U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~March 31~~June 30, 2011

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 000-18731

Forlink Software Corporation, Inc.

(Exact name of small business issuer as specified in its charter)

Nevada (State or other jurisdiction of incorporation or organization)	98-0398666 (I.R.S. employer identification number)
Nevada	98-0398666
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification number)
Shenzhou Mansion 9F, ZhongGuanCun South Street, No. 31,
Haidian District, Beijing, China 100081
(Address of principal executive offices and zip code)
01186-10 6811 8866
(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 Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~YES þ NO ¨~~

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer o¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~YES ¨ NO þ~~

OnYES ~~May~~¨ NO ~~12, 2011, we had 4,651,173 shares of common stock issued and outstanding.~~þ

On July 29, 2011, we had 4,651,173 shares of common stock issued and outstanding.

FORLINK SOFTWARE CORPORATION, INC.

FORM 10-Q

INDEX

		Page Number
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		ii
PART I. FINANCIAL INFORMATION		1	1
Item 1.	Financial Statements (unaudited)	1	1
	Consolidated Balance Sheet as of March 31, 2011	2
	Consolidated Balance Sheet as of June 30, 2011		2
	Consolidated Statements of Operations	3	3
	Consolidated Statements of Cash Flows	4	4
	Notes to the Consolidated Financial Statements as of March 31, 2011	5
	Notes to the Consolidated Financial Statements as of June 30, 2011		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	22	22
Item 4.	Controls and Procedures	30	31
PART II. OTHER INFORMATION		31	32
Item 6.	Exhibits	31	32
SIGNATURES		32	33

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to growth and strategies, future operating and financial results, financial expectations and current business indicators, are based upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “will,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update this forward-looking information. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Quarterly Report on Form 10-Q (“Form 10-Q”). No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

The information required by Item 1 begins on the next page.

Forlink Software Corporation, Inc.

Consolidated Balance Sheets

(Expressed in US Dollars)
	March 31,			December 31,
	June 30,			December 31,
	2011			2010
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	~~941~~814,~~694~~689		$	3,580,269
Accounts receivable		34,~~959~~309,~~352~~781			3,778,529
Other receivables, deposits and prepayments (Note 3)		~~669~~611,~~624~~018			563,568
Loan receivable (Note 4)		1,~~050~~066,~~742~~240			0
Inventories (Note 5)		~~801~~872,~~275~~642			633,998
Deferred taxes assets		-			-
Total current assets		7,674,370			8,556,364
Total current assets		7,422,687			8,556,364
Property, plant and equipment (Note 6)		333,997			370,409
Property, plant and equipment (Note 6)		348,468			370,409
Long term investments (Note 7)		1,169,095			1,183,585
Long term investments (Note 7)		1,170,274			1,183,585
Total assets	$	9,177,462		$	10,110,358
Total assets	$	8,941,429		$	10,110,358
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	727,426		$	1,027,862
Amounts due to stockholders (Note 8)		530,475			524,668
Customer deposits		1,082,545			1,206,267
Other payables and accrued expenses (Note 9)		240,374			370,318
Income tax payable		0			0
Other tax payable		0			21,531
Deferred taxes debt		33,088			32,736
Total current liabilities	$	2,613,908		$	3,183,382
Commitments and contingencies
Non-controlling interest (Note 10)	$	86,618		$	99,560
Stockholders’ equity
Common stock, par value $0.001 per share; 200,000,000 and 200,000,000 shares authorized; 4,966,173 and 4,966,173 shares issued and 4,651,173 and 4,651,173 shares outstanding, respectively	$	99,322		$	99,322
Treasury stock		(163,800	)		(163,800	)
Additional paid-in capital		10,195,693			10,195,693
Accumulated losses		(5,206,073	)		(4,544,648	)
Accumulated other comprehensive income		1,315,761			1,240,849
Total stockholders’ equity	$	6,240,903		$	6,827,416
Total liabilities and stockholders’ equity	$	8,941,429		$	10,110,358


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Accounts payable	$	678,613		$	1,027,862
Amounts due to stockholders (Note 8)		531,223			524,668
Customer deposits		1,273,239			1,206,267
Other payables and accrued expenses (Note 9)		247,718			370,318
Other tax payable		0			21,531
Deferred taxes debt		32,198			32,736

Total current liabilities	$	2,762,991		$	3,183,382

Commitments and contingencies

Non-controlling interest (Note 10)	$	75,912		$	99,560

Stockholders’ equity
Common stock, par value $0.001 per share;
200,000,000 and 200,000,000 shares authorized;
4,966,173 and 4,966,173 shares issued and
4,651,173 and 4,651,173 shares outstanding, respectively	$	99,322		$	99,322
Treasury stock		(163,800	)		(163,800	)
Additional paid-in capital		10,195,693			10,195,693
Accumulated losses		(5,209,469	)		(4,544,648	)
Accumulated other comprehensive income		1,416,813			1,240,849

Total stockholders’ equity	$	6,338,559		$	6,827,416

Total liabilities and stockholders’ equity	$	9,177,462		$	10,110,358

See accompanying notes to unaudited consolidated condensed financial statements.

Forlink Software Corporation, Inc.

Consolidated Statements of Operations

(unaudited)

(Expressed in US Dollars)

	Three Months ended						Six Months Ended
	March 31,
	June 30,						June 30,
	2011			2010			2011			2010
Net sales		~~457~~1,~~291~~337,105			~~683~~435,~~075~~664			1,794,396			1,118,739
Cost of sales		(~~377~~596,~~729~~430	)		(~~364~~312,~~832~~866	)		(974,159	)		(677,698	)
Gross profit		79740,~~562~~675			~~318~~122,~~243~~798			820,237			441,041
Selling expenses		(~~297~~235,~~090~~365	)		(~~223~~233,~~160~~195	)		(532,455	)		(456,355	)
Research and development expenses		(~~203~~194,~~685~~359	)		(~~179~~199,~~047~~317	)		(398,044	)		(378,364	)
General and administrative expenses		(~~267~~301,~~783~~615	)		(~~341~~348,~~512~~165	)		(569,398	)		(689,677	)
Total operating expenses		(~~768~~731,~~558~~339	)		(~~743~~780,~~719~~677	)		(1,499,897	)		(1,524,396	)
Operating profit/(loss)		~~(688~~9,~~996~~336	)		(~~425~~657,~~476~~879	)		(679,660	)		(1,083,355	)
Loss from equity method investee		(1320,~~138~~897	)		(224,~~182~~926	)		(34,035	)		(27,108	)
Interest income		2,770			2,220
Income from cost method investee		-			-			-			-
Other income, net		24,997			512,899
Interest income		945			1,672			3,715			3,892
Profit / (Loss) before tax		(674,367	)		67,461
Other income, net		275			120,904			25,272			633,803
Income tax		-			3,555
Profit / (Loss) before tax		(10,341	)		(540,229	)		(684,708	)		(472,768	)
Non-controlling interest		(12,942	)		(14,040	)
Income tax		(3,761	)		3,555			(3,761	)		-
Net profit/(loss)		(661,425	)		77,946
Minority interest		(10,706	)		(12,665	)		(23,648	)		(26,705	)
Profit/(loss) per share		(0.14	)		0.02
Net profit/(loss)		(3,396	)		(524,009	)		(664,821	)		(446,063	)
Weighted average common shares outstanding -basic and diluted		4,651,173			4,651,173
Profit/(loss) per share		(0.00073	)		(0.11	)		(0.14	)		(0.10	)
Weighted average common shares outstanding -basic and diluted		4,651,173			4,651,173			4,651,173			4,651,173

See accompanying notes to unaudited consolidated condensed financial statements.

Forlink Software Corporation, Inc.

Consolidated Statements of Cash Flows

Increase in Cash and Cash Equivalents

(unaudited)

(Expressed in US Dollars)

(Expressed in US Dollars)
	Six Months Ended
	June 30,
	2011			2010
Cash flows from operating activities
Net profit/(loss)	$	(664,821	)	$	(446,063	)
Adjustments to reconcile net profit/(loss) to net cash provided by/(used in) operating activities
Non-controlling interest		(23,648	)		(26,705	)
(Gain)/loss from write-off of property, plant and equipment
Depreciation of property, plant and equipment		62,771			75,780
Loss from equity method investee		34,035			27,108
Effect of deferred taxes		(1,378	)		(97,790	)

Change in:
Accounts receivables		(434,325	)		(40,154	)
Other receivables, deposits and prepayments		(32,993	)		(147,923	)
Inventories		(222,381	)		(121,371	)
Accounts payable		(375,616	)		(147,116	)
Amounts due to stockholders		(6,904	)		17,114
Customer deposits		36,029			(29,118	)
Other payables and accrued expenses		(132,099	)		(182,353	)
Other taxes payable		(22,083	)		(730,129	)

Net cash provided by/(used in) operating activities		(1,783,413	)		(1,848,720	)

Cash flows from investing activities
Purchase of long term investment
Acquisition of property, plant and equipment		(4,599	)		(4,550	)
Proceeds from disposal of long term investment		14, 849			-
Dividend from investee		-			108,441
Loan to another company		(1,066,240	)		-

Net cash used in investing activities		(1,055,990	)		103,891

Cash flows from financing activities
Repayment to short term borrowings		-			-
(Repayments to)/advances from stockholders		-			-
Proceeds from issuances of common stock under Plan 2002		-			-

Net cash provided by financing activities		-			-

Effect of exchange rate changes		73,823			10,382

Net increase/(decrease) in cash and cash equivalents		(2,765,580	)		(1,734,447	)

Cash and cash equivalents at beginning of period		3,580,269			2,240,863

Cash and cash equivalents at end of period	$	814,689		$	506,416

Supplemental disclosure of cash flow information
Income tax paid	$	5,157			-
Interest paid	$	-		$	-

