Jingwei International LTD - FORM 10-Q

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EX-31.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - Jingwei International LTD	v229476_ex31-2.htm
EX-10.1 - EXHIBIT 10.1 - Jingwei International LTD	v229476_ex10-1.htm
EX-31.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER) PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - Jingwei International LTD	v229476_ex31-1.htm
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EX-32 - CERTIFICATIONS OF THE CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER) AND THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - Jingwei International LTD	v229476_ex32.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2011.

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: 000-51725

JINGWEI INTERNATIONAL LIMITED

(Exact name of registrant as specified in its charter)

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

Room 701-702, Building14, Keji C. Rd.,2nd, Software Park,

Nanshan District,

Shenzhen, PRC 518057

(Address of Principal Executive Offices including Zip Code)

+86 755 8343 7888

(Registrant’s Telephone Number, Including Area Code)

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

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

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

Large Accelerated Filer ¨

Accelerated Filer ¨

Non-Accelerated Filer ¨

Smaller Reporting Company x

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

As of August 15, 2011, there were 20,452,634 shares of the issuer’s common stock, par value $0.001 per share, outstanding.

PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Removed and reserved	20
Item 5.	Other Information	20
Item 6.	Exhibits	20

PART I.

FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Condensed Consolidated Balance Sheets	1

Condensed Consolidated Statements of Income and Comprehensive Income	2

Condensed Consolidated Statements of Cash Flows	3

Notes to Condensed Consolidated Financial Statements	4-12

Jingwei International Limited and Subsidiaries

Condensed Consolidated Balance Sheets

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

	June 30, 2011			December 31, 2010
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	4,445		$	7,519
Accounts receivable, less allowance of doubtful accounts of $2,885 and $2,040, respectively		37,687			34,558
Other receivables, prepayments and deposits, less allowance for doubtful accounts of $137 and $134, respectively		7,111			3,610
Inventories		7,522			5,780
Deferred tax assets		544			413
Total current assets		57,309			51,880

Non-current assets
Property, plant and equipment, net		1,999			1,854
Intangible assets, net		15,831			17,448
Long-term investment		1,838			1,797
Goodwill		3,283			3,209
Total assets	$	80,260		$	76,188

LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	5,231		$	4,122
Accruals and other payable		561			1,890
Income tax payable		1,582			1,610
Deferred tax		265			259
Loan from a stockholder		201			262
Total current liabilities		7,840			8,143

Non-current liabilities
Deferred tax liabilities		857			965

Total liabilities		8,697			9,108

Commitments and contingencies		-			-
Equity
Common stock, ($0.001 par value; 75,000,000 shares authorized; 20,478,676 and 20,350,167 shares issued as of June 30, 2011 and December 31, 2010, respectively; 20,452,334 and 20,347,167 shares outstanding as of June 30, 2011 and December 31, 2010, respectively)		21			20
Treasury stock, at cost (26,342 shares and 3,000 share as of June 30, 2011 and December 31, 2010, respectively)		(91	)		(12	)
Additional paid-in capital		22,751			22,502
Statutory and other reserves		3,590			3,590
Retained earnings		31,799			28,948
Accumulated other comprehensive income		5,582			4,299
Total Company’s stockholders' equity		63,652			59,347
Noncontrolling interest		7,911			7,733
Total equity		71,563			67,080

Total liabilities and equity	$	80,260		$	76,188

See notes to condensed consolidated financial statements.

Jingwei International Limited and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

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

	Six Months Ended June 30,						Three Months Ended June 30,
	2011			2010			2011			2010
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Sales	$	18,940		$	13,349		$	11,414		$	8,230
Cost of sales		10,489			6,095			6,895			3,615
Gross profit		8,451			7,254			4,519			4,615

Operating expenses
Selling, general and administrative expenses		4,982			2,563			2,403			1,609
Research and development costs		1,520			1,331			781			598
		6,502			3,894			3,184			2,207

Income from operations		1,949			3,360			1,335			2,408

Other income (expenses)
Subsidy income		921			320			523			11
Interest income		40			33			8			10
Interest expense		-			(5	)		-			(3	)
Other expense		(1	)		(60	)		-			(14	)
		960			288			531			4

Income before income taxes		2,909			3,648			1,866			2,412
Income tax expense (benefit)		58			149			(41	)		(67	)

Net income		2,851			3,499			1,907			2,479
Less: Net income attributable to noncontrolling interest		-			-			-			-
Net income attributable to the Company’s stockholders		2,851			3,499			1,907			2,479
Foreign currency translation adjustment		1,461			188			872			173
Comprehensive income	$	4,312		$	3,687		$	2,779		$	2,652
Comprehensive income attributable to noncontrolling interest		178			32			105			31
Comprehensive income attributable to the Company’s stockholders		4,134			3,655			2,674			2,621
Basic earnings per share	$	0.14		$	0.21		$	0.09		$	0.15
Diluted earnings per share	$	0.14		$	0.18		$	0.09		$	0.12
Weighted average common shares outstanding
Basic		20,390,342			17,049,000			20,427,007			17,049,000
Diluted		20,522,955			19,897,076			20,447,519			20,787,762

See notes to condensed consolidated financial statements.

