UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549




**Form
      10-K**


(Mark
      One)


T
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**


**For
      the fiscal year ended**  **June
      30, 2007**




**OR**




o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**


**For
      the transition period from _____ to _________**




**Commission
      file number:** **000-27129**






**ASIAN
      FINANCIAL, INC.**


(Exact
      name of registrant as specified in its charter)




**Wyoming**
            **91-1922225**(State
                or other jurisdiction of incorporation or
              organization)
            (I.R.S.
                Employer
              Identification
                No.)**4/F,
                No. 3 Jinyuan Road**
              **Daxing
                District Industrial Development Zone**
              **Beijing,
                Peoples’ Republic of
                China**
              ****102600****(Address
                of principal executive
                offices)




**+86
      10 6021 2222**


(Registrant’s
      telephone number, including area code)




**Pioneer
      Corporate Services**


**1720
      Care Avenue**


**Suite
      600**


**Cheyenne,
      Wyoming**


**Zip
      Code: 82001**


**+307
      635 1456**


(Former
      name, former address and former fiscal year, if changed since last
      report)




Securities
      registered pursuant to Section 12(b) of the Act:




Title
                  of class
              Name
                  of each exchange on which
                  registered





Securities
      registered pursuant to Section 12(g) of the Act:




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes
o No
x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Exchange Act.


Yes
o No
x




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days.


Yes x No
o









Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not 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-K or any amendment to
      this
      Form 10-K. o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer, as defined in Rule 12b-2 of the
      Exchange Act.


Large
                accelerated filero
            Accelerated
                filero
            Non-accelerated
                filerx






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
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant. The aggregate market value shall be computed
      by reference to the price at which the common equity was sold, or the average
      bid and asked prices of such common equity, as of a specified date within
      60 days prior to the date of filing None




There
      were 25,000,050 shares of the registrant’s common stock issued and outstanding as of
      September 24, 2007.




2
 
  **ASIAN
          FINANCIAL, INC.**
 
 FORM
          10-K
 
 INDEX
 
 **Page**PART
                    IItem
                    1. Business
                
                
                3Item
                    1A. Risk Factors
                
                
                17Item
                    2. Properties
                
                
                28Item
                    3. Legal Proceedings
                
                
                29Item
                    4. Submission of Matters to a Vote of Security Holders
                
                
                29PART
                    IIItem
                    5. Market for Registrant’s Common Equity, Related Stockholder Matters and
                    Issuer Purchases of Equity Securities
                
                
                29Item
                    6. Selected Financial Data
                
                
                29Item
                    7. Management’s Discussion and Analysis of Financial Condition and Results
                    of Operations
                
                
                31Item
                    7A. Quantitative and Qualitative Disclosures About Market Risk
                
                
                37Item
                    8. Financial Statements and Supplementary Data
                
                
                38Item
                    9. Changes in and Disagreements with Accountants on Accounting
                    and
                    Financial Disclosure
                
                
                38Item
                    9A. Controls and Procedures
                
                
                39Item
                    9B. Other Information
                
                
                40PART
                    IIIItem
                    10. Directors, Executive Officers and Corporate Governance
                
                
                40Item
                    11. Executive Compensation
                
                
                42Item
                    12. Security Ownership of Certain Beneficial Owners and Management
                    and
                    Related Stockholder Matters
                
                
                48Item
                    13. Certain Relationships and Related Transactions, and Director
                    Independence
                
                
                48Item
                    14. Principal Accountant Fees and Services
                
                
                50PART
                    IVItem
                    15. Exhibits and Financial Statement Schedules
                
                
                51Signatures
                
                
                52Report
                    of independent registered public accounting firm
                
                
                F-1Financial
                    Statements
                
                
                F-2
 
 3


**PART
      I**




**Item
                1.**
            **Business.**





*The
      Acquisition of Duoyuan*


We
        were
        originally organized under the law of the State of Nevada on August 10, 1998
        to
        engage in any lawful activity. On July 27, 2005, we merged with Asian Financial,
        a Wyoming corporation, for the purpose of changing our domicile from Nevada
        to
        Wyoming.




On
      October 6, 2006, Asian Financial completed an acquisition of Duoyuan Digital
      Printing Technology Industries (China) Co., Ltd., “Duoyuan China”, pursuant to
      the Equity Transfer Agreement, and Duoyuan China became Asian Financial’s
      wholly-owned subsidiary. The purpose of this equity transfer is to have Duoyuan
      China become a public company through a reverse merger route. Prior to the
      Equity Transfer in 2006, Asian Financial did not have any operations and had
      not
      generated any revenues and it has no employees other than officers and
      directors. The primary activity of Asian Financial before the Equity Transfer
      was to seek merger or acquisition candidates which it could either merge with
      or
      acquire.





On
      November 2, 2006, we closed the transactions contemplated by the Securities
      Purchase Agreement dated October 24, 2006 by and among us and certain unrelated
      investors, the “Purchase Agreement”. In accordance with the Purchase Agreement,
      we issued an aggregate of 16,447,019 shares (pre-split shares) of our common
      stock for a purchase price of approximately $1.43 (pre-split price) per share
      or
      an aggregate purchase price of $23,549,200. This private equity financing was
      made pursuant to the exemption from the registration provisions of the
      Securities Act provided by Section 4 (2) of the Securities Act of 1933, as
      amended, the “Securities Act”, for issuances not involving a public offering and
      Rule 506 of Regulation D promulgated thereunder.





*Duoyuan
      China* .
      Duoyuan
      China was originally established in the People’s Republic of China (the ‘PRC”)
      in 2001 by Duoyuan Industries (Holding), Inc, which was incorporated in the
      British Virgin Islands. In September 2002, Duoyuan Industries entered into
      an
      Equity Transfer Agreement with Duoyuan Investments Limited, whereby Duoyuan
      Investments acquired 100% of the equity in Duoyuan China from Duoyuan
      Industries. Mr. Wenhua Guo is the sole shareholder of both Duoyuan Industries
      and Duoyuan Investments. The purpose of this equity transfer was to simplify
      and
      clarify the structure and operations of Duoyuan China: after the equity
      transfer, Duoyuan Industries became the sole shareholder of Duoyuan Information
      Technology Industries (China) Co. Ltd., “Duoyuan Information”, and Duoyuan
      Investments became the sole shareholder of Duoyuan China. As a consequence,
      the
      business of Duoyuan Information and Duoyuan China do not have any overlap and
      do
      not compete with each other.




Duoyuan’s
      origin in offset press engineering can be traced back to 1994. In 1994, Beijing
      Duoyuan Electric Co. Ltd was established by Mr. Wenhua Guo and Beijing Duoyuan
      Electric Group Co. Ltd., a company also controlled by Mr. Wenhua Guo in Beijing,
      which produced its first generation of single-color small-format offset presses.
      Besides printing press, Duoyuan Electric also manufactured water treatment
      equipment and fax machines. As the printing industry in China developed, we
      took
      a long-term view on our printing press business and decided to spin off the
      printing business into a new entity. On June 21, 2001, Duoyuan China was
      established to focus on development, manufacturing and marketing of printing
      equipment. Duoyuan China acquired only relevant intellectual property
      and know-how about printing presses from Duoyuan Electric. The assets and
      liabilities were left in Duoyuan Electric because Duoyuan Electric is still
      an
      operating company with business in water treatment and equipment and fax
      machines. Duoyuan Electric engages in different industry sectors from Duoyuan
      China and does not compete with Duoyuan China. Duoyuan China is our operating
      headquarters with strategic planning, management, financing, research and
      development, sales and marketing, after-sales service and headquarters
      administration functions.





*Langfang
      Duoy* *uan.* In
      October 2000, Beijing Yinhang Yinlu Advertisement Co. Ltd and Beijing Huiyuan
      Duoyuan Digital Printing Technology Institution both controlled by Mr. Wenhua
      Guo, established Duoyuan Digital Printing Technology Industries (China) Co.,
      Ltd., “Langfang Duoyuan”, in Langfang, Hebei Province as a production base for
      offset presses. Yinghang Yinlu and Huiyuan Duoyuan had 5% and 95% of the capital
      interest of Langfang Duoyuan, respectively.





In
      March
      2002, Duoyuan China acquired the 5% capital interest in Langfang Duoyuan that
      was previously held by Yinghang Yinlu. In October 2005, Duoyuan China acquired
      from Huiyuan Duoyuan 90% capital interest in Langfang Duoyuan. After this
      transaction, Duoyuan China and Huiyuan Duoyuan had 95% and 5% of capital
      interest of Langfang Duoyuan, respectively. Langfang Duoyuan is the
      manufacturing base for small-format offset presses. The prepress and postpress
      equipment are currently manufactured at Langfang Duoyuan.




3




*Hunan
      Duoyuan* .
      Duoyuan
      China acquired Hunan Duoyuan Printing Equipment Manufacturer Co., Ltd., “Hunan
      Duoyuan”, in March 2004, in which Duoyuan China and Langfang Duoyuan acquired
      88% and 12% of the capital interest, respectively. Prior to this acquisition,
      Hunan Duoyuan was known as Hunan Printing Machinery Co., Ltd. and was formerly
      a
      state-owned enterprise founded in 1969. Hunan Duoyuan was historically one
      of
      the three major large-format offset press manufacturers in China and was
      designated to produce multicolor presses. Duoyuan acquired Hunan Duoyuan to
      increase the production capacity to meet the market demand for large-format
      offset presses. Hunan Duoyuan now is the manufacturing base for large-format
      offset presses.