	Three Months Ended March 31,
	2011			2010
Cash flows from operating activities
Net profit/(loss)	$	(661,425	)	$	77,945
Adjustments to reconcile net profit/(loss) to
net cash provided by/(used in) operating activities
Non-controlling interest		(12,942	)		(14,040	)
(Gain)/loss from write-off of property, plant and equipment
Depreciation of property, plant and equipment		(10,051	)		45,411
Income from equity method investee
Loss from equity method investee		13,138			22,182
Effect of deferred taxes		(1,129	)		3,560
Change in:
Accounts receivables		(9,825	)		(572,793	)
Other receivables, deposits and prepayments		(80,552	)		(585,513	)
Inventories		(138,585	)		(112,764	)
Accounts payable		(346,952	)		483,979
Amounts due to stockholders		(17,937	)		98,934
Customer deposits		(178,312	)		297,453
Other payables and accrued expenses		(146,703	)		(168,994	)
Income tax payable		-			-
Other taxes payable		(22,505	)		(727,023	)
Net cash provided by/(used in) operating activities		(1,613,780	)		(1,151,662	)
Cash flows from investing activities
Purchase of long term investment
Acquisition of property, plant and equipment		(2,734	)		-
Proceeds from disposal of long term investment		14,633			-
Dividend from investee		-			107,980
Loan to another company		(1,050,742	)		0
Net cash used in investing activities		(1,038,843	)		107,980
Cash flows from financing activities
Repayment to short term borrowings		-			-
(Repayments to)/advances from stockholders		-			-
Proceeds from issuances of common stock under Plan 2002		-			-
Net cash provided by financing activities		-			-
Effect of exchange rate changes		14,049			9,634
Net increase/(decrease) in cash and cash equivalents		(2,638,575	)		(1,034,048	)
Cash and cash equivalents at beginning of period		3,580,269			2,240,863
Cash and cash equivalents at end of period	$	941,694		$	1,206,815
Supplemental disclosure of cash flow information
Income tax paid	$	-			-
Interest paid	$	-		$	-

See accompanying notes to unaudited consolidated condensed financial statements.

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Forlink Software Corporation, Inc. (the "Company" or the "Registrant" or "Forlink"), is a Nevada corporation which was originally incorporated on January 7, 1986 as "Why Not?, Inc. " under the laws of the State of Utah and subsequently reorganized under the laws of Nevada on December 30, 1993. From 1996 until 1999, the Company continued as an unfunded venture in search of a suitable business acquisition or business combination.

On November 3, 1999, we entered into a Plan of Reorganization with Beijing Forlink Software Technology Co., Ltd., (hereinafter "BFSTC"), a limited liability company organized under the laws of the PRC, under the terms of which BFSTC gained control of the Company. Pursuant to the Plan of Reorganization, we acquired 100% of the registered and fully paid-up capital of BFSTC in exchange for 20,000,000 shares of the Company's authorized, but unissued, common stock. BFSTC is engaged in the provision of computer software consultancy and engineering services and the development and sale of computer software in the PRC. As a part of its computer consultancy and engineering services, BFSTC is also engaged in the sale of computer hardware. In June 2001, BFSTC changed its name to Forlink Technologies Co. Ltd. (“FTCL”). FTCL is our major operating subsidiary in China.

In August 2001, we acquired Beijing Slait Science & Technology Development Limited Co. (“SLAIT”) pursuant to a Plan of Reorganization dated January 11, 2001. We issued 59,430,000 shares of our common stock to SLAIT’s original owners in exchange for 100% of the outstanding equity of SLAIT. As a result of the share exchange, the former owners of SLAIT own approximately 70% of the issued and outstanding shares of the Company, and SLAIT became a wholly owned subsidiary of the Company. We also agreed to transfer 1,085,000 Renminbi (“RMB”) (approximately US$131,039) to the former owners of SLAIT. A change in control occurred in which all but one of the officers and directors of the Company resigned and two former directors (also former owners) of SLAIT became officers and directors of the Company. Prior to its dissolution in 2004, SLAIT provided application system integration technology and specializes in large volume transaction processing software for networks such as mobile phone billing and band operation. Subsequent to our acquisition, the principal activities of SLAIT were gradually shifted to those of FTCL. On February 13, 2004, SLAIT was officially dissolved in accordance with relevant PRC regulations.

On June 18, 2003, Forlink Technologies (Hong Kong) Limited (“FTHK”) was incorporated in Hong Kong Special Administrative Region as a limited liability company. In December 2003, FTHK became a wholly owned subsidiary of Forlink. FTHK is an investment holding company. Because of the favorable business environment in Hong Kong, we can simplify and speed up investment transactions through this subsidiary. Through FTHK, on December 18, 2003, we invested $760,870 in All China Logistics Online Co., Ltd. ("All China Logistics"), a privately held PRC company and a leading provider of logistic services in China, in exchange for a 17.8% equity interest. Through this investment, we have become the second largest shareholder of All China Logistics and its sole software solution provider. FTHK is also responsible for directly importing from overseas companies certain hardware needed for product integration, which allows us to improve our hardware pass-through profit margin.

On June 14, 2004, Forlink Technologies (Chengdu) Limited ("FTCD") was established as a limited liability company in Chengdu, PRC and subsequently became a wholly owned subsidiary of FTHK in September 2004. FTCD is in the business of providing software outsourcing services and software development. The registered capital of FTCD is $5,000,000 and the fully paid up capital was $750,000 as of December 31, 2005. In April 2006, FTHK further invested $130,000 in FTCD. FTCD commenced operations in late 2005. The registered capital of FTCD was reduced to $200,000 in December 2007.

In compliance with China’s foreign investment restrictions on telecom value-added services and other laws and regulations, we conduct our telecom value-added services and application integration services for government organizations in China via Beijing Forlink Hua Xin Technology Co. Ltd. ("BFHX"). BFHX was established in the PRC on September 19, 2003 as a limited liability company. The registered capital of BFHX is $120,733 (RMB 1,000,000) and was fully paid up as of March 31, 2005. Mr. Yi He and Mr. Wei Li have been entrusted as nominee owners of BFHX to hold 70% and 30%, respectively, of the fully paid up capital of BFHX on behalf of Forlink as the primary beneficiary. BFHX is considered a Variable Interest Entity ("VIE"), and because we are the primary beneficiary, our consolidated financial statements include BFHX. Upon the request of the Company, Mr. Yi He and Mr. Wei Li are required to transfer their ownership in BFHX to us or our designee at any time for the amount of the fully paid registered capital of BFHX. Mr. Yi He is the Chief Executive Officer, a director and a major stockholder of the Company. Mr. Wei Li is the administration manager of FTCL.

On October 24, 2005, we entered into a definitive agreement to acquire a 17.5% equity interest from China Liquid Chemical Exchange Company Limited (“CLCE”), a PRC limited liability company. Under the terms of the agreement, Forlink deployed the “For-online Electronic Trading System”, a proprietary, integrated software solution, to support CLCE’s operations, including, but not limited to, online trading, online billing and payment, user authentication and customer care, in exchange for the 17.5% equity interest. In early 2007, CLCE increased its share capital to $1,708,526 (RMB 13,000,000). As we did not subscribe for the new shares, our shareholding of CLCE was diluted and as of December 31 2008 was 13.46%. CLCE commenced operations fully in early 2007.

On October 3, 2006, we entered into a Transfer of Right to Invest and Project Cooperation Agreement (“Statelink Agreement”) with Statelink International Group, Ltd., a British Virgin Islands company (“Statelink”), pursuant to which we acquired 22.73% registered capital in Guangxi Caexpo International Trade and Logistics Co., Ltd. (“Guangxi Caexpo”), a PRC limited liability company in the businesses of real estate development, advertising and computer distribution, for cash consideration of $2,557,545 (RMB 20,000,000) from BFHX and stock consideration of 13,000,000 shares of our restricted common stock. Thereafter, we also won a contract from Guangxi Caexpo to build an “Electronic Trade and Logistics Information Platform and Call Center” (the “Project”). On October 26, 2006, BFHX established Forlink Technologies (Guangxi) Limited (“FTGX”), a PRC limited liability company and wholly owned subsidiary, to carry out this contract. At the time of incorporation, BFHX injected RMB 20,000,000 (approximately US$2,557,545) as registered capital to FTGX. The Project was completed in the fourth quarter of 2007, and with the successful deployment of the relevant software, the client signed the final inspection report in January 2009. On August 20, 2010, the Company transferred all its ownership interests in Guangxi Caexpo to Guangxi Sanqi Investment Co., Ltd for the amount of Guangxi Caexpo’s 22.73% fully paid up capital. The Company got cash payment of $3,024,355 (RMB 20,000,000).

On October 12, 2006, we invested $31,969 (RMB 250,000) in Wuxi Stainless Steel Exchange Co., Ltd. (“Wuxi Exchange”), a PRC limited liability company, for a 12.5% equity interest. In addition, we agreed to deploy a proprietary, integrated software solution, estimated at RMB 1,000,000, to support Wuxi Exchange’s operations. The software was deployed in February 2007. On January 14, 2007, the Company entered into an agreement with a major shareholder of Wuxi Exchange pursuant to which the Company transferred 2.5% of the Company’s interest in Wuxi Exchange to this major shareholder for a cash payment of RMB 500,000.

On January 25, 2007, our board of directors and the majority holders of the Company’s common stock jointly approved an amendment to our Articles of Incorporation by written consent, to increase the number of authorized shares of common stock from 100,000,000 to 200,000,000. The Certificate of Amendment to our Articles of Incorporation to effect the increase of the number of our authorized common shares was filed with Nevada’s Secretary of State on April 4, 2007.

On April 29, 2007, we invested, through BFHX, $138,158 (RMB 1,050,000) in Beijing GuoXin Forlink Internet Technologies Limited (“BGXF”), a privately held PRC company that operates a finance study website, for a 35% equity interest. The investment in BGXF is accounted for under the equity method of accounting due to the Company’s significant influence over the operational and financial policies of BGXF. BGXF commenced operations on March 9 2008. On October 14, 2008, BGXF increased its registered capital to RMB 4,285,700, and since we did not invest additional funds into BGXF, the ratio of our holding was diluted to a 24.5% equity interest. On March 15, 2011, the Company transferred all its ownership interests in BGXF to Beijing Guo Xin XinChuang Investment Co., Ltd for the amount of BGXF’s 24.5% fully paid up capital. The Company got cash payment of RMB 95,741.

