Jingwei International LTD - FORM 10-K/A

Attached files

file	filename
EX-31.1 - Jingwei International LTD	v200105_ex31-1.htm
EX-32.2 - Jingwei International LTD	v200105_ex32-2.htm
EX-31.2 - Jingwei International LTD	v200105_ex31-2.htm
EX-32.1 - Jingwei International LTD	v200105_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

Amendment No. 2

(Mark One)

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

For the Fiscal year ended December 31, 2009

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

For the transition period from to

Commission File Number: 001-15046

JINGWEI INTERNATIONAL LIMITED

(Exact name of Registrant as Specified in its Charter)

Nevada		20-1970137
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

Unit 701-702, Building 14,

Software Park, Keji Yuan Second Road

Nanshan District

Shenzhen PRC 518057

(Address of Principal Executive Offices) (Zip Code)

+86 755-83437888

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

None.

Securities registered pursuant to Section 12(g) of the Exchange Act:

Title of Each Class: Common Stock, $ 0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicated by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant:(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for past 90 days. Yesx No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes¨ No ¨

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

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 Act.

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 June 30, 2009 the aggregate market value of the voting and non-voting equity held by non-affiliates was approximately $17.0 million.

As of March 31, 2010, there were 17,049,000 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Explanatory Note

In connection with the Amendment No. 1 on Form 10-K/A filed by Jingwei International Limited (the “Company”) with the Securities and Exchange Commission (the “SEC”) on July 13, 2010 (“Amendment No. 1”), with respect to the consolidated financial statements for the fiscal year ended December 31, 2009, management has assessed the effectiveness of our disclosure controls and procedures and has included revised disclosure in this Amendment No. 2 on Form 10-K/A under Item 9A of Part II, “Controls and Procedures.” In addition, a revised report of the Company’s independent registered public accounting firm is included in Item 8 of Part II, “Financial Statements and Supplementary Data.”

Management identified a material weakness in our internal control over financial reporting with respect to our interpretation of an asset acquisition agreement with Shenzhen Newway Digital S&T Co., Ltd. (“Newway”) effective July 1, 2009. Solely as a result of this material weakness, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of December 31, 2009. As of the date of this Form 10-K/A, Management has taken and is taking steps, as described under Item 9A of Part II in “Remediation Steps to Address Material Weakness,” to remediate the material weakness in our internal control over financial reporting.

For purposes of this Form 10-K/A, and in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, each item of Amendment No. 1 that was affected by the re-assessment has been amended and restated in its entirety. No material changes have been made in this Form 10-K/A to update other disclosures presented in Amendment No. 1, except as required to reflect the effects of the re-assessment. This Amendment No. 2 does not reflect events occurring after the filing of Amendment No. 1 or modify or update those disclosures, including the exhibits to the Amendment No. 1 affected by subsequent events. The following sections of this Amendment No. 2 have been amended to reflect the re-assessment:

Item 8 (Financial Statements and Supplementary Data)

Item 9A (Controls and Procedures)

This Form 10-K/A is dated as of a current date and includes as exhibits 31.1, 31.2, 32.1 and 32.2 new certifications by the Company’s Chief Executive Officer and Chief Financial Officer as required by Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended. This Amendment should be read in conjunction with the Company’s filings made with the SEC subsequent to the Original Filing, including any amendments to those filings.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following financial statements and the footnotes thereto are included in the section beginning on page F-1.

	1.	Report of Independent Registered Public Accounting Firm.
	2.	Consolidated Balance Sheets as of December 31, 2009 and 2008.
	3.	Consolidated Statements of Operations for the years ended December 31, 2009 and 2008.
	4.	Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2009 and 2008.
	5.	Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008.
	6.	Notes to the Consolidated Financial Statements.

ITEM 9A. CONTROLS AND PROCEDURES.

Restatement of Previously Issued Financial Statements

On June 11, 2010, the Audit Committee of the Board of Directors of Jingwei International Limited (the “Company”) concluded, based on recommendation from management, that the Company’s consolidated interim financial statements for the periods ended September 30, 2009 contained in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2009, the consolidated financial statements for the year ended December 31, 2009 contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 and the consolidated interim financial statements for the period ended March 31, 2010 contained in the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2010, each as filed with the Securities and Exchange Commission, need to be restated to correctly reflect the acquisition agreement described below; and hence, accounting treatment of the payment terms associated with the acquisition of intangible assets from Shenzhen Newway Digital S&T Co., Ltd.(“Newway”) on July 1, 2009. Consequently, management filed a Form 8-K/A on June 17, 2010 to disclose that the financial results contained in the above-referenced reports should no longer be relied upon by investors (collectively, the "Affected Periods").

Effective on July 1, 2009, the Company and its wholly owned subsidiary, Shenzhen Xinguochuang Information Technology Co., Ltd. (“Xinguochuang”) acquired a group of intangible assets from Newway. In exchange, the Company agreed to pay Newway an acquisition fee of $6.6 million (RMB 45.0 million), including a fixed number of shares worth $3.3 million (RMB 22.5 million) on the acquisition date upon satisfaction of meeting net income targets at the one year anniversary. In May 2010, management discussed with Newway the details of the contingent share payment arrangement as stipulated in the acquisition agreement with Newway in preparation for a settlement at the one year anniversary of the acquisition. During this process, management had identified a significant difference in interpretation of the contract terms and reported the findings to the Audit Committee of the Board of Directors, that:

1) the total number of shares issuable should have been fixed to be 3,287,167 on the acquisition date with a fair value of $1 each;

2) the final settlement has to be in the form of shares, with no guaranteed fair value after 07/01/09.

Throughout the Affected Periods, the Company believed and prepared the financial statements based on the interpretation that the number of shares to be granted would be determined by dividing the total amount of $3.3 million (RMB 22.5 million) into the market price at the time of distribution of the shares.

With the analysis provided by management, the Audit Committee of the Board conducted a thorough review. It concluded on June 11, 2010 that there were a couple of ambiguous payment terms in the acquisition agreement, with regards to contingent share issuance, which had misled the accounting and finance team into improper interpretation and accounting treatment. Also, the revised interpretation on key elements of contingent share payment arrangement was correct. The revised interpretation on the contingent share arrangement was subsequently reconfirmed with Newway and a “Unanimous Written Minutes” among the relevant parties was signed on June 23, 2010 to document such a combination and contract clarification.

a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed in reports filed by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

At the time our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 was filed on March 31, 2010, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2009. In connection with the filing of Amendment No. 1, such officers re-evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by that report. Subsequent to that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, re-assessed the conclusion expressed in such evaluation and the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that re-assessment, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements because of the identification of material weaknesses in our internal control over financial reporting described further below.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Exchange Act defines internal control over financial reporting as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

●

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

●

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

●

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can only provide reasonable assurances with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Through the investigation discussed above, management identified: (i) control deficiencies in its internal controls associated with significant acquisition transaction processes that constitute material weaknesses, and (ii) the need to restate prior period financial statements. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the control deficiencies as of December 31, 2009 described in the following paragraph that constituted two material weaknesses in our operations:

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

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

As a result, these control deficiencies resulted in the restatement of our previously issued consolidated financial statements for the third quarter of 2009, the fiscal year of 2009, and the first quarter of 2010. Additionally, these control deficiencies could result in an overstatement of the total liability and an understatement of the equity, which would result in a material misstatement of the Company's financial statements that would not be prevented or detected.

In connection with the Company’s filing of Amendment No. 1, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2009. Subsequent to that filing, the Company’s management, including our Chief Executive Officer and Chief Financial Officer, reassessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009, as a result of the misstatement and the background discussed in the Explanatory Note and Item 9A in this Form 10-K/A, and reached the opposite conclusion, that the material weakness in internal control over financial reporting described above existed as of December 31, 2009. As a result of the material weakness, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2009 based upon the criteria set forth in Internal Control—Integrated Framework issued by the COSO. Accordingly, management has restated its report on internal control over financial reporting.

Bernstein & Pinchuk LLP, our independent registered public accounting firm, has performed an audit of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009, and, as part of its audit, has issued its attestation report on the effectiveness of the Company's internal controls over financial reporting herein as of December 31, 2009, included herein.

