This report contains "Forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 which provides a "Safe harbor" for these types of statements. To the extent statements in this report involve, without limitation, our expectations for growth, estimates and outlook of future revenue, expenses, profit, cash flow, balance sheet items or any other guidance on future periods, these statements are forward-looking statements.
Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, level of activity, performance or achievements expressed or implied by any forward-looking statement. We assume no obligation to update any forward-looking statements. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's audited consolidated financial statements and the related notes included elsewhere in this report.

Overview

We are a leading developer and provider of integrated ERP software solutions, development on demand and services in China. Our clientele base includes sophisticated Chinese businesses, especially those operating in China's gas and oil industry. Our solutions and services are designed to (i) enable centralized financial and accounting activity management for large corporations with operations spreading throughout China and internationally; (ii) improve decision efficiency, budget control and cash flow management; and (iii) prevent fraud. While our solutions initially centered upon accounting matters, we have expanded our solutions to address other business operational needs such as planning, statistics, process control, business intelligence, equipment management and other business needs. Our solutions enable our customers to implement company-wide solutions by integrating business activities ranging from a company's headquarters down to its various subsidiaries and other operational units. Our major clients, PetroChina (PetroChina Company Limited and China National Petroleum Corporation, its state-owned parent company) and Sinopec (China Petrochemical Corporation/China Petroleum and Chemical Corporation and Sinopec Group, its state-owned parent company) are large oil and refinery firms formed following the Chinese government's decision to decentralize the oil and gas industry within China. Each company is ranked in the Fortune 500.

Overview of Business Operations in the First Fiscal Quarter of 2009

We generate revenue through software systems development, integration and provision of related support services. Our revenue during the fiscal quarter ended March 31, 2009, reflect the seasonality nature of our business. Our revenue has been subject to high seasonality and the revenue recognized in the first quarter is usually the smallest in proportion of that for the whole year in most cases, so does in this year, due to our clients' budgeting and planning schedule. Nevertheless, we continued to experience steady demand for our services from and also to generate revenue through the provision of our services to our oil industrial client base during the three months ended March 31, 2009.

The accompanying audited consolidated financial statements reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the results for the three month period ended March 31, 2009. These financial statements have been prepared in accordance with generally accepted accounting principles in the United States. These financial statements should be read in conjunction with the related notes for the period ended March 31, 2009 included elsewhere in this Form 10-Q.

Operating Results

The condensed and consolidated financial statements presented in hereinbefore
set forth key components of our results of operations for the periods indicated,
both in dollars and as a percentage of sales revenue and key components of our
revenue for the periods indicated in dollars. The financial data for the three
months ended March 31, 2009 reflect the operating results of the Company, in
comparison with the financial data for the same period in 2008.

Summary of Gross Margin

                         3 Months Ended at March 31
                                   2009         2008     Change $ Change %
          Sales               1,422,086      558,006      864,080     155%
          Cost of sales         768,042      493,758      274,284      56%
          Gross profit          654,044       64,248      589,796     918%
          GM Ratio                  46%          12%                  299%

Revenue

During the first quarter of 2009, revenue from large-scale software systems integration projects comprised a higher proportion of total revenue. The total value of our revenue is $1,422,086, 155% increase from $558,006 in first quarter of 2008. Our revenue from large-scale software systems integration projects continued to comprise a higher proportion of total revenue The significant increase in our sales comparing to that in the same period in 2008 due to a large sales contract for the equipment in association with the system implementation signed with our major client and new business contract signed by our new Hong Kong branch, in addition to the natural growth with our running projects as well as natural extension of the large system projects completed in the past.

Cost of sales

Our cost of sales increased by $274,284, or 56% to $3,395,695 for the three month ended March 31, 2009, from $493,758 in the same three month period ended in 2008. Our costs increased in a slower pace with our revenue as a result of cost control measures to contain total employee salaries, which is the major part of our cost of sales. The increase in the cost of sales, was largely due to our total pay-roll cost has increased in this period as the Company recruited a large number of new employees to work for the increasing orders and contracts from the clients.

Gross Profit

For the three months ended March 31, 2009, our gross profit increased to $654,044 from $64,248 for the same period in 2008, $589,796, or 918% increase. For the three months ended March 31, 2009, our gross profit as a percentage of revenue increased to 46%, from 12% for the same period in 2008. The significant increase in gross profit margin was due to exceptional increase in revenue in first quarter of 2009 and the relatively slower pace of increase in cost of sales. It also indicates that high seasonality pattern of our revenue is improving.

