UNITED
STATES




SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q


x
              Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended June 30,
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 xNo  ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).*  YesoNoo*The registrant has not yet been phased
into the interactive data requirements.




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange. (Check
one):




Large
      Accelerated Filer  ̈
            Accelerated
      Filer  ̈
            Non-Accelerated
      Filer  ̈
            Smaller
      Reporting Company x




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




As of
August 11, 2009, there were 17,049,000 shares of the issuer’s common stock, par
value $0.001 per share, outstanding.







PART
      I. FINANCIAL INFORMATIONItem
      1.
                Condensed
      Consolidated Financial Statements
                F-1Item
      2.
                Management’s
      Discussion and Analysis or Plan of Operation
                1Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                8Item
      4T.
                Controls
      and Procedures
                9PART
      II. OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                10Item
      1A.
                Risk
      Factors
                10Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                10Item
      3.
                Defaults
      Upon Senior Securities
                10Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                10Item
      5.
                Other
      Information
                10Item
      6.
                Exhibits
                10




i




PART
I.


FINANCIAL
INFORMATION





Item
1. Condensed Consolidated Financial Statements





Condensed Consolidated Balance
    Sheets
                F-2Condensed
      Consolidated Statements of Operations
                F-3Condensed
      Consolidated Statements of Comprehensive Income
                F-4Condensed
      Consolidated Statement of Stockholders’ Equity
                F-5Condensed
      Consolidated Statements of Cash Flows
                F-6Notes
      to Condensed Consolidated Financial Statements
                F-7




F-1


Jingwei
International Limited And Subsidiaries


Condensed
Consolidated Balance Sheets


(Stated
in US Dollars)


June
      30
                    
                    
                    December
      312009
                    
                    
                    2008(Unaudited)
                    
                    
                    (Audited)ASSETSCurrent
      assetsCash
      and equivalents
                    
                    $
                    7,303,235
                    
                    
                    $
                    5,472,408Inventories
                    
                    
                    4,401,449
                    
                    
                    
                    2,802,037Trade
      receivables (net of allowance of doubtful accounts of $141,133 and
      $135,422)
                    
                    
                    19,564,068
                    
                    
                    
                    19,371,524Other
      receivables, prepayments and deposits (net of allowance of doubtful
      accounts of $103,410 and $117,787)
                    
                    
                    1,521,570
                    
                    
                    
                    3,749,169Total
      Current Assets
                    
                    
                    32,790,322
                    
                    
                    
                    31,395,138Non-current
      assetsProperty,
      plant and equipment – Net
                    
                    
                    1,510,393
                    
                    
                    
                    1,305,917Acquired
      Intangible Assets
                    
                    
                    11,620,073
                    
                    
                    
                    12,238,501Long
      term Investment
                    
                    
                    1,735,624
                    
                    
                    
                    1,733,244Total
      Assets
                    
                    $
                    47,656,412
                    
                    
                    $
                    46,672,800LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesTrade
      payables
                    
                    $
                    1,795,126
                    
                    
                    $
                    1,965,619Accruals
      and other payables
                    
                    
                    984,858
                    
                    
                    
                    1,465,571Income
      Tax payable
                    
                    
                    430,553
                    
                    
                    
                    358,168Deferred
      Tax
                    
                    
                    288,035
                    
                    
                    
                    192,930Loan
      from a stockholder
                    
                    
                    487,916
                    
                    
                    
                    559,286Total
      Current Liabilities
                    
                    
                    3,986,488
                    
                    
                    
                    4,541,574Total
      Liabilities
                    
                    
                    3,986,488
                    
                    
                    
                    4,541,574EquityCommon
      stock, $.001 par value; 75,000,000 shares authorized, 17,049,000 shares
      issued and outstanding
                    
                    
                    17,049
                    
                    
                    
                    17,049Additional
      Paid-in Capital
                    
                    
                    15,475,331
                    
                    
                    
                    15,403,411Statutory
      and other reserves
                    
                    
                    883,936
                    
                    
                    
                    883,936Accumulated
      other comprehensive income
                    
                    
                    2,612,423
                    
                    
                    
                    2,564,066Retained
      Earnings
                    
                    
                    17,211,282
                    
                    
                    
                    15,803,104Total
      Jingwei International Limited and Subsidiaries' Stockholders'
      Equity
                    
                    
                    36,200,021
                    
                    
                    
                    34,671,566Noncontrolling
      interest
                    
                    
                    7,469,903
                    
                    
                    
                    7,459,660Total
      Equity
                    
                    
                    43,669,924
                    
                    
                    
                    42,131,226Total
      Liabilities and Stockholders' Equity
                    
                    $
                    47,656,412
                    
                    
                    $
                    46,672,800





See
accompanying notes to condensed consolidated financial
statements


F-2


Jingwei
International Limited And Subsidiaries


Condensed
Consolidated Statements of Operations (unaudited)


(Stated
in US Dollars)





Three
      months
                        Ended
      June 30,
                        2009
                      
                      
                      Three
      months
                        Ended
      June 30,
                        2008
                      
                      
                      Six
      months Ended
                        June
      30, 2009
                      
                      
                      Six
      months Ended
                        June
      30, 2008(Unaudited)
                      
                      
                      (Audited)
                      
                      
                      (Unaudited)
                      
                      
                      (Audited)Sales
                      
                      $
                      4,086,795
                      
                      
                      $
                      8,788,418
                      
                      
                      $
                      8,030,513
                      
                      
                      $
                      14,541,866Cost
      of sales
                      
                      
                      (2,611,391
                      )
                      
                      
                      (3,869,131
                      )
                      
                      
                      (5,033,697
                      )
                      
                      
                      (5,938,519
                      )Gross
      profit
                      
                      
                      1,475,404
                      
                      
                      
                      4,919,287
                      
                      
                      
                      2,996,816
                      
                      
                      
                      8,603,347ExpensesSelling,General and Administrative
      expenses
                      
                      
                      (715,112
                      )
                      
                      
                      (1,012,663
                      )
                      
                      
                      (1,118,489
                      )
                      
                      
                      (1,710,188
                      )Research and development
      costs
                      
                      
                      (189,530
                      )
                      
                      
                      (351,151
                      )
                      
                      
                      (443,387
                      )
                      
                      
                      (516,142
                      )Total
      Expenses
                      
                      
                      (904,642
                      )
                      
                      
                      (1,363,814
                      )
                      
                      
                      (1,561,876
                      )
                      
                      
                      (2,226,330
                      )Income
      from operations
                      
                      
                      570,762
                      
                      
                      
                      3,555,473
                      
                      
                      
                      1,434,940
                      
                      
                      
                      6,377,017Other
      income (expenses)Subsidy
      income
                      
                      
                      234,171
                      
                      
                      
                      286,962
                      
                      
                      
                      355,386
                      
                      
                      
                      543,690Interest
      income
                      
                      
                      3,740
                      
                      
                      
                      3,835
                      
                      
                      
                      7,764
                      
                      
                      
                      8,760Finance
      costs
                      
                      
                      -
                      
                      
                      
