Unassociated Document

		Page
INTRODUCTION		4
FORWARD-LOOKING INFORMATION		4
PART I		6
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	6
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	6
ITEM 3.	KEY INFORMATION	6
ITEM 4.	INFORMATION ON THE COMPANY	19
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	39
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	55
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	63
ITEM 8.	FINANCIAL INFORMATION	65
ITEM 9.	THE OFFER AND LISTING	65
ITEM 10.	ADDITIONAL INFORMATION	67
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
	MARKET RISK	77
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	78
PART II		78
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	78
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
	HOLDERS AND USE OF PROCEEDS	78
ITEM 15.	CONTROLS AND PROCEDURES	78
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT.	78
ITEM 16B.	CODE OF ETHICS.	79
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES.	79
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
	COMMITTEES.	80
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
	AFFILIATED PURCHASERS.	80
PART III		81
ITEM 17.	FINANCIAL STATEMENTS	81
ITEM 18.	FINANCIAL STATEMENTS	81
ITEM 19.	EXHIBITS	122
INDEX TO EXHIBITS		122

Yucheng Technologies Limited was formed on November 24, 2006 upon consummation of a three party merger of China Unistone Acquisition Corporation ("China Unistone"), Beijing Sihitech Technology Co., Ltd., and Beijing e-Channels Century Technology Co., Ltd. Due to the purchase method of accounting used in consolidating e-Channels and China Unistone Acquisiton Corporation into Sihitech, there is only one month’s operating data of e-Channels included in the consolidated income statement for the year ended December 31, 2006 of the Yucheng Group. To provide readers with a fuller view of the combined financial condition and operational results of the Yucheng Group for 2006 and meaningful comparison with previous years, the following selected financial information for the Yucheng Group is derived from the Yucheng Group’s unaudited pro forma results as if Sihitech and e-Channels (the Chinese operating companies) were combined as of January 1, 2003. The summary statement of operations data for the year ended December 31, 2006 and the summary balance sheet data as of December 31, 2006 are derived from the unaudited pro forma results in Note 20 “Acquisition of a subsidiary” and the audited consolidated financial statements of the Company, respectively, and are qualified in their entirety by reference to, the audited consolidated financial statements of the Company, including the notes thereto, which are included in this annual report. The summary statement of operations data for the years ended December 31, 2003, 2004 and 2005, and the summary balance sheet data as of December 31, 2003, 2004 and 2005 set forth below are derived from audited consolidated financial statements of Sihitech and e-Channels not included in this annual report, but filed with SEC in the Form S-4 Registration Statement declared effective on November 3, 2006. Our unaudited pro forma financial statements are assembled based on the consolidated financial statements or information prepared and presented in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

	Pro forma (Unaudited), Year Ended December 31
	2006(USD)			2006(RMB)			2005(RMB)			2004(RMB)			2003(RMB)
Revenues:
Total revenues		39,979,849			312,190,647			201,381,727			260,091,930			198,477,863
-SI		24,915,788			194,559,916			118,706,464			206,156,475			167,459,338
-Non-SI		15,064,061			117,630,731			82,675,263			53,935,455			31,018,525

Cost of revenues:
Total Cost of revenues		(28,599,404	)		(223,324,163	)		(141,039,821	)		(198,474,216	)		(159,447,092	)
-SI		(22,017,235	)		(171,925,980	)		(107,327,345	)		(176,817,463	)		(142,622,243	)
-Non-SI		(6,582,169	)		(51,398,183	)		(33,712,476	)		(21,656,753	)		(16,824,849	)

Total gross profit		11,380,445			88,866,484			60,341,906			61,617,714			39,030,771
-SI		2,898,554			22,633,936			11,379,119			29,339,012			24,837,095
-Non-SI		8,481,892			66,232,548			48,962,787			32,278,702			14,193,676

Operating expenses:
Research and development		(482,146	)		(3,764,931	)		(2,349,536	)		(1,416,277	)		(811,103	)
Selling and marketing		(2,015,399	)		(15,737,643	)		(13,363,294	)		(16,694,697	)		(13,725,030	)
General and administrative		(2,599,996	)		(20,302,592	)		(16,838,352	)		(16,173,768	)		(13,300,981	)
Subsidies and value-added tax refunds		468,485			3,658,256			2,627,557			1,229,499			552,188

Total operating expenses		(4,629,056	)		(36,146,910	)		(29,923,625	)		(33,055,243	)		(27,284,926	)

Other income (expenses):
Interest income		17,111			133,618			164,063			168,383			220,330
Interest expense		(163,646	)		(1,277,861	)		(630,520	)		(224,483	)		(125,429	)
Equity in loss of affiliates, net		(17,287	)		(134,986	)		(758,609	)		(444,498	)		(1,275,481	)
Other income(expense), net		5,036			39,322			472,360			107,639			64,280
Minority interests		-			-			-			(260,550	)		(244,465	)

Income before income taxes		6,592,603			51,479,667			29,665,575			27,908,962			10,385,080
Income tax expense		(482,495	)		(3,767,659	)		(4,326,053	)		(2,165,796	)		(1,272,111	)

Net income		6,110,108			47,712,008			25,339,522			25,743,166			9,112,969

We have published our financial statements in U.S. dollars. Our business is primarily conducted in China and revenues are denominated in Renminbi. Periodic reports will be made to shareholders and will be expressed in U.S. dollars using the then-current exchange rates. The conversion of Renminbi into U.S. dollars in this annual report is based on the daily base exchange rate of Reminbi into U.S. dollars published by the People’s Bank of China. Unless otherwise noted, for the years ended December 31, 2003, 2004, 2005 and 2006, all translations from Renminbi to U.S. dollars in this annual report were made at RMB8.0845, RMB8.0845, RMB8.0702 and RMB7.8087 per $1.00, respectively, which were the prevailing year end rates for those years. The high and low exchange rates of Renminbi into U.S. dollars are 7.8135 and 7.7735 for January 2007, 7.7662 and 7.7408 for February 2007, 7.7474 and 7.7303 for March 2007, 7.7349 and 7.7055 for April 2007, 7.6971 and 7.6488 for May 2007, 7.6785 and 7.618 for the most up to date period in June 2007. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated above, or at all. The PRC government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade.

Yucheng, on a combined basis in 2006, received approximately 54.0% of its revenues from services and products to different provincial branch offices and departments in the headquarters of the China Construction Bank (“CCB”), one of the largest banks in the PRC. The engagements with the branches and departments are under separate and independent contracts, and the projects vary in scope and nature of services and products. In 2006, there were 140 separate legal contracts. On a combined historical basis, the largest accounts within CCB accounted for 30.0% of the Company's revenues in 2006 and was with the head office of CCB. Two other accounts within the CCB Group represented 5.0% and 3.1% of revenues in 2006 and were with the Beijing Branch and Liaoning Provincial Branch. The rest of the contracts were distributed among other provincial branches around China. Notwithstanding the separate legal treatment of the engagements, a substantial failure to provide the contracted services and products under one agreement may result in a disruption to the overall CCB relationship. Also, if the general IT spending pattern and budgeting of CCB is changed or reduced, there could be an adverse impact on the Company’s ability to offer services and win contracts from different entities within CCB. The Agricultural Bank of China Head Office and the CITIC Bank were also significant customers in 2006, representing12.6% and 5.2% respectively of the total revenues. There are no long-term contracts with the CCB group on which the Company depends. There can be no assurance that Yucheng will be able to continue to retain these customers, and that Yucheng will maintain or increase their current level of business in the future.

Yucheng will rely on a combination of patent, copyright, trademark and anti-competition laws, as well as licensing agreements, third-party nondisclosure agreements, internal confidentiality policies and other contractual provisions and technical measures to protect the intellectual property rights. PRC law is still developing in this area and the enforcement of such rights at the judicial level cannot be certain. There can be no assurance that these protections will be adequate to prevent competitors from copying or reverse-engineering their products, or that competitors will not independently develop technologies that are substantially equivalent or superior to their technology. To protect its trade secrets and other proprietary information, employees, consultants, advisors and collaborators are required to enter into confidentiality agreements. There can be no assurance that these agreements will provide meaningful protection for the trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. Although Yucheng will hold registered rights covering certain aspects of its technology, there can be no assurance of the level of protection that these registrations will provide. Yucheng may have to resort to litigation to enforce the intellectual property rights, to protect the trade secrets or know-how, or to determine their scope, validity or enforceability. Enforcing or defending intellectual property rights is expensive, could cause diversion of resources and may not prove successful.