Jingwei International Limited and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in US dollars thousands)

	Six Months Ended June 30,
	2011			2010
	(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income	$	2,851		$	3,499
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		2,506			1,731
Allowance for doubtful accounts		1,232			285
Share-based compensation expense		172			404
Changes in operating assets and liabilities:
Accounts receivables		(4,361	)		(5,803	)
Other receivables, prepayments and deposits		(3,501	)		1,050
Inventories		(1,742	)		(1,965	)
Deferred tax asset		(233	)		13
Accounts payable		1,047			(1,562	)
Accruals and other payables		(559	)		326
Income tax payable		(28	)		(208	)
Net cash used in operating activities		(2,616	)		(2,230	)
Cash flows from investing activities
Acquisition of property and equipment		(534	)		(174	)
Acquisition of intangible assets		(68	)		-
Cash paid for acquisition of Haicom (Note 1)		(771	)		-
Net cash used in investing activities		(1,373	)		(174	)
Cash flows from financing activities
Loan from a stockholder		48
Repayment of stockholder loans		(410	)		-
Net cash used in financing activities		(362	)		-
Effect of foreign currency translation on cash and cash equivalents		1,277			98
Net decrease in cash and cash equivalents		(3,074	)		(2,306	)
Cash and cash equivalents - beginning of period		7,519			10,239
Cash and cash equivalents - end of period	$	4,445		$	7,933
Supplemental Disclosure of Cash Flow Information
Income tax paid	$	232		$	351
Interest paid	$	-		$	-

See notes to condensed consolidated financial statements.

Jingwei International Limited and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Stated in US dollars thousands, except per share amounts)

(Unaudited)

Note 1 CORPORATE INFORMATION AND DESCRIPTION OF BUSINESS

The consolidated financial statements include the financial statements of Jingwei International Limited (“Jingwei”), its subsidiaries and companies it controls through contractual agreements in the form of variable interest entities (“VIEs”) ,which include Jingwei International Investments Limited (“Jingwei BVI”), Jingwei International Investment (HK) Ltd. (“Jingwei HK”), Jingwei Hengtong Technology (ShenZhen) Co. Ltd (“Jingwei Hengtong”), Shenzhen Jingwei Communication Co., Ltd. (“Jingwei Communication”), New Yulong Information Technology Co. Ltd. (“New Yulong IT”), New Yulong Software Technology Development Co. Ltd. (“New Yulong Software”), Beijing New Media Advertising Co. Ltd. (“Beijing New Media”), Shenzhen Xinguochuang Information Technology Company Limited (“Xinguochuang”), Shanghai Haicom Telecommunication Technology Limited ("Haicom"), and Jiangsu Liandong Communication Ltd. ("Jiangsu Liandong"). Jingwei International Limited, its subsidiaries and VIEs are collectively referred to as the “Company”. All significant inter-company accounts and transactions have been eliminated in consolidation.

Corporation Information

The Company, formerly known as Neoview Holdings Inc. (“Neoview”), was established in Nevada on November 17, 2004, as a public shell company. On May 16, 2007, Neoview and Synergy Business Consulting LLC, a principal stockholder of Neoview, entered into a share exchange agreement with the stockholders of Jingwei BVI. Pursuant to the share exchange agreement, Neoview 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 Neoview’s common stock, constituting 86.4% of outstanding common shares of Neoview on a fully-diluted basis.

As a result of this share exchange transaction, Jingwei BVI became a wholly-owned subsidiary of Neoview. Under accounting principles generally accepted in the United States of America (“U.S. GAAP”), the share exchange transaction was treated as a reverse acquisition, with Jingwei BVI as the accounting acquirer and Neoview as the acquired party.

Immediately following the closing of the merger, Neoview changed its name to Jingwei International Limited (“the Company”), and consummated a private placement of 3,395,000 units on May 16, 2007, each consisting of one (1) share of its common stock and 0.3 of a warrant to purchase one (1) share of its common stock, at a price per unit of $5.00 for for aggregate gross proceeds of $16,975,000.

Jingwei BVI was incorporated in British Virgin Islands (“BVI”) in May 2006, and is a holding company without any operation.

Jingwei HK, a wholly owned subsidiary of Jingwei BVI, was established on October 31, 2006 in Hong Kong. It is engaged in telecommunication equipment sales, software development and e-commerce.

Jingwei Hengtong, a wholly owned subsidiary of Jingwei HK, was established in People’s Republic of China (“PRC”) on February 8, 2007. It is engaged in computer hardware and software development, and business consulting services.

On February 8, 2007, Jingwei Hengtong entered into a series of contractual agreements (“Contractual Agreements”) for a ten-year term with Jingwei Communication, a PRC company established on May 8, 2001 to develop computer software and telecommunication equipments, to operate call centers, as well as to provide internet and mobile value added services. Pursuant to the Contractual Agreements, Jingwei Hengtong has agreed to exclusively provide to Jingwei Communication technology consulting services, and bear all of Jingwei Communication’s operating costs, in exchange for all of its income from the business operations. Jingwei Hengtong has also agreed 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. Moreover, the stockholders of Jingwei Communication have also entered into pledge agreements with Jingwei Hengtong, pursuant to which they agreed to pledge all their rights and interests, including voting rights, in favor of Jingwei Hengtong. Jingwei Hengtong was also granted an option to acquire the equity interests of Jingwei Communication within 10 years for a purchase price equal to its shareholders’ original paid-in price or the lowest price permissible under PRC laws. Finally, Jingwei Hentong had made an interest-free loan to Jingwei Communications to fund its capitalization, which can only be repaid upon the shareholders of Jingwei Communications transferring their equity interests to Jingwei Hengtong.

The noncontrolling interest does not change since 100% of all income and losses are allocated to the Company in accordance with the Contractual Agreements. Since there is no dividend distribution to noncontrolling interest, its balance changed between periods according to the exchange rate during that period.

PRC regulations prohibit direct foreign ownership of entities engaged in certain restricted businesses, including the provision of value-added telecommunications services in the PRC where certain licenses are required for the provision of such services. To comply with PRC laws and regulations, the Company engages in such businesses through contractual commitments with the VIEs, principally Jingwei Communication and the subsidiaries directly or indirectly controlled by Jingwei Communication, included New Yulong IT, New Yulong Software, Jiangsu Liandong, Beijing New Media, Xinguochuang and Haicom.

