**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **FORM
        10-KSB**
  (Mark
        One)
  **x**
              **ANNUAL
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934**
  **For
        the fiscal year ended June 30, 2007**
  **o**
              **TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934**
  **For
        the transition period from ___________ to ___________**
  **Commission
        file number 0-26598**
 
  **CHINA
        DONGSHENG INTERNATIONAL, INC.**
 (Exact
        name of registrant as specified in its charter)
  **Delaware**
              **22-3137907**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)**Jilin
                  Dongsheng Weiye Science and Technology Development Co., Ltd., Jifeng
                  East
                  Road, Gaoxin District**
                **Jilin,
                  Jilin Province, PRC**
              **132012**(Address
                  of principal executive offices)
              (Zip
                  Code)
 
 Registrant’s
                  telephone number, including area code:
              **86-432-4566702**
  **c/o
                  American Union Securities 100 Wall Street 15th Floor New York,
                  NY**
              **10005**(Address
                  of principal agent offices)
              (Zip
                  Code)
 
 Agent’s
                  telephone number, including area code:
              **(212)
                  232-0120**
 
 **PAPERCLIP
        SOFTWARE, INC.**
 (Former
        name, former address and former fiscal year, if changed since last
        report)
 
 Securities
                  registered under Section 12(b) of the Exchange Act:Title
                  of each class
              Name
                  of each exchange on which registered**None**
              **None**Securities
                  registered under Section 12(g) of the Exchange Act:**Common
                  Stock, par value $.001**(Title
                  of class)
  Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days. Yes x No o
  Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B contained in this form, and no disclosure will be contained,
        to
        the best of registrant’s knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB or any
        amendment to this Form 10-KSB. o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes o No x
 
 State
        issuer’s revenues for its most recent fiscal year. $31,320,831
 
 Aggregate
        market value of the voting and non-voting common stock held by non-affiliates
        of
        the Company as of June 30, 2007: $84,403,415
  Number
          of
          shares of the registrant's Common Stock outstanding as of October 12, 2007:
          31,546,134.
 1
   **TABLE
        OF CONTENTS**
 
 
 **Part
                  I**Item
                  1.
              Description
                  of Business.
              4Item
                  2.
              Description
                  of Property.
              7Item
                  3.
              Legal
                  Proceedings.
              7Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders.
              7**Part
                  II**Item
                  5.
              Market
                  for Common Equity and Related Stockholder Matters.
              8Item
                  6.
              Management’s
                  Discussion and Analysis or Plan of Operations.
              9Item
                  7.
              Financial
                  Statements.
              14Item
                  8.
              Changes
                  in and Disagreements With Accountants on Accounting and Financial
                  Disclosure.
              14Item
                  8A.
              Controls
                  and Procedures.
              14Item
                  8B.
              Other
                  Information.
              14**Part
                  III**Item
                  9.
              Directors,
                  Executive Officers, Promoters and Control Persons; Compliance with
                  Section
                  16(a) of the Exchange Act.
              15Item
                  10.
              Executive
                  Compensation.
              17Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters.
              18Item
                  12.
              Certain
                  Relationships and Related Transactions.
              18Item
                  13.
              Exhibits.
              19Item
                  14.
              Principal
                  Accountant Fees and Services.
              19**Signatures**
 
 
 2
 
 *Except
        as otherwise required by the context, all references in this prospectus to
        "we",
        "us”, "our", “CDSG”, or "Company" refer to the consolidated operations of China
        Dongsheng International, Inc., a Delaware corporation, and its wholly owned
        subsidiaries.*
  **Forward-Looking
        Statements and Associated Risks**
   *The
        Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
        for
        certain forward-looking statements. Some of the statements contained in this
        annual report of the Company discuss future expectations, contain
        projections of our operations or financial condition or state other
        forward-looking information. Some statements contained in this annual report
        on
        Form 10-KSB that are not historical facts (including without limitation
        statements to the effect that we "believe," "expect," "anticipate," "plan,"
        "intend," "foresee," or other similar expressions) and are forward-looking
        statements. These forward-looking statements are based on our current
        expectations and beliefs concerning future developments and their potential
        effects on us. There can be no assurance that future developments affecting
        us
        will be those anticipated by us. All comments concerning our expectations
        for
        future revenue and operating results are based on our forecasts of our plan
        of
        operation and do not include the potential impact of any future acquisitions
        or
        operations. These forward-looking statements involve significant risks and
        uncertainties (some of which are beyond our control) and assumptions. Should
        one
        or more of these risks or uncertainties materialize, or should any of our
        assumptions prove incorrect, actual results may vary in material respects
        from
        those projected in the forward-looking statements.*
   3
  **PART
        I**
 **Item
        1.********Description
        of
        Business.**
  **Business
        Development**
 
 PaperClip
        Software, Inc. (“Paperclip”), a Delaware Corporation, was originally
        incorporated in New Jersey in October 1991 as PaperClip Imaging Software,
        Inc.
        and is the successor by merger as of March 1992. Paperclip was engaged in
        the
        development and distribution of computer software for document management
        and
        transport of electronic document packages across the public Internet or a
        private intranet with interoperability, security and tracking
        capabilities.
  American
        Sunrise International, Inc. (“ASI”), a Delaware Corporation, was incorporated on
        May 30, 2006. Jilin Dongsheng Weiye Science & Technology Development Co.,
        Ltd. (“Dongsheng”) was incorporated in the People’s Republic of China (the “PRC”
or “China”) on August 16, 2002. On July 31, 2006, Dongsheng signed an agreement
        with ASI, whereby ASI agreed to purchase all of the net assets of Dongsheng
        for
        $1,250,000. Due to this change of ownership, Dongsheng became a wholly foreign
        owned entity. Dongsheng received its business license indicating its status
        as a
        wholly foreign owned entity on August 3, 2006.
  On
        November 6, 2006, the Company, ASI, all shareholders of ASI, and Dongsheng
        entered into a Stock Purchase and Share Exchange Agreement in which the Company
        acquired all of the issued and outstanding capital stock of ASI. As a result
        of
        this “Reverse Merger” transaction, the Company anticipated effecting a spin-off
        of its software development business. As a result of the spin-off, shareholders
        of record prior to effectiveness of the Reverse Merger will receive shares
        in
        the software development subsidiary. As of June 30, 2007, the Company has
        not
        completed the spin-off process, but it is expected that the registration
        statement will be filed by the end of October 2007. Going forward, the Company
        will operate its business through Dongsheng, its wholly-owned subsidiary
        which
        is engaged in the development and manufacture of nutritional supplements
        and
        personal care products domestically in China.
 
 **Our
        Business**
 
 ***Overview
        and Business Model***
  Dongsheng
          is a private Chinese corporation founded in 2002 that develops and manufactures
          nutritional supplements and personal care products. The Company employs
          a
          network marketing system, selling its products through approximately 200,000
          independent distributors (which include 17,607 full time independent sales
          representatives), 2,500 retail stores (which include 379 stores which
          exclusively sell Dongsheng's products) and e-commerce outlets over the
          internet.
          Distributors belonging to the network marketing system purchase products
          not
          only for their own sales efforts, but are encouraged to build and manage
          their
          own sales force by recruiting, managing, and training others to sell products.
          Distributors are compensated with commissions for a percentage of the sales
          generated by themselves, and by their business group.
 For
          the
          fiscal year ended June 30, 2007, Dongsheng sold products from two primary
          product lines: Aidong Nutritionals, which include supplements and healthcare
          products with Chitosan as a main ingredient and Jiujiu Ozone Purifiers,
          a line
          of portable home Ozone air, water, and food purifiers. In addition, Dongsheng
          sold "Nao Li Zhi Bao" herbal extracts, a Chinese herbal supplement line
          of
          natural botanical extracts and Donghe Cosmetics, a line of skin care
          products.
 By
        the
        end of October 2007, all forty Stock Keeping Units from these two principal
        product lines will be manufactured in-house. Dongsheng has received the Good
        Manufacturing Practices (GMP) accreditation (GB17405-1998) for its tablet,
        capsule, granule, soft gel, and hard gel nutraceutical products for its
        production facilties.  With in-house manufacturing and development
        facilities, Dongsheng can better control the quality of its raw materials
        and
        finished products, develop more high technology health care products, and
        enhance existing products.
 
 
 4
  ***Principal
        Products***
 
 For
        the
        fiscal year ended June 30, 2007, Dongsheng sold two principal product lines:
        Aidong Chitosan Nutritionals and  Jiujiu Ozone Purifiers. Aidong
        Chitosan Nutritionals accounted for 54% of total revenues while Jiujiu ozone
        purifier products accounted for 46% of total revenues.
 
 
 **Aidong
        Nutritionals**
 
 Aidong
        Nutritionals is Dongsheng’s main product line, and includes core nutritional
        supplementary products using chitosan as the main ingredient. Chitosan is
        an all
        natural product that has been widely used as a health supplement throughout
        Asia.  Extracted from chitin, chitosan is a polysaccharide, found in
        the exoskeletons of crustaceans. It is widely available in shrimps, crabs
        and
        certain insects. Chitosan has the ability to latch onto heavy metals, amino
        acids and fat. Chitosan has also been known to regulate the secretion of
        human
        hormones, and adjust the functionalities of the human body.
  Along
        with Chitosan Soft Capsules and Chitosan Fiber Capsules, products in the
        Aidong
        Nutritionals line include Chitosan Multi-Vitamins Capsules, American Ginseng
        Capsules, Ginkgo Capsules, Deep Sea Fish Oil, Calcium Capsules, and Aloe
        Vera
        Capsules.
 
