Kingtone Wirelessinfo Solution Holding Ltd (Form: 20-F, Received: 01/20/2011 17:23:38)

Our board of directors consists of five members being Mr. Tao Li, Ms. Li Wu, Dr. Lili Dong, Ms. Melody Shi and Mr. James Fong. Our directors hold office until our annual meeting of shareholders, where their successor will be duly elected and qualified, or until the directors’ death, resignation or removal, whichever is earlier. Our directors are not subject to a term of office and hold office until their resignation, death or incapacity or until their respective successors have been elected and qualified in accordance with our fourth amended and restated memorandum of association and articles of association. A director will be removed from office if, among other things, the director (1) becomes bankrupt, (2) dies or becomes of unsound mind, or (3) is absent from meetings of our board of directors for six consecutive months without leave and our board of directors resolves that the office is vacated. A director is not entitled to any special benefits upon termination of service with the company.

Director Independence

Our board of directors consists of five members, three of whom have been determined by us to be independent directors within the meaning of the independent director guidelines of the Nasdaq Corporate Governance Rules (the “Nasdaq Rules”).

Committees of Our Board of Directors

To enhance our corporate governance, we established three committees under our board of directors: an audit committee, a compensation committee, and a nominating and corporate governance committee. We have adopted a charter for each of these committees. The committees have the following functions and members.

Audit Committee

Our audit committee reports to our board of directors regarding the appointment of our independent public accountants, the scope and results of our annual audits, compliance with our accounting and financial policies and management’s procedures and policies relating to the adequacy of our internal accounting controls. Our audit committee consists of Lili Dong, Melody Shi, and James Fong. Ms. Shi, having accounting and financial management expertise, serves as the chairman of the audit committee. Our board of directors has determined that each of these persons meet the definition of an “independent director” under the applicable Nasdaq Rules and under Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Our audit committee is responsible for, among other things:

the appointment, evaluation, compensation, oversight and termination of the work of our independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting);

an annual performance evaluation of the audit committee;

establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, auditing matters or potential violations of law, and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters or potential violations of law;

ensuring that it receives an annual report from our independent auditor describing our internal control procedures and any steps taken to deal with material control deficiencies and attesting to the auditor’s independence and describing all relationships between the auditor and us;

reviewing our annual audited financial statements and quarterly financial statements with management and our independent auditor;

reviewing and approving all proposed related party transactions;

reviewing our policies with respect to risk assessment and risk management;

meeting separately and periodically with management and our independent auditor; and

reporting regularly to our board of directors.

Compensation Committee

Our compensation committee assists the board of directors in reviewing and approving the compensation structure of our directors and executive officers, including all forms of compensation to be provided to our directors and executive officers. In addition, the compensation committee reviews share compensation arrangements for all of our other employees. Members of the compensation committee are not prohibited from direct involvement in determining their own compensation. Our chief executive officer is not permitted to be present at any committee meeting during which his or her compensation is deliberated. Our compensation committee consists of Lili Dong, Melody Shi, and James Fong, with Dr. Dong serving as the chairman of the compensation committee. Our board of directors has determined that each of these persons meet the definition of “independent director” under the applicable requirements of the Nasdaq Rules.

Our compensation committee is responsible for, among other things:

reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, evaluating the performance of our chief executive officer in light of those goals and objectives and setting the compensation level of our chief executive officer based on this evaluation;

reviewing and making recommendations to the board with respect to the compensation of our executives, incentive compensation and equity-based plans that are subject to board approval; and

providing annual performance evaluations of the compensation committee.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee assists the board of directors in identifying and selecting or recommending individuals qualified to become our directors, developing and recommending corporate governance principles and overseeing the evaluation of our board of directors and management. Our nominating and corporate governance committee consists of Lili Dong, Melody Shi, and James Fong, with Mr. Fong serving as the chairman of the nominating and corporate governance committee. Our board of directors has determined that each of these persons meet the definition of “independent director” under the applicable requirements of the Nasdaq Rules.

Our nominating and corporate governance committee is responsible for, among other things:

selecting and recommending to our board nominees for election or re-election to our board, or for appointment to fill any vacancy;

reviewing annually with our board the current composition of the board of directors with regards to characteristics such as independence, age, skills, experience and availability of service to us;

selecting and recommending to our board the names of directors to serve as members of the audit committee and the compensation committee, as well as the nominating and corporate governance committee itself;

advising our board of directors periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any remedial action to be taken; and

monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.

Code of Business Conduct and Ethics

Our board of directors adopted a code of business conduct and ethics applicable to our directors, officers and employees.

Duties of Directors

Under British Virgin Islands law, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum of association and articles of association. We have the right to seek damages if a duty owed by our directors is breached.

The functions and powers of our board of directors include, among others:

appointing officers and determining the term of office of the officers;

authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable;

exercising the borrowing powers of the company and mortgaging the property of the company;

executing cheques, promissory notes and other negotiable instruments on behalf of the company; and

maintaining or registering a register of mortgages, charges or other encumbrances of the company.

Remuneration and Borrowing

The directors may receive such remuneration as our board of directors may determine from time to time. Each director is entitled to be repaid or prepaid all traveling, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our board of directors or committees of our board of directors or shareholder meetings or otherwise in connection with the discharge of his or her duties as a director. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors.

Our board of directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.

Qualification

A director is not required to hold shares as a qualification to office.

Limitation on Liability and Other Indemnification Matters

British Virgin Islands law does not limit the extent to which a company’s memorandum of association and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the British Virgin Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.

Under our memorandum of association and articles of association, we may indemnify our directors, officers and liquidators against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with civil, criminal, administrative or investigative proceedings to which they are party or are threatened to be made a party by reason of their acting as our director, officer or liquidator. To be entitled to indemnification, these persons must have acted honestly and in good faith with a view to the best interest of the company and, in the case of criminal proceedings, they must have had no reasonable cause to believe their conduct was unlawful.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is an officer or employee of our company. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

Employment Agreements

Each of our executive officers (except Ms. Yang, as discussed below) has entered into an employment agreement with Softech, our wholly-owned PRC subsidiary. Softech may terminate a senior executive officer’s employment for cause, at any time, without prior notice or remuneration, for certain acts of the officer, including, but not limited to, material violation of our regulations, failure to perform agreed duties or embezzlement that caused material damage to us and conviction of a crime. A senior executive officer may terminate his or her employment at any time by 60-days prior written notice. Each senior executive officer is entitled to certain benefits upon termination, including a severance payment equal to a certain specified number of months of his or her then salary, if he or she resigns for certain good reasons specified by the agreement or the relevant rules or if Softech terminated his or her employment without any of the above causes.

We have an employment agreement with Ms. Ying Yang, pursuant to which she serves as our chief financial officer. The employment agreement has a term of one year and entitles Ms. Yang to an annual base salary of $160,000. The agreement will be automatically extended for an additional year upon the same terms and conditions unless either party provides notice to the other that the agreement shall not be extended within 60 days prior to the end of the prior term. We may terminate the agreement at any time for cause without prior written notice. Pursuant to the terms of her employment agreement, upon the consummation of our May 2010 public offering, Ms. Yang was granted under our 2010 Omnibus Incentive Plan (i) 100,000 restricted ordinary shares which vest in equal installments on April 23, 2011 and April 23, 2012, and (ii) options to purchase 150,000 ordinary shares at an exercise price of $4.00 per share, 1/3 of which shall vest on the grant date, 1/3 of which vested on April 23, 2011, and 1/3 of which shall vest on April 23, 2012.

D. EMPLOYEES.

As of September 30, 2010, we had a total of 190 full-time employees, of which three were in executive management, five were in accounting, 97 were in research and development including 31 responsible for developing our core middleware, 48 were responsible for developing vertical industry applications, 18 were responsible for developing automation telematics applications, 29 were in vertical industry application sales and 9 were in automation telematics application sales, one were in procedure and quality control, four were in human resources and nine were in administration. None of our employees is currently represented by a union and/or collective bargaining agreements. We believe that we have good relations with our employees and since our inception we have had no history of work stoppages or union organizing campaigns.

E. SHARE OWNERSHIP.

The following table provides information as to the beneficial ownership of our ordinary shares as of January 18, 2011 by the persons listed . Beneficial ownership of shares is determined under the rules of the Securities and Exchange Commission and generally includes any shares over which a person exercises sole or shared voting or investment power. For purposes of the following table, a person is deemed to have beneficial ownership of any ordinary shares of that such person has the right to acquire within 60 days after the date of this annual report. For purposes of computing the percentage of outstanding shares held by each person, any shares that such person has the right to acquire within 60 days after the date of this annual report are deemed to be outstanding, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Except as otherwise noted, the persons named in the table have sole voting and investment power with respect to all of the ordinary shares beneficially owned by them. Unless otherwise indicated, the address of each person listed is c/o Xi’an Kingtone Information Co., Ltd., 3rd Floor, Borough A, Block A. No. 181, South Taibai Road, Xi’an, Shaanxi Province, People’s Republic of China 710065.

Percentage ownership in the following table is based on 14,000,000 ordinary shares outstanding on January 18, 2011.

Name	Position	Number of Shares Beneficially Owned			Percent of Shares Outstanding
Officers and Directors
Tao Li	Chairman		6,787,755	(1)		48.5	%
Ying Yang	Chief Financial Officer		150,000	(2)		1.1	%
Li Wu	Director		107,839	(3)			*
Peng Zhang	Chief Executive Officer		35,357	(4)			*
Pengguo Xi	Vice President, Research and Development		35,357	(5)			*
Xianying Chen	Vice President, Application Development		35,357	(6)			*
Lili Dong	Independent Director		3,333	(7)			*
Melody Shi	Independent Director		3,333	(8)			*
James Fong	Independent Director		3,333	(9)			*
All directors and executive officers as a group (9 persons)			7,053,825			49.8	%
5% Shareholders
SCGC Capital Holding Company Limited	n/a		1,060,714	(10)		7.6	%
Xuetao Chen	n/a		883,982	(11)		6.3	%
Hu Gao	n/a		530,357	(12)		3.8	%

*	Less than 1%.

(1)

Represents (i) 688,648 ADSs owned by Mr. Li and (ii) 6,099,107 ordinary shares held of record by Xtra Heights Management Ltd., a British Virgin Islands company (“Xtra”), which are beneficially owned by Mr. Li pursuant to a certain Call Option Agreement, dated December 15, 2009, between Mr. Li, Xtra and Ms. Sha Li, a Singapore resident (“Sha Li”). Additionally, pursuant to such agreement, Mr. Li has vested options to purchase 3,049,554 ordinary shares from Xtra and unvested options to purchase 3,049,554 ordinary shares from Xtra. There is no relationship between Mr. Li and Ms. Sha Li other than pursuant to the transactions disclosed herein. Xtra is the record holder of an aggregate of 6,806,250 shares, of which the remaining shares are beneficially owned by Kingtone Information shareholders other than Mr. Li, some of whom are officers of our company. See notes (2) through (6).

(2)	Represents (i) 100,000 restricted ordinary shares and (ii) options to purchase 50,000 ordinary shares exercisable within 60 days, granted to Ms. Yang. Excludes options to purchase 100,000 ordinary shares not be exercisable within 60 days granted to Ms. Yang.

(3)

Represents ordinary shares held of record by Xtra, which are beneficially owned by Ms. Wu pursuant to a certain Call Option Agreement, dated December 15, 2009, between Ms. Wu, Xtra and Sha Li. Additionally, pursuant to such agreement, Ms. Wu has vested options to purchase 53,920 ordinary shares from Xtra and unvested options to purchase 53,919 ordinary shares from Xtra.

(4)

Represents ordinary shares held of record by Xtra, which are beneficially owned by Mr. Zhang pursuant to a certain Call Option Agreement, dated December 15, 2009, between Mr. Zhang, Xtra and Sha Li. Additionally, pursuant to such agreement, Mr. Zhang has vested options to purchase 17,679 ordinary shares from Xtra and unvested options to purchase 17,678 ordinary shares from Xtra.

(5)

Represents ordinary shares held of record by Xtra, which are beneficially owned by Mr. Xi pursuant to a certain Call Option Agreement, dated December 15, 2009, between Mr. Xi, Xtra and Sha Li. Additionally, pursuant to such agreement, Mr. Xi has vested options to purchase 17,679 ordinary shares from Xtra and unvested options to purchase 17,678 ordinary shares from Xtra.

(6)

Represents ordinary shares held of record by Xtra, which are beneficially owned by Mr. Chen pursuant to a certain Call Option Agreement, dated December 15, 2009, between Mr. Chen, Xtra and Sha Li, an individual, pursuant to which Mr. Chen has the right to receive ordinary shares from Xtra upon the occurrence of certain events.

(7)	Represents options to purchase 3,333 ordinary shares exercisable within 60 days granted to Dr. Dong. Excludes options to purchase 6,667 ordinary shares not exercisable within 60 days granted to Dr. Dong.

(8)	Represents options to purchase 3,333 ordinary shares exercisable within 60 days granted to Ms. Shi upon the consummation of this offering. Excludes options to purchase 6,667 ordinary shares not exercisable within 60 days granted to Ms. Shi.

(9)	Represents options to purchase 3,333 ordinary shares exercisable within 60 days granted to Mr. Fong upon the consummation of this offering. Excludes options to purchase 6,667 ordinary shares not exercisable within 60 days granted to Mr. Fong.

(10)

SCGC Capital Holding Company Limited, a British Virgin Islands company (“SCGC”), is owned by Shenzhen Capital (Hong Kong) Company Limited. The registered address of SCGC is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The beneficial owners of the shares held by SCGC are Shenzhen Capital Group Co., Ltd and Xi’an Hongtu Capital Co., Ltd., both of which are shareholders of Kingtone Information and are owned and controlled (as to voting and disposition) by the Shenzhen Municipal Government in the PRC.

(11)

Represents ordinary shares held of record by Big Leap Enterprises Limited, a British Virgin Islands company (“Big Leap”), which are beneficially owned by Mr. Chen. Big Leap is the record holder of an aggregate of 1,060,714 shares, of which the remaining shares are beneficially owned by Kingtone Information shareholders other than Mr. Chen.

(12)

Represents ordinary shares held of record by Silver Avenue Overseas Inc., a British Virgin Islands company (“Silver Avenue”), which are beneficially owned by Mr. Gao. Big Leap is the record holder of an aggregate of 972,322 shares, of which the remaining shares are beneficially owned by Kingtone Information shareholders other than Mr. Gao.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

A. MAJOR SHAREHOLDERS

To our knowledge, (A) we are not directly or indirectly owned or controlled by (i) another corporation or (ii) any foreign government and (B) there are no arrangements (including any announced or expected takeover bid), the operation of which may at a subsequent date result in a change in our control.

The voting rights of our major shareholders do not differ from the voting rights of other holders of the same class of shares.

As of January 18, 2011, 100,000 of our ordinary shares are held of record by a single record holder in the United States. Additionally, 100,000 restricted ordinary shares have been granted to Ying Yang, our chief financial officer, but have not yet been issued on the books of our registrar. The Bank of New York Mellon, as the depositary for our ADSs, is the record holder of 4,000,000 ordinary shares; however, we are unaware of the names and domiciles of the beneficial owners of the ADSs representing such shares.