New Yulong IT, a wholly owned subsidiary of Jingwei Communication, was established on January 4, 1999 in Shenzhen, China. It mainly conducts mobile value added services, software development and computer information system integration.

New Yulong Software, wholly owned by Jingwei Communication directly and indirectly through New Yulong IT, was established on June 14, 2005 in Shenzhen, China. It is engaged in software development and computer information system integration.

Jiangsu Liandong, a wholly owned subsidiary of Jingwei Communication, was established on December 11, 2009 in Suqian, China. It is engaged in software development and computer information system integration.

Beijing New Media, a wholly owned subsidiary of New Yulong IT, was established on July 23, 2008 in Beijing, China. It is engaged in creating, planning and handling advertising, as well as providing branding strategy and sales promotions for its clients.

Xinguochuang, a wholly owned subsidiary of New Yulong IT, was established on April 29, 2009, in Shenzhen, China. It is engaged in software development, computer information system integration, and domestic and international trade.

On November 9, 2010, Xinguochuang completed the acquisition of 100% equity interest of Haicom, a corporation registered in Shanghai, China that provides internet and mobile value added service platforms to telecommunication operators in more than ten provinces in China.

Because the above Contractual Agreements,, which assigned all of Jingwei Communications equity owners' rights and obligations to Jingwei Hengtong the equity owners of Jingwei Communications lacked the ability to make decisions that have a significant effect on Jingwei Communications and its subsidiaries’ operations, and Jingwei Hengtong was entitled to the profits from the operation of Jingwei Communications and its subsidiaries, and assumed all of the residual benefits. Because Jingwei Hengtong and its indirect parent, Jingwei International Limited, are the sole interest holders of Jingwei Communications, the Company consolidates Jingwei Communications and its subsidiaries from its inception, consistent with the provisions of FASB Accounting Standards Codification ("ASC") 810-10.

Description of Business

The Company is one of the leading providers of data mining and interactive marketing and software services in the 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 the leading mobile telecommunication carriers in the PRC.

Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)	Basis of presentation and consolidation

The consolidated financial statements of the Company and its subsidiaries have been prepared in conformity with prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All significant inter-company accounts and transactions have been eliminated in consolidation.

The Company used the purchase method to consolidate Jingwei Communication, with the current assets and liabilities recorded at fair value which approximated their historic book value on February 8, 2007, the effective date (“effective date”) of the Contractual Agreements. The fair value of the acquired net assets of Jingwei Communication was $6.6 million on the effective date, after eliminating all the intercompany transaction and balances, and was recognized as noncontrolling interest on the consolidated balance sheet. The noncontrolling interest changes only for translation adjustments since 100% of all income and losses are allocated to the Company in accordance with the Contractual Agreements and there are no dividend distributions to noncontrolling interest. The noncontrolling interest amounted to $7.9 million and $7.7 million as of June 30, 2011 and December 31, 2010, respectively. The change in amount was the result of foreign currency translation adjustment.

Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, previously filed with the SEC.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s consolidated financial position as of June 30, 2011, its consolidated results of operations and cash flows for the six months and three months ended June 30, 2011 and 2010, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

b)	Use of estimates

In preparing consolidated financial statements in conformity with U.S. 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 consolidated financial statements, as well as the amounts of revenues and expenses during the periods ended June 30, 2011 and 2010. Actual results could differ from those estimates.

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

c)	Fair value of financial instruments

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

d)	Business combination

For a business combination with acquisition date on or after January 1, 2009, the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree were recognized at the acquisition date, measured at their fair values as of that date. In a business combination achieved in stages, the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, were recognized at the full amounts of their fair values. In a bargain purchase in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus any noncontrolling interest in the acquiree, that excess in earnings was recognized as a gain attributable to the Company.

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

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

e)	Recently enacted accounting standards

The Financial Accounting Standards Board (“FASB”) issued ASU 2010-13, Compensation—Stock Compensation (ACS Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. The ASU codifies the consensus reached in Emerging Issues Task Force (EITF) Issue No. 09-J. The amendments to the Codification clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity shares trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity.

The amendments in the ASU are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The amendments are to be applied by recording a cumulative-effect adjustment to beginning retained earnings. The adoption does not have any impact on the Company’s consolidated financial position and results of operations.

In December 2010, FASB issued revised guidance on “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” The revised guidance specifies that an entity with reporting units that have carrying amounts that are zero or negative is required to assess whether it is more likely than not that the reporting units’ goodwill is impaired. If the entity determines that it is more likely than not that the goodwill of one or more of its reporting units is impaired, the entity should perform Step 2 of the goodwill impairment test for those reporting unit(s). Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. Any goodwill impairments occurring after the initial adoption of the revised guidance should be included in earnings as required by Section 350-20-35. The revised guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. The adoption does not have any impact on the Company’s consolidated financial position and results of operations.

In May 2011, the FASB issued ASU No. 2011-04, “’ Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is not expected to have a material impact on the consolidated financial statements upon adoption.

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income”. Under the amendments in this ASU, an entity has two options for presenting its total comprehensive income: to present total comprehensive income and its components along with the components of net income in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company intends to conform to the new presentation required in this ASU beginning with its Form 10-Q for the three months ended March 31, 2012.

Except for the ASUs above, in the first six months ended June 30, 2011, The FASB has issued ASU No. 2011-01 through ASU 2011-05, which are not expected to have a material impact on the consolidated financial statements upon adoption.