Remediation Plan

Management has been actively engaged in developing remediation plans to address the above control deficiencies. The remediation efforts that have taken place or are in process to be implemented include the following:

Making personnel changes in the fourth quarter of 2009 and in the first quarter of 2010, including appintment of new senior executives in the Company to improve management competence to oversee the financial and accounting reporting and to insure compliance to standards;

Implementing procedures to improve the capture, review, approval, and recording of all merger and acquisition transactions in the third quarter of 2010, including review of agreements by high quality external legal councel and timely confirmation of key contract terms;

Establishing top level reviews procedures in the third quarter of 2010 that include the Chief Financial Officer, Chief Executive Officer and the Board in relation to merger and acquisition transactions.

The Audit Committee has approved the detailed plan prepared by the management and a timetable for the implementation of the foregoing remediation efforts, and will monitor the implementation. In addition, under the direction of the Audit Committee, management will continue to review and make necessary changes to the overall design of the Company’s internal control environment, as well as to policies and procedures to improve the overall effectiveness of internal control over financial reporting.

Management believes the foregoing efforts will effectively remediate these material weaknesses. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above.

c) Changes in Internal Control over Financial Reporting

The management has acknowledged a material weakness in our internal controls over financial reporting on Form 10-K for the year ended on December 31, 2008, and has taken actions to remediate during 2009. We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment.

Actions taken and significant changes in 2009 include:

Appointed senior executives in the Company to improve management competence to oversee the financial and accounting reporting and to insure compliance to standards,

Realigned the finance and accounting department with clear segregation of duties and staffed with a qualified tax accountant and a full time management accountant to be responsible for the functions，

Staffed and set up Internal Audit Department to design, implement and monitor the internal controls throughout the company, on regular basis,

Provided quarterly internal control seminars for managers and relevant personnel to increase the awareness of internal control，

Established processes in collecting and reviewing information required for the preparation of the financial statements and related footnotes.

These improvements over controls have operated effectively for a sufficient period of time to reduce to a less than reasonably possible likelihood of a material misstatement, and remediated the material weakness the management has identified in our internal controls over financial reporting on Form 10-K for the year ended on December 31, 2008.

Except for the changes described above, there were no changes in our internal controls over financial reporting during the fourth quarter of fiscal 2009 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None

PART IV.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) List the following documents filed as a part of the report:

1. Financial Statements

An index to Consolidated Financial Statements appears on page F-1.

2. Schedules

All financial statement schedules are omitted because they are not applicable, not required under the instructions or all the information required is set forth in the financial statements or notes thereto.

3. Exhibits

Number		Description

2.1		Share Exchange Agreement, dated as of May 16, 2007 (1)

2.2		Agreement and Plan of Merger, dated May 17, 2007 (1)

3.1		Certificate of Incorporation (2)

3.2		By-laws of the Company (2)

4.1		Form of Lock-Up Agreement, dated as of May 16, 2007 (1)

4.2		Form of Warrant (1)

4.3		Registration Rights Agreement, dated as of May 16, 2007 (1)

10.1		Securities Purchase Agreement, dated as of May 16, 2007 (1)

10.2		Escrow Agreement, dated as of May 16, 2007 (1)

10.3		Exclusive Technology Consulting Services Agreement, dated February 8, 2007 (3)

10.4		Operating Agreement, dated February 8, 2007 (3)

10.5		Intellectual Property Assignment Agreement, dated February 8, 2007 (3)

10.6		Intellectual Property Agreement, dated February 8, 2007 (3)

10.7		Equity Pledge Agreement, dated February 8, 2007 (3)

10.8		Exclusive Option Agreement dated February 8, 2007 (3)

10.9		Amended and Restated Loan Agreement, dated February 8, 2007 (3)

10.10		Letter Agreement between the Company and John (Yijia) Bi, dated May 12, 2008 (4)

10.11		Stock Option Agreement between Jingwei International Limited and John (Yijia) Bi, dated December 25, 2008 (5)

10.12		Employment Agreement with Robert Feng, dated as of June 2, 2009 (6)

10.13		Acquisition Agreement among Shenzhen Newway Digital S&T Co., Ltd., Shenzhen Xinguochuang Information Technology Co. Ltd. and Jingwei International Limited, dated July 31, 2009 (7)

10.14		Employment Offer Letter between the Company and Rick Luk, dated September 29, 2009 (9)

10.15		Supplemental Acquisition Agreement among Jingwei International Limited, Shenzhen Xinguochuang Information Technology Co., Ltd. and Shenzhen Newway Digital S&T Co., Ltd., dated January 22, 2010 (10)

16.1		Letter from Morison Cogen LLP to the U.S. Securities Exchange Commission, dated September 14, 2009 (8)

21.1		List of subsidiaries, filed herewith. (11)

31.1		Certification of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31.2		Certification of the Principal Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed herewith.

32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed herewith.

(1) Incorporated by reference herein to the corresponding exhibit to the Current Report on Form 8-K filed on May 21, 2007.

(2) Incorporated by reference herein to the corresponding exhibit to the Company’s registration statement on Form SB-2 (File No. 333-122557).

(3) Incorporated by reference herein to the corresponding exhibit to the Company’s registration statement on Form SB-2 (File No. 333-145496).

(4) Incorporated by reference herein to the corresponding exhibit to the Current Report on Form 8-K filed on June 5, 2008.

(5) Incorporated by reference herein to the corresponding exhibit to the Current Report on Form 8-K filed on February 17, 2009.

(6) Incorporated by reference herein to the corresponding exhibit to the Current Report on Form 8-K filed on June 18, 2009.

(7) Incorporated by reference herein to the corresponding exhibit to the Current Report on Form 8-K filed on August 6, 2009.

(8) Incorporated by reference herein to the corresponding exhibit to the Current Report on Form 8-K filed on September 15, 2009.

(9) Incorporated by reference herein to the corresponding exhibit to the Current Report on Form 8-K filed on September 30, 2009.

(10) Incorporated by reference herein to the corresponding exhibit to the Current Report on Form 8-K filed on January 26, 2010.

(11) Incorporated by reference herein to the corresponding exhibit to the Annual Report on Form 10-K filed on March 31, 2010.

SIGNATURES

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

		JINGWEI INTERNATIONAL LIMITED

Dated: October 27, 2010	By:	/s/ Rick H. Luk
		Name:	Rick H. Luk
		Title:	Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Dated: October 27, 2010	By:	/s/ Rick H. Luk
		Name:	Rick H. Luk
		Title:	Chief Executive Officer (Principal Executive Officer)

Dated: October 27, 2010	By:	/s/ Yong Xu
		Name:	Yong Xu
		Title:	Chief Financial Officer (Principal Financial and Accounting Officer)

Dated: October 27, 2010	By:	/s/ George (Jianguo) Du
		Name:	George (Jianguo) Du
		Title:	President and Chairman

Dated: October 27, 2010	By:	/s/ Zhisheng Wang
		Name:	Zhisheng Wang
		Title:	Director

Dated: October 27, 2010	By:	/s/ Corla Chen
		Name:	Corla Chen
		Title:	Director

Dated: October 27, 2010	By:	/s/ Jason Chen
		Name:	Jason Chen
		Title:	Director

Dated: October 27, 2010	By:	/s/ Wenhuang Liu
		Name:	Wenhuang Liu
		Title:	Director

Dated: October 27, 2010	By:	/s/ Lily Sun
		Name:	Lily Sun
		Title:	Director

JINGWEI INTERNATIONAL LIMITED AND SUBSIDIARIES

TABLE OF CONTENTS

		Pages

Report of Independent Registered Public Accounting Firm		F-2 - F-3

Consolidated Balance Sheets as of December 31, 2009 and 2008		F-5

Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2009 and 2008		F-7

Consolidated Statements of Changes in Equity for the years ended December 31, 2009 and 2008		F-8

Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008		F-9

Notes to Consolidated Financial Statements for the years ended December 31, 2009 and 2008		F-10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Jingwei International Limited and subsidiaries

We have audited the accompanying consolidated balance sheet of Jingwei International Limited and subsidiaries (“the Company”) as of December 31, 2008, and the related statement of operations, comprehensive income, stockholders’ equity and cash flows for the year then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We have conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2008, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

/s/Morison Cogen LLP

Bala Cynwyd, Pennsylvania

March 30, 2009

F-4

Jingwei International Limited and Subsidiaries

Consolidated Balance Sheets

(Stated in US Dollars)

	December 31
	2009		2008
	(Restated)
ASSETS
Current assets
Cash and cash equivalents	$	10,238,930	$	5,472,408
Inventories, net		2,316,043		2,802,037
Trade receivables, less allowance for doubtful accounts of $1,266,293 and $135,422, respectively		23,456,704		19,371,524
Other receivables, prepayments and deposits, less allowance for doubtful accounts of $175,712 and $117,787, respectively		3,219,008		3,749,169
Deferred tax assets		257,837		-
Total current assets		39,488,522		31,395,138