 **Jiujiu
        Ozone Purifiers**
 
 Jiujiu
        Ozone Purifiers is a line of
        portable home Ozone air, water, and food purifiers. Ozone is a natural component
        of air, created when oxygen molecules are split into two separate atoms by
        ultraviolet radiation from the sun. The free atoms recombine in three-atom
        groups to form ozone. Ozone is a powerful natural sanitizer and deodorizer,
        and
        can help eliminate various kinds of harmful substances found in drinking
        water,
        such as mold and fungus. Compared to other water-purifying methods such as
        the
        usage of chlorine agent, which forms carcinogens such as chlorine ammonia
        and
        chloroform, ozone naturally dissolves into pure oxygen after a very short
        lifespan without leaving byproduct pollution.Ozone air purifiers
        improve the air
        quality by converting normal oxygen into ozone, which breaks down odors and
        other pollutants.
 
 
 ***Sales,
        Marketing and Distribution of Products***
 
 Dongsheng
        distributes products through
        a network marketing system, natural health food retailers, and e-commerce
        outlets over the web. Currently there are approximately 200,000 independent
        distributors and over 2,500 retail stores carrying the Company’s products.A network marketing
        system
        is a form of direct selling through independent distributors who purchase
        products at wholesale prices from the manufacturer and then make sales to
        consumers. Distributors belonging to the network marketing system purchase
        product not only for their own consumption, but are encouraged to build and
        manage their own sales force by recruiting, managing, and training others
        to
        sell products. Distributors are compensated for a percentage of the sales
        generated by their business group.
 
 To
        become
        a distributor of Dongsheng, a person must complete an application, purchase
        the
        products, and attend training seminars. Dongsheng also periodically sponsors
        and
        conducts regional distributor events and intensive training
        seminars.
   5
 
 ***Competition***
  In
        a
        competitive environment that is very fragmented, Dongsheng faces very few
        direct
        competitors. Several companies sell products similar to Dongsheng’s principal
        products.
 However
        no company uses the same network marketing distribution model for these
        products.
 Among
        the
        companies that sell chitosin based products are Xiamen Longlive Biological
        Product Co., Ltd.,  Hangtai County Jin Hu Carapace Product Co., Ltd.,
        Max Environmental Science Technologies Co., Ltd of Industrial Park of Suzhou,
        and Shenzhen Nanbai Enterprise Co., Ltd . These companies are manufacturers
        with
        small regional distribution networks. In comparison, Dongsheng sells its
        products in approximately 2500 retail outlets in twenty six provinces throughout
        China.  In addition, while Dongsheng maintains only two product lines
        with approximately 40 Stock Keeping Units (SKU), these companies generally
        sell
        hundreds of different lines of products with thousands of SKUs.
 
 
 ***Development
        and Growth Strategy***
 
 Dongsheng  has
        been involved in a significant build out of manufacturing, R&D and office
        facilities, as part of a vertical integration strategy that will allow the
        Company to bring the production of its main product lines in-house, by
        implementing the following strategic development plan.
 
 *Construction
        of New Facilities.*
 
 Dongsheng
        has invested in two production bases. The production lines are expected to
        be at
        full operations by the end of 2007. As of the date of this report, the
        production lines have already begun manufacturing.
  In
        addition, Dongsheng has invested in the construction of a research and
        development center which has been completed and will be used in the development
        of new products and research on improving existing products.
 
 *Pursue
          Strategic Acquisitions.* Dongsheng intends to pursue strategic
          acquisitions to add new products to the existing product mix.
 
 *Expand**Markets in China and Overseas**.*Dongsheng plans to
          distribute its products overseas including in the U.S., Europe, and Southeast
          Asia in the future.**The Company is also developing four companies
          domestically in Beijing, Shanghai,**Shenzhen, and Wuhan in 2007 in
          order to increase market share.
 ***Intellectual
        Property***
 
 We
        do not
        hold any U.S. registered patents or trademarks, or other intellectual
        property.
 
 ***Government
        Regulation***
 
 We
        are
        not aware of any existing or probable PRC government regulations that will
        have
        a material affect on our business.
 
 ***Research
        and Development***
 
 We
        did
        not incur any research and development expenses for the fiscal years ended
        June
        30, 2007 and 2006. As of the date of this report, Dongsheng has completed
        the
        construction of a research and development centers within its GMP certified
        workshops. In addition, Dongsheng has cooperation agreements with Huada
        Corporation based in Hong Kong to jointly develop new products for distribution
        within China and throughout the world. Lastly, Dongsheng has secured research
        partnerships with Northeast Agricultural University, the Medical School of
        Beihua University, the China Agricultural & Scientific Research Institute,
        and the Jilin Zuojia Specialty Institute of China.
 ***Employees***
 
 As
        of June 30, 2007, Dongsheng had 86 employees, 49 of which are in senior and
        middle management.
  
 6
 
 **Item
        2.    Description of Property.**
  The
        Company operates its business primarily in the PRC on a 28,183 square meter
        campus. The campus includes a tablet production line, a capsule production
        line,
        a research and development center, and a power station in addition to offices,
        meeting rooms, and conference halls.
 
 **Item
        3.    Legal Proceedings.**
  Neither
        the Company nor any of its subsidiaries is a party to any pending or threatened
        legal proceedings.
  **Item
        4.    Submission of Matters to a Vote of Security
        Holders.**
  There
        were no matters submitted to a vote of security holders in the fourth quarter
        of
        the fiscal year ended June 30, 2007.
   7
  **PART
        II**
  **Item
                  5.**
              **Market
                  for Common Equity and Related Stockholder
                  Matters.**
   **Market
        Information**
 
 Our
        Common Stock is currently quoted on the OTCBB under the symbol “CDSG”. There is
        a limited trading market for our Common Stock. The following table sets forth
        the range of high and low bid quotations for each quarter within the last
        two
        fiscal years and the subsequent interim period. These quotations as reported
        by
        the OTCBB reflect inter-dealer prices without retail mark-up, mark-down,
        or
        commissions and may not necessarily represent actual transactions.
  **Closing
                  Bid****Y    FISCAL
                  YEAR 2006**
              **High
                  Bid**
              **Low
                  Bid**1st
                  Quarter
                  Ended September 30, 2005
              $0.08
              $0.042nd
                  Quarter
                  Ended December 31, 2005
              $0.06
              $0.033rd
                  Quarter
                  Ended March 31, 2006
              $1.85
              $0.9624th
                  Quarter
                  Ended June 30, 2006
              $1.85
              $1.332**FISCAL
                  YEAR 2007**
              **High
                  Bid**
              **Low
                  Bid**1st
                  Quarter
                  Ended September 30, 2006
              $1.85
              $0.9622nd
                  Quarter
                  Ended December 31, 2006
              $10.36
              $0.743rd
                  Quarter
                  Ended March 31, 2007
              $35.15
              $3.334th
                  Quarter
                  Ended June 30, 2007
              $10.02
              $3.50**FISCAL
                  YEAR 2008**
              **High
                  Bid**
              **Low
                  Bid**Period
                  Ended October 12, 2007
              $5.25
              $1.40
  **Holders**
  As
        of
        June 30, 2007 in accordance with our transfer agent records, we had 80 record
        holders of our Common Stock, holding 31,546,134
        shares.
 
 8
  **Dividends**
 
 Holders
        of our common stock are entitled to receive dividends if, as and when declared
        by the Board of Directors out of funds legally available therefore. We have
        never declared or paid any dividends on our common stock. We intend to retain
        any future earnings for use in the operation and expansion of our business.
        Consequently, we do not anticipate paying any cash dividends on our common
        stock
        to our stockholders for the foreseeable future.
 
 **Recent
        Sales of Unregistered Securities**
  Except
          as
          previously disclosed in our quarterly reports on Form 10-QSB and current
          reports
          on Form 8-K, we did not sell or issue any shares of stock during the fourth
          quarter of 2007
  **Equity
          Compensation Plan Information**
 
 None.
 
 **Item
                  6.**
              **Management’s
                  Discussion and Analysis or Plan of
                  Operations.**
 
 *The
        following discussion should be read in conjunction with the Consolidated
        Financial Statements and Notes thereto appearing elsewhere in this Form 10-KSB.
        The following discussion contains forward-looking statements within the meaning
        of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
        Exchange Act of 1934 relating to future events or our future performance.
        Actual
        results may materially differ from those projected in the forward-looking
        statements as a result of certain risks and uncertainties set forth in this
        prospectus. Although management believes that the assumptions made and
        expectations reflected in the forward-looking statements are reasonable,
        there
        is no assurance that the underlying assumptions will, in fact, prove to be
        correct or that actual results will not be different from expectations expressed
        in this report.*
 
 **Results
        of Operations**
 
 ***For
        the Fiscal Year Ended June 30, 2007 as Compared to the Fiscal Year Ended
        June
        30, 2006***
 
 The
        following table sets forth the amounts and the percentage relationship to
        revenues of certain items in our consolidated statements of income for the
        years
        ended June 30, 2007 and 2006:
 
 **2007**
              
              
              **2006**Revenues
              
              $
              31,320,831
              
              
              $
              19,783,912Cost
                  of Goods Sold
              
              
              12,672,386
              
              
              
              8,891,958Gross
                  Profit
              
              
              18,648,445
              
              
              
              10,891,954Operating
                  ExpensesSelling,
                  general and administrative
              
              
              2,357,762
              
              
              
              1,083,029Income
                  before other Income and (Expenses)
              
              
              16,290,683
              
              
              
              9,808,925Other
                  Income and (Expenses)Interest
                  income
              
              
              7,539
              
              
              
              -Settlement
                  of loans and notes payable
              
              
              51,379
              
              
              
              -Other
                  income
              
              
              303,890
              
              
              
              300,645Interest
                  expense
              
              
              (73,492
              )
              
              
              -Other
                  expense
              
              
              (18,392
              )
              
              
              (16,662
              )Total
                  other income and (expenses)
              
              
              270,924
              
              
              
              283,983Income
                  Before Income Taxes
              
              
              16,561,609
              
              
              
              10,092,908Provision
                  for Income Taxes
              
              
              5,587,615
              
              
              
              3,331,405Net
                  Income
              
              $
              10,973,994
              
              
              $
              6,761,503
   9
  **Revenues**
 Revenues
          for the fiscal year ended June 30, 2007 were $31,320,831, an increase of
          58.3%
          or $11,536,919 over revenues for the fiscal year ended June 30, 2006. The
          Company’s Dongsheng subsidiary accounted for $30,102,955 in revenues while the
          software subsidiary (“Paperclip”) accounted for $1,217,876 in
          revenues.
 