                      (4,276
                      )
                      
                      
                      -
                      
                      
                      
                      (8,039
                      )Other
      income (expense)
                      
                      
                      (12,229
                      )
                      
                      
                      (28,544
                      )
                      
                      
                      (26,295
                      )
                      
                      
                      (24,450
                      )Total
      other income
                      
                      
                      225,682
                      
                      
                      
                      257,977
                      
                      
                      
                      336,855
                      
                      
                      
                      519,961Income
      before income taxes
                      
                      
                      796,444
                      
                      
                      
                      3,813,450
                      
                      
                      
                      1,771,795
                      
                      
                      
                      6,896,978Income
      taxes
                      
                      
                      (8,963
                      )
                      
                      
                      (776,686
                      )
                      
                      
                      (363,617
                      )
                      
                      
                      (1,080,625
                      )Net
      income
                      
                      
                      787,481
                      
                      
                      
                      3,036,764
                      
                      
                      
                      1,408,178
                      
                      
                      
                      5,816,353Less:
      Net income attributable to the noncontrolling interest
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Net
      Income attributable to Jingwei International Limited and
      Subsidiaries
                      
                      $
                      787,481
                      
                      
                      $
                      3,036,764
                      
                      
                      $
                      1,408,178
                      
                      
                      $
                      5,816,353Earnings
      Per Share (Basic)
                      
                      $
                      0.05
                      
                      
                      $
                      0.18
                      
                      
                      $
                      0.08
                      
                      
                      $
                      0.34Earnings
      Per Share (Diluted)
                      
                      $
                      0.05
                      
                      
                      $
                      0.18
                      
                      
                      $
                      0.08
                      
                      
                      $
                      0.34Weighted
      Average Common Shares OutstandingBasic
                      
                      
                      17,049,000
                      
                      
                      
                      17,049,000
                      
                      
                      
                      17,049,000
                      
                      
                      
                      17,049,000Diluted
                      
                      
                      17,049,000
                      
                      
                      
                      17,131,660
                      
                      
                      
                      17,049,000
                      
                      
                      
                      17,090,330




See
accompanying notes to condensed consolidated financial
statements.


F-3


Jingwei
International Limited And Subsidiaries


Condensed
Consolidated Statements of Comprehensive Income (unaudited)


(Stated
in US Dollars)





Three
      Months
                  Ended
      June 30,
                  2009
                
                
                Three
      Months
                  Ended
      June 30,
                  2008
                
                
                Six
      Months
                  EndedJune
      30,
                  2009
                
                
                Six
      Months
                  Ended
      June 30,
                  2008Net
      Income
                
                $
                787,481
                
                
                $
                3,036,764
                
                
                $
                1,408,178
                
                
                $
                5,816,353Other
      Comprehensive IncomeForeign
      currency translation adjustment
                
                
                4,837
                
                
                
                643,583
                
                
                
                48,357
                
                
                
                1,261,434Comprehensive
      Income
                
                
                792,318
                
                
                
                3,680,347
                
                
                
                1,456,535
                
                
                
                7,077,787Comprehensive
      income attributable to the noncontrolling interest
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Comprehensive
      income attributable to Jingwei's Limited and Subsidiaries
                
                $
                792,318
                
                
                $
                3,680,347
                
                
                $
                1,456,535
                
                
                $
                7,077,787




See
accompanying notes to condensed consolidated financial
statements.


F-4


Jingwei
International Limited And Subsidiaries


Condensed
Consolidated Statements of Stockholders’ Equity


(Stated
in US Dollars)





Jingwei
      International Limited StockholdersTotal
                  
                  
                  Comprehensive
                    Income
                  
                  
                  Retained
      Earnings
                  
                  
                  Accumulated
                    Other
                    Comprehensive
                    income
                  
                  
                  Common
                    Stock
                  
                  
                  Additional
                    Paid-In
                    Capital
                  
                  
                  Statutory
                    and
      Other
                    Reserves
                  
                  
                  Noncontrolling
                    InterestBeginning
      Balance
                  
                  $
                  42,131,226
                  
                  
                  $
                  -
                  
                  
                  $
                  15,803,104
                  
                  
                  $
                  2,564,066
                  
                  
                  $
                  17,049
                  
                  
                  $
                  15,403,411
                  
                  
                  $
                  883,936
                  
                  
                  $
                  7,459,660Comprehensive
      income:Net
      income (loss)
                  
                  
                  1,408,178
                  
                  
                  
                  1,408,178
                  
                  
                  
                  1,408,178
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Other
      comprehensive income:Foreign
      currency translation adjustment
                  
                  
                  58,600
                  
                  
                  
                  48,357
                  
                  
                  
                  -
                  
                  
                  
                  48,357
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  10,243Share
      based compensation cost
                  
                  
                  71,920
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  71,920
                  
                  
                  
                  -
                  
                  
                  
                  -Ending
      balance(unaudited)
                  
                  $
                  43,669,924
                  
                  
                  $
                  1,456,535
                  
                  
                  $
                  17,211,282
                  
                  
                  $
                  2,612,423
                  
                  
                  $
                  17,049
                  
                  
                  $
                  15,475,331
                  
                  
                  $
                  883,936
                  
                  
                  $
                  7,469,903


See
accompanying notes to condensed consolidated financial
statements.


F-5


Jingwei
International Limited And Subsidiaries


Condensed
Consolidated Statements of Cash Flows (unaudited)


(Stated
in US Dollars)





Six
      Months Ended
                    June 30,
      2009
                  
                  
                  Six
      Months Ended
                    June 30,
      2008Cash
      flows from operating activitiesNet
      income
                  
                  $
                  1,408,178
                  
                  
                  $
                  5,816,353Adjustments
      to reconcile net income to netcash(used
      in)provided by operating activities:Depreciation
      & amortization
                  
                  
                  1,064,215
                  
                  
                  
                  752,533Allowance
      for doubtful accounts
                  
                  
                  38,913
                  
                  
                  
                  21,233Amortization
      of stock options issued for services
                  
                  
                  71,920
                  
                  
                  
                  171,263Write-off
      of long term investment
                  
                  
                  49,527
                  
                  
                  
                  -Changes
      in operating assets and liabilities:Trade
      receivables
                  
                  
                  (664,568
                  )
                  
                  
                  (4,331,308
                  )Other
      receivables, prepayments and deposits
                  
                  
                  141,373
                  
                  
                  
                  (2,641,977
                  )Inventories
                  
                  
                  462,697
                  
                  
                  
                  (719,045
                  )Trade
      payables
                  
                  
                  319,566
                  
                  
                  
                  (275,992
                  )Other
      payables and accrued expenses
                  
                  
                  (479,516
                  )
                  
                  
                  (1,130,615
                  )Income
      tax payable
                  
                  
                  163,064
                  
                  
                  
                  351,410Net
      cash flows provided by (used in) operating activities
                  
                  
                  2,575,369
                  
                  
                  
                  (1,986,145
                  )Cash
      flows from investing activitiesAcquisition
      of property and equipment
                  
                  
                  (359,887
                  )
                  