The
      chart
      below shows Duoyuan’s ownership structure, including its subsidiaries and
      affiliated companies.













*Our
      Business*




Since
      our
      inception and prior to the Equity Transfer, we did not have any operations
      and
      had not generated any revenues, and we had no employees other than officers
      and
      directors. The primary activity of the Company before the Equity Transfer in
      2006 was to seek merger or acquisition candidates. As a result of the Equity
      Transfer, the operations of Duoyuan China became our principal operations and
      the management of Duoyuan China became our management, and therefore all the
      information provided below includes the operations of Duoyuan China, which
      is
      now our subsidiary. We believe we are a leading non-government owned offset
      printing equipment manufacturer in China. Our products cover all three stages
      of
      the offset printing process, including prepress, press and postpress. Offset
      presses currently generate the majority of our total sales.




We
      believe we are one of the leaders in the design and development of offset
      printing equipment and solutions in China. We have R&D centers located in
      Langfang Duoyuan and Hunan Duoyuan that is equipped with what we believe to
      be
      some of the best design and test tools and staffed with highly talented R&D
      staff in the industry in China, enabling us to continuously launch new products
      with improved quality and functionality with short time to market.




4




Our
      sales
      and service network consists of representative offices and agents that covers
      23
      provinces and over 100 cities in China. We believe this is the one of the
      largest sales and service network among our competitors in China.





Over
      20,000 offset printing companies in China are using our offset presses. We
      estimate this to be a 15% market coverage of currently operating offset presses
      in China. The Print and Print Equipment Industries Association of China,
“PEIAC”, ranked us among the top three printing equipment providers in China, in
      terms of Sales revenue.





In
      our
      offset press segment, we offer four types of sheet-fed offset presses:
      single-color small-format presses, single-color large-format presses, multicolor
      small-format presses and multicolor large-format presses.





·
            Within
                the press segment, our multicolor presses currently generate the
                majority
                of our press sales.·
            In
                prepress, we offer thermal Computer-To-Plate (CTP) systems, which
                transmit
                digital image data directly to a press plate from a computer. CTP
                technology offers better consistency and higher quality because it
                eliminates the risk for human errors. We believe that we are the
                first,
                and currently the only Chinese offset press producer in China to
                offer CTP
                systems at the commercial level.·
            In
                postpress, we offer automatic booklet makers and automatic cutters
                and
                have several other products in trial production.





We
      have
      PRC cost advantages that enable us to offer our products at one-quarter to
      one-third the price of our international competitors. Our large format presses
      are manufactured in our Hunan Duoyuan facility and our small format presses
      and
      prepress and postpress solutions are manufactured in our second facility,
      Langfang Duoyuan.





We
      believe there are two major barriers to entry in the printer manufacturing
      market in China: A high capital requirement and a high degree of technical
      know-how. The industry is particularly capital intensive due to the cost of
      machinery to build printing equipment. We believe that the technical knowledge
      in the industry is limited to a selected few.





*The
      Industry in Which We Operate*





We
      believe we are well positioned to benefit from the rapid growth of expenditures
      on equipment in printing industry in China and from the growing demand for
      domestic printing equipment and solutions in China.





*The
      Printing Industry in China*





As
      the
      economy is growing rapidly and the export sector is booming in China, demand
      for
      publication printing work, such as, newspapers, magazines and books, etc.,
      and
      commercial printing work, such as packages, corporate brochures, product
      categories, conference materials, etc., also grows. From 2001 to 2005, the
      total
      output of the printing industry grew at an average rate of 12% per annum,
      according to PEIAC. In
      dollar value, in
      2004, package
      printing is the largest category with nearly $13.5 billion in output,
      representing 36% of the total industry, and books and magazines printing and
      news paper printing represented the second and third largest categories, with
      about 25% and 16% of total output, respectively, according to PEIAC. This growth
      was largely driven by a combination of improved printing work quality and low
      price charged for providing the service.





The
      printing industry in China is currently undergoing an important wholesale
      transition from single-color printing to multicolor printing. A few years ago,
      most high quality multicolor printing work was handled by large and
      sophisticated printing companies in the coastal areas, especially in the Pearl
      River Delta region. Now, almost every major city has a suburban area with
      concentrated printing companies that can handle a wide spectrum of printing
      works, from simple single-color works to fairly high quality multicolor printing
      works. Multicolor printing is becoming a mainstream capability that almost
      every
      printing company has to have.




5




*The
      Printing Equipment Industry in China*





The
      rapid
      development in the printing industry fueled the even faster growth of the
      printing equipment in China. From 2002 to 2004, the
      output value of the domestic printing equipment industry in China grew at an
      average rate of 22% per annum, according to PEIAC.





The
      printing companies in China generally have two sources from which to purchase
      printing equipment: domestic manufacturers and overseas manufacturers. Although
      the domestic printing equipment industry witnessed rapid growth during the
      past
      few years, the design and engineering level of the domestic industry still
      cannot meet the high-end users’ requirements. Each year China still imports a
      large amount of high-end printing equipment, which is reflected in large import
      dollar value in this category of products. According to the data reported by
      PEIAC based on Chinese Customs Office statistics, China imported $1.7 billion
      worth of printing equipment during 2005. This was about 1.4 times of those
      made
      and sold domestically. Including domestically-made and imported printing
      equipment, the printing industry in China spent about $2.6 billion on printing
      equipment in 2005, up from about $2 billion in 2001. Printing equipment spending
      was growing at an average rate of about 11% per annum from 2002 to 2005. Leading
      domestic printing equipment manufacturers are determined to catch up with top
      international counterparts by investing in research and development and
      elevating engineering standards. As the result, they are gaining market share
      more quickly than overseas suppliers. Although domestically-made and sold
      printing equipment is still less in total dollar value purchased, the market
      share had improved from about 33% in 2002 to about 42% in 2005. The trends
      show
      imports of printing equipment are decreasing and exports increasing. In 2005,
      Chinese manufacturers exported $381 million worth of printing equipment, a
      39%
      increase from 2004 and 9.5 times of that was exported five years
      ago.





*Our
      Competitive Strength*




Our
      business is characterized by the following competitive strengths:





*Non-government
      Owned.* We
      are
      the largest privately owned major offset printing equipment and solution
      provider in China. As a non-government company, our focus is market-oriented
      and
      client-centric and we have an operating system that enables us to introduce
      new
      technologies and launch new products faster than our domestic competitors.
      In
      addition, we have better internal control of sales and payment collection,
      and
      we are more proactive in market expansion and efficient in time to market.





*PRC
      Cost Advantage.* Our
      pricing is competitive among domestic producers. Those prices are about
      one-quarter to one-third the price of imported machines. Our PRC cost advantages
      allow us to offer a quality product at a much lower price than international
      competitors, thus opening several markets for us outside of China. We are
      currently expanding distribution to price-conscious markets like Africa, the
      Middle East and parts of Asia. We are also developing a marketing strategy
      to
      offer products in some developed and western countries, where there is demand
      for standard machines at low costs.





*One
      of the Largest Sales and Service Networks.* We
      believe we have one of the largest sales and service networks of all domestic
      offset printing equipment producers with over 200 sales professionals covering
      over 100 cities and 23 provinces throughout China. We have wide geographic
      coverage and deep penetration in many local markets. Our comprehensive service
      and quick response in after-sales maintenance and repair minimizes downtime
      for
      our customers.





*Established
      Market Presence.* We
      have
      established market share in China in the offset press market, particularly
      in
      the small-format segment and increasingly in the large-format segment. Our
      subsidiary Hunan Duoyuan, which produces multicolor large-format offset presses,
      has a significant existing customer base. Hunan Duoyuan was established in
      March
      2004 through an acquisition of the assets of a government-owned entity, Hunan
      Printing Machinery. Before it was acquired by the Company, Hunan Printing
      Machinery had suffered operating losses for many years. Despite all of the
      losses, it had accumulated a significant customer base over the years. Hunan
      Duoyuan became profitable in the second quarter after it was acquired by the
      Company and the Company seeks to capitalize on Hunan Duoyuan’s existing brand
      awareness, market share and customer base to grow in large format offset press
      segments. We intend to capitalize on this existing brand awareness and market
      share and to leverage Hunan Duoyuan’s production capacity and existing customer
      base to grow in multicolor and large-format offset press segments, the largest
      and fastest growing segments of the print equipment market.




*R&D
        Capabilities.* We
        believe we have one of the largest R&D capabilities among all Chinese offset
        printing equipment producers. With over 200 research and design engineers
        located at our two R&D facilities with total floor space of 59,180 square
        feet, we are confident that our R&D capabilities is one of, if not the best,
        in China. This advantage enables us to compete at the forefront of new
        technologies and thus allows new solutions to be implemented in the marketplace
        in a short amount of time.




