MERGER AND ACQUISITIONS - Note 3

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

MERGER AND ACQUISITION - Note 3

NOTE 3 — MERGER AND ACQUISITIONS

The Company acquired 100% equity in Silver Tech on May 31, 2010. As of May 31, 2010, the net assets of Silver Tech were $2,564,160. The purchase consideration was $10,960,000 which resulted in goodwill of $8,395,840.

Silver Tech's subsidiary Nollec Wireless primarily focuses on R&D for mobile phones, and hardware and software solutions for domestic Chinese and overseas customers. Its design team includes experienced engineers in the core technologies of wireless communication and mobile phone development. Nollec provides state of the art industrial, user inter-phase, mechanical and engineering designs and software and hardware integration. The acquisition of Nollec allows the Company to provide complete original design and manufactured solutions to its customers in order to maintain a competitive advantage in the mobile handset manufacturing market.

The Company acquired 100% ownership of CDE on January 4, 2011. As of January 4, 2011, the net assets of CDE were $(43,409). The purchase consideration was $1,818,000 which resulted in goodwill of $1,861,409. The Company acquired CDE to broaden and deepen its knowledge base towards software solutions for mobile handsets. CDE has designed games for iOS and Android platforms for several years. The accumulated knowledge and source codes can be useful to the Company in integrating and testing operating systems with the hardware that the Company produces.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed from CDE as of the date of acquisition on January 4, 2011.

Cash	$	235,112
Other receivables	5,895
Prepaid expenses	3,259
Accounts receivable	8,413
Fixed assets	6,565
Goodwill	1,861,409
Short-term loan	(20,075)
Accounts payable	(990)
MPF payable	(1,758)
Due to related party	(277,774)
Accrued expenses	(2,056)
Purchase price	$	1,818,000

The Company acquired 55% ownership of Portables on October 11, 2011. As of October 11, 2011, the net assets of Portables were $(9,290,241). The purchase consideration was $9,851,486 which resulted in goodwill of $ 27,005,953. The Company acquired Portables for two reasons; (a) to diversify its revenue sources, and (b) to gain access to the most mature mobile handset market in the world.

The following table summarizes the fair market values assigned to the assets acquired and liabilities assumed from Portables as of October 11, 2011.

Cash	$	81,048
Other receivables	4,054,550
Prepaid expenses	255,816
Accounts receivable	3,896,008
Inventory	1,045,478
Due from related parties	3,813,514
Fixed assets	2,216,272
Equipment deposit	103,602
Intangible assets	223,557
Goodwill	27,005,953
Short-term loan	(1,352,562)
Notes payable	(4,757,186)
Accounts payable	(10,717,533)
Accrued expenses	(2,749,780)
Due to related party	(2,818,775)
Other payables	(2,584,250)
Valuation of non-controlling interest		(7,864,226)
Purchase Price	$	9,851,486

Our purchase price allocation is preliminary and will be finalized within one year from the date of acquisition of Portables. The Company derecognized the $1,350,000 acquisition payable and revised goodwill from $27,005,953 as at December 31, 2011 to $25,688,755 as at March 31, 2012 as a result of this derecognition (See Note 1).

The following table summarizes goodwill as of March 31, 2012 and December 31, 2011 resulting from the acquisitions of Jiangsu Leimone, Silver Tech, CDE and Portables:

		March 31, 2012		December 31, 2011
		(Unaudited)		(Audited)
Jiangsu Leimone	$	103,057	$	103,057
Silver Tech		8,395,840		8,395,840
CDE		1,583,169		1,861,409
Portables		25,668,755		27,005,953
		35,750,821		37,126,605
Less: Impairment		(1,033,762)		(1,033,762)
Total goodwill	$	34,717,059	$	36,332,497

As of December 31, 2011, the Company had recorded total impairment of goodwill of $1,033,762. During the quarter ended March 31, 2012, after considering market conditions and the performance of those subsidiaries listed above, the Company concluded that it did not need to record additional impairment of goodwill. The Company continues to closely monitor its subsidiaries when major events occur that may cause the carrying value of the goodwill associated with the above subsidiaries to be impaired.