On July 12, 2007, we invested through FTGX, $1,063,830 (RMB 8,000,000) in Nanning Bulk Commodities Exchange Corporation Limited (“NNBCE”), a privately held PRC company, for an 80% equity interest. NNBCE became a subsidiary of FTGX. NNBCE, established on April 29, 2007, commenced operations on March 28, 2008, and provides logistical e-commerce service.

On September 5, 2007, we invested through NNBCE, $465,425 (RMB 3,500,000) in Guangxi Bulk Sugar & Ethanol Exchange Corporation Limited (“GBSEE”), a PRC limited liability company established on September 12, 2007, for a 35% equity interest. On the same date, All China Logistics was entrusted to hold 20% of the fully paid up capital of GBSEE on behalf of NNBCE as the primary beneficiary. Upon the request of NNBCE, All China Logistics is required to transfer its ownership interests in GBSEE to NNBCE or its designees at any time for the amount of the 20% fully paid up capital. In accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46R “Consolidation of Variable Interest Entities - An Interpretation of ARB No. 51” (“FIN 46R”), NNBCE is deemed to hold the primary beneficial interest of the 55% equity interest in GBSEE. GBSEE was established to provide logistical e-commerce service, but it was dissolved on December 16, 2007 before it commenced any operations, and NNBCE received payments back of its investment in GBSEE of $410,397 (RMB 3,000,000) in December 2007; $66,211 (RMB 484,000) in February 2008, and $2,189 (RMB 16,000) in September 2008.

On December 24, 2007, our board of directors and the majority holders of the Company’s common stock jointly approved an amendment to our Articles of Incorporation by written consent, to effect a 1-for-20 reverse stock split. The Certificate of Amendment to our Articles of Incorporation to effect the reverse split was filed with Nevada’s Secretary of State on February 21, 2008.

On March 20, 2008, Forlink invested $71,124 (RMB 500,000), through BFHX, in Shandong LongDong Internet Technologies Limited (“SDLD”), a PRC limited liability company, established on October 24, 2007, for a 5% equity interest. SDLD, which commenced operations in December 2007, is in the business of providing of providing primary products e-commerce services. The purpose of the investment is to gain cash dividends from SDLD.

On February 8, 2010, the Company transferred all its ownership interests in FTCL to BFHX for the amount of FTCL’s 100% fully paid up capital.

Forlink, its subsidiaries and VIE (hereinafter collectively referred to as the “Company”), are all operating companies. Set forth below is a diagram illustrating the Company’s corporate structure as of ~~March~~June 3130, 2011:

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America that include the financial statements of Forlink and its subsidiaries and VIE, namely, FTCL, FTHK, BFHX, FTCD, FTGX, and NNBCE. All interentiry transactions and balances have been eliminated.

Noncontrolling interests at the balance sheet date, being the portion of the net assets of subsidiaries attributable to equity interests that are not owned by Forlink, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheet separately from liabilities and the shareholders’ equity. Non-controlling interests in the results of the Company for the years are also separately presented in the income statement.

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation and Transactions

The functional currency of Forlink is US Dollar (“US$”) and the financial records are maintained and the financial statements prepared in US$. The functional currency of FTHK is HK Dollar (“HK$”) and its financial records are maintained, and its financial statements prepared, in HK$. The functional currency of FTCL, BFHX, FTCD, FTGX, and NNBCE is Renminbi (“RMB”) and their financial records are maintained, and their financial statements are prepared, in RMB.

Foreign currency transactions during the period are translated into each company’s denominated currency at the exchange rates at the transaction dates. Gain and loss resulting from foreign currency transactions are included in the consolidated statement of operations. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into each company’s denominated currency at the yearend exchange rates. All exchange differences are dealt with in the consolidated statements of operations.

The financial statements of the Company’s operations based outside of the United States have been translated into US$ under the guidance of the FASB Accounting Standards Codification (ASC) Topic 830 “Foreign Currency Matters”. Management has determined that the functional currency for each of the Company’s foreign operations is its applicable local currency. When translating functional currency financial statements into US$, year-end exchange rates are applied to the consolidated balance sheets, while average period rates are applied to consolidated statements of operations. Translation gains and losses are recorded in translation reserve as a component of stockholders’ equity.

The value of the RMB is subject to changes in China’s central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. Since 1994, the conversion of RMB into foreign currencies, including US$, has been based on rates set by the People’s Bank of China, which are set daily based on the previous day’s inter-bank foreign exchange market rates and current exchange rates on the world financial markets. Since 1994, the official exchange rate generally has been stable. In July 2005, the Chinese government announced that it will no longer peg its currency exclusively to US$ but will switch to a managed floating exchange rate based on market supply and demand with reference to a basket of currencies which will likely increase the volatility of RMB as compared to US$. The exchange rate of RMB to US$ changed from RMB8.28 to RMB8.11 in late July 2005.

The exchange rates used as of ~~March~~June 3130, 2011 and December 31, 2010 are US$1:HK$7.78:RMB6.5445, and US$1:HK$7.82:RMB6.61, respectively. The weighted average rates ruling for the periods ended ~~March~~June 3130, 2011 and ~~March~~June 3130, 2010 are US$1:HK$7.7978:RMB6.5548, and US$1:HK$7.80:RMB6.84, respectively.

Foreign Currency Risk

The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.

The PRC subsidiaries conduct their business substantially in the PRC, and their financial performance and position are measured in terms of RMB. Any devaluation of the RMB against the US$ would consequently have an adverse effect on the financial performance and asset values of the Company when measured in terms of US$. The PRC subsidiaries’ products are primarily procured, sold and delivered in the PRC for RMB. Thus, their revenues and profits are predominantly denominated in RMB. Should the RMB devalue against US$, such devaluation could have a material adverse effect on the Company’s profits and the foreign currency equivalent of such profits repatriated by the PRC entities to the Company.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and all highly liquid investments with an original maturity of three months or less.

Allowance for Doubtful Accounts

We record an allowance for doubtful accounts based on specifically identified amounts that the Company believes to be uncollectible. We have a limited number of customers with individually large amounts due at any given balance sheet date. Any unanticipated change in one of those customers’ credit worthiness or other matters affecting the collectability of amounts due from such customers, could have a material effect on the results of operations in the period in which such changes or events occur. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

Inventories

Inventories are stated at the lower of cost or market. For inventory used in system integration services, cost is calculated using the specific identification method. For the sale of computer hardware, cost is calculated using first-in, first-out method. Cost includes all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Market value is determined by reference to the sales proceeds of items sold in the ordinary course of business after the balance sheet date or to management estimates based on prevailing market conditions.

Property, Plant, Equipment and Depreciation

Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method to allocate the cost of depreciable assets over the estimated useful lives of the assets as follows:

	Estimated useful life (in years)

Building	20
Computer equipment	3
Office equipment	5
Motor vehicle	10

Major improvements of property, plant and equipment are capitalized, while expenditures for repair and maintenance and minor renewals and betterments are charged directly to the statements of operations as incurred. When assets are disposed of, the related cost and accumulated depreciation thereon are removed from the accounts and any resulting gain or loss is included in the statement of operations.

Computer Software Development Costs

Software development costs are expensed as incurred until technological feasibility in the form of a working model has been established. Deferred software development costs will be amortized over the estimated economic life of the software once the product is available for general release to customers. For the current software products, the Company determined that technological feasibility was reached at the point in time it was available for general distribution. Therefore, no costs were capitalized.

Long term investments

The Company’s long term investments consist of (1) equity investments which are accounted for in accordance with the equity method and (2) cost investments which are accounted for under the cost method. Under the equity method, each such investment is reported at cost plus the Company’s proportionate share of the income or loss or other changes in stockholders’ equity of each such investee since its acquisition. The consolidated results of operations include such proportionate share of income or loss. See Note 8.

Fair Values of Financial Instruments

The carrying amounts of financial instruments (cash and cash equivalents, investments, accounts receivable and accounts payable) approximate their fair values as of ~~March~~June 3130, 2011 and December 31 2010 because of the relatively short-term maturity of these instruments.

Revenue Recognition

The Company generally provides services under multiple element arrangements, which include software license fees, hardware and software sales, and the provision of system integration services including consulting, implementation, and software maintenance. The Company evaluates revenue recognition on a contract-by-contract basis as the terms of each arrangement vary. The evaluation of the contractual arrangements often requires judgments and estimates that affect the timing of revenue recognized in the statements of operations. Specifically, the Company may be required to make judgments about:

whether the fees associated with our products and services are fixed or determinable;

whether collection of our fees is reasonably assured;

whether professional services are essential to the functionality of the related software product;

whether we have the ability to make reasonably dependable estimates in the application of the percentage-of-completion method; and

whether we have verifiable objective evidence of fair value for our products and services.

The Company recognizes revenues in accordance with the provisions of ASC 985, “Software Revenue Recognition.” ASC 985 requires among other matters, that there be a signed contract evidencing an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable.

Software license revenue is recognized over the accounting periods contained in the terms of the relevant agreements, commencing upon the delivery of the software provided that (1) there is evidence of an arrangement, (2) the fee is fixed or determinable, and (3) collection of the fee is considered probable.

Revenue from non-software, multiple-element arrangements is recognized in accordance with ASC 605-25, “Revenue Arrangements with Multiple Deliverables”. Under ASC 605-25, the Company recognizes revenue from the multiple-deliverables which has value to the customer on a stand-alone basis. Deliverables in an arrangement that do not meet the separation criteria in ASC 605-25 are treated as one unit of accounting for purposes of revenue recognition.

In the case of maintenance revenues, vendor-specific objective evidence, or VSOE, of fair value is based on substantive renewal prices, and the revenues are recognized ratably over the maintenance period.

In the case of consulting and implementation services revenues, where VSOE is based on prices from stand-alone sale transactions, the revenues are recognized as services that are performed pursuant to ASC 985-605-25.

For hardware transactions where software is incidental, the Company does not apply separate accounting guidance to the hardware and software elements. The Company applies the provisions of ASC 985-605-15. Per ASC 985-605-15, if the software is considered not essential to the functionality of the hardware, then the hardware is not considered “software related” and is excluded from the scope of ASC 985-605-15. Such sale of computer hardware is recognized as revenue on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and title has passed.