B. RELATED PARTY TRANSACTIONS.

Members of our management team and our principal shareholders currently hold majority equity interests in Kingtone Information, our contractually-controlled entity in the PRC from which we derive substantially all of our revenues. We are party to a series of control agreements with Kingtone Information. See “Item 4 – Information About the Company – C. Organizational Structure - Contractual Arrangements with Kingtone Information and Its Respective Shareholders”. In addition, certain of our officers, directors and principal shareholders serve as officers and directors of Kingtone Information and/or are shareholders of Kingtone Information. The following table sets forth the relationship of such officers, directors and principal shareholders with Kingtone Information and their respective ownership interest in Kingtone Information:

Name	Relationship with Kingtone Wireless	Relationship with Kingtone Information	Percentage Ownership Interest in Kingtone Information
Tao Li	Chairman	Chairman		61.61	% (1)
Peng Zhang	Chief Executive Officer	Vice President		0.36	%
Li Wu	Director	Chief Financial Officer		1.09	%
Pengguo Xi	Vice President of Research and Development	Vice President of Research and Development		0.36	%
Xianying Chen	Vice President of Application Development	Shareholder		0.36	%
Lili Dong	Independent Director	Independent Director		—
Shenzhen Capital Group Co., Ltd. (2)	Indirect Shareholder	Shareholder		10.72	%
Xuetao Chen	Indirect Shareholder	Shareholder		8.93	%

(1)	Consists of (i) 36.61% of the shares of Kingtone Information owned of record by Mr. Li, and (ii) 25% of the shares of Kingtone Information owned of record by Xi’an TechTeam Investment Holding Group Company (“TechTeam Investment”). Mr. Li, as the majority shareholder of TechTeam Investment, has dispositive power over the shares of Kingtone Information owned by TechTeam Investment.

(2)	Shenzhen Capital Group Co., Ltd. has dispositive power with respect to the 1,060,714 ordinary shares of our company held of record by SCGC Capital Holding Company Limited.

On June 19, 2008, Kingtone Information signed an agreement to produce the fertilizer processing equipment for Shaanxi TechTeam Humic Acid Products Co., Ltd. (“Techteam”), an indirect subsidiary of China Green Agriculture, Inc. (CGA: NYSE), a company that is majority owned by Mr. Tao Li, our chairman (“CGA”). Mr. Li also serves as the chairman, president and chief executive officer of CGA, and CGA’s chief financial officer was, until April 23, 2010, Ms. Ying Yang, our chief financial officer. The total contracted value, including value-added taxes (VAT) and other taxes, was RMB 4 million, or approximately $586,000. The project was performed from May 2009 to June 2009. Pursuant to the agreement, Kingtone Information provided certain services including designing, manufacturing, installing and adjusting the production facilities for Techteam’s compound fertilizer for drip irrigation (the “Project”). Kingtone Information was also responsible for debugging the system and training Techteam employees to operate the production line. The agreement required Kingtone Information to complete the Project within 25 days unless there were causes for delay beyond its control. The agreement sets forth an eighteen month warranty period during which Techteam is entitled to receive certain spare parts for the facilities and to receive maintenance and repair services for free.

On October 20, 2008, Kingtone Information signed an agreement to construct the phase II expansion of an integrated pipeline control project for TechTeam. The total contracted value, including VAT and other taxes, was RMB 5.2 million, or approximately $760,000. The project was performed from December 2008 to June 2009. The term of the agreement is from the date of its signing until one year after the operation of the subject project. Pursuant to the agreement, Kingtone Information provided services in order to develop and install the automation system solution for Techteam’s phase II production line and to upgrade the automation system solution for its phase I production line. Work related to the phase II production line included the development of automation system software, setup of integrated automation management and control computer network to realize relevant data collection, and automatic management and control of the production process. Work related to the phase I production line included upgrading the existing automation system so that phase I and phase II automation systems become integrated into the same management and control system. In addition to the wired automation system, Kingtone Information also developed and installed a wireless system solution for Techteam. This wireless system solution integrates into Techteam’s production automation system and the plant video surveillance system.

On August 10, 2010, Kingtone Information entered into an agreement with Techteam, pursuant to which Kingtone Information is responsible for developing certain electronic control systems for Xi’an Hu County Yuxing Agriculture Technology Development Co., Ltd. (“Yuxing”), a wholly-owned subsidiary of Techteam in the PRC. The total contracted value of this agreement, including value-added taxes and other taxes, is RMB 3.03 million, or approximately $452,000. Pursuant to the agreement, Kingtone Information will design, plan, construct and purchase materials for the electronic control systems to be used in 28 greenhouses of Yuxing. The agreement sets forth a warranty period, which is the earlier of (a) 18 months after the construction raw materials are delivered, inspected and accepted, and (b) 12 months after the inspection and acceptance of the work completed. During the warranty period Yuxing is entitled to receive maintenance and repair services at no cost.

Our Beijing branch office is located in office space leased to us by Mr. Tao Li, our chairman, who owns this space. We lease it from him for no consideration.

On September 30, 2010, Kingtone Information entered into a lease agreement with Techteam, pursuant to which Techteam rents 360 square meters of office space from Kingtone Information. The lease provides for a two-year term effective as of July 1, 2010 with monthly rent of RMB 10,800, or approximately $1,600.

During our fiscal year ended September 30, 2010 and during prior fiscal years, Kingtone Information provided a series of loans to Xi’an Xingrong Tech Enterprise Co., Ltd. (“Xi’an Xingrong”), a company that is majority-owned by Mr. Tao Li. During our prior three fiscal years, the largest outstanding balance of the loans to Xi’an Xingrong was RMB 117.3 million, or approximately $17.2 million, on December 5, 2006. At September 30, 2010, all outstanding loan amounts had been repaid in full. The loan proceeds were used for Xi’an Xingrong’s working capital and general corporate purposes. The loans did not bear interest, were payable on demand and were not documented pursuant to a written agreement.

During our fiscal year ended September 30, 2010 and during prior fiscal years, Kingtone Information provided a series of loans to Xi’an TechTeam Investment Holding Group Ltd. (“TechTeam Investment”), a company that is majority-owned by Mr. Tao Li and which owns a 25% interest in Kingtone Information. During our prior three fiscal years, the largest outstanding balance of the loans to TechTeam Investment was RMB 35.2 million, or approximately $5.2 million, on May 19, 2009. At September 30, 2009, all outstanding loan amounts had been repaid in full. The loan proceeds were used for TechTeam Investment’s working capital and general corporate purposes. The loans did not bear interest, were payable on demand and were not documented pursuant to a written agreement.

In February 2003, Kingtone Information made a one-time loan to Shaanxi WeiDong Plant Biochemical Stock Co., Ltd. (“Shaanxi WeiDong”). The principal shareholders of Shaanxi WeiDong are Xi’an Xingrong and TechTeam Investment. The principal amount of the loan was repaid in December 2003, however, interest payable of $48,000 remained outstanding until such amount was repaid by Shaanxi WeiDong in September 2009.

On November 16, 2009 and December 12, 2009, Mr. Tao Li, our chairman, loaned $200,000 and $800,000, respectively, to Topsky to register Softech in the PRC. There were no formal agreements between Mr. Li and Topsky regarding the terms of these loans. The loans were repaid to Mr. Li in September 2010.

As of September 30, 2010, we had an outstanding loan of approximately $116,000 to Jinong High-Tech Agriculture Model Park, Inc., a company that is controlled by Tao Li, our chairman. The loan is interest free and payable on demand.

C. INTERESTS OF EXPERTS AND COUNSEL.

None.

ITEM 8. FINANCIAL INFORMATION.

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.

Consolidated Statements

See “Item 18. Financial Statements.”

Legal Proceedings

We are not currently a party to any material legal proceeding and, to our knowledge, there are no material legal proceedings threatened against us. From time to time, we may be subject to various claims and legal actions arising in the ordinary course of business.

Dividend Policy

We currently intend to retain all of our available funds and future earnings for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Under the terms of our Amended and Restated Memorandum and Articles of Association the declaration and payment of any dividends in the future will be determined by our board of directors, in its discretion, and will depend on a number of factors, including our earnings, capital requirements and overall financial condition and our ability to receive dividends from our subsidiaries. If we pay any dividends, we will pay our ADS holders dividends with respect to their underlying shares to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

Our ability to receive dividends from our subsidiaries may limit our ability to pay dividends on our ordinary shares. See Risk Factors – Risks Related to Doing Business in China – Our holding company structure may limit the payment of dividends” and “Item 10. Additional Information – D. Exchange Controls – Dividend Distribution.”.

B. SIGNIFICANT CHANGES.

Except as otherwise set forth in annual report, there have been no significant changes since September 30, 2010, the date of the financial statements in this annual report.

ITEM 9. THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS.

Markets and Share Price History

The primary trading market for our ordinary shares is the Nasdaq Capital Market, where our shares have been listed and traded under the symbol KONE since May 14, 2010.

The table below sets forth the high and low reported sales prices in dollars of our ordinary shares, as reported by Nasdaq:

PERIOD	HIGH		LOW

December 2010		5.47		2.93
November 2010		4.68		3.23
October 2010		3.97		2.35
September 2010		2.49		2.15
August 2010		2.80		2.15
July 2010		2.80		2.23
June 2010		3.51		2.42
May 2010		3.97		2.90

B. PLAN OF DISTRIBUTION.

Not Applicable.

C. MARKETS.

Our ADSs are listed on the Nasdaq Capital Market under the symbol “KONE”.

D. SELLING SHAREHOLDERS.

Not applicable.

E. DILUTION.

Not applicable.

F. EXPENSES OF THE ISSUE.

Not applicable.

ITEM 10. ADDITIONAL INFORMATION.

A. SHARE CAPITAL

Not applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

The description of our Memorandum of Association and Articles of Association set forth in the section entitled “Description of Share Capital” contained in Amendment No. 3 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 11, 2010 is incorporated by reference herein.

C. MATERIAL CONTRACTS.

In the years ended September 30, 2009 and 2008, we derived a material portion of our revenues from a small number of customers. In particular, a single customer, Shaanxi Yanchang Petroleum Group, provided approximately $5.0 million of our revenue, representing 44.7% of our total revenue in the year ended September 30, 2009. The material terms of our two largest contracts with such customer are summarized below.

On October 15, 2008, Kingtone Information entered into an Installation and Construction Subcontract, to act as a subcontractor with The Refine Chemical Company of Shaanxi Yanchang Petroleum Group, as the construction party and Shaanxi Chemical Construction Co., Ltd., as the general contract party. Pursuant to the agreement, Kingtone Information was subcontracted to contribute safety, security, and quality control measures to the project named “HuiJiaHe Petroleum Product Adjusting Supply Renovation Instrument and Control System and Control System Full Installation and System Adjusting of Yangzhuanghe Refine Chemical Project System.” The term of the project, as set forth in the agreement, is from October 15, 2008 through January 31, 2009 for a fixed amount payable to Kingtone Information of RMB 21,600,000 (approximately $3.2 million) before the deduction of administrative fees, taxes and utility fees (2.5% of the fixed amount). The project was completed and all sums were paid.

On April 30, 2009, Kingtone Information, as the supplier, entered into a Material Purchase Contract with Xi’an Product Petroleum Pipe Transportation Project Management Department of Shanxi Huajian Yelian, as the purchaser. Pursuant to the agreement, Kingtone Information supplied a series of software and facilities to the purchaser for a total price of RMB12,200,000 (approximately $1.8 million). According to the agreement, Kingtone Information was required to deliver the subject items by June 25, 2009. The agreement has a one-year warranty period. The project was completed and all sums were paid.

D. EXCHANGE CONTROLS.

This section sets forth a summary of the most significant regulations or requirements that affect our business activities in China or our shareholders’ right to receive dividends and other distributions from us.

Regulations of the Software Industry

The software industry in the PRC is regulated pursuant to two primary policies — the Measures Concerning Software Products Administration (the “Software Products Measures”) and the Recognition Standard and Management measures of Software Enterprises (the “Standards and Measures”). As further discussed below, Kingtone Information as a registered software enterprise with registered software products can take advantage of certain favorable tax, investment, government and other programs and policies that are designed to encourage development of the software industry in the PRC.

Software Products Registration and Administration

On March 1, 2009, the Ministry of Industry and Information Technology of the People’s Republic of China (the “MIIT”) promulgated the Software Products Measures which became effective on April 10, 2009. Under the Software Products Measures, software products developed in China (including those developed in China on the basis of imported software) can enjoy certain favorable policies when the products have been registered and recorded pursuant to the “Certain Policies to Encourage the Development of Software and Integrated Circuit Industries” issued by the State Council on June 24, 2000 (the “2000 Software Encouragement Policies”). Kingtone Information has registered its software products, including its “Wireless emergency command and management system V1.0,” with the Shaanxi Provincial Department of Information Technology through Kingtone Information. Please refer to the specific favorable policies under the sub-section below entitled “Policies to Encourage the Development of Software and Integrated Circuit Industries.”

Software Enterprise Registration and Administration

On October 16, 2000, the Ministry of Information Industry, the Ministry of Education, the Ministry of Science and Technology and the State Tax Bureau issued the “Standard and Measures” to encourage the development of the software industry in China and to enhance the competitiveness of the PRC information technology industry in the international market. The Standard and Measures provide strict conditions and standards, including but not limited to, the requirement of ownership of the software products, technical employees proportion, independent software technology and product research to recognize a company as a “software enterprise”. Such recognized software enterprises can enjoy the favorable policies pursuant to the 2000 Software Encouragement Policies. Kingtone Information has been recognized as a software enterprise since January 6, 2009. A software enterprise is subject to annual inspection, failure of which in a given year shall cause the enterprise to be disqualified for the relevant benefits.

Policies to Encourage the Development of Software and Integrated Circuit Industries

The 2000 Software Encouragement Policies encourage the development of the software and integrated circuit industries in China and to enhance the competitiveness of the PRC information technology industry in the international market. The 2000 Software Encouragement Policies encourage such development through various methods, including:

Encouraging venture capital investment in the software industry and providing or assisting software enterprises to raise capital overseas;

Providing tax incentives, including an immediate tax rebate for taxpayers who sell self-developed software products, before 2010, of the amount of the statutory value-added tax that exceeds 3% and a number of exemptions and reduced enterprise income tax rates;

Providing government support, such as government funding in the development of software technology;

Providing preferential treatment, such as credit facilities with low interest rates to enterprises that export software products;

Taking various strategies to ensure that the software industry has sufficient expertise; and

Implementing measures to enhance intellectual property protection in China.

As discussed above, to qualify for favorable treatment, an enterprise must be recognized as a software enterprise by governmental authorities and must have registered software products. Because Kingtone Information is recognized as a software enterprise, it can enjoy the above favorable policies. For example, Kingtone Information currently receives an immediate tax rebate on the sale of software products that it creates equal to the amount of the statutory value-added tax that exceeds 3%.

Relevant Laws and Regulations of the Computer Information System

Management Measures on the Computer Information System Integration

On February 13, 2001, the MIIT promulgated the Management Measures on the Computer Information System Integration Qualification (trial) or the Management Measures, which commenced to be enforced on February 13, 2001. The Management Measures provides that enterprises involved in providing the computer information system integration services shall apply for the qualification recognition to the MIIT or its provincial branch pursuant to the conditions required in the Management Measures and obtain the qualification certificate to provide information system integration service. The computer information system integration means the engagement in the overall plan, design, development, execution, protection of the computer application system projects and network system projects. Kingtone Information has obtained the computer information system integration certificate and we are qualified to provide the computer information system integration services.

Regulations for Safety Protection of Computer Information System

The State Security Bureau of PRC issued the “Administration of the Maintenance of Secrets in the International Networking of Computer Information Systems Provisions of the People’s Republic of China” to protect the safety of national secrets on January 25, 2000. Under the Administration, computer systems that contain information that is considered to be national secrets are forbidden to directly or indirectly connect to international or other public information networks. The State Security Bureau of PRC and its branch handle the secret maintenance work of the international networking of computer information systems. The company has the obligation to safeguard the national secrets of governmental authorities that it learns through the company’s services to such governmental authorities.