                  
                  (319,750
                  )Acquisition
      of intangible assets
                  
                  
                  (270,588
                  )
                  
                  
                  (1,900,861
                  )Long
      term Investment
                  
                  
                  (49,520
                  )
                  
                  
                  -Net
      cash flows used in investing activities
                  
                  
                  (679,995
                  )
                  
                  
                  (2,220,611
                  )Cash
      flows from financing activitiesNet
      proceeds from private placement
                  
                  
                  -
                  
                  
                  
                  -Loan
      from a stockholder
                  
                  
                  (71,579
                  )
                  
                  
                  -Repayment
      of stockholder loans
                  
                  
                  -
                  
                  
                  
                  -Net
      cash flows used in financing activities
                  
                  
                  (71,579
                  )
                  
                  
                  -Effect
      of foreign currency translation on cashand
      cash equivalents
                  
                  
                  7,032
                  
                  
                  
                  436,839Net
      increase (decrease) in cash and equivalents
                  
                  
                  1,830,827
                  
                  
                  
                  (3,769,917
                  )Cash
      and cash equivalents-beginning of period
                  
                  
                  5,472,408
                  
                  
                  
                  10,760,020Cash
      and cash equivalents-end of period
                  
                  $
                  7,303,235
                  
                  
                  $
                  6,990,103Supplemental
      Disclosure of Cash Flow InformationIncome
      tax paid
                  
                  $
                  196,860
                  
                  
                  $
                  773,665Supplemental
      Disclosure of Non-cash Investing ActivitiesTransfer
      of prepayment to acquired intangible assets
                  
                  $
                  -
                  
                  
                  $
                  5,231,805





See
accompanying notes to condensed consolidated financial
statements.


F-6





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Note
1       CORPORATE INFORMATION AND DESCRIPTION
OF BUSINESS




The
accompanying unaudited condensed consolidated financial statements have been
prepared by Jingwei International Limited (the “Company”).  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”).  Certain financial information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, although 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 six
months ended June 30, 2009 may not be indicative of operating results to be
expected for the full year.




Jingwei
International Limited and its consolidated subsidiaries and variable interest
entities (the “Company”) 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”). Jingwei BVI has one wholly owned
subsidiary, Jingwei International Investment (HK) Ltd. (“Jingwei HK”), which was
established on October 31, 2006 in HongKong. On February 8, 2007, a wholly
subsidiary of Jingwei HK, Jingwei Hengtong Technology (ShenZhen) Co. Ltd
(“Jingwei Hengtong”) was established in People’s Republic of China (“PRC’). On
the same day, Jingwei Hengtong and Shenzhen Jingwei Communication Co., Ltd.
(Jingwei Communication), a PRC company, entered into 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 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
Co. Ltd. (“Yulong IT”) which Jingwei Communication owns 100% and New Yulong
Software Technology Development Co. Ltd. (“Yulong Software”) which Jingwei
Communication owns 51.89% and Yulong IT owns the other 48.11%. On July 23, 2008,
Yulong IT established a 100%-owned subsidiary, Beijing Media Advertising Co.
Ltd. (“Beijing Media”). On April 29, 2009, Yulong IT established a 100%-owned
subsidiary, Shenzhen Xinguo Chuang Information Technology Co. Ltd. (“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”).
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.


F-7




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.




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 ofn
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.




Note
2       SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES




Basis of
presentation and consolidation




The
accompanying consolidated financial statements of Jingwei International Limited
(“Jingwei International”), its subsidiaries, namely, Jingwei HK, Jingwei
Hengtong, and its variable interest entities, namely Jingwei Communication,
Yulong IT, Yulong Software, Beijing Media and Xinguo Chuang have been prepared
in accordance with generally accepted accounting principles in the United States
of America.


F-8




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 (“FIN 46R”).  These interpretations address
financial reporting for entities over which control is achieved through means
other than voting rights.  According to the requirements of FIN 46R,
Jingwei International has evaluated its relationships with Jingwei
Communication.  Jingwei International has concluded that, Jingwei
Communication is a “variable interest entity” for accounting purposes, and 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 FIN 46R 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, Beijing New Media and Xinguo Chuang which are
qualified as variable interest entities (VIE). 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 June 30,
2009, the VIE had assets of $43,691,621, liabilities of $17,296,215, revenues of
$7,141,740, and operating expenses of $1,232,934. No assets were pledged or
given as collateral against any borrowings.




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 receivables and all of its assets to Jingwei
Hengtong.




Use of
estimates




In
preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, 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 June 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.


F-9




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. 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 net income and foreign currency translation
adjustments.




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.




Allowance
of doubtful accounts




The
Company establishes an allowance for doubtful accounts based on management’s
assessment of the collectability 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, the management establishes the
general provisioning policy to make allowance 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 aged less than
three years to the extent which they are considered to be doubtful.




F-10




Bad debts
are written off when identified. The Company extends unsecured credit to
customers ranging from four to seven months in the normal course of business.
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.




Acquired
intangible assets, net




Acquired
intangible assets are the database valued at acquisition cost less accumulated
amortization. Amortization is calculated using the straight-line method over
their expected useful lives of 8 years.




Impairment
of long-lived assets




The
Company follows SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets.  The Statement requires that
long-lived assets and certain identifiable intangibles 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
intangibles 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 intangibles 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




In
accordance with Securities and Exchange Commission (“SEC”) Staff Accounting
Bulletin (“SAB”) No. 104, Revenue Recognition, the
Company recognizes revenue, net of taxes, when persuasive evidence of a customer
or distributor arrangement exists or acceptance occurs, receipt of goods by
customer occurs, the price is fixed or determinable, and the sales revenues are
considered collectible.


F-11





Software
and system services




Subject
to these criteria and in accordance with Statement of Position (“SOP”) 97-2,
Software
Revenue Recognition, the Company recognizes revenue from software and
system services 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. The Company’s software and system services sale arrangements
do not have multiple deliverables.  As the software and system
services typically takes more than three months to complete, the Company
accounted for the timing and amount of revenue using the
percentage-of-completion method based on proportion of work done. The percentage
of work done is determined based on milestones agreed in the contract and
percentage of total contract value due to be paid upon achievement of such
milestones. The amount due to be paid after achievement of certain milestones
agreed in the contract generally reflects the progress of work done at that
point.





Datamining
services




Revenue
from datamining services is recognized when the services are
rendered.




Consumer
electronic sales




The
Company follows Emerging Issues Task Force (“EITF”) No. 99-19, “Reporting
Revenue as a Principal versus Net as an Agent”. Under the guidance of this EITF,
the assessment of whether revenue should be reported gross with separate display
of cost of sales to arrive at gross profit should be based on the following
considerations: the Company acts as principal in the transaction, takes titles
to the products and has risk and rewards of ownership (such as the risk of loss
for collection, delivery or return). Based on EITF No.99-19, the Company
recognized all revenue from the sales of consumer electronic goods on a net
basis. This is classified as dataming service for the three and six months ended
June 10, 2009 in Segment information in Note 8.