Non-current assets
Property and equipment, net		1,385,438		1,305,917
Intangible assets, net		17,450,692		12,238,501
Long term investment		1,737,553		1,733,244
Total non-current assets		20,573,683		15,277,662

Total assets	$	60,062,205	$	46,672,800

See notes to consolidated financial statements

F-5

Jingwei International Limited and Subsidiaries

Consolidated Balance Sheets (Continued)

(Stated in US Dollars)

	December 31,
	2009		2008
	(Restated)

LIABILITIES AND EQUITY
Current liabilities
Trade payables	$	4,152,787	$	1,965,619
Accruals and other payables		1,279,474		1,465,571
Income tax payable		1,718,786		551,098
Loan from a stockholder		369,462		559,286
Total current liabilities		7,520,509		4,541,574

Non-current liabilities
Deferred tax, non-current		803,242		-

Total liabilities		8,323,751		4,541,574

Equity
Common stock, $.001 par value; 75,000,000 shares authorized, 17,049,000 shares issued and outstanding		17,049		17,049
Additional paid-in capital		18,930,306		15,403,411
Statutory and other reserves		2,916,292		883,936
Retained earnings		19,738,394		15,803,104
Accumulated other comprehensive income		2,658,206		2,564,066
Total Company’s stockholders' equity		44,260,247		34,671,566
Noncontrolling interest		7,478,207		7,459,660
Total equity		51,738,454		42,131,226

Total liabilities and equity	$	60,062,205	$	46,672,800

See notes to consolidated financial statements

F-6

Jingwei International Limited and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

(Stated in US Dollars)

	Year Ended December 31,
	2009			2008
	(Restated)

Sales	$	30,258,956		$	27,881,694
Cost of sales		18,997,730			13,989,763
Gross margin		11,261,226			13,891,931

Operating expenses
Selling, general and administrative expenses		3,859,312			3,922,323
Research and development costs		1,155,397			1,184,661
		5,014,709			5,106,984

Income from operations		6,246,517			8,784,947

Other income (expense)
Subsidy income		736,236			1,037,008
Interest income		180,893			237,017
Finance costs		(14,061	)		(15,918	)
Other expense		(55,482	)		(51,751	)
		847,586			1,206,356

Income before income taxes		7,094,103			9,991,303

Income tax expense		1,126,457			962,856

Net income		5,967,646			9,028,447
Less: Net income attributable to noncontrolling interest		-			-
Net income attributable to the Company		5,967,646			9,028,447

Foreign currency translation adjustment		94,140			1,340,693
Comprehensive income	$	6,061,786		$	10,369,140

Basic earnings per share	$	0.35		$	0.53
Diluted earnings per share	$	0.34		$	0.53

Weighted average number of shares outstanding
Basic		17,049,000			17,049,000
Diluted		17,512,610			17,049,000

See notes to consolidated financial statements

F-7

Jingwei International Limited and Subsidiaries

Consolidated Statements of Changes in Equity

(Stated in US Dollars)

			Company’s stockholders' equity
	Total equity		Number of shares of common stock		Common stock		Additional paid-in capital		Statutory and other reserves		Retained earnings			Accumulated other comprehensive income		Noncontrolling interest
Balance, January 1, 2008	$	30,529,910		17,049,000	$	17,049	$	15,063,981	$	703,475	$	6,955,118		$	1,223,373	$	6,566,914
Foreign currency translation adjustment		2,233,439		-		-		-		-		-			1,340,693		892,746
Share based compensation cost		339,430		-		-		339,430		-		-			-		-
Transfer to statutory and other reserves		-		-		-		-		180,461		(180,461	)		-		-
Net income		9,028,447		-		-		-		-		9,028,447			-		-
Balance, December 31, 2008		42,131,226		17,049,000		17,049		15,403,411		883,936		15,803,104			2,564,066		7,459,660

Shares to be issued as acquisition consideration		3,287,167						3,287,167
Foreign currency translation adjustment		112,687		-		-		-		-		-			94,140		18,547
Share based compensation cost		239,728		-		-		239,728		-		-			-		-
Transfer to statutory and other reserves		-		-		-		-		2,032,356		(2,032,356	)		-		-
Net income		5,967,646		-		-		-		-		5,967,646			-		-
Restated Balance, December 31, 2009	$	51,738,454		17,049,000	$	17,049	$	18,930,306	$	2,916,292	$	19,738,394		$	2,658,206	$	7,478,207

See notes to consolidated financial statements

F-8

Jingwei International Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Stated in US Dollars)

	Year Ended December 31,
	2009			2008
	(Restated)

Cash flows from operating activities
Net income	$	5,967,646		$	9,028,447
Adjustments to reconcile net income to net
Cash provided by (used in) operating activities：
Depreciation and amortization		2,762,986			1,850,340
Allowance for doubtful accounts		1,188,796			66,162
Amortization of stock options issued for services		239,728			339,430
Change in operating assets and liabilities:
Trade receivables		(5,216,051	)		(6,656,514	)
Other receivables, prepayments and deposits		472,236			(2,992,392	)
Inventories		485,994			(739,649	)
Deferred tax assets		(257,837	)		-
Trade payables		2,187,168			(1,463,008	)
Accruals and other payables		(186,097	)		(1,005,514	)
Income tax payable		1,167,688			100,336
Net cash flows provided by (used in) operating activities		8,812,257			(1,472,362	)

Cash flows from investing activities
Acquisition of property and equipment		(445,000	)		(574,336	)
Acquisition of intangible assets		(3,632,955	)		(1,964,867	)
Long term investment		-			(1,733,492	)
Net cash flows used in investing activities		(4,077,955	)		(4,272,695	)

Cash flows from financing activities
Loan from a stockholder		-			3,940
Repayment of loan from a stockholder		(189,824	)		-
Net cash flows (used in) provided by financing activities		(189,824	)		3,940

Effect of foreign currency fluctuation on cash and cash equivalents		222,044			453,505

Net increase (decrease) in cash and cash equivalents		4,766,522			(5,287,612	)

Cash and cash equivalents-beginning of year		5,472,408			10,760,020

Cash and cash equivalents-end of year	$	10,238,930		$	5,472,408
Income tax paid	$	309,594		$	1,482,796
Interest paid	$	-		$	-
Supplemental Disclosure of Non-cash Investing Activities
Transfer of prepayment to intangible assets	$	-		$	5,557,110

See notes to consolidated financial statements

F-9

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

Note 1 CORPORATE INFORMATION AND DESCRIPTION OF BUSINESS

Corporation Information

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

Jingwei Communication has three subsidiaries, New Yulong Information Technology Co. Ltd. (“Yulong IT”) of which Jingwei Communication owns 100%, New Yulong Software Technology Development Co. Ltd. (“Yulong Software”) of which Jingwei Communication owns 51.89% and Yulong IT owns the other 48.11%, and Jiangsu Liandong Communication Ltd. ("Jiangsu Liandong") established by Jingwei Communication on December 11, 2009 with 100% equity interest. On July 23, 2008, Yulong IT established a 100%-owned subsidiary, Beijing New Media Advertising Co. Ltd. (“Beijing New Media”). On April 29, 2009, Yulong IT established a 100%-owned subsidiary, Shenzhen Xinguo Chuang Information Technology Company Limited (“Xinguo Chuang”).

F-10

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

As Jingwei International is the primary beneficiary of Jingwei Communication, New Yulong IT, New Yulong Software, and Beijing New Media which are qualified as variable interest entities (VIE), the assets and liabilities and revenues and expenses of the VIE have been included in the consolidated financial statements. The principal activities of the VIE are in the provision of data mining and software development services. As of December 31, 2009 and for the year ended December 31, 2009, the VIE had assets of $51.9 million, liabilities of $20.7 million, revenues of $25.1 million, and operating expenses of $4.9 million. The assets and liabilities include balances due from and due to the subsidiaries of Jingwei International. These inter-company receivables and payables are eliminated upon consolidation of the VIE with Jingwei International and its subsidiaries. No assets were pledged or given as collateral against any borrowings.