6


*Business
      Strategy*





We
      intend
      to continue to grow our business by pursuing the following
      strategies:





*Market
      Expansion.* Through
      our R&D capabilities, we can develop technologies and functions that will
      enable us to offer products to a wider range of geographical markets. Currently
      our primary market is the PRC, however we are building relationships to
      distribute to non-western countries, including countries in Africa, the Middle
      East, and parts of Asia, and other price-conscious international markets. Our
      current product lines address price-conscious markets, and we intend to further
      that capability by widening our reach. We see growth potential in U.S. and
      western European countries in niche sectors of the printing market. Because
      we
      offer our products at about a 50% - 60% discount to other major international
      competitors, we believe we can begin to capture mainstream printing sectors
      of
      the U.S. and additional western markets. Current trends in western markets
      have
      included the addition of printing enhancements for more complex printing
      projects. These products come from our competitors in Germany and Japan, but
      at
      higher costs. We believe we can offer standard printing presses to this market
      at half the cost of our competitors.





*Increase
      Prepress and Postpress Products.* We
      plan
      to offer more prepress and postpress products. In prepress, our CTP systems
      are
      experiencing strong growth. We plan to increase production and expand market
      presence in China. In postpress, we currently offer automatic booklet makers
      and
      automatic cutters, both of which we plan to push into new markets. In addition,
      we have several other postpress equipment in trial production, which will be
      introduced into the market. We also plan on developing multicolor offset presses
      with maximum sheet width of 1,040 mm (40.94 inches) to widen our large-format
      multicolor press offering.




*Reach
      Western Product Standards.* Our
      PRC
      cost advantage is principally attributed to lower labor costs, however, our
      international competitors, mainly German and Japanese companies, offer presses
      with increased functionality and durability for which western and more developed
      markets are accustomed. We intend to reach these western standards through
      continuing R&D in new materials and design, while still maintaining the cost
      advantage.





*Growth
      through Acquisition.* We
      intend
      to grow our business through strategic acquisitions of related printing software
      and hardware developers and their technologies. Specifically, we plan to acquire
      workflow management solutions to integrate our prepress, press and post-press
      equipment solutions.




*Products,
      Technology and Solutions*





We
      currently offer prepress, press and post-press equipment. Below is a table
      of
      our current product offerings:


Category
              
              Commercial
                  Name
              
              Model
                  Code
              
              Specifications/Paper
                  SizeSingle-color
              
              Large
                  Octavo Thin
              
              YP1A3A
              
              440
                  x 320 mm
              
              17.32
                  x 12.60 inch
              
              A3Small-format
              
              Paper
                  King
              
              YP1A3B
              
              440
                  x 320 mm
              
              17.32
                  x 12.61 inch
              
              A3Press
              
              Large
                  Octavo Omnipotent King
              
              YP1A3C
              
              440
                  x 320 mm
              
              17.32
                  x 12.62 inch
              
              A3Large
                  Octavo Note King
              
              YP1A3D-NP*
              
              440
                  x 320 mm
              
              17.32
                  x 12.63 inch
              
              A3Sexto
                  Omnipotent King
              
              DYA47C
              
              470
                  x 360 mm
              
              18.50
                  x 14.17 inchDY52C
              
              520
                  x 360 mm
              
              20.47
                  x 14.17 inch
              
              B3Sexto
                  Note King
              
              DYA47D-NP*
              
              470
                  x 360 mm
              
              18.50
                  x 14.17 inchDY47C-NP*
              
              470
                  x 360 mm
              
              18.50
                  x 14.17 inchDY52D-NP*
              
              520
                  x 360 mm
              
              20.47
                  x 14.17 inch
              
              B3DY56C
              
              560
                  x 400 mm
              
              22.05
                  x 15.75 inchSingle-color
              
              Quarto
                  Press
              
              J4105
              
              660
                  x 480 mm
              
              25.98
                  x 18.90 inch
              
              A2Large-format
              
              
              
              J4109
              
              660
                  x 480 mm
              
              25.98
                  x 18.90 inch
              
              A2Press
              
              
              
              DYA174
              
              740
                  x 540 mm
              
              29.13
                  x 21.28 inch
              
              B2DY174***
              
              740
                  x 540 mm
              
              29.13
                  x 21.27 inch
              
              B2DY174-AL**
              
              740
                  x 540 mm
              
              29.13
                  x 21.28 inch
              
              B2Multicolor
                  Press
              
              2-color
                  Large Octavo Press
              
              YP2A3
              
              440
                  x 320 mm
              
              17.32
                  x 12.60 inch
              
              A32-color
                  Sexto Press
              
              DY252
              
              520
                  x 360 mm
              
              20.47
                  x 14.17 inch
              
              B3DYA252**
              
              520
                  x 370 mm
              
              20.47
                  x 14.57 inch
              
              B32-color
                  Quarto Press
              
              DY274
              
              740
                  x 540 mm
              
              29.13
                  x 21.26 inch
              
              B2DY274-AL**
              
              740
                  x 540 mm
              
              29.13
                  x 21.26 inch
              
              B24-color
                  Large Octavo Press
              
              YP4A3
              
              440
                  x 320 mm
              
              17.32
                  x 12.60 inch
              
              A3DY452
              
              520
                  x 370 mm
              
              20.47
                  x 14.57 inch
              
              B34-color
                  Sexto Press
              
              DYA452**
              
              520
                  x 370 mm
              
              20.47
                  x 14.57 inch
              
              B34-color
                  Quarto Press
              
              PZ4660
              
              660
                  x 480 mm
              
              25.98
                  x 18.90 inch
              
              A2PZ4660-AL**
              
              660
                  x 480 mm
              
              25.98
                  x 18.90 inch
              
              A2DY474
              
              740
                  x 540 mm
              
              29.13
                  x 21.26 inch
              
              B2DY474-AL**
              
              740
                  x 540 mm
              
              29.13
                  x 21.26 inch
              
              B2Prepress
              
              CTP
                  System
              
              DYCTP600IDYCTP800I
              
              1160
                  x 940 mm
              
              45.67
                  x 37.01 inch
              
              A0CTP
                  Developer
              
              DYSB560
              
              580
                  x 400 mm
              
              22.05
                  x 15.75 inchDYSB650
              
              650
                  x 550 mm
              
              25.60
                  x 21.65 inch
              
              A2Postpress
              
              Automatic
                  Booklet Maker Cutter
              
              DYPDZQ520
              
              520
                  x 350 mm
              
              20.47
                  x 13.78 inch
              
              B3


*
              with
                  number-punching function**
              with
                  alcohol dampening system***
              with
                  high paper-collecting plate


7





*Sheet-fed
      Offset Printing Presses*





In
      sheet-fed offset printing press, we follow the European-US style of
      manufacturing, which is built on solid framework and is designed for heavy
      commercial printing work. Our offset presses have passed testing by the National
      Printing Machinery Quality Supervision and Testing Center.





We
      offer
      four types of sheet-fed offset presses:





*Single-color
      Small-format Press* .
      A
      single-color offset press has one set of press rollers dedicated to one color.
      To make color print with a single color press, a sheet of paper typically must
      be processed four times, each time requiring precise adjustments for overprint,
      an obviously time-consuming and efficiency deficient form of printing. Generally
      speaking, a small-format offset press has a maximum sheet in-take width of
      equal
      to or less than 520 mm, about 24.47 inch. This type of press is typically best
      suited for a user who is just moving into offset printing from type-set
      printing, or whose print works are mostly single-colored, such as printing
      books. It requires low initial investment and low operating skills for simple
      print projects.




*Single-color
      Large-format Press* .
      A
      large-format offset press has a maximum sheet in-take width of larger than
      520
      mm, about 24.47 inch. It can also handle thick and ultra-thick paper sheet.
      Therefore, a single-color large-format offset press is an entry-level solution
      for package printing. It requires relatively low initial investment and
      relatively low operating skills for simple package and multicolor print
      projects.





*Multicolor
      Small-format Offset Press* .
      A
      multicolor offset press has more than one set of rollers. Most multicolor
      presses have four sets of rollers dedicated to four separate colors - typically
      black, magenta, cyan, and yellow - widely used in the printing industry, to
      generate all different colors. A multicolor small-format offset press offers
      a
      relatively low-cost solution for higher quality and higher margin multicolor
      print works. It requires relatively higher operating skills. A multicolor
      small-format offset press is most suitable for a variety of multicolor print
      works such as corporate brochures, product catalogues, labels and small
      packages, etc.





*Multicolor
      Large-format Offset Press* .
      This
      press combines multicolor with large paper sheet printing ability. This is
      the
      most robust printing solution and is suited for high quality, high margin,
      and
      timely projects. Multicolor large-format offset press requires the highest
      engineering skill to make and high operating skill to operate. This type of
      press also requires a fair amount of high investment from the printing
      companies.





*Prepress
      Printing Equipment*





In
      prepress, we currently produce thermal Computer-to-Plate (CTP) systems, plate
      developers and automatic plate punch-makers.





*CTP
      systems.* Digital
      formatting and processing - both prepress processes - plays an important role
      in
      improving the quality of presswork and efficiency of printing process. This
      type
      of quality and efficiency can be achieved through the use of CTP systems. Since
      its inception, CTP has quickly been adopted by commercial printing, package
      printing and newspaper printing companies in Europe and the U.S. In 2002,
      Chinese printing companies started using CTP, much later than those in developed
      economies. Because the price of CTP plates is much higher than that of
      traditional plates, CTP penetration in Chinese printing companies was relatively
      low. With increased investment in CTP plate technology, the output of CTP plates
      will increase and the price is expected to drop, thus boosting sales of CTP
      systems. Currently, the majority of CTP systems in China are imported from
      overseas suppliers, principally from Japan and U.S.




8




We
      believe we are among the first few companies in China to develop CTP systems
      and
      the first offset press maker able to commercially produce them. We currently
      produce two models of CTP systems: the CTP600 and the CTP800. CTP800 has a
      higher configuration than CTP600. To date, all CTP systems sold were CTP800s.





*Plate
      Developer and Automatic Plate Punch-Maker.* We
      also
      produce traditional plate developers and automatic plate punch-makers.
      Traditional plate development is the transfer of an image onto a press plate.
      Plate developers are typically sold by us as an accessory to offset presses,
      not
      as a stand-alone product. Automatic plate punch-makers punch holes of specific
      measurements through a plate to fit different offset presses. We also sell
      automatic plate punch-makers as our complimentary products.





*Post-press
      Equipment*





Automatic
      Paper Cutter. We manufacture an automatic paper cutter that is typically
      packaged it as a complimentary product to our offset presses.





Automatic
      Booklet Maker. Our Automatic booklet maker combines the function of collating,
      folding, stitching and cutting into one machine. We have the ability to
      commercially produce automatic booklet makers but the product has not started
      to
      generate sales.




*Technology*




We
      combine forefront technical innovation and precise engineering to offer a broad
      range of high quality and durable offset printing equipment at affordable
      prices. We have proprietary technologies and applications that make our products
      stand out among our competitors in China. These technologies increase the
      quality of printing and reduce operator workload, while setting barriers to
      entry. We have accumulated and implemented many technologies and applications
      to
      our production, mainly associated with automation process as it relates to
      sheet-feeding and transfer, ink dispense, and overall centralized control
      ability. These technologies decrease error and increase efficiency.


**Technology**
              
              **Application
                  and Function**Sheet-feeding
                  system
              
              Designed
                  with four suckers for sheet-placing and sheet-advancing, all controlled
                  by
                  conjugated cams, which are a pair of cams coupled together to drive
                  a
                  common moving mechanism and designated to create an outline that
                  follows
                  the same motion cycle of the mechanism. Height of paper sheet pile
                  can be
                  automatically measured and adjusted based on thickness of paper
                  sheet, and
                  angle of sheet-lifting suckers also automatically adjusted according
                  to
                  angle of paper sheet pile.Sheet-guiding
                  technology
              
              Uses
                  atmospheric pressure to push paper onto transfer bridge to reduce
                  jams
                  caused by mechanical parts, which increases smoothness of paper
                  sheet
                  transfer.Centralized
                  monitoring and automatic regulation
              
              Central
                  touch screen control panel shows status of sheet-feed and automatically
                  regulates paper arrival time and slant sheet
                  misregistration.Centralized
                  subsystems
              
              Central
                  control panel regulates and readies all sub-systems, such as
                  sheet-feeding, front and side lay, pressure controller and cylinder
                  registration controller. Data inputted or adjusted through touch
                  screen
                  window for pre-configuration to reduce make-ready
                  time.






9




Cam-controlled
                  hem front design
              
              Increases
                  both printing speed and accuracy of sheet transfer.Multiple
                  front lay guides
              
              Several
                  groups of individually adjustable front lay guides increase efficiency
                  of
                  press while in operation.The
                  combination of front lay and transfer gripping sheet control and
                  localizing technology
              
              Combination
                  improves operating stability and printing speed.Photoelectric
                  detecting and auto lock-up
              
              Automatically
                  detects errors during printing and stops press if
                  necessary.Double-diameter
                  impression cylinders
              
              Use
                  large impression cylinders twice the size of normal impression
                  cylinders,
                  producing higher quality print work, particularly in multicolor
                  printing
                  and can also handle thicker paper.


Anti-triangle
                7 o’clock cylinder alignment
            
            Superior
                cylinder layout assures even and consistent inking and prevents dot
                deformation. Dots are the basis for reproduction of prints and recreation
                of colors and also reflect the realization of gradation, levels and
                color
                reproduction of prints. The quality of microdots directly determines
                the
                quality of prints and hence the quality control of dots is very
                important.Data
                memory
            
            Most
                frequently used press configuration data can be stored on a memory
                chip
                for the repeated print work.Semiautomatic
                plate-changing
            
            Aids
                manual changing of press plate, which reduces the make-ready time
                and
                increases efficiency.Pneumatic
                engagement and disengagement unit
            
            Improves
                accuracy of any adjustment.Continuous
                alcohol
            
            System
                improves quality of color application and can automatically match
                press
                speed.CPC
                technology
            
            CPC
                is an add-on sub-system to centrally control the amount of ink dispensed
                on to press rollers and adjusting color hue as needed. Traditional
                way of
                adjusting color hue is by manually adjusting the individual screw
                that
                controls each ink flow. CPC can be added to an electronically-controlled
                offset press to achieve the same
                purpose.





*CTP
      Technology*





We
      have
      also developed proprietary technologies used in our CTP systems. These
      technologies enable better customization of each plate according to various
      customer requirements. This includes an open data interface technology that
      allows customers to use custom workflow control systems, multiple plate
      compatibility that allows various plate threshold ranges, and data storage
      network that can be shared for varying types of CTP plates.




10




**Technology**
            
            **Application
                and Function**Variable
                laser modulation
            
            Modular-design
                enables various combinations of laser scanners assembled to match
                differing customer requirements. Increased number of laser scanners
                translates into faster speed and increased efficiency.Intelligent
                data center
            
            Ensures
                multiple outputs after one raster image processing and enables Tagged
                Image File Format, one of the most widely supported file formats
                for
                storing bit-mapped images on personal computers, to be transferred
                to any
                CTP system through a network, to share resources.Open
                data interface
            
            Ability
                to select custom workflow control systems from different suppliers
                to
                match CTP needs.User-friendly
                interface
            
            Ensures
                simple and safe operation.Plate-compatibility
            
            Enables
                CTP system to use various types of thermo-plates with 830 nano meter
                in
                wavelength and 120 - 140mj/cm2 in threshold
                range.




*Solutions*





With
      a
      wide range of products and an intimate knowledge of the printing industry,
      we
      offer open and scalable solutions to printing companies with various
      requirements, at different stages and within pre-determined operating budgets.
      This ability to offer complete and flexible solutions is one of the key
      competitive advantages for us in the fast changing environment of the Chinese
      printing industry. These solutions can be custom-fit for each type of customer,
      ranging from low-cost, low operation skills for small print projects to more
      advanced, high-quality robust printing projects. We offer products in every
      category to compliment each customer scenario. The following table details
      our
      product offering from 1-5 categorized by an economy solution at 1, and the
      more
      robust solution at 5.





**Solution**
            
            **Target
                Client**
            
            **Features
                of Solution**1)
                Economy
            
            Transitioning
                from type-set printing to offset printing
            
            Requires
                small investment, lower operation skills and small space, but generates
                quick return on investment. Products include: Plate Developer, Small-size
                single-color offset press, Cutter.2)
                Premium
            
            Thick
                paper and/or multicolor printing
            
            Generates
                high quality printing and handles thick and ultra-thick paper. Products
                include: CTP System, Plate Developer, Single-color small-format offset
                press, Automatic Booklet Maker, Cutter.3)
                Note Printing
            
            Large
                amount of commercial note printing such as invoices, receipts, etc.,
                printing work and multicolor printing work
            
            Handles
                extra-thin paper and reduces paper waste associated with thin- and
                extra-thin paper printing. Modular design enables multiple projects
                to be
                processed simultaneously. Products include: CTP System, Plate Developer,
                Single-color small-format offset press, and Cutter.4)
                Multicolor
            
            High
                quality and higher margin multicolor print projects
            
            Offers
                high quality printing at reasonable prices. Products include: CTP
                System,
                Plate Developer, Multicolor offset press, Automatic Booklet Maker,
                and
                Cutter.5)
                Packaging
            
            Small-format
                package print
            
            Offers
                high quality package print solution at affordable price. Products
                include:
                Single-color large-format offset press.6)
                Advanced
            
            Highest
                quality and timely printing tasks
            
            Requires
                very low operating expenses with highest quality output. Products
                include:
                CTP System, Plate Developer, Multicolor offset press, Automatic Booklet
                Maker and Cutter.




11




*Research
      & Development* ****





*R&D
      Centers.* Historically, our R&D center was located at our headquarters in Beijing. Our
      R&D emphasis in the initial years was to invent new printing press models,
      especially multicolor presses, and add new functionalities. In 2006, our R&D
      emphasis gradually shifted to improving existing printing presses’ features and
      performances based on customers’ feedback. This required our R&D to be close
      to production so that any improvement change can be effectively reflected in
      production. In addition, our Langfang Duoyuan and Hunan Duoyuan produce
      different lines of products. Therefore, in the late 2006, we split the R&D
      center into two and moved the R&D centers to Langfang Duoyuan and Hunan
      Duoyuan, respectively. The R&D center at Langfang Duoyuan occupies
      approximately 26,900 square feet of floor space and has a strong 150-member
      R&D team. Langfang Duoyuan R&D center mainly focuses on improvement of
      small-format single-color and multicolor printing presses, as well as
      development of new press models and prepress and postpress equipments. The
      R&D center at Hunan Duoyuan occupies approximately 32,280 square feet of
      floor space and consists of a 50-member R&D team. Hunan Duoyuan R&D
      center mainly focuses on improvement of large-format single-color and multicolor
      printing presses. Since Hunan Duoyuan is also the production base for key parts
      used in all of our models, Hunan Duoyuan R&D center is also engaged in
      development and improvement of foundry casting technique and mechanical
      processing technique. The expertise of our research and design engineers covers
      a broad range of disciplinary knowledge bases, including printing theory, image
      processing, mechanical engineering, automation, and computer sciences.
      Experienced engineers are hired from major offset printer manufacturers in
      China, who have spent decades in offset printing product designs and development
      and who help guide project work and supervise overall design. We employ
      engineers who are quick to grasp the latest technologies and respond to market
      demands. We believe their profound design experience and precise working style
      form the basis for high design quality and sound design structure, on which
      our
      products are based.




*Software
      and Design Tools.* We
      believe our R&D centers are equipped with the best design and test tools in
      the industry. We installed and used Inventor 3D designing software for product
      design. We also established a software-based printing equipment simulation
      platform to test design and process control. Specific printing parts can be
      designed in the 3D software and exported directly to the simulation platform
      where it is tested for real-world applications. Such a simulation system
      drastically improves design efficiency and lowers cost for new product
      development.





*File
      Management System.* We
      apply
      a complete design process and file management system to better use and manage
      our R&D resources. Our R&D ideas come mainly from two resources. One is
      the tracking of latest design technologies and applications used in offset
      printing equipment. The second source, and more important source, is the
      feedback from our sales and service teams. Our sales and technical staff hold
      regular monthly calls to each of our major customers to determine market needs
      and changes. These ideas are collected, categorized, filed, and prioritized.
      We
      have formed project-based teams to work on each customer suggestion to determine
      feasibility. All R&D files are electronically stored and managed by our
      product documentation management with passwords to access and modify these
      R&D files. This process improves design efficiency, consistency and
      accuracy, and also protects our intellectual property and know-how.





*Strategic
      Relationships.* In
      addition to our in-house R&D team, we have established long-term cooperation
      with Beijing Printing Institute, Xi’an Technology University and Beijing
      Printing Machinery Research Institute. We also have cooperative research
      arrangements with aerospace research and engineering institutes for product
      reliability and latest technology trends.




12




*Customer
      Service and Support*





As
      precisely engineered capital goods, offset printing equipment requires reliable
      sales-related and after-sales service. Our representatives consult with
      customers and agents to craft a best-fit solution based on the type and amount
      of project work most commonly used and within pre-determined budget constraints.
      After product delivery, we are responsible for the installation and
      configuration of the machines. Our team consists of staff from the sales, the
      service, and the R&D departments. The team works around pre-set timetables
      to ensure timely installation and operation. After a product is installed and
      operational, our service team performs a trial run to test performance and
      stability to the customers’ satisfaction. In addition, we provide training to
      our client’s operators. For large format machines, we often keep staff at
      customer sites to assist with fulfilling initial orders and simultaneously
      provide in-depth individualized training to operators.




In
      after-sales services, we have a fast and responsive parts supply system and
      credible after-sales service. We have representative offices that act as local
      warehouses for spare parts. We produce our own key parts, allowing us a 24-hour
      response time to customers. We have a multi-tiered after-sales service process,
      where common problems are handled by our agents, more complicated problems
      are
      handled by local representatives, and the most complex problems are handled
      through experts from our Beijing headquarters. All these measures help minimize
      downtime for our customers.





We
      have
      monthly calls to our customers from service staff and annual visits from senior
      management to assist with overall strategy and client satisfaction. These calls
      and visits are an integral part in determining the dynamics of the printing
      industry as it relates to market needs and changing demands. We also provide
      regular overhaul and upgrade services.




*Manufacturing*





We
      emphasize precision and quality in our production and assembly. We have been
      certified with the ISO9001 and ISO14001 systems.





Our
      products are manufactured at our plants at Langfang Duoyuan and Hunan Duoyuan
      facilities. Langfang Duoyuan focuses on small-format offset presses and prepress
      and postpress products, while Hunan Duoyuan focuses on large-format offset
      presses. Both Langfang Duoyuan and Hunan Duoyuan are equipped with advanced
      and
      high-precision processing machines, tools and measuring devices. Both plants
      are
      staffed with skilled and experienced workers and apply quality assurance and
      quality control measures. We also use Statistic Processing Control/Statistic
      Processing Diagnostics in workflow management and Six Sigma management.





We
      source
      raw materials and parts from third-party suppliers and do not have any single
      primary supplier. We apply Just-in-Time in inventory management to improve
      quality and lower cost. We produce all key machinery parts internally. Hunan
      Duoyuan has its own foundry plant to produce casting for its offset presses.
      By
      avoiding off-the-shelf key parts, we are able to ensure quality and protect
      our
      intellectual property.





We
      produce both standardized products and products with customization. Small-format
      presses are a relatively standard product and are kept at an optimum inventory
      level. Most large-format presses are built when ordered, with sub-systems that
      can be added later if desired. Langfang Duoyuan created the first production
      line in China to produce small-format offset presses. As a result, we realize
      flexible production ability to produce different models based on the standard
      platform to meet changing market demands and reduce production
      costs.





*Competition*





*Sheet-fed
      Offset Presses*





*Small
      Format Presses.* In
      small-format sheet-fed offset press sector, there are three tiers of producers
      in China. In the top tier, there are Yingkou Gronhi Printing Machinery Co.,
      Ltd., Yingkou Saxin Printing Machine Co., Ltd, Shandong Weifang Huaguang
      Printing Machinery Co., Ltd., Duoyuan, Shandong Weihai Hamada (JV) Printing
      Machinery Co., Ltd. and Shandong Weihai Printing Machinery Co., Ltd. There
      are
      about 20 companies in the middle tier groups and many companies, estimated
      at
      over 1,000, are in the bottom tier. Top tier companies have their own research
      and development, as well as large distribution network. They have the majority
      of the market share and are able to command a higher price. As the market demand
      for higher end machines increase, the tier-one companies are increasingly
      focusing on multicolor small-format and even large-format offset presses.
      Several of the top tier companies are gradually launching their multicolor
      small-format offset press products.




13




Among
      international competitors, German press producers have completely ceased
      producing single-color presses. Heidelberger Druckmaschinen AG is the only
      German press producer that still produces multicolor small-format presses.
      Japanese producers supply most of the small-format presses in the international
      markets, both single-color and multicolor models. Major Japanese small format
      press suppliers include Hamada Printing Press Co., Ltd. and Ryobi, Ltd. Most
      Japanese producers focus on large-format presses and only keep small-format
      presses as legacy products.





*Large
      Format Presses.* There
      are
      a few domestic companies producing large-format presses. Even fewer domestic
      companies are capable of producing multicolor large-format offset presses and
      they are mainly competing with overseas companies for domestic market share.
      Major domestic producers in this sector include Beiren Printing Machinery
      Holdings Limited, Shanghai Electric Group Printing & Packaging Machinery
      Co., Ltd., and Zhongjing Group and Duoyuan.





German
      and Japanese companies traditionally dominate multicolor large-format press
      sector. German and Japanese Companies represent the top five suppliers in the
      world, including Heidelberger Druckmaschinen AG, MAN Roland Druckmaschinen
      AG,
      Koenig & Bauer Group (KBA), Mitsubishi Heavy Industries, Ltd., and Komori
      Corporation. Other important producers include Shinohara Machinery Company,
      Sakurai Graphic Systems Corp, and Ryobi Limited from Japan, and Adast, the
      largest manufacturer of printing press in Eastern Europe.




*Marketing,
      Sales and Services*





*Sales
      Network.* We
      have
      integrated sales, marketing and service capabilities with over 200 people.
      At
      our headquarters, sales and service staff are divided into seven regional teams,
      covering Northeast China, North China, East China, Southeast China, Middle
      China, South China and Southwest China markets. We have established 28
      representative offices in 23 provinces with 106 agents and distributors in
      over
      100 cities. All of our sales are accomplished through our agents. Our
      representatives are mainly responsible for supporting our agents’ sales efforts
      and providing sales service to our customers.





*Exclusive
      Distributorship Agreements.* We
      manage
      our sales agents through exclusive distributorship arrangements and provide
      them
      with incentives in the form of a performance-based year-end rebating system.
      The
      rebate for the distributor begins after the distributor exceeds $667,000 in
      sales. Upon achieving this base amount the distributor receives a sliding rebate
      of from 1.5% to 5% of sales. Rebates amounted to $594,400 in 2007. We sign
      an
      exclusive local agent agreement for each local market. We may also designate
      multiple agents for various models in a single local market as selected agents
      may specialize in distributing to different types of customers. Our local
      representatives also develop key local customers who in turn are referred to
      our
      local agents at the time of purchase. In case the purchase agreement is signed
      directly between us and a client, payment for purchase is typically made in
      full
      immediately after shipment is received. Credit is not extended to small-format
      press buyers. In the event that a purchase agreement is signed between a client
      and our agent, the agent must pay in full or sign a definitive installment
      schedule before shipment, and such installment is usually six months for
      multicolor large format presses. Agents may have a variety of payment
      arrangements with their customers, but those arrangements will not affect our
      payment collection. In order to support our agent’s sales efforts, we assess
      agent credit worthiness and lend products accordingly for display and
      demonstration purposes. The lending period varies from one to three months.
      At
      the end of the lending period, our agents must pay back the cost of the machine
      or return it.





*Advertising
      and Exhibitions.* We
      use
      advertisements and exhibitions to promote our products to new customers and
      reinforce existing market positions. We advertise in industrial journals and
      publications and often advertise at the local level to support our local agents
      while a new local market is being developed. Industrial exhibitions are the
      most
      important means to promote our product and corporate image. For example, we
      attended the Drupa Printing Technology Exhibition in 2006 and in 2007, the
      Beijing International Printing Technology Exhibition, “China Print 2006”, and
      many other exhibits in Shanghai, Guangzhou, Xiamen and Xian. Both the Drupa
      Exhibition and China Print are among the six largest exhibitions in the global
      printing industry.




14




*Pre-sales
      Service.* Our
      sales
      and marketing efforts are closely integrated with our pre-sales service
      activities. We provide several types of product brochures and materials to
      our
      agents and potential and existing customers in an effort to familiarize them
      with specific product solutions and the benefits of our product offering. We
      also regularly hold seminars and training programs focused on the latest
      developments in printing technologies, products implementation and related
      skills. Our potential and existing customers can send staff to these seminars
      and training programs to learn how to master these technologies and skills
      and
      to practice on our demo products. We can, in turn, convert these potential
      customers into buyers. We have found that by creating a model client - by
      allowing customers to test machines at our facilities - additional potential
      buyers will be persuaded to become customers as they can see examples of
      existing customers.





*Customers*





Our
      customers are local distributors who sell our products to printing companies
      as
      end users. We do not have a major customer whose sales revenues exceed 5% of
      our
      total revenues for fiscal years 2004, 2005 and 2006. The typical revenue from
      each distributor is around 1%-2% of our total sales revenues. The change of
      the
      composition of the customers each year is not significant because our marketing
      and sales strategy is to establish stable sale and purchase relationships with
      our customers by offering our customers good pre-sale and after-sale support,
      which includes training and periodic calls and visits.





***Financial
      Information about Products & Geographic Areas***





*Revenue
      breakdown by products*




**Year
                  ended June 30,****2005**
              
              **2006**
              
              **2007**Single-color
                  Small-format Presses
              
              
              31.4
              %
              
              18.1
              %
              
              8.78
              %Single-color
                  Large-format Presses
              
              
              28.6
              %
              
              18
              %
              
              14.35
              %Multicolor
                  Small-format Presses
              
              
              22.3
              %
              
              19.4
              %
              
              25.56
              %Multicolor
                  Large-format Presses
              
              
              15.3
              %
              
              39.2
              %
              
              45.76
              %Prepress
                  (CTP)
              
              
              2.4
              %
              
              5.3
              %
              
              5.55
              %Total
              
              
              100
              %
              
              100
              %
              
              100.0
              %




Our
      sales
      of single-color printing presses as percentages of our total net revenue had
      been consistently declining while our sales of multicolor printing presses
      as
      percentages of our total net revenue has been consistently increasing. Sales
      of
      multicolor large-format presses as a percentage of our total net revenue had
      been increasing particular fast. Sales of our CTP products also increased
      noticeably from a low base.




15




*Financial
      Information about Geographic Areas*




**Year
                ended June 30,****2005**
            
            **2006**
            
            **2007**North
                China
            
            
            9
            %
            
            12.4
            %
            
            13.00
            %South
                China
            
            
            18.5
            %
            
            20
            %
            
            18.00
            %Middle
                China
            
            
            18.3
            %
            
            20
            %
            
            22.00
            %East
                China
            
            
            10
            %
            
            10.7
            %
            
            15.00
            %Northeast
                China
            
            
            9.3
            %
            
            6.4
            %
            
            8.00
            %Northwest
                China
            
            
            16.4
            %
            
            13.8
            %
            
            10.00
            %Southwest
                China
            
            
            17.1
            %
            
            15.5
            %
            
            12.00
            %Outside
                China
            
            
            1.4
            %
            
            1.2
            %
            
            2.00
            %Total
            
            
            100
            %
            
            100
            %
            
            100.0
            %




The
      overwhelming majority of net revenue was generated within China. Overseas sales
      currently only represented about 1.2% of our net revenue. In China, our sales
      come fairly evenly from 7 of our identified key regional markets. Middle China
      is our single largest and a fast-growing market, representing about 25% of
      our
      total sales. The next important market in terms of sales to us is South China.





*Intellectual
      Property*





As
      of
      March **** 1 **,** 2007, we
      had four patents registered with the China Patent Bureau: (1) a vacuum chamber
      paper sheet lifting and advancing device, with a duration of ten years starting
      from the date of application, May 22, 2003; (2) a single-fiber field pattern
      used in multicolor press imaging systems, with a duration of ten years starting
      from the date of application, May 22, 2003; (3) an offset print appearance
      design, with a duration of ten years starting from the date of application,
      January 31, 2005 and (4) an automatic offset press printing oil supply quick
      cleaning device, with a duration of ten years starting from the date of
      application, September 25, 2000. We have additional patents pending acceptance
      by the China Patent Bureau. We have achieved approximately 30 technology awards
      from May 1, 1995 to June 30, 2007 from the Chinese government, various industry
      association and consumer interest associations for our technology achievement
      and the quality and trustworthiness of our products, and our offset presses
      are
      endorsed by the China Consumer Protection Fund as trustworthy products. Some
      of
      our stronger competitors have also received some of these awards. None of these
      associations are affiliated with us or compensated by us for such awards.





*Employees*





We
      currently have over 1,700 employees. All our employees are based in China and
      are full-time employees, and most of them have executed employment agreements
      with us, which are governed by Chinese law. All of our employment contracts
      are
      for a fixed period of one year and may be renewed upon notice from an employee,
      and with our consent. After 10 years of employment, an employee may enter into
      an employment agreement with us for an indefinite period of time, subject to
      our
      consent. We may terminate an employment agreement for cause, without notice
      or
      severance. We may also terminate an employment agreement upon 30 days’ notice if
      an employee is not suitable for the job due to medical or other reasons. If
      we
      lay off an employee because of an economic downturn or terminate an employee
      because the employee is not suitable for the job or is not able to work due
      to
      sickness or injury, we are obligated to pay up to 12 months’ salary as
      severance. An employee may terminate his/her employment agreement without cause
      upon one month’s notice or for cause, without notice. None of our employees are
      members of any labor union, and we are not a party to any collective bargaining
      agreement.




16




**Item
                1A.**
            **Risk
                Factors.**





*Investment
      in our common stock involves risks. You should carefully consider the risks
      we
      describe below before deciding to invest. The market price of our common stock
      could decline due to any of these risks, in which case you could lose all or
      part of your investment. In assessing these risks, you should also refer to
      the
      other information included in this Form 10-K, including our consolidated
      financial statements and the accompanying notes. You should pay particular
      attention to the fact that we are a holding company with substantial operations
      in China and are subject to legal and regulatory environments that in many
      respects differ from that of the United States. Our business, financial
      condition or results of operations could be affected materially and adversely
      by
      any of the risks discussed below and any others not foreseen. This discussion
      contains forward-looking statements.*





***Risks
      Related to Our Business and Industry***





***We
      conduct substantially all of our operations through our subsidiaries, and our
      performance will depend upon the performance of our subsidiaries.***





We
      have
      no operations independent of those of Duoyuan China and its subsidiaries. As
      a
      result, we are dependent upon the performance of Duoyuan China and its
      subsidiaries and will be subject to the financial, business and other factors
      affecting such subsidiaries as well as general economic and financial
      conditions. As substantially all of our operations are conducted through our
      subsidiaries, we are dependent on the cash flow of our subsidiaries to meet
      our
      obligations.





Because
      virtually all of our assets are held by our operating subsidiaries, the claims
      of our shareholders will be structurally subordinate to all existing and future
      liabilities and obligations, and trade payables of such subsidiaries. In the
      event of a bankruptcy, liquidation or reorganization of the Company, our assets
      and those of our subsidiaries’ will be available to satisfy the claims of our
      shareholders only after all of Duoyuan China’ and its subsidiaries’ liabilities
      and obligations have been paid in full.





***The
      Market for Offset Presses is very Competitive.***





The
      printing equipment industry is extremely competitive. Our small-format offset
      presses compete against several top-tier domestic companies such as Yinkou
      Gronhi Printing Machinery Co., Ltd., Shandong Weihai Hamada (JV) Printing
      Machinery Co., Ltd., Shandong Weihai Printing Machinery Co., Ltd., Shandong
      Weifang Huaguang Printing Machinery Co., Ltd., and Beiren No. 2 Printing
      Machinery Co., Ltd. Our large-format presses compete against Beiren Printing
      Machinery Holdings Limited, Shanghai Electric Printing & Package Machinery
      Co., Ltd., and Zhongjing Group. We also compete with German and Japanese
      companies for market share. The market share of our overseas competitors in
      2007
      in the PRC was estimated to be between 65-70%. The main competitive advantages
      of our overseas competitors are in their branding, financial capability,
      quality, design and functionalities. The weakness of the overseas competitors
      is
      that the price of their products are generally 3-4 times higher than that of
      the
      presses produced by Chinese local companies, and Chinese local companies are
      catching up on quality, design and functionalities, while still maintaining
      their price advantage.





Some
      competitors have significantly greater financial, technical, manufacturing,
      sales, marketing and other resources than us and have achieved greater name
      recognition for their products and technologies than us. Because of this, we
      may
      not be able to successfully increase our market penetration or our overall
      share
      of the printer market.





Increased
      competition may result in price reductions, increased sales incentive offerings,
      lower gross margins, and loss of market share which could require increased
      investments in inventory, research and development, sales expenses, marketing
      programs and expenditures to expand channels to market. Our competitors may
      offer products with better market acceptance, better price or better
      performance. We may be adversely affected if we are unable to maintain current
      product cost reductions, or achieve future product cost reductions, including
      warranty costs.




17




Customers
      may defer their purchasing decisions in anticipation of the introduction of
      new
      products or the actual introduction of new products by us or our competitors.
      If
      we fail to address these competitive challenges, there could be a material
      adverse effect upon our business, consolidated results of operations and
      financial condition.





***We
      do not typically have long term purchase contracts with our customers and our
      customers have in the past and could at any time in the future, reduce or cease
      purchasing products from us, harming our operating results and business.***





We
      typically do not have long-term volume purchase contracts with our customers,
      and they are not obligated to purchase products from us. Accordingly, our
      customers could at any time reduce their purchases from us or cease purchasing
      our products altogether. In addition, any decline in demand for our products
      and
      any other negative development affecting our major customers or the printing
      industry in general, would likely harm our results of operations. For example,
      several of our customers have in the past experienced serious financial
      difficulties which led to a decline in sales of our products to these customers.
      If any significant customers should face such difficulties in the future, our
      operating results could be harmed through, among other things, decreased sales
      volumes and write-offs of accounts receivables and inventory related to products
      we have manufactured for these customers.





In
      addition, a significant portion of our operating expenses are fixed in advance
      based on projected sales levels and margins, sales forecasts from our customers
      and product development programs. A substantial portion of our backlog is
      scheduled for delivery within 90 days or less and our customers may cancel
      orders and change volume levels or delivery times for products they have ordered
      from us without penalty. Accordingly, if sales to our customers are below
      expectations in any given quarter, the adverse impact of the shortfall in
      revenues on operating results may be increased by our inability to adjust
      spending in the short term to compensate for this shortfall.





***If
      demand for our products declines in the major end markets that we serve, our
      selling prices and overall sales will decrease. Even if the demand for our
      products increases, when such increase cannot outgrow the decrease of selling
      price, our overall sales revenues may decrease.***





Demand
      for our products is affected by a number of factors, including the general
      demand for the products in the end markets that we serve and the price
      attractiveness. A vast majority of our sales revenues are derived from customers
      who use our products to provide commercial printing services. Any significant
      decrease in the demand for commercial printing services may result in a decrease
      in the demand for our offset presses and a decrease in our revenues and
      earnings. A variety of factors, including economic, regulatory, political and
      social instability could contribute to a slowdown in the demand for commercial
      printing services because demand for commercial printing services is highly
      correlated with general economic activities. In addition, the average price
      charged to regular and low-end commercial printing services has been on the
      downward trend and the average selling price of offset presses has also been
      on
      the downward trend. As a result, even if the demand for our products increases,
      when the increase of demand cannot outgrow the decrease of selling price, our
      overall sales revenues may decrease.





***Increased
      costs for manufactured components and raw materials may adversely affect our
      profitability. The cessation of tax exemptions and deductions by the Chinese
      government may also affect our profitability.***





We
      use a
      broad range of manufactured components and raw materials in our products,
      including steel, iron, rubber rollers and electronic components. Because it
      may
      be difficult to pass increased prices for these items on to our customers,
      a
      significant increase in the prices of the components and materials could
      materially increase our operating costs and adversely affect our profit margins
      and profitability.





The
      cessation of tax exemptions and deduction is another factor that may affect
      our
      profitability. The policy of the Chinese government for tax exemptions has
      a
      limited time period. Under the existing Chinese Income Tax Law, foreign
      investment enterprises are generally subject to an income tax at a tax rate
      of
      33%. A foreign invested entity like us is entitled to a 100% tax exemption
      for
      two years after it becomes profitable and a tax reduction of 50% for the
      subsequent three years. The 100% income tax exemption for Duoyuan China expired
      in 2006. Currently Duoyuan China receives a 50% reduction of income tax instead
      of a 100% exemption as in 2004 and 2005, which may affect our ability to
      continue to be profitable in the future.




18




Beginning
      January 1, 2008, the new Enterprise Income Tax Law will replace the existing
      laws for domestic enterprises and foreign invested enterprises. The new standard
      Enterprise Income Tax rate of 25% will replace the current income tax rate
      of
      33% applicable to both domestic entities and foreign invested entities. We
      are
      currently evaluating the impact that the new Enterprise Income Tax Law will
      have
      on our financial condition.





***We
      face competition from other suppliers and if we are not able to compete
      successfully, our business may be harmed.***





The
      digital printing marketplace is highly competitive which is characterized by
      rapid technological changes. We compete against a number of other suppliers
      of
      offset presses. Although we attempt to develop and support innovative products
      that our customers demand, products or technologies developed by competing
      suppliers could render our products or technologies obsolete or
      noncompetitive.





***We
      may face increased risk of inventory obsolescence related to our offset presses.***





We
      procure raw materials and build our offset presses based on our sales forecasts.
      If we do not accurately forecast demand for our products, we may end up with
      excess inventory, or we may lose sales because we do not have the correct
      products available for sale. If we have excess printing machines or other
      products we may have to lower prices to stimulate demand. We may also run the
      risk that our inventory of raw materials may become obsolete. If we do not
      sell
      such components before the end of their shelf life, they will no longer be
      sellable and will have to be expensed.





***Our
      products might contain undetected defects that are not discovered until after
      shipping.***





Our
      products consist of hardware and software developed by us and others. Although
      we have strict quality control over our products and we have not in the past
      discovered any material software and hardware errors resulting in significant
      warranty expense or other expenses, our products might contain undetected
      errors. Errors could also be found in new versions of our products after
      commencement of commercial shipment and any such errors could result in a loss
      or delay in market acceptance of such products and thus harm our reputation
      and
      revenues. In addition, errors in our products, including errors in licensed
      third party software, detected prior to new product releases could result in
      delays in the introduction of new products and our incurring additional
      expenses, which could harm our operating results.





***We
      operate in an industry characterized by fast technological change and evolving
      industry standards.***





The
      printing industry is extremely competitive and is characterized by fast
      technological change, frequent new product developments, periodic product
      obsolescence, higher industry standards, changing information technologies
      and
      evolving distribution-channels. We must adapt quickly to changing technological,
      application and solutions needs, and the introduction of new technologies and
      products offering improved features and functionality. We could incur
      substantial cost to keep pace with the technological changes, and may not be
      able to adapt to these changes.





Although
      we believe that we currently compete favorably with respect to these
      characteristics, this may change in the future. Our future success largely
      depends upon our ability to continuously develop new products with the quality
      levels our customers demand, and develop new services and solutions. We spend
      a
      greater amount on research and development than the industry average because
      we
      believe that providing innovative products and solutions is important to our
      future operations. In spite of our efforts, we may fail to develop new products.





Additionally,
      the new products we develop may not achieve market acceptance or may not be
      manufactured at competitive costs or in sufficient volume due to competitive
      pressures, our consolidated results of operations could be affected. We cannot
      guarantee the success of our research and development efforts.




19




Our
      failure to enhance our existing products, services and solutions or to develop
      and introduce new products, services and solutions that meet changing customer
      requirements and evolving technological standards would adversely impact our
      ability to sell our products.





***We
      have sustained losses in the past and cannot guarantee profitability in the
      future.***





Although
      Duoyuan China and Langfang Duoyuan have been profitable since the fiscal year
      ended June 30, 2004 and Hunan Duoyuan has been profitable since the fiscal
      year
      ended June 30, 2005, there is no assurance that we will remain profitable in
      the
      future. A variety of factors may cause our operating results to decline and
      financial condition to worsen, including:




·
              Competitors
                  offering comparable products at cheaper prices;·
              Continuing
                  downward pressure on the average selling prices of our products
                  caused by
                  intense competition in our industry and other reasons;·
              Superior
                  product innovations by competitors;·
              Rising
                  raw materials cost;·
              Changes
                  to management and key personnel; and·
              Increased
                  operating expenses relating to research and development, sales
                  and
                  marketing efforts and general and administrative expenses as Duoyuan
                  seeks
                  to grow our business.






As
      a
      result of these and additional factors, we could fail to achieve our revenue
      targets or experience higher than expected operating expenses, or both. As
      a
      result, we cannot assure you that we will remain profitable in the future.





***Our
      limited operating history may not serve as an adequate basis to judge our future
      prospects and operating results.***





We
      have a
      limited operating history with respect to our current business, which may not
      provide a sufficient basis on which to evaluate our business or future
      prospects. Although our sales have grown rapidly in recent years, we cannot
      assure you that we will maintain profitability or that we will not incur net
      losses in the future. We expect that our operating expenses will increase as
      we
      expand. Significant failure to realize anticipated sales growth could result
      in
      significant operating losses. We will continue to encounter risks and
      difficulties frequently experienced by companies at a similar stage of
      development, including our potential failure to:




·
              Implement
                  our business model and strategy and adapt and modify them as needed;·
              Maintain
                  our current, and develop new, relationships with customers;·
              Manage
                  our expanding operations and product offerings, including the integration
                  of any future acquisitions;·
              Maintain
                  adequate control of expenses;·
              Attract,
                  retain and motivate qualified personnel;·
              Protect
                  our reputation and enhance customer loyalty; and·
              Anticipate
                  and adapt to changing conditions in the offset printing industry
                  and other
                  markets in which we operate as well as the impact of any changes
                  in
                  government regulation, mergers and acquisitions involving our competitors,
                  technological developments and other significant competitive and
                  market
                  dynamics.




20




If
      we are
      not successful in addressing any or all of these risks, our business may be
      materially and adversely affected.





***We
      may not be able to sustain our current growth rates, and even if we maintain
      them, we are susceptible to many challenges relating to our growth.***





We
      have
      experienced significant growth in the scope and complexity of our business.
      Net
      sales have grown from approximately $5 million in fiscal 2003 to approximately
      $12.9 million in fiscal 2004 to approximately $26.5 million in fiscal 2005
      and
      to approximately $43.7 million in fiscal 2006 and over $68 million in fiscal
      2007. If we are unable to manage our growth effectively, we may not be able
      to
      take advantage of market opportunities, develop new products, enhance our
      technological capabilities, satisfy customer requirements, execute our business
      plan or respond to competitive pressures. To successfully manage our growth,
      we
      believe we must effectively:





·
            Hire,
                train, integrate and manage additional qualified engineers, sales
                and
                marketing personnel and financial and information technology personnel;·
            Implement
                additional and improve existing administrative, financial and operations
                systems, procedures and controls;·
            Continue
                to enhance manufacturing and customer resource management systems;·
            Continue
                to expand and upgrade our multicolor presses;·
            Manage
                multiple relationships with foundries, distributors, suppliers and
                certain
                other third parties; and·
            Manage
                our financial condition.





Our
      success also depends largely on our ability to anticipate and respond to
      expected changes in future demand for our products. If the timing of our
      expansion does not match market demand, our business strategy may need to be
      revised, and there could be delays in our roll-out of new products, which may
      adversely affect our growth and future prospects. If we over-expand and demand
      for our products does not increase as we may have projected, our financial
      results will be materially and adversely affected. However, if we do not expand,
      and demand for our products increases sharply, our business could be seriously
      harmed because we may not be as cost-effective as our competitors due to our
      inability to take advantage of increased economies of scale. In addition, we
      may
      not be able to satisfy the needs of current customers or attract new customers,
      and we may lose credibility and our relationships with our customers may be
      negatively affected. Moreover, if we do not properly allocate our resources
      in
      line with future demand for particular products, we may miss changing market
      opportunities and our business and financial results could be materially and
      adversely affected. We cannot assure you that we will be able to successfully
      sustain our current growth rate or that we will be able to manage our growth
      in
      the future.





***The
      loss of key personnel, the failure to attract or retain specialized technical
      and management personnel or the failure of our CEO to devote sufficient time
      to
      our business could impair our ability to grow our business.***




21




We
      rely
      heavily on the services of our key employees, including Wenhua Guo, our Chief
      Executive Officer. In addition, our engineers and other key technical personnel
      are a significant asset and are the source of our technological and product
      innovations. We believe our future success will depend upon our ability to
      retain these key employees and ability to attract and retain other skilled
      managerial, engineering, technical and sales and marketing personnel. The
      competition for such personnel, particularly technical personnel, is intense
      in
      the industry in which we operate. We currently do not have an employment
      agreement with Wenhua Guo. We may not be successful in attracting and retaining
      sufficient numbers of technical personnel to support our anticipated growth.
      Despite the incentives we provide, our current employees may not continue to
      work for us, and if additional personnel were required for our operations,
      we
      may not be able to obtain the services of additional personnel necessary for
      our
      growth. In addition, we do not maintain “key person” life insurance for any of
      our senior management or other key employees. The loss of the key employees
      or
      the inability to attract or retain qualified personnel, including engineers,
      could delay the development and introduction of, and have an adverse effect
      on
      our ability to sell our products as well as our overall growth.





In
      addition, if any other members of our senior management or any of our other
      key
      personnel join a competitor or form a competing company, we may not be able
      to
      replace them easily and we may lose customers, business partners, key
      professionals and staff members. Substantially all of our senior executives
      and
      key personnel have entered into confidentiality and non-disclosure agreements
      with us. In the event of a dispute between senior executives or key personnel
      and us, these provisions may not enforceable in China due to uncertainties
      involving the Chinese legal system.





Further,
      our CEO, Wenhua Guo currently spends approximately 65% of his total time to
      our
      business and 35% of his time to his other businesses. If our CEO is not able
      to
      devote all the time needed to our company and respond promptly to our business
      needs, our business and our ability to succeed and grow will be materially
      affected.





***We
      may be unsuccessful in developing and selling new products or in penetrating
      new
      markets required to maintain or expand our business.***





Our
      revenue growth has been primarily from sales of our offset presses. Our future
      success depends, in part, on our ability to develop successful new offset
      presses solutions in a cost-effective and timely manner. We continually evaluate
      expenditures for planned product developments and choose among alternatives
      based upon our expectations of future market trends. The development of our
      offset printing solutions is highly complex, and successful product development
      and market acceptance of our products depends on a number of factors,
      including:




·
            Our
                accurate prediction of the changing requirements of our customers;·
            Our
                timely completion and introduction of new designs;·
            The
                quality, price and performance of our products and those of our
                competitors;·
            Our
                management of our sales channels; and·
            Our
                customer service capabilities and responsiveness.





***Failure
      to protect our proprietary technologies or maintain the right to certain
      technologies may negatively affect our ability to compete.***





We
      believe that the protection of our intellectual property rights will continue
      to
      be important to the success of our business. We rely on a combination of patent,
      copyright, trademark and trade secret laws and restrictions on disclosure to
      protect our intellectual property rights. We have also entered into
      confidentiality or license agreements with our employees, business partners
      and
      other third parties, and have implemented procedures to control access to and
      distribution of our documentation and other proprietary information. Despite
      these efforts, we cannot assure you that these measures will provide adequate
      protection of our intellectual property rights. Further, these agreements do
      not
      prevent others from independently developing technologies that are equivalent
      to
      or superior to our technology. In addition, unauthorized parties may attempt
      to
      copy or otherwise obtain and use our proprietary technology. Monitoring
      unauthorized use of technology is difficult, and we cannot be certain that
      the
      steps we have taken will prevent unauthorized use of our technology,
      particularly in the PRC, where the laws may not protect our proprietary rights
      as fully as do the laws of the United States.




22




We
      currently have four patents registered and a few patent applications pending
      in
      China. Patents might not be issued for our pending applications and any issued
      patents may not protect or benefit us or give us adequate protection from
      competing products. For example, issued patents may be circumvented or
      challenged and declared invalid or unenforceable or provide only limited
      protection for our technologies. We also cannot be certain that others will
      not
      design around our patented technology, independently develop our unpatented
      proprietary technology or develop effective competing technologies on their
      own.





***We
      will incur increased costs as a result of being a public company.***





As
      a
      public company, we incur significant legal, accounting and other expenses that
      a
      private company does not incur. In addition, the Sarbanes-Oxley Act of 2002,
      as
      well as new rules subsequently implemented by the Securities and Exchange
      Commission and stock exchanges have required changes in corporate governance
      practices of public companies. We expect that these new rules and regulations
      will increase our legal and financial compliance costs and will make some
      activities more time-consuming and costly. For example, as a result of becoming
      a public company, we added independent directors, created additional board
      committees and intend to adopt additional policies regarding internal controls
      and disclosure controls and procedures. We will incur additional costs
      associated with public company reporting requirements and compliance with the
      internal controls of Section 404 of the Sarbanes-Oxley Act of 2002. We also
      expect these new rules and regulations will make it more difficult and more
      expensive for us to obtain directors’ and officers’ liability insurance. As a
      result, our general and administrative expenses will likely increase and it
      may
      be more difficult for us to attract and retain qualified persons to serve on
      our
      board of directors or as executive officers. We are currently evaluating and
      monitoring developments with respect to these new rules, and we cannot predict
      or estimate the amount of additional costs we may incur or the timing of such
      costs.





***We
      have not held any annual shareholder meetings before we acquired Duoyuan China
      in 2006.***





We
      have
      not held an annual meeting of shareholders since inception. Under Wyoming law,
      the district court of the county where a corporation's principal office may
      summarily order a meeting to be held upon application of any member or other
      person entitled to participate in an annual or regular meeting, if an annual
      meeting was not held within fifteen months after its last annual meeting.
      Because we have not held regular shareholders' meetings, our shareholders
      ability to exercise their voting rights may be limited. We plan to call a
      shareholder meeting as soon as
      practicable after our
      annual report for the fiscal year ended June 30, 2007 is filed with the SEC.





***Mr.
      Wenhua Guo, our Chief Executive Officer, controls approximately 70.4% of our
      outstanding common shares and may have conflict of interest with our minority
      shareholders.***





Mr.
      Wenhua Guo, our Chief Executive Officer, beneficially owns approximately 70.4%
      of the outstanding shares of our common stock. As a result of being the majority
      shareholder, for transactions that require shