
                        5,451,796
                        
                        
                        $
                        3,311,371
                        
                        
                        $
                        8,763,167
                        
                        
                        $
                        5,959,194
                        
                        
                        $
                        2,609,166
                        
                        
                        $
                        8,568,360Gross
      Profit
                        
                        
                        2,213,017
                        
                        
                        
                        1,122,583
                        
                        
                        
                        3,335,600
                        
                        
                        
                        2,433,045
                        
                        
                        
                        1,008,099
                        
                        
                        
                        3,441,144Net
      Income
                        
                        
                        918,717
                        
                        
                        
                        482,891
                        
                        
                        
                        1,401,608
                        
                        
                        
                        1,344,658
                        
                        
                        
                        557,141
                        
                        
                        
                        1,901,799Segment
      Assets
                        
                        
                        41,907,845
                        
                        
                        
                        11,967,303
                        
                        
                        
                        53,875,148
                        
                        
                        
                        36,578,697
                        
                        
                        
                        11,146,142
                        
                        
                        
                        47,724,839Depreciation&
      Amortization
                        
                        
                        843,020
                        
                        
                        
                        35,448
                        
                        
                        
                        878,468
                        
                        
                        
                        442,198
                        
                        
                        
                        26,847
                        
                        
                        
                        469,045Expenditure
      for Segment Assets
                        
                        
                        3,302,995
                        
                        
                        
                        -
                        
                        
                        
                        3,302,995
                        
                        
                        
                        531,338
                        
                        
                        
                        -
                        
                        
                        
                        531,338





Nine
      Months Ended September 30,2009
                      
                      
                      2008Datamining
                        Services
                        (Restated)
                      
                      
                      Software
                        Services
                        (Restated)
                      
                      
                      Total
                        (Restated)
                      
                      
                      Datamining
                        Services
                      
                      
                      Software
                        Services
                      
                      
                      TotalNet
      Revenue
                      
                      $
                      10,221,720
                      
                      
                      $
                      6,571,960
                      
                      
                      $
                      16,793,680
                      
                      
                      $
                      15,622,288
                      
                      
                      $
                      7,487,938
                      
                      
                      $
                      23,110,226Gross
      Profit
                      
                      
                      4,171,516
                      
                      
                      
                      2,160,906
                      
                      
                      
                      6,332,422
                      
                      
                      
                      7,769,835
                      
                      
                      
                      4,274,655
                      
                      
                      
                      12,044,490Net
      Income
                      
                      
                      1,839,760
                      
                      
                      
                      970,032
                      
                      
                      
                      2,809,792
                      
                      
                      
                      4,881,092
                      
                      
                      
                      2,837,060
                      
                      
                      
                      7,718,152Segment
      Assets
                      
                      
                      41,907,845
                      
                      
                      
                      11,967,303
                      
                      
                      
                      53,875,148
                      
                      
                      
                      36,578,697
                      
                      
                      
                      11,146,142
                      
                      
                      
                      47,724,839Depreciation&
      Amortization
                      
                      
                      1,836,377
                      
                      
                      
                      106,300
                      
                      
                      
                      1,942,677
                      
                      
                      
                      1,175,451
                      
                      
                      
                      55,216
                      
                      
                      
                      1,230,667Expenditure
      for Segment Assets
                      
                      
                      3,933,470
                      
                      
                      
                      -
                      
                      
                      
                      3,933,470
                      
                      
                      
                      1,388,416
                      
                      
                      
                      -
                      
                      
                      
                      1,388,416





There is
no inter-segment revenue. Substantially, all of the Company’s operations are
located in the PRC and a majority of their customers are also located in the
PRC. Segment assets include property, plant and equipment and intangible
assets.




31


NOTE
9 LEASE COMMITMENT AND OTHER CONTRACTUAL OBLIGATIONS




Lease
Commitment





Future
minimum lease payments under non-cancellable operating leases as of September
30, 2009 are as follows:




September 30, 2009Within
      1 year
                    
                    $
                    151,156Within
      2 years
                    
                    
                    151,156Thereafter
                    
                    
                    213,431$
                    515,743





New
Yulong IT entered into a lease agreement with a lease term of five years from
April 22, 2008 to April 21, 2013 at a monthly rental of RMB75,050
($10,978).  Beijing Media rents a unit at a monthly rental of
RMB11,070 ($1,618) from July 1, 2009 to December 31, 2011.





Other
contractual obligations





On
February 29, 2008, New Yulong IT engaged Tsinghua University to provide research
and development service for total consideration of RMB7.0 million ($1,023,751).
As of September 30, 2009, RMB500,000 ($73,125) has been paid. Due to the delay
in meeting the project planned target, the Company is
still  negotiating with the service provider for the settlement of the
remaining balance.




NOTE
10 MAJOR CUSTOMERS





The
Company had sales to three customers that accounted for approximately 22% of net
sales during the nine months ended September 30, 2009. These customers accounted
for approximately 16% of trade receivable balance as at September 30,
2009.





NOTE
11 MAJOR SUPPLIERS





The
Company had purchases from three vendors that accounted for approximately 27% of
purchases during the nine months ended September 30, 2009. These vendors were
fully paid as at September 30, 2009.





NOTE
12 SUBSEQUENT EVENTS





As of
November 14, the Company did not have significant subsequent
events.


32


Item
2. Management’s Discussion and Analysis or Plan of Operation




NOTE
REGARDING FORWARD-LOOKING STATEMENTS




This
report includes forward-looking statements. Generally, the words “believes,”
“anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,”
“continue,” and similar expressions or the negative thereof or comparable
terminology 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 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.




The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto and other
financial information contained elsewhere in this report.




Business
Overview




Jingwei
International Limited (“we,” “us,” “the Company,” or “Jingwei”) is one of the
leading providers of data mining and customer relationship marketing 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. Our 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 (“WVAS”). We also operate a software services business, which
provides a broad range of billing systems, provisioning solutions, decision
support and customer relationship management systems for China’s leading mobile
telecommunication carriers. The software services business strengthens sales
opportunities for our high margin data mining platform, and allows us to enhance
our customer database. In addition, it allows us to leverage the telecom
resources to provide comprehensive marketing and advertising delivery channels
to reach the target consumers for our corporate customers.




Currently,
we offer 17 software platforms and our intellectual property portfolio is
covered by nine patents issued by the National Intellectual Property
Administration of China and the Shenzhen Bureau of Science, Technology and
Information. When these patents were registered with the appropriate authority,
we received a certificate with respect to our protected intellectual property in
such software. We then license the software to our customers for a usage fee. We
presently do not have any registered trademarks. We continue to expand our
product offerings as well as creating innovative data mining software tools to
enhance our service offerings to support database marketing for our corporate
customers.




The
primary geographic focus of our operations is in China, where we derive all of
our revenues. We conduct our business operations through Jingwei HengTong, a
wholly-owned subsidiary company that became the primary beneficiary of Jingwei
Communication via various contractual agreements. Jingwei Communication has two
subsidiaries, New Yulong Information Technology Co. Ltd (”New Yulong IT”) and
New Yulong Software Technology Development Co. Ltd ( “New Yulong
Software”)




We raised
net proceeds of $15.071 million through a private placement in May 2007. The
proceeds of the private placement are being used to purchase equipment for
storage and maintenance of our data, purchase of new data and working capital.
With the injection of this capital, we expect to realize our business strategy
and become a leading provider of data mining services in China.




We
believe our future growth is in the broad adoption of our data mining service
across various business segments and to leverage our vast consumer data to
provide targeted 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 marketing, we will need to enhance our
data mining infrastructure such as hardware and software tools as well as our
data center. In addition, we plan to continue to acquire more consumer data from
different industries and to constantly refresh and update the data that will
help strengthen our data mining business.




33


Business
Outlook and Other Recent Developments




Weathering
through the downturn of the global economy in the end of 2008 with disappointing
results in the first half of 2009, the Company has taken management actions
aimed at re-building revenue growth momentum with improved margin and earnings
through rationalized product cost reduction, improved spending and cost control
as well as strengthening our market position and expanding our services and
product capabilities. In July 2009, we completed the strategic business
partnering agreement with Newway Technology to acquire the right to leverage
their telecom value-added services and channel sales business to augment our
datamining business portfolio. This agreement has provided the platform for us
to expand into 3G related value-added services which would help to fuel our
growth in the datamining segment. In the third quarter, we have recorded noted
improvement in revenue and earnings, but percentage GP and EBT improvement was
marginal due to additional investment in sales, marketing and product
initiatives in both the data mining and software services area.




In the
datamining segment, while Jingwei has achieved marginal improvement in the
existing market sector, its agreement with Newway Technology on the telecom
value added services completed in July 2009 has contributed to a solid growth in
revenue and earnings. This growth is expected to accelerate as Jingwei begins to
integrate the expanded capabilities into its mainstream offerings. Also,
building on the momentum to become an integrated marketing solutions provider
through multi-media channels, on October 22, 2009, the Company signed a
framework agreement with Jiangsu province (Suqian municipal government
Industrial Park) to collaborate with the telecom operators to leverage our
datamining and software services expertise to build 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.




In the
Software Services segment, our operation analysis and billing software continued
to enjoy moderate growth in revenue and earnings. In addition, following full
deployment of 3G nationwide in China, Jingwei has delivered several major
application service solutions to the telecom operators, resulting in strong
growth in revenue over Q2. One major customer achievement was to provide a total
system solution to the Henan Telecom Bureau of China Telecom for their security
monitoring and operation control systems in their switching centers in the
province.




Looking
ahead, we expect our growth momentum to continue as the global economy continues
to recover. And the demand for our product and services increases as result of
the full deployment of 3-G in the telecom sector and the rapidly increasing
subscribers base in the PRC. For the year, while we still expect our results to
trail behind 2008, we expect strong recovery in revenue and earnings growth in
the second half compared to the first half of 2009.




Critical
Accounting Policies and Estimates




We
prepare our consolidated financial statements in accordance with generally
accepted accounting principles in the United States. In doing so, we have to
make estimates and assumptions that affect our reported amount of assets,
liabilities, revenues and expenses, as well as related disclosure of contingent
assets and liabilities. In some cases, changes in the accounting estimates are
reasonably likely to occur from period to period. Accordingly, actual results
could differ materially from our estimates. To the extent that there are
material differences between these estimates and actual results, our financial
condition or results of operations will be affected. We base our estimates on
historical data and trends and other assumptions that we believe are reasonable
under the circumstances, and we evaluate these estimates on an ongoing basis.
For further information on our critical accounting policies, see the discussion
in Note 2 to the Notes to the Consolidated Financial
Statements.


34


Software
and system service


Revenues
from software and system were internally developed and were generally recognized
revenue from software and system services in accordance with Statement of
Position No. 97-2, Software Revenue Recognition, when: a) a contract has been
signed by the customers, b) the Company has delivered software and system
services to the customers as defined by the customers receiving the work
product, c) the project milestone delivered is assigned a fixed price, and d)
the customer acceptance of the project is reasonably assured, and e) when
collectability is probable. There is no multiple deliverable in software
revenue.




Recent
Accounting Pronouncements


FASB
Establishes Accounting Standards Codification TM





In June
2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally Accepted Accounting
Principles” (“ASC Topic 105”) which establishes the FASB Accounting
Standards Codification (“the Codification” or “ASC”) as the official single
source of authoritative U.S. GAAP. All existing accounting standards are
superseded. All other accounting guidance not included in the Codification will
be considered non-authoritative. The Codification also includes all relevant
Securities and Exchange Commission (“SEC”) guidance organized using the same
topical structure in separate sections within the Codification.





Following
the Codification, the Board will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts.
Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to
update the Codification, provide background information about the guidance and
provide the basis for conclusions on the changes to the
Codification.





The
Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented. The Codification is effective for our third-quarter
2009 financial statements and the principal impact on our financial statements
is limited to disclosures as all future references to authoritative accounting
literature will be referenced in accordance with the Codification. In order to
ease the transition to the Codification, we are providing the Codification
cross-reference alongside the references to the standards issued and adopted
prior to the adoption of the Codification.





Fair
Value Accounting





In 2006,
the FASB issued SFAS No. 157, “Fair Value Measurements”
(“ASC Topic 820”) which defines fair value, establishes a market-based framework
or hierarchy for measuring fair value and expands disclosures about fair value
measurements. This guidance is applicable whenever another accounting
pronouncement requires or permits assets and liabilities to be measured at fair
value. It does not expand or require any new fair value measures; however the
application of this statement may change current practice. We adopted the
statement for nonfinancial assets and nonfinancial liabilities on January 1,
2009. The adoption, which primarily affected the valuation of our derivative
contracts, did not have a material effect on our financial condition or results
of operations.





In April
2009, the FASB issued the following updates that provide additional application
guidance and enhance disclosures regarding fair value measurements and
impairments of securities:




FSP FAS
157-4, “Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly” (“ASC Topic 820-10-65”). This update relates to
determining fair values when there is no active market or where the price inputs
being used represent distressed sales. It reaffirms the need to exercise
judgment to ascertain if a formerly active market has become inactive and in
determining fair values when markets have become inactive.





FSP FAS
115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (“ASC topic 320-10-65”). This update
applies to investments in debt securities for which other-than-temporary
impairments may be recorded. If an entity’s management asserts that it does not
have the intent to sell a debt security and it is more likely than not that it
will not have to sell the security before recovery of its cost basis, then an
entity may separate other-than-temporary impairments into two components: 1) the
amount related to credit losses (recorded in earnings) and 2) all other amounts
(recorded in Other comprehensive income).




35


FSP FAS
107-1 and APB 28-1,“Interim
Disclosures about Fair Value of Financial Instruments”(“ASC Topic
320-10-65”). This update requires fair value disclosures for financial
instruments that are not currently reflected on the balance sheet at fair value
on a quarterly basis.