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

Immediately following the closing of the merger, Shellco consummated a private placement of 3,395,000 units, each consisting of one (1) share of Common Stock and 0.3 of a Warrant to purchase one (1) share of common stock, for aggregate gross proceeds of $16,975,000 or $5.00 per unit. In conjunction with this offering, the Company paid a placement agent cash of $1,188,250, representing 7% of the aggregate gross proceeds of the offering, and issued the placement agent warrants to purchase 441,350 shares of its common stock, representing 10% of the total number of shares sold in the offering, including the warrants to purchase 1,018,500 shares of the Company’s common stock ("Warrant Shares").

F-11

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

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 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 should 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 a liquidated damages of $328,549 on that date. We have fully reserved the potential liabilities since then including accumulated interests, which amounted to $446,262 in total as of December 31, 2009.

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

Description of Business

The Company, through its subsidiaries and VIEs, is one of the leading providers of data mining and interactive marketing services in PRC. The Company's services include market segmentation, customer trend and churn analysis, fraud detection and direct marketing services such as telemarketing, direct mailing and wireless value added services. The Company also operates 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.

F-12

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)	Basis of presentation and consolidation

The 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 New Media, Xingguo Chuang, and Jiangsu Liandong have been prepared in accordance with US GAAP.

The consolidated financial statements include the financial statements of Jingwei International, its subsidiaries and variable interest entities. All significant inter-company accounts and transactions have been eliminated in consolidation.

ASC 810 Consolidation addresses financial reporting for entities over which control is achieved through means other than voting rights. According to requirements, Jingwei International evaluated its relationship with Jingwei Communication and concluded that Jingwei Communication is a “variable interest entity” for accounting purpose, as a result of the contractual arrangements, which enable Jingwei International to control and to be the primary beneficiary of Jingwei Communication. Accordingly, Jingwei International adopted the provisions of ASC 810 Consolidation and consolidated Jingwei Communication.

The Company used purchase method to consolidate Jingwei International. The fair value of the acquired net assets less deemed consideration and non-current assets were accounted as noncontrolling interest, amounted to $7,478,207 and $7,459,660 as of December 31, 2009 and 2008, respectively. We believe that the noncontrolling interest changes only for translation adjustments since 100% of all income and losses are allocated to the company in accordance with the agreements and there are no dividend distributions to noncontrolling interest.

ii.

Restatement of previously issued financial statements

On June 11, 2010, the Audit Committee of the Board of Directors of Jingwei International Limited (the “Company”) concluded, based on recommendation from management, that the consolidated financial statements for the fiscal year ended December 31, 2009 contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as filed with the Securities and Exchange Commission, should no longer be relied upon by investors. This amendment is filed to reflect revisions only to the Company’s accounting for the intangibles acquired from Shenzhen Newway Digital S&T Co., LTD (“Newway”), as well as the classification of contingently issuable shares as a part of the consideration paid in the same transaction.

Effective on July 1, 2009, the Company and its wholly owned subsidiary, Shenzhen Xinguochuang Information Technology Co., Ltd. (“Xinguo Chuang”) acquired the value-added service related sales channel, product know-how and technological achievements from Shenzhen Newway Digital S&T Co., Ltd.(“Newway”). In exchange, the Company agreed to pay Newway an acquisition fee of $6.6 million (RMB 45.0 million) in the forms of both cash and shares. After an initial cash payment of $3.3 million (RMB 22.5 million) in the third quarter of 2009, a fixed number of shares worth $3.3 million (RMB 22.5 million) with fair value of $1 each on acquisition date are to be granted to Newway upon satisfaction of meeting net income targets at the one year anniversary. Due to difficulties in interpreting the original agreement, the financial staff misinterpreted several provisions relating to consideration. After an internal review and a confirmation with Newway, management has identified the following errors related to accounting for this acquisition:

F-13

Initial measurement of intangible assets

The intangible assets are now measured to be $6.6 million (RMB 45 million) by the amount of cash paid, plus the cost of total equity interests to be issued based on their fair value on acquisition date, as defined in FASB Accounting Standards Codification (“ASC”) 350-30-30-1.

In the consolidated financial statements for the fiscal year ended December 31, 2009 contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, the initial value of the intangible assets was improperly measured to be $6.1 million (RMB 41.7 million). As a part of the purchase consideration, the contingently issuable shares were believed to have a fixed monetary value of $3.3 million (RMB 22.5 million) with the number of shares determined by dividing the total amount into market price at the time of distribution of the shares. As a result, these shares were classified as a non-current liability and a discount for the time value of two years had been applied, thus understating the value of intangible assets.

Management has also assessed that it is more likely than not that the tax basis of the intangible assets acquired is zero, with supporting documents gathered on hand at present, therefore determined to apply the simultaneous equations method to record the assigned value of the asset and the related deferred tax liability to be $0.8 million (RMB 5.5 million).

Therefore the total value of the intangible assets acquired is measured to be $7.4 million (RMB 50.5 million).

Accordingly, the periodic amortization of the intangible assets acquired must also be adjusted higher.

Classification of equity interests paid

As discussed above, a fixed number of shares determinable on the acquisition date will be issued at one year anniversary, as compared to the misunderstanding that a fixed moneratry value of obligation would have to be settled at a variable number of shares. As an industry insider, the Company believed that the performance target in the first year after acquisition would be achieved without much difficulty. Even so, the contingent share payment arrangement was made partly to ensure that Newway would abide by the terms of the agreement including the non-compete clause and not harm the business results. In case of underperformance by the acquired assets, shares to be granted will be cut by half or completely as a penalty. Therefore, the monetary benefits that the Newway parties will receive vary predominantly with the share price of the Company. The Company meant to bring in an industry player like Newway as a significant shareholder, and align Newway’s long term interest with the existing shareholders. In view of the business intent, the management concluded that the contingently issuable shares should be recorded under equity, with the auditor’ consent.

Dilutive effect of the contigently issuable shares

With the contingently issuable shares reported under non-current liabilities, the Company has not considered whether these shares were outstanding at the end of each reporting period since the third quarter of 2009, and whether to include them in computation of the basic EPS or diluted EPS. After confirming with Newway, the management has calculated the revenue and net income contributions from the acquired asset by quarter. Accordingly, the management has considered shares outstanding upon satisfaction of net income conditions, and included in the computation of annual diluted EPS.

F-14

The following tables set forth the financial impacts of the restatement on the Company.

Consolidated Balance Sheet	As of December 31, 2009
(in $)	As Previously Reported		Adjustment			As Restated
ASSETS
Current assets
Cash and equivalents	$	10,238,930	$			$	10,238,930
Inventories		2,316,043					2,316,043
Trade receivables, less allowance for doubtful accounts of $1,266,293 and $135,422, respectively		23,456,704					23,456,704
Other receivables, prepayments and deposits, less allowance for doubtful accounts of $175,712 and $117,787, respectively		3,219,008					3,219,008
Deferred tax assets		257,837					257837
Total Current Assets		39,488,522					39,488,522

Non-current assets
Property, plant and equipment, net		1,385,438					1,385,438
Intangible assets, net		16,283,425		1,167,267			17,450,692
Long term investment		1,737,553					1,737,553
Total non-current assets		19,406,416		1,167,267			20,573,683

Total Assets	$	58,894,938	$	1,167,267		$	60,062,205

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade payables	$	4,152,787	$			$	4,152,787
Accruals and other payables		1,279,474					1,279,474
Income tax payable		1,718,786					1,718,786
Loan from a stockholder		369,462					369,462
Total Current Liabilities		7,520,509		-			7,520,509

Other liabilities		2,930,257		(2,930,257	)		-
Deferred tax, non-current				803,242			803,242
Total Liabilities		10,450,766		(2,127,015	)		8,323,751

Equity
Common stock, $.001 par value; 75,000,000 shares authorized, 17,049,000 shares issued and outstanding		17,049					17,049
Additional paid-in capital		15,643,139		3,287,167			18,930,306
Statutory and other reserves		2,916,292					2,916,292
Retained earnings		19,734,935		3,459			19,738,394
Accumulated other comprehensive income		2,654,550		3,656			2,658,206
Total Jingwei International Stockholders' Equity		40,965,965		3,294,282			44,260,247
Noncontrolling interest		7,478,207					7,478,207
Total Equity		48,444,172		3,294,282			51,738,454
	$	58,894,938	$	1,167,267		$	60,062,205

F-15

Consolidated Statements of Operations and Comprehensive Income	Year Ended December 31,2009
(in $)	As Previously Reported			Adjustment			As Restated
Sales	$	30,258,956		$			$	30,258,956
Cost of sales		18,881,066			116,664			18,997,730
Gross Margin		11,377,890			(116,664	)		11,261,226