Remote hosting services, where VSOE is based upon consistent pricing charged to customers based on volumes and performance requirements on a stand-alone basis and substantive renewal terms, are recognized ratably over the contract term as the services are performed. The remote hosting arrangements generally require the Company to perform one-time set-up activities and include a one-time set-up fee. This one-time set-up fee is generally paid by the customer at contract execution. The Company has determined that these set-up activities do not constitute a separate unit of accounting, and accordingly, the related set-up fees are recognized protractedly over the term of the contract.

The Company is considering the applicability of ASC 985-605-55, “Application of AICPA Statement of SOP 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware,” to the hosting services arrangements on a contract-by-contract basis. If the Company determines that the customer does not have the contractual right to take possession of the Company’s software at any time during the hosting period without significant penalty, ASC 985-605 would not apply to these contracts in accordance with ASC 985-605-55.

Stock Based Compensation

Effective January 1, 2006, we adopted “Statement of Financial Accounting Standards ASC 718, Share-Based Payment”, using the modified prospective application transition method. Before we adopted ASC 718, we accounted for share-based compensation in accordance with “Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.”

ASC 718 requires the Company to record the cost of stock options and other equity-based compensation in its income statement based upon the estimated fair value of those rewards. The Company elected to use the modified prospective method for adoption, which requires compensation expense to be recorded for all unvested stock options and other equity-based compensation beginning in the first quarter of adoption. Accordingly, prior periods have not been restated to reflect stock based compensation. On January 1, 2006, the Company adopted ASC 718 using the modified prospective method, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements because most of the Company’s outstanding stock options were vested as of December 31, 2005 and the unvested portion of the stock options was considered immaterial.

ASC 718 also requires the Company to estimate forfeitures in calculating the expense relating to share-based compensation as opposed to recognizing forfeitures as an expense reduction as they incur. The adjustment to apply estimated forfeitures to previously share-based compensation was considered immaterial by the Company and as such was not classified as a cumulative effect of a change in accounting principle. As of January 1, 2006, the Company had no unrecognized compensation cost remaining associated with existing stock option grants. Also, the Company made no modifications to outstanding stock option grants prior to the adoption of ASC 718, and there were no changes in valuation methodologies or assumptions compared to those used by the Company prior to January 1, 2006.

In November 2005, the FASB issued FSP No. 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” The Company adopted the alternative transition method provided in the FSP for calculating the tax effects of share-based compensation pursuant to ASC 718 in the fourth quarter of fiscal 2006. The alternative transition method includes simplified methods to establish the beginning balance of the Additional Paid-in Capital (“APIC”) pool related to the tax effects of employee share-based compensation, and to determine the subsequent impact on the APIC pool and Consolidated Statements of Cash Flows of the tax effects of employee share-based compensation awards that are outstanding upon adoption of ASC 718. The adoption did not have a material impact on the Company’s results of operations and financial position.

In February 2006, the FASB issued FASB ASC 718-10-35, “Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event.” This position amended ASC 718 to incorporate that a cash settlement feature that can be exercised only upon the occurrence of a contingent event that is outside the employee’s control does not meet certain conditions in ASC 718 until it becomes probable that the event will occur. The guidance in this FASB Staff Position was required to be applied upon initial adoption of ASC 718. The Company does not have any option grants that allow for cash settlement.

The Company did not adopt any new share-based compensation plans in 2010. 200,000 stock options issued under the Company’s 2002 Stock Plan were exercised during the year 2008.

Advertising costs

All advertising costs incurred in the promotion of the Company’s products and services are expensed as incurred. Advertising expenses were insignificant for the three months ended ~~March~~June 3130, 2011 and 2010.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740 “Accounting for Income Taxes.” Under ASC 740, deferred tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or recovered. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets not be realized.

In July, 2006, the FASB ASC 740-10-25, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109”. This Interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in ASC 740, “Accounting for Income Taxes.” ASC 740-10-25 prescribes a threshold condition that a tax position must meet for any of the benefit of the uncertain tax position to be recognized in the financial statements. Guidance is also provided regarding derecognition, classification and disclosure of these uncertain tax positions.

Earnings Per Common Share

The Company computes net earnings per share in accordance with ASC 260, “Earnings per Share” and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). Under the provisions of ASC 260 and SAB 98, basic net earnings per share is computed by dividing the net earnings available to common shareholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net earnings per share gives effect to common stock equivalents, however, potential common stock in the diluted EPS computation are excluded in net loss periods, as their effect is anti-dilutive.

Recent Issued Accounting Guidance

On October 27, 2010, the FASB clarified that the disclosures proposed as part of its project on disclosures of certain loss contingencies will not be effective for the 2010 annual financial statements of public calendar-year-end entities as originally proposed. The Board will discuss a revised effective date during redeliberations on the project.

On October 19, 2010, the FASB and IASB issued a DP to obtain feedback from the FASB’s and IASB’s stakeholders on (1) the time and effort they would need to adopt several new and significant accounting and reporting standards and (2) the dates on which those new standards should be effective. On the basis of the responses, the FASB and IASB plan to develop an implementation plan whose main objective will be to help stakeholders properly manage the cost and pace of these changes. Comments on the DP are due by January 31, 2011.

On August 17, 2010, the FASB and IASB issued an ED on lease accounting. The ED, released by the FASB as a proposed ASU, creates a new accounting model for both lessees and lessors and eliminates the concept of operating leases. The proposed ASU, if finalized, would converge the FASB’s and IASB’s accounting for lease contracts in most significant areas.

In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for us with the reporting period beginning July 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on our financial statements.

In September 2009, FASB introduced new guidance addressing the accounting for revenue arrangements with multiple elements and certain revenue arrangements that include software. The guidance allows companies to allocate consideration in a multiple element arrangement in a way that better reflects the economics of the transaction and eliminates the residual method. In addition, tangible products that have software components that are “essential to the functionality” of the tangible product will be scoped out of the software revenue guidance. The new guidance became effective on January 1, 2011 and it is not expected to have a material impact on our financial statements.

The Company does not anticipate that the adoption of these statements will have a material effect on the Company's financial condition and results of operations.

NOTE 3 - OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

	March 31,		December 31,
	June 30,		December 31,
	2011		2010
Other receivables	$	~~534~~503,~~289~~928	$	490,760
Deposits		6721,~~375~~817		6,033
Prepayments		6785,~~960~~273		66,775
	$	~~669~~611,~~624~~018	$	563,568

Other receivables include deposits for operating leases and advances to employee for traveling outlays.

NOTE 4 – LOAN RECEIVABLES

	March 31,		December 31,
	June 30,		December 31,
	2011		2010
Loan receivables	$	1,~~050~~066,~~742~~240	$	0
	$	1,050,742	$	0

Loan receivables include a short-term loan to a non-related company. We received the loan fully on July 20, 2011.

NOTE 5 - INVENTORIES

	March 31,		December 31,
	June 30,		December 31,
	2011		2010
Computer hardware and software	$	6365,~~586~~714	$	47,014
Work-in-progress		~~737~~806,~~689~~928		586,984
	$	~~801~~872,~~275~~642	$	633,998

All the inventories were purchased for identified system integration contracts.

Work-in-progress includes payroll and other operating expenses associated with various contracts in progress.

NOTE 6 – RELATED PARTY TRANSACTIONS

The Company, from time to time, borrowed money from and made repayment to ~~one~~two major ~~stockholder~~stockholders, Mr. Lam Hongkeung and Mr. Yi He who isboth are also a management ~~member~~members of the Company. The amounts due to ~~this~~the ~~stockholder~~two stockholders do not bear any interest and do not have clearly defined terms of repayment.

As of ~~March~~June 3130, 2011 and December 31, 2010, the amounts due to ~~this~~the ~~stockholder~~two stockholders were $~~530~~531,~~475~~223 and $524,668, respectively, representing advances from ~~this~~stockholders ~~stockholder~~ for our working capital.

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT, NET

	March 31,			December 31,
	June 30,			December 31,
	2011			2010
Building	$	~~213~~219,~~705~~187		$	213,705
Computer and office equipment		1,~~247~~269,~~253~~668			1,221,478
Motor vehicles		~~211~~217,~~698~~129			211,698
		1,672,656			1,646,8818
		1,705,984			1,646,8818
Less: Accumulated depreciation		(1,~~324~~371,~~188~~987	)		(1,276,472	)
	$	~~348~~333,~~468~~997			370,409

The building is located in Chengdu, PRC and was purchased on behalf of the Company by Mr. Yi He, one of the stockholders and directors of the Company. By a stockholders’ resolution passed on March 8, 1999, it was ratified that the title to the building belonged to the Company. In 2005, the title to the building was transferred to Forlink Technologies (Chengdu) Limited.

NOTE 8 - LONG TERM INVESTMENTS

	March 31,		December 31,
	June 30,		December 31,
	2011		2010
Equity investments	$	276,~~216~~763	$	54,418
Cost investments		1,~~143~~162,~~058~~332		1,129,167
	$	1,~~170~~169,~~274~~095		1,183,585

In December 2003, the Company invested $760,870 in a privately held PRC company, All China Logistics Online Co., Ltd., for a 17.8% equity interest. The Company has recorded the investment at cost because it does not have the ability to exercise significant influence over the investee.

On October 24, 2005, the Company set up China Liquid Chemical Exchange Company Limited, a limited liability company in PRC, and shares the risk and rewards up to the equity interest of 13.46%. The consideration is made in form of the Company-developed “For-Online Electronic Trading System” without any cash outflow. Therefore, the Company recorded the contribution of software at the lower of its carrying amount or fair value, and accounted for under the equity method under SOP 78-9. As of ~~March~~June 3130, 2011 and 2010, the Company’s share of the joint venture’s profit (loss) was ($1334,~~138~~035) and ($36,~~924)~~640, respectively.