 Dongsheng’s
          Chitosan based product sales rose from approximately $11.03 million in
          fiscal
          year 2006 to approximately $15.84 million in fiscal year 2007. Ozone purifier
          product sales rose from approximately $8.66 million in fiscal year 2006
          to
          approximately 14.16 million in fiscal year 2007. Among, the 2,500 retail
          outlets
          that sells Dongsheng’s products, there are 379 retail stores that exclusively
          sells its products.
          These exclusive retail outlets were a driving force behind the increase
          in sales
          during the past fiscal year.
 
 **Cost
          of Goods Sold and Gross Profit**
 
 Cost
          of
          goods sold was $12,672,386 for the fiscal year ended June 30, 2007, compared
          to
          $8,891,958 for the fiscal year ended June 30, 2006. The Company’s Dongsheng
          subsidiary accounted for the entire amount of $12,672,386 in cost of goods
          sold.
          As a percentage of revenues, cost of goods sold was 40.2% for the fiscal
          year
          ended June 30, 2007, compared to 44.9% for the fiscal year ended June 30,
          2006.
          We were able to lower cost of goods sold as a percentage of revenues as
          a result
          of our ability to negotiate lower prices from our third party manufacturers
          due
          to the increase in orders to them.
 
 Our
          gross
          profit for the fiscal year ended June 30, 2007 was $18,648,445, as compared
          to
          $10,891,954 for the same period in 2006.  The Company’s Dongsheng
          subsidiary accounted for $17,430,569 in gross profit while the Paperclip
          subsidiary accounted for $1,217,876 in gross profit. Gross margins increased
          to
          59.7% in 2007 compared to 55.1% in 2006 as a result of our ability to decrease
          our cost of goods sold.
 
 **Selling
          and General Administrative Expenses, and R&D**
 
 Selling
          and general administrative expenses increased from $1,083,029 in the fiscal
          year
          ended June 30, 2006 to $2,357,762 in the fiscal year ended June 30, 2007,
          representing a 117.7% increase.
  The
          Company’s Dongsheng subsidiary accounted for $1,311,717 in selling and general
          administrative expenses while the Paperclip subsidiary accounted for $1,217,876
          in selling and general administrative expenses. This increase in selling
          and
          general administrative is attributed to our increase in sales of 58.3%
          year on
          year. In addition, we experienced higher selling and general administrative
          expenses as a result of market development. By recruiting full time sales
          representatives to market our products, we incurred costs to locate and
          train
          these individuals. In the past, we relied primarily on part-time sales
          representatives to be the driving force in marketing our products and increasing
          our independent distributor network. As our business operations have grown,
          we
          have began relying more on full time independent sales representatives
          to
          promote our brand and recruit new distributors of our products.
 
 **Net
          Income**
 
 Our
          net
          income for the fiscal year ended June 30, 2007 totaled $10,973,994, a increase
          of 62.3% from $6,761,503 for the fiscal year ended June 30, 2006. The Company’s
          Dongsheng subsidiary accounted for $10,798,693 in net income while the
          Paperclip
          subsidiary accounted for $175,300 in net income. The
          increase in net income is a direct result of our 58.3% increase in sales.
          In
          addition, we were able to lower our cost of goods sold as sales order volume
          increased.
  10
 
 **Liquidity
          and Capital Resources Cash Flow 2007 Compared to 2006**
 
 Cash
          flows from operations during fiscal year June 30, 2007 amounted to $25,999,761
          representing an increase of approximately 164.9% compared with cash flows
          from
          operations of $9,815,226 for the same period in 2006. The increased cash
          flow
          was due primarily to the increase of our net income by $4,212,491, to
          $10,973,994 in fiscal year 2007, compared with net income of $6,761,503
          in
          fiscal year 2006. The increased cash flow was also due in part to a decrease
          in
          advances to suppliers by $3,280,649 during fiscal year 2007, due to our
          better
          control over payment to our suppliers. In addition, our taxes payable changed
          from $6,838,637 in fiscal year 2006 to $11,155,583 in fiscal year 2007.
          In 2006,
          Dongsheng changed its status from the private-run enterprise to foreign-invested
          enterprise following the acquisition by ASI. In accordance with Chinese
          laws,
          the subsidiary is now eligible to the income tax holiday of 5 years commencing
          from its first profit-making year. The subsidiary had applied for the income
          tax
          exemption from Chinese tax authority. As of September 23, 2007, Dongsheng,
          received an tax clearance notice from the Local Tax Bureau in China which
          stated
          that, all tax liabilities have been cleared. Furthermore, Dongsheng no
          longer
          owes the outstanding balance relating to income taxes and other tax liabilities.
          The Company has opted to make adjustment to the previous accrued tax liabilities
          in the next quarterly
 filing
          in
          which the accrued income tax payable will be reversed and recorded as income
          tax
          benefit in the period when the certificate of approval and tax clearance
          are
          granted by the Chinese authority. The total tax payable of $18,925,542
          accrued
          in the Company’s book as of June 30, 2007 includes $18,884,618 for the Company’s
          operating subsidiary, Dongsheng Weiye, and $40,924 for the Company.
 
 Our
          cash
          flows used in investing activities amounted to $26,377,230 for the year
          ended
          June 30, 2007. Compared to 2005, our cash flows used in investing activities
          increased by $14,704,568, which is attributed primarily to the additions
          in
          construction in progress which account for approximately
          $23,614,652.
 
 Our
          cash
          flows provided by financing activities amounted to $41,443 in the fiscal
          year
          ended June 30 2007 compared to $1,185,056 in the same period for 2006.
          Our
          financing activity in fiscal year 2007 consisted our receiving $63,145
          from our
          management as part of a note payable for miscellaneous business activity
          expenses. We also made payments of loans from our software development
          subsidiary in the amount of $21,702. In comparison, in fiscal year 2006,
          the
          $1,185,056 was a result of additional capital contributions by our
          management.
 
 **Working
          Capital**
 
 As
          of
          June 30, 2007 the Company had a working capital deficit of $18,988,320.
          The main
          reason for our working capital deficiency was due to the $18,925,542 we
          have
          booked as taxes payable. However, subsequent
          to the issuance of the audited report for the fiscal year ended June 30,
          2007,
          the Company’s operating subsidiary, Dongsheng, received an tax clearance notice
          from the Local Tax Bureau in China stating that as of September 23, 2007,
          all
          tax liabilities have been cleared and Dongsheng does not owe any outstanding
          balance relating to income taxes and other tax liabilities.
 11
  **Contractual
        and Other Obligations**
 
 The
        Company has no long-term liabilities, or purchase commitments, operating
        leases,
        or other capital commitments as of June 30, 2007.
 
 **Critical
        Accounting Policies**
 
 ***Estimates
        Affecting Accounts Receivable and Inventories***
 
 The
        preparation of our consolidated financial statements requires management
        to make
        estimates and assumptions that affect our reporting of assets and liabilities
        (and contingent assets and liabilities). These estimates are particularly
        significant where they affect the reported net realizable value of the Company's
        accounts receivable and inventories.
 
 
 **Inventories**
  Inventories
        are valued at the lower of cost or market with cost determined on a first-in
        first-out basis. Cost of work in progress and finished goods comprises direct
        material, direct production cost and an allocated portion of production
        overheads. We maintain no statutory reserve for our inventory as we believe
        only
        a non-material, if any amount of inventory will not be sold at cost to the
        Company.
 
 ***Policy
        Affecting Recognition of Revenue***
 
 Among
        the
        most important accounting policies affecting our consolidated financial
        statements is our policy of recognizing revenue in accordance with the SEC's
        Staff Accounting Bulletin ("SAB") No. 104. Under this policy, The Company
        recognizes revenue on product sales when products are delivered and the title
        passes to the customers and collection is reasonably assured.
 
 **Off-Balance
        Sheet Arrangements**
 
 We
        do not
        have any off-balance sheet arrangements, financings, or other relationships
        with
        unconsolidated entities or other persons, also known as “special purpose
        entities” (SPEs).
 
 **Risk
        Factors That May Affect Future Results**
 
 You
        should carefully consider the risks described below before buying our common
        stock.  If any of the risks described below actually occurs, that event
        could cause the market value of our common stock to decline, and you could
        lose
        all or part of your investment.
 
 
 12
 
 *We
        may have difficulty establishing adequate management and financial controls
        in
        China.*
 
 The
        People’s Republic of China has only recently begun to adopt the management and
        financial reporting concepts and practices with which investors in the United
        States are familiar.  We may have difficulty in hiring and retaining
        employees in China who have the experience necessary to implement the kind
        of
        management and financial controls that are expected of a United States public
        company.  If we cannot establish such controls, we may experience
        difficulty in collecting financial data and preparing financial statements,
        books of account and corporate records and instituting business practices
        that
        meet U.S. standards.
 