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.




Subsidy
income




Government
subsidies that compensate Yulong IT and Yulong Software for general expenses
incurred and research and development activities are recognized as subsidy
income at the time when the approval documents are obtained from the relevant
government authorities and when the proceeds are received.




Included
in subsidy income for the six months ended June 30, 2009 of $355,386 is $14,620
and $116,960 received from the Shenzhen Technology and Information Bureau on
March 11, 2009 and June 29, 2009 which are categorized as a subsidy to
Yulong Software for technology research and development and $223,806 VAT
returned from Shenzhen tax authority.




Advertising,
transportation, research and development expenses




Advertising,
transportation and research and development expenses are charged to expense as
incurred.


F-12




For the
three months and six months ended June 30, 2009, there were no advertising and
transportation costs incurred.




Retained
earnings -appropriated




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:




(a)      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.




(b)      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 toJune30, 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”.  Under
the asset and liability method of SFAS 109, 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.




Off-balance
sheet arrangements




The
Company does not have any off-balance sheet arrangements.




Reporting
Currency and Translation




The
financial statements of the Company’s foreign subsidiaries are measured using
the local currency as the functional currency; 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 (cumulative translation
adjustment).


F-13




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 (cumulative
translation adjustment).




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 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 SFAS No. 123(R). 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.”




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 June 30, 2009 and 2008, and
$74,149 and $nil recognized for the six months ended June 30, 2009 and
2008.




On
December 25, 2008 the Company granted to Yijia Bi (John), the former CFO of the
Company, options to purchase a total of 100,000 shares of the Company’s common
stock at a strike price equal to $1.00 and vested equally in a two-year period
with the first 50,000 due to vest on May 12, 2010 provided he is still employed
by the Company. The contractual term is 10 years. Based on the Black-Scholes
option pricing model, the options were valued at $53,500 ($ 0.535 per unit) with
an assumed 74.5% volatility, a five year term for the options, a risk free rate
of 2.10% and a dividend yield of 0%. John resigned as of June 30, 2009. As none
of the option has vested as at his date of resignation, the Company reversed
$6,688 of the cost of stock-based compensation charged to the income statement
in prior periods.




In
accordance with SFAS No. 123R, the Company has recorded stock-based compensation
expense during the three months ended June 30, 2009 of $30,387 and six months
ended June 30, 2009 and 2008 of $71,920 and $171,263 in connection with the
issuance of these options.




The
Company does not have sufficient information to assess the volatility of its
equity securities since the Company has not been public long enough to support a
historical volatility analysis and there are no publicly traded options on the
Company stock to facilitate an implied volatility analysis. The management
utilized a peer group in order to assess its volatility. When a peer group is
used, the volatility estimate is generally either the average or the median
volatility of the group.




F-14




The
following table summarizes all Company stock option transactions between January
1, 2009 and June 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 three months endedJune
      30, 2009
                  
                  
                  -
                  
                  
                  
                  65,100
                  
                  
                  $
                  4.95Cancelledduring
      the three months ended June 30, 2009
                  
                  
                  (100,000
                  )
                  
                  
                  -
                  
                  
                  $
                  1.00Balance,
      June 30, 2009
                  
                  
                  1,803,250
                  
                  
                  
                  1,607,950
                  
                  
                  $
                  4.90-$7.00





Options
& warrants Outstanding





Weighted
                    AverageNumber
      Outstanding
                  
                  
                  Remaining
                  
                  
                  Weighted
      AverageRange
      of
                    Exercise
      Prices
                  
                  Currently
      Exercisable
                    at
      June 30, 2009
                  
                  
                  Contractual
      Life
                    (Years)
                  
                  
                  Exercise
      Price of Options
                    Currently
      Exercisable$4.90-$7.00
                  
                  
                  1,607,950
                  
                  
                  
                  2.22
                  
                  
                  $
                  5.94





Basic and
diluted earnings per share




In accordance with SFAS No. 128, 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
warrants for which the market price exceeds the exercise price, less shares that
could have been purchased by the Company with related proceeds.For 2008, the incremental
shares from assumed
conversion of the options and warrants amounted to 41,330 for the six months to
June 30, 2008. There was no incremental share for the three months to June 30,
2008 as assumedconversionwas anti-dilutive. For 2009, the basic
and diluted earnings per
share was the same since assumed conversion of the options and warrants was
anti-dilutive.




Comprehensive
Income




The
Company follows the Statement of Financial Accounting Standard (“SFAS”) No. 130,
Reporting Comprehensive
Income. 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.


F-15


Recently
Adopted Accounting Pronouncements




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 noncontrolling interests and
requires, among other things, that noncontroling interests be recorded as equity
in the consolidated financial statements. The adoption of this standard resulted
in the reclassification of $7,469,903 in 2009 and $7,459,660 in 2008 of Minority
Interests (now referred to as noncontrolling 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.




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), which clarifies the accounting for convertible debt
instruments that may be settled in cash upon conversion, including partial cash
settlement. FSP APB 14-1 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. FSP APB 14-1 is effective
for the Company’s fiscal year beginning January 1, 2009, and retrospective
application is required for all periods presented. FSP APB 14-1 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(“EITF Issue
No. 07-5”), 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 SFAS No. 133 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 EITF Issue No. 07-5 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. FSP EITF 03-6-1 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 SFAS No.
128, Earnings Per
Share. Under the guidance of FSP EITF 03-6-1, 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 FSP EITF 03-6-1 as of January 1, 2009.
Company does not currently have any share-based awards that would qualify as
participating securities.




In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS
No. 157 establishes a framework for measuring fair value and expands disclosures
about fair value measurements. The changes to current practice resulting from
the application of this statement relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007. In February 2008, the FASB issued FSP No. SFAS No. 157-2,
Effective Date of FASB
Statement No. 157, which provides a one-year deferral of the effective
date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed in the financial statements at
fair value at least annually. The Company adopted this statement for financial
assets and financial liabilities and nonfinancial assets and nonfinancial
liabilities disclosed or recognized at fair value on a recurring basis (at least
annually) as of January 1, 2008. The Company adopted the statement for
nonfinancial assets and nonfinancial liabilities on January 1, 2009. The
adoption of this statement in each period did not have a material impact on its
financial statements.




F-16


In April
2009, the FASB issued FASB Staff Position No. 107-1 (“FSP FAS 107-1”) and APB
28-1 (“APB 28-1”), which amends FASB Statement No. 107, Disclosures about Fair Value of
Financial Instruments and APB Opinion No. 28, Interim Financial Reporting,
to require disclosures about the fair value of financial instruments for interim
reporting periods. FSP FAS 107-1 and APB 28-1 is effective for interim reporting
periods ending after June 15, 2009. The adoption of this staff position did not
have a material impact on the Company’s financial statements.




In April
2009, the FASB issued FASB Staff Position No. 157-4 (“FSP FAS 157-4”), which
provides additional guidance in accordance with FASB No. 157, Fair Value Measurements, when
the volume and level of activity for the asset or liability has significantly
decreased. FSP FAS 157-4 is effective for interim and annual reporting periods
ending after June 15, 2009. The adoption of this staff position did not have a
material effect on its financial statements.




In April
2009, the FASB issued FASB Staff Position No. 115-2 (“FSP FAS 115-2”) and FASB
Staff Position No. 124-2 (“FSP FAS 124-2”), which amends the
other-than-temporary impairment guidance for debt and equity securities. FSP FAS
115-2 and FSP FAS 124-2 is effective for interim and annual reporting periods
ending after June 15, 2009. The adoption of this staff position did not have a
material effect on its financial statements.




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 for
its interim period ended June 30, 2009. Subsequent events have been evaluated
through August 13, 2009, the date the financial statements were issued as
further discussed in EITF Topic No. D-86.




Recently Issued Accounting Pronouncements Not Yet
Adopted




In June
2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation
No. 46(R).This Statement is a revision to FIN 46(R) and changes how a
company determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. The
determination of whether a company is required to consolidate an entity is based
on, among other things, an entity’s purpose and design and a company’s ability
to direct the activities of the entity that most significantly impact the
entity’s economic performance. This Statement requires an additional
reconsideration event when determining whether an entity is a variable interest
entity when any changes in facts and circumstances occur such that the holders
of the equity investment at risk, as a group, lose the power from voting rights
or similar rights of those investments to direct the activities of the entity
that most significantly impact the entity’s economic performance. It also
requires ongoing assessments of whether an enterprise is the primary beneficiary
of a variable interest entity. These requirements will provide more relevant and
timely information to users of financial statements. This Statement shall be
effective as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period, and for interim and annual reporting periods
thereafter. The Company is currently evaluating the potential impact the
adoption of this Statement will have on its financial
statements.


F-17




In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
Codification,which establishes the Codification as the source of
authoritative GAAP recognized by the FASB to be applied by nongovernmental
entities. SFAS 168 is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The adoption of SFAS 168 is not
expected to have an effect on the Company’s financial reporting.




Note
3       INVENTORIES





June
      30, 2009
                    
                    
                    December
      31, 2008Project
      cost
                    
                    $
                    3,997,134
                    
                    
                    $
                    2,225,275Others
                    
                    
                    404,315
                    
                    
                    
                    576,762Total
                    
                    
                    4,401,449
                    
                    
                    
                    2,802,037





Note
4       OTHER RECEIVABLES, PREPAYMENT AND
DEPOSITS





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





June
      30, 2009
                                
                                
                                December 31,
                                  2008Prepayment
      for purchasing of data, goods and
      services
                                
                                $
                                1,055,799
                                
                                
                                $
                                1,082,181Others
                                
                                465,771
                                
                                
                                2,666,988Total
                                
                                $
                                1,521,570
                                
                                
                                $
                                3,749,169





Note
5       ACQUIRED INTANGIBLE ASSETS,
NET




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





June
      30, 2009
                    
                    
                    December
      31, 2008Cost
                    
                    $
                    14,611,618
                    
                    
                    
                    14,322,795Accumulated
      amortization
                    
                    
                    (2,991,545
                    )
                    
                    
                    (2,084,294
                    )Net
                    
                    
                    11,620,073
                    
                    
                    
                    12,238,501





The
acquired intangible assets represent cost of acquired databases net of
accumulated amortization. The increase in acquired intangible assets represents
databases that have been tested and been placed in service during the six months
ended June 30, 2009. The databases have estimated useful lives of 8 years.
Amortization expenses related to intangible assets was $456,631 and $380,021 for
the three months ended June 30, 2009 and 2008, and $904,797 and $655,576 for the
six months ended June 30, 2009.




F-18


Note
6       LONG TERM INVESTMENT




In 2008,
one of the Company’s VIE, Yulong IT invested in a PRC company “Shanghai
Jiuhong”. Leveraging Jingwei’s core competency in software and datamining,
Shanghai Jiuhong is going to invest in High Tech companies. Yulong IT holds a
19.8% interest in the company. The investment is accounted for under the cost
method.




Note
7       INCOME TAXES




The
Company utilizes the asset and liability method of accounting for income taxes
in accordance with SFAS No. 109.




The
Company’s effective tax rates for the three months ended June 30, 2009 and 2008
were 1.1% and 20.4%, and for the six months ended June 30, 2009 and 2008 were
20.5% and 15.7% 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, subsidy income that is
exempt from income tax, additional deduction allowed for research and
development expenses by the Chinese tax authority, over-provision of tax for
fiscal year ended December 31, 2008 for Yulong IT due to an approval 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 June 30, 2009. Tax
years from 2006 to 2008 remain subject to examination by major tax
jurisdiction.





United
States





Jingwei
International Limited is subject to the United States of America Tax law at tax
rate of 34%. No provision for the US federal income taxes has been made as the
Company had no US taxable income for the 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 six months ended June 30, 2009 and 2008 is
16.5%.




PRC




The
Company generated substantially all of its net income from its PRC operations
for the six months ended June 30, 2009. New Yulong Software and New Yulong IT
were registered in Shenzhen, a special economic zone in the People’s Republic of
China (“PRC”). The two companies are entitled to a preferential income tax rate
of 10% and 15% respectively in 2009.  According to the pronouncement
of 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.


F-19


Note
8       SEGMENT INFORMATION




Beginning
February 1, 2007, with the acquisition of Jingwei Communication, 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 six months ended June 30, 2009 and 2008 in accordance with FAS 131,
“Disclosures about Segments of
an Enterprise and Related Information” are as follows:




Three
      Months Ended June 302009
                      
                      
                      2008Datamining
                        Services
                      
                      
                      Software
                        Services
                      
                      
                      Total
                      
                      
                      Data-
                        mining
                        Services
                      
                      
                      Software
                        Services
                      
                      
                      TotalNet
      Revenue
                      
                      $
                      2,580,227
                      
                      
                      $
                      1,506,568
                      
                      
                      $
                      4,086,795
                      
                      
                      $
                      6,406,853
                      
                      
                      $
                      2,381,565
                      
                      
                      $
                      8,788,418Gross
      Profit
                      
                      
                      970,236
                      
                      
                      
                      505,168
                      
                      
                      
                      1,475,404
                      
                      
                      
                      3,398,773
                      
                      
                      
                      1,520,514
                      
                      
                      
                      4,919,287Net
      Income
                      
                      
                      517,853
                      
                      
                      
                      269,628
                      
                      
                      
                      787,481
                      
                      
                      
                      2,098,123
                      
                      
                      
                      938,641
                      
                      
                      
                      3,036,764Segment
      Assets
                      
                      
                      35,777,220
                      
                      
                      
                      11,879,192
                      
                      
                      
                      47,656,412
                      
                      
                      
                      31,001,037
                      
                      
                      
                      13,868,979
                      
                      
                      
                      44,870,016Depreciation
      & Amortization
                      
                      
                      501,606
                      
                      
                      
                      35,428
                      
                      
                      
                      537,034
                      
                      
                      
                      414,815
                      
                      
                      
                      11,430
                      
                      
                      