Note 3 ACCOUNTS RECEIVABLE, NET

As of June 30, 2011 and December 31, 2010, accounts receivable include the following (in thousands):

	June 30, 2011		December 31, 2010
	(Unaudited)
Accounts receivable	$	40,572	$	36,598
Less: allowance for doubtful debts		2,885		2,040
	$	37,687	$	34,558

Note 4 INVENTORIES

As of June 30, 2011 and December 31, 2010, inventories consist of the following (in thousands):

	June 30, 2011		December 31, 2010
	(Unaudited)
Installations in progress	$	6,581	$	5,780
Finished goods		941		-
	$	7,522	$	5,780

Note 5 INTANGIBLE ASSETS, NET

The breakdown of the intangible asset balance as of June 30, 2011 and December 31, 2010 as well as related amortization period for each asset class is as follows (in thousands):

Cost	June 30, 2011		December 31, 2010		Amortization Period
	(Unaudited)
Databases	$	14,935	$	14,864	8 years
Strategic alliance		7,378		7,278	5.5 years
Non-compete agreement		-		327	2 years
Customer relationship		800		782	5.2 yeas
Competed technology		521		509	4.2 years
Partnership agreement		1,469		1,435	4.2 years
Software		671		397	8 years
		25,774		25,592
Less: accumulated amortization		9,943		8,144
Net	$	15,831	$	17,448

Amortization expense for the six months ended June 30, 2011 and 2010 was $2,071 and $1,723, respectively. Amortization expense for the three months ended June 30, 2011 and 2010 was $1,053 and $893, respectively.

As of June 30, 2011, estimated amortization expenses for future periods are expected as follows:

Fiscal Year	Amount
2011	$	1,989
2012		3,978
2013		3,918
2014		3,923
2015		1,675
Thereafter		348
	$	15,831

Note 6 INCOME TAX EXPENSE

United States

Jingwei International Limited is subject to the US federal tax at tax rate of 34%. No provision for US federal income taxes has been made as the Company had no US taxable income for the periods presented, and the earnings will be permanently reinvested in the PRC.

BVI

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

Hong Kong

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

PRC

The applicable income tax rates in 2011 for the Company’s PRC operating companies, New Yulong IT, New Yulong Software, Jingwei Hengtong, Jingwei Communication, Beijing New Media, Xinguochuang and Jiangsu Liandong, Haicom, are described as follows: New Yulong IT and Haicom are qualified as high-tech software enterprises and entitled to a preferential income tax rate of 15%, which is subject to government review and approval every three years. New Yulong Software, Jingwei Hengtong, Jingwei Communication are all entitled to a preferential income tax rate of 24%, 22% and 22% respectively in 2011. Jiangsu Liandong is subject to 25% income tax rate in 2011. Beijing New Media as a small business taxpayer and taxed on a deemed basis, i.e. 2.5% of its reported total revenue, due to its small business status. Xinguochuang was approved for its application for preferential enterprise income tax treatment in 2010, which exempted the entity from income tax in 2010 and 2011, and entitled it to 12.5% for the subsequent three years and 25% thereafter.

For the six months ended June 30, 2011, the Company recognized an income tax expense of $58 on income before income taxes of $2,909, representing an effective income tax rate of 2.0%, as compared to an income tax expense of $149 on income before income taxes of $3,648, representing an effective income tax rate of 4.1% for the same period in 2010. The significantly lower effective tax rate than the statutory income tax rate in the current period is attributed to two factors: 1. To make the best use of Xinguochuang’s preferential tax status starting from 2010, the Company has shifted a significant portion of business operations from New Yulong Software and other affiliates to Xinguochuang, resulting in a significant tax saving in 2010 and in 2011; 2. the Company recorded deferred tax benefits of $131 in the current period.

Note 7 SHARE-BASED COMPENSATION

On May 21, 2008, the Company adopted the Jingwei International Limited 2008 Omnibus Securities and Incentive Plan (the “Plan”), which authorized the Company to grant options for the purchase shares of common stock to employees, directors and consultants at prices not less than the fair market value on the date of grant for incentive stock options and nonqualified options. Shares as to which an option is granted under the Plan but remains unexercised at the expiration, forfeiture or other termination of such option may be the subject of the grant of further options.

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

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

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

On November 5, 2009 the Company granted ToneTat Investment Limited (“ToneTat”) options to purchase a total of 500,000 shares of the Company’s common stock at a strike price of $2.10 per share as compensation for investor relations and financial advisory services. The contractual term is 3 years and it is non-transferable. The first batch of options to purchase 100,000 shares of common stock was vested on November 5, 2009, and was valued at $0.76 per unit on the grant date. The second batch of options to purchase 100,000 shares of common stock was vested on May 5, 2010, and was valued at $2.72 per unit. On June 27, 2011, the Company held a performance review with ToneTat in accordance with the Amendment No. 1 entered in May 2010, and acknowledged its satisfactory completion of services on the Company’s behalf. Therefore, the third batch of options to purchase 300,000 shares of common stock was vested on June 27, 2011, and was valued at $0.06 per unit on the grant date.

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

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

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

For the six months ended June 30, 2011 and 2010, total share-based compensation expense recognized for options under the Plan was $172 and $404, respectively. For the three months ended June 30, 2011 and 2010, total share-based compensation expense recognized for options under the Plan was $72 and $339, respectively.

The following table summarizes all of the Company’s stock option and warrant transactions for the six months ended June 30, 2011:

	Number of options and warrants		Weighted- average exercise price		Weighted-average remaining contractual life (Years)
Outstanding, January 1, 2011		2,477,800	$	4.82		2.58
Granted		300,000		2.10		1.33
Forfeited		1,485,850	$	5.97		4.42
Exercised		255,997	$	1.79		8.49
Outstanding, June 30, 2011		1,035,953	$	3.13		3.31

Exercisable options and warrants as of June 30, 2011:

Range of exercise prices	Number outstanding currently exercisable as of June 30, 2011		Weighted-average remaining contractual life (years)		Weighted-average exercise price of options currently exercisable

$1.64-$7.00		602,528		2.0	$	2.70

On June 2, 2011，the Company’s Board of Directors has authorized to repurchase up to an aggregate of $2 million of its outstanding common shares in the next twelve months (the “Share Repurchase Program”), subject to market and other conditions. Under the Share Repurchase Program, the Company can repurchase shares from time to time for cash in open market purchases, block transactions, and privately negotiated transactions in accordance with applicable US federal securities laws. During the six months ended June 30, 2011, the Company has repurchased 300 shares at $1.57 per share on average. The Company has 26,342 treasury shares as of June 30, 2011.

Note 8 BASIC AND DILUTED EARNINGS PER SHARE

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares comprise shares issuable upon the exercise of share based awards, using the treasury stock method. The reconciliation of the numerators and denominators of the basic and diluted EPS computations for income from continuing operations is shown as follows (in thousands, except share and per share data):

	Six Months Ended June 30,				Three Months Ended June 30,
	2011		2010		2011		2010
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Numerator for basic and diluted earnings per share:
Net income	$	2,851	$	3,499	$	1,907	$	2,479
Denominator for basic earnings per share—weighted average shares outstanding		20,390,342		17,049,000		20,427,007		17,049,000
Dilutive effect of stock-based compensation plan		132,612		382,701		20,512		451,595
Dilutive effect of contingently issuable shares		-		2,465,375		-		3,287,167

Denominator for diluted earnings per share		20,522,955		19,897,076		20,447,519		20,787,762
Basic earnings per share	$	0.14	$	0.21	$	0.09	$	0.15
Diluted earnings per share	$	0.14	$	0.18	$	0.09	$	0.12

Options and warrants to purchase 1.0 million shares of common stock at an average price $3.13 per share were outstanding during the six months ended June 30, 2011, but options and warrants to acquire 0.9 million shares of common stock were not included in the computation of diluted EPS because the effect would have been anti-dilutive. These options and warrants were still outstanding as of June 30, 2011.

Note 9 SEGMENT INFORMATION

The Company has two reportable segments based on the type of services provided, i.e. data mining services, and software and system services. Information for the segments for the three and six months ended June 30, 2011 and 2010 in accordance with ASC 280 Segment Reporting is shown separately as follows (in thousands):

	Three Months Ended June 30,
	2011						2010
	(Unaudited)						(Unaudited)
	Data mining		Software				Data mining		Software
	Services		Services		Total		Services		Services		Total
Net Revenue	$	4,823	$	6,591	$	11,414	$	4,428	$	3,802	$	8,230
Gross profit		2,368		2,151		4,519		1,934		2,681		4,615
Net Income		1,000		907		1,907		1,039		1,440		2,479
Segment Assets		43,438		36,822		80,260		43,879		18,864		62,743
Depreciation& Amortization		1,219		37		1,256		840		36		876
Expenditure for segment assets	$	36	$	-	$	36	$	21	$	-	$	21

	Six Months Ended June 30,
	2011						2010
	(Unaudited)						(Unaudited)
	Data mining		Software				Data mining		Software
	Services		Services		Total		Services		Services		Total
Net Revenue	$	8,438	$	10,502	$	18,940	$	7,498	$	5,851	$	13,349
Gross profit		4,731		3,720		8,451		3,204		4,050		7,254
Net Income		1,596		1,255		2,851		1,559		1,940		3,499
Segment Assets		43,438		36,822		80,260		43,879		18,864		62,743
Depreciation& Amortization		2,308		198		2,506		1,660		71		1,731
Expenditure for segment assets	$	534	$	68	$	602	$	174	$	-	$	174

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

Note 10 COMMITMENTS AND CONTINGENCY

Lease Commitment

Future minimum lease payments under non-cancellable operating leases as of June 30, 2011 are as follows (in thousands):

Within 1 year	$	211
Within 1-2 years		116
Within 2-3 years		-
Thereafter		-
	$	327

NOTE 11 SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the issuance of the consolidated financial statements and no subsequent event has been identified.

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

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

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

Business Overview

We are one of the leading providers of data mining, interactive marketing and software services in the PRC. We have established multiple anchor customers in both the Telecom & Power sectors with long-term relationships since 2001. These relationships are expected to continue and further strengthen in 2011 as result of our technical competency and services leadership which continued to bring high value to the business of these customers. We offer a rich portfolio of business intelligence and interactive marketing services powered by a proprietary database with more than 400 million consumer profiles and a complementary set of Data Mining and Business Intelligence tools to enable customers to reach their targeted Chinese consumers. Services include market segmentation, customer churn, fraud detection, trend analysis, self-service reporting, database marketing, contact center services, mobile value-added services (MVAS) and multi-media, multi-channel advertising. In addition to the deployment of our “mobile application store” platform at China Telecom and the pilot platform in China Unicom in 2010, we have successfully designed and deployed mobile value-added services ("MVAS") Society Channel and marketing support system for China Unicom in Guangdong, Zhejiang and Fujian provinces, to leverage our core competences in data mining and interactive marketing to help them effectively operate and expand the society distribution channels on partnership and revenue sharing basis for mutual benefits. This will be another strategic growth initiative for the Company in 2011.

Our services assist customers in improving product development and marketing effectiveness, increase operational efficiency and profitability, helps identify new market trends, target audiences and opportunities, delivers effective marketing messages to targeted consumers and provides interactive, proactive and personalized marketing and advertising for optimal results. We have sharpened our focus to further develop our interactive marketing platform and integrated mobile value added service platforms with targeted outbound sales campaigns via mobile phone advertising and value added services, as well as customer service/order fulfillment using online stores and at call centers throughout the country.

Along-with our core data mining and interactive marketing services segment, we also operate a software services business, with proven leadership in quality billing, Business Intelligence, Provisioning Support, Decision Support, Operations Support and Customer Relationship Management software applications, primarily for China’s leading telecommunication services carriers. The software services business also strengthens sales opportunities for our high margin interactive marketing and data mining platform, and allows us to enhance our customer database. At present, we have achieved leadership position in the deployment of billing and OSS solutions to support IPTV rollout for China Telecom in 23 out of the country’s 31 provinces. And, through our channel partners, we have also deployed our billing and OSS solution for telecom carriers in overseas countries including Africa, Middle East and Asia.

Currently, we offer 36 data mining and software platforms registered with the Shenzhen Bureau of Science, Technology and Information and National Government. And our intellectual property portfolio is covered by 30 patents issued by National Intellectual Property Administration of the People’s Republic of China. When these patents were registered with the appropriate authority, we receive a certificate with respect to protected intellectual property in such software; we then license the software to the customers for a usage fee as well as an optional annual maintenance fee after the standard warranty period. Our software services streamline back-office operations for the customers, enable accurate billing and provisioning, improve business operational efficiency, as well as enable intimate and personalized relationship management for their end-customers.

In the data mining segment, we presently own and manage a database containing detailed biographical, demographic and purchasing information on over 400 million Chinese consumers and a selected group of SMEs. We believe our database is one of the largest in China, and that it would be difficult for competitors to duplicate. The breadth of our database affords us the ability to conduct a wide range of interactive marketing and data mining processes. Once a target audience is identified through data mining analysis, we assist our customers in the promotion and marketing of new products and services through telemarketing, direct marketing and mobile text and interactive advertising. We share in the revenues derived from consumer purchases resulting from our marketing and promotion activities. Within our data mining services operations, we also offer carriers a vast range of MVAS. Unlike our competitors who mainly use carriers’ networks simply as a distribution channel, we work with telecommunications carriers to design, build, operate and manage MVAS platforms jointly with them to offer to their customers under their own brands; based on which we have a share of the revenue derived from the services provided to their customers

The primary geographic focus of our operations is in China, with presence in more than 20 cities, where we derive most of our revenues. We conduct our business operations through Jingwei Hengtong, a wholly-owned subsidiary company of Jingwei that became the primary beneficiary of Jingwei Communication via various contractual agreements. Both companies are registered in China.

Our future plans are to stay sharply focused to capitalize on the favorable industry trends to grow our business. By leveraging our core competence and the multiple long term relationships with our clients in the telecommunications and power sectors, we are confident of our unique and competitive position to benefit from the significant growth waves unfolding in China.

Business Outlook and Other Recent Developments

The Company has delivered strong performance in the first half of 2011 in sales, compared to the same period last year. In data mining, we have expanded greatly our product offering in 3G related MVAS business, and have seen a significant revenue contribution from this part of the business in the current period. With the rising demands from consumers, we expect this business to continue to contribute to the sales and margin improvement of the data mining segment through 2011.

In the first quarter of 2011, the Company signed a strategic business partnering agreement with Zhejiang China Unicom to leverage Jingwei's data mining, interactive marketing and software service expertise to design, develop and operate Zhejiang China Unicom's mobile value-added services ("MVAS") Society Channel and marketing support system, to support its over 80,000 society channel depots in Zhejiang province, for optimal marketing results. With its early success in signing up subscribers for 3G service, China Unicom publicly announced a strategic focus to develop society channels at provincial levels, so as to continue to build up its lead in the 3G service. With the deployment of this platform and participation in its daily operation, Jingwei will enjoy a share of the revenues derived from sales and service contracts generated from the channel depots supported by the system. In the second quarter of 2011, the Company successfully deployed this product in Fujian province, and is current operating the system with early success. Furthermore, the Company is in discussion with several other provincial operators to leverage similar capabilities to benefit their local operation.

In the software services segment, in the first half of 2011 the Company continued to expand the deployment of internet protocol TV (“IPTV”) overseas through our business partner, as well as successfully completed another mobile application store platform development for a major telecom operator. It also took significant system integration contracts to develop a web-based integrated governmental service platform for local governments in Guangdong province. In addition, we have secured contracts to work with seven China Unicom’s regional offices to upgrade their integrated call center platforms, and to develop new capabilities called “Communication Managers”, to support China Unicom’s launch of the “WO Family Service” offering nationwide.

RESULTS OF OPERATIONS

Sales

	Three Months Ended June 30,
	2011					2010					% Change
	(In thousands, except percentages)
	(Unaudited)		% of sales			(Unaudited)		% of sales
Sales:
Data mining	$	4,823		42	%	$	4,428		54	%		9	%
Software services		6,591		58	%		3,802		46	%		73	%
Total sales	$	11,414		100	%	$	8,230		100	%		39	%

Total net revenue increased 39% in the second quarter year over year, due to robust growth in both segments.

Data mining. Revenue in this segment increased by 9% for the second quarter compared to the same period in 2010, as the sales in 3G related MVAS continued to grow.

Software services. Revenue in this segment increased by 73% for the second quarter compared to the same period in 2010. The increase was mainly due to successful completion of a few large system integration orders.

	Six Months Ended June 30,
	2011					2010					% Change
	(In thousands, except percentages)
	(Unaudited)		% of sales			(Unaudited)		% of sales
Sales:
Data mining	$	8,438		45	%	$	7,498		56	%		13	%
Software services		10,502		55	%		5,851		44	%		79	%
Total sales	$	18,940		100	%	$	13,349		100	%		42	%

Total net revenue increased 42% in the first half year over year, due to robust growth in both segments.

Data mining. Revenue increased by 13% for the first quarter compared to the same period in 2010, as the sales in 3G related MVAS continued to grow.

Software services. The increase in revenue by 79% for the first quarter compared to the same period in 2010. The increase was mainly due to a successful completion of another mobile application store platform development for a major telecom operator, as well as completion of a few large system integration orders.

Cost of Sales

	Three Months Ended June 30,
	2011		2010
	(Unaudited)		(Unaudited)		% Change
	(In thousands, except percentages)
Cost of sales:
Data mining	$	2,455	$	2,494		-2	%
Software services		4,440		1,121		296	%
Total cost of sales	$	6,895	$	3,615		91	%

Total cost of sales was $6.9 million for the three months ended June 30, 2011, increasing by 91% from $3.6 million for the same period in 2010.

Data mining. Cost of data mining decreased by 2% for the three months ended June 30, 2011 compared to the same period in 2010. This improvement in cost control was mainly due to a strong growth in high-margin MVAS business and less demand for the bundled mobile VAS solutions product line, resulting in a highly favorable change in product mix.

Software services. Cost of software services increased 296% for the three months ended June 30, 2011 compared to the same period in 2010. This significant increase in cost is primarily attributed to changes in product mix in two areas: (a) the solutions delivered last year were primarily replication of similar IPTV support software deployed in different provinces, whereas products delivered this year had new functionalities that required substantially higher cost of implementation; and (b) several large scale system integration solutions had a high content of hardware acquired through third parties, which resulted in lower margin achieved for those orders.

	Six Months Ended June 30,
	2011		2010
	(Unaudited)		(Unaudited)		% Change
	(In thousands, except percentages)
Cost of sales:
Data mining	$	3,706	$	4,294		-14	%
Software services		6,783		1,801		277	%
Total cost of sales	$	10,489	$	6,095		72	%

Total cost of sales was $10.5 million for the six months ended June 30, 2011, increasing by 72% from $6.1 million for the same period in 2010.

Data mining. Cost of data mining decreased by 14% for the six months ended June 30, 2011 compared to the same period in 2010. This improvement in cost control was mainly due to a strong growth in high-margin MVAS business and less demand for the bundled mobile VAS solutions product line, resulting in a highly favorable change in product mix.

Software services. Cost of software services increased 277% for the six months ended June 30, 2011 compared to the same period in 2010. This significant increase in cost is primarily attributed to changes in product mix in two areas: (a) the solutions delivered last year were primarily replication of similar IPTV support software deployed in different provinces, whereas products delivered this year had new functionalities that required substantially higher cost of implementation; and (b) several large scale system integration solutions had a high content of hardware acquired through third parties, which resulted in lower margin achieved for those orders.

Gross margin

	Three Months Ended June 30,
	2011			2010			% Change
Gross margin:
Data mining		49	%		44	%		5	%
Software services		33	%		71	%		-38	%
Total sales		40	%		56	%		-16	%

Overall gross margin dropped by 16% year over year for the three months ended June 30, 2011 compared to the same period in 2010, mainly due to change in product mix in both business segments.

Data mining. The gross margin of data mining increased by 5% year over year for the three months ended June 30, 2011 compared to the same period in 2010. The significant improvement was mainly due to a strong growth in high-margin MVAS business and less demand for the bundled mobile VAS solutions product line, resulting in a highly favorable improvement in segment margin.

Software services. The gross margin of software services sales decreased 38% for the three months ended June 30, 2011 compared to the same period in 2010. This decrease in gross margin is mainly attributed to several large scale system integration orders in the current period, in which the Company delivered a high degree of hardware acquired through third parties.

	Six Months Ended June 30,
	2011			2010			% Change
Gross margin:
Data mining		56	%		43	%		13	%
Software services		35	%		69	%		-34	%
Total sales		45	%		54	%		-9	%

Overall gross margin dropped by 9% year over year for the six months ended June 30, 2011 compared to the same period in 2010, mainly due to change in product mix in both business segments.

Data mining. The gross margin of data mining increased by 13% year over year for the six months ended June 30, 2011 compared to the same period in 2010. The significant improvement was mainly due to a strong growth in high-margin MVAS business and less demand for the bundled mobile VAS solutions product line, resulting in a highly favorable improvement in segment margin.

Software services. The gross margin of software services sales decreased 34% for the six months ended June 30, 2011 compared to the same period in 2010. This decrease in gross margin is mainly attributed to several large scale system integration orders in the current period, in which the Company delivered a high degree of hardware acquired through third parties.

Operating expenses

	Three Months Ended June 30,
	2011					2010
	(In thousands, except percentages)
			% of					% of
			total					total
	(Unaudited)		sales			(Unaudited)		sales			% of Changes

Selling, general and administrative expenses	$	2,403		21	%	$	1,609		20	%		49	%
Research and development costs		781		7	%		598		7	%		31	%
Total expenses	$	3,184		28	%	$	2,207		27	%		44	%

Selling, General and Administrative Expenses. The total selling, general and administrative expenses were $2.4 million for the three months ended June 30, 2011, compared to $1.6 million in the same period last year. The year-on-year increase in total expenses for the second quarter of 2011 was $0.8 million. The increase was mainly due to an increase of $0.4 million in bad debt provision, an increase of $0.3 million in salary and annual bonus, and an increase of $0.1 million in selling expenses from Haicom, business entity acquired in 2010.

Research and Development Costs. The total R&D costs were $0.8 million for the three months ended June 30, 2011, which has increased 31%, as compared to the same period last year. The increase was mainly due to an increase of $0.2 million in amortization expense from technology acquired through the business acquisition last year.

	Six Months Ended June 30,
	2011					2010
	(In thousands, except percentages)
			% of					% of
			total					total
	(Unaudited)		sales			(Unaudited)		sales			% of Changes

Selling, general and administrative expenses	$	4,982		26	%	$	2,563		19	%		94	%
Research and development costs		1,520		8	%		1,331		10	%		14	%
Total expenses	$	6,502		34	%	$	3,894		29	%		67	%

Selling, General and Administrative Expenses. The total selling, general and administrative expenses were $5.0 million for the six months ended June 30, 2011, compared to $2.6 million in the same period last year. The year-on-year increase in total expenses was $2.4 million. The increase was mainly due to an increase of $0.9 million in bad debt provision, an increase of $0.3 million in professional service fees, an increase of $0.4 million in depreciation and amortization related to the business acquisition in the end of 2010, as well as an increase of $0.7 million in salary and annual bonus and $0.3 million in selling expense from acquisition of Haicom.

Research and Development Costs. The total R&D costs were $1.5 million for the six months ended June 30, 2011, which has increased 14%, as compared to the same period last year. The increase was mainly due to an increase of $0.2 million in amortization expense from technology acquired through the business acquisition last year.

LIQUIDITY AND CAPITAL RESOURCES

	June 30, 2011		December 31, 2010
	(Unaudited)
	(In thousands)
Cash and cash equivalents	$	4,445	$	7,519
Working capital		49,469		43,737
Stockholder’s equity	$	63,652	$	59,347

As of June 30, 2011, we had $4.4 million in cash and cash equivalents. While we have incurred a reduction in cash and cash equivalents in the last two quarters, largely resulting from a high growth of revenues and installment payment for business acquisition consideration, we believe our ability to generate cash flow from our operating activities, our focus and commitment in improving trade receivables, along with our available cash will be sufficient to fund our operating activities, capital expenditures and other obligations through 2011 and beyond.

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

	Six Months Ended June 30,
	2011			2010
	(Unaudited)			(Unaudited)
	(In thousands)
Net cash used in operating activities	$	(2,616	)	$	(2,230	)
Net cash used in investing activities		(1,373	)		(174	)
Net cash used in financing activities		(410	)		-
Effect of foreign currency translation on cash and cash equivalents		1,325			98
Net decrease in cash and cash equivalents		(3,074	)		(2,306	)
Cash and cash equivalents - beginning of period		7,519			10,239
Cash and cash equivalents - end of period	$	4,445		$	7,933

Operating activities

Net cash used in operating activities for the six months ended June 30, 2011 was $2.6 million. This was primarily attributable to the net income of $2.9 million, adjusted by non-cash items of share-based compensation of $0.2 million, allowance for doubtful accounts of $1.2 million, and depreciation and amortization of $2.5 million, offset by a net decrease in cash from working capital items of $9.4 million.

Investing activities

Net cash used in investing activities for the six months ended June 30, 2011 was $1.4 million, which was attributable to $0.5 million spent on acquisition of properties and equipment, and $0.8 million installment payment for business acquisition consideration.

Financing activities

For the six months ended June 30, 2011, the Company has paid $0.4 million to its Chairman, Mr. Du, to partially pay off an interest free loan he provided to the Company at its development stage. In addition, the Company incurred $0.05 million short-term debts in total to the Chairman in the current quarter.

OFF-BALANCE SHEET ARRANGEMENTS

None.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

Under the supervision and with the participation of our management, including our chief executive officer and the chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of June 30, 2011, the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the material information required to be included in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to us and our consolidated subsidiaries, and communicated to our management (including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal controls over financial reporting

There have been no changes in our internal controls over financial reporting that occurred during the three months ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.

OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

We are not required to respond to this item because we are a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On June 3, 2011, Jingwei announced that its Board of Directors has approved the repurchase of up to $2 million of its outstanding common shares in the next twelve months, subject to market and other conditions. Under this plan, the Company can repurchase shares from time to time for cash in open market purchases, block transactions, and privately negotiated transactions in accordance with applicable US federal securities laws. This share repurchase program may be modified, suspended, terminated or extended by the Company at any time without prior notice. The repurchases will be funded with available cash on hand; any shares of common stock repurchased under the program will be returned to treasury.

The following table includes the information for securities repurchased for the three month ended June 30, 2011:

ISSUER PURCHASES OF EQUITY SECURITIES
Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
June 2011 (06/03/2011 – 06/30/2011)		300	$	1.57		300	$	1,999,518.50
Total		300	$	1.57		300	$	1,999,518.50

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Removed and reserved

Item 5. Other Information

None.

Item 6. Exhibits

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

Exhibit		Description

10.1		Amendment No. 1 to the Jingwei International Limited 2008 Omnibus Securities and Incentive Plan.

31.1		Certification of the Chief Executive Officer (Principal Executive Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certifications of the Chief Executive Officer (Principal Executive Officer) and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 15, 2011

	JINGWEI INTERNATIONAL LIMITED

	By:	/s/ George Du
		Name: George Du
		Title: Chief Executive Officer
		(Principal Executive Officer)

		/s/ Yong Xu
		Name: Yong Xu
		Title: Chief Financial Officer
		(Principal Accounting and Financial Officer)

Jingwei International LTD - FORM 10-Q - August 15, 2011

Attached files

Jingwei International LTD Reports