Summary of Operating Expenses

                                               3 Months Ended at March 31
                                                     2009                2008      Change $       Change %
General and administrative expenses               160,037              13,369       146,668           1097 %
Selling expenses                                   62,097               3,065        59,032           1926 %
Professional fees                                  83,561              32,972        50,589            153 %
Stock option expense                              171,921                           171,921            100 %
Gain on disposition of property and
equipment                                            (732 )            (1,374 )         642          46.72 %
Total admin expenses                              476,884              48,032       428,852            893 %

Operating Expenses

Operating expenses consist primarily of general and administrative expenses, selling expenses, professional fees and stock option expense and other expenses incurred in connection with general operations. Administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff. Professional fee covers expenses for legal counsel and other advisor fees, audit fees and service charges associated with corporate publicity and investor relations. For the three months ended March 31, 2009, our operating expenses increased to $476,884 from $48,032 for the three month period ended at March 31, 2008, a 893% increase. For the three months ended March 31, 2009, our general and administrative expenses increased to $160,037, from $13,369 for the three months ended March 31, 2008, or 1097% increase. The increase in administrative expenses was mainly attributable to the increases in our administrative business trips including the international trips for investor relations. The increase in selling expenses (by 1926%, from the period to period) was due to the overhead allocation of the newly established sales and marketing department. It also included a large increase in the expenses for professional fee for the services relating to our NASDAQ listing and publicity. In addition, stock options issued to our employees became a large proportion in this category and accounted for 36% of our total operating expenses, which contributed significantly to the total increase of our expenses during this period.

Summary of Other Income and Expenses


                                             3 Months Ended at March 31
Items                                                2009             2008        Change $       Change %
Income from operations                            177,160           16,216         160,944            993 %
Other Income (expense)
Other income                                           -               537          (537)
Government Grand                                  146,325               -          146,325            100 %
Finance cost                                        (389)            (214)           (175)           (82) %
Interest income                                    39,526           14,125          25,401            180 %

Income before provision for income taxes          362,622           30,664         331,958           1083 %

Income tax                                         69,496                -          69,496           100%

Net income for the year                           293,126           30,664         262,462            856 %
Other comprehensive income                        (29,060 )        184,518       (213,578)          (116) %

Comprehensive income                              264,066          215,182          48,882             23 %

Income from Operations

Income from operations was $177,160, for the three months ended March 31, 2009, a 993% increase from $16,216 for the same period in 2008 because of a large revenue growth in first quarter of 2009.

Other Income and Expenses

In the Other Income and Expenses, other income was $ 146,324, increased substantially by 27148%, comparing to $537 for the three months ended March 31, 2008, due to receiving a large cash award from the local government for our successful IPO and international market listing.. Interest income was $39,526 for the three months ended March 31, 2009 and $14,125 for the three months ended March 31, 2008, a 180% increase. The increase in interest income was mainly due to large cash fund available from the proceeds of our IPO in September 2008 to be invested and investment in selected bank certificate programs with relatively higher returns and little risk for the principal

Income Before Provision of Income Tax

As a result of the factors described above, income before tax provision was $362,622 for the three months ended March 31, 2009, an increase of $331,958, or 1083%, from $30,664 for the same period in 2008. The substantial increase in income before tax provision was resulted from the revenue increase following our expansion strategy unfolding.

Income Tax Expense

Pansoft Jinan is a Foreign Investment Enterprise or FIE engaged in the advanced technology industry which entitles it to a two-year exemption from income tax before 2008 and then started to pay income tax at the rate of 12.5%, 50% cut from the regular income tax rate, due to its FIE tax deduction status granted by PRC tax authorities. Current income tax expense for the three months ended March 31, 2009 was $5,197. Income tax provision for the future income expense for the three months ended March 31, 2009 was $64,299 driven by temporary differences between PRC GAAP and the US GAAP.

Net Income and Comprehensive Income

As a result of the factors described above, net income was $293,126 for the three months ended March 31, 2009, substantially increased by $262,462, or 856%, from $30,664 for the same period in 2008. However comprehensive income for the three months ended March 31, 2009 was $264,066, increased by 23% from $215,182 for the same period in 2008 due to a loss of $29,060 in other comprehensive income in this reporting period resulted from the unfavorable exchange rate move that US dollar had been in uptrend against Chinese currency - RMB, in contrast, there was a large gain of $184,518 in the same period in 2008.

Liquidity and Capital Resources

Cash Flows and Working Capital

As of March 31, 2009, we had cash and cash equivalents of $ 10,794,237.

Our cash and cash equivalents substantively increased due to the proceeds from the IPO which was completed in September 2008. Management believes that the Company's current available working capital should be adequate to sustain its operations at current levels through at least the next twelve months and will provide the Company with the funds necessary to execute its business strategy.

Comparison of Three Months Ended March 31, 2009 and 2008

Net cash used in operating activities totaled $1,259,074 for the three months ended March 31, 2009, an decrease of $1,364,036 compared to cash used in operations of $104,962 for the three months ended March 31, 2008. This decrease resulted primarily from the following changes in operating assets and liabilities:

· $397,150 increase in accounts receivable

· $525,856 increase in unbilled revenues

· $79,357 increase in prepayments, deposits and other receivables

· 87,730 increase in inventory

· $492,532 decrease in accounts payable and accrued liabilities

· $86,433 decrease in deferred revenue

Account receivable is the revenue recognized based on percentage completion of the project contracted and has been billed to the client. The increase in accounts receivable was due to the fact that while we experienced rapid revenue growth, the contract payments from major customers have not picked up to the same level during the first quarter of 2009..

Unbilled revenue represents accumulated unbilled amount of revenue recognized, based on the Company's revenue recognition policy. The increase in unbilled revenue was due to the timing difference between revenue recognition process and invoicing process which needs to be coordinated with our clients' payment approval process.

The increase in prepayments, deposits and other receivables resulted from resulted from increases in business travel advance and bidding deposits..

The increase in inventory was resulted from hardware equipment purchased and resold to clients, yet the payment collected. The decrease in accounts payable and accrued liabilities is the result of paying off the bonuses for employees due to last year's performance and income tax.

Deferred revenue was the revenue was earned and recognized for projects for which the advanced payment was received as deposit. The decrease was resulted from the reduction of number of such projects requiring advanced payments.

Net cash used in investing activities was $109,335 for the three months ended March 31, 2009, compared to net cash used in investing activities of $486,510 for the three months ended March 31, 2008. The cash used in investing activities for the three months ended March 31, 2009 mainly occurred to acquire computer equipment for software development projects.

Cash flows from financing activities amounted to nil for the three months ended March 31, 2009.

The Company's working capital increased from $ $14,662,621 as of December 31, 2008 to $14,267,469 as of March 31, 2009.

Total current assets at March 31, 2009 amounted to $15,410,855, a decrease of $308,529 compared to $ 15,719,384 at December 31, 2008. The decrease was mainly due to decrease in the cash and equivalent account.

Current liabilities amounted to $748,234 on March 31, 2009 decreased by $703,661, 48% compared to $1,451,915 at December 31, 2008. This decrease has been attributed to a decrease of $494,071 in accounts payable and accrued liabilities in this period. Accounts payable and accrued liabilities mainly consisted of payables for management bonus, salary accruals and audit fees. The Company paid out most of fiscal 2008 outstanding account payable balance and employee bonus accrual during first quarter of 2009. In addition, the Company accrued $242,129 for both payable and future payable income taxes due to the timing difference of recognizing revenue.

The current ratio increased from 10.8 at December 31, 2008 to 20.6 at March 31, 2009. The change in the Company's current ratio was primarily due to the decrease of current liabilities. Management believes this changed current ratio indicates strong operating liquidity and expansion investment funds available for Company use.

Seasonality of Our Sales

Historically, the Company's operating results and operating cash flows were subject to seasonal variations. The Company's revenues recognized in the first two quarters are usually lower in proportion of that for the whole year. This is due to the fact that the Company generates revenue primarily through software systems development, integration and provision of related support services provided to large oil businesses in China. It is common for our large clients to sign large contracts in later quarters, especially fourth quarter of a year. We expect this pattern to continue and may be even more drastic, as a result of new market opportunity and new client development.

Inflation

Inflation did not materially affect our business or the results of our operations.

Off-Balance Sheet Arrangements

We did not have any off-balance arrangements.

Markets and Outlook

Looking forward, the management believes that demand for its services will continue to grow as the Company ramps up its development capacity and expansion strategy. As a result of the Company's brand name and reputation in the ERP industry for delivering high quality services at competitive prices in China, the management believes that it will continue to deliver solid revenue and earnings growth in rest of 2009.