The operations of the Company depends on its ability to protect its systems from interruption caused by damage from fire, earthquake, power loss, telecommunications failure, unauthorized entry or other events beyond our control. The Company in the future plans to maintain its own offsite disaster recovery facility. In the event of major disasters, both primary and backup locations could be equally, adversely impacted. The Company does not currently have sufficient backup facilities to provide full Internet services, if the primary facility is not functioning. The Company could also experience system interruptions due to the failure of its systems to function as intended or the failure of the systems relied upon to deliver services such as ATM networks, the Internet, or the systems of financial institutions, processors that integrate with other systems and networks and systems of third parties. Loss of all or part of the systems for a period of time could have a material adverse effect on the business and business reputation of the Company. Yucheng may be liable to its clients for breach of contract for interruptions in service. Due to the numerous variables surrounding system disruptions, the extent or amount of any potential liability cannot be predicted.

PRC law allows enterprises owned by foreign investors to remit their profits, dividends and bonuses earned in the PRC to other countries, and the remittance does not require prior approval by the State Administration of Foreign Exchange, or SAFE. SAFE regulations require extensive documentation and reporting, some of which is burdensome and slows payments. If there is a return to payment restrictions and reporting, the ability of a PRC company to attract investors will be reduced. Also, current investors may not be able to obtain the benefits of the profits of the business generated in the PRC for other reasons. Relevant PRC laws and regulations permit payment of dividends only from retained earnings, if any, determined in accordance with PRC accounting standards and regulations. It is possible that the PRC tax authorities may require changes in determining income of the company that would limit its ability to pay dividends and make other distributions. PRC law requires companies to set aside a portion of net income to fund certain reserves, which amounts are not distributable as dividends. These rules and possible changes could restrict our PRC operating companies from repatriating funds to our stockholders as dividends.

Because our earnings and cash from operations are denominated in Renminbi, fluctuations in exchange rates between U.S. dollars and Renminbi will affect our balance sheet and earnings per share in U.S. dollars. In addition, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. The People’s Bank of China sets and publishes daily a base exchange rate. Beginning on July 21, 2005, the People’s Bank of China has set this rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day, and the People’s Bank of China also takes into account other factors such as the general conditions existing in the international foreign exchange markets. The PRC government may further adjust the exchange rate between the Renminbi and the U.S. dollar and other foreign currencies, and may further amend its policy of using a fixed-rate regime to govern foreign currency transactions, although the PRC government has not committed itself to take any such action currently. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue which will be exchanged into U.S. dollars, the value of any U.S. dollar denominated investments we make in the future and any earnings on such investments.

Our major shareholders who are PRC residents, or whose shares are beneficially owned by PRC residents, have completed foreign exchange registration with the local foreign exchange bureau according to these SAFE regulations. As a result of the newness of the regulations and uncertainty concerning the reconciliation of the new regulations with other approval requirements, it remains unclear how the regulations, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We are committed to complying and to ensuring that our shareholders who are subject to the regulations comply with the relevant rules. However, we cannot assure you that all of our shareholders who are PRC residents will comply with our request to make or obtain any applicable registrations or approvals required by the regulations or other related legislation. The failure or inability of our PRC resident shareholders to receive any required approvals or make any required registrations may subject us to fines and legal sanctions, restrict our overseas or cross border investment activities, limit our PRC subsidiaries from making distributions or paying dividends or affect our ownership structure, as a result of which our business operations and our ability to distribute dividend to you could be materially and adversely affected.

The legal authorities are evaluating tax and fee benefits that have been available to foreign investors and companies operating in China and tax holidays for new enterprises. In the near term, there are going to be changes that substantially reduce or eliminate many, if not all, the tax and other governmental fee advantages that heretofore have been available to foreign entities and newly created entities whether or not such new entities are foreign. The goal is to institute greater equalization of tax and government fee treatment of all corporate and similar entities in China. China is being encouraged to create this more equal treatment because of its WTO obligations and public opinion within China. There are to be phase-ins of various taxes and tax rates and fees for entities that currently benefit from either no or lower tax rates and fees compared to wholly Chinese companies and entities, but there can be no assurance of this. Even if there are phase-in periods, the length of such periods is not known, but may be as long as five years. In addition, there are expected to be changes to allowable business deductions, reduced tax rates for certain industries, and to definitions of foreign enterprises. Any one or some of these changes may have an adverse impact on operating margins and net income.

We are incorporated in the British Virgin Islands and our PRC operating companies are formed under PRC law. Substantially all of our assets are located in the PRC. In addition, most of our directors and executive officers reside within the PRC, and substantially all of the assets of these persons are located within the PRC. It may not be possible to effect service of process within the United States or elsewhere outside the PRC upon our directors, or executive officers and experts named in the annual report, including effecting service of process with respect to matters arising under United States federal securities laws or applicable state securities laws. The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States and many other countries. As a result, recognition and enforcement in the PRC of judgments of a court in the United States and many other jurisdictions in relation to any matter, including securities laws, may be difficult or impossible. Furthermore, an original action may be brought in the PRC against our assets and our subsidiaries, our directors and executive officers and experts named in the annual report only if the actions are not required to be arbitrated by PRC law and only if the facts alleged in the complaint give rise to a cause of action under PRC law. In connection with any such original action, a PRC court may award civil liability, including monetary damages.

As required by the WTO ascension agreement, China has been slowly phasing out limits on foreign financial institutions. While a very gradual market opening has taken place to date, more dynamic change is anticipated after December 2006 when a number of important restrictions on foreign financial institutions will be removed, including, geographic restrictions on business activities and the permitted scope of business. The removal of current restrictions will eliminate two key advantages that Chinese banks currently enjoy: 1) the ability to take Renminbi deposits; and 2) their broad network scale. Management believes that the liberalization of the banking and financial services industry in the PRC will force both the domestic and foreign banks and financial institutions to upgrade their operations to offer their customers a range of financial products and services, breadth of services and the level of service quality that are in line with international standards. As such, financial institutions could seek technology and outsourced solutions to resolve inefficiencies and lower costs so that they can compete effectively in the market place. The financial services industry has traditionally been one of the largest and most aggressive users of technology in developed countries like the United States and we believe this characteristic could emerge in China as well.

To some extent, the products and services of Yucheng will be affected by the Basel Capital Accords relating to international banking, and therefore internal banking practices of the PRC. The Basel Capital Accord, or Basel I, was introduced by the Basel Committee on Banking Supervision, or Basel Committee, in 1988. Since 1999, the Basel Committee has issued certain proposals for a New Capital Adequacy Framework, or Basel II, to replace Basel I. Basel II will be available for implementation in its entirety as of the end of 2007. Basel I was not adopted in the PRC and is not legally binding on PRC banks. Chinese government committed that all Chinese banks will be Basel Accord II compliance by 2012. The PRC, during the last five years, has developed a more comprehensive body of laws to protect intellectual property rights within the country. This, in part, has been prompted by China’s commitment for entry into the WTO. In July 2000 a comprehensive patent law was adopted. In October 2000 a comprehensive copyright law was adopted. In January 2002, there was adopted a law on the regulation of computer software protection. Also, in 2002, the Ministry of Information Industry developed an administration rule on Internet domain names. As these laws are developed and enforced, they will have impact on the property rights of Yucheng to add protection for those items registered and facilitate enforcement of rights.