Expenses
Selling, General and Administrative expenses		3,979,435			(120,123	)		3,859,312
Research and development costs		1,155,397						1,155,397
		5,134,832			(120,123	)		5,014,709

Income from operations		6,243,058			3,459			6,246,517

Other income (expense)
Subsidy income		736,236						736,236
Interest income		180,893						180,893
Finance costs		(14,061	)					(14,061	)
Other expenses		(55,482	)					(55,482	)
		847,586						847,586

Income before income taxes		7,090,644			3,459			7,094,103

Income tax expense		1,126,457						1,126,457

Net income		5,964,187			3,459			5,967,646
Less: Net income attributable to the noncontrolling interest		-						-
Net Income attributalbe to Jingwei International Limited and Subsidiaries	$	5,964,187		$	3,459		$	5,967,646

Foreign currency translation adjustment		90,484			3,656			94,140
Comprehensive Income	$	6,054,671		$	7,115		$	6,061,786

Earnings per share
Basic	$	0.35					$	0.35
Diluted		0.35			(0.01	)		0.34
Weighted Average Common Shares Outstanding
Basic		17,049,000						17,049,000
Diluted		17,101,714			410,896			17,512,610

F-16

Consolidated Statements of Cash Flow	Year Ended December 31,2009
(in $)	As Previously Reported			Adjustment			As Restated

Cash flows from operating activities
Net income	$	5,964,187		$	3,459		$	5,967,646
Adjustments to reconcile net income to net
Cash provided by (used in) operating activities：
Depreciation and amortization		2,766,445			(3,459	)		2,762,986
Allowance for doubtful accounts		1,188,796						1,188,796
Amortization of stock options issued for services		239,728						239,728
Change in operating assets and liabilities:								-
Trade receivables		(5,216,051	)					(5,216,051	)
Other receivables, prepayments and deposits		472,236						472,236
Inventories		485,994						485,994
Deferred tax assets		(257,837	)					(257,837	)
Trade payables		2,187,168						2,187,168
Accruals and other payables		(186,097	)					(186,097	)
Income tax payable		1,167,688						1,167,688
Net cash flows provided by (used in) operating activities		8,812,257			-			8,812,257

Cash flows from investing activities
Acquisition of property and equipment		(445,000	)					(445,000	)
Acquisition of intangible assets		(3,632,955	)					(3,632,955	)
Long term investment		-						-
Net cash flows used in investing activities		(4,077,955	)					(4,077,955	)

Cash flows from financing activities
Loan from a stockholder		-						-
Repayment of loan from a stockholder		(189,824	)					(189,824	)
Net cash flows (used in) provided by financing activities		(189,824	)					(189,824	)

Effect of foreign currency fluctuation on cash and cash equivalents		222,044						222,044

Net increase (decrease) in cash and cash equivalents		4,766,522						4,766,522

Cash and cash equivalents-beginning of year		5,472,408						5,472,408

Cash and cash equivalents-end of year	$	10,238,930		$			$	10,238,930
Income tax paid	$	309,594		$			$	309,594
Interest paid	$	-		$			$	-
Supplemental Disclosure of Non-cash Investing Activities
Transfer of prepayment to intangible assets	$	-		$			$	-

F-17

b)	Use of estimates

In preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the amounts of revenues and expenses during the years ended December 31, 2009 and 2008. Actual results could differ from those estimates.

Significant estimates based on management's best estimation include, but are not limited to, the valuation of trade receivables and other receivables, inventories, the estimation on useful lives of property and equipment and intangible assets., the valuation of options and warrants, and allowance for deferred tax assets.

c)	Concentrations of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, trade and other receivables. As of December 31, 2009 and 2008, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in PRC. With respect to trade and other receivables, the Company establishes 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.

d)	Fair value of financial instruments

ASC 825-10 Financial Instruments, previously SFAS No.159, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments. The carrying values of the Company’s financial instruments, including cash and cash equivalents, trade receivables, other receivables, prepayments and deposits, trade payables, accruals 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 majority of its trading transactions are denominated in its functional currency.

e)	Comprehensive income

The Company follows ASC 220-10 previously 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 years ended December 31, 2009 and 2008 presented includes foreign currency translation adjustments.

f)	Cash and cash equivalent

Cash and cash equivalents include all cash, deposits in banks and highly liquid investments with original maturity of three months or less.

F-18

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

g)	Trade and other receivables and allowance of doubtful accounts

Trade receivables are carried at original invoiced amounts less an allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts based on management’s assessment of the 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. Additional specific provision is made against trade and other receivables aged less than three years to the extent when collection appears doubtful.

Bad debts are written off when identified. The Company does not accrue interest on trade and other receivables.

h)	Inventories

Inventories consist of direct materials, labor costs and those indirect costs related to contract performance. Inventories are valued at lower of cost or market using first-in-first-out method or specific identification where applicable.

i)	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 value
Software		20	%		0	%
Motor vehicles		10	%		10	%
Office equipment and computers		20	%		10	%

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.

F-19

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

j)	Intangible assets, net

Intangible assets represent database, software, strategic alliance and non-compete agreement. The value of the database was established based on historic acquisition costs. The valuation and allocation of intangible assets of strategic alliance and non-compete agreement were measured based on fair value.

The Company follows ASC 350-30-50 Goodwill and Other Intangible Assets, previously SFAS No. 142. Under this guidance, finite lived intangible assets are amortized over their estimated useful lives, and are reviewed annually for impairment, or more frequently, if indications of possible impairment exist. Amortization of database, software, strategic alliance and non-compete agreement is calculated using the straight-line method over their expected useful lives of 8 years, 5.5 years and 2 years, respectively.

k)	Long term investment, at cost

Long term investment with equity interest of less than 20% is recorded at cost and carried at that amount until it is sold or otherwise disposed of or until it is written down. A write-down from original cost is appropriate when dividends received represent a dividend received in excess of earnings subsequent to the investment date. Otherwise, dividends received are recorded as investment income.

l)	Impairment of long-lived assets

The Company follows ASC 360-10 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.

m)	Revenue recognition

The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that economic benefits will flow to the entity and specific criteria have been met for each of the Company’s activities as described below.

F-20

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

i. Software and system services

Subject to these criteria and in accordance with ASC 985 Software Revenue Recognition, previously Statement of Position (“SOP”) 97-2, the Company generally 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 pursuant to the percentage-of completion method of accounting, and d) evidence of customers’ acceptance of milestone achievement. 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 accounts 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 after reaching certain milestones agreed in the contract generally reflects the progress of work at that point.

ii. Data mining services

Revenue from data mining services is recognized when the services are rendered.

iii. Bundled mobile products

In accordance with ASC 605-25, 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.

The Company followed 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). During the year ended December 31, 2008, the Company earned a marketing service fee from the sales of bundled mobile product and reported revenue on a net basis, assist only earned a fixed percentage of total revenue as its fee and the supplier not the Company had credit risk. During the year ended December 31, 2009, the Company has recognized a large amount sales order of handsets with customized VAS softwares built in on a gross basis as the Company acts as the primary obligor in the arrangement, has latitude in establishing price and physically changes products in most cases, the Company recognized all revenue from these sales of bundled mobile product on a gross basis, based on EITF No.99-19. The sale of bundled mobile product is classified as data mining service for the year ended December 31, 2009 in Segment information in Note 14.

F-21

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

n)	Advertising, transportation, research and development expenses

Advertising is expensed when incurred or when advertising first takes place. Transportation and research and development expenses are charged to expense as incurred.

For the years ended December 31, 2009 and 2008, there were no material advertising or transportation costs incurred.

o)	Subsidy income

Subsidy income received in cash from government is recognized as income in the period received. For the year ended December 31, 2009, we received and recognized $394,686 from Shenzhen Technology and Information Bureau and $341,550 from Shenzhen tax authority as VAT refund.

p)	Statutory and other reserves

In accordance with the relevant PRC regulations and the Articles of Association of the Company’s PRC subsidiaries and VIEs, allocation from net income to the following reserves is required:

i. Statutory surplus reserve

In accordance with the relevant laws and regulations of PRC and the articles of association of our PRC subsidiaries and VIEs, these companies are required to appropriate 10% of their net income reported in PRC statutory accounts, after offsetting prior years’ losses, to the statutory surplus reserve. 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.

ii. Discretionary surplus reserve

In accordance with the articles of association of our PRC subsidiaries and VIEs, the appropriation of net income reported in PRC statutory accounts to the discretionary surplus reserve and its utilization are subject to the stockholders’ approval at their general meeting. None of our PRC subsidiaries and VIEs had appropriated their earnings to discretionary surplus reserve from their respective dates of inception to December 31, 2009.