 *Capital
        outflow policies in China may hamper our ability to pay dividends to
        shareholders in the United States.*
 
 The
        People’s Republic of China has adopted currency and capital transfer
        regulations. These regulations require that we comply with complex regulations
        for the movement of capital. Although Chinese governmental policies were
        introduced in 1996 to allow the convertibility of RMB into foreign currency
        for
        current account items, conversion of RMB into foreign exchange for capital
        items, such as foreign direct investment, loans or securities, requires the
        approval of the State Administration of Foreign Exchange. We may be unable
        to
        obtain all of the required conversion approvals for our operations, and Chinese
        regulatory authorities may impose greater restrictions on the convertibility
        of
        the RMB in the future. Because most of our future revenues will be in RMB,
        any
        inability to obtain the requisite approvals or any future restrictions on
        currency exchanges will limit our ability to fund our business activities
        outside China or to pay dividends to our shareholders.
 
 *We
        have limited business insurance coverage.*
 
 The
        insurance industry in China is still at an early stage of development. Insurance
        companies in China offer limited business insurance products, and do not,
        to our
        knowledge, offer business liability insurance. As a result, we do not have
        any
        business liability insurance coverage for our operations. Moreover, while
        business disruption insurance is available, we have determined that the risks
        of
        disruption and cost of the insurance are such that we do not require it at
        this
        time. Any business disruption, litigation or natural disaster might result
        in
        substantial costs and diversion of resources.
 
 *Currency
        fluctuations may adversely affect our business.*
 
 We
        generate revenues and incur expenses and liabilities in Chinese RMB. However
        we
        report our financial results in the United States in U.S. Dollars.  As a
        result, we are subject to the effects of exchange rate fluctuations between
        these currencies.  Recently, there have been suggestions made to the
        Chinese government that it should adjust the exchange rate and end the linkage
        that in recent years has held the RMB-U.S. dollar exchange rate constant.
        If the
        RMB exchange rate is adjusted or is allowed to float freely against the U.S.
        dollar, our revenues, which are denominated in RMB, may fluctuate significantly
        in U.S. dollar terms. We have not entered into agreements or purchased
        instruments to hedge our exchange rate risks.
 
 *Our
        common stock may be affected by limited trading volume and may fluctuate
        significantly, and this may adversely affect your investment.*
  There
        has
        been a limited public market for our common stock and there can be no assurance
        that a more active trading market for our common stock will develop. An absence
        of an active trading market could adversely affect our shareholders' ability
        to
        sell our common stock in short time periods, or possibly at all. Our common
        stock has experienced in the past, and is likely to experience in the future,
        significant price and volume fluctuations, which could adversely affect the
        market price of our common stock without regard to our operating performance.
        In
        addition, we believe that factors such as changes in the overall economy
        or the
        condition of the financial markets could cause the price of our common stock
        to
        fluctuate substantially. These fluctuations may also cause short sellers
        to
        enter the market from time to time in the belief that we will have poor results
        in the future. We cannot predict the actions of market participants and,
        therefore, can offer no assurances that the market for our stock will be
        stable
        or appreciate over time.
 
 
 13
  **Item
        7.    Financial Statements.**
  The
        Company’s financial statements, together with notes and the Report of
        Independent Registered Public Accounting Firm, are set forth immediately
        following Item 14 of this Form 10-KSB.
 
 **Item
        8.    Changes In and Disagreements With Accountants on
        Accounting and Financial Disclosure.**
  On
        November 28, 2006, we dismissed our
        independent accountants, Sobel & Co., LLC (“Sobel”) and engaged Bagell
        Josephs, Levine & Company, LLC (“BJL”) as our new independent registered
        public accounting firm. The change in independent registered public accounting
        firm was not the result of any disagreement with Sobel.The decision to change
        accountants was
        approved by our Board of Directors.
  **Item
        8A.    Controls and Procedures.**
  **Evaluation
        of Disclosure Controls and Procedures**
 
 Under
        the
        supervision and with the participation of our management, including our
        principal executive officer and principal financial officer, we conducted
        an
        evaluation of our disclosure controls and procedures, as such term is defined
        under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
        Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2007. Based
        on
        this evaluation, our principal executive officer and principal financial
        officer
        have concluded that our disclosure controls and procedures are effective
        to
        ensure that information required to be disclosed by us in the reports we
        file or
        submit under the Exchange Act is recorded, processed, summarized, and reported
        within the time periods specified in the Securities and Exchange Commission's
        rules and forms and that our disclosure and controls are designed to ensure
        that
        information required to be disclosed by us in the reports that we file or
        submit
        under the Exchange Act is accumulated and communicated to our management,
        including our principal executive officer and principal financial officer,
        or
        persons performing similar functions, as appropriate to allow timely decisions
        regarding required disclosure.
 
 **Changes
        in Internal Controls**
 
 There
        were no changes (including corrective actions with regard to significant
        deficiencies or material weaknesses) in our internal controls over financial
        reporting that occurred during the fiscal year ended June 30, 2007 that has
        materially affected, or is reasonably likely to materially affect, our internal
        control over financial reporting.
  **Item
        8B.    Other Information.**
  None.
   14
 
 **PART
        III**
  **Item
                  9.**
              **Directors,
                  Executive Officers, Promoters and Control Persons; Compliance with
                  Section
                  16(a) of the Exchange Act.**
  The
        following table sets forth the name, age and position of each of our executive
        officers and directors as of September 28, 2007.
 
 **Name**
              
              **Age**
              
              **Position**
              
              **Date
                  Appointed Director**Aidong
                  Yu
              
              54
              
              President,
                  Chief Executive Officer, Chief Financial Officer and
                  Chairman
              
              November
                  9, 2006Huizhu
                  Xie
              
              60
              
              Director
              
              November
                  9, 2006Dekui
                  Wang
              
              51
              
              Director
              
              November
                  9, 2006
 
 Set
        forth
        below is a brief description of the background and business experience of
        our
        executive officers and directors for the past five years (and, in some
        instances, for prior years).
 
 **Aidong
        Yu, Chairman, Chief Executive Officer, Chief Financial Officer,
        Director**
 
 Mr.
        Yu
        founded Dongsheng and has been its Chairman since 2001. Mr. Yu has led the
        development of Dongsheng into a leading enterprise in the health products
        industry. Mr. Yu has a deep understanding of the health care industry, and
        was
        awarded the honor of “Entrepreneur of Jilin Province” in 2003. In 2004, Mr. Yu
        was appointed advanced researcher of the Society for International Industry
        Organization Studies of China. Mr. Yu is also a representative in the National
        People’s Congress.
 
 **Huizhu
        Xie, General Manager, Director**
 
 Ms.
        Xie
        has been the General Manager of Dongsheng since 2003, and is responsible
        for the
        training of the distribution team and general operations. Ms. Xie has also
        served as a Director of the Harbin Wang Gang Hospital for 10 years, and has
        an
        extensive background in the health care and health products industry. Ms.
        Xie
        received her bachelor’s degree from Harbin Medical University.
 
 **Dekui
        Wang, Vice President, Director**
 
 Mr.
        Wang
        has been the Secretary and Assistant General Manager of Dongsheng since October
        2005. Prior to joining Dongsheng, Mr. Wang served as Assistant to the General
        Manager at Jilin Huana Investment Company, as Manager at Jilin City Senxin
        Decoration Company, as Deputy Director General at Jilin City Longtan District
        Bureau of Quality and Technical Supervision, and as Deputy Director at the
        Jilin
        City Bureau of Standards.
  **Term
        of Office**
  Our
        directors are appointed for a one-year term to hold office until the next
        annual
        general meeting of our shareholders or until removed from office in accordance
        with our bylaws. Our officers are appointed by our board of directors and
        hold
        office until removed by the board.
 
 **Audit
        Committee**
 
 The
        Company anticipates appointing independent directors in place by the end
        of
        calendar year 2007 to serve on the audit committee.
 
 15
 
 **Family
        Relationships**
 
 No
        family
        relationships exist among our directors or executive officers.
 
 **Involvement
        in Certain Legal Proceedings**
  To
        our
        knowledge, during the past five years, none of our directors, executive
        officers, promoters, control persons, or nominees has been:
   •
              the
                  subject of any bankruptcy petition filed by or against any business
                  of
                  which such person was a general partner or executive officer either
                  at the
                  time of the bankruptcy or within two years prior to that
                  time;
  •
              convicted
                  in a criminal proceeding or is subject to a pending criminal proceeding
                  (excluding traffic violations and other minor
                  offenses);
  •
              subject
                  to any order, judgment, or decree, not subsequently reversed, suspended
                  or
                  vacated, of any court of competent jurisdiction, permanently or
                  temporarily enjoining, barring, suspending or otherwise limiting
                  his
                  involvement in any type of business, securities or banking activities;
                  or
  •
              found
                  by a court of competent jurisdiction (in a civil action), the Commission
                  or the Commodity Futures Trading Commission to have violated a
                  federal or
                  state securities or commodities
                  law.
   **Compliance
        with Section 16(a) of the Exchange Act**
  Section
        16(a) of the Securities Exchange Act of 1934 requires the Company's officers
        and
        directors, and persons who own more than 10 percent of a registered class
        of the
        Company's equity securities, to file reports of ownership and changes in
        ownership with the Securities and Exchange Commission (SEC). Officers,
        directors, and greater than 10 percent stockholders are required by SEC
        regulation to furnish the Company with copies of all Section 16(a) forms
        they
        file.
 