There may be some potential liability to Sihitech arising from the provision of systems maintenance contracts from time to time. The liability would arise from unanticipated down-time of a system that is related to the work of Sihitech. Often these amount are quantified in the contract in the nature of liquidated damages. Sihitech has one contract that could result in such penalties being due at the rate of RMB280,000 per day, but Sihitech does not believe that the likelihood of system disruption is high. Yucheng could be liable for the failure to provide products and services that meet the requirements of its clients. In some areas of the products and services provided, the clients are relying on the expertise of Yucheng the failure of which could have consequential damages to the client. The Company's operating companies attempt to protect themselves through contractual limitations in the client engagements, and in the future will seek insurance for such events as such insurance becomes more readily available in the PRC market and the potential for claims increases in response to the growth of their businesses. Notwithstanding the contractual limitations, the Company's operating companies may face breach of contract and product liability claims.

Yucheng was formed on November 24, 2006 upon consummation of a three-party merger of China Unistone, Beijing Sihitech Technology Co., Ltd., and Beijing e-Channels Century Technology Co., Ltd. Due to the purchase method of accounting used in consolidating e-Channels and China Unistone into Sihitech, there is only one month’s operating data of e-Channels included in the consolidated income statements for the year ended December 31, 2006 for the Yucheng Group. Therefore the following discussion of our financial condition as of December 31, 2006 and our results of operations for the year then ended is based upon and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2006 and the unaudited pro forma result in Note 20 “Acquisition of a subsidiary” and their related notes, to provide readers with a more complete view of the financial condition and operating results for the Yucheng Group for the year of 2006. In order to provide a meaningful comparison between 2006, 2005, 2004 and 2003, the following discussion of our financial condition and results of operations for the years ended December 31, 2003, 2004, and 2005 is based on the Yucheng Group’s unaudited pro forma results derived from audited financial statements of Sihitech and e-Channels previously filed with SEC for the years ended December 31, 2003, 2004, and 2005 as if Sihitech and e-Channels (Chinese operating companies) were combined as of January 1, 2003. The pro forma statements/results based on which the discussion in this section is conducted hereafter are unaudited pro forma financial information and not intended to represent or be indicative of the Yucheng Group's consolidated results of operations or financial condition that would have been reported had the acquisition been completed as of the beginning of the periods presented and should not be taken as indicative of the Yucheng Group's future consolidated results of operations or financial condition. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect”, “anticipate”, “intend”, “believe”, or similar language. All forward-looking statements included in this annual report are based on information available to us on the date hereof, and we assume no obligation to update any such forward — looking statements. Actual results could differ materially from those projected in the forward — looking statements. In evaluating our business, you should carefully consider the information provided under the caption “Risk Factors” in this annual report on Form 20-F. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

As more fully described in Note 2(l) to the consolidated financial statements, the Yucheng Group generates revenues primarily from system integration, software development, IT consulting, maintenance and support, and agency services. Generally speaking, the Yucheng Group recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered or products have been delivered, the price is fixed and determinable, and collectibility is reasonably assured. Due to our business characteristic of having substantial repeat business from a particular customer or branch, it is quite common that the Yucheng Group has already started the project without the contract signed. Accordingly, the Yucheng Group defers revenue until persuasive evidence of an arrangement exists. Management has a stringent internal approval process in place to mitigate the risks of not being able to receive compensation for the work done without contracts. Due to the high quality of our customers and the customer satisfaction of our service level, the Yucheng Group has not encountered any losses from this kind of arrangements. For software development and IT consulting contracts requiring significant production, modification, or customization, the Yucheng Group uses the percentage of completion method to recognize revenues. In the case of multiple element arrangements contained in a sales contract, revenue is allocated to the various elements based on vendor-specific objective evidence of fair value, regardless of any separate prices stated within the contract for each element. If sufficient vendor-specific objective evidence does not exist for the allocation of revenue to the various elements of the arrangement, all earnings from the arrangement is deferred until the earlier of the point at which such sufficient vendor-specific objective evidence does exist or all elements of the arrangement have been delivered. If the only undelivered element is post-contract customer support (‘‘PCS’’), revenue and costs are recognized on a zero margin basis and all earnings are recognized ratably over the PCS period.

In accordance with SFAS No. 142 Goodwill and Other Tangible Assets, the impairment evaluation of goodwill is conducted annually, or more frequently, if events or changes in circumstances indicate that an asset might be impaired. The evaluation is performed by using a two-step process. In the first step, the fair value of each reporting unit is compared with the carrying amount of the reporting unit, including goodwill. The estimated fair value of the reporting unit is generally determined on the basis of discounted future cash flows. If the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, then a second step must be completed in order to determine the amount of the goodwill impairment that should be recorded. In the step, the implied fair value of the reporting unit’s goodwill is determined by allocating the reporting unit’s fair value to all of its assets and liabilities other than goodwill (including any unrecognized intangible assets) in a manner similar to a purchase price allocation. The resulting implied fair value of the goodwill that results from the application of the second step is then compared to the carrying amount of the goodwill and an impairment charge is recorded for the difference.

Unaudited pro forma net cash provided by operating activities for the year ended December 31, 2005 was RMB16,658,414, while the net cash provided by operating activities for the year ended December 31, 2004 was RMB1,799,852. The decrease in unaudited pro forma cash generated from operating activities is mainly due to increased trade accounts payable balance at RMB22,727,506 (US $2,816,226) resulted from the prolonged trade accounts payable cycle due to our better payable management practice and offset by the increase of other current assets at RMB11,026,410 (US $1,366,312), and the increase of trade accounts receivable of RMB17,744,449 (US $2,198,762). The increase of Yucheng’s trade accounts receivable in 2005 is due mainly to a prolonged payment cycle of a significant customer that resulted from a more stringent internal approval process by the customer. The amount of accounts receivable outstanding from this particular customer was RMB 33,381,120 (US $4,136,344) as of December 31, 2005. Management of Yucheng has considered the change in the payment cycle occurring in 2005, and it does not expect its trade accounts receivable collectibility estimate to change. The increase of inventory for the year ended December 31, 2005 is attributable to one undelivered customer order of RMB6.9 million. Even though the Yucheng Group’s overall unaudited pro forma revenues decreased in 2005 compared with 2004, its unaudited pro forma IT consulting revenue and e-Channels solutions increased significantly in 2005. Costs and estimated earnings in excess of billings increased significantly from December 31, 2004 to 2005. Unaudited pro forma costs and estimated earnings in excess of billings are comprised of IT consulting contracts. The increase of unaudited pro forma costs and estimated earnings in excess of billings is due to increased unaudited pro forma IT consulting revenue in 2005 and more uncompleted contracts as of the end of 2005. The Yucheng Group’s gross margin is a blended gross margin of system integration, IT consulting,e-Channels solutions and maintenance and support. Lower unaudited pro forma gross margin of system integration brings down the Yucheng Group’s overall unaudited pro forma gross margin. As costs and estimated earnings in excess of billings are comprised of IT consulting contracts, the unaudited pro forma gross margin on unbilled costs as of December 31, 2005 and 2004 is 51% and 76%, higher than the unaudited pro forma earned gross margins of 25% and 21% during these two years. Total unaudited pro forma consolidated revenues increased by 31% from RMB198,477,863 for the year ended December 31, 2003 to RMB260,091,930 for the year ended December 31, 2004, but unaudited pro forma net cash provided by operating activities decreased from 17,652,772 in 2003 to 1,799,852 in 2004. It was primarily due to the increase in unaudited pro forma accounts receivable balances as of December 31, 2004. DSO has increased from 33 days in 2003 to 53 days in 2004, which was still in line with the usual payment terms arranged with the Yucheng Group’s banking clients. The increase in unaudited pro forma accounts receivable in 2004 was mainly due to the increased unaudited pro forma sales in system integration services toward the end of the year. As the majority of its customers are Chinese tier I state-owned banks and the Yucheng Group has not historically encountered any accounts receivable collectibility problems, management does not expect any significant collectibility problems with its accounts receivable at December 31, 2004.