Relevant Regulations of the High-tech Enterprise

The Ministry of Information Industry, the Ministry of Science and Technology and the State Tax Bureau collectively promulgated and issued the “Certifying Standard and Managing Measures for High-tech Enterprises” and “the High-tech Areas of Main National Support ” on April 14, 2008 to certify the High-tech enterprise and encourage and support the development of the Chinese High-tech enterprises. Under the High-tech Enterprises Measures, the enterprise can enjoy the favorable tax policy when it is certified as a High-tech enterprise by the Ministry of Information Industry, the Ministry of Science and Technology and the State Tax Bureau or with its provincial branch according to the stipulated standard. The software and computer and network technology are recognized as the main national supported High-tech field. Kingtone Information is a High-tech enterprise and enjoys a favorable income tax rate of 15%.

Laws and Regulations of Intellectual Property Rights

China has adopted legislation governing intellectual property rights, including patents, copyrights and trademarks. China is a signatory to the main international conventions on intellectual property rights and became a member of the Agreement on Trade Related Aspects of Intellectual Property Rights upon its accession to the WTO in December 2001.

Patents

The “Patent Law of the People’s Republic of China” promulgated by the Standing Committee of the National People's Congress, adopted in 1985 and revised in 1992, 2001 and 2008, protects registered patents. The State Intellectual Property Office of PRC handles granting patent rights, provding for a twenty-year patent term for inventions and a ten-year patent term for utility models and designs. As we disclosed in Item 4, of this Annual Report on Form 20-F, through Kingtone Information, we have been granted one invention patent “wireless video transmission system based on BREW platform” by the State Intellectual Property Office (“SIPO”) of PRC on September 23, 2009 and therefore such invention is entitled to all the protections provided under the Patent Law for twenty years.

Computer Software Copyright and Administration

On December 20, 2001, the State Council of PRC issued the “Regulation for Computer Software Protection of the People’s Republic of China” (the “Regulation for Computer Software Protection”) which became effective on January 1, 2002 to protect the interests of copyright owners, to promote the research and application and to encourage the development of the Chinese software industry. Under the Regulation for Computer Software Protection, natural persons, legal persons or any other organizations shall have a copyright on the software developed by such persons no matter whether such software has been published. The protection period of software copyrights owned by the legal person or other organization is fifty years and expires on December 31 of the fiftieth year from the initial publication date of such computer software. Currently, Kingtone Information has seven registration certificates for software copyrights.

Trademarks

The “Trademark Law of the People’s Republic of China” promulgated by the State Council of PRC, adopted in 1982 and revised in 1993 and 2001, protects registered trademarks. The Trademark Office under the Chinese State Administration for Industry and Commerce handles trademark registrations and grants a term of ten years to registered trademarks which are renewable for another ten years after the application to the Trademark Office by the owners of the trademarks. Trademark license agreements must be filed with the Trademark Office for record. China has a “first-to-register” system that requires no evidence of prior use or ownership. Kingtone Information has its registered trademarks as described in Item 4 of this Annual Report on Form 20-F. Accordingly, such trademarks are entitled to the protection under the Trademark Law.

Foreign Currency Exchange

On August 29, 2008, the SAFE issued the Notice of the General Affairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-funded Enterprises, or Circular 142. Pursuant to Circular 142, RMB converted from the foreign currency-denominated capital of a foreign-invested company may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC unless specifically provided for otherwise. The use of such Renminbi capital may not be changed without SAFE’s approval and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been used.

See “Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of our initial public offering to make loans or additional capital contributions to our PRC operating subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business”.

Dividend Distribution

We are a British Virgin Islands holding company and substantially all of our operations are conducted through Kingtone Information. We rely on dividends and other distributions from our PRC subsidiary and Kingtone Information to provide us with our cash flow and allow us to pay dividends on the shares underlying our ADSs and meet our other obligations. The principal regulations governing distribution of dividends paid by wholly foreign-owned enterprises include:

Wholly Foreign-Owned Enterprise Law (1986), as amended; and

Implementation Rules on Wholly Foreign-Owned Enterprise Law (1990), as amended.

Under these regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to set aside at least 10% of their after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reach 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a FIE has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation.

Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions

In October 2005, the SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Return Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or SAFE Notice 75, which became effective as of November 1, 2005, and was further supplemented by two implementation notices issued by the SAFE on November 24, 2005 and May 29, 2007, respectively. Under Circular 75, prior registration with the local SAFE branch is required for PRC residents to establish or to control an offshore company for the purposes of financing that offshore company with assets or equity interests in an onshore enterprise located in the PRC. An amendment to the registration or filing with the local SAFE branch by such PRC resident is also required for the injection of equity interests or assets of an onshore enterprise in the offshore company or overseas funds raised by such offshore company, or any other material change with respect to the offshore company in connection with any increase or decrease of capital, transfer of shares, merger, division, equity investment, debt investment, or creation of any security interest over any assets located in the PRC.

Under SAFE Notice 75, PRC residents are further required to repatriate into the PRC all of their dividends, profits or capital gains obtained from their shareholdings in the offshore entity within 180 days of their receipt of such dividends, profits or capital gains. The registration and filing procedures under SAFE Notice 75 are prerequisites for other approval and registration procedures necessary for capital inflow from the offshore entity, such as inbound investments or shareholders loans, or capital outflow to the offshore entity, such as the payment of profits or dividends, liquidating distributions, equity sale proceeds, or the return of funds upon a capital reduction. Therefore, failure to comply with such registration may subject us to certain restrictions on, including but not limited to, the increase of the registered capital of our PRC subsidiary, making loans to our PRC subsidiary, and making distributions to us from our on-shore companies.

Regulations of Overseas Investments and Listings

On August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC and the SAFE, jointly adopted the New M&A Rule, which became effective on September 8, 2006. This regulation, among other things, includes provisions that purport to require that an offshore SPV formed for purposes of overseas listing of equity interests in PRC companies and controlled directly or indirectly by PRC companies or individuals obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange.

On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by SPVs. The CSRC approval procedures require the filing of a number of documents with the CSRC and it would take several months to complete the approval process.

The application of the New M&A Rule with respect to overseas listings of SPVs remains unclear with no consensus currently existing among the leading PRC law firms regarding the scope of the applicability of the CSRC approval requirement.

We believe that, based on our understanding of the current PRC laws, regulations and rules and the procedures announced on September 21, 2006, there is no requirement in this regulation that would require an application to be submitted to the MOFCOM or the CSRC for the approval of the listing and trading of our ADSs on the Nasdaq Capital Market.

See “Risk Factors — Risks Related to Doing Business in China — If we were required to obtain the prior approval of the China Securities Regulatory Commission, or CSRC, of the listing and trading of our ADSs on the Nasdaq Capital Market, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies . .”

E. TAXATION

The following discussion sets forth the material British Virgin Islands, PRC and U.S. federal income tax consequences of an investment in our ADSs and the ordinary shares represented by our ADSs, sometimes referred to collectively as the “securities”. It is based upon laws and relevant interpretations thereof in effect as of the date of this report, all of which are subject to change. This discussion does not deal with all possible tax consequences relating to an investment in the securities, such as the tax consequences under state, local and other tax laws. As used in this discussion, “we,” “our” and “us” refers only to Kingtone Wirelessinfo Solution Holding Ltd.

British Virgin Islands Taxation

Under the law of the British Virgin Islands as currently in effect, a holder of the securities who is not a resident of the British Virgin Islands is not liable for British Virgin Islands tax on dividends paid with respect to the securities and all holders of the securities are not liable to the British Virgin Islands for tax on gains realized during that year on the sale or disposal of such ordinary shares. The British Virgin Islands does not impose a withholding tax on dividends paid by a company incorporated or re-registered under the BVI Act.

There are no capital gains, gift or inheritance taxes levied by the British Virgin Islands on companies incorporated under the BVI Act. In addition, shares of companies incorporated under the BVI Act are not subject to transfer taxes, stamp duties or similar charges.

There is no income tax treaty or convention currently in effect between the United States and the British Virgin Islands or between China and the British Virgin Islands.

People’s Republic of China Taxation

In 2007, the PRC National People’s Congress enacted the new Enterprise Income Tax Law (the “EIT Law”), which became effective on January 1, 2008. The new EIT Law imposes a single uniform income tax rate of 25% on all Chinese enterprises, including foreign-invested enterprises, and levies a withholding tax rate of 10% on dividends payable by Chinese subsidiaries to their foreign shareholders unless any such foreign shareholders’ jurisdiction of incorporation has a tax treaty with China that provides for a different withholding agreement. Under the new EIT Law, enterprises established outside China but deemed to have a “de facto management body” within the country may be considered “resident enterprises” for Chinese tax purposes and, therefore, may be subject to an enterprise income tax rate of 25% on their worldwide income. Pursuant to the implementation rules of the new EIT Law, a “de facto management body” is defined as a body that has material and overall management control over the business, personnel, accounts and properties of the enterprise. Although substantially all members of our management are located in China, it is unclear whether Chinese tax authorities would require (or permit) us to be treated as PRC resident enterprises. If we and/or Topsky are deemed a Chinese tax resident enterprise, we and/or Topsky may be subject to an enterprise income tax rate of 25% on our worldwide income, excluding dividends received directly from another Chinese tax resident enterprise, as well as PRC enterprise income tax reporting obligations. If we and/or Topsky are not deemed to be a Chinese tax resident enterprise, we and/or Topsky may be subject to certain PRC withholding taxes. See “Risk Factors — Risks Related to Doing Business in China — Our holding company structure may limit the payment of dividends.” As a result of such changes, our and Topky’s historical tax rates may not be indicative of our and Topky’s tax rates for future periods and the value of our ADSs may be adversely affected. If we are deemed a PRC resident enterprise and investors’ gain from the sales of the securities and dividends payable by us are deemed sourced from China, such gains and dividends payable by us may be subject to PRC tax. See “Risk Factors — Risks Related to Doing Business in China — If we and/or Topsky were deemed a “resident enterprise” by PRC tax authorities, we and/or Topsky could be subject to tax on our global income at the rate of 25% under the New EIT Law and our non-PRC shareholders could be subject to certain PRC taxes.”

United States Federal Income Taxation

General

The following is a discussion of the material U.S. federal income tax consequences to an investor of purchasing, owning and disposing of our securities. This discussion does not address any aspects of U.S. federal gift or estate tax or the state, local or non-U.S. tax consequences of an investment in the securities.

YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF THE SECURITIES IN YOUR PARTICULAR SITUATION.

This discussion applies only to those investors that purchase the securities in this offering and that hold the securities as capital assets within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”). This section does not apply to holders that may be subject to special tax rules, including but not limited to:

dealers in securities or currencies;

traders in securities that elect to use a mark-to-market method of accounting;

banks, insurance companies or certain financial institutions;

tax-exempt organizations;

governments or agencies or instrumentalities thereof;

partnerships or other entities treated as partnerships or other pass-through entities for U.S. federal income tax purposes or persons holding the securities through such entities;

regulated investment companies or real estate investment trusts;

holders subject to the alternative minimum tax;

holders that actually or constructively own 10% or more of the total combined voting power of all classes of our shares entitled to vote;

holders that acquired the securities pursuant to the exercise of employee stock options, in connection with employee stock incentive plans or otherwise as compensation;

holders that hold the securities as part of a straddle, hedging or conversion transaction; or

holders whose functional currency is not the U.S. dollar.

This section is based on the Code, its legislative history, existing and proposed U.S. Treasury regulations, published rulings and other administrative guidance of the U.S. Internal Revenue Service (the “IRS”) and court decisions, all as in effect on the date hereof. These laws are subject to change or different interpretation by the IRS or a court, possibly on a retroactive basis.

We have not sought, and will not seek, a ruling from the IRS as to any U.S. federal income tax consequence described herein. The IRS may disagree with the discussion herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulation, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion.

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of the securities that is for U.S. federal income tax purposes:

a citizen or resident of the United States;

a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) under the laws of the United States, any state thereof or the District of Columbia;

an estate whose income is subject to U.S. federal income tax regardless of its source; or

a trust if (a) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (b) if the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If a beneficial owner of the securities is not described as a U.S. Holder and is not an entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes, such owner will be considered a “Non-U.S. Holder.” The material U.S. federal income tax consequences applicable specifically to Non-U.S. Holders are described below under the heading “Tax Consequences to Non-U.S. Holders.”

If a partnership (including for this purpose any entity treated as a partnership for U.S. tax purposes) is a beneficial owner of the securities, the U.S. tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. A holder of the securities that is a partnership or partners in such a partnership should consult their own tax advisors about the U.S. federal income tax consequences of holding and disposing of the securities.

This discussion assumes that any distributions made (or deemed made) on the securities and any consideration received by a holder in consideration for the sale or other disposition of the securities will be in U.S. dollars. This discussion also assumes that the representations contained in the Deposit Agreement are true and that the obligations in the Deposit Agreement and any related agreement will be complied with in accordance with their terms. Finally, this discussion assumes that each ADS will only represent ordinary shares in us, and will not represent any other type of security, such as a bond, cash or other property.

For U.S. federal income tax purposes, a holder of an ADS will be treated as the beneficial owner of the shares represented by such ADS and an exchange of an ADS for ordinary shares will not be subject to U.S. federal income tax. The U.S. Treasury has expressed concerns that parties to whom ADSs are pre-released, or intermediaries in the chain of ownership between holders of ADSs and the issuer of the securities underlying the ADSs may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. Holders of ADSs. Such actions would also be inconsistent with the claiming of the reduced rate of tax applicable to dividends received by certain non-corporate U.S. Holders, including individual U.S. Holders, as described below under “Tax Consequences to U.S. Holders — Taxation of Distributions.” Accordingly, the availability of foreign tax credits or the reduced tax rate for dividends received by certain non-corporate U.S. Holders, including individual U.S. Holders, could be affected by actions taken by parties to whom the ADSs are released, or by future actions by the U.S. Treasury.

Tax Consequences to U.S. Holders

Taxation of Distributions

Subject to the passive foreign investment company, or PFIC, rules discussed below, the gross amount of any cash distributions we make with respect to a U.S. Holder in respect of such U.S. Holder’s ADSs or shares will generally be treated as dividend income if the distributions are made from our current or accumulated earnings and profits, calculated according to U.S. federal income tax principles. Cash dividends will generally be subject to U.S. federal income tax as ordinary income on the day the U.S. Holder actually or constructively receives such income. With respect to non-corporate U.S. Holders for taxable years beginning before January 1, 2011, dividends may be taxed at the lower applicable long-term capital gains rate provided that (a) our ADSs or shares are readily tradable on an established securities market in the United States, or, in the event we are deemed to be a Chinese “resident enterprise” under the EIT Law (as described above under “People’s Republic of China Taxation”), we are eligible for the benefits of the income tax treaty between the United States and the PRC (the “U.S.-PRC Tax Treaty”), (b) we are not a PFIC, as discussed below, for either the taxable year in which the dividend was paid or the preceding taxable year, and (c) certain holding period requirements are met. Under published IRS authority, ADSs are considered for purposes of clause (a) above to be readily tradable on an established securities market in the United States only if they are listed on certain exchanges, which presently includes the Nasdaq Capital Market. U.S. Holders should consult their own tax advisors regarding the availability of the lower rate for any dividends paid with respect to our ADSs or shares.

Dividends will not be eligible for the dividends-received deduction allowed to U.S. corporations in respect of dividends received from other U.S. corporations. Generally, if we distribute non-cash property as a dividend (other than pro rata distributions of our shares) out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes), a U.S. Holder generally will include in income an amount equal to the fair market value of the property, on the date that it is distributed.

Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as a non-taxable return of capital to the extent of the U.S. Holder’s basis in its shares or ADSs and thereafter as capital gain. However, we do not plan on calculating our earnings and profits in accordance with U.S. federal income tax principles. U.S. holders therefore should generally assume that any distributions paid by us will be treated as dividends for U.S. federal income tax purposes.