 To
        the
        Company's knowledge, based solely on a review of the copies of such reports
        furnished to the Company, all reports under Section 16(a) required to be
        filed
        by its officers and directors and greater than ten percent beneficial owners
        were timely filed as of the date of this filing.
  16
 
 **Item
        10.    Executive Compensation.**
  **Compensation
        of Executive Officers**
  The
        following summary compensation table sets forth in U.S. dollars all compensation
        awarded to, earned by, or paid to the named executive officers paid by us
        during
        the fiscal years ended June 30, 2007 and 2006 in all capacities for the accounts
        of our executives, including the Chief Executive Officer (CEO) and Chief
        Financial Officer (CFO):
 
 **SUMMARY
        COMPENSATION TABLE**
   
 **Name
                  and Principal Position**
              
              
              **Year**
              
              **Salary**
                **($)**
              
              
              **Bonus**
                **($)**
              
              
              **Stock
                  Awards**
                **($)**
              
              
              **Option
                  Awards**
                **($)**
              
              
              **Non-Equity
                  Incentive Plan Compensation ($)**
              
              
              **Non-Qualified
                  Deferred Compensation Earnings**
                **($)**
              
              
              **All
                  Other Compensation**
                **($)**
              **Totals**
                **($)**Aidong
                  Yu,(1)
              
              
              2007
              
              12,000
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              12,000Chief
                  Executive Officer,
              
              
              2006
              
              10,000
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              10,000Chief
                  Financial Officer,PresidentWilliam
                  Weiss,(2)
              
              
              2006
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              0Chief
                  Executive Officer,
              
              
              2005
              
              118,958
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              118,958Chief
                  Financial Officer,President
 
  (1)
              Mr.
                  Yu was appointed as our President, Chief Executive Officer and
                  Chief
                  Financial Officer on November 9, 2006 pursuant to the Reverse Merger.
                  Prior to the Reverse Merger, he earned $10,000 as an officer of
                  Jilin
                  Dongsheng Weiye Science and Technology Development Co.,
                  Ltd.(2)
              Mr.
                  Weiss resigned as President, Chief Executive Officer and Chief
                  Financial
                  Officer on November 9, 2006 pursuant to the Reverse
                  Merger.
 
 **Outstanding
        Equity Awards at Fiscal Year-End Table.** There were no individual grants
        of stock options to purchase our common stock made to the named executive
        officers in the Summary Compensation Table during the fiscal year ended June
        30,
        2007, and the subsequent period up to the date of the filing of this
        prospectus.
  **Employment
        Agreements**
  None
        of
        our executive officers have employment agreements.
  17
 
 **Compensation
        of Directors**
  For
        the
        fiscal year ended June 30, 2007, we did not compensate our directors for
        their
        services.
  **Item
        11.    Security Ownership of Certain Beneficial Owners and
        Management and Related Stockholder Matters.**
  The
        following table sets forth certain information regarding the ownership of
        our
        capital stock, as of September 28, 2007, for: (i) each director; (ii) each
        person who is known to us to be the beneficial owner of more than 5% of our
        outstanding common stock; (iii) each of our executive officers named in the
        Summary Compensation Table; and (iv) all of our current executive officers
        and
        directors of as a group. Except as otherwise indicated in the footnotes,
        all
        information with respect to share ownership and voting and investment power
        has
        been furnished to us by the persons listed. Except as otherwise indicated
        in the
        footnotes, each person listed has sole voting power with respect to the shares
        shown as beneficially owned.
 
 **Title
                  of Class**
              
              **Name
                  and Address of Beneficial Owner**
              
              **Amount
                  and Nature of Beneficial Ownership**
              
              **Percent
                  of Class (2)**Common
                  Stock
              
              Aidong
                  Yu(1)
              
              16,880,683
              
              53.5%Common
                  Stock
              
              Huizhu
                  Xie(1)
              
              30,000
              
              0.09%Common
                  Stock
              
              Dekui
                  Wang(1)
              
              20,000
              
              0.06%Common
                  Stock
              
              Dandan
                  Yu(3)
              
              1,577,549
              
              5.00%Common
                  Stock
              
              Chunxiao
                  Zou(4)
              
              1,577,549
              
              5.00%**Common
                  Stock**
              
              **All
                  officers and directors as a group (3 in number)**
              
              **16,930,683**
              
              **53.66%**
 
 (1)The person listed is an officer and/or
        director of the Company and the address for each beneficial owner isJilin Dongsheng Weiye
        Science and Technology Development Co., Ltd., Jifeng East Road, Gaoxin
        District****Jilin,
        Jilin Province,
        PRC
 
 (2)
        Based on
        31,546,133 shares of Common Stock issued and outstanding as of June 30,
        2007.
 
 (3)Dandan
        Yu is the
        adult daughter of our Chairman, Aidong Yu.
 
 (4)Chunxiao
        Zou is a
        non-affiliate shareholder of the Company.
  **Item
        12.    Certain Relationships and Related
        Transactions.**
  **None.**
  
 18
 
 **Item
        13.    Exhibits.**
  **Exhibit No.**
              
              **Title
                  of Document**
              
              **Location**2.1
              
              Stock
                  Purchase and Share Exchange Agreement by and among Paperclip Software,
                  Inc., American Sunrise Internataional, Inc., the shareholders of
                  American
                  Sunrise International, Inc., and Jilin Dongsheng Weiye Science
                  and
                  Technology Co., Ltd.
              
              Incorporated
                  by reference as Exhibit 2.1 to Form 8-K filed November 9,
                  20063.1.4
              
              Certificate
                  of Designation of Class B Preferred Stock
              
              Incorporated
                  by reference as Exhibit 3.1 to Form 8-K filed November 9,
                  20064.0
              Code
                  of Ethics
              Filed
                  herewith.31.1
              
              Certification
                  of Chief Executive Officer Pursuant to Rule 13a-14(a) of the
                  Securities Exchange Act of 1934, as adopted pursuant to Section
                  302 of the
                  Sarbanes-Oxley Act of 2002
              
              Filed
                  herewith31.2
              
              Certification
                  of Chief Executive Officer Pursuant to Rule 13a-14(b) of the
                  Securities Exchange Act of 1934, as adopted pursuant to Section
                  302 of the
                  Sarbanes-Oxley Act of 2002
              
              Filed
                  herewith
  32.1
              
              Certification
                  of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as
                  adopted pursuant to Section 906 of the Sarbanes Oxley Act of
                  2002.
              
              Filed
                  herewith32.2
              
              Certification
                  of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as
                  adopted pursuant to Section 906 of the Sarbanes Oxley Act of
                  2002.
              
              Filed
                  herewith
 
 **Item
        14.    Principal Accounting Fees and
        Services.**
  **Audit
        Fees**
  For
        the Company’s fiscal years ended June 30, 2007 and 2006, we were billed
        approximately $76,520 and $55,000 for professional services rendered for
        the
        audit and review of our financial statements filed with the Securities and
        Exchange Commission for our years ended June 30, 2007 and 2006,
        respectively.
  **Tax
        Fees**
  For
        our
        fiscal years ended June 30, 2007 and 2006, we were not billed for professional
        services rendered for tax compliance, tax advice, and tax planning.
  **All
        Other Fees**
  The
        Company did not incur any other fees related to services rendered by our
        principal accountant for the fiscal years ended June 30, 2007 and
        2006.









19




**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 
 The
        Board
        of Directors and Stockholders of
 China
        Dongsheng International, Inc. and Subsidiaries
 Jilin,
        China
 
 We
        have
        audited the accompanying consolidated balance sheet of China Dongsheng
        International, Inc. and subsidiaries as of June 30, 2007 and the related
        consolidated statements of income, changes in stockholders’ equity, and cash
        flows for each of the years in the two-year period ended June 30,
        2007.  These consolidated financial statements are the responsibility
        of the Company’s management.  Our responsibility is to express an
        opinion on these consolidated financial statements based on our
        audits.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the
        consolidated financial statements are free of material misstatement. The
        company
        is not required to have, nor were we engaged to perform, an audit of its
        internal control over financial reporting. Our audit included consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose of
        expressing an opinion on the effectiveness of the company’s internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        also
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the consolidated financial statements, assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall financial statement presentation. We believe that
        our
        audit provides a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of China Dongsheng
        International, Inc. and subsidiaries, as of June 30, 2007, and the results
        of
        its operations, changes in stockholders’ equity, and cash flows for each of the
        years in the two year period ended in conformity with accounting principles
        generally accepted in the United States of America.
 
 
 /s/Bagell
        Josephs, Levine & Company, LLC
 
 Bagell
        Josephs, Levine & Company, LLC
 Gibbsboro,
        New Jersey
 
 
 September
        12, 2007




F-1




**CHINA
      DONGSHENG INTERNATIONAL, INC.**


**(FORMERLY
      PAPERCLIP SOFTWARE, INC.)**


**CONSOLIDATED
      BALANCE SHEET**


**JUNE
      30, 2007**





**ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            585,126Accounts
                receivable
            
            
            69,884Inventory
            
            
            74,388Prepaid
                expense
            
            
            57,500Other
                receivable
            
            
            4,660Advances
                to suppliers
            
            
            616,914Total
                Current Assets
            
            
            1,408,472Property
                and equipment, net of accumulated depreciation of $308,382
            
            
            34,390,372Other
                assets:Deposit
                on land
            
            
            2,758,802Land
                use right
            
            
            2,706,374Other
                assets
            
            
            8,506Total
                Other Assets
            
            
            5,473,682Total
                Assets
            
            $
            41,272,526**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            682,223Unearned
                revenue
            
            
            493,666Taxes
                payable
            
            
            18,925,542Accrued
                expenses and other payables
            
            
            295,361Total
                Current Liabilities
            
            
            20,396,792Notes
                payable - related party
            
            
            88,145Total
                Liabilities
            
            
            20,484,937Commitments
                and ContingenciesStockholders'
                EquityCommon
                stock, $0.001 par value, 100,000,000 shares authorized;31,546,134
                shares issued and outstanding at June 30, 2007
            
            
            31,546Additional
                paid-in capital
            
            
            1,034,546Accumulated
                other comprehensive income
            
            
            863,783Retained
                earnings - appropriated
            
            
            1,218,086Retained
                earnings - unappropriated
            
            
            17,639,628Total
                Stockholders' Equity
            
            
            20,787,589Total
                Liabilities and Stockholders' Equity
            
            $
            41,272,526




See
        accompanying notes to the consolidated financial statements.