Net cash used in investing activities for the year ended December 31, 2006 was RMB54,059,330 (US $6,922,961), which is mainly comprised of the investments deposits paid on acquisition of a new subsidiary and the payment to purchase a new subsidiary of RMB52,543,085(US $6,728,787) and capital expenditures of RMB2,884,970(US $369,455) and offset by RMB1,282,212(US $164,203) from disposal of its shareholding of an affiliate. The capital expenditures were partly for purchased and developed software amounting to RMB1,366,549 (US $175,003), with the remainder of RMB1,518,421 (UD$ 194,452) for office equipment, furniture and motor vehicles. Net cash used in investing activities for the year ended December 31, 2005 was RMB14,149,546 (US $1,753,308) mainly comprising capital expenditures and deposits paid for business to be acquired. The capital expenditure were partly for purchased and developed software amounting to RMB3,936,855 (US $487,826) with the reminder of RMB2,936,078(US $363,817) for office equipment, furniture and motor vehicles. The Yucheng Group also incurred an amount of RMB7,000,000 as the prepayment for the acquisition of a related company named Jianyin Computer Co., Limited ("Jianyin Computer"). Unaudited pro forma net cash used in investing activities for the year ended December 31, 2004 was mainly comprised of capital expenditure of RMB5,131,813 including RMB3,179,891 for software development and the remainder for office equipment, furniture and motor vehicles.

Except as described above under ‘‘contract obligation and commercial commitments,’’ we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.

Quantitative and Qualitative Disclosure About Market Risks

The Yucheng Group is exposed to various market risks. First, the Company faces the potential risk of failing to adapt to rapid technological changes in the dynamic Chinese IT industry, which could cause the company to lose revenue opportunities. The Company expects to address this business challenge with continued investment in its intellectual and human resources. Nonetheless, as an early-stage growth company, it will be subject to the general risks, uncertainties and problems frequently encountered by similar companies operating in the Chinese IT industry. Changes in the financial services industry also could have adverse impacts on the Yucheng Group’s revenue since the majority of the revenues of the Company are derived from services and products to Chinese banks. Unfavorable economic conditions adversely impacting that part of the financial services industry could have a material adverse effect on the business, financial condition and results of operations of the Company. The Yucheng Group generates significant portion of its revenues from various provincial branches and head office of China Construction Bank and the loss of which would have an adverse impact on the financial condition and results of operation of the Company. Even though the IT purchasing practice and decision-making process are independent of each other and vary across different provincial branches and the headquarters and are treated as separate customers with separate legal engagement contracts, any disruptions to the CCB relationship in one department could result in an adversely impact on the overall business relationship with CCB. Also, if the general IT spending pattern and budgeting of CCB is changed or reduced, there could be an adverse impact on the Yucheng Group’s financial performance. The failure to retain existing customers or changes in their continued use of our services will adversely affect the company’s operating results. Further, if projects are not managed or completed to the satisfaction of our customers, the due contract installments may not be paid or we may suffer a loss of the customer and reputation, which in turn will have an adverse effect on the Company’s revenues and future ability to market its solutions and products. Another risk is that a failure to retain key management and technical personnel would cause disruptions to the daily businesses and operation, which in turn would negatively impact the Company’s financial performance and change in foreign currency exchanges rates may affect the Company’s financial performance in US dollar terms. However, the Yucheng Group’s product sales, assets and liabilities are denominated in RMB and therefore its actual exposure to foreign currency exchange risk is minimal unless its financial figures are converted and presented in US $. The Yucheng Group also has an exposure to the changes in interest rates primarily related to our short-term working capital bank debt and long-term debt. The current bank loan rate is about 5.76%, and the future interest expenses may fluctuate in line with changes in interest rates.

Stock option plan and option agreements

Our stock options are granted under the China Unistone Acquisition Corporation 2005 Performance Equity Plan, which became the Yucheng Technologies Limited 2005 Performance Equity Plan (the “Plan”) by operation of law under the terms of our merger with China Unistone Acquisition Corporation. We adopted and obtained shareholder approval of the Plan in November 2006, under which we could issue share options with the right to purchase up to 1,500,000 ordinary shares to our directors, officers, employees, individual consultants and advisors. We granted no options under the Plan as of December 31, 2006.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and senior management.

The following table sets forth certain information regarding our directors and executive officers as of April 30, 2007.

Name	Age	Position
Chih T. Cheung	36	Non-Executive Chairman of the Board
Weidong Hong	40	Director and Chief Executive Officer
Shuo Zeng	37	Director and Chief Operating Officer
Li Liao	41	Director
Tao Huang (Michael)	43	Director
Chi Wei Joong	51	Director
Henry Wang	48	Director
Peter Li	42	Chief Financial Officer

Chih T. Cheung was the Chairman of the Board of China Unistone and predecessor from May, 2004 to November, 2006 and became the non-executive chairman of the board of Yucheng since November, 2006. Since September 2005, Mr. Cheung has been the Managing General Partner of Staples Asia Investment Limited, a subsidiary of Staples, Inc., created to make investments and form partnerships in the office product market in Asia. He currently sits on the boards of a number of private companies. From March 2003 until February 2006, he was a senior advisor to the chairman of the Chinatrust Commercial Bank. Prior to that, Mr. Cheung co-founded and was the chief executive officer of HelloAsia Corporation from its inception in 1999 until February 2002. In February 2002, Mr. Cheung negotiated the merger of HelloAsia into Brience, Inc. and served as executive vice president of Brience until February 2003. Prior to forming HelloAsia, Mr. Cheung co-founded and was the chief executive officer of Crimson Solutions. Mr. Cheung graduated from Harvard College, received an A.M. from Harvard Graduate School of Arts and Sciences, a J.D. from Harvard Law School and an M.B.A. from Harvard Business School.

Weidong Hong became the Chief Executive Officer and a director of Yucheng since November, 2004. Mr. Hong is a founder and is also the Chairman and Chief Executive Officer of Sihitech. Prior to founding Sihitech in June, 1999, he was part of the senior management of Secom China Ltd., the Japanese publicly listed based electronic security services provider, from December 1994 to May 1997, where he served as the Vice President of the PC Department. From May 1997 to June 1999, Mr. Hong held the position of General Manager of GIT, a company engaged in the business of providing IT services to the Chinese banking industry. He holds B.E and EMBA degrees from Tsinghua University.

Shuo Zeng became the Chief Operating Officer and a director of Yucheng since November, 2004. Mr. Zeng is a founder and is also the Chairman and Chief Executive Officer of e-Channels. From July 1991 to May 2000, Mr. Zeng held several senior positions in the Nantian Group, a manufacturer electronic and communication equipment in China publicly listed in Shenzhen, including as the General Manager of Information Product Department and Finance Project & System Integration Department. He holds a B.E in Automation from Beijing Polytechnic University.

Li Liao became a director of Yucheng since November, 2006. Mr. Li has been a distinguished academician, serving as the Associate Dean and Director of EMBA Program as well as a Professor of Finance at the prestigious School of Economics and Management of Tsinghua University since September 2000. Between May 1999 and August 2000 he served as the Assistant to Chairman at the Esquel Group, a company engaged in apparel manufacturing. He finished his BE in Electrical Engineering and Ph. D in Engineering Economics from Tsinghua University followed by an MBA in Financial Engineering from the coveted MIT Sloan School of Management in the US. Mr. Li will be considered an independent director.

Tao Huang (Michael) became a director of Yucheng since November, 2006. Since March 2005, Mr. Huang has served as the Chairman and director of China Expert Technology Inc., a company listed on the OTC-BB (ticker: CSTI) and engaged in the business of providing e-government infrastructure and consulting services to community and governments in China. From August 1990 until March 2005, he worked at the Bank of China. He served as Deputy General Manager and Manager for the Retail Banking Department for the Bank of China, in charge of strategy and marketing between October 1998 and May 2004. From February 1997 to October 1998, he was the Deputy Manager of Bank of China’s Credit Card division. Prior to that, he managed the Board Secretariat, worked in the International Business Department and the Branch Banking division at Bank of China. Mr. Huang earned a degree in English language from Nanjing Normal University and a degree in Business Economy at China Academy of Social Sciences. Mr. Huang will be considered an independent director. .