If PRC taxes apply to dividends paid by us to a U.S. Holder (see “People’s Republic of China Taxation,” above), such taxes may be treated as foreign taxes eligible for credit against such holder’s U.S. federal income tax liability (subject to certain limitations), and a U.S. Holder may be entitled to certain benefits under the U.S.-PRC Tax Treaty. The rules relating to the U.S. foreign tax credit are complex. U.S. Holders should consult their own tax advisors regarding the creditability of any such PRC tax and their eligibility for the benefits of the U.S.-PRC Tax Treaty.

Taxation of Dispositions of ADSs or Shares

Subject to the PFIC rules discussed below, a U.S. holder that sells or otherwise disposes of its shares or ADSs will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference between the amount realized and such U.S. Holder’s tax basis in its shares or ADSs. Prior to January 1, 2011, capital gains of a non-corporate U.S. holder are generally taxed at a maximum rate of 15% where the property is held for more than one year (and 20% thereafter). The ability to deduct capital losses is subject to limitations.

If PRC taxes apply to any gain from the disposition of our ADSs or shares by a U.S. Holder, such taxes may be treated as foreign taxes eligible for credit against such holder’s U.S. federal income tax liability (subject to certain limitations), and a U.S. Holder may be entitled to certain benefits under the U.S.-PRC Tax Treaty. U.S. Holders should consult their own tax advisors regarding the creditability of any such PRC tax and their eligibility for the benefits of the U.S.-PRC Tax Treaty.

Passive Foreign Investment Company

We do not expect to be a PFIC for U.S. federal income tax purposes for our current tax year or in the foreseeable future. The determination of whether or not we are a PFIC in respect of any of our taxable years is a factual determination that cannot be made until the close of the applicable tax year and that is based on the types of income we earn and the value and composition of our assets (including goodwill), all of which are subject to change. Therefore, we can make no assurances that we will not be a PFIC in respect of our current taxable year or in the future.

In general, we will be a PFIC in any taxable year if either:

at least 75% of our gross income for the taxable year is passive income; or

at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income.

Passive income includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), the excess of gains over losses from certain types of transactions in commodities, annuities and gains from assets that produce passive income. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any corporation in which we own, directly or indirectly, at least 25% (by value) of the stock.

If we are treated as a PFIC in any year during which a U.S. Holder owns the securities, and such U.S. Holder did not make a mark-to-market election, as described below, the U.S. Holder will be subject to special rules with respect to:

any gain recognized by the U.S. Holder on the sale or other disposition of its shares or ADSs; and

any excess distribution that we make to the U.S. Holder (generally, the excess of the amount of any distributions to such U.S. Holder during a single taxable year of such U.S. Holder over 125% of the average annual distributions received by such U.S. Holder in respect of the shares or ADSs during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder holding period for the shares or ADSs).

Under these rules:

the gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the shares and ADSs;

the amount allocated to the U.S. Holder’s taxable year in which it realized the gain or excess distribution or to the period in the U.S. Holder’s holding period before the first day of our first taxable year in which we are a PFIC will be taxed as ordinary income;

the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest tax rate in effect for that year; and

the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.

Special rules apply for calculating the amount of the foreign tax credit with respect to excess distributions by a PFIC.

Alternatively, if a U.S. Holder, at the close of its taxable year, owns ordinary shares or ADSs in a PFIC that are treated as marketable stock, the U.S. Holder may make a mark-to-market election with respect to such shares for such taxable year. Our ADSs or shares will be “marketable” to the extent that they remain regularly traded on a national securities exchange, such as the Nasdaq Capital Market. If a U.S. Holder makes this election in a timely fashion, it will not be subject to the PFIC rules described above. Instead, in general, the U.S. Holder will include as ordinary income each year the excess, if any, of the fair market value of its shares or ADSs at the end of the taxable year over its adjusted basis in its shares or ADSs. Any ordinary income resulting from this election would generally be taxed at ordinary income tax rates and would not be eligible for the reduced rate of tax applicable to qualified dividend income. The U.S. Holder will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its shares or ADSs over the fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holder’s basis in the shares or ADSs will be adjusted to reflect any such income or loss amounts. U.S. Holders should consult their own tax advisor regarding potential advantages and disadvantages of making a mark-to-market election with respect to their ADSs or shares.

Alternatively, a U.S. Holder of stock in a PFIC may avoid the PFIC tax consequences described above in respect to our ADSs or shares by making a timely “qualified electing fund” election to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our taxable year ends. However, the qualified electing fund election is available only if the PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not intend to furnish the information that a U.S. Holder would need in order to make a qualified electing fund election. Therefore, U.S. Holders will not be able to make or maintain such election with respect to their ADSs or shares.

If a U.S. Holder owns our shares or ADSs during any year that we are a PFIC, such holder must file U.S. Internal Revenue Service Form 8621 regarding such holder’s shares or ADSs and the gain realized on the disposition of the shares or ADSs. The reduced tax rate for dividend income, discussed in “Taxation of Distributions,” is not applicable to dividends paid by a PFIC. U.S. Holders should consult with their own tax advisors regarding reporting requirements with respect to their shares or ADSs.

Tax Consequences to Non-U.S. Holders

Dividends paid to a Non-U.S. Holder in respect of our ADSs or shares generally will not be subject to U.S. federal income tax, unless the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains in the United States).

In addition, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other disposition of our ADSs or shares unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains in the United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of sale or other disposition and certain other conditions are met (in which case, such gain from United States sources generally is subject to tax at a 30% rate or a lower applicable tax treaty rate).

Dividends and gains that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base in the United States) generally will be subject to tax in the same manner as for a U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.

Information Reporting and Backup Withholding

In general, information reporting for U.S. federal income tax purposes generally should apply to distributions made on the securities within the United States to a non-corporate U.S. Holder and to the proceeds from sales and other dispositions of the securities by a non-corporate U.S. Holder to or through a U.S. office of a broker. Payments made (and sales and other dispositions effected at an office) outside the United States generally should be subject to information reporting in limited circumstances.

Dividend payments made to U.S. Holders and proceeds paid from the sale or other disposition the securities may be subject to information reporting to the IRS and possible U.S. federal backup withholding at a current rate of 28%. Certain exempt recipients, such as corporations, are not subject to these information reporting requirements. Backup withholding will not apply to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification, or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status must provide a duly executed IRS Form W-9.

A Non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.

Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a non-U.S. Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the IRS.

PROSPECTIVE PURCHASERS OF OUR SECURITIES SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY ADDITIONAL TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING OR DISPOSING OF OUR SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR NON-U.S. JURISDICTION, INCLUDING ESTATE, GIFT, AND INHERITANCE LAWS AND APPLICABLE TAX TREATIES.

F. DIVIDENDS AND PAYING AGENTS.

Not applicable .

G. STATEMENT BY EXPERTS.

Not applicable.

H. DOCUMENTS ON DISPLAY.

We previously filed a registration statement on Form F-1 (File No. 333-166056) with the SEC relating to our initial public offering in May 2010. This annual report does not contain all of the information in the registration statement and the exhibits and financial statements included with the registration statement. References in this annual report to any of our contracts, agreements or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contracts, agreements or documents. You may read and copy the registration statement, the related exhibits and other materials we file with the SEC at the SEC's public reference room in Washington, D.C. at 100 F Street, Room 1580, N.E., Washington, D.C. 20549. You can also request copies of those documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The SEC also maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file with the SEC. The website address is http://www.sec.gov . You may also request a copy of these filings, at no cost, by writing us at 3rd Floor, Borough A, Block A. No. 181, South Taibai Road, Xi’an, Shaanxi Province, People’s Republic of China 710065 or telephoning us at +86-29-88266368

I. SUBSIDIARY INFORMATION

For a listing of our subsidiaries, see “Item 4. Information on the Company – C. Organizational Structure.”

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

As of September 30, 2010, we had no short-term or long-term borrowings. If we borrow money in future periods, we may be exposed to interest rate risk. Our exposure to market risk for changes in interest rates relates primarily to the interest income generated by our cash deposits with our banks and held-to-maturity investments. We have not used any derivative financial instruments in our investment portfolio. Interest earnings instruments carry a degree of interest rate risk. We have not been exposed, nor do we anticipate being exposed to material risks due to changes in interest rates. However, our future interest income may fall short of expectations due to changes in interest rates.

Foreign Exchange Risk

Translation adjustments amounted to $0.6 million and $0.02 million as of September 30, 2010 and 2009, respectively. The Company translated balance sheet amounts with the exception of equity at September 30, 2010 at RMB 6.6981 to $1.00 as compared to RMB 6.8376 to US$1.00 at September 30, 2009. The Company stated equity accounts at their historical rate. The average translation rates applied to income statement accounts for the year ended September 30, 2010 and September 30, 2009 were RMB 6.8214 and RMB 6.8452 to US$1.00, respectively. So far, the PRC government has been able to manage a stable exchange rate between RMB and the U.S. Dollar. We do not anticipate material translation adjustments due to large fluctuations in exchange rates between RMB and the U.S. Dollar. However, our future downward translation adjustments may occur and can be significant due to changes in such exchange rate.

To the extent that we need to convert U.S. dollars received in our May 2010 public offering into the Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount that we receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us.

The PRC government imposes strict restrictions on PRC resident companies regarding converting RMB into foreign currencies and vice versa under capital account transactions, such as receiving equity investments from outside of the PRC, making equity investments outside of the PRC, borrowing money from or lending money outside of the PRC, and repaying debt or remitting liquidated assets and/or accumulated profits outside of the PRC. These transactions have to be approved by the relevant PRC government authorities, including but not limited to the commerce bureau, the tax bureau and the State Administration of Foreign Exchange, or SAFE, and have to be conducted at banks entrusted by the local SAFE branch. Kingtone Information has not conducted any foreign currency transactions during prior fiscal years since its inception. Softech was recently established and had not conducted any foreign currency transactions except for converting a relevantly small amount of foreign currency into RMB as registered capital pursuant to PRC regulations. In anticipation of this offering, we will invest or lend the proceeds as equity or loans into our PRC subsidiaries. As our business continues to grow, we may need to continuously finance our PRC subsidiaries by raising capital from outside of the PRC. The restriction on converting RMB into foreign currencies, and vice versa, may limit our ability to use capital resources from outside of the PRC. Such restrictions may also limit our ability to remit profits from our PRC subsidiaries outside of the PRC, therefore potentially limiting our ability to pay dividends to our shareholders. In addition, such restrictions will limit our ability to freely transfer temporary excess cash in our or our subsidiaries’ bank accounts in and out of the PRC, therefore limiting our ability to conduct cross-border cash management activities to optimize the utilization of our cash.

Inflation

Although China has experienced an increasing inflation rate, inflation has not had a material impact on our results of operations in recent years. According to the National Bureau of Statistics of China, the change in the consumer price index in China was 0.46%, (0.77%), and 1.16% in 2001, 2002 and 2003, respectively. However, in connection with a 3.9% increase in 2004, the PRC government announced measures to restrict lending and investment in China in order to reduce inflationary pressures in China’s economy. Following the government’s actions, the consumer price index decreased to 1.8% in 2005 and to 1.5% in 2006. In 2007, the consumer price index increased to 4.8%. In response, China’s central bank, the People’s Bank of China, announced that the bank reserve ratio would rise half a percentage point to 15.5% in an effort to reduce inflation pressures. China’s consumer price index growth rate reached 8.7% year over year in 2008. The results of the PRC government’s actions to combat inflation are difficult to predict. Adverse changes in the Chinese economy, if any, will likely impact the financial performance of a variety of industries in China that use, or would be candidates to use, our software products and services.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

A. DEBT SECURITIES.

Not applicable.

B. WARRANTS AND RIGHTS.

Not applicable.

C. OTHER SECURITIES.

Not applicable.

D. AMERICAN DEPOSITARY SHARES.

The Bank of New York Mellon, as depositary, will register and deliver ADSs. Each ADS will represent one (1) ordinary share (or a right to receive one (1) ordinary share) deposited with principal Hong Kong office of The Hong Kong and Shanghai Banking Corporation Limited, as custodian for the depositary. Each ADS will also represent any other securities, cash or other property that may be held by the depositary. The depositary’s corporate trust office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286. The Bank of New York Mellon’s principal executive office is located at One Wall Street, New York, New York 10286.

You may hold ADSs either (A) directly (i) by having ADSs registered in your name in the Direct Registration System, or (ii) by having an American depositary receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.

The Direct Registration System, or DRS, is a system administered by The Depository Trust Company, also referred to as DTC, pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership will be confirmed by periodic statements sent by the depositary to the registered holders of uncertificated ADSs.

As an ADS holder, you will not be treated as one of our registered shareholders and you will not have direct shareholder rights. British Virgin Island’s law governs our direct shareholders’ rights. The depositary will be the holder of the shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A Deposit Agreement among us, the depositary and you, as an ADS holder, and all other persons indirectly holding ADSs, sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the Deposit Agreement and the ADSs.

The following is a summary of the material provisions of the Deposit Agreement. For more complete information, you should read the entire Deposit Agreement and the form of ADS, which contains the terms of the ADSs. The Deposit Agreement is filed as an exhibit to our registration statement filed on Form F-1. You may obtain the registration statement and the attached Deposit Agreement from the SEC’s website at http://www.sec.gov . You may also obtain a copy of the Deposit Agreement at the SEC’s Public Reference Room, which is located at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330.

Fees and Expenses

Persons depositing or withdrawing shares or ADS holders must pay:		For:

$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)		Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property

		Cancellation of ADSs for the purpose of withdrawal, including if the Deposit Agreement terminates

$.05 (or less) per ADS		Any cash distribution to ADS holders

A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs		Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders

$.05 (or less) per ADSs per calendar year		Depositary services

Registration or transfer fees		Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares

Expenses of the depositary		Cable, telex and facsimile transmissions (when expressly provided in the Deposit Agreement) converting foreign currency to U.S. dollars

Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, share transfer taxes, stamp duty or withholding taxes		As necessary

Any charges incurred by the depositary or its agents for servicing the deposited securities		As necessary

Payment of Taxes

Holders of our ADSs are responsible for any taxes or other governmental charges payable on their ADSs or on the deposited securities represented by any of their ADSs. The depositary may refuse to register any transfer of a holder’s ADSs or allow withdrawal of the deposited securities represented by the ADSs until such taxes or other charges are paid. It may apply payments owed to the holder or sell deposited securities represented by the ADSs to pay any taxes owed and the holder will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

On May 14, 2010, we completed our initial public offering of our ADSs at a price of $4.00 per ADS and listed our ADS on the Nasdaq Capital Market under the symbol “KONE.” We sold an aggregate of 4,000,000 ADSs, representing 4,0000,000 ordinary shares and generated net proceeds of approximately $14.6 million, after deducting underwriting discounts and other offering expenses. ROTH Capital Partners LLC acted as sole book-running manager of the offering and as representative for the underwriters.

The registration statement on Form F-1 (File No. 333-166056) filed by us in connection with our initial public offering was declared effective on May 14, 2010. The amount of expenses incurred by us in connection with the issuance and distribution of the registered securities totaled approximately $1.4 million, consisting of $0.8 million for underwriting discounts and commissions, and approximately $0.6 million for other expenses. None of the payments were direct or indirect payments to our directors, officers, general partners of our associates, persons owning 10% or more of any class of our shares, or any of our affiliates. As of the date of this annual report, we have invested the net proceeds in interest bearing accounts and have not specifically applied any of the net proceeds.

ITEM 15. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures, which included inquiries made to certain other of our employees. Based on their evaluation, the our Chief Executive Officer and Chief Financial Officer have each concluded that, as of September 30, 2010, the Company's disclosure controls and procedures were effective and sufficient to ensure that we record, process, summarize and report information required to be disclosed by the Company in its periodic reports filed under the Securities and Exchange Commission's rules and forms.

Management’s Annual Report on Internal Control Over Financial Reporting

This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

Attestation report of the registered public accounting firm.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during our fiscal year ended September 30, 2010 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.