                      426,245Expenditure
      for Segment Assets
                      
                      
                      616,753
                      
                      
                      
                      -
                      
                      
                      
                      616,753
                      
                      
                      
                      930,995
                      
                      
                      
                      -
                      
                      
                      
                      930,995
 
 Six
      Months Ended June 302009
                      
                      
                      2008Datamining
                        Services
                      
                      
                      Software
                        Services
                      
                      
                      Total
                      
                      
                      Data-
                        mining
                        Services
                      
                      
                      Software
                        Services
                      
                      
                      TotalNet
      Revenue
                      
                      $
                      4,769,924
                      
                      
                      $
                      3,260,589
                      
                      
                      $
                      8,030,513
                      
                      
                      $
                      9,663,094
                      
                      
                      $
                      4,878,772
                      
                      
                      $
                      14,541,866Gross
      Profit
                      
                      
                      1,958,493
                      
                      
                      
                      1,038,323
                      
                      
                      
                      2,996,816
                      
                      
                      
                      5,336,790
                      
                      
                      
                      3,266,556
                      
                      
                      
                      8,603,346Net
      Income
                      
                      
                      921,037
                      
                      
                      
                      487,141
                      
                      
                      
                      1,408,178
                      
                      
                      
                      3,536,434
                      
                      
                      
                      2,279,919
                      
                      
                      
                      5,816,353Segment
      Assets
                      
                      
                      35,777,220
                      
                      
                      
                      11,879,192
                      
                      
                      
                      47,656,412
                      
                      
                      
                      31,001,037
                      
                      
                      
                      13,868,979
                      
                      
                      
                      44,870,016Depreciation&
      Amortization
                      
                      
                      993,363
                      
                      
                      
                      70,852
                      
                      
                      
                      1,064,215
                      
                      
                      
                      724,164
                      
                      
                      
                      28,369
                      
                      
                      
                      752,533Expenditure
      for Segment Assets
                      
                      
                      630,475
                      
                      
                      
                      -
                      
                      
                      
                      630,475
                      
                      
                      
                      2,220,611
                      
                      
                      
                      -
                      
                      
                      
                      2,220,611




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.


F-20


Note
9       LEASE COMMITMENT AND OTHER CONTACTRAL
OBILIGATIONS





Lease
Commitment




On May
21, 2008, one of the Company’s VIE, Beijing Media entered into a lease agreement
with a lease term of 39 months from October 1, 2008 to December 31, 2011 at a
monthly rental of RMB 184,932 ($27,037) and a monthly service charge of RMB
26,534 ($3,879). This agreement provides office space for the operation of
Beijing Media. Beijing Media is not obligated to pay rent for the following
months: October 2008, October 2009, November 2009, November 2010, December
2010 and December 2011. A 3-month deposit has been paid.




On March
21, 2009, Beijing Media signed an agreement with Beijing Huaxia Fengjing Network
technology Co., Ltd (“Beijing Huaxia”). According to the agreement, Beijing
Huaxia will take over the rental liability with effect from January 1, 2009 and
the service charge effective from April 1, 2009.




In June,
2009, Beijing Media and Beijing Huaxia entered into a new agreement in which
Beijing Media will bear the rental of a unit at a monthly rental of RMB 11,070
($1,618) and a monthly service charge of RMB 1,589 ($232) effective from July 1,
2009.





Other
contractual obligations




On
February 29, 2008, one of the Company’s VIE, New Yulong IT engaged Tsinghua
University to provide research and development service for total consideration
of RMB 7.0M ($1,022,674). As of December 31, 2008, RMB 500,000 ($73,048) has
been paid. The remaining balance is required to be paid in four installments
with RMB 1.5M ($219,144) to be paid by March 31, 2009 based on the progress of
project development, RMB 2.5M ($365,241) to be paid by February 29,
2010 and RMB 2.5M ($365,241) to be paid by February 29, 2011. Since the project
did not meet the planned target on June 30, 2009, the payment of the remaining
balance will be delayed.





On July
31, 2009, one of the Company’s VIE, Xinguo Chuang entered into an acquisition
agreement with Shenzhen Newway Digital S&T Co., Ltd.(“Newway”), a company
organized under the laws of the People’s Republic of China. Pursuant to the
agreement, Xinguo Chuang will acquire the value-added service and channel sales
business of Newway for cash and stock options of the Company in the amount of
RMB 45 million ($6,574,334). The total amount in cash payment is RMB 22.5
million ($3,287,167), of which RMB 10 million ($1,460,963) shall be paid within
one month of the effective date and RMB 12.5 million ($1,826,204) shall be paid
within three months of the effective date. The equity portion of the
consideration consists of options to purchase RMB 22.5 million ($3,287,167)
shares of the Company’s common stock at an exercise price of $1.00 per share,
provided that sales revenue from the business is not less than RMB 30 million
($4,382,889) and net income from the business is not less than RMB 15 million
($2,191,445) for the fiscal year ending June 30, 2010 and sales revenue from the
business is not less than RMB 40 million ($5,843,852) and net income from the
business is not less than RMB 15 million ($2,191,445) for the fiscal year ending
June 30, 2011. If net income from the business is not less than more than RMB 10
million ($1,460,963) but less than RMB 15 million ($2,191,445) for the fiscal
year ending June 30, 2010, then the number of options to be granted shall be
reduced by half, or 11.25 million ($1,643,583) options. If net income is more
than RMB 8.0 million ($1,168,770) but less than RMB 10 million ($1,460,963) for
the fiscal year ending June 30, 2010, then no options will be granted and Newway
shall return RMB 6.25 million ($913,102) cash to Xinguo Chuang before September
30, 2010.


F-21


Note
10     MAJOR CUSTOMERS




The
Company had sales to a customer that accounted for approximately 12% of net
sales during the six months ended June 30, 2009. This customer accounted for
approximately 8% of trade receivable balance as at June 30, 2009.




Note
11     MAJOR SUPPLIERS




The
Company had purchases from three vendors that accounted for approximately 35% of
purchases during the six months ended June 30, 2009. These vendors
accounted for approximately 29% of trade payable as at June 30,
2009.


F-22




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 300 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.


1




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 target marketing for domestic and multinational companies who want to
carve out a burgeoning consumer market in China. In order to cement our
leadership position in data mining and 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.




Business
Outlook and Other Recent Developments




We have
seen slight improvements in our business during the second quarter of 2009.
Although our data mining business continued to experience slowdowns from the
private business sectors, demands for our software in the telecom sectors have
improved.




In data
mining, due to stimulus measures implemented by the Chinese government, we have
seen increasing activities in real estate marketing as this sector is the first
to benefit from this measure. Revenue from the real estate sectors account for a
large share of our data mining revenues. However, other business sectors such as
financials and retails were still very cautious on spending in marketing and
advertising. With our current large accounts cutting back significantly on their
marketing budgets, the data mining revenue share has dropped slightly compared
to our previous year.