On October 3, 2006, the Company entered into a Transfer of Right to Invest and Project Cooperation Agreement (“Statelink Agreement”) with Statelink International Group, Ltd., a British Virgin Islands company (“Statelink”), pursuant to which the Company acquired 22.73% registered capital in Guangxi Caexpo International Trade and Logistics Co., Ltd. (“Guangxi Caexpo”), a PRC limited liability company in the businesses of real estate development, advertising and computer distribution for cash consideration of $2,557,545 (RMB 20,000,000) from BFHX and stock consideration of 13,000,000 shares of the Company’s restricted common stock. On October 26, 2006, BFHX established Forlink Technologies (Guangxi) Limited (“FTGX”), a PRC limited liability company, to carry out a contract from Guangxi Caexpo to build an “Electronic Trade and Logistics Information Platform and Call Center” (the “Project”). At the time of incorporation, BFHX injected RMB 20,000,000 (approximately US$2,557,545) as registered capital to FTGX. On August 20, 2010, the Company transferred all its ownership interests in Guangxi Caexpo to Guangxi Sanqi Investment Co., Ltd for an amount equivalent to 22.73% of Guangxi Caexpo’s fully paid up capital. The Company received a cash payment of $3,024,355 (RMB 20,000,000). The loss of this disposition was $627,561.

On October 12, 2006, the Company entered into a definitive agreement to acquire 12.5% of registered capital in Wuxi Stainless Steel Exchange Co., Ltd. (“Wuxi”), a private held PRC company. In exchange for the 12.5% registered capital, the Company was to deploy a proprietary, integrated software solution (“software”), estimated at RMB 1,000,000, by reference to the similar products sold to third parties in 2006, to support Wuxi’s operations, plus RMB 250,000 cash payment to Wuxi. In 2006, the Company contributed cash of $31,969 (RMB 250,000), the software been deployed to Wuxi in December 2006. The Company recorded the investment at cost because it does not have the ability to exercise significant influence over Wuxi. On January 14, 2007, the Company entered into a Share Transfer Agreement with a major shareholder of Wuxi to transfer 2.5% interest in Wuxi held by the Company to the major shareholder for a cash payment of RMB 500,000. After this transfer, the Company continues to hold a 10% equity interest in Wuxi.

On April 29, 2007, the Company invested $138,158 in a privately held PRC company, Beijing GuoXin Forlink Internet Technologies Limited (“BGXF”), for a 35% equity interest. The Company’s investment was made through BFHX. The investment in BGXF is accounted for under the equity method of the accounting due to the Company’s significant influence over the operational and financial policies of BGXF. On March 9, 2008, BGXF commenced operations.

On September 17, 2007, the Company invested $99,734 in a privately held PRC Company, Ningbo Bulk Commodities Exchange Corporation Limited (“NBBCE”), for a 25% equity interest. The Company’s investment was made through BFHX. The Company recorded the investment at cost as the Company does not have the ability to exercise significant influence over NBBCE because NBBCE’s strategic and business decisions are dominated by another major shareholder.

On March 20, 2008, Forlink invested $71,124 (500,000 RMB), through BFHX, in Shandong LongDong Internet Technologies Limited (“SDLD”), a PRC limited liability company, established on October 24, 2007, for a 5% equity interest. SDLD, which commenced operations in December 2007, is in the business of providing of providing primary products e-commerce services. The purpose of this investment is to gain cash dividends from SDLD.

On October 8, 2010, the Company invested $151,213 (RMB 1,000,000), through BFHX, in Shanghai Shipping Freight Exchange Co., LTD (“SSFE”), a PRC limited liability company, established on October 8, 2010, for a 5% equity interest. Till March 25, 2011, SSFE has not commenced its operations. The Company has recorded the investment at cost because it does not have the ability to exercise significant influence over the investee.

NOTE 9 - OTHER PAYABLES AND ACCRUED EXPENSES

	March 31,		December 31,
	June 30,		December 31,
	2011		2010
Other payables	$	92101,~~296~~826	$	196,412
Accrued salaries & wages		~~148~~145,~~078~~892		173,906
	$	~~240~~247,~~374~~718	$	370,318

Other payables include rental payable and utilities payable.

NOTE 10 – NON-CONTROLLING INTEREST

The non-controlling interest balance of $8675,~~618~~912 represents equity value held by minority shareholders of NNBCE.

NOTE 11 - INCOME TAX

According to the relevant PRC tax rules and regulations, FTCL, which is recognized as a New Technology Enterprise operating within a New and High Technology Development Zone, is entitled to an Enterprise Income Tax (“EIT”) rate of 15%.

Pursuant to approval documents dated September 23, 1999 and August 2, 2000 issued by the Beijing Tax Bureau and State Tax Bureau respectively, FTCL was fully exempted from EIT for fiscal years 1999, 2000, 2001 and 2002. FTCL received a 50% EIT reduction at the rate of 7.5% for fiscal years 2003, 2004 and 2005. As of December 31, 2010, FTCL was entitled to an EIT rate of 15%.

Pursuant to an approval document dated January 19, 2004 issued by the State Tax Bureau, BFHX was fully exempted from EIT for fiscal years 2004, 2005 and 2006. As of December 31, 2010, BFHX was entitled to an EIT rate of 25%.

Hong Kong profits tax is calculated at 16.5% on the estimated assessable profits of FTHK for the period. The EIT rate for FTCD, FTGX and NNBCE is 25%. No provision for EIT and Hong Kong profits tax were made for FTCL, FTCD, FTGX, NNBCE and FTHK as they have not gained taxable income for the periods.

On January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”). This Interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in ASC 740, Accounting for Income Taxes. FIN 48 prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial statements. Guidance is also provided regarding derecognition, classification and disclosure of these uncertain tax positions. The Company classified all interest and penalties related to tax uncertainties as income tax expense. The Company’s liability for income taxes includes the liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by taxing authorities. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to our liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of September 30, 2010, the Company does not have any liability for uncertain tax positions. The adoption of FIN 48 did not have a material impact on the Company’s results operations, financial position or liquidity.

On March 16, 2007, the 5th Plenary Session of the 10th National People's Congress passed the Corporate Income Tax Law of the PRC ("the New Corporate Income Tax Law"), which took effect on January 1, 2008. Beginning on that date, the EIT rate is expected to gradually increase to the standard rate of 25% over a five-year transition period. However, the New Corporate Income Tax Law does not specify how the existing preferential tax rate will gradually increase to the standard rate of 25%. Also, under the New Corporate Income Tax Law, certain high technology enterprises will continue to be entitled to a reduced tax rate of 15%. However, the implementation rules regarding the preferential tax policies (e.g. the details on how the taxpayer can qualify as a high-tech enterprise under the New Corporate Income Tax Law) have yet to be made public. Consequently, the Company is not able to make an estimate of the expected financial effect of the New Corporate Income Tax Law on its deferred tax assets and liabilities. The enactment of the New Corporate Income Tax Law did not have any financial effect on the provision for income tax for the year ended December 31, 2010 and on the amounts accrued in the balance sheet in respect of current tax payable.

NOTE 12 - OTHER TAXES RECOVERABLE/(PAYABLE)

Other taxes payable comprise mainly of the Valued-Added Tax (“VAT”) and Business Tax (“BT”). The Company is subject to output VAT levied at the rate of 17% of its operating revenue. The input VAT paid on purchases of materials and other direct inputs can be used to offset the output VAT levied on operating revenue to determine the net VAT payable or recoverable. BT is charged at a rate of 5% on the revenue from other services.

As part of the PRC government’s policy of encouraging software development in the PRC, companies that fulfill certain criteria set by the relevant authorities, and which develop their own software products and have the software products registered with the relevant authorities in the PRC, are entitled to a refund of VAT equivalent to the excess over 3% of revenue paid in the month when output VAT exceeds input VAT (excluding export sales). The excess portion of the VAT is refundable and is recorded by the Company on an accrual basis. The VAT rebate included in other income was $275 and $120,904 for the three months ended June 30, 2011 and 2010, respectively.

As part of the PRC government’s policy of encouraging software development in the PRC, companies that fulfill certain criteria set by the relevant authorities, and which develop their own software products and have the software products registered with the relevant authorities in the PRC, are entitled to a refund of VAT equivalent to the excess over 3% of revenue paid in the month when output VAT exceeds input VAT (excluding export sales). The excess portion of the VAT is refundable and is recorded by the Company on an accrual basis. The VAT rebate included in other income was $24,997 and $512,899 for the three months ended March 31, 2011 and 2010, respectively.

NOTE 13– COMPREHENSIVE INCOME/(LOSS)

The components of comprehensive income/(loss) were as follows:

	Three Months Ended March 31,
	Six Months Ended June 30,
	2011			2010
Net profit/(loss)	$	(~~661~~644,~~425~~821	)	$	77(446,~~945~~063	)
Foreign currency translation adjustment		22175,~~687~~964			~~(353~~14,959	)
Comprehensive income/(loss)	$	(~~638~~488,~~738~~857	)	$	77(431,~~592~~104	)

NOTE 14 - STOCK PLAN

On August 16, 2002, the Company established a plan of stock-based compensation incentives for selected eligible participants of the Company and its affiliated corporations. This plan is known as the “Forlink Software Corporation, Inc. 2002 Stock Plan” (the “2002 Plan”). The total number of shares of common stock reserved for issuance by Forlink either directly as stock awards or underlying options granted under the 2002 Plan shall not be more than 8,000,000. Under the terms of the 2002 Plan, options can be issued to purchase shares of Forlink’s common stock. The Board of Directors shall determine the terms and conditions of each option granted to eligible participants, which terms shall be set forth in writing. The terms and conditions so set by the Board of Directors may vary from one eligible participant to another.