Chi Wei Joong became a director of Yucheng since November, 2006. Since March 2004, Mr. Joong has been the General Manager and President for the Credit Card division of China Merchants Bank, the largest credit issuer in China. Before that, he was an Executive Vice President of the retail banking division of Chinatrust Commercial Bank, the largest credit issuer and one of the leading financial holdings company in Taiwan, from March 1999 to January 2004. From 1997 to 1998, he served as the Financial Director of AIG Credit Card Company (Taiwan). Between 1995 and 1997, he served as Financial Director for the credit card division of the Taipei City Bank (Taiwan). He also worked at American Express in the U.S. Currently, he also serves on the advisory board for Visa International. Mr. Joong has a degree from Keynes University and one from New York University. Mr. Joong is considered an independent director.

Henry Wang became a director of Yucheng since November, 2006. Since February 2003, Mr. Wang has served as the General Manager of the Operating Center of China Construction Bank. From July 2000 to February 2003, he served as General Manager of Settlement Accounts Department of China Construction Bank. Before that, he worked in the Funds Clearing Department and project auditing and consulting activities in the Investment and Research Department of China Construction Bank. He studied at Beihang University and later at South Western University of Finance and Economics. Mr. Wang is considered an independent director.

Peter Li, became the Chief Financial Officer of Yucheng since November, 2006, and from 2002 to November, 2006 he was the Chief Financial Officer of Sihitech. Prior to his joining Sihitech in 2002, Mr. Li held the position of Internal Controller in Lenovo Group, a Chinese computer equipment manufacturer publicly listed on the Hong Kong Stock Exchange, from September 2002 to March 2004. Mr. Li was the Financial Controller in Bayshore Capital Inc., a privately held high technology investment and incubator company, from February 2002 to August 2002. From April 1999 to November 2001, Mr. Li held the position of Financial Controller in Delano Technologies Corporation, a CRM software solution provider which had been a Nasdaq-listed software company. From July 1998 to April 1999, Mr. Li was the Accounting Manager in Keating Technologies Inc., a marketing and sales service provider for high technology companies. Mr. Li was the Assistant Controller in SoftArc Inc., a communication software provider, from April 1995 to July 1998. Mr. Li is a Certified General Accountant (C.G.A.) in Canada and holds a Master of education from the University of Toronto and a B.A. from Beijing Foreign Studies University.

B. Compensation.

In 2006, the aggregate cash compensation paid to our directors and executive officers as a group was RMB1,144,104(US $146,517). Below is a table of the 2006 compensation paid to our three most highly compensated officers:

	Annual Compensation(RMB)
Name	salary	bonus	Total
Weidong Hong	318,986		318,986
Shuo Zeng	380,370	117,900	498,270
Peter Li	279,996		279,996

2005 Performance Equity Plan

Yucheng has an equity performance plan under the name Yucheng Technologies Limited 2005 Performance Equity Plan. To date, no awards have been granted under the plan.

Employment Agreements

Each of Mr. Weidong Hong, Mr. Shuo Zeng and Mr. Chih T. Cheung has entered into employment agreements with Yucheng, effective as of the effective time of the redomestication merger. Mr. Hong is employed as the chief executive officer at an annual salary of $50,000, Mr. Zeng is employed as the chief financial officer at an annual salary of $50,000 and Mr. Cheung is employed as the non-executive chairman of the board at an annual salary of $50,000. Each of the executives also is eligible for a cash bonus not to exceed 100% of the base salary, as determined by the compensation committee. Each executive is eligible to be awarded equity compensation as determined from time to time by the board of directors or the compensation and stock option committees. The executives are provided regular benefits as provided to other senior executives, such as medical, dental and life insurance, four weeks paid vacation, reimbursed automobile expenses and reimbursement of business related travel and moving expenses. Upon an early termination for no cause or upon a breach of the agreement by the Company, he would be paid $300,000 and benefits. The employment agreement also provides for the protection of confidential information and a three-year non-competition period with the business of Yucheng within the PRC, Hong Kong SAR and Taiwan. The agreements contain provisions for the protection of confidential information and a three-year-after employment non-competition period within China. In the securities purchase agreement for the acquisition by Yucheng of Sihitech and e-Channels, there is an additional non-competition agreement applicable to these persons for three years after consummation that includes Hong Kong and Taiwan, in addition to China.

C. Board Practices.

Terms of directors and executive officers

Our directors are not subject to a term of office limitation and hold office until the next annual meeting of members or until such director’s earlier resignation, removal from office, death or incapacity. Any vacancy on the board of directors resulting from death, resignation, removal or other cause and any newly created directorship resulting from any increase in the authorized number of directors between meetings of members may be filled either by the affirmative vote of a majority of all the directors then in office (even if less than a quorum) or by a resolution of members.

Our officers are appointed by the board of directors. The officers shall hold office until their successors are duly elected and qualified, but any officer elected or appointed by the directors may be removed at any time, with or without cause, by resolution of directors. Any vacancy occurring in any office may be filled by resolution of directors.

Independence of Directors

Yucheng has elected to follow the rules of Nasdaq to determine whether a director is independent. The board of directors of Yucheng also will consult with counsel to ensure that the board’s determinations are consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors. The Nasdaq listing standards define an “independent director” generally as a person, other than an officer of the company, who does not have a relationship with the company that would interfere with the director’s exercise of independent judgment. Consistent with these considerations, the board of directors of Yucheng has affirmatively determined that, Messrs. Li Liao, Tao Huang, Chi Wei Joong and Henry Wang are independent directors of Yucheng.

Director Compensation

Yucheng pays its directors who are not employees a meeting fee of $3,000 and reimbursement of expenses. Directors who are committee chairman also receive $750 per committee meeting and other committee members receive $500 per committee meeting.

Board Committees

Our board of directors has established an audit committee, a stock option committee and a nominations committee.

Audit Committee

The members of our audit committee are Tao Huang, Chi Wei Joong and Li Liao.. Our board of directors has determined that all of our audit committee members are independent directors within the meaning of Nasdaq Marketplace Rule 4200(a)(15) and meet the criteria for independence set forth in Rule 10A-3(b)(1) of the Securities and Exchange Act of 1934.

The board of directors has determined that Messrs. Huang, Joong and Liao each has an understanding of generally accepted accounting principles and financial statements, the ability to assess the general application of such principles in connection with our financial statements, including estimates, accruals and reserves, experience in analyzing or evaluating financial statements of similar breadth and complexity as our financial statements, an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions.

The board of directors believes that Mr. Chi Wei Joong qualifies as an “audit committee financial expert” within the meaning of all applicable rules. The board of directors believes that Mr. Joong has financial expertise from his degrees in business, his activities as a chief executive officer and chief financial officer of various companies, and his consulting activities in the areas of accounting, corporate finance, capital formation and corporate financial analysis.

We adopted an audit committee charter under which the committee is responsible for reviewing the scope, planning and staffing of the audit and preparation of the financial statements. This includes consultation with management, the auditors and other consultants and professionals involved in the preparation of the financial statements and reports. The committee is responsible for performing oversight of the our relationship with our independent auditor. The committee also has a general compliance oversight role in assuring that our directors, officers and management comply with our code of ethics, review and approval of related party transactions, dealing with complaints regarding accounting, internal controls and auditing matters, and compliance with accounting and legal requirements applicable to us.

Pursuant to the terms of its charter, the audit committee’s responsibilities include, among other things:

annually reviewing and reassessing the adequacy of the committee’s formal charter;

reviewing our annual audited financial statements with our management and our independent auditors and the adequacy of our internal accounting controls;

reviewing analyses prepared by management and independent auditors concerning significant financial reporting issues and judgments made in connection with the preparation of our financial statements;

the engagement of the independent auditor;

reviewing the independence of the independent auditors;

reviewing our auditing and accounting principles and practices with the independent auditors and reviewing major changes to our auditing and accounting principles and practices as suggested by the independent auditor or our management;

the appointment of the independent auditor to the board of directors, which firm is ultimately accountable to the audit committee and the board of directors;

approving professional services provided by the independent auditors, including the range of audit and non-audit fees; and

reviewing all related party transactions on an ongoing basis for potential conflicts of interest.

The audit committee will pre-approve the services to be provided by our independent auditors going forward. The audit committee also will also review and recommend to the board of directors whether or not to approve transactions between us and any officer or director that occurs outside the ordinary course of business.