F-22

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

q)	Income taxes

The Company uses the asset-liability method of accounting for income taxes prescribed by ASC 740 Income Taxes. Under the asset-liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Warranty

We account for product warranties in accordance with ASC 450, Accounting for Contingencies, previously known as SFAS No. 5. We provide for the estimated costs of hardware and software warranties at the time the related revenue is recognized. For hardware warranty, we estimate the costs based on historical and projected product failure rates, historical and projected repair costs, and knowledge of specific product failures (if any). The hardware manufacture generally provides a warranty for the first year of the life of the component. For software warranty, we estimate the costs to provide bug fixes, such as security patches, over the life of the warranty. We regularly reevaluate our estimates to assess the adequacy of the recorded warranty liabilities and adjust the amounts as necessary. In our experience the cost of providing warranties has been immaterial.

s)	Reporting currency and translation

The consolidated financial statements have been prepared in accordance with US GAAP. The functional currency of the operating subsidiaries in PRC is the Chinese Yuan Renminbi (“RMB”). However, the reporting currency is the United States dollar (“USD”). Assets and liabilities of these companies have been translated into dollars using the exchange rate at the balance sheet date. Income and expense items are translated at average rate for the year. Translation adjustments are reported separately and accumulated in a separate component of equity (accumulated other comprehensive income).

t)	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 separately and accumulated in a separate component of equity (accumulated other comprehensive income).

F-23

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

u)	Foreign operations

Almost 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.

The per dollar exchange rates adopted are as follows:

	2009		2008
Year end RMB exchange rate		6.84		6.83
Average yearly RMB exchange rate		6.84		6.92

No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.

There has been no significant fluctuation in exchange rate for the conversion of RMB to U.S. dollars after the balance sheet date.

v)	Stock-based compensation

The Company adopted ASC 718 Stock Compensation, previously Revised SFAS No.123(R), effective on January 1, 2006. We recognize the cost resulting from all share-based payment transactions in our financial statements using a fair-value-based method. We measure compensation cost for all outstanding unvested stock-based awards made to our employees and directors based on estimated fair values and recognize compensation over the service period for awards expected to vest. The estimated fair value of stock options and stock purchase rights granted pursuant to our employee stock purchase plan is determined using the Black-Scholes valuation model. The Black-Scholes valuation model requires us to make certain assumptions about the future. Estimation of these equity instruments’ fair value is affected by our stock price, as well as assumptions regarding subjective and complex variables such as employee exercise behavior and our expected stock price volatility over the term of the award. Generally, our assumptions are based on historical information and judgment is required to determine if historical trends may be indicators of future outcomes. Where such historical information is not available, we applied the "Simplified Method" in accordance with ASC 718-10-S99-1 in valuation of all our options, which are granted at-the-money, nontransferable and nonhedgeable, and vest based upon a service condition alone. For stock options and common stock warrants issued to non-employees, they are measured as of the date required by ASC 505-50 Equity-Based Payments to Non-Employees.

w)	Basic and diluted earnings per share

In accordance with ASC 260 Earnings per Share, basic earnings per common share is computed by using net income divided by the weighted average number of shares of common stock outstanding for the periods presented. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the Company. Potential common stock shares consist of shares that may arise from outstanding dilutive common stock options and warrants (the number of which is computed using the “treasury stock method”). The calculation of 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.

x)	Reclassification

The comparative figures have been reclassified to conform to current year presentation.

F-24

y)	Recently Adopted Accounting Pronouncements

FASB Establishes Accounting Standards Codification ™

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

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

The Codification is not intended to change US GAAP, but it will change the way US GAAP is organized and presented. The Codification is effective for our third-quarter 2009 financial statements and the principal impact on our financial statements is limited to disclosures as all future references to authoritative accounting literature will be referenced in accordance with the Codification.

Fair Value Accounting

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

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

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

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

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

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

F-25

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

Revenue Recognition

In October 2009, the FASB issued the following ASUs:

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

ASU No. 2009-14, Software, ASC 985 - Certain Revenue Arrangements That Include Software Elements, a consensus of the FASB EITF. This guidance modifies the scope of ASC subtopic 965-605 Software-Revenue Recognition to exclude from its requirements (a) non-software components of tangible products and (b) software components of tangible products that are sold, licensed, or leased with tangible products when the software components and non-software components of the tangible product function together to deliver the tangible product’s essential functionality.

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

Other Accounting Changes

In June 2009, the FASB issued the following standards:

SFAS No. 167, Amendments to FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, ASC 810-10. This updated guidance requires an analysis to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity. It also requires an ongoing reassessment and eliminates the quantitative approach previously required for determining whether an entity is the primary beneficiary. SFAS No. 167 is effective for the first annual reporting period beginning after November 15, 2009 and will be effective for the Company as of January 1, 2010.

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

In May 2009, the FASB issued SFAS No. 165, Subsequent Events, which is effective for interim or annual financial periods ending after June 15, 2009. SFAS No. 165 establishes general standards of accounting and disclosure of events that occur after the balance sheet but before financial statements are issued or are available to be issued. However, since the Company is a public entity, management is required to evaluate subsequent events through the date that financial statements are issued and disclose the date through which subsequent events have been evaluated, as well as the date the financial statements were issued. SFAS No. 165 was adopted since its interim period ended June 30, 2009. Subsequent events for the year ended December 31, 2009 have been evaluated through March 17, 2010, the date the financial statements were issued as further discussed in EITF Topic No. D-86.

F-26

In February 2010, the FASB issued ASU No. 2010-09 which removes the requirement for an SEC filer to disclose a date in both issued and revised financial statements. This amendment shall be applied prospectively for interim or annual financial periods ending after June 15, 2010. Management does not believe the adoption will have a material effect on the Company’s financial statements.

From June 2009 to March 2010, the FASB has issued several ASU’s – ASU No. 2009-02 through ASU No. 2009-17 and ASU No. 2010-01 through ASU No. 2010-11. Except for ASU’s No. 2009-05, 2009-13, 2009-14, and 2010-09 discussed above, the ASU’s entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore have minimal, if any, impact on the Company.

Note 3 TRADE RECEIVABLES

	December 31,
	2009		2008
Trade receivables	$	24,722,997	$	19,506,946
Less: allowance for doubtful debts		1,266,293		135,422
	$	23,456,704	$	19,371,524

Movements on the provision for impairment of trade receivables are as follows:

	2009		2008
Balance, January 1	$	135,422	$	176,808
Provision of doubtful debts		1,130,871		63,661
Less: receivables written off		-		105,047
Balance, December 31	$	1,266,293	$	135,422

Note 4 OTHER RECEIVABLES, PREPAYMENT AND DEPOSITS

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

	December 31,
	2009		2008
Prepayment for purchasing of data, goods and services	$	2,527,208	$	1,082,181
Others		867,512		2,784,775
		3,394,720		3,866,956
Less: allowance for doubtful debts		175,712		117,787
	$	3,219,008	$	3,749,169

The balance of prepayment as of December 31, 2009 includes $731,293 (equivalent to RMB5.0 million) to Shenzhen Zhonggrong Shengshi Investment Holding Co., Limited for project development of an on-line tourism platform and $1,170,070 (equivalent to RMB8.0 million) paid to Kexuda Information Technology Co., Limited for project development of database market platform.

Note 5 INVENTORIES

At December 31, 2009 and 2008, inventories consist of:

	December 31,
	2009		2008
Project costs	$	2,271,943	$	2,225,274
Others		44,100		576,763
	$	2,316,043	$	2,802,037

F-27

Note 6 PROPERTY AND EQUIPMENT

At December 31, 2009 and 2008, property and equipment, at cost, consist of:

	December 31,
Cost	2009		2008
Software	$	152,519	$	154,840
Motor vehicles		371,171		370,251
Office equipments and computers		1,475,434		1,068,349
		1,999,124		1,593,440
Less: accumulated depreciation		613,686		287,523
	$	1,385,438	$	1,305,917

Depreciation expenses for the years ended December 31, 2009 and 2008 were $355,762 and $271,966, respectively.

Note 7 INTANGIBLE ASSETS, NET

Movements on intangible assets for the years ended December 31, 2009 and 2008 are as follows:

	Cost		Accumulated amortization		Net
Balance, January 1, 2008	$	6,110,297	$	428,628	$	5,681,669
Addition		7,539,422		1,607,722		5,931,700
Currency translation difference		673,076		47,944		625,132
Balance, December 31, 2008		14,322,795		2,084,294		12,238,501
Addition		7,725,516		2,543,552		5,181,964
Currency translation difference		30,227		-		30,227
Restated Balance, December 31, 2009	$	22,078,538	$	4,627,846	$	17,450,692

The breakdown of the intangible asset balance as of December 31, 2009 and 2008, as well as related amortization period for each asset class is as follows:

	December 31,				Amortization
Cost	2009		2008		Period
	(Restated)
Database	$	14,492,880	$	14,297,380	8 years
Strategic alliance		7,068,463		-	5.5 years
Non-compete agreement		316,358		-	2 years
Software		200,837		25,415	8 years
		22,078,538		14,322,795
Less: accumulated amortization		4,627,846		2,084,294
	$	17,450,692	$	12,238,501

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

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

F-28

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

Therefore, the Company accounted for the intangible assets to be $6.6 million (RMB 45 million) by the amount of cash paid, plus the cost of total equity interests to be issued based on their fair value on acquisition date, as defined in FASB Accounting Standards Codification (“ASC”) 350-30-30-2. Moreover, the carrying amount of the intangible assets are increased by $0.8 million (RMB 5.5 million) to account for the difference between the amount paid and the tax basis of the intangible assets acquired. The management has assessed that it is more likely than not that the tax basis of the intangible assets acquired is zero, with supporting documents gathered on hand at present, therefore determined to apply the simultaneous equations method to record the assigned value of the asset and the related deferred tax liability.

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

The Company has performed a requisite annual impairment tests on intangible assets and determined that no impairment adjustments were necessary

As of December 31, 2009, estimated amortization expenses for future periods are expected as follows:

Fiscal Year	Amount
2010	$	3,288,755
2011		3,209,666
2012		3,130,551
2013		3,125,088
2014		3,081,284
Thereafter		1,615,348
	$	17,450,692

Note 8 LONG TERM INVESTMENT

In December 2008, Yulong IT invested in Shanghai Jiuhong Investment Company Limited for a 19.8% equity interest. Leveraging Jingwei’s core competency in software and data mining, Shanghai Jiuhong invests in high-tech companies. The investment is accounted for under the cost method.

The Company did not receive any dividends in 2009, and has not received any dividends in excess of the proportionate share of accumulated earnings since the date of acquisition, as a reduction of the cost of the investment.

The fair value of the Company’s investment under cost-method was not estimated in 2009 because of the absence of any impairment indicators.

Note 9 INCOME TAXES

The Company uses the asset-liability method of accounting for income taxes prescribed by ASC 740 Income Taxes.

F-29

United States

Jingwei International Limited is subject to the United States of America Tax law at tax rate of up to 35%. 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, 2009 and 2008 and believes that its earnings are permanently invested in 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 years ended December 31, 2009 and 2008 was 16.5%.

PRC

The Company generated substantially all of its net income from its PRC operations for the year ended December 31, 2009. The applicable income tax rate for the Company’s operating companies, Yulong IT, Yulong Software, Jingwei Hengtong, Jingwei Communication, Beijing New Media, Xinguo Chuang and Jiangsu Liandong, is described as follows: Yulong IT, Yulong Software, Jingwei Hengtong, Jingwei Communication and Xinguo Chuang were registered in Shenzhen, a special economic zone in PRC. Yulong IT and Yulong Software were qualified as high-tech software enterprises and entitled to a preferential income tax rate of 15% and 10% respectively in 2009. Jingwei Hengtong was subject to 20% income tax rate in 2009. Jingwei Communication, Xinguo Chuang and Jiansu Liandong receive statutory income tax rate of 25% in 2009. Beijing New Media is a small business tax payer and taxed on a deemed basis, i.e. 2.5% of its reported total revenue, due to its small business status. According to New Enterprise Income Tax Law, effective on January 1, 2008, the statutory enterprise income tax rate will gradually increase to 25% in 4 years for those enterprises subject to a reduced tax rate of 15% before 2008 (i.e. 20% in 2009, 22% in 2010, 24% in 2011 and 25% from 2012).

The components of the provision for income taxes from continuing operations are:

	Year ended December 31,
	2009			2008
Current – PRC	$	1,384,294		$	962,856
Deferred – PRC		(257,837	)		-
	$	1,126,457		$	962,856

The Company’s effective tax rates for the years ended December 31, 2009 and 2008 were 21% and 10%, respectively The increase in effective income tax rate mainly reflects the impact of transition to PRC statutory income tax rate of 25% among the Chinese operating companies, as required by the New Enterprise Income Tax Law.

Following is a reconciliation of income taxes at the calculated statutory rates:

	Year ended December 31,
	2009			2008
Income before income taxes	$	7,090,644		$	9,991,303
Effective tax rate		21	%		10	%
Computed expected income tax expenses		1,461,956			1,037,632
Income not subject to tax		(77,662	)		(74,776	)
Actual income tax expenses	$	1,384,294		$	962,856

F-30

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities as of December 31, 2009 and 2008 are as follows:

	Year ended December 31,
	2009		2008
	(Restated)
Deferred tax assets
Bad debts allowance	$	170,853	$	-
Deferred tax asset for NOL - China		110		53,000
Share-based compensation		86,874		115,000
		257,837		168,000
Less: valuation allowance		-		168,000
Net deferred tax assets	$	257,837	$	-

Deferred tax liabilities
Tax effect of asset purchase	$	803,242	$	-

In assessing the likelihood of realizing the deferred tax assets, management considers whether it is more likely than not that some portion of or all of the deferred tax assets will not realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Considering the Company’s profitable operating results in the past three years, and its projected future taxable income and tax planning strategies, management believes that the Company is able to generate sufficient future taxable income to reap the full tax benefits of deducible temporary difference.

The company adopted ASC 740-10, formerly FIN 48 Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109, effective January 1, 2007 to account for uncertain tax position. ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The evaluation of a tax position in accordance with ASC 740-10 is a two-step process. The first step is recognition - we determine whether it is “more-likely-than-not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the “more-likely-than-not” recognition threshold, we presume that the position will be examined by the appropriate taxing authority that would have full knowledge of all relevant information. The second step is measurement - a tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement.

The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. The Company did not recognize any interest or penalties for the years ended December 31, 2009 and 2008 related to unrecognized tax benefits.

Note 10 AMOUNTS DUE TO A STOCKHOLDER

Amount includes an interest bearing loan (an annual interest rate of 6.75%) from stockholder Mr. Du with a payable balance of $102,381 and $233,434 at December 31, 2009 and 2008, and an interest free loan from Mr. Du with a payable balance of $267,081 and $325,852 at December 31, 2009 and 2008. The loan is unsecured and repayable on demand. Interest expenses recorded for the years ended December 31, 2009 and 2008 were $14,061 and $15,516.

F-31

Note 11 NON-CURRENT OTHER LIABILITIES

Amount refers to the contingent payment consideration in relation to the acquisition of intangible assets from Newway, which would be settled in shares based on certain performance conditions. The amount has been assessed by an independent valuation specialist to be RMB18.9 million, or $2,930,257. The Company recorded the balance as non-current liabilities in accordance with ASC 480-10 Distinguishing Liabilities from Equity, and measured the payment obligation at the end of year with no change in fair value recognized.

Note 12 SHARE-BASED COMPENSATION

On May 21, 2008, The Company adopted Jingwei International Limited 2008 Omnibus Securities and Incentive Plan (the “Plan”). The Plan provides for the granting of Distribution Equivalent Rights, Incentive Stock Options, Non-Qualified Stock Options, Performance Share Awards, Restricted Stock Awards, Stock Appreciation Rights, Tandem Stock Appreciation Rights, Unrestricted Stock Awards or any combination of the foregoing, as may be best suited to the circumstances of the particular Employee, Director or Consultant as provided herein.

On April 16, 2008 the Company granted total of 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 $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%.