On the
other hand, we have seen increased demand for our software services in the
telecom sector as operators are now in full gears for 3G deployment. As some of
our trials have started to transition into commercial deployments, we
experienced increase revenue shares from the software segment. We supplied
application software to telecom operators for their 3G services. One particular
significant win for us was the Unicom Operation Analysis Software System where
the Company is the sole provider of the systems software for the Guangzhou
branch of China Unicom operations. We expect this trend to continue as the
subscriber base expands in China.




In
addition to getting the existing business back on growth track, the Company has
recently acquired a data mining service business for the telecom value added
services. This acquisition will provide the launch pad for us to expand into 3G
related value added services. Since this is an accretive acquisition, we will
expect to see revenue and net profit contributions from this
transaction.




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 Condensed Consolidated Financial Statements.




Recent
Accounting Pronouncements




See
footnote 2 - Summary of Accounting Policies to the condensed consolidated
financial statements for recent accounting pronouncements.


2




RESULTS
OF OPERATIONS




Net
revenues





Three
      Months Ended June 302009
                                    
                                    2008
                                    
                                    
                                    %
      of Changes(In
      thousands, except percentages)%
      of net
                                      revenue
                                    
                                    
                                    
                                    
                                    
                                    %
      of net
                                      revenueNet
      revenues:Data
      mining
                                    
                                    $
                                    2,580
                                    
                                    
                                    
                                    63
                                    %
                                    
                                    $
                                    6,407
                                    
                                    
                                    
                                    73
                                    %
                                    
                                    
                                    (60
                                    )%Software
      Services
                                    
                                    
                                    1,507
                                    
                                    
                                    
                                    37
                                    %
                                    
                                    
                                    2,381
                                    
                                    
                                    
                                    27
                                    %
                                    
                                    
                                    (36
                                    )%Total
      net revenue
                                    
                                    $
                                    4,087
                                    
                                    
                                    
                                    100
                                    %
                                    
                                    $
                                    8,788
                                    
                                    
                                    
                                    100
                                    %
                                    
                                    
                                    (53
                                    )%




Total net
revenue decreased 53% for the second quarter of 2009 year over year. This was
primarily due to year over year decrease in data mining by 60% and software by
36% resulting from a steep decline in demand for our services.




Data mining.Data mining revenue decrease 60% for the second quarter of 2009 year over
year. This decrease was mainly due to economic downturn in the world, which
significantly affected our business. Particularly in the financial and retail
sectors as well as in older telecom services, we experienced a significant
slowdown in marketing and advertising spending.  Several of the banks
in China that we signed contracts with during the last year have either
cancelled or delayed their marketing campaigns.




Software
Services.  Software services revenue decrease 36% for the
second quarter of 2009 year over year. Although we experienced down turns in the
software sector, demands for new software services fueled by 3G deployments in
telecom helped cushion the severity of the downturn. As a result, the software
revenue decrease was not as dramatic as in the data mining segment during this
quarter. In fact, we are seeing slightly higher demand for our software services
compared to last quarter.




Six
      Months Ended June 302009
                                  
                                  2008
                                  
                                  
                                  %
      of Changes(In
      thousands, except percentages)%
      of net
                                    revenue
                                  
                                  
                                  
                                  
                                  
                                  %
      of net
                                    revenueNet
      revenues:Data
      mining
                                  
                                  $
                                  4,770
                                  
                                  
                                  
                                  59
                                  %
                                  
                                  $
                                  9,663
                                  
                                  
                                  
                                  66
                                  %
                                  
                                  
                                  (51
                                  )%Software
      Services
                                  
                                  
                                  3,261
                                  
                                  
                                  
                                  41
                                  %
                                  
                                  
                                  4,879
                                  
                                  
                                  
                                  34
                                  %
                                  
                                  
                                  (33
                                  )%Total
      net revenue
                                  
                                  $
                                  8,031
                                  
                                  
                                  
                                  100
                                  %
                                  
                                  $
                                  14,542
                                  
                                  
                                  
                                  100
                                  %
                                  
                                  
                                  (45
                                  )%




3




For the
first half year of 2009, total net revenue decreased 45% compared with the same
period of 2008. During the first half year of 2008, international software sales
accounted for $3.71 million (RMB 25.36 million), while 2009 has almost zero in
the international software sales. Similarly, during the first half of 2009,
datamining business in Coloring Ring tone, Magic Ring tone and mobile short
messages advertising experienced a significant downturn compared to
approximately $0.58 million (RMB 4 million) revenue in the first half of
2008.  Finally, due to customer delayed deployment, software revenue
also experienced a decrease of almost $1.5 million (RMB 10 million). Added to
the effect of financial crisis, Beijing New Media’s business did not reach the
Company’s original target and no revenue was generated.




Cost
of revenues




Three
      Months Ended June 302009
                                
                                2008
                                
                                
                                %
      of Changes(In
      thousands, except percentages)Cost
      of revenues:Data
      mining
                                
                                $
                                1,610
                                
                                
                                $
                                3,008
                                
                                
                                
                                (46
                                )%Software
      Services
                                
                                
                                1,001
                                
                                
                                
                                861
                                
                                
                                
                                16
                                %Total
      cost of revenues
                                
                                $
                                2,611
                                
                                
                                $
                                3,869
                                
                                
                                
                                (32
                                )%




After implementation
of cost reductions, our total cost of revenues decreased 32% for the second
quarter of 2009 year over year, while sales revenue was 53% lower. Our
efforts to control costs on the labor side were more effective than on the
materials purchase side.




Data mining.Cost of data mining revenue decreased 46% for the second quarter of 2009
year over year. This decrease was associated with the decrease in data mining
services and amortization costs of acquired database assets.


4




Cost of
data mining revenue consists mainly of  a) compensation and expenses
for the professionals involved in data mining and data analysis, b) amortization
of acquired database assets, and c) fees paid to third-party software service
companies, mobile operators and others for their services and
resources.




Software
Services.  Cost of software services revenue increased 16% for
the second quarter of 2009 year over year. The increased cost mainly was
contributed to retaining our human capital while revenue was not able to cover
the cost.




Cost of
software services revenue consists mainly of a) compensation and expenses for
the professionals and engineers involved in modifying, customizing or installing
our software products and solutions, system maintenance and support b) fees paid
to third-party software service companies for their services or license right,
and c) materials or hardware integrated with our software products and purchased
from third-parties.




Six
      Months Ended June 302009
                                
                                2008
                                
                                
                                %
      of Changes(In
      thousands, except percentages)Cost
      of revenues:Data
      mining
                                
                                $
                                2,811
                                
                                
                                $
                                4,326
                                
                                
                                
                                (35
                                )%Software
      Services
                                
                                
                                2,222
                                
                                
                                
                                1,613
                                
                                
                                
                                38
                                %Total
      cost of revenues
                                
                                $
                                5,033
                                
                                
                                $
                                5,939
                                
                                
                                
                                (15
                                )%




For the first half year of 2009,
total cost of revenue
decreased 15% compared with the same period of 2008. The decrease is mainly due
tolowerpurchase costsanda decrease inheadcount.