We
elected to adopt these updates effective for interim and annual reporting
periods ending after June 15, 2009 The adoption did not have a material effect
on our financial condition or results of operations.





In August
2009, FASB issued ASU No. 2009-05 which amends Fair Value Measurements and
Disclosures – Overall (“ASC Topic 820-10”) to provide guidance on the fair value
measurement of liabilities. This update requires clarification for circumstances
in which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using one or
more of the following techniques: 1) a valuation technique that uses either the
quoted price of the identical liability when traded as an asset or quoted prices
for similar liabilities or similar liabilities when traded as an asset; or 2)
another valuation technique that is consistent with the principles in ASC Topic
820 such as the income and market approach to valuation. The amendments in this
update also clarify that when estimating the fair value of a liability, a
reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of the liability. This update further clarifies that if the fair value
of a liability is determined by reference to a quoted price in an active market
for an identical liability, that price would be considered a Level 1 measurement
in the fair value hierarchy. Similarly, if the identical liability has a quoted
price when traded as an asset in an active market, it is also a Level 1 fair
value measurement if no adjustments to the quoted price of the asset are
required. This update is effective for our fourth quarter 2009.





Business
Combinations and Noncontrolling Interests





In 2007,
the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“ASC
Topic 805”). This guidance requires the acquiring entity in a business
combination to recognize the full fair value of assets acquired and liabilities
assumed in the transaction (whether a full or partial acquisition); establishes
the acquisition date fair value as the measurement objective for all assets
acquired and liabilities assumed; requires expensing of most transaction and
restructuring costs; and requires the acquirer to disclose the information
necessary to evaluate and understand the nature and financial effect of the
business combination. We adopted this guidance effective January 1, 2009
and have applied it to all business combinations prospectively from that date.
The impact of ASC 805 on our consolidated financial statements will depend upon
the nature, terms and size of the acquisitions we consummate in the
future.




In April
2009, the FASB issued Staff Position No. FSP FAS 141(R)-1, “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies” (“ASC Topic 805-20”). This updated guidance amended the
accounting treatment for assets and liabilities arising from contingencies in a
business combination and requires that pre-acquisition contingencies be
recognized at fair value, if fair value can be reasonably determined. If fair
value cannot be reasonably determined, measurement should be based on the best
estimate in accordance with SFAS No. 5, “Accounting for Contingencies”
(“ASC Topic 405”). This updated guidance was effective January 1, 2009. The
Company does not have any assets acquired or liabilities assumed in a business
combination that arise from contingencies.





In
December 2007, the FASB issued FAS 160 “Non-controlling Interests in
Consolidated Financial Statements” (“FAS160”), which amends Accounting Research
Bulletin (“ARB 51”), “Consolidated Financial Statements “(ARB 51”). This
statement was adopted effective January 1, 2009. FAS160 provides guidance for
the accounting, reporting and disclosure of non-controlling interests and
requires, among other things, that non-controlling interests be recorded as
equity in the consolidated financial statements. The adoption of this standard
resulted in the reclassification of $7,477,767 in 2009 and $7,459,660 in 2008 of
Minority Interests (now referred to as non-controlling interests) to a separate
component of Stockholders’ Equity on the Consolidated Balance Sheet.
Additionally, net income attributable to non controlling interests is now shown
separately from parent net income in the Consolidated Statement of Income. Prior
periods have been restated to reflect the presentation and disclosure
requirements of FAS 160.




36


Revenue
Recognition





In
October 2009, the FASB issued the following ASUs:





ASU No.
2009-13, Revenue
Recognition (“ASC Topic 605”) - Multiple-Deliverable Revenue
Arrangements, a consensus of the FASB Emerging Issues Task Force;





ASU No.
2009-14, Software (“ASC Topic 985”) - Certain Revenue Arrangements That
Include Software Elements, a consensus of the FASB Emerging Issues Task
Force.





ASU No.
2009-13: This guidance modifies the fair value requirements of ASC subtopic
605-25 Revenue Recognition-Multiple Element Arrangements by allowing the use of
the “best estimate of selling price” in addition to VSOE and VOE (now referred
to as TPE standing for third-party evidence) for determining the selling price
of a deliverable. A vendor is now required to use its best estimate of the
selling price when VSOE or TPE of the selling price cannot be determined. In
addition, the residual method of allocating arrangement consideration is no
longer permitted.





ASU No.
2009-14: This guidance modifies the scope of ASC subtopic 965-605
Software-Revenue Recognition to exclude from its requirements (a) non-software
components of tangible products and (b) software components of tangible products
that are sold, licensed, or leased with tangible products when the software
components and non-software components of the tangible product function together
to deliver the tangible product’s essential functionality.





These
updates require expanded qualitative and quantitative disclosures and are
effective for fiscal years beginning on or after June 15, 2010. However,
companies may elect to adopt as early as interim periods ended September 30,
2009. These updates may be applied either prospectively from the beginning of
the fiscal year for new or materially modified arrangements or retrospectively.
We are currently evaluating the impact of adopting these updates on our
consolidated financial statements.





Other
Accounting Changes





In June
2009, the FASB issued the following standards:





SFAS No.
167, “Amendments to FASB Interpretation No. 46(R), Consolidation of Variable
Interest Entities” (“ASC Topic 810-10”). This updated guidance requires an
analysis to determine whether a variable interest gives the entity a controlling
financial interest in a variable interest entity. It also requires an ongoing
reassessment and eliminates the quantitative approach previously required for
determining whether an entity is the primary beneficiary. We are currently
evaluating the potential impact the adoption of this Statement will have on its
financial statements.





SFAS No.
166, “Accounting for Transfers of Financial Assets”, (“ASC Topic 810”). This
updated guidance removed the concept of a qualifying special-purpose entity and
removed the exception from applying consolidation guidance to these entities.
This update also clarified the requirements for isolation and limitations on
portions of financial assets that are eligible for sale accounting. ASC Topic
810 is effective for our fiscal year beginning on January 1, 2010. We are
currently evaluating the potential impact the adoption of this Statement will
have on its financial statements.




37


In May
2009, the FASB issued SFAS No. 165, Subsequent Events, which is
effective for interim or annual financial periods ending after June 15, 2009.
SFAS No. 165 establishes general standards of accounting and disclosure of
events that occur after the balance sheet but before financial statements are
issued or are available to be issued. However, since the Company is a public
entity, management is required to evaluate subsequent events through the date
that financial statements are issued and disclose the date through which
subsequent events have been evaluated, as well as the date the financial
statements were issued. SFAS No. 165 was adopted since its interim period ended
June 30, 2009. Subsequent events for the nine months ended September 30, 2009
have been evaluated through November 14, 2009, the date the financial statements
were issued as further discussed in EITF Topic No. D-86.





During
2009, the FASB has issued several ASU’s – ASU No. 2009-02 through ASU No.
2009-15. Except for ASU’s No. 2009-05, 2009-13 and 2009-14 discussed above, the
ASU’s entail technical corrections to existing guidance or affect guidance
related to specialized industries or entities and therefore have minimal, if
any, impact on the Company.





In 2008,
the FASB issued Staff Position No. FAS 132(R)-1, “Employers’ Disclosures about
Postretirement Benefit Plan Assets” (“ASC Topic 715-20-65”). This guidance will
expand disclosure by requiring the following new disclosures: 1) how investment
allocation decisions are made by management; 2) major categories of plan assets;
and 3) significant concentrations of risk. Additionally, ASC 715-20-65 will
require an employer to disclose information about the valuation of plan assets
similar to that required in ASC Topic 820 Fair Value Measurements and
Disclosures. We are currently evaluating the potential impact the adoption of
this Statement will have on its financial statements.





In May
2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (“ASC Topic 420-20-25”), which clarifies the accounting for
convertible debt instruments that may be settled in cash upon conversion,
including partial cash settlement. ASC Topic 420-20-25 specifies that an issuer
of such instruments should separately account for the liability and equity
components of the instruments in a manner that reflects the issuer’s
non-convertible debt borrowing rate when interest costs are recognized in
subsequent periods. ASC Topic 420-20-25 is effective for the Company’s fiscal
year beginning January 1, 2009, and retrospective application is required for
all periods presented. ASC Topic 420-20-25 is currently not applicable to the
Company.





In June
2008, the FASB issued EITF Issue No. 07-5, Determining Whether an Instrument
(or Embedded Feature) is Indexed to an Entity’s Own Stock(“ASC Topic
815-40”), which is effective for financial statements for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. The
Issue addresses the determination of whether an instrument (or an embedded
feature) is indexed to an entity’s own stock, which is the first part of the
scope exception in Paragraph 11(a) of ASC Topic 815-10 for the purpose of
determining whether the instrument is classified as an equity instrument or
accounted for as a derivative instrument which would be recognized either as an
asset or liability and measured at fair value. The guidance shall be applied to
outstanding instruments as of the beginning of the fiscal year in which this
Issue is initially applied. Any debt discount that was recognized when the
conversion option was initially bifurcated from the convertible debt instrument
shall continue to be amortized. The cumulative effect of the change in
accounting principles shall be recognized as an adjustment to the opening
balance of retained earnings. The adoption of ASC Topic 815-40 did not have a
material impact on the Company’s financial statements.