On June 12, 2008 the Company granted to Strategic Growth International, Inc (“SGI”) options to purchase a total of 150,000 shares of the Company’s common stock at a premium strike price of US$7.00 per share as part of the compensation for investor relations service. The contractual term is 5 years and it is non-transferable; however, hedging is not prohibited. The options were valued at $2.669 per unit using the Black-Scholes option-pricing model with an assumed 70.10% volatility, a five year term for the options, a risk free rate of 3.715% and a dividend yield of 0%. These options vest in 4 quarterly installments in equal amount of 25,000 beginning with the date of the grant and the balance of 50,000 vesting on June 5, 2009. The consulting expense for these services is recognized on a straight-line basis over the one year period of the related consulting contract. On October 5, 2008 the company terminated the service of SGI. Upon the termination of the service, pursuant to Section 4 of the option agreement, the Company rescinded 117,000 options granted to SGI pursuant to the terms of the Agreement. Correspondingly, pursuant to Section 5 of the option agreement and Section 6.3 of the Plan, the Option Agreement hereinafter represents the right to purchase 33,000 Shares on the terms and conditions contained therein.

On June 9, 2008 the Company granted to Yijia Bi (John), the prior CFO of the Company, options to purchase a total of 50,000 shares of the Company’s common stock at a strike price equal to the greater of fair market value of the stock at grant date or US$4.90. These options are fully vested at grant. The contractual term is 10 years. Based on the Black-Scholes option pricing model, the options were valued at $ 2.758 per unit with an assumed 70.16% volatility, a five year term for the options, a risk free rate of 3.470% and a dividend yield of 0%. On December 25, 2008 the Company granted to Yijia Bi (John) 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 two years period. The contractual term is 10 years. Based on the Black-Scholes option pricing model, the options were valued at $ 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%. Upon John’s resignation from the Company, the Company forfeited 100,000 unvested options and 50,000 vested options which were not timely exercised, pursuant to Section 4 and 5 of the option agreements between John and the Company in 2008 and Section 6.2 of the Plan.

On September 29, 2009 the Company granted to Rick Luk, the CEO of the Company, options to purchase a total of 200,000 shares of the Company’s common stock at a strike price equal to the greater of fair market value of the stock at grant date or US$1.64 to be vested quarterly over three years. The contractual term is 10 years. Based on the Black-Scholes option pricing model, the options were valued at $0.883 per unit.

F-32

On November 5, 2009 the Company decided to grant to ToneTat Investment Limited options to purchase a total of 500,000 shares of the Company’s common stock at a premium strike price of US$2.10 per share as part of the compensation for investor relations service. Among the total 500,000 options, 100,000 option were immediately vested and exercisable as of November 5, 2009; another 100,000 shares become vested and exercisable upon the optionee’s satisfactory completion of six months of services for the Company pursuant to the terms of the Consulting Services Agreement entered into as of November 5, 2009; the remaining 300,000 shares become vested and exercisable solely if and when the Common Stock is successfully listed on NASDAQ by no later than November 5, 2010. The contractual term is 3 years and it is non-transferable. The options were valued at $0.76 per unit using the Black-Scholes option-pricing model.

In accordance with ASC 718 Stock Compensation, the Company has recorded stock-based compensation expense during year ended December 31, 2009 of $239,728 in connection with the issuance of these options.

The following table summarizes all Company stock option and warrant transactions for the years ended December 31, 2009 and 2008:

	Number of options and warrants			Vested shares			Weight average exercise price of outstanding options and warrants
Outstanding at January 1, 2008		1,459,850			1,459,850		$	6.00
Granted		443,400			83,000		$	4.21
Balance, December 31, 2008		1,903,250			1,542,850		$	5.58
Granted		300,000			233,925		$	1.79
Forfeited		(150,000	)		(50,000	)		-
Balance, December 31, 2009		2,053,250			1,726,775		$	5.27

Options and warrants outstanding as of December 31, 2009:
Range of exercise prices	Number outstanding currently exercisable as of December 31, 2009		Weighted average remaining contractual life (years)		Weighted average exercise price of options currently exercisable

$1.00-$7.00		1,726,775		2.02	$	5.67

Note 13 BASIC AND DILUTED EARNINGS PER SHARE

The reconciliation of the numerators and denominators of the basic and diluted EPS computations for income from continuing operations for the years ended December 31, 2009 and 2008 is shown as follows:

	Year ended December 31,
	2009		2008
	(Restated)
Numerator for basic and diluted earnings per share:
Net income	$	5,967,647	$	9,028,447

Denominator for basic earnings per share—weighted average shares outstanding		17,049,000		17,049,000
Dilutive effect of stock-based compensation plan		52,714		-
Dilutive effect of contingenly issuable shares		410,896
Denominator for diluted earnings per share		17,512,610		17,049,000
Basic earnings per share	$	0.35	$	0.53
Diluted earnings per share	$	0.34	$	0.53

F-33

Options and warrants to purchase 2,053,250 shares of common stock at an average price $5.27 per share were outstanding during the year 2009, but options and warrants to acquire 2,000,536 shares of common stock were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares. These options and warrants were still outstanding as of December 31, 2009.

Regarding the dilutive effect of contingently issuable shares, please refer to our detailed discussion in Note 2- a)-(ii) Restatement of Previously Issued Financial Statement for more information.

Note 14 SEGMENT INFORMATION

The Company has two reportable segments based on the type of services provided, data mining services, and software and system services. Information for the segments for the years ended December 31, 2009 and 2008 in accordance with ASC 280 Segment Reporting is shown as follows.

	Year Ended December 31,
	2009						2008
	Data mining Services		Software Services		Total		Data mining Services		Software Services		Total
	(Restated)		(Restated)		(Restated)

Net revenue	$	19,452,377	$	10,806,579	$	30,258,956	$	18,536,929	$	9,344,765	$	27,881,694
Gross margin		6,958,472		4,302,754		11,261,226		8,675,614		5,216,317		13,891,931
Net income		3,712,182		2,255,465		5,967,647		5,523,515		3,504,932		9,028,447
Segment assets		43,699,754		16,362,451		60,062,205		28,568,887		18,103,913		46,672,800
Depreciation and amortization		2,621,190		141,795		2,762,985		1,710,980		139,360		1,850,340
Expenditure for segment assets	$	4,077,955	$	-	$	4,077,955	$	2,539,203	$	-	$	2,539,203

Included in data mining services is marketing service fee of $2,180,324 for the year ended December 31, 2009, compared with a total fee of $1,923,687 in 2008, earned from the sales of consumer electronic goods by the manufacturer Century International Industrials Limited, also known as “Bainian Century International” based on a marketing service contract. There is no inter-segment revenue. The Company generates total revenues of $5,940,840 outside PRC through Jingwei HK for 2009, compared with total revenue of $1,923,687 for 2008. Segment assets include property and equipment and intangible assets.

Note 15 COMMITMENT AND CONTINGENCY

Lease Commitment

Future minimum lease payments under non-cancellable operating leases as of December 31, 2009 are as follows:

2010	$	176,650
2011		152,337
2012		131,738
2013		43,913
2014		-
Thereafter		-
	$	504,638

F-34

Jingwei International Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Stated in US Dollars)

Other contractual obligations

On February 29, 2008, New Yulong IT engaged the Research Institute of Tsinghua University to conduct a multi-year R&D joint project for a total consideration of RMB7.0 million ($1,023,811). However, due to key personnel changes at the Research Institute, there had been little to no progress in 2009 and the project had been on hold and the agreement was effectively cancelled in accordance with the default clause in the agreement. As of December 31, 2009, RMB500,000 ($73,129) has been paid, and there is no further payment obligation to the Institute in accordance with the default clause for project termination in the original agreement.

Legal matter

On September 5, 2008, Beijing New Media provided a short-term loan of RMB2.0 million ($292,255) at zero interest rate to Shanghai Jujun Infotech Limited (“Jujun”), with its majority shareholder and Chairman Jerry Yu providing personal guarantee, for its general business development. In 2009, Jujun paid back only RMB300,000 ($43,988) but defaulted on the rest. On November 10, 2009, the Company submitted the dispute over RMB1.7 million ($249,267) to Shenzhen Arbitration Commission for arbitration against Jujun and Jerry Yu. For the above legal matter, no contingent reserve has been recorded in the balance sheets as such potential losses are not deemed estimable.

NOTE 16 MAJOR CUSTOMERS

The Company had sales to three customers that accounted for approximately 23% of net sales during the year ended December 31, 2009. These customers accounted for approximately 23% of trade receivable balance as of December 31, 2009.

NOTE 17 MAJOR SUPPLIERS

The Company had purchases from three vendors that accounted for approximately 24% of purchases during the year ended December 31, 2009. These vendors were fully paid as of December 31, 2009.

NOTE 18 SUBSEQUENT EVENTS

As of March 31, 2010, the Company did not have significant subsequent event.

F-35

Jingwei International LTD - FORM 10-K/A - October 28, 2010

Attached files

Jingwei International LTD Reports