Gross
profit margin




Three
      Months Ended June 302009
                      
                      
                      2008(In
      thousands, except percentages)Gross
      profit margin:Data
      mining
                      
                      
                      38
                      %
                      
                      
                      53
                      %Software
      Services
                      
                      
                      34
                      %
                      
                      
                      64
                      %Overall
                      
                      
                      36
                      %
                      
                      
                      56
                      %




Overall
gross margin decreased 20% year over year for the second quarter of 2009, which
was mainly due to the decrease in the gross margins of data mining and software
services.


5




Data
mining. The gross margin of data mining decreased 15 percentage points
year over year for the second quarter of 2009. This was mainly due to lower
revenue and the fixed nature of many of the costs in this business.




Software
Services.  The gross margin of software services decreased 30
percentage points year over year for the second quarter of 2009. This was mainly
due to the decrease in revenue and higher compensation costs and expenses caused
by increased project headcount.




Six
      Months Ended June 302009
                            
                            
                            2008(In
      thousands, except percentages)Gross
      profit margin:Data
      mining
                            
                            
                            41
                            %
                            
                            
                            55
                            %Software
      Services
                            
                            
                            32
                            %
                            
                            
                            67
                            %Overall
                            
                            
                            37
                            %
                            
                            
                            59
                            %




For the
first half year of 2009, total gross margin decreased 22% compared with the same
period of 2008. The price of each order decreased due to the strong market
competition, however, purchase costs decreased slightly, with the result that
margin decreased accordingly.




Operating
Expenses


Three
      Months Ended June 302009
                          
                          
                          2008
                          
                          
                          %
      of
                            Changes(In
      thousands, except percentages)%
      of
                            total
      net
                            revenue
                          
                          
                          
                          
                          
                          %
      of
                            total
      net
                            revenueSelling,
      General and Administrative Expenses.
                          
                          $
                          715
                          
                          
                          
                          17
                          %
                          
                          $
                          1,013
                          
                          
                          
                          12
                          %
                          
                          
                          (29
                          )%Research
      and Development Costs.
                          
                          
                          189
                          
                          
                          
                          5
                          %
                          
                          
                          351
                          
                          
                          
                          4
                          %
                          
                          
                          (46
                          )%




Selling, General
and Administrative Expenses.  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. The decrease
reflected the gradually decreased headcount during the first half year of 2009
and our implementation of a salary freeze. In addition,  management
decreased traveling expenses and  took action to control expenses,
such as rental and stationary expenditure.


6




Research and
Development Costs.  Research and development costs consist
primarily of personnel-related expenses incurred for the development of software
and maintenance of our database. Due in part to the economic downturn, payments
pursuant to our cooperation agreement with Tsinghua University were delayed
until later in 2009, resulting a decrease in research and development costs.
However, we believe that our research and development expenses will increase
accordingly in the second half year of 2009.





Six
      Months Ended June 302009
                          
                          2008
                          
                          
                          %
      of
                            Changes(In
      thousands, except percentages)%
      of
                            total
      net
                            revenue
                          
                          
                          
                          
                          
                          %
      of
                            total
      net
                            revenueSelling,
      General and Administrative Expenses.
                          
                          $
                          1,118
                          
                          
                          
                          14
                          %
                          
                          $
                          1,710
                          
                          
                          
                          12
                          %
                          
                          
                          (35
                          )%Research
      and Development Costs.
                          
                          
                          443
                          
                          
                          
                          6
                          %
                          
                          
                          516
                          
                          
                          
                          4
                          %
                          
                          
                          (14
                          )%




For the
first half year of 2009, SG&A decreased 35% compared with the same period of
2008 and R&D cost decreased 14%. These decreases were due to the headcount
decreases and salary freeze described above, as well as the expense cutting
actions taken by management.




LIQUIDITY
AND CAPITAL RESOURCES




As
      of June 302009
                          
                          
                          2008(In
      thousands)Cash
      and cash equivalents
                          
                          $
                          7,303
                          
                          
                          $
                          6,990Working
      capital
                          
                          $
                          28,804
                          
                          
                          $
                          25,742Shareholder’s
      equity
                          
                          $
                          36,200
                          
                          
                          $
                          31,212




As of
June 30 2009, we had $7.3 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.


7




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




Six
      Months Ended June 302009
                                                    
                                                    
                                                    
                                                    2008(In
      thousands)Net
      cash provided by (used in) operating activities
                                                    
                                                    $
                                                    2,575
                                                    
                                                    
                                                    $
                                                    (1,986
                                                    )Net
      cash used in investing activities
                                                    
                                                    
                                                    (680
                                                    )
                                                    
                                                    
                                                    (2,220
                                                    )Net
      cash used in financing activities
                                                    
                                                    
                                                    (71
                                                    )
                                                    
                                                    
                                                    -Effect
      of foreign currency translation on cash and cash
    equivalents
                                                    
                                                    
                                                    7
                                                    
                                                    
                                                    
                                                    436Net
      increase (decrease) in cash and cash equivalents
                                                    
                                                    
                                                    1,831
                                                    
                                                    
                                                    
                                                    (3,770
                                                    )Cash
      and cash equivalents - beginning of period
                                                    
                                                    
                                                    5,472
                                                    
                                                    
                                                    
                                                    10,760Cash
      and cash equivalents - end of period
                                                    
                                                    $
                                                    7,303
                                                    
                                                    
                                                    $
                                                    6,990




Operating
activities




Our net
cash provided by operating activities for the six months ended June 30, 2009 was
$2.6 million. This was primarily attributable to the net income of $1.4 million,
adjusted by non-cash related expenses of $1.2 million. The net increase in
working capital items was primarily due to an increase in trade receivables and
decrease in trade payables and other payables. We extend credit to customers
ranging from four to seven months in the normal course of business and our trade
receivables are within our credit control. However, we expect to speed up our
collection process in the next quarter.




Investing
activities




Cash used
in investing activities for the six months ended June 30, 2009 was $680 thousand
which was mainly attributable to the acquisition of fixed assets and office
software.




Financing
activities




Cash flow
used in financing activities for the six months ended June 30, 2009 was $71,000
which is due to loan from stockholder.




OFF-BALANCE
SHEET ARRANGEMENTS




We do not
have any off-balance sheet arrangements.




Item
3.     Quantitative and Qualitative Disclosures About
Market Risk




Not
applicable.


8




Item
4T.   Controls and Procedures





Disclosure Controls and
Procedures





Under the
supervision and with the participation of our management, including our chief
executive officer and the chief financial officer, we conducted an evaluation of
the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as of June 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.





Changes
in internal controls 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 three months ended June 30, 2009 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.


9




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 quarter ended June 30,
2009.




Item
      5.
            Other
      Information




None.




Item
      6.
            Exhibits




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




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.




10




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:
August 13, 2009





JINGWEI INTERNATIONAL LIMITEDBy:
                    /s/Regis
      KwongName:
      Regis KwongTitle:
      Chief Executive Officer(Principal
      Executive Officer)By:
                    /s/
      Robert FengName:
      Robert FengTitle:
      Chief Financial Officer(Principal Accounting and Financial
    Officer)




11