The following table summarizes the activity on stock options under the 2002 Plan:

	Number of shares			Weighted average exercise price
Granted on September 7, 2004		3,315,000		$	0.10
Exercised		(15,000	)	$	(0.10	)
Forfeited or Cancelled		0		$	0.00
Outstanding at December 31, 2004		3,300,000		$	0.10
Exercised		(136,500	)	$	(0.10	)
Forfeited or Cancelled		(132,500	)	$	(0.10	)
Outstanding at December 31, 2005		3,031,000		$	0.10
Exercised		0		$	0.00
Forfeited or Cancelled		(1,734,000	)	$	(0.10	)
Outstanding at December 31, 2006		1,297,000		$	0.10
Exercised		(897,000	)	$	(0.10	)
Forfeited or Cancelled		0		$	0.00
Outstanding at December 31, 2007		400,000		$	0.10
Exercised		(200,000	)	$	0.00
Forfeited or Cancelled		(200,000	)	$	0.00
Outstanding at December 31, 2008		0		$	0.00
Exercised		0		$	0.00
Forfeited or Cancelled		0		$	0.00
Outstanding at March 31, 2011		0		$	0.00
Outstanding at June 30, 2011		0		$	0.00
Fully vested and exercisable at March 31, 2011		0		$	0.00
Fully vested and exercisable at June 30, 2011		0		$	0.00

On September 7, 2004, 3,315,000 options were granted to the Company’s employees to purchase the Company’s shares of common stock, $0.001 par value, at an exercise price of $0.10 per share. Of the 3,315,000 options, 800,000 options with a 5-year vesting period were granted to an employee, and 2,515,000 options with a 3-year vesting period were granted to selected employees. Of the 2,515,000 options with the 3-year vesting period, 2,385,000 options were to expire on December 30, 2006 (the “December 2006 Options”), while the remaining 130,000 options expired on June 30, 2007 (the “June 2007 Options”). The expiration date for 800,000 options with the 5-year vesting period is June 30, 2009 (the “June 2009 Options”). On September 7, 2004, January 1, 2005, January 1, 2006 and January 1, 2007, 854,500 (the “December 2006 Options”), 904,500, 1,156,000 (400,000 of “June 2009 Options”; 130,000 of “June 2007 Options”; and 626,000 of “December 2006 Options”) and 200,000 (the “June 2009 Options”) options were vested to employees respectively. The market price of the stock as of September 7, 2004 and January 1, 2005 was $0.10 per share. In December 2006, the Company extended the expiration date of the December 2006 Options by one month to the end of January 2007, but there was no additional compensation expense as the Company considered the amount was immaterial. On January 29, 2007, 367,000 options of the “December 2006 Options” and 400,000 of the “June 2009 options” were exercised. On July 6, 2007, 130,000 options of the “June 2007 Options” were exercised. On July 15, 2008, 200,000 options of “June 2009 Options” were exercised.

The following table summarizes the cumulative activities up to ~~March~~June 3130, 2011 of the options issued under the 2002 Plan with different expiration dates:

	Granted		~~Exercised~~	Exercised	~~Forfeited or Cancelled~~		~~Outstanding~~Forfeited ator ~~March 31, 2011~~Cancelled		Outstanding at June 30, 2011
December 2006 Options		2,385,000	~~518,500~~		518,500	~~1,866,500~~	0	1,866,500		0
June 2007 Options		130,000	~~130,000~~		130,000	0	0	0		0
June 2009 Options		800,000	~~600,000~~		600,000	~~200,000~~	0	200,000		0
		3,315,000	~~1,248,500~~		1,248,500	~~2,066,500~~	0	2,066,500		0

The weighted average fair value of the December 2006 Options, the June 2007 Options and the June 2009 Options granted on the date of grant, were $0.042, $0.046 and $0.058 per option, respectively. At December 31, 2007, all future compensation expenses were recognized.

There was no aggregate intrinsic value of options outstanding and exercisable as of December 31 2007 and December 31, 2006. The aggregate intrinsic value represents the intrinsic value, based on options with an exercise price less than the market value of the Company’s stock on December 31 2007 and December 31, 2006, which would have been received by the option holders had those option holders exercised those options at of that date.

The Company calculated the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for each respective option.

	The Value of Options
	December 2006 Options			June 2007 Options			June 2009 Options

Risk-free interest rate		2.17	%		2.28	%		2.66	%
Expected lives (in years)		1.167			1.417			2.417
Dividend yield		0	%		0	%		0	%
Expected volatility		100	%		100	%		100	%

NOTE 15 - CONCENTRATION OF CUSTOMERS

During the year, the following customers accounted for more than 10% of total sales:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

Net sales derived from:

Customer A

*719,657

~~530,352~~*

719,657

502,740

Customer B

*158,001

316,001

Customer C

Customer D

*51,530

*107,412

65,861

121,003

Customer E

97175,~~893~~942

*52,141

274,910

% to total net sales from:

Customer A

*54

78*

Customer B

*12

Customer C

Customer D

*25

Customer E

2113

*12

Account receivable from:

Customer A

~~375,435~~

65,914

Customer B

~~1,779,368~~

2,064,076

1,786,970

Customer C

269,359

Customer D

Customer E

176,804

% to total accounts receivable from:

Customer A

Customer B

Customer C

Customer D

Customer E

* less than 10%

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Statements contained herein that are not historical facts are forward-looking statements as that term is defined by the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in such forward looking statements are reasonable, the forward looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. We caution investors that any forward looking statements made by us are not guarantees of future performance and that actual results may differ materially from those in the forward-looking statements. Such risks and uncertainties include, without limitation: well-established competitors who have substantially greater financial resources and longer operating histories, regulatory delays or denials, ability to compete as a company in a highly competitive market, and access to sources of capital.

The following discussion and analysis should be read in conjunction with our financial statements and notes thereto included elsewhere in this Form 10-Q. Except for the historical information contained herein, the discussion in this Form 10-Q contains certain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward looking statements wherever they appear in this Form 10-Q. The Company's actual results could differ materially from those discussed here. We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future.

Overview

We are a provider of software solutions and information technology services in China (the “PRC” or “China”). We focus on providing Enterprise Application Integration (EAI) solutions for large companies in the telecom, finance, and logistics industries. In May 2004, we launched For-online, which delivers enterprise applications and services over the Internet to small and medium-sized enterprises (SMEs) in China. Since its launch, For-Online has become ana ~~important~~ channel for delivering and distributing our products and services to more customers. In August 2007, we launched our integrated e-business application platform For-Online 4.0, and based on this platform, we also released new versions of For-eMarket 3.0 in September 2007, ForCRM in October 2007 and ForOA in October 2007. We released For-eMarketPlace 3.1 in August 2008. We released For-EAI 5.0 and For-Online 5.0 in June 2009.

Revenues

Our business includes Forlink’s “For-series” brand software system sales such as ForOSS, ForRMS, For-Mail and their copyright licensing, and “For-series” related system integration, which consists of hardware sales and other related services rendered to customers. The following table shows our revenue breakdown by business line:

	Three Months Ended March 31,
	Three Months Ended
	June 30,
	2011			2010
Sales of For-series software	$	~~457~~1,~~282~~237,734		$	~~541~~375,~~045~~260
as a percentage of net sales		~~100~~93	%		7986	%
For-series related system integration	$	999,371		$	~~142~~60,~~030~~404
as a percentage of net sales		07	%		2114	%

As indicated in the foregoing table, sales of For-series software ~~decreased~~increased by approximately 15230% to $~~457~~1,~~282~~237,734 in the ~~first~~second quarter of 2011 from $~~541~~375,~~045~~260 in the comparable quarter of 2010. For-series related system integration as a percentage of net sales decreased from $~~142~~60,~~030~~404 or 2114% in the comparable quarter of 2010 to $999,371 or 07% in the ~~first~~second quarter of 2011. The gross margins for the three months ended ~~March~~June 3130, 2011 and 2010 were 1755% and 4728%, respectively.

Generally, we offer our products and services to our customers on a total-solutions basis. Most of the contracts we undertake for our customers include revenue from hardware and software sales and professional services.

Sources of Revenue

Hardware Revenue: Revenues from sales of products are mainly derived from sales of hardware. Normally, the hardware that we procure is in connection with total-solutions basis system integration contracts.

Service Revenue: Service revenue consists of revenue for the professional services we provide to our customers for network planning, design and systems integration, software development, modification and installation, and related training services.

Software License Revenue: We generate revenue in the form of fees received from customers to whom we issue licenses for the use of our software products over an agreed period of time.

Cost of Revenue

Our cost of revenue includes hardware costs, software-related costs and compensation and travel expenses for the professionals involved in the relevant projects. Hardware costs consist primarily of third party hardware costs. We recognize hardware costs in full upon delivery of the hardware to our customers. Software-related costs consist primarily of packaging and written manual expenses for our proprietary software products and software license fees paid to third-party software providers for the right to sublicense their products to our customers as part of our solutions offerings. The costs associated with designing and modifying our proprietary software are classified as research and development expenses as such costs are incurred.

Operating Expenses

Operating expenses are comprised of selling expenses, research and development expenses and general and administrative expenses.

Selling expenses include compensation expenses for employees in our sales and marketing departments, third party advertising expenses, as well as sales commissions and sales agency fees.

Research and development expenses relate to the development of new software and the modification of existing software. We expense such costs as they are incurred.

General and administrative expenses include salaries and wages in the management section, office expenses, and traveling expenses.

Taxes

According to the relevant PRC tax rules and regulations, FTCL, is recognized as New Technology Enterprises operating within a New and High Technology Development Zone, are entitled to an Enterprise Income Tax (“EIT”) rate of 15%.

Pursuant to approval documents dated September 23, 1999 and August 2, 2000 issued by the Beijing Tax Bureau and the State Tax Bureau respectively, FTCL received full exemption from EIT for fiscal years 1999 through 2002, and a 50% EIT reduction at the rate of 7.5% for fiscal years 2003 through 2005. As of ~~March~~June 3130, 2011, FTCL was entitled to an EIT rate of 15%.

Pursuant to an approval document dated January 19, 2004 issued by the State Tax Bureau, BFHX received full exemption from EIT for fiscal years 2004 through 2006. As of ~~March~~June 3130, 2010, BFHX was entitled to an EIT rate of 25%.

Hong Kong profits tax is calculated at 16.5% on the estimated assessable profits of FTHK for the period. The EIT rates for FTCD and NNBCE range from 9% to 33%.

Revenue from the sale of hardware procured in China together with the related system integration is subject to a 17% value added tax (“VAT”). However, companies that develop their own software and have the software registered are generally entitled to a VAT refund. If the net amount of the VAT payable exceeds 3% of software sales, the excess portion of the VAT is refundable upon our application to the tax authority. This policy is effective until 2011. Changes in Chinese tax laws may adversely affect our future operations.

Foreign Exchange

Our functional currency is the U.S. Dollar (“US$”), and our financial records are maintained and financial statements prepared in US$. The functional currency of FTHK is the Hong Kong Dollar (“HK$”) and the financial records are maintained and the financial statements prepared in HK$. The functional currency of Slait, FTCL, BFHX and FTCD is the Renminbi (“RMB”) and their financial records are maintained and the financial statements are prepared in RMB.