In June
2008, the FASB issued FASB Staff Position (FSP) Emerging Issues Task Force
(EITF) 03-6-1, Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities (“ASC Topic 260-10”). ASC Topic 260-10
addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore, need to be included in
the earnings allocation in computing earnings per share under the two-class
method as described in ASC Topic 260-10, Earnings Per Share. Under the guidance
of ASC Topic 260-10, unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and must be included in the computation of
earnings per share pursuant to the two-class method. All prior period earnings
per share information must be adjusted retrospectively. The Company adopted ASC
Topic 260-10as of January 1, 2009. Company does not currently have any
share-based awards that would qualify as participating securities.




38


RESULTS
OF OPERATIONS




Net
revenues


Three
      Months Ended September 302009
                      
                      
                      2008
                      
                      
                      %
      of Changes(In
      thousands, except percentages)%
      of net
                        revenue
                      
                      
                      
                      
                      
                      %
      of net
                        revenueNet
      revenues :Datamining
                      
                      $
                      5,452
                      
                      
                      
                      62
                      %
                      
                      $
                      5,959
                      
                      
                      
                      70
                      %
                      
                      
                      (9
                      )%Software
      Services
                      
                      
                      3,311
                      
                      
                      
                      38
                      %
                      
                      
                      2,609
                      
                      
                      
                      30
                      %
                      
                      
                      27
                      %$
                      8,763
                      
                      
                      
                      100
                      %
                      
                      $
                      8,568
                      
                      
                      
                      100
                      %
                      
                      
                      2
                      %




Total net
revenue increased 2% for the third quarter year over year.  This was
primarily due to a 27% increase in software services revenue year over year
offset by a decrease of 9% in data mining revenue.




Datamining. Revenue decreased by 9% for the third quarter compared to the same
period in 2008.  This decrease was due to a continuing softness in
demand for our services in the existing market sector experienced in the first
half year.  However, 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.




Software
Services. Revenue increased by 27% for the third quarter compared to
the same period in 2008. This increase was primarily due to customer acceptance
of several trials of our operation analysis and billing software in the quarter.
In addition, the full deployment of 3G in China created new demand for our
software services.  One major achievement with a new customer, in the
amount of $2.19 million for the third quarter was to provide a total system
solution to the Henan Telecom Bureau of China Telecom for their security
monitoring and operation control systems in their switching centers in the
province.





Nine
      Months Ended September 302009
                    
                    
                    2008
                    
                    
                    %
      of Changes(In
      thousands, except percentages)%
      of net
                      revenue
                    
                    
                    
                    
                    
                    %
      of net
                      revenueNet
      revenues :Datamining
                    
                    $
                    10,222
                    
                    
                    
                    61
                    %
                    
                    $
                    15,622
                    
                    
                    
                    68
                    %
                    
                    
                    (35
                    )%Software
      Services
                    
                    
                    6,572
                    
                    
                    
                    39
                    %
                    
                    
                    7,488
                    
                    
                    
                    32
                    %
                    
                    
                    (12
                    )%$
                    16,794
                    
                    
                    
                    100
                    %
                    
                    $
                    23,110
                    
                    
                    
                    100
                    %
                    
                    
                    (27
                    )%





For the
nine months of 2009, total net revenue decreased 27% compared with the same
period in 2008. This was primarily due to general market weakness and
disappointing results in the first 2 quarters of 2009; of which, major decrease
was on the data mining segment for the first 6 months. In the third quarter,
however, we have taken management actions and we are starting to rebuild the
growth momentum for both the data mining and the software services segment as
witnessed by the much improved results in the third quarter of 2009 compared
to  the second quarter of 2009. For the year, while we still expect
the results to trail behind 2008, we would expect strong recovery in the second
half of 2009 in terms of revenue and earnings growth compared to the first half
of 2009.




39


Cost
of revenues


Three
      Months Ended September 302009
                    
                    
                    2008
                    
                    
                    %
      of Changes(In
      thousands, except percentages)Cost
      of revenues :Datamining
                    
                    $
                    3,238
                    
                    
                    $
                    3,526
                    
                    
                    
                    (8
                    )%Software
      Services
                    
                    
                    2,189
                    
                    
                    
                    1,601
                    
                    
                    
                    37
                    %$
                    5,427
                    
                    
                    $
                    5,127
                    
                    
                    
                    6
                    %




Total
cost of revenue for the quarter was 6% higher compared to the same period in
2008, while sales revenue increased by 2%. The unfavorable cost increase was
primarily due to a higher than expected increase in cost of software services
associated with the new development and provisioning of new system solutions in
procuring new contracts.