Stock Option Committee

We established a stock option committee with Messrs Chi Wei Joong and Li Liao as its members. The purpose of the stock option committee is to administer our stock option plans, including authority to make and modify awards under such plans. Initially, our only plan is the 2005 Performance Equity Plan.

Nominating Committee

Our nominating committee consists of Messrs. Chi Wei Joong and Li Liao. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The nominating committee will identify, evaluate and recommend candidates to become members of the Board of Directors with the goal of creating a balance of knowledge and experience.

The committee will consider suggestions from individual stockholders, based upon its assessment of certain criteria, including the proposed person’s merits. The suggested nominee must provide a statement of consent to being considered for nomination.

D. Employees.

We had 349, 390 and 612 employees as of December 31, 2004, 2005 and 2006, respectively. We plan to hire additional employees as we expand. Substantially all of our employees are located in China. The following table sets forth the number of our employees categorized by our areas of operations and as a percentage of our workforce as of December 31, 2006:

	R&D			Sales			Manager			Total
Numbers		498			52			62			612
percentage		81.4	%		8.5	%		10.1	%		100	%

From time to time, we also employ part-time employees, independent contractors to support our research and development and producing activities, and other temporary employees. During 2006, we had no temporary employees.

We offer our employees additional annual merit-based bonuses based on the overall performance of our company, his or her department and the individual. We are required by applicable PRC regulations to contribute amounts equal to 28%, 12%, 16%, 2%, 0.8% and 0.8%, of our employees’ aggregate salary to a pension contribution plan, a medical insurance plan, a housing fund, an unemployment insurance plan, a personal injury insurance plan and a maternity insurance plan, respectively, for our employees.

Our employees are not covered by any collective bargaining agreement. We believe that we have a good relationship with our employees.

E. Share ownership.

The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of December 31, 2006, by:

each of our directors and executive officers who beneficially own our ordinary shares; and

each person known to us to own beneficially more than 5.0% of our ordinary shares.

Name	Shares of China Unistone Common Stock		Approximate Percentage of Outstanding Common Stock(1)
Chih T. Cheung(2)(3) Chairman of the Board	410,872	(4)	4.2	%
Weidong Hong(2)(3) CEO and Director	2,252,090	(5)	23.6	%
Shuo Zeng(2)(3) COO and Director	678,651	(6)	7.12	%
Li Liao(2) Director	0		0	%
Tao Huang(2) Director	0		0	%
Chi Wei Joong(2) Director	0		0	%
Henry Wang(2) Director	0		0	%
Peter Li(2) CFO	37,545		0.4	%
Sihitech Company Limited(7)	2,252,090		23.6	%
Mega Capital Group Services Limited(8)	652,641		6.8	%
Profit Loyal Consultants Limited(9)	849,752		8.9	%
Elite Concord International Limited(10)	816,360		8.6	%
James Z. Li(11)	510,874		5.2	%
Jack Silver(12)	1,422,500		13.2	%
Directors and officers as a group (eight persons)	3,379,158	(4)(5)	34.75	%

(1)	Beneficial ownership and percentage has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, based on 9,528,320 shares outstanding.

(2)	Unless otherwise indicated, the business address is c/o 3^rd Floor, Tower B, Finance & Trust Building, No. 5 Anding Road, Chaoyang District, Beijing PRC.

(3)	Each of these persons directly or indirectly is a party to or benefits from a voting agreement covering 6,150,064 shares of Yucheng voting stock representing 62% thereof, in respect of the nomination, election and removal of directors.

(4)	Includes 194,872 shares of common stock issuable upon exercise of publicly traded common stock purchase warrants that are exercisable upon consummation of the acquisition of Yucheng.

(5)	Includes 675,807 shares held by Mr. Hong’s spouse. Represents shares held through Sihitech Company Limited, a BVI company, owned by Mr. Hong and his spouse, of which Mr. Hong has voting and dispositive authority.

(6)	Represents shares held through Elite Concord International Limited, a BVI company, of which Mr. Hong has voting and dispositive authority.

(7)	A BVI company owned by Mr. Hong and his spouse of which Mr. Hong has voting and dispositive authority.

(8)	A BVI company owned by ten persons, of which Mr. Yan Mei Wang is sole director, who has voting and dispositive authority.

(9)	A BVI company owned by nine persons, of which Mr. Hua Ge Ma is sole director, who has voting and dispositive authority.

(10)	A BVI company owned by three persons, of which Mr. Shuo Zeng is the sole director, who have voting and dispositive authority. Mr. Zeng has 83% ownership of Elite Concord International Limited representing 678,651 shares.

(11)	Includes 294,870 shares of common stock issuable upon exercise of warrants held by Mr. Li that become exercisable upon consummation of the acquisition of Yucheng.

(12)

Jack Silver beneficially owns 1,422,500 shares of Common Stock of China Unistone Acquisition Corporation. Such shares of Common Stock beneficially owned by Mr. Silver include (i) 10,000 shares of Common Stock held by Sherleigh Associates Inc. Profit Sharing Plan (“Sherleigh Profit”), a trust of which Mr. Silver is the trustee and (ii) 199,000 shares of Common Stock held by Sherleigh Associates Inc. Defined Benefit Pension Plan (“Sherleigh Defined”), a trust of which Mr. Silver is the trustee, and includes (i) warrants to purchase 275,500 shares of Common Stock held by Sherleigh Profit and (ii) warrants to purchase 938,000 shares of Common Stock held by Sherleigh Defined. The information is derived from a Schedule 13G filed by such entity with the Securities and Exchange Commission on January 29, 2007.

None of the above shareholders have voting rights that differ from the voting rights of other shareholders.

For information regarding stock options granted to them and other employees, see Item 6.B above.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major shareholders.

Please refer to Item 6.E “Directors, Senior Management and Employees — Share Ownership.”

B. Related party transactions.

Escrow of Shares

Pursuant to an escrow agreement between Yucheng, nine initial shareholders of China Unistone Acquisition Corporation and Continental Stock Transfer & Trust Company, 750,000 ordinary shares, representing all of their shares were placed in escrow, with Continental acting as escrow agent, pursuant to an escrow agreement, until the earliest of: (i) November 18, 2007; (ii) our liquidation; or (iii) the consummation of a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property subsequent to our consummating a business combination with a target business.

During the escrow period, these shares cannot be sold, but the share holders will retain all other rights as stockholders, including, without limitation, the right to vote their shares of common stock and the right to receive cash dividends, if declared. If dividends are declared and payable in shares of common stock, such dividends will also be placed in escrow.

Registration Rights Agreement

Yucheng has a registration rights agreement with the nine initial shareholders of China Unistone Acquisition Corporation in respect of the 750,000 ordinary shares they hold pursuant to which the holders of the majority of the shares will be entitled to make up to two demands that Yucheng register the shares. The holders of the majority of the shares may elect to exercise these registration rights at any time after the date on which these shares of common stock are released from escrow. In addition, these shareholders have certain “piggy-back” registration rights on registration statements filed subsequent to the date on which these shares of common stock are released from escrow. Yucheng will bear the expenses incurred in connection with the filing of any such registration statements.

Loans and other arrangements

Yucheng had an aggregate of RMB386,867 (US $49,543) and RMB2,599,256 due from the company managements in fiscal years 2006 and 2005, respectively. Yucheng also owed RMB907,949 (US $116,274) and RMB5,407,949 to affiliates and shareholders in fiscal years 2006 and 2005, respectively .The balances were non-interest bearing and payable on demand. Amounts owed will be repaid when due or at such other times when repayment will not adversely impact the operating cash requirements. It is not intended to repay these amounts from funds available as a result of the merger.

As a public company, Yucheng, neither directly nor indirectly nor through any subsidiary, will make loans, extend credit, maintain credit or arrange for the extension of credit or renew an extension of credit in the form of a personal loan to or for any director or executive officer of the Company. This prohibition is in compliance with the provisions of the Sarbanes-Oxley Act of 2002. Moreover, Yucheng has adopted an audit committee charter that requires the audit committee to review and approve all related party transactions, assure compliance with the company’s code of ethics, and monitor and discuss with the auditors and outside counsel policies and compliance with applicable accounting and legal standards and requirements.