F-2


**CHINA
        DONGSHENG INTERNATIONAL, INC.**
 **(FORMERLY
        PAPERCLIP SOFTWARE, INC.)**
 **CONSOLIDATED
        STATEMENTS OF INCOME**
 **FOR
        THE YEARS ENDED JUNE 30,**
   **2007**
              
              
              **2006**Revenues
              
              $
              31,320,831
              
              
              $
              19,783,912Cost
                  of Goods Sold
              
              
              12,672,386
              
              
              
              8,891,958Gross
                  Profit
              
              
              18,648,445
              
              
              
              10,891,954Operating
                  ExpensesSelling,
                  general and administrative
              
              
              2,357,762
              
              
              
              1,083,029Income
                  before other Income and (Expenses)
              
              
              16,290,683
              
              
              
              9,808,925Other
                  Income and (Expenses)Interest
                  income
              
              
              7,539
              
              
              
              -Settlement
                  of loans and notes payable
              
              
              51,379
              
              
              
              -Other
                  income
              
              
              303,890
              
              
              
              300,645Interest
                  expense
              
              
              (73,492
              )
              
              
              -Other
                  expense
              
              
              (18,392
              )
              
              
              (16,662
              )Total
                  other income and (expenses)
              
              
              270,924
              
              
              
              283,983Income
                  Before Income Taxes
              
              
              16,561,609
              
              
              
              10,092,908Provision
                  for Income Taxes
              
              
              5,587,615
              
              
              
              3,331,405Net
                  Income
              
              $
              10,973,994
              
              
              $
              6,761,503Basic
                  and diluted income per common share
              
              $
              0.98
              
              
              $
              30.52Weighted
                  average number of common shares
              
              
              11,209,317
              
              
              
              221,528




See
        accompanying notes to the consolidated financial statements.






F-3






**CHINA
      DONGSHENG INTERNATIONAL, INC.**


**(FORMERLY
      PAPERCLIP SOFTWARE, INC.)**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**


FOR
      THE YEARS ENDED JUNE 30, 2007 AND
      2006





**Preferred
                Stock**
            
            
            **Preferred
                  Stock**
            
            
            
            
            
            
            
            
            **Additional**
            
            
            **Accumulated
                Other**
            
            
            **Retained**
            
            
            **Retained****Series
                A**
            
            
            **Series
                B**
            
            
            **Common
                Stock**
            
            
            **Paid-in**
            
            
            **Comprehensive**
            
            
            **Earnings**
            
            
            **Earnings**
            
            
            **Comprehensive****Shares**
            
            **Amount**
            
            
            **Shares**
            
            
            **Amount**
            
            
            **Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Income**
            
            
            **(Appropriated)**
            
            
            **(Unappropriated)**
            
            
            **Income**
            
            
            **Total**Balance
                - July 1, 2005
            
            
            3,649,543
            
            
            $
            3,650
            
            
            
            -
            
            
            $
            -
            
            
            
            8,196,521
            
            
            $
            8,196
            
            
            $
            48,559
            
            
            $
            15
            
            
            
            159,069
            
            
            $
            963,148
            
            
            
            
            
            $
            1,182,637Additional
                paid-in
              capitalcontributed
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,185,055
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,185,055Comprehensive
                incomeNet
                income for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,030,037
            
            
            
            5,731,466
            
            
            
            6,761,503
            
            
            
            6,761,503Other
                Comprehensive
              income,
                net of taxForeign
                currency
              translation
                adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            110,731
            
            
            
            
            
            
            
            
            
            
            
            110,731
            
            
            
            110,731Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            6,872,234Balance
                - June 30, 2006
            
            
            3,649,543
            
            
            
            3,650
            
            
            
            -
            
            
            
            -
            
            
            
            8,196,521
            
            
            
            8,196
            
            
            
            1,233,614
            
            
            
            110,746
            
            
            
            1,189,106
            
            
            
            6,694,614
            
            
            
            
            
            
            
            9,239,926Recapitalization
                on reverse acquisition
            
            
            (3,649,543
            )
            
            
            (3,650
            )
            
            
            1,762,472
            
            
            
            17,625
            
            
            
            21,803,479
            
            
            
            21,804
            
            
            
            (215,147
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            (179,368
            )-Reserve
                split 1:37
            
            
            -
            
            
            
            -
            
            
            
            (1,703,756
            )
            
            
            (17,038
            )
            
            
            (29,000,000
            )
            
            
            (29,000
            )
            
            
            46,038
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            --Conversion
                of preferred stock
            
            
            -
            
            
            
            -
            
            
            
            (58,716
            )
            
            
            (587
            )
            
            
            30,546,134
            
            
            
            30,546
            
            
            
            (29,959
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Comprehensive
                incomeNet
                income for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            28,980
            
            
            
            10,945,014
            
            
            
            10,973,994
            
            
            
            10,973,994Other
                Comprehensive
              income,
                net of taxForeign
                currency
              translation
                adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            753,037
            
            
            
            
            
            
            
            
            
            
            
            753,037
            
            
            
            753,037Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            11,727,031Balance
                - June 30, 2007
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            
            31,546,134
            
            
            $
            31,546
            
            
            $
            1,034,546
            
            
            $
            863,783
            
            
            $
            1,218,086
            
            
            $
            17,639,628
            
            
            
            
            
            
            $
            20,787,589




See
        accompanying notes to the consolidated financial statements.




F-4


**CHINA
        DONGSHENG INTERNATIONAL, INC.**


**(FORMERLY
      PAPERCLIP SOFTWARE, INC.)**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED JUNE 30,**





**2007**
            
            
            **2006**Cash
                Flows From Operating Activities:Net
                income
            
            $
            10,973,994
            
            
            $
            6,761,503Adjustments
                to reconcile net income to net cashprovided
                by operating activities:Depreciation
                and amortization
            
            
            192,857
            
            
            
            90,037Settlement
                of loans and notes payable
            
            
            (51,379
            )
            
            
            -Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            74,258
            
            
            
            (211
            )Inventory
            
            
            (17,209
            )
            
            
            7,285Advances
                to suppliers
            
            
            3,280,649
            
            
            
            (3,853,160
            )Prepaid
                expenses
            
            
            (57,500
            )
            
            
            -Other
                accounts receivable
            
            
            (632
            )
            
            
            -Accounts
                payable
            
            
            346,553
            
            
            
            -Taxes
                payable
            
            
            11,155,583
            
            
            
            6,838,637Unearned
                revenue
            
            
            105,070
            
            
            
            (981
            )Accrued
                expenses and other payables
            
            
            (2,483
            )
            
            
            (27,884
            )Cash
                provided by operating activities
            
            
            25,999,761
            
            
            
            9,815,226Cash
                Flows From Investing Activities:Payment
                made for the land use right
            
            
            (2,729,117
            )
            
            
            (1,176,984
            )Purchase
                of property and equipment
            
            
            (33,461
            )
            
            
            (4,098,120
            )(Additions)
                to construction in process
            
            
            (23,614,652
            )
            
            
            (6,397,558
            )Cash
                (used in) investing activities
            
            
            (26,377,230
            )
            
            
            (11,672,662
            )Cash
                Flows From Financing ActivitiesProceeds
                from issuance of stock
            
            
            -
            
            
            
            1,185,056Proceeds
                from notes payable
            
            
            63,145
            
            
            
            -Payment
                of loans and notes payable
            
            
            (21,702
            )
            
            
            -Cash
                provided by financing activities
            
            
            41,443
            
            
            
            1,185,056Effect
                of exchange rate changes on cash and cash equivalents
            
            
            431,569
            
            
            
            101,524Increase
                (decrease) in cash and cash equivalents
            
            
            95,542
            
            
            
            (570,856
            )Cash
                and Cash Equivalents - Beginning of year
            
            
            489,584
            
            
            
            601,657Cash
                and Cash Equivalents - Ending of year
            
            $
            585,126
            
            
            $
            30,801Supplemental
                disclosures of cash flow information:Interest
                paid
            
            $
            61,162
            
            
            $
            16,662Income
                taxes paid
            
            $
            95,500
            
            
            $
            -Non-cash
                investing and financing activities:Conversion
                of notes payable to common stock
            
            $
            14,170
            
            
            $
            -Conversion
                of accrued compensation to common stock
            
            $
            75,814
            
            
            $
            -




See
        accompanying notes to the consolidated financial statements.







F-5




**CHINA
          DONGSHENG INTERNATIONAL, INC.**
 **(FORMERLY
          PAPERCLIP SOFTWARE, INC.)**
 **CONSOLIDATED
          NOTES TO FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED JUNE 30, 2007 AND 2006**


**NOTE
        1. ORGANIZATION AND DESCRIPTION OF BUSINESS**
  China
        Dongsheng International, Inc. (“the Company” or “CDSG”) was incorporated under
        the laws of the State of Delaware in October, 1991 and formerly known as
        Paperclip Software, Inc.
  On
        November 9, 2006, the Company acquired 100% of the issued and outstanding
        capital stock of American Sunrise international, Inc. (“ASI”), a Delaware
        corporation, thereby making ASI a wholly-owned subsidiary of the Company,
        in
        consideration for a cash payment of $230,000 and in exchange for the
        issuance of (i) 18,153,934 shares of the Company's common stock and (ii)
        1,762,472 shares of the Company's newly-designated Series B Convertible
        Preferred Stock, of which series each share can be convert into 500 shares
        of
        the Company's common stock. After giving effect to the transactions contemplated
        by the Share Exchange Agreement (the "Transaction"), the ASI Shareholders
        and
        the former shareholders of the Company own 98.7% and 1.3%, respectively,
        of the
        Company's common stock on a fully-diluted basis, thereby resulting in a
        substantial dilution to the Company's shareholders of record as of November
        6,
        2006 (the "Historic PaperClip Shareholders") and constituting a change in
        control of the Company.
 