Our board of directors has determined that Ms. Melody Shi qualifies as an audit committee financial expert. Our board of directors has determined that Ms. Shi meets the definition of an “independent director” under the applicable Nasdaq Rules and under Rule 10A-3 of the Securities Exchange Act of 1934, as amended.

ITEM 16B. CODE OF ETHICS.

Our board of directors has adopted a code of business conduct and ethics applicable to our directors, officers and employees. We have filed our code of business conduct and ethics as an exhibit to our registration statement on Form F-1 (No. 333-166056) and posted the code on our website at http://www.kingtoneinfo.com/en/overview/ethics.aspx.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees

The aggregate fees billed by B&P for professional services rendered for the audit of our annual financial information included in our Annual Report on Form 20-F were $125,000 and $120,000 for the fiscal years ended September 30, 2010 and 2009, respectively.

Audit-Related Fees

The aggregate fees billed by our principal accountants for audit-related services were $132,500 and $128,961 for the fiscal years ended September 30, 2010 and 2009, respectively.

Tax Fees

We did not engage our principal accountants to provide tax or related services during the last two fiscal years.

All Other Fees

We did not engage our principal accountants to render services to us during the last two fiscal years, other than as reported above.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.

Not applicable.

ITEM 16G. CORPORATE GOVERNANCE.

We believe that there are no significant differences between our corporate governance practices and those of U.S. domestic companies under the listing standards of the Nasdaq Capital Market.

PART III

ITEM 17. FINANCIAL STATEMENTS.

We have elected to provide financial statements and related information specified in Item 18.

ITEM 18. FINANCIAL STATEMENTS.

See “Index to Consolidated Financial Statements” for a list of all financial statements filed as part of this annual report.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	KINGTONE WIRELESSINFO SOLUTION HOLDING LTD.

	By:	/s/ Peng Zhang
		Peng Zhang
		Chief Executive Officer

January 20, 2011

ITEM 19. EXHIBITS.

EXHIBIT INDEX

The following documents are filed as part of this Annual Report on Form 20-F.

Exhibit Number		Description

1.1*		Amended and Restated Memorandum of Association and Articles of Association of Kingtone Wirelessinfo Solution Holding Ltd., dated March 25, 2010 and as currently in effect.

2.1*		Deposit Agreement among the Company, depositary and holders of the American Depositary Receipts.

2.2*		Form of American Depositary Receipt.

2.3*		English translation of Entrusted Management Agreement dated December 15, 2009 between Xi’an Softech Co., Ltd., Xi’an Kingtone Information Technology Co., Ltd. and the shareholders of Xi’an Kingtone Information Technology Co., Ltd.

3.1*		English translation of Shareholder’s Voting Proxy Agreement dated December 15, 2009 between Xi’an Softech Co., Ltd., Xi’an Kingtone Information Technology Co., Ltd. and the shareholders of Xi’an Kingtone Information Technology Co., Ltd.

4.1*		English translation of Exclusive Technology Service Agreement dated December 15, 2009 between Xi’an Softech Co., Ltd. and Xi’an Kingtone Information Technology Co., Ltd.

4.2*		English translation of Exclusive Option Agreement dated December 15, 2009 between Xi’an Softech Co., Ltd., Xi’an Kingtone Information Technology Co., Ltd. and the shareholders of Xi’an Kingtone Information Technology Co., Ltd.

4.3*		English translation of Equity Pledge Agreement dated December 15, 2009 between Xi’an Softech Co., Ltd., Xi’an Kingtone Information Technology Co., Ltd. and the shareholders of Xi’an Kingtone Information Technology Co., Ltd.

4.4*		English translation of Loan Agreement dated September 14, 2009 between Xi’an Kingtone Information Technology Co., Ltd. and Xian City Commercial Bank.

4.5*		English translation of Mortgage Agreement dated September 14, 2009 between Xi’an Kingtone Information Technology Co., Ltd. and Xian City Commercial Bank.

4.6*		English translation of Form of Call Option Agreement dated December 15, 2009 by and among Xtra Heights Management Ltd., Sha Li and twelve shareholders of Kingtone Information Technology Co., Ltd.

4.7*		English translation of Form of Employment Agreement entered into between the Company and the Company’s executive officers.

4.8*		Term Sheet dated October 27, 2009 between Sha Li and certain shareholders of Kingtone Information Technology Co., Ltd.

4.9*		English translation of Material Purchase Contract dated April 30, 2009 between Xi’an Kingtone Information Technology Co., Ltd. and Xi’an Product Petroleum Pipe Transportation Project Management Department of Shanxi Chemical Construction YanLian.

4.10*		Employment Agreement dated April 23, 2010 between the Company and Ying Yang.

4.11*		2010 Omnibus Incentive Plan of the Company

4.12		English translation of Project Construction Contract dated August 10, 2010 between Xi’an Hu County Yuxing Agriculture Science & Technology Co., Ltd. and Xi’an Kingtone Information Technology Co., Ltd.

4.13		English translation of Lease Agreement dated September 30, 2010 between Shaanxi TechTeam Jinong Humid Acid Product Co., Ltd. and Xi’an Kingtone Information Technology Co., Ltd.

8.1		List of Subsidiaries Topsky Info-tech Holdings Pte Ltd, a Singapore company. Xi’an Softech Co., Ltd., a PRC company Xi’an Kingtone Information Technology Co., Ltd., a PRC company (a variable interest entity)

11.1*		Code of Ethics

12.1		Certification of Chief Executive Officer required by Rule 13a-14(a)..

12.2		Certification of Chief Financial Officer required by Rule 13a-14(a).

13.1		Certification of Chief Executive Officer required by Rule 13a-14(a).

13.2		Certification of Chief Financial Officer required by Rule 13a-14(a).

*	Previously filed as an exhibit to the Company’s Registration Statement on Form F-1 (Reg. No. 333-166056) filed with the Commission and incorporated herein by reference.

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

NOTE 1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Kingtone Wirelessinfo Solution Holding Ltd (“Kingtone Wireless”) was incorporated in the British Virgin Islands on October 27, 2009 under the name of Reizii Capital Management Limited. It has wholly-owned subsidiaries and a variable interest entity (“VIE”). Its wholly-owned subsidiaries include: Topsky Info-tech Holdings Pte Ltd. (“Topsky”), which was established in Singapore on November 3, 2009, and Xi’an Softech Co., Ltd. (“Softech”), which was established on November 27, 2009 in Xi’an, Shaanxi Province, China by Topsky. Its VIE is Xi’an Kingtone Information Technology Co., Ltd. (“Kingtone Information”) which was incorporated in Xi’an, Shaanxi province, China on December 28, 2001. Kingtone Wireless and its wholly-owned subsidiaries and VIE together are referred to as the “Company”.

Kingtone Wireless’ controlling shareholder since its inception, October 27, 2009, also owned more than 50% of Kingtone Information since its inception, December 28, 2001. On December 15, 2009, Kingtone Wireless through one of its subsidiaries, Softech, entered into a series of agreements (the “Restructuring Agreements”) with Kingtone Information for it to qualify as a VIE and to meet foreign ownership limitations established by the People Republic of China (the “Reorganization”). The Restructuring Agreements are as follows:

Entrusted Management Agreement

Pursuant to the terms of a certain Entrusted Management Agreement dated December 15, 2009 among Kingtone Information, Softech and the shareholders of Kingtone Information (the “Entrusted Management Agreement”), Kingtone Information and its shareholders agreed to entrust the operations and management of its business to Softech. According to the Entrusted Management Agreement, Softech possesses the full and exclusive right to manage Kingtone Information’s operations, assets and personnel, has the right to control all of Kingtone Information's cash flows through an entrusted bank account, is entitled to Kingtone Information's net profits as a management fee, is obligated to pay all of Kingtone Information’s payables and loan payments, and bears all losses of Kingtone Information. The Entrusted Management Agreement will remain in effect until (i) the parties mutually agree to terminate the agreement; (ii) the dissolution of Kingtone Information or (iii) Softech acquires all of the assets or equity of Kingtone Information (as more fully described below under “Exclusive Option Agreement”).

Exclusive Technology Service Agreement

Pursuant to the terms of a certain Exclusive Technology Service Agreement dated December 15, 2009 between Kingtone Information and Softech (“the Exclusive Technology Services Agreement”), Softech is the exclusive technology services provider to Kingtone Information. Kingtone Information agreed to pay Softech all fees payable for technologies services prior to making any payments under the Entrusted Management Agreement. Any payment from Kingtone Information to Softech must comply with applicable Chinese laws. Further, the parties agreed that Softech shall retain sole ownership of all intellectual property developed in connection with providing technology services to Kingtone Information. The Exclusive Technology Services Agreement shall remain in effect until (i) the parties mutually agree to terminate the agreement; (ii) the dissolution of Kingtone Information or (iii) Softech acquires Kingtone Information (as more fully described below under “Exclusive Option Agreement”).

Shareholders’ Voting Proxy Agreement

Pursuant to the terms of a certain Shareholders’ Voting Proxy Agreement dated December 15, 2009 among Softech and the shareholders of Kingtone Information (the “Shareholders’ Voting Proxy Agreement”), each of the shareholders of Kingtone Information irrevocably appointed Softech as their proxy to exercise on each of such shareholder’s behalf all of their voting rights as shareholders pursuant to PRC law and the Articles of Association of Kingtone Information, including the appointment and election of directors of Kingtone Information. Softech agreed that it shall maintain a board of directors the composition of which will be the members of the board of directors of Kingtone Wireless, except those directors that are employed solely for the purpose of satisfying listing or financing requirements of Kingtone Wireless. The Shareholders’ Voting Proxy Agreement will remain in effect until Softech acquires all of the assets or equity of Kingtone Information.

F-6

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

Exclusive Option Agreement

Pursuant to the terms of a certain Exclusive Option Agreement dated December 15, 2009 among Softech, Kingtone Information and the shareholders of Kingtone Information (the “Exclusive Option Agreement”), the shareholders of Kingtone Information granted Softech an irrevocable and exclusive purchase option (the “Option”) to acquire Kingtone Information’s equity interests and/or remaining assets, but only to the extent that the acquisition does not violate limitations imposed by PRC law on such transactions. As discussed above, current PRC law does not allow foreigners to hold equity interests in a PRC entity that engages in business dealings with classified government information. Accordingly, the Option is exercisable at any time at Softech’s discretion so long as such exercise and subsequent acquisition of Kingtone Information does not violate PRC law. The consideration for the exercise of the Option is to be determined by the parties and memorialized in the future by definitive agreements setting forth the kind and value of such consideration. To the extent Kingtone Information shareholders receive any of such consideration, the Option requires them to transfer (and not retain) the same to Kingtone Information or Softech. The Exclusive Option Agreement may be terminated by mutual agreement or by 30 days written notice by Softech.

Equity Pledge Agreement

Pursuant to the terms of a certain Equity Pledge Agreement dated December 15, 2009 among Softech and the shareholders of Kingtone Information (the “Pledge Agreement”), the shareholders of Kingtone Information pledged all of their equity interests in Kingtone Information, including the proceeds thereof, to guarantee all of Softech's rights and benefits under the Entrusted Management Agreement, the Exclusive Technology Service Agreement, the Shareholders’ Voting Proxy Agreement and the Exclusive Option Agreement. Prior to termination of the Pledge Agreement, the pledged equity interests cannot be transferred without Softech's prior written consent. The Pledge Agreement may be terminated only upon the written agreement of the parties.

Call Option Agreements between Xtra Heights Management Ltd. and Certain Shareholders of Kingtone Information

In connection with the Reorganization, twelve individual shareholders (listed below) of Kingtone Information (individually a “Purchaser” and collectively the “Purchasers”) each entered into a Call Option Agreement (collectively the “Call Option Agreements”) with Xtra Heights Management Ltd., a corporation incorporated under the laws of the British Virgin Islands (“Xtra”) and its sole shareholder Sha Li (collectively the “Seller”) dated as of December 15, 2009. Pursuant to the terms and conditions of the Call Option Agreements, the Purchasers are entitled to purchase up to an aggregate of 6,806,250 ordinary shares of the Company from the Seller at a price of $0.001 per share. Specifically, (i) if the Purchasers enter into an employment agreement to serve for Softech for a term of not less than five years, the Purchasers are entitled to purchase up to 3,403,125 ordinary shares from the Seller; (ii) if Softech achieves not less than $500,000 in consolidated after-tax net income as determined under US GAAP for the fiscal year ending September 30, 2010, the Purchasers are entitled to purchase up to 1,361,250 ordinary shares from the Seller; (iii) if Softech achieves not less than $1,000,000 in consolidated after-tax net income as determined under US GAAP for the fiscal year ending September 30, 2011, the Purchasers are entitled to purchase up to 1,361,250 ordinary shares from the Seller; and (iv) if Softech achieves not less than $2,000,000 in consolidated after-tax net income as determined under US GAAP for the fiscal year ending September 30, 2012, the Purchasers are entitled to purchase up to 680,625 ordinary shares from the Seller. Under the Call Option Agreements, the Seller also irrevocably appoints each corresponding Purchaser with the exclusive right to exercise, on its behalf, all of the voting rights of the Seller’s shares. Additionally, the Call Option Agreements grant the Purchasers the right to all distributions made by us, including without limitation, dividends, in respect of the Seller’s shares.

The Purchasers entered into the Call Option Agreements upon terms substantially similar to the terms set forth in that certain Term Sheet, dated October 27, 2009, between the Purchasers and Ms. Sha Li.

F-7

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

As a result of these contractual arrangements, Kingtone Wireless is able to exercise control over Kingtone information and was entitled to substantially all of the economic benefits of Kingtone information through its subsidiary, Softech. Therefore, Kingtone Wireless consolidates Kingtone Information in accordance with ASC 810-10, “Consolidation of Variable Interest Entities”) since the date of the Reorganization. The controlling shareholder also controlled Kingtone Wireless and Kingtone Information before and after the Reorganization, therefore the Reorganization is accounted for as a transaction between entities under common control in a manner similar to pooling of interests.

On December 17, 2009, Reizii Capital Management Limited changed its name to Kingtone Wirelessinfo Solution Holding Ltd.

On March 23, 2010, the board of directors of Kingtone Wireless resolved to change the fiscal year end of Kingtone Wireless and its wholly-owned subsidiaries, Topsky and Softech, from November 30th to September 30th so they have the same fiscal year end as Kingtone Information.

On May 14, 2010, the Company completed the initial public offering of its American Depositary Shares (“ADSs”) at a price of $4.00 per ADS and listed its ADS on the Nasdaq Capital Market under the symbol “KONE.” The Company sold an aggregate of 4,000,000 ADSs, representing 4,000,000 ordinary shares and received net proceeds of approximately $14.5 million, net of underwriting discounts and other offering expenses.

The Company is principally involved in developing and implementing mobile enterprise solutions for its customers in a broad variety of sectors and industries to improve its operating efficiency by facilitating mission-specific field and long-distance information management in wireless environments through its VIE, Kingtone Information.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The consolidated and combined financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”). The financial statements are solely those of Kingtone Information for the fiscal years ended September 30, 2008 and 2009 and for the subsequent period ended October 26, 2009, and then they are combined with Kingtone Wireless and its subsidiaries through the date of the Reorganization, December 15, 2009, and they are consolidated with Kingtone Wireless and its subsidiaries following the date of the Reorganization. The consolidated and combined financial statements as of September 30, 2010 include the financial statements of Kingtone Wireless, its subsidiaries, and its VIE for which Kingtone Wireless is the primary beneficiary. All inter-company transactions and balances between Kingtone Wireless, its subsidiaries and its VIE are eliminated upon consolidation. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, and such adjustments are of a normal recurring nature.