Datamining.Cost
of datamining revenue decreased by 8% for the third quarter of 2009 year
compared to the third quarter of 2008.  This reflected a cost
reduction in line with the decrease of 9% in revenue for the
quarter.




Software
Services.  Cost of software services revenue increased by 37%
for the third quarter of 2009 year over year.  This increase was more
than the 27% increase in revenue for the quarter. This increase was due to
higher development and material costs associated with the development of a new
software and provisioning of system solutions to procure new
contracts.





Nine Months Ended September
    302009
                    
                    
                    2008
                    
                    
                    % of Changes(In
      thousands, except percentages)Cost
      of revenues :Datamining
                    
                    $
                    6,050
                    
                    
                    $
                    7,852
                    
                    
                    
                    (23
                    )
      %Software
      Services
                    
                    
                    4,411
                    
                    
                    
                    3,213
                    
                    
                    
                    37
                    %$
                    10,461
                    
                    
                    $
                    11,065
                    
                    
                    
                    (5
                    )
      %




For the
nine months ended September 30, 2009, total cost of revenue decreased by 5%
compared to the same period in 2008. This decrease was mainly due to lower
purchase costs and a decrease of headcount in the first two quarters. Cost of
revenues in datamining experienced a decrease of 23% for the nine months ended
September 30, 2009, while the software service increased by 37% for the nine
months ended September 30, 2009.




Gross
profit margin


Three Months Ended September
    302009
                  
                  
                  2008(In
      thousands, except percentages)Gross
      profit margin :Data
      mining
                  
                  
                  41
                  %
                  
                  
                  41
                  %Software
      Services
                  
                  
                  34
                  %
                  
                  
                  39
                  %Overall
                  
                  
                  38
                  %
                  
                  
                  40
                  %




Overall
gross margin decreased by 2 % year over year for the third quarter of 2009,
which was primarily due to a 5% decrease in software services.




40


Datamining.
The gross margin of datamining remained flat year over year for the third
quarter of 2009, as the positive impact from improved market condition and
better pricing was offset by a higher amortization in the quarter.




Software
Services.  The gross margin of software services decreased by 5
percentage year over year for the third quarter of 2009. This was primarily due
to an increase in development and material costs associated with the development
of new software and provisioning of system solutions to win new
contracts.




Nine Months Ended September
    302009
                  
                  
                  2008(In
      thousands, except percentages)Gross
      profit margin :Data
      mining
                  
                  
                  41
                  %
                  
                  
                  50
                  %Software
      Services
                  
                  
                  33
                  %
                  
                  
                  57
                  %Overall
                  
                  
                  38
                  %
                  
                  
                  52
                  %




For the
nine months ended September 30, 2009, total gross margin decreased by 14%
compared with the same period in 2008. This decrease was primarily due to
significant price erosion as result of the downturn of the economy and a very
fierce market competition in the first two quarters of 2009.




Operating
Expenses


Three Months Ended September
    302009
                
                
                2008
                
                
                % of
                  Changes(In
      thousands, except percentages)% of
                  total net
                  revenue
                
                
                
                
                
                % of
                  total net
                  revenueSelling,
      General and Administrative Expense
                
                $
                1,640
                
                
                
                19
                %
                
                $
                1,279
                
                
                
                15
                %
                
                
                28
                %Research
      and Development Cost
                
                
                393
                
                
                
                4
                %
                
                
                203
                
                
                
                2
                %
                
                
                94
                %




Selling, General
and Administrative Expense.  Selling, general and
administrative expenses consist primarily of compensation and incentive
expenses, entertaining and marketing expenses, fees for professional services,
traveling and transportation expenses, and office expenses. Due to the operation
development in the third quarter of 2009, more sales persons are employed, and
the selling, general and administrative expenses increased
accordingly.




Research and
Development Cost.  Research and development costs consist
primarily of personnel-related expenses incurred for the development of software
and maintenance of our database. Our core competitive strength is research and
development.  Although our revenues decreased  due to
economic downturn, we increased research and development costs  to
position the company for future profit capability.


41





Nine Months Ended September
    302009
                
                
                2008
                
                
                % of
                  Changes(In
      thousands, except percentages)% of
                  total net
                  revenue
                
                
                
                
                
                % of
                  total net
                  revenueSelling,
      General and Administrative Expense
                
                $
                2,758
                
                
                
                16
                %
                
                $
                2,989
                
                
                
                13
                %
                
                
                (8
                )%Research
      and Development Cost
                
                
                836
                
                
                
                5
                %
                
                
                719
                
                
                
                3
                %
                
                
                16
                %




For the
nine months ended September 30, 2009, SG&A decreased by 8% compared with the
same period of 2008. R&D cost increased by 16%. The decrease in
SG&A was primarily due to staff reduction and expenses control in the first
6 months of 2009; whereas the increase in R&D was to strengthen our core
products to position for future growth and profit capability, despite revenue
softness in the first six months of 2009




LIQUIDITY
AND CAPITAL RESOURCES


As
      of September 302009
                
                
                2008(In
      thousands)Cash
      and cash equivalents
                
                $
                2,882
                
                
                $
                7,135Working
      capital
                
                $
                27,842
                
                
                $
                27,777Stockholder’s
      equity
                
                $
                40,967
                
                
                $
                33,320




As of
September 30 2009, we had $2.9 million in cash and cash equivalents to meet the
future requirements of our operating activities. We believe that our existing
cash and cash equivalents will be sufficient to fund our operating activities,
capital expenditures and other obligations through 2009.





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




Nine Months Ended September
    302009
                  
                  
                  2008(In
      thousands)Net
      cash (used in) provided by operating activities
                  
                  $
                  1,219
                  
                  
                  $
                  (2,689
                  )Net
      cash (used in) provided by investing activities
                  
                  
                  (3,933
                  )
                  
                  
                  (1,388
                  )Net
      cash used in financing activities
                  
                  
                  (72
                  )
                  
                  
                  -Effect
      of foreign currency translation on cash and cash
    equivalents
                  
                  
                  196
                  
                  
                  
                  452Net
      (decrease) increase in cash and cash equivalents
                  
                  
                  (2,590
                  )
                  
                  
                  (3,625
                  )Cash
      and cash equivalents - beginning of period
                  
                  
                  5,472
                  
                  
                  
                  10,760Cash
      and cash equivalents - end of period
                  
                  $
                  2,882
                  
                  
                  $
                  7,135




Operating
activities




Our net
cash provided by operating activities for the nine months ended September 30,
2009 was $1.2 million. This was based on net income of $2.9 million, adjusted by
non-cash related expenses of $2.8 million, while the net decrease in other
payables is $0.36 million, the decrease in inventory is $0.5million, and minus
$5.5 million used in trade receivables, resulting in $1.2 M of net cash provided
by operating activities for the nine months ended September
30,2009.




42


Investing
activities




Cash used
in investing activities for the nine months ended September 30, 2009 was $3.9
million which was mainly attributable to the strategic business agreement with
Newway Technology based on which we will have access to their intangible assets
for profitable growth of our business in the datamining segment.




Financing
activities




Cash flow
used in financing activities for the nine months ended September 30, 2009 was
$72 thousand which is due to loan from stockholder.




OFF-BALANCE
SHEET ARRANGEMENTS




We do not
have any off-balance sheet arrangements.




43


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.


In
connection with the restatement of the consolidated financial statements in this
Quarterly Report on Form 10-Q/A, the Company’s management, including the
Company’s chief executive officer and the chief financial officer, 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 of September 30, 2009, 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 Securities and
Exchange Commission (“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 the issuer’s management
(including our principal executive officer and principal financial officer, or
persons performing similar functions) as appropriate to allow timely decisions
regarding required disclosure.




Because
of their inherent limitations, disclosure controls and procedures may not
prevent or detect misstatements. The root cause for the restatement was not
insufficient disclosure control activities, but the result of ambiguous contract
terms, that were later clarified as to their meaning. Correct accounting
treatment has been applied based on an interpretation of the terms at the time.
The subsequent clarification of terms by the parties and the entry
into of the supplemental minutes regarding this understanding, does not, in
management's view, implicate the effectiveness of the Company's disclosure
controls and procedures.




Changes
in Internal Control over Financial Reporting




There
were no changes in our internal controls over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during
the nine months ended September 30, 2009 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.




44


PART
II. OTHER INFORMATION




Item 1.
            Legal
      Proceedings




Not
applicable.




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.
            Submission of Matters to a Vote
      of Security Holders




No matter
was submitted to a vote of security holders during the nine months ended
September 30, 2009.




Item 5.
            Other
      Information




None.




Item 6.
            Exhibits




The
following exhibits are furnished as part of the Quarterly Report on Form
10-QSB:




Exhibit
                
                Description31.1
                
                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.


45


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:
July 12, 2010





JINGWEI
      INTERNATIONAL LIMITEDBy:
                /s/
      Rick H. LukName:
      Rick H. LukTitle:
      Chief Executive Officer(Principal
      Executive Officer)JINGWEI
      INTERNATIONAL LIMITEDBy:
                /s/ Yong XuName:
      Yong XuTitle:
      Chief Financial Officer(Principal
      Accounting and Financial
Officer)




46