 For
        accounting purposes, the transaction described above has been accounted for
        as a
        reverse acquisition under the purchase method of accounting since the former
        shareholders of ASI obtained control of the Company. Accordingly, ASI is
        treated
        as the continuing entity for accounting purposes. As a part of the merger,
        Paperclip Software, Inc. was renamed to China Dongsheng International, Inc.
        (the
“Company”
 
 ASI
        was
        established as a non-operating holding company of Jilin Dongsheng Weiye Science
        and Technology Co., Ltd. (“Dongsheng Weiye”), a Chinese company incorporated
        under the laws of the People’s Republic of China (the “PRC” or “China”) on
        August 16, 2002. ASI operates its business through Dongsheng Weiye, which
        is
        engaged in the manufacturing and distributing of nutritional supplements,
        beauty
        care products and other alternative health care products.
 
 As
        a part
        of the merger, the Company changed its name to China Dongsheng International,
        Inc. and effected a reverse split for all shareholders on record as of February
        25, 2007. All per share date including earnings per share has been retroactively
        restated to reflect the reverse split.
 
 In
        connection with the transactions described above, the Company also changed
        its
        fiscal year end to June 30.
   F-6
  **CHINA
            DONGSHENG INTERNATIONAL, INC.**
 **(FORMERLY
            PAPERCLIP SOFTWARE, INC.)**
 **CONSOLIDATED
            NOTES TO FINANCIAL STATEMENTS (Continued)**
 **FOR
            THE YEARS ENDED JUNE 30, 2007 AND 2006**
 
  **NOTE
        2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
  **USE
        OF ESTIMATES**
  The
        preparation of financial statements in conformity with generally accepted
        accounting principals requires management to make estimates and assumptions
        that
        effect the reported amounts of assets and liabilities and the disclosure
        of
        contingent assets and liabilities at the date of the financial statements
        and
        the reported amounts of revenues and expenses during the reporting period.
        Actual results could differ from those estimates.
  **BASIS
        OF PRESENTATION**
  The
        accompanying consolidated Financial Statements include the accounts of the
        Company and its wholly owned subsidiaries, American Sunrise International,
        Inc.
        and  Jilin Dongsheng Weiye Science and Technology Co. Inter-company
        transactions and balances have been eliminated in consolidation and
        combination.
  The
        accompanying consolidated financial statements have been prepared in accordance
        with accounting principles generally accepted in the United States of
        America.
  **CASH
        AND CONCENTRATIONS OF RISKS**
 
 The
        Company considers all highly liquid investments with original maturities
        of
        three months or less at the time of purchase to be cash equivalents, for
        cash
        flow statement purposes. Cash includes cash on hand and demand deposits in
        accounts maintained with state owned banks within The PRC and the United
        States.
  Certain
        financial instruments, which subject the Company to concentration of credit
        risk, consist of cash. The Company maintains balances at financial institutions
        which, from time to time, may exceed Federal Deposit Insurance Corporation
        insured limits for the banks located in the Unites States. Balances at financial
        institutions or state owned banks within the PRC are not covered by insurance.
        As of June 30, the Company had deposits in excess of federally insured limits
        total of $188,684 The Company has not experienced any losses in such accounts
        and believes it is not exposed to any significant risks on its cash in bank
        accounts.
 
 F-7
  **CHINA
            DONGSHENG INTERNATIONAL, INC.**
 **(FORMERLY
            PAPERCLIP SOFTWARE, INC.)**
 **CONSOLIDATED
            NOTES TO FINANCIAL STATEMENTS (Continued)**
 **FOR
            THE YEARS ENDED JUNE 30, 2007 AND 2006**
   **NOTE
        2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**
  **ACCOUNTS
        RECEIVABLE**
 
 The
        Company’s policy is to maintain reserves for potential credit losses on accounts
        receivable. Management reviews the composition of accounts receivable and
        analyzes historical bad debts, customer concentrations, customer credit
        worthiness, current economic trends and changes in customer payment patterns
        to
        evaluate the adequacy of these reserves. The Company had accounts receivable,
        net of allowance for doubtful accounts of $69,884 as of June 30, 2007. The
        allowance for doubtful accounts amounted to $40,000 as of June 30,
        2007.
 
 **INVENTORY**
 
 Inventory
        is primarily composed of finished goods. Inventory is valued at the lower
        of
        cost or market value using first-in first-out method. Management compares
        the
        cost of inventory with the market value and an allowance is made for writing
        down the inventory to its market value, if lower.
 
 **PROPERTY,
        PLANT AND EQUIPMENT**
 
 Property,
        plant and equipment are stated at cost, net of accumulated
        depreciation.  Maintenance, repairs and betterments, including
        replacement of minor items, are charged to expense; major additions to physical
        properties are capitalized. Depreciation and amortization are provided using
        the
        straight-line method over the following estimated useful lives:
  Buildings
                  and improvements
                40
                  yearsMachinery,
                  equipment and automobiles
                5-10
                  years
  Construction
        in progress represents the costs incurred in connection with the construction
        of
        buildings or new additions to the Company’s plant facilities. No depreciation is
        provided for construction in progress until such time as the assets are
        completed and are placed into service.
 
 The
        Company periodically evaluates the carrying value of long-lived assets in
        accordance with SFAS 144. When estimated cash flows generated by those assets
        are less than the carrying amounts of the asset, the Company recognizes an
        impairment loss. Based on its review, the Company believes that, as of June
        30,
        2007, there were no significant impairments of its long-lived
        assets.
    F-8
  **CHINA
            DONGSHENG INTERNATIONAL, INC.**
 **(FORMERLY
            PAPERCLIP SOFTWARE, INC.)**
 **CONSOLIDATED
            NOTES TO FINANCIAL STATEMENTS (Continued)**
 **FOR
            THE YEARS ENDED JUNE 30, 2007 AND 2006**
   **NOTE
        2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**
  **REVENUE
        RECOGNITION**
 
 The
        Company’s revenue recognition policies are in compliance with Staff Accounting
        Bulletin (“SAB”) 104. Sales revenue is recognized at the date of shipment to
        customers when a formal arrangement exists, the price is fixed or determinable,
        the delivery is completed, no other significant obligations of the Company
        exist
        and collectability is reasonably assured. Payments received before all of
        the
        relevant criteria for revenue recognition are recorded as unearned
        revenue.
  **INCOME
        TAXES**
 
 The
        Company utilizes Statement of Financial Accounting Standards (SFAS) No. 109,
“
Accounting for Income Taxes,” which requires the recognition of deferred tax
        assets and liabilities for the expected future tax consequences of events
        that
        have been included in the financial statements or tax returns. Under this
        method, deferred income taxes are recognized for the tax consequences in
        future
        years of differences between the tax bases of assets and liabilities and
        their
        financial reporting amounts at each period end based on enacted tax laws
        and
        statutory tax rates applicable to the periods in which the differences are
        expected to affect taxable income. Valuation allowances are established,
        when
        necessary, to reduce deferred tax assets to the amount expected to be realized.
        There are no deferred tax amounts at June 30, 2007 and 2006,
        respectively.
  **FAIR
        VALUE OF FINANCIAL INSTRUMENTS**
 
 Statement
        of Financial Accounting Standard No. 107, “Disclosures about Fair Value of
        Financial Instruments,” requires that the Company disclose estimated fair values
        of financial instruments. The carrying amounts reported in the balance sheets
        for current assets and current liabilities qualifying as financial instruments
        are a reasonable estimate of fair value. The Company considers the carrying
        amount of cash, accounts receivable, other receivables, accounts payable,
        accrued liabilities and other payables to approximate their fair values because
        of the short period of time between the origination of such instruments and
        their expected realization and their current market rate of
        interest.
 
 F-9
  **CHINA
            DONGSHENG INTERNATIONAL, INC.**
 **(FORMERLY
            PAPERCLIP SOFTWARE, INC.)**
 **CONSOLIDATED
            NOTES TO FINANCIAL STATEMENTS (Continued)**
 **FOR
            THE YEARS ENDED JUNE 30, 2007 AND 2006**
  **NOTE
        2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**
  **FOREIGN
        CURRENCY TRANSLATION**
 
 The
        functional currency for the Company’s operations in China is the Renminbi
        (“RMB”). Foreign currency transactions are translated at the applicable rates of
        exchange in effect at the transaction dates. Monetary assets and liabilities
        denominated in foreign currencies at the balance sheet date are translated
        at
        the applicable rates of exchange in effect at that date. Revenues and expenses
        are translated at the average exchange rates in effect during the reporting
        period.
 