In March 2010, the Company changed its fiscal year-end from November 30 th to September 30 th , so that it would have the same fiscal year end as its VIE, Kingtone Information. The Company had no operations other than the operations of Kingtone Information from October 1, 2009 to November 30, 2009. In addition, the consolidated and combined statements of income and comprehensive income and cash flows for the years ended November 30, 2009 and 2008 included Kingtone Information for the years ended September 30, 2009 and 2008. Therefore the Company is presenting its consolidated and combined statements of income and comprehensive income and cash flows for the years ended September 30, 2010, 2009 and 2008 instead of for the ten months ended September 30, 2010 and the years ended November 30, 2009 and 2008.

(b) Foreign currency transaction

The functional currency of the Company is United States dollars (“US$”), and the functional currency of Topsky is Singapore dollars (“SG$”). The functional currency of the Company’s PRC subsidiary, Softech and Kingtone Information, is the Renminbi (“RMB’), and PRC is the primary economic environment in which the Company operates.

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. The resulting exchange differences are included in the determination of net income for the respective periods.

F-8

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

For financial reporting purposes, the financial statements of the Company’s PRC subsidiary which are prepared using the RMB, are translated into Company’s reporting currency, the United States Dollar (“U.S. dollar”). Assets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average rates prevailing during each reporting period, and stockholders’ equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in stockholders’ equity.

The exchange rates applied are as follows:

	2010		2009		2008
RMB exchange rate at balance sheets dates,		6.6981		6.8376		6.8551
Average RMB exchange rate for each period		6.8214		6.8452		7.1106

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

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the 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 revenue and expenses during the reporting period. Management makes these estimates using the best information available at the time the estimates are made. Significant estimates and judgments made by the management include: (i) estimates of profits and losses on contracts in process; (ii) accrual of estimated liabilities; and (iii) contingencies and litigation. However actual results could differ from those estimates.

(d) Cash and cash equivalents

Cash and cash equivalents represent cash on hand and deposits held with banks. The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

(e) Accounts receivable

Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts as needed. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on aging data, historical collection experience, customer specific facts and economic conditions. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company did not have any off-balance-sheet credit exposure related to its customers.

(f) Inventories

Inventories consist of raw materials, finished goods, and work-in-progress, which include the direct labor, direct materials and overhead costs related to projects. Inventories are stated at lower of cost or market value. Cost is determined using first in first out method.

Where there is evidence that the market value of inventories, in their disposal in the ordinary course of business, will be less than cost, whether due to physical deterioration, obsolescence, changes in price levels, or other causes, a provision is accrued for the difference with charges to cost of goods sold.

F-9

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

(g) Property and equipment

The Company states plant and equipment at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets with 5% residual value.

Estimated useful lives of property and equipment:

		Useful Life
Property and improvements		20-35 years
Transportation equipment		5 years
Office equipment		5 years
Furniture		5 years

The Company eliminates the cost and related accumulated depreciation of assets sold or otherwise retired from the accounts and includes any gain or loss in the statement of income. The Company charges maintenance, repairs and minor renewals directly to expenses as incurred, and it capitalizes major additions and betterment to buildings and equipment.

Impairment of long-lived assets

The Company applies the Accounting Standards Codification (“ASC”) No. 360-10 “Property, plant and equipment”, ASC NO. 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

The Company tests long-lived assets, including property, plant and equipment and intangible assets subject to periodic amortization, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There were no events or changes in circumstances that necessitated a review of impairment of long-lived assets as of September 30, 2010 and November 30, 2009.

(h) Statutory surplus reserve

The Company is required to set aside 10% of its income after income taxes prepared in accordance with PRC accounting regulations to the statutory surplus reserve until the balance reaches 50% of the paid-in capital or registered capital, after which further appropriation will be at the directors’ recommendation.

(i) Revenue recognition

Revenues consist primarily of sales of wireless system software service solutions and other customized software with support contracts. The Company recognizes revenue when (1) pervasive evidence of an arrangement exists, (2) delivery has occurred and customer acceptance is reasonable assured (3) the fee is fixed or determinable, and (4) collectability is probable.

F-10

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

The Company generally provides wireless system software service solutions and customized software under short and long-term fixed-price contracts that require significant production and customization. The contract periods generally range from two months to one year in length. The Company recognizes income for these contracts following both the percentage-of-completion method, measured by contract milestones and on the basis of actual costs incurred versus the total estimated contract costs, and on the completed contract method in accordance with the ASC No. 605 -35 “Construction-Type and Production-Type Contracts” and ASC No. 985 - 605 “Software Revenue Recognition”.

Provided unapproved change orders or claims occur in the future, in accounting for contracts, the Company follows ASC No. 605-35. The Company will recognize as revenues costs associated with unapproved change orders or claims to the extent it is probable that such claims and change orders will result in additional contract revenue, and the amount of such additional revenue can be reliably estimated. Contract losses are provided for in their entirety in the period that they become known, without regard to the percentage-of-completion. However, the Company has not experienced significant unapproved change orders in the past.

The software contracts generally provide for post-contract customer support (“PCS”) for a period of one year from delivery of the software. The value of PCS revenue is not separately reported and is accounted for as part of the entire fee under the contract accounting methods described above since the PCS meets the criteria specified in ASC No. 985-605-25-71 as follows:

PCS is included in the total contract price;

PCS is for one year or less;

estimated costs are insignificant;

upgrades and enhancements during the PCS term have historically been and are expected to continue to be minimal and infrequent; and

the contract does not include any service elements that are accounted for separately.

All other services are provided under separate agreements and fee arrangements and the related revenue is recognized over the period the services are provided.

Unbilled revenue consists of recognized recoverable costs and accrued profits on contracts for which billings had not been presented to clients as of the balance sheet date.

The Company presents all sales revenue net of a value-added tax (“VAT”) or a sales tax.

The Company's PRC subsidiary and VIE are subject to business tax on revenues related to certain types of services at various rates. Business tax on revenues earned from provision of services to customers is recorded as a deduction from gross revenue to derive net revenue in the same period in which the related revenue is recognized.

Cost of Sales

When the criteria for revenue recognition have been met, costs incurred are recognized as cost of sales. Cost of sales (exclusive of depreciation and amortization) primarily includes the cost of the hardware purchased from the third parties, the labor costs of those responsible for the software development and project implementation and the applicable share of overhead expense directly related to the execution of services and delivery of projects.

The Company is responsible for the cost of providing a warranty. In the past warranty costs have been insignificant.

F-11

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

(j) Research and development costs

Research and development costs include salaries, consultant fees, supplies and materials, as well as costs related to other overhead expenses such as depreciation, facilities, utilities and other R&D departmental expenses. Research and development costs are expensed as incurred in performing research and development activities in accordance with ASC No. 730-10-5, Accounting for Research and Development Costs .

(k) Advertising expenses

Advertising expenses, which generally represent the cost of promotions to create or stimulate a positive image of the Company or a desire to buy the Company’s products and services, are expensed as incurred. The Company incurred no advertising expenses in each of the periods presented.

(l) Share-based compensation

Share options granted to employees and independent directors are accounted for under ASC 718, "Share-Based Payment". In accordance with ASC 718, the Company determines whether a share option should be classified and accounted for as a liability award or an equity award. All grants of share options to employees classified as equity awards are recognized in the financial statements based on their grant date fair values. All grants of share options to employees classified as liability awards are re-measured at the end of each reporting period with an adjustment for fair value recorded to the current period expense in order to properly reflect the cumulative expense based on the current fair value of the vested options over the vesting period. The Company has elected to recognize compensation expenses using the Black-Scholes-Merton (BSM) option-pricing model estimated at the grant date based on the award’s fair value and is recognized as expense on a straight-line basis for each separately vesting portion of the award (the graded vesting attribution method).

Restricted stock units (RSUs) are measured based on the fair market values of the underlying stock on the dates of grant. Shares are issued on the vesting dates net of the statutory withholding requirements to be paid by the Company on behalf of its employees. As a result, the actual number of shares issued will be fewer than the actual number of RSUs outstanding. Also, the Company recognizes stock-based compensation using the graded vesting attribution method.

The Company records share-based compensation expense for awards granted to non-employees in exchange for services at fair value in accordance with the provisions of ASC 505-50, " Equity based " payment to non-employees. For the awards granted to non-employees, the Company will record compensation expenses equal to the fair value of the share options at the measurement date, which is determined to be the earlier of the performance commitment date or the service completion date.

(m) Taxation

Income tax

i).

The Company is incorporated in the BVI. Under the current law of the BVI, the Company is not subject to tax on income or capital gains. Additionally, upon payments of dividends by the Company to its shareholders, no BVI withholding tax will be imposed.

ii).

Topsky was incorporated in Singapore and does not conduct any substantial operations of its own. No provision for Singapore profits tax has been made in the financial statements as Topsky has no assessable profits for the years ended September 30, 2010, 2009 and 2008. Additionally, upon payments of dividends by Topsky to its shareholders, no Singapore withholding tax will be imposed.

iii).

The Company’s PRC subsidiary and VIE, being incorporated in the PRC, are governed by the income tax law of the PRC and is subject to PRC enterprise income tax (“EIT”). Effective from January 1, 2008, the EIT rate of PRC was changed from 33% of to 25%, and applies to both domestic and foreign invested enterprises.

F-12

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

According to a filing document from Xi’an State Tax authorities of the High-technology zone, Kingtone Information was granted a reduced income tax rate of 15% from January 1, 2008 to December 31, 2009 on the basis of being a high-tech company.

	For the years ended September 30,
	2010			2009			2008
	US$(’000)			US$(’000)			US$(’000)
PRC federal statutory tax rate		25%			25%			25%
Taxable income		9,861			6,232			1,206
Computed expected income tax expense		2,465			1,558			302
Non-deductible expenses		—			—			4
Effect of tax holidays		(857	)		(623	)		(115	)
Income tax expenses		1,608			935			191

Value-added tax and business tax

PRC Value-added Tax

The Company’s products are only sold in the PRC and therefore are generally subject to a Chinese VAT at a rate of 17%. The VAT may be offset by VAT the Company pays on raw materials and other materials included in the cost of producing its finished product. Accrued VAT payables are subject to a 10% surtax, which includes urban maintenance and construction taxes and additional education fees.

PRC Business Tax

Revenues from services provided by Kingtone Information are subject to a PRC business tax of 5% for software solution and 3% for wireless system solution, with a surtax of 0.5%. Kingtone Information pays business tax on gross revenues.

Deferred tax

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and any operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided to reduce the amount of deferred tax asset if it is considered more likely than not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

F-13

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

Uncertain tax positions

The Company adopted ASC No. 740-10 “Income Taxes”, on January 1, 2007. ASC No. 740-10 prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. For the yeas ended September 30, 2010, 2009 and 2008, the Company did not have any interest and penalties associated with tax positions and the Company did not have any significant unrecognized uncertain tax positions.

(n) Comprehensive income

Accumulated other comprehensive income, as presented on the accompanying consolidated and combined balance sheets are the cumulative foreign currency translation adjustments.

(o) Commitments and contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, product and environmental liability, and tax matters. In accordance with ASC No. 450-10, “ Accounting for Contingencies” , the Company records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Historically, the Company has not experienced any material service liability claims.

(p) Fair value measurements

The carrying amounts of cash and cash equivalents, accounts receivable from third and related parties, amounts due from and due to related parties, accounts payable, other payables and short-term borrowings approximate their fair values due to their short term nature.

The Company adopted ASC No. 820 Fair Value Measurements and Disclosures on January 1, 2008 for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the combined financial statements on a recurring basis (at least annually). ASC No. 820-10 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company has not adopted ASC No. 820-10 for non-financial assets and non-financial liabilities, as these items are not recognized at fair value on a recurring basis.

ASC No. 820-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

ASC No. 820-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC No. 820-10 establishes three levels of inputs that may be used to measure fair value:

F-14

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

(q) Segment reporting

The Company follows ASC No. 280, " Segment Reporting ". The Company's chief operating decision-maker, who has been identified as the Chief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Company as a whole and hence, the Company has only one reportable segment. As the Company's long-lived assets are substantially all located in the PRC and substantially all the Company's revenues are derived from within the PRC, no geographical segments are presented.

(r) Significant risks

Credit risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, accounts receivable, other receivables and amounts due from related parties. As of September 30, 2010 and November 30, 2009, US$13,758,000 and US$134,000, respectively, were deposited with major financial institutions located in the PRC and US$1,151,000 and $210,000, respectively, were deposited with major financial institutions located in Singapore. Historically, deposits in Chinese banks are secure due to the state policy on protecting depositors' interests. However, China promulgated a new Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly stating that the State Council may promulgate implementation measures for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the new Bankruptcy Law, a Chinese bank may go into bankruptcy. In addition, since China's concession to the World Trade Organization, foreign banks have been gradually permitted to operate in China and have been significant competitors against Chinese banks in many aspects, especially since the opening of the Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy of those Chinese banks in which the Company has deposits has increased. In the event of bankruptcy of one of the banks which holds the Company's deposits, it is unlikely to claim its deposits back in full since it is unlikely to be classified as a secured creditor based on PRC laws.

The Company conducts credit evaluations of customers and generally does not require collateral or other security from its customers. The Company establishes an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers.

F-15

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

Business, political and economic risks

The Company participates in a relatively young and dynamic industry that is heavily reliant and also susceptible to complementary and/or competitive technological advancements. The Company believes that changes in any of the following areas could have a material adverse effect on the Company's future financial position, result of operations or cash flows:

(i)

Business Risk.

Third parties may develop technological or business model innovations that address content delivery requirements in a manner that is, or is perceived to be, equivalent or superior to the Company's services. If competitors introduce new products or services that compete with, or surpass the quality, price or performance of the Company's services, the Company may be unable to renew its agreements with existing customers or attract new customers at the prices and levels that allow the Company to generate reasonable rates of return on its investment.

(ii)

Political, economic and social uncertainties.

The Company's operations could be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than 20 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC political, economic and social conditions. There is also no guarantee that the PRC government's pursuit of economic reforms will be consistent or effective.

(iii)

Regulatory restrictions.

The applicable PRC laws, rules and regulations currently prohibit foreign ownership of companies that provide content and application delivery services. Accordingly, the Company's subsidiary, Softech is currently ineligible to apply for the required licenses for providing content and application delivery services in China. As a result, the Company operates its business in the PRC through its VIEs, which holds the licenses and permits that are required to provide content and application delivery services in the PRC. The PRC Government may also choose at any time to block access to the Company's customers' content which could also materially impact the Company's ability to generate revenue.

Foreign currency risk

A majority of the Company’s sales and expenses transactions and a significant portion of the Company’s assets and liabilities are denominated in Renminbi (“RMB”). The RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or any other China foreign exchange regulatory body which require certain supporting documentation in order to affect the remittance.

From July 21, 2005, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. While the international reaction to the appreciation of the RMB has generally been positive, there remains significant international pressure on the PRC Government to adopt an even more flexible currency policy, which could result in a further and potentially more significant appreciation of the RMB against the US$.

F-16

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

(s) Earnings per share (“EPS”)

EPS is calculated in according with ASC No. 260 “Earning per share”. Basic EPS excludes dilution and is computed by dividing net income attributable to common stockholders by the weighted average number of ordinary shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (convertible preferred stock, forward contract, warrants to purchase common stock, contingently issuable shares, common stock options and warrants and their equivalents using the treasury stock method) were exercised or converted into common stock. The Company excludes potential ordinary shares in the diluted EPS computation in periods of losses from continuing operations, as their effect would be anti-dilutive.

(t) Recently issued accounting standards

In July 2010, the FASB issued Accounting Standards Update 2010-20 which amended “Receivables” (Topic 310). ASU 2010-20 is intended to provide additional information to assist financial statement users in assessing an entity’s risk exposures and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. The Company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Company’s consolidated and combined financial statements.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“ASC Topic 855”), which is effective for interim or annual financial periods ending after June 15, 2009. ASC Topic 855 establishes general standards of accounting and disclosure of events that occur after the balance sheet but before financial statements are issued or are available to be issued. However, since the Company is a public entity, management is required to evaluate subsequent events through the date that financial statements are issued and disclose the date through which subsequent events have been evaluated, as well as the date the financial statements were issued. ASC Topic 855 was adopted since its interim period ended June 30, 2009.

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

During 2009 and 2010, the FASB has issued several ASU’s – ASU No. 2009-02 through ASU No. 2010-13. Except for ASU’s No. 2010-09 and ASU’s No. 2010-20 discussed above, the ASU’s entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore have minimal, if any, impact on the Company.

NOTE 3. ACCOUNTS RECEIVABLE, NET

Accounts receivable and allowance for doubtful accounts consisted of the following:

	As of September 30, 2010			As of November 30, 2009
	US$(’000)			US$(’000)
Accounts receivable		6,699			2,401
Less: allowance for doubtful accounts		(49	)		(48	)
		6,650			2,353

F-17

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

As of September 30, 2010 and November 30, 2009, all accounts receivable were due from third party customers.

Any additions, deductions and amounts recovered of the Company's allowance for doubtful accounts are recorded within general and administration expenses for the respective periods.

NOTE 4. UNBILLED REVENUE

Unbilled revenue consisted of the following:

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
Unbilled revenue		973		178
		973		178

The Company records revenue in excess of billings as “unbilled revenue”. The Company expects all billed and unbilled amounts to be collected within one year.

NOTE 5. AMOUNTS DUE FROM RELATED PARTIES

Amounts due from related parties consisted of the following:

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
Jinong High-Tech Agriculture Model Park, Inc.		116		—
Xi'an Ding Tian Investment Holding Group Ltd		4		—
		120		—

These related parties are directly or indirectly owned and controlled by Tao Li, the Chairman of the Company. The Company provided short-term financing to these parties. The balance due from Xi'an Ding Tian Investment Holding Group Ltd as of September 30, 2010 was paid off by December 2010. The balance due from Jinong High-Tech Agriculture Model Park, Inc will be paid off by January 2011.

NOTE 6. INVENTORIES, NET

Inventories consisted of the following:

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
Raw material		181		15
Finished goods		55		25
Project-in-progress		147		87
		383		127

F-18

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

The Company reviews its inventories periodically for possible obsolete or damaged goods and to determine if any allowance is necessary for potential obsolescence. As of September 30, 2010 and November 30, 2009, the Company determined that no allowance for obsolescence was necessary.

NOTE 7. OTHER RECEIVABLES AND PREPAYMENTS

Other receivables and prepayments consisted of the following:

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
Advances to employees		361		182
Deposits on projects		101		140
Prepayment to suppliers		309		690
		771		1,012

NOTE 8. DEPOSIT TO PURCHASE BUILDING

Deposit to purchase building consisted of the following:

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
Deposit to purchase building		—		12,200
		—		12,200

Deposit to purchase building was an upfront payment to a property owner for purchasing a building for the Company’s research and development center. The consideration has been fully paid and the title to the property was transferred to the Company as of September 30, 2010.

NOTE 9. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

	As of September 30, 2010			As of November 30, 2009
	US$(’000)			US$(’000)
Buildings and improvements		14,117			2,078
Vehicles		88			—
Other equipment and devices		342			285
		14,547			2,363
Less: accumulated depreciation		(910	)		(670	)
		13,637			1,693

F-19

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

For the years ended September 30, 2010, 2009 and 2008, depreciation expenses were US$222,000, US$129,000 and US$121,000, respectively.

NOTE 10. INTANGIBLE ASSETS, NET

The intangible assets consisted of the following:

	As of September 30, 2010			As of November 30, 2009
	US$(’000)			US$(’000)
Land-use rights		633			—
Less: accumulated amortization		(3	)		—
		630			—

Amortization expense for the year ended September 30, 2010 was $3,000. There were no amortization expenses for the years ended September 30, 2009 and 2008, respectively. Estimated amortization expense relating to the existing intangible assets for the aggregated and each of the next five years are as follows:

	US$ (‘000)
September 30, 2011		17
September 30, 2012		17
September 30, 2013		17
September 30, 2014		17
September 30, 2015		17
Total:		85

NOTE 11. ACCOUNTS PAYABLE

Accounts payable consisted of the following:

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
Payable to third-party suppliers		575		1,409
		575		1,409

The accounts payable to third-party suppliers are mainly for raw materials purchase.

NOTE 12. ADVANCE FROM CUSTOMERS

Advance from customers consisted of the following:

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
Advance from third-party customers		371		1,398
		371		1,398

F-20

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

The advance from customers represents the upfront payment of 10-30% of the contract price received from the customers according payment schedules in the sales contracts.

NOTE 13. OTHER PAYABLES AND ACCRUALS

Other payables and accruals consisted of the following:

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
Accrued employee benefits		14		497
Accrued payroll		—		16
Deposits from suppliers		51		46
Other payables		102		—
		167		559

Accrued employee benefits include the withholding individual tax on the dividends paid to individual shareholders in fiscal year 2009 in accordance with PRC tax regulation.

NOTE 14. TAXES PAYABLE

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
VAT payable		64		26
Enterprise Income tax payable		1,958		422
Other taxes payable		1,399		153
		3,421		601

NOTE 15. AMOUNTS DUE TO SHAREHOLDER

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
Amounts due to shareholder		—		200
		—		200

In November 2009, Mr. Li, the Chairman of the Company, loaned Topsky $200,000 with no interest for its initial working capital. The loan was fully paid off on September 13, 2010.

NOTE 16. SHORT-TERM BANK LOAN

		As of September 30, 2010		As of November 30, 2009
		US$(’000)		US$(’000)
Bank Name	Interest rate

Xi'an Commercial Bank	Monthly interest rate 0.6638% initially, adjustable in line with basic interest rate announced by PBOC.		—		3,437
			—		3,437

F-21

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

The interest rate was 8% per annum and was secured by a guarantee granted by a third party and Tao Li, and pledged by another third party with two land use rights valued as RMB114,709,735. The Company repaid the loan on July 6, 2010. The interest expenses from these short-term loans were $218,000, $340,000 and $531,000 for the years ended September 30, 2010, 2009 and 2008, respectively.

NOTE 17. DIVIDEND PAYABLE

	As of September 30, 2010		As of November 30, 2009
	US$(’000)		US$(’000)
Dividend due to shareholders		772		1,117

In fiscal year 2009 the shareholders made a resolution to appropriate US$4,096,000 to all shareholders in proportion to their shareholding percentage. In fiscal year 2010, two shareholders received their dividend payment. The balance represents outstanding unpaid dividends to the shareholders.

NOTE 18. RELATED PARTY TRANSACTIONS

	For the years ended September 30,
	2010		2009		2008
	US$(’000)		US$(’000)		US$(’000)
Sales to related parties:
Xi’an TechTeam Humic Acid Productions Co., Ltd.		—		1,148		—
		—		1,148		—

Xi’an TechTeam Humic Acid Productions Co., Ltd., which is a subsidiary of China Green Agricultural Co., Inc. (CGA), a company under common control with the Company, received products from the Company at a consideration of US$1,148,000 in the year ended September 30, 2009 and the payment was fully received. There were no other sales from related parties for the year ended September 30, 2010.

For the year ended September 30, 2009, Kingtone Information, the VIE provided its self-owned office space at 3/F, Area A, Block A, No. 18 South Taibai Road, Xi’an 710065, People’s Republic of China to Xi’an Techteam Science and Technology Industry (Group) Co., Ltd. (the “Group Company”), which is controlled by Tao Li, the Company’s Chairman. The Group Company later leased these offices to CGA for no consideration for an unspecified term. On September 30, 2010, CGA cancelled the lease agreement with the Group Company without penalty and signed a two year lease starting from July 1, 2010 directly with the VIE. According to the new lease agreement, the monthly rent is approximately $1,600 (RMB 10,800).

The Company’s Beijing office is located in two Suites (2208 and 2209) at Building 16, An Hui Dong Li, Chaoyang District, Beijing. It covers a combined gross floor space of 184.8 square meters. Tao Li owns this space and allows the Company to use it for no consideration for an unspecified term. Such amount is immaterial.

F-22

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

NOTE 19. MAJOR CUSTOMERS AND VENDORS

One customer accounted for 15.5% , 44.7% and 57% of total sales for the years ended September 30, 2010, 2009 and 2008, respectively. The outstanding accounts receivable balance for this customer is 21.8% and 64.4% of the total accounts receivable balance as of September 30, 2010 and November 30, 2009, respectively.

Two vendors each accounted for over 10% of the total purchases for the year ended September 30, 2010. No vendor accounted for over 10% of the total purchases for the years ended September 30, 2009 and 2008.

NOTE 20. COMMITMENTS AND CONTINGENCIES

The Company has one VIE as of September 30, 2010. In the opinion of the management, (i) the ownership structure of the Company and the VIE are in compliance with existing PRC laws and regulations; (ii) the contractual arrangements with the VIE and its shareholder are valid and binding, and will not result in any violation of PRC laws or regulations currently in effect; and (iii) the Company's business operations are in compliance with existing PRC laws and regulations in all material respects. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Company and its contractual arrangements with the VIE are found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its ownership structure and operations in the PRC to comply with the changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company's current ownership structure or the contractual arrangements with the VIE is remote based on current facts and circumstances.

On December 18, 2009, the VIE entered into a two-year financial guarantee with Xi’an Taiyigong Credit Union to guarantee the payment obligations of a third party’s short-term loan of RMB4,400,000.

NOTE 21. SHARE-BASED COMPENSATION

In order to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of the Company's business, its board of directors and its shareholders approved and adopted an Omnibus Incentive Plan in April 2010 (the "2010 Plan"). Under the 2010 Plan, the Company may grant options or restricted award to its employees, directors and consultants to purchase an aggregate of no more than 1,500,000 ordinary shares of the Company, subject to different vesting requirements. The 2010 Plan will be administered by the Compensation Committee (the "Plan Administrator"). The officers of the Company have been authorized and directed by the Plan Administrator to execute Option Agreements with those persons selected by the Plan Administrator and issue ordinary shares of the Company upon exercise of any options so granted pursuant to the terms of an Option Agreement.

All options granted under the 2010 Plan have a term of ten years from the option grant date and vest according to the terms and conditions set forth in each respective grant agreement. On May 14, 2010, the Company granted 180,000 options, to a combination of employees and directors of the Company at an exercise price of US$4.00. The Company did not grant any equity awards for the year ended September 30, 2009. As of September 30, 2010, options to purchase 180,000 of ordinary shares were outstanding. On May 14, 2010, the Company also granted 100,000 restricted shares to an officer with 1/2 to be vested on April 23, 2011 and 1/2 to be vested on April 23, 2012.

The Black-Scholes option pricing model was applied in determining the estimated fair value of the options granted to employees and non-employees. The model requires the input of highly subjective assumptions including the estimated expected stock price volatility, the expected price multiple at which employees are likely to exercise share options. For expected volatilities, the Company has made reference to the historical price volatilities of ordinary shares of several comparable companies in the same industry as the Company. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury Bills yield in effect at the time of grant. The Company's management is ultimately responsible for the determination of the estimated fair value of its ordinary shares. The Company calculated the estimated fair value of the options on the grant date (May 14, 2010) with the following assumptions:

F-23

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

	May 14, 2010
Risk-free interest rates		1.63%
Expected term	2 years
Expected volatility		90%
Expected dividend yield		0%
Fair value of underlying ordinary share (per share) (*)	US$ 3.94

(* there is no trade on the grand date, this represented initial public offering close price)

The Company recognized compensation cost for options granted as general and administrative expense on a straight-line basis for each separately vesting portion of the award (the graded vesting attribution method). The fair value of options on the grant date of May 14, 2010 was $1.89 per share. The share-based compensation expense for options was $179,000 for the year ended September 30, 2010. There was no share-based compensation expense for options for the years ended September 30, 2009 and 2008.

The Company records share-based compensation expense for restricted shares granted to non-employees in exchange for services at fair value as of the grand date which was $3.94 based on the graded vesting attribution method . The share-based compensation expense for restricted shares was $123,000 for the year ended September 30, 2010. There was no share-based compensation expense for restricted shares for the years ended September 30, 2009 and 2008.

NOTE 22. STATUTORY RESERVES

Under PRC law, Softech and Kingtone Information are required to provide for certain statutory reserves, namely a general reserve, an enterprise expansion fund and a staff welfare and bonus fund. The entities are required to allocate at least 10% of their after tax profits on individual company basis as determined under PRC GAAP to the general reserve and have the right to discontinue allocations to the general reserve if such reserve has reached 50% of registered capital. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the Board of Directors of the entity. These reserves can only be used for specific purposes and are not transferable to the Company in the form of loans, advances, or cash dividends.

As of September 30, 2010 and November 30, 2009, the Company had appropriated US$844,000 and US$231,000, respectively in its statutory reserves.

NOTE 23. ORDINARY SHARES

The Company’s Memorandum and Articles of Association, as amended, authorized the Company to issue 100,000,000 shares of US$0.001 par value per ordinary share. Each ordinary share is entitled to one vote. The holders of ordinary shares are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors. The Company had 10,000,000 ordinary shares issued and outstanding prior to the May 2010 public offering. In May 2010, the Company issued 4,000,000 shares of ADSs, representing 4,000,000 ordinary shares, through its depositary, Bank of New York Mellon on the Nasdaq Capital Market, at a consideration of US$4.00 per share for a gross consideration of US$16,000,000. As of September 30, 2010, there were 14,000,000 ordinary shares issued and outstanding.

F-24

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except shares and per share amount)

NOTE 24. EARNINGS PER ORDINARY SHARE

	For the years ended September 30,
	2010		2009		2008

Numerator used in basic net income per share:
Net income	$	8,237,000	$	5,297,000	$	1,015,000
Shares (denominator):
Weighted average ordinary shares outstanding		11,527,473		10,000,000		10,000,000
Weighted average ordinary shares outstanding used in computing diluted earnings per ordinary share		11,527,473		10,000,000		10,000,000

Earnings per ordinary share- basic and diluted	$	0.71	$	0.53	$	0.10

As of September 30, 2010, the Company had 100,000 restricted shares and 180,000 outstanding options that could potentially dilute basic income per share in the future, but which were excluded in the computation of diluted income per share in the periods presented, as their effect would have been anti-dilutive since the grant price of these restricted shares and the exercise price of these option were higher than the average market price during period presented.

NOTE 25. SUBSEQUENT EVENTS

Management has considered all events and transactions that occurred after September 30, 2010 and through the date of the financial statements are issued, and has determined that the Company did not have any material subsequent events that require adjustment to or disclosure in the consolidated and combined financial statements during this period.

F-25

British Virgin Islands		3rd Floor, Borough A, Block A. No.181, South Taibai Road, Xi’an, Shaanxi Province, People’s Republic of China 710065
(Jurisdiction of incorporation or organization)		(Address of principal executive offices)

Title of each class		Name of each exchange on which registered
Ordinary shares, par value $.001 per share		None

American Depositary Shares, each representing		Nasdaq Capital Market
one Ordinary Share

	E.	Taxation.	73

	F.	Dividends and Paying Agents.	79

	G.	Statement by Experts.	79

	H.	Documents on Display.	79

	I.	Subsidiary Information.	79

Item 11.		Quantitative and Qualitative Disclosures about Market Risk.	79

Item 12.		Description of Securities Other than Equity Securities.	80

Part II			82

Item 13.		Defaults, Dividend Arrearages and Delinquencies.	82

Item 14.		Material Modifications to the Rights of Security Holders and Use of Proceeds.	82

Item 15.		Controls and Procedures.	83

Item 16A.		Audit Committee Financial Expert.	83

Item 16B.		Code of Ethics.	83

Item 16C.		Principal Accountant Fees and Services.	84

Item 16D.		Exemptions from the Listing Standards for Audit Committees.	84

Item 16E.		Purchases of Equity Securities by the Issuer and Affiliated Purchasers.	84

Item 16F.		Change in Registrant’s Certifying Accountant.	84

Item 16G.		Corporate Governance.	84

Part III

Item 17.		Financial Statements.	84

Item 18.		Financial Statements.	84

Item 19.		Exhibits.	86

Index to Consolidated Financial Statements			F-1

For the Years Ended September 30,
	2010			2009			2008			2007			2006
	Audited			Audited			Audited			Unaudited			Unaudited
	Consolidated and Combined			Consolidated and Combined
	($ in Thousands, Except per Share Data)
Total revenues	$	14,506		$	11,240		$	4,286		$	4,012		$	1,472
Cost of revenues		2,352			3,894			1,621			2,972			775
Gross profit		12,154			7,346			2,665			1,040			697
Operating expenses:
Selling and marketing		341			350			301			239			237
General and administrative		1,635			537			355			644			504
Research and development		179			139			79			0			0
Total operating expenses		2,155			1,026			735			883			740
Operating income (loss)		9,999			6,320			1,930			157			(44	)
Subsidy income		44			307			163			—			—
Interest expense		(218	)		(340	)		(531	)		(608	)		(506	)
Other income (expense)		20			(55	)		(356	)		—			2
Income before income tax expense		9,845			6,232			1,206			(451	)		(547	)
Income tax expenses		1,608			935			191			—			—
Net income(loss)	$	8,237		$	5,297		$	1,015		$	(451	)	$	(547	)
Other comprehensive income
Foreign currency translation gain		598			22			544			267			-
Comprehensive income	$	8,835		$	5,319		$	1,559		$	(184	)	$	(547	)
Earnings (loss) per share:
Basic	$	0.71		$	0.53		$	0.10		$	(0.05	)	$	(0.05	)
Diluted	$	0.71		$	0.53		$	0.10		$	(0.05	)	$	(0.05	)
Weighted average ordinary shares:
Basic		11,527,473			10,000,000			10,000,000			10,000,000			10,000,000
Diluted		11,527,473			10,000,000			10,000,000			10,000,000			10,000,000

	As of September 30,		As of November 30
	2010		2009		2008		2007		2006
	Audited		Audited		Audited		Unaudited		Unaudited
	Consolidated and Combined		Consolidated and Combined
			($ in Thousands)
Cash and bank deposits		14,909		344		9		7		98
Total current assets		23,806		4,014		12,884		17,360		11,745
Total assets		38,073		17,907		14,677		18,687		13,833
Advances from customers		371		1,398		2,817		3,168		315
Dividend payable		772		1,117		—		—		—
Total current liabilities		5,306		8,781		6,953		13,601		8,794
Total shareholders’ equity		32,767		9,126		7,724		5,086		5,039
Total liabilities and shareholders’ equity		38,073		17,907		14,677		18,687		13,833

Part I			5

Item 1.		Identity of Directors, Senior Management and Advisers.	5

Item 2.		Offer Statistics and Expected Timetable.	5

Item 3.		Key Information.	5

	A.	Selected Financial Data.	5

	B.	Capitalization and Indebtedness.	7

	C.	Reasons for the Offer and Use of Proceeds.	7

	D.	Risk Factors.	7

Item 4.		Information on the Company.	25

	A.	History and Development of the Company.	25

	B.	Business Overview.	26

	C.	Organizational Structure.	37

	D.	Property, Plants and Equipment.	39

Item 4A.		Unresolved Staff Comments.

Item 5.		Operating and Financial Review and Prospects.	40

	A.	Operating Results.	40

	B.	Liquidity and Capital Resources.	53

	C.	Research and Development, Patents and Licenses, etc.	53

	D.	Trend Information.	53

	E.	Off-balance Sheet Arrangements.	54

	F.	Tabular Disclosure of Contractual Obligations.	55

Item 6.		Directors, Senior Management and Employees.	55

	A.	Directors and Senior Management.	55

	B.	Compensation.	57

	C.	Board Practices.	60

	D.	Employees.	63

	E.	Share Ownership.	63

Item 7.		Major Shareholders and Related Party Transactions.	65

	A.	Major Shareholders.	65

	B.	Related Party Transactions. Business Relationships.	65

	C.	Interests of Experts and Counsel.	67

Item 8.		Financial Information.	67

	A.	Consolidated Statements and Other Financial Information. Financial Statements.	67

	B.	Significant Changes.	68

Item 9.		The Offer and Listing.	68

	A.	Offer and Listing Details.	68

	B.	Plan of Distribution.	68

	C.	Markets.	68

	D.	Selling shareholders.	69

	E.	Dilution.	69

	F.	Expenses of the issue.	69

Item 10.		Additional Information.	69

	A.	Share Capital.	69

	B.	Memorandum and Articles of Association	69

	C.	Material Contracts.	69

	D.	Exchange Controls.	69

Name	Relationship to Kingtone Wireless	Shares
Tao Li	Chairman	6,099,107
Peng Zhang	Chief Executive Officer	35,357
Li Wu	Director	107,839
Pengguo Xi	Vice President of Research and Development	35,357
Xianying Chen	Vice President of Application Development	35,357
Wei Pu	Softech employee	102,536
Yu Fan Zhang	Softech employee	88,393
Wei Zhang	Softech employee	88,393
Xiao Bin Zhang	Softech employee	53,036
Wei Wang	Softech employee	37,125
June Ma	Former Chief Technology Officer	35,357
Jian Ping Li	Former Softech employee	88,393

Name of Invention	Application Number	Publication Number	Publication Date
BREW platform based audio-video collection and wireless transmission system	200710018505.0	101159864	April 9, 2008

WINCE platform based audio-video collection and wireless transmission system	200710018506.5	101159865	April 25, 2008

Wireless video transmission system based on Arena platform	200810150745.0	101420597	April 29, 2009

Multilink wireless mobile industrial management and control integrated data transmission system	200810150072.9	101345764	January 14, 2009

Video monitoring information interaction system based on Symbian platform	200810150746.5	101420598	April 29, 2009

Name of Software	Registration Number	Date of Issuance
Wireless video monitoring system V1.0	2007SR12909	August 28, 2007

RFID based wireless transportation administration monitoring system V1.0	2007SR17240	November 1, 2007

Wireless emergency command and management system V1.0	2008SR04120	February 26, 2008

Mobile industry management and control integrated system V1.0	2008SR18892	September 10, 2008

Wireless mobile news dispatches system V1.0	2008SR18893	September 10, 2008

Wireless police affairs system V1.0	2009SR04756	November 10, 2009

Wireless OA system V1.0	2009SR07729	February 25, 2009

Registered Trademark	Registration Number	Classification Number	Valid Period
联合寻呼	1639871	38*	September 21, 2001 to September 20, 2011
KingTone	3559772	9*	November 28, 2004 to November 27, 2014
KingTone	4392291	42*	July 28, 2008 to July 27, 2018
联合信息	6484024	38*	April 7, 2010 to April 6, 2020
联合	6484025	38*	March 28, 2010 to March 27, 2020

Pending Trademark	Application Number	Classification Number	Application Date	Date of Acceptance for Application
	7402901	9*	May 18, 2009	June 4, 2009
联合信息	7402911	35*	May 18, 2009	June 4, 2009
联合信息	7402912	37*	May 18, 2009	June 4, 2009
联合信息	7402913	42*	May 18, 2009	June 4, 2009
联合信息	7402914	9*	May 18, 2009	June 4, 2009
	7402915	41*	May 18, 2009	June 4, 2009
	7402916	45*	May 18, 2009	June 4, 2009

	For the Years Ended September 30
	2010					2009					Changes
	($ in Thousands, Except per Share Data)
Revenue	$	14,506		100.0	%	$	11,240		100.0	%		29.1	%
Cost of sales		2,352		16.2	%		3,894		34.6	%		-39.6	%
Gross profit		12,154		83.8	%		7,346		65.4	%		65.5	%
Operating expenses
Selling and marketing expenses		341		2.4	%		350		3.1	%		-2.6	%
General and administrative expenses		1,635		11.3	%		537		4.8	%		204.5	%
Research and development expense		179		1.2	%		139		1.2	%		28.8	%
Total operating expenses		2,155		14.9	%		1,026		9.1	%		110.0	%
Income from operations		9,999		68.9	%		6,320		56.2	%		58.2	%
Other income (expense)
Subsidy income		44		0.3	%		307		2.7	%		-85.7	%
Interest expense		(218	)	-1.5	%		(340	)	-3.0	%		-35.9	%
Other income (expense)		20		0.1	%		(55	)	0.5	%		-136.4	%
Total other income (expense)		(154	)	-1.1	%		(88	)	-0.8	%		74.6	%
Income before income tax expenses		9,845		67.9	%		6,232		55.4	%		58.0	%
Income tax expenses		1,608		11.1	%		935		8.3	%		72.0	%
Net income	$	8,237		56.8	%	$	5,297		47.1	%		55.5	%
Other comprehensive income
Foreign currency translation gain		598		4.1	%		22		0.2	%		2,618.2	%
Comprehensive income	$	8,835		60.9	%	$	5,319		47.3	%		66.1	%
Net earnings per ordinary share:
Basic and Diluted	$	0.71				$	0.53					34.9	%
Weighted average number of ordinary shares outstanding		11,527,473					10,000,000					15.3	%

	For years ended September 30,
	2009				2008				changes
	($ in thousands, except per share data)
Revenue
Software	$	5,170	46.0	%	$	987	23.0	%		423.8	%
Wireless system solution		6,070	54.0	%		3,299	77.0	%		84.0	%
Total revenue		11,240	100.0	%		4,286	100.0	%		162.2	%

Cost of Sales
Software		476	12.2	%		183	11.3	%		160.1	%
Wireless system solution		3,418	87.8	%		1,438	88.7	%		137.7	%
Total cost of sales		3,894	100.0	%		1,621	100.0	%		140.2	%

Gross Margin
Software		4,694	63.9	%		804	30.2	%		483.8	%
Wireless system solution		2,652	36.1	%		1,861	69.8	%		42.5	%
Total gross margin		7,346	100.0	%		2,665	100.0	%		175.6	%

Gross Margin Percentage
Software			90.8	%			81.5	%
Wireless system solution			43.7	%			56.4	%
Blended gross margin percentage			65.4	%			62.2	%

Name	Type of Equity Award	Number of Ordinary Shares			Exercise Price		Grant Date	Expiration Date
Ying Yang	Restricted Shares		100,000	(1)		n/a	May 14, 2010		n/a
Ying Yang	Options		150,000	(2)	$	4.00	May 14, 2010	May 14, 2020
Lili Dong	Options		10,000	(3)	$	4.00	May 14, 2010	May 14, 2020
Melody Shi	Options		10,000	(3)	$	4.00	May 14, 2010	May 14, 2020
James Fong	Options		10,000	(3)	$	4.00	May 14, 2010	May 14, 2020

	PAGES

Report of Independent Registered Public Accounting Firm	F-1

Consolidated and Combined Balance Sheets
as of September 30, 2010 and November 30, 2009	F-2

Consolidated and Combined Statements of Income and Comprehensive Income	F-3
for the Years Ended September 30, 2010, 2009 and 2008

Consolidated and Combined Statements of Cash Flows	F-4
for the Years Ended September 30, 2010, 2009 and 2008

Consolidated and Combined Statements of Stockholders’ Equity	F-5
for the Ten Months Ended September 30, 2010 and the Years Ended November 30, 2009 and 2008

Notes to the Consolidated and Combined Financial Statements	F-6 – F-25

	As of September 30,		As of November 30,
	2010		2009
	(see note below)
ASSETS
Current assets
Cash and cash equivalents	$	14,909	$	344
Accounts receivable, net of allowance		6,650		2,353
Unbilled revenue		973		178
Due from related companies		120		-
Inventories, net		383		127
Other receivables and prepayments		771		1,012
Total Current Assets		23,806		4,014
Non-current assets
Property and Equipment, net		13,637		1,693
Deposit to purchase building		-		12,200
Intangible assets		630		-
Total Assets	$	38,073	$	17,907

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Accounts payable	$	575	$	1,409
Advances from customers		371		1,398
Other payables and accruals		167		559
Taxes payable		3,421		601
Short-term loan		-		3,437
Amounts due to shareholder		-		200
Dividend payable		772		1,177
Total Current Liabilities		5,306		8,781

Commitments and contingencies

Stockholders' equity
Ordinary share ($.001 par value, 100,000,000 shares authorized, and 10,000,000 shares and 14,000,000 shares issued and outstanding)	$	14	$	10
Paid in capital		-		6,897
Additional paid in capital		21,915		216
Appropriated retained earnings		844		231
Unappropriated retained earnings		8,281		657
Accumulated other comprehensive income		1,713		1,115
Total Stockholders' Equity		32,767		9,126
Total Liabilities and Stockholders' Equity	$	38,073	$	17,907

	Ordinary shares				Paid-in			Additional paid-in		Appropriated Retained		Unappropriated Retained			Comprehensive		Total stockholders’
	No. of share		Amount		capital			capital		earnings		earnings			income		equity

Balance at November 30, 2007		-	$	-	$	6,034		$	-	$	30	$	(1,527	)	$	549	$	5,086
Net income for the year		-		-		-			-		-		1,015			-		1,015
Share contribution		-		-		863			216		-		-			-		1,079
Transfer to statutory reserves		-		-		-			-		32		(32	)		-		-
Foreign currency translation gain		-		-		-			-		-		-			544		544

Balance as of November 30, 2008		-	$	-	$	6,897		$	216	$	62	$	(544	)	$	1,093	$	7,724
Share contribution		10,000,000		10		-												10
Net income for the year		-		-		-			-		-		5,297			-		5,297
Payment of dividends		-		-		-			-		-		(4,096	)		-		(4,096	)
Transfer to statutory reserves		-		-		-			-		169					-		169
Foreign currency translation gain		-		-		-			-		-		-			22		22

Balance as of November 30, 2009		10,000,000		10		6,897			216		231		657			1,115		9,126
Issuance of ordinary shares in form of American Depositary Shares		4,000,000		4		-			14,500									14,504
Share-based compensation									302									302
Net income for the year		-		-		-			-		-		8,237			-		8,237
Effect of reorganization		-		-		(6,897	)		6,897		-					-		-
Transfer to statutory reserves		-		-		-			-		613		(613	)		-		-
Foreign currency translation gain		-		-		-			-		-		-			598		598

Balance as of September 30, 2010		14,000,000	$	14	$	-		$	21,915	$	844	$	8,281		$	1,713	$	32,767

	4.	Scope:
		Party B shall work on the 28 greenhouses located at Yuxing Modern Agricultural Science & Technology Park, Hu County, including the design and overall plan of an automation system, surveillance system (including greenhouse and road), background music system, surrounding protective system and integrated pipeline system; as well as purchase and construction of all the said systems.

	4)	Construct per the engineering design, and in accordance with the relevant provisions issued by the State;
	5)	Cooperate with the staff or delegate from Party A for regular inspection and testing.

Party A:	Party B
Xi’an Hu County Yuxing Agriculture	Xi’an Kingtone Information Co., Ltd (Seal)
Technology Development Co., Ltd. (Seal)
Address: North Xi’an Village,	Address: No.181 Taibai Road South,
Weifeng Town, Hu County	Borough A, Block A , 3rd floor, Xi’an
Xi’an, Shaanxi	Shaanxi

Legal Representative:	Legal Representative:
Appointed Representative: Qingqing Zhang	Appointed Representative: Peng Zhang
Telephone: 029-84999286	Telephone:029-88231591
Issuing Bank: SPD Bank Xi'an Branch	Issuing Bank: SPD Bank Xi'an Branch
in Xi’an High-tech Development Zone	in Xi’an High-tech Development Zone
Bank Account: 72040158000017563	Bank Account: 72040158000007060
Signing Date: August 10, 2010	Signing Date: August 10, 2010