Voting Agreement

Sihitech Company Limited, Mega Capital Group Services Limited, Profit Loyal Consultants Limited, Elite Concord International Limited, all significant shareholders of the Company and two other corporate shareholders of the Company and Messrs. Chih T Cheung and James Z. Li entered into a voting agreement whereby they will agree to vote for a period of three years ending November 24, 2009, all of their respective shares held during the term of the agreement for six directors nominated by the Selling Stockholders and three directors nominated by Messrs. Cheung and Li. The parties to the voting agreement have also agreed not to take any action that would change the number of directors or the process of nomination, voting and removal of directors as set forth in the Articles of Association and Memorandum of Association of Yucheng, unless they agree unanimously on such action. The persons who are subject to the voting agreement, hold approximately 62% of the voting stock of Yucheng, and therefore they will have control of the board of directors and be able to influence the decisions of the board and the direction of the Company. Such agreement may also cause the current management to remain in place without opportunity for the other shareholders to effectuate change. Such an agreement may also be considered an anti-takeover device. Each of the parties to the agreement disclaim that they are part of a group for Section 13(d) purposes.

C. Interests of experts and counsel.

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated statements and other financial information.

We have appended consolidated financial statements filed as part of this annual report. See Item 18 “Financial Statements.”

Legal Proceedings

Not applicable

Dividend Policy

We have never declared or paid any dividends, nor do we have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

Our board of directors may by resolution authorize payment of dividends if the directors are satisfied, on reasonable grounds, Yucheng will, immediately after the distribution of dividends, satisfy the solvency test as stipulated in Section 56 of the BVI Business Companies Act. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

B. Significant changes.

We have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

ITEM 9. THE OFFER AND LISTING

A. Offering and listing details.

The common stock, warrants and units of China Unistone Acquisition Corporation, our predecessor, were quoted on the Over the Counter Bulletin Board (“OTCBB”) under the symbols of CUAC.OB,CUACW.OB and CUACU.OB, respectively. China Unistone Units commenced public trading on November 18, 2004, and its common stock and warrants commenced public trading on November 24, 2004. On November 24, 2006, China Unistone merged with and into Yucheng for the purpose of redomestication out of the United States. From November 27, 2006 to March 13, 2007, Yucheng’s ordinary shares and warrants traded on the OTCBB, under the symbols YCHTF.OB and YCHWF.OB. On March 14, 2007, the ordinary shares and warrants were admitted for listing on the NASDAQ Capital Market, under the symbols YTEC and YTECW. On June 13, 2007, the warrants were delisted in connection with consummation of a call for redemption.

The following table provides the high and low trading prices for Yucheng’s ordinary shares, and historical prices for the common stock, warrants and units of Yucheng for the periods indicated below as reported on the Over-the-Counter Bulletin Board. The over-the-counter market quotations reported below reflect inter-dealer prices, without markup, markdown or commissions and may not represent actual transactions.

	The OTCBB Price Per Common Stock				The OTCBB Price Per Warrant				The OTCBB Price Per Unit				The Nasdaq Capital Market Price Per Share				The Nasdaq Capital Market Price Per Warrant
	High		Low		High		Low		High		Low		High		Low		High		Low
Annual Market Prices
Year 2004 (from November 24, 2004)			$	$			$	$			$	$		N/A		N/A		N/A		N/A
Year 2005														N/A		N/A		N/A		N/A
Year 2006														N/A		N/A		N/A		N/A

Quarterly Market Prices
Fourth Quarter 2004		5.2		4.78		0.8		0.6		7		5.95		N/A		N/A		N/A		N/A
First Quarter 2005		5.6		5.1		1.12		0.8		7.75		6.6		N/A		N/A		N/A		N/A
Second Quarter 2005		5.52		5.05		0.98		0.75		7.15		6.5		N/A		N/A		N/A		N/A
Third Quarter 2005		5.45		5.1		1.2		0.83		7.95		6.6		N/A		N/A		N/A		N/A
Fourth Quarter 2005		6.75		5.15		2.07		0.93		10.6		6.65		N/A		N/A		N/A		N/A
First Quarter 2006		8.4		6.77		3		1.96		14		10.7		N/A		N/A		N/A		N/A
Second Quarter 2006		8.85		6.25		3.28		1.83		15		10		N/A		N/A		N/A		N/A
Third Quarter 2006		7		5.4		1.78		1.18		10.4		7.85		N/A		N/A		N/A		N/A
Fourth Quarter 2006		7.55		5.35		2.74		1.1		13.03		7.55
First Quarter 2007 (until March 13, 2007)		8.3		6.47		2.95		1.84		14.2		10.15
First Quarter 2007 (from March 13, 2007)		-		-		-		-		-		-		8.8		7.52		3.8		2.51
Second Quarter 2007 (until June 25, 2007)														9.5		8.06
Second Quarter 2007 (trading halted on June 14, 2007)																		4.45		3.02
Monthly Market Prices
January 2006		8.24		6.77		2.72		1.96		13.68		10.69
February 2006		8.4		7.3		3.00		2.30		14.4		11.9
March 2006		8.85		7.85		3.28		2.85		15.41		13.55
April 2006		8.37		7.73		3.08		2.80		14.53		13.33
May 2006		7.75		6.25		2.85		1.83		13.45		9.91
June 2006		6.71		5.80		2.03		1.04		10.77		7.88
July 2006		7.00		6.00		1.78		1.35		10.56		8.7
August 2006		6.35		5.40		1.43		1.25		9.21		7.9
September 2006		5.68		5.40		1.33		1.18		8.34		7.76
October 2006		5.65		5.27		1.3		1.06		8.25		7.39
November 2006		7.45		5.56		2.52		1.27		12.49		8.1
December 2006		7.55		6.93		2.74		1.34		13.03		9.61
January 2007		7.40		6.47		2.61		1.84		12.62		10.15

B. Plan of distribution.

Not applicable

C. Markets.

See Item 9.A above.

D. Selling shareholders.

Not applicable

E. Dilution.

Not applicable

F. Expenses of the issue.

Not applicable

ITEM 10. ADDITIONAL INFORMATION

A. Share capital.

Not applicable.

B. Memorandum and articles of association.

The following is a summary description of certain provisions of our Memorandum and Articles of Association:

Charter

Our charter documents consist of our Memorandum of Association and our Articles of Association. The Memorandum of Association loosely resembles the Articles of Incorporation of a United States corporation, and the Articles of Association loosely resembles the bylaws of a United States corporation. This description and summary does not purport to be complete and does not address all differences between United States and British Virgin Islands corporate laws. Copies of our Memorandum and Articles of Association have been filed as exhibits to the intial registration statement on Form S-4 of Yucheng.

Corporate Powers

Yucheng was first incorporated as a company under the International Business Companies Act, 1984 (as amended) on November 17, 2005. The M&A states that the Company can carry out any object not prohibited by the BVI Business Companies Act 2004 or as the same may be revised from time to time, or any other law of the British Virgin Islands.

Directors

The directors may fix their compensation for services rendered to us.

By a resolution of directors, the directors may exercise all our powers to borrow money, mortgage our property, issue debentures, and issue stock or other securities for any debt, liability or obligation given by us.

A director may resign or retire from our board at any time. The director must give written notice of his resignation to us. Directors hold office until the next annual meeting of members. We currently do not have a staggered election of directors.

The shareholding qualification for directors may be fixed and varied by a resolution of members and unless it is fixed no shareholding qualification is required. A director must be an individual.

Rights of Shares

We are authorized to issue ordinary shares and preferred shares. The ordinary shares have one vote each, are subject to purchase or acquisition by us for fair value and have the same rights with regard to dividends and distributions upon our liquidation. The directors are authorized to issue one or more classes and series of preferred shares and to fix the rights and preferences attached to each class of preferred shares.

Meetings

An annual meeting of members must be held each year at such date and time as may be determined by the directors, but no later than one year after the end of our fiscal year pursuant to relevant Nasdaq rules. Special meetings of members may be called by the directors pursuant to a resolution of directors to that effect or upon the written request of members holding more than 50 percent of the votes of our outstanding voting shares. No less than seven days notice of meetings is required to be given to members.

A meeting of members may be called on short notice if members holding not less than 90 percent of the total number of shares entitled to vote on all matters to be considered at the meeting, or 90 percent of the votes of each class or series of shares where members are entitled to vote thereon as a class or series together with not less than a 90 percent majority of the remaining votes, have agreed to short notice of the meeting, or if all members holding shares entitled to vote on all or any matters to be considered at the meeting have waived notice of the meeting and for this purpose presence at the meeting shall be deemed to constitute waiver.

The inadvertent failure of the directors to give notice of a meeting to a member, or the fact that a member has not received notice, does not invalidate the meeting.

A member may be represented at a meeting of members by a proxy who may speak and vote on behalf of the member. A written instrument giving the proxy such authority must be produced at the place appointed for the meeting before the time for holding the meeting.

A meeting of members is duly constituted if; at the commencement of the meeting, there are present in person or by proxy not less than 50 percent of the votes of the shares or class or series of shares entitled to vote on resolutions of members to be considered at the meeting.

Limitations on Ownership of Securities

There are no limitations on the right of non residents or foreign persons to own our securities imposed by British Virgin Islands law or by our M&A.

Change in Control of Company

There are no provisions in our M&A that would operate only to delay, defer or prevent a change of control of our company. However, the board of directors has the power to issue preferred shares with such rights attaching to them as they decide and that this power could be used in a manner that would delay, defer of prevent a change of control of our company.

Ownership Threshold

There are no provisions governing the ownership threshold above which shareholder ownership must be disclosed.

Changes in Capital

Subject to the provisions of the BVI Business Companies Act, 2004, we may, by a resolution of directors or members, amend our M&A to increase or decrease the number of shares authorized to be issued. There is no definition of capital in the BVI Business Companies Act, 2004. The directors of a company may, by resolution, authorize a distribution (including a capital distribution) by their company at a time, of an amount, and to any members they think fit if they are satisfied, on reasonable grounds, that the company will, immediately after the distribution, satisfy the solvency test. The solvency test is satisfied if the value of the company’s assets exceeds its liabilities, and the company is able to pay its debts as they fall due.

C. Material contracts.

We have not entered into any material contracts other than in the ordinary course of business and other than those described in Item 4, “Information on the Company” and in Item 7, “Major Shareholders and Related Party Transactions” or elsewhere in this annual report on Form 20-F.

D. Exchange controls.

British Virgin Islands

There are no material exchange controls restrictions on payment of dividends, interest or other payments to the holders of our ordinary or preferred shares or on the conduct of its operations in the BVI, where we were incorporated. There are no material BVI laws which impose any material exchange controls on us or that affect the payment of dividends, interest or other payments to nonresident holders of its ordinary or preferred shares. BVI law and our M&A impose no material limitations on the right of non-residents or foreign owners to hold or vote our ordinary or preferred shares.

China

China’s government imposes control over the convertibility of RMB into foreign currencies. Under the current unified floating exchange rate system, the China Foreign Exchange Transaction Center, authorized by the People’s Bank of China publishes a daily exchange rate for RMB, or the PBOC Exchange Rate, based on the weighted average of quotations from all the market makers in the inter-bank foreign exchange market before open quotation. Financial institutions authorized to deal in foreign currency may enter into foreign exchange transactions at exchange rates within an authorized range above or below the PBOC Exchange Rate according to market conditions.

Pursuant to the Foreign Exchange Control Regulations issued by the State Council on January 29, 1996 and effective as of April 1, 1996 (and amended on January 14, 1997) and the Administration of Settlement, Sale and Payment of Foreign Exchange Regulations which came into effect on July 1, 1996 regarding foreign exchange control, or the Regulations, conversion of Renminbi into foreign exchange by foreign investment enterprises for current account items, including the distribution of dividends and profits to foreign investors of joint ventures, is permissible upon the proper production of qualified commercial vouchers or legal documents as required by the Regulations. Foreign investment enterprises are permitted to remit foreign exchange from their foreign exchange bank account in China upon the proper production of, inter alia, the board resolutions declaring the distribution of the dividend and payment of profits. Conversion of RMB into foreign currencies and remittance of foreign currencies for capital account items, including direct investment, loans, security investment, is still subject to the approval of the State Administration of Foreign Exchange or any authorized local branches, or SAFE or the Branches, in each such transaction. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations and added, among other things, an important provision, as Article 5 provides that the State shall not impose restrictions on recurring international payments and transfers under current accounts.

Under the Regulations, foreign investment enterprises are required to open and maintain separate foreign exchange accounts for capital account items (but not for other items). In addition, foreign investment enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business upon the production of valid commercial documents and, in the case of capital account item transactions, document approval from SAFE or the Branches.

Currently, foreign investment enterprises are required to apply to SAFE for “foreign exchange registration certificates for foreign investment enterprises.” With such foreign exchange registration certificates (which are granted to foreign investment enterprises upon fulfilling specified conditions and which are subject to review and renewal by SAFE or its Branches on an annual basis) or with the foreign exchange sales notices from SAFE (which are obtained on a transaction-by-transaction basis), foreign-invested enterprises may open foreign exchange bank accounts (the advance examination and approval for the opening of foreign exchange current accounts has been cancelled according to the Notice of SAFE on Adjusting Policies Concerning the Administration of Foreign Exchange Current Accounts, which came into effect on May 1, 2006) and enter into foreign exchange transactions at banks authorized to conduct foreign exchange business to obtain foreign exchange for their needs.

E. Taxation.

The following is a general summary of certain material British Virgin Islands and U.S. federal income tax considerations. The discussion is not intended to be, nor should it be construed as, legal or tax advice to any particular prospective shareholder. The discussion is based on laws and relevant interpretations thereof in effect as of the date hereof, all of which are subject to change or different interpretations, possibly with retroactive effect.

The discussion does not address United States state or local tax laws, or tax laws of jurisdictions other than t

Title of each class	Name of each exchange on which registered
Ordinary Shares	The Nasdaq Stock Market LLC

	As at Year Ended December 31,
	Derived from audited financial statements				Pro forma (Unaudited)
	2006(USD) (1)		2006(RMB)		2005(RMB)		2004(RMB)		2003(RMB)
Cash		12,595,907		98,357,657		48,968,481		45,098,376		35,286,352
Trade accounts receivable		14,932,874		116,606,333		69,733,102		53,205,165		21,907,268
Total current assets		39,167,573		305,847,828		169,046,187		119,574,721		80,358,712
Total assets		49,834,239		389,140,626		186,434,530		135,008,164		92,739,898
Total current liabilities		18,084,760		141,218,461		103,840,139		79,459,038		51,155,864
Long-term liabilities		677,796		5,292,707		4,151,968		346,225		35,730
Minority interests		-		-		-		3,001,004		3,089,573
Stockholders' equity		31,071,683		242,629,458		78,442,423		52,201,897		38,458,731
Total liabilities and stockholders' equity		49,834,239		389,140,626		186,434,530		135,008,164		92,739,898

	Year Ended December 31
	Audited									Pro forma (Unuaudited)
	2006(USD)			2006(RMB)			2005(RMB)			2005(RMB)			2004 (RMB)
Net cash (used in) provided by operating activities		(1,723,656	)		(13,459,510	)		14,805,904			16,658,414			1,799,852
Net cash used in investing activities		(6,922,961	)		(54,059,330	)		(13,555,598	)		(14,149,546	)		(6,119,337	)
Net cash provided by financing activities		15,772,252			123,160,786			1,634,797			1,361,237			14,131,509
Net increase in cash		7,125,635			55,641,946			2,885,103			3,870,105			9,812,024
Cash, beginning of the year		5,470,272			42,715,712			39,830,609			45,098,376			35,286,352
Cash, end of period		12,595,907			98,357,658			42,715,712			48,968,481			45,098,376

	Payment Due by Period
			Within 1
	Total		Year		2008		2009
	RMB		RMB		RMB		RMB
Bank Debt		35,500,000		35,500,000
Interest on Bank Debt		923,474		923,474
Operating leases		4,346,283		2,782,369		1,353,377		210,537
Total		40,769,757		39,205,843		1,353,377		210,537