Foreign currency transactions during this reporting period are translated into each company’s denominated currency at the exchange rates ruling at the transaction dates. Gains and losses resulting from foreign currency transactions are included in the consolidated statement of operations. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into each company’s denominated currency at year-end exchange rates. All exchange differences are dealt with in the consolidated statements of operations.

The financial statements of our operations based outside of the United States have been translated into US$ under the guidance of the Foreign Currency Matters Topic of the FASB Accounting Standards Codification. We have determined that the functional currency for each of the Company’s foreign operations is its applicable local currency. When translating functional currency financial statements into US$, period-end exchange rates are applied to the consolidated balance sheets, while average period rates are applied to consolidated statements of operations. Translation gains and losses are recorded in translation reserve as a component of shareholders’ equity.

Exchange rates among US$, HK$ and RMB had minimal fluctuations during the periods presented. The applicable rates as of ~~March~~June 3130, 2011 are US$1: HK$7.~~785~~782: RMB6.~~543~~448.The weighted average rates applicable for the three months ended ~~March~~June 3130, 2011 are US$1: HK$7.~~790~~783: RMB6.~~551~~479.

	March 31, 2011
	June 30, 2011
Applicable Rates	$1 US = 7.~~785~~782 HK	1 US = 6.448 RMB	~~1 US = 6.543 RMB~~
Weighted Average Rates : Three Months Ended March 31, 2011	$1 US = 7.790 HK		1 US = 6.543 RMB
Weighted Average Rates : Three Months Ended June 30, 2011	$1 US = 7.783 HK	1 US = 6.479 RMB

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States of America. The preparation of those financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to revenues and cost of revenues under customer contracts, bad debts, income taxes, investment in affiliate, long-lived assets and goodwill. We base our estimates and judgments on historical experience and on various other factors that we believe are reasonable. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We generally provide services under multiple element arrangements, which include software license fees, hardware and software sales, provision of system integration services including consulting, implementation, and software maintenance. We evaluate revenue recognition on a contract-by-contract basis as the terms of each arrangement vary. The evaluation of the contractual arrangements often requires judgments and estimates that affect the timing of revenue recognized in the statements of operations. Specifically, we may be required to make judgments about:

whether the fees associated with our products and services are fixed or determinable;

whether collection of our fees is reasonably assured;

whether professional services are essential to the functionality of the related software product;

whether we have the ability to make reasonably dependable estimates in the application of the percentage-of-completion method; and

whether we have verifiable objective evidence of fair value for our products and services.

We recognizes revenues in accordance with the provisions of ASC 985, “Software Revenue Recognition.” ASC 985 requires among other matters, that there be a signed contract evidencing an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable.

Income Taxes

In July, 2006, the FASB ASC 740-10-25, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.” This Interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in ASC 740, “Accounting for Income Taxes.” ASC 740-10-25 prescribes a threshold condition that a tax position must meet for any of the benefit of the uncertain tax position to be recognized in the financial statements. Guidance is also provided regarding derecognition, classification and disclosure of these uncertain tax positions.

Allowance for Doubtful Accounts

We record an allowance for doubtful accounts based on specifically identified amounts that the Company believes to be uncollectible. We have a limited number of customers with individually large amounts due at any given balance sheet date. Any unanticipated change in one of those customers’ credit worthiness or other matters affecting the collectability of amounts due from such customers could have a material effect on the results of operations in the period in which such changes or events occur. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

Recent Issued Accounting Guidance

In September 2009, FASB introduced new guidance addressing the accounting for revenue arrangements with multiple elements and certain revenue arrangements that include software. The guidance allows companies to allocate consideration in a multiple element arrangement in a way that better reflects the economics of the transaction and eliminates the residual method. In addition, tangible products that have software components that are “essential to the functionality” of the tangible product will be scoped out of the software revenue guidance. The new guidance became effective on January 1, 2011, and it is not expected to have a material impact on our financial statements.

The Company does not anticipate that the adoption of these statements will have a material effect on the Company's financial condition and results of operations.

Consolidated Results of Operations for the Three Months Ended ~~March~~June 3130, 2011 and 2010.

The following table sets forth the results of our operations for the periods indicated:

	Three Months Ended			Three Months Ended
	March 31, 2011			March 31, 2010
	June 30, 2011			June 30, 2010
Net Sales	$	~~457~~1,~~291~~337,105		$	~~683~~435,~~075~~664
Cost of Sales		(~~377~~596,~~729~~430	)		(~~364~~312,~~832~~866	)
Gross Profit		79740,~~562~~675			~~318~~122,~~243~~798
Selling Expenses		(~~297~~235,~~090~~365	)		(~~223~~233,~~160~~195	)
Research and Development Expenses		(~~203~~194,~~685~~359	)		(~~179~~199,~~047~~317	)
General and Administrative Expenses		(~~267~~301,~~783~~615	)		(~~341~~348,~~512~~165	)
Operating Profit (Loss)		(~~688~~731,~~996~~339	)		(~~425~~780,~~476~~677	)
Other Income		~~24,997~~275			~~512~~120,~~899~~904
Net Profit (Loss)		(~~661~~3,~~525~~396	)		77(524,~~946~~009	)
Gain/Loss Per Share		(0.1400073	)		(0.0211	)
Basic Weighted Average Shares Outstanding		4,651,173			4,651,173
Diluted Weighted Average Shares Outstanding		4,651,173			4,651,173

Net Sales

For the three-month period ended ~~March~~June 3130, 2011, our revenue was $~~457~~1,~~291~~337,105, aan ~~decrease~~increase of approximately ~~32.8~~207% from our revenue of $~~683~~435,~~075~~664 for the comparable period in 2010. The ~~decrease~~increase was mainly due to ~~the~~an ~~decrease~~increase ofin system integration sales and software sales, which ~~decrease~~increase in sales was due to aan ~~decrease~~increase in customer demand. Normally system integration sales were accompanied with our software sales and based on ~~the needs of~~ our customers’ needs. System integration sales have a lower profit margin than software sales.

Cost of Sales

Our cost of sales was $~~377~~596,~~729~~430 for the three-month period ended ~~March~~June 3130, 2011, compared with $~~364~~312,~~832~~866 for the same period in 2010. ~~This~~The increase was ~~due~~in toline with the increase ~~of business tax for the first quarter of 2011, which included portion of taxes that should have been accrued~~ in ~~prior~~our ~~period~~overall sales.

Gross Profit

For the three-month period ended ~~March~~June 3130, 2011, gross profit was $79740,~~562~~675, representing aan ~~decrease~~increase of 75503% ~~against~~from $~~318~~122,~~243~~798 for the comparable period in 2010. This ~~decrease~~increase was in line with aan ~~decrease~~increase in both software sales and system integration sales ~~for~~during the quarter.

Operating Expenses

Total operating expenses were $~~768~~731,~~558~~339 for the three-month period ended ~~March~~June 3130, 2011, as compared to $~~743~~780,~~719~~677 for the comparable period in 2010, representing ana ~~increase~~decrease of ~~3.3~~6%. The ~~overall~~decrease ~~increase~~ in operating expenses was mainly attributable to ~~increases~~decreases in ~~selling~~general and administrative expenses during the period.

Selling expenses were $~~297~~235,~~090~~365 for the three-month period ended ~~March~~June 3130, 2011, representing an increase of ~~33.~~1% ~~against~~from $~~223~~233,~~160~~195 for the comparable period in 2010. This increase was primarily due to our increased sales efforts to market our ASP (Application Service Provider) services “For-online,” our IT outsourcing services, as well as our EAI (Enterprise Application Integration) services “For-eMarket”, “ForCRM” and “ForOA”.

Research and development expenses were $~~203~~194,~~685~~359 for the three-month period ended ~~March~~June 3130, 2011, compared with $~~179~~199,~~047~~317 for the same period in 2010. ~~The~~We ~~approximate~~were ~~13.8%~~able ~~increase~~to ~~was~~reduce ~~attributable~~our toresearch and development expenses by cutting down on our ~~efforts~~communication inexpenses, ~~new~~such ~~projects~~as inthe internet trusteeship management fee for telecom providers, during the ~~first~~second quarter ofin 2011.

General and administrative expenses were $~~267~~301,~~783~~615 for the three-month period ended ~~March~~June 3130, 2011, as compared to $~~341~~348,~~512~~165 for the same period in 2010, a decrease of ~~21.6~~13%. The decrease was primarily due to ~~dealing~~a ~~with~~decrease ~~bad debts~~ in ~~the~~training ~~first~~fees ~~quarter~~during ~~of 2010, compared with no bad debts in~~ the ~~same~~second ~~period~~quarter in 2011.

Operating Profit (Loss)

We recorded an operating ~~loss~~profit $~~688~~9,~~996~~336 for the three-month period ended ~~March~~June 3130, 2011 compared to an operating loss of $~~425~~657,~~476~~879 for the three-month period ended ~~March~~June 3130, 2010~~, representing an increase in operating loss of 61~~.~~9%.~~ The increase in operating ~~loss~~profit ~~for~~during the ~~first~~second quarter of fiscal 2011 was due to our increased ~~cost~~net of sales ~~from~~and ~~$364,832~~decreased inoperating expenses during the three-month period ended ~~March~~June 3130, ~~2010 to $377,729 for the comparable period in~~ 2011.

Other Income

Our other income is mainly derived from a value added tax (“VAT”) refund associated with our software product sales. Software sales in China are subject to a 17% VAT. However, companies that develop their own software and have the software registered are generally entitled to a refund of the VAT. If the net amount of the VAT payable exceeds 3% of software product sales, then the excess portion of the VAT is refundable to us upon our application to tax authority. This policy is effective through 2011. Our other income was $~~24,997~~275 for the three-month period ended ~~March~~June 3130, 2011, as compared to $~~512~~120,~~899~~904 for the same period in 2010, representing a decrease of 95100% in other income. The significant decrease was the result of a decrease in VAT refunds that we received from software product sales.

~~Liquidity~~Consolidated ~~and~~Results ~~Capital~~of ~~Resources~~Operations for the Six Months Ended June 30, 2011 and 2010.

~~For~~The ~~the~~following ~~three-month~~table ~~period~~sets ~~ended~~forth ~~March 31, 2011, we recorded a net loss of $661,425, or basic and diluted loss of $0.14 per share, compared to a net profit of $77,946, or basic and diluted profit of $0.02 per share, for~~ the ~~same~~results ~~period~~ of ~~2010. Our capital requirements are primarily working capital requirements related to costs of hardware for network solution projects and costs associated with the expansion of~~ our ~~business.~~operations ~~In order to minimize our working capital requirements, we generally obtain from our hardware vendors payment terms that are timed to permit us to receive payment from our customers~~ for the ~~hardware~~periods before our payments to our hardware vendors are due. However, we sometimes obtain less favorable payment terms from our customers, thereby increasing our working capital requirements. We have historically financed our working capital and other financing requirements through careful management of our billing cycle and, to a limited extent, bank loans.indicated:

	Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010
Net Sales	$	1,794,396		$	1,118,739
Cost of Sales		(974,159	)		(677,698	)
Gross Profit		820,237			441,041
Selling Expenses		(532,455	)		(456,355	)
Research and Development Expenses		(398,044	)		(378,364	)
General and Administrative Expenses		(569,398	)		(689,677	)
Operating Profit (Loss)		(679,660	)		(1,083,355	)
Other Income		25,272			633,803
Net Profit (Loss)		(664,821	)		(446,063	)
Gain/Loss Per Share		(0.14	)		(0.10	)
Basic Weighted Average Shares Outstanding		4,651,173			4,651,173
Diluted Weighted Average Shares Outstanding		4,651,173			4,651,173

~~Our~~Net accounts receivable balance at March 31, 2011 was $3,959,352, as compared to $3,778,529 at December 31, 2010. The increase of $180,823 was due to the receipt of two accounts receivable from two of our major customers.Sales

~~Our~~For ~~inventory position at~~ the ~~end~~six-month ofperiod ~~the~~ended ~~first~~June ~~quarter~~30, of2011, ~~fiscal~~our ~~2011~~revenue was $~~801~~1,~~275~~794,396, asan ~~compared~~increase toof 60% from our revenue of $~~633~~1,~~998~~118,739 atfor ~~December~~the ~~31,~~comparable period in 2010. ~~This~~The increase was mainly due to anincreased ~~increase~~software insales. Our sales increased for the ~~number~~six-month ofperiod ~~projects~~ended ~~that~~June ~~were~~30, ~~not~~2011 ~~completed~~compared atto the ~~end~~same period ended June 30, 2010 because of ~~the~~an ~~quarter~~increase ~~and~~in ~~remain~~sales ~~work~~of For-~~in-progress~~series ~~(WIP)~~software.

WeCost ~~ended the first quarter~~ of ~~fiscal 2011 with a cash position of $941,694. We had a negative operating cash flow of $1,613,780, primarily due to a net profit of $661,425 in the first quarter of 2011.~~Sales

Our cost of sales was $974,159 in the six-month period ended June 30, 2010, representing an increase of 44% from $677,698 for the comparable period in 2010. The increase in our cost of sales was in line with our overall net sales.

Gross Profit

For the six-month period ended June 30, 2011, gross profit was $820,237, representing an increase of 86% from $441,041 for the comparable period in 2010. This increase in our gross profit was in line with an increase in the sales of For-series software, which has a higher gross profit ratio than the related system integration sales.

Operating Expenses

Total operating expenses were $1,499,897 in the six-month period ended June 30, 2011 compared with $1,524,396 for the six-month period ended June 20, 2010, representing a decrease of 2%. The decrease in operating expenses during the second quarter ended June 30, 2011 was mainly attributable to decreases in general and administrative expenses during the period.

Selling expenses were $532,455 in the six-month period ended June 30, 20101 representing an increase of 17% from $456,355 for the comparable period in 2010. This increase was primarily due to a market promotion fee during the six-month period ended June 30, 2011.

Research and development expenses were $398,044 in the six-month period ended June 30, 2011 compared with $378,364 in the six month period ended June 30, 2010, representing an increase of 5%. The increase in R&D expenses was due to our increased capital input on research and development for internal projects in order to control costs.

General and administrative expenses were $569,398 in the six-month period ended June 30, 2011 compared with $689,677 for the comparable period ended June 30, 2010, representing a decrease of 17%. The decrease was primarily due to a decrease in training fees and attorneys’ fees.

Operating Profit (Loss)

We recorded an operating loss $679,660 for the six-month period ended June 30, 2011, representing a decrease of 37% from an operating loss of $1,083,355 for the comparable period in 2010. The decrease in operating loss during the first six months of fiscal 2011 was attributable to an increase in gross profit during the period.

Other Income

Our other income was $25,272 for the six-month period ended June 30, 2011, representing a decrease of 96% as compared to $633,803 for the comparable period in 2010. The decrease was due to a decrease in VAT refund we received during the six-month period ended June 30, 2011.

Liquidity and Capital Resources

For the six-month period ended June 30, 2011, we recorded a net loss of $664,821, or basic and diluted loss of $0.14 per share, compared to a net loss of $446,063, or basic and diluted loss of $0.10 per share, for the same period of 2010. Our capital requirements are primarily working capital requirements related to costs of hardware for network solution projects and costs associated with the expansion of our business. In order to minimize our working capital requirements, we generally obtain from our hardware vendors payment terms that are timed to permit us to receive payment from our customers for the hardware before our payments to our hardware vendors are due. However, we sometimes obtain less favorable payment terms from our customers, thereby increasing our working capital requirements. We have historically financed our working capital and other financing requirements through careful management of our billing cycle and, to a limited extent, bank loans.

Our accounts receivable balance at June 30, 2011 was $4,309,781, as compared to $3,778,529 at December 31, 2010. The increase of $531,252 was due to the receipt of two accounts receivable from two of our major customers.

Our inventory position at the end of the first quarter of fiscal 2011 was $872,642, as compared to $633,998 at December 31, 2010. This increase was mainly due to an increase in the number of projects that were not completed at the end of the quarter and remain work-in-progress (WIP).

We ended the first quarter of fiscal 2011 with a cash position of $814,689. We had a negative operating cash flow of $2,765,580, primarily due to a net loss of $664,821 for the six-month period ended June 30, 2011.

Although our revenues and operating results for any period are not necessarily indicative of future periods, we anticipate that our available funds and cash flows generated from operations will be sufficient to meet our anticipated needs for working capital, capital expenditures and business expansion through 2011. We may need to raise additional funds in the future, however, in order to fund acquisitions, develop new or enhanced services or products, respond to competitive pressures to compete successfully for larger projects involving higher levels of hardware purchases, or if our business otherwise grows more rapidly than we currently predict. If we do need to raise additional funds, we expect to raise those funds through new issuances of shares of our equity securities in one or more public offerings or private placements, or through credit facilities extended by lending institutions.

Off-Balance Sheet Arrangements

As of ~~March~~June 3130, 2011, we had not entered into any off-balance sheet arrangements with any individuals or entities.

Contractual Obligations

As of ~~March~~June 3130, 2011, we had commitments under non-cancelable operating leases requiring annual minimum rental payments as follows:

Date	Rent Payment Due
April 1, 2011 to March 31, 2012	$	464,350
July 1, 2011 to June 30, 2012	$	447,801
April 1, 2012 to March 31, 2013	$	452,765
July 1, 2012 to June 30, 2013	$	411,068

Related Party Transactions

The Company, from time to time, ~~received~~borrowed money from orand made ~~repayments~~repayment to ~~one~~two major ~~stockholder~~stockholders, Mr. Lam Hongkeung and Mr. Yi He, who isboth are also a management ~~member~~members of the Company. The amounts due ~~from/~~to ~~this~~the ~~stockholder~~two stockholders do not bear any interest and do not have clearly defined terms of repayment.

As of ~~March~~June 3130, 2011 and December 31, 2010, the amounts due to ~~this~~the ~~stockholder~~two stockholders were $~~530~~531,~~475~~223 and $524,668, respectively, representing advances from ~~this~~the ~~stockholder~~stockholders for our working capital.

ITEM 4. CONTROLS AND PROCEDURES

Under the direction of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we evaluated our disclosure controls and procedures and internal control over financial reporting. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO and CFO concluded that as of ~~March~~June 3130, 2011, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

There was no change in our internal control over financial reporting during the quarter ended ~~March~~June 3130, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibit No.		Description

3.1		Articles of Incorporation, as amended and currently in effect. (Incorporated by reference to Exhibit No. 3.1 of the Form 10-QSB for the quarter ended March 31, 2000, and filed on May 15, 2000.)

3.2		Bylaws dated May 11, 2000. (Incorporated by reference to Exhibit No. 3.2 of the Form 10-QSB for the quarter ended March 31, 2000, and filed on May 15, 2000.)

3.3		Text of Amendment to Bylaws of Forlink Software Corporation, Inc. (Incorporated by reference to Exhibit 3.3 of the Current Report on Form 8-K filed on January 18, 2007)

3.4		Certificate of Amendment to Increase Number of Authorized Shares of Common Stock as filed with the Nevada Secretary of State on April 4, 2007 (Incorporated by reference to Exhibit No. 3.2 of the Form 10-K for the year ended December 31, 2008, and filed on March 30, 2009.)

3.5		Certificate of Amendment to Effect a 1-for-20 Reverse Stock Split as filed with the Nevada Secretary of State on February 21, 2008 (Incorporated by reference to Exhibit No. 3.3 of the Form 10-K for the year ended December 31, 2008, and filed on March 30, 2009.)

31.1		Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2		Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.1		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

32.2		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

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SIGNATURES

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

	FORLINK SOFTWARE CORPORATION, INC.
Date: May 13, 2011	By:	/s/ Yi He
Date: August 5, 2011	By:	/s/ Yi He
	~~Yi He~~	Yi He
	~~Chief Executive Officer~~	Chief Executive Officer
	~~(Authorized Officer)~~	(Authorized Officer)
Date: May 13, 2011	By:	/s/ Hongkeung Lam
Date: August 5, 2011	By:	/s/ Hongkeung Lam
	~~Hongkeung Lam~~	Hongkeung Lam
	~~Chief Financial and Accounting Officer~~	Chief Financial and Accounting Officer
	~~(Principal Financial Officer)~~	(Principal Financial Officer)

3233

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