 Translation
        adjustments arising from the use of different exchange rates from period
        to
        period are included as a component of stockholders' equity as "Accumulated
        Other
        Comprehensive Income".  Gains and losses resulting from foreign
        currency translations are included in Accumulated Other Comprehensive
        Income.
  **NEW
        ACCOUNTING PRONOUNCEMENTS**
 
 In
        February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
        Assets and Financial Liabilities—Including an amendment of FASB Statement No.
        115 (“SFAS 159”). SFAS 159 permits companies to choose to measure many financial
        instruments and certain other items at fair value that are not currently
        required to be measured at fair value. The objective of SFAS 159 is to provide
        opportunities to mitigate volatility in reported earnings caused by measuring
        related assets and liabilities differently without having to apply hedge
        accounting provisions. SFAS 159 also establishes presentation and disclosure
        requirements designed to facilitate comparisons between companies that choose
        different measurement attributes for similar types of assets and liabilities.
        SFAS 159 will be effective in the first quarter of fiscal 2009. The Company
        is
        evaluating the impact that this statement will have on its consolidated
        financial statements.
 
 In
        September 2006, the FASB issued SFAS No. 157 “Fair Value
        Measurements,” which provides a definition of fair value, establishes a
        framework for measuring fair value and requires expanded disclosures about
        fair
        value measurements. SFAS No. 157 is effective for financial statements
        issued for fiscal years beginning after November 15, 2007 and interim
        periods within those fiscal years. The provisions of SFAS No. 157
        should be applied prospectively. The Company is currently analyzing whether
        this
        new standard will have impact on its financial position and results of
        operations.
  F-10
   **CHINA
            DONGSHENG INTERNATIONAL, INC.**
 **(FORMERLY
            PAPERCLIP SOFTWARE, INC.)**
 **CONSOLIDATED
            NOTES TO FINANCIAL STATEMENTS (Continued)**
 **FOR
            THE YEARS ENDED JUNE 30, 2007 AND 2006**
  **NOTE
        2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**
 
 In
        September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting
        for Defined Benefit Pension and Other Postretirement Plans”, which amends
        SFAS No. 87 “Employers’ Accounting for Pensions”
(SFAS No. 87), SFAS No. 88 “Employers’ Accounting for
        Settlements and Curtailments of Defined Benefit Pension Plans and for
        Termination Benefits” (SFAS No. 88), SFAS No. 106
“Employers’ Accounting for Postretirement Benefits Other Than Pensions”
(SFAS No. 106), and SFAS No. 132R “Employers’ Disclosures
        about Pensions and Other Postretirement Benefits (revised 2003)”
(SFAS No. 132R). This Statement requires companies to recognize an
        asset or liability for the overfunded or underfunded status of their benefit
        plans in their financial statements. SFAS No. 158 also requires the
        measurement date for plan assets and liabilities to coincide with the sponsor’s
        year end. The standard provides two transition alternatives related to the
        change in measurement date provisions. The recognition of an asset
        and
        liability related to the funded status provision is effective for fiscal
        year
        ending after December 15, 2006 and the change in measurement date
        provisions is effective for fiscal years ending after December 15, 2008 The
        implementation of this standard did not have a material impact on the Company’s
        financial position, results of operations or cash flows.
 
 **NOTE
        3. INVENTORY**
 
 Inventory
        is valued at the lower of cost or market. Cost is determined on a first-in,
        first-out basis and includes all expenditures incurred in bringing the goods
        to
        the point of sale and putting them in a sellable condition.  At June
        30, 2007, the Company’s inventory consists of the finished goods
        only.
 
 **NOTE
        4. PROPERTY, PLANT AND EQUIPMENT, NET**
  Machinery
                      and Equipment
                  
                  $
                  408,040Building
                      and Plant
                  
                  
                  4,278,504Subtotal
                  
                  
                  4,686,544Less:
                      Accumulated Depreciation
                  
                  
                  (308,382
                  )Construction
                      in progress
                  
                  
                  30,012,210Total
                      property and equipment, net
                  
                  $
                  34,390,372
 
 Depreciation
        expense for the years ended June 30, 2007 and 2006 was $170,114 and $90,037,
        respectively.
   F-11
  **CHINA
            DONGSHENG INTERNATIONAL, INC.**
 **(FORMERLY
            PAPERCLIP SOFTWARE, INC.)**
 **CONSOLIDATED
            NOTES TO FINANCIAL STATEMENTS (Continued)**
 **FOR
            THE YEARS ENDED JUNE 30, 2007 AND 2006**
 **NOTE
        5. LAND USE RIGHT**
 
 The
        Company’s operating subsidiary, Dongsheng Weiye, purchased the right to use land
        from the local government for the period of 30 years to build a new research
        facility. The land use right is stated at cost less accumulated amortization.
        Amortization is provided using the straight-line method over 30 years. The
        amortization expense was $22,743 and $ - 0 – for the years ended June 30, 2007
        and 2006, respectively.
 
 **NOTE
        6. DEPOSIT ON LAND**
 
 In
        June
        2005, the Company’s operating subsidiary also signed an agreement with the Land
        Committee of Jilin City Hi-Tech Zone to purchase the land use right for a
        planned new manufacturing site.
  As
        of
        June 30, 2007, the Company has not received the official Certificate of Approval
        for the land use right from the local government. The total payment of
        $2,758,802 made on purchase of land use right were recorded as deposit on
        land
        and no amortization on land use right will be booked until the official approval
        is received.
 
 **NOTE
        7. INCOME TAX PAYABLE**
 
 The
        Company’s operating subsidiary, Dongsheng, is located in China and governed by
        the Income Tax Law of China concerning the private-run enterprises, which
        are
        normally subject to income tax at a statutory rate of 33% (30% state income
        tax
        plus 3% local income tax) on its taxable income. Dongsheng has been accruing
        the
        income tax payable since the first year it had profits.
 
 In
        2006,
        Dongsheng changed its status from the private-run enterprise to foreign-invested
        enterprise following the acquisition by ASI. In accordance with Chinese laws,
        the subsidiary is now eligible to the income tax holiday of 5 years commencing
        from its first profit-making year. The subsidiary is applying for the income
        tax
        exemption from Chinese tax authority and is expected to be approved soon.
        Until
        then, the subsidiary is continuing to accrue the income taxes as usual. The
        accrued income tax payable will be reversed and recorded as income tax benefit
        in the period when the certificate of approval and tax clearance are granted
        by
        the Chinese authority.
 
 The
        total
        tax payable of $18,925,542 accrued in the Company’s book as of June 30, 2007
        includes $18,884,618 for the Company’s operating subsidiary, Dongsheng Weiye,
        and $40,924 for the Company. Majority of the tax payable for Dongsheng Weiye
        is
        the accrued income tax liability, which is expected to be forgiven.
  F-12
  **CHINA
            DONGSHENG INTERNATIONAL, INC.**
 **(FORMERLY
            PAPERCLIP SOFTWARE, INC.)**
 **CONSOLIDATED
            NOTES TO FINANCIAL STATEMENTS (Continued)**
 **FOR
            THE YEARS ENDED JUNE 30, 2007 AND 2006**
 **NOTE
        8.   STOCKHOLDERS' EQUITY**
 
 On
        November 9, 2006, in accordance with the Share Exchange Agreement with ASI,
        the
        Company issued 18,153,934 shares of its common stock and 1,762,472 shares
        of its
        newly-designated Series B Convertible Preferred Stock, of which series each
        share will convert into 500 shares of the Company’s common stock (upon the
        increase of the Company’s authorized common stock to an appropriate amount to
        satisfy full conversion of all Series B Convertible Preferred Stock
        shares).
 
 On
        February 25, 2007, the Company effectuated a 1-for-37 reverse stock split
        on all
        of its issued and outstanding shares of common stock and preferred stock.
        Simultaneously, all preferred stock was converted into common stock at the
        designated ratio.
 
 As
        of
        June 30, 2007, there were 31,546,134 shares of Common Stock issued and
        outstanding and no preferred stock.
 
 **NOTE
        9.   CURRENT VULNERABILITY DUE TO CERTAIN
        CONCENTRATIONS**
 
 The
        Company's operations are carried out in the PRC. Accordingly, the Company's
        business, financial condition and results of operations may be influenced
        by the
        political, economic and legal environments in the PRC, and by the general
        state
        of the PRC's economy.
 
 The
        Company's operations in the PRC are subject to specific considerations and
        significant risks not typically associated with companies in the North America
        and Western Europe. These include risks associated with, among others, the
        political, economic and legal environments and foreign currency exchange.
        The
        Company's results may be adversely affected by changes in governmental policies
        with respect to laws and regulations, anti-inflationary measures, currency
        conversion and remittance abroad, and rates and methods of taxation, among
        other
        things.
 
 **NOTE
        10.   SUBSEQUENT EVENTS**
 
 Subsequent
        to the issuance of our report, the Company’ operating subsidiary, Dongsheng,
        received an tax clearance notice from the Local Tax Bureau in China stating
        that
        as of September 23, 2007, all tax liabilities have been cleared and the Company
        does not owe any outstanding balance relating to income taxes and other tax
        liabilities. The Company opts to make any adjustment to the previous accrued
        tax
        liabilities in the next quarterly filing.
 
 
 F-13




**SIGNATURES**
  In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
  **CHINA
                  DONGSHENG INTERNATIONAL, INC.**Date: October
                  12, 2007
              By:
              /s/ *Aidong
                  Yu*AIDONG
                  YUPresident,
                  Chief Executive Officer,
                Chief
                  Financial Officer
  In
        accordance with the Exchange Act, this report has been signed below by the
        following persons on behalf of the registrant and in the capacities and on
        the
        dates indicated.
 
 **Name**
              
              **Title**
              
              **Date***/s/
                  Aidong Yu*
                
                AIDONG
                  YU
              
              President,
                  Chief Executive Officer,
                Chief
                  Financial Officer and Chairman
              
              October
                  12, 2007*/s/
                  Huizhu Xie*
                HUIZHU
                  XIE
              
              Director
              
              October
                  12, 2007*/s/
                  Dekui Wang*
                DEKUI
                  WANG
              
              Director
              
              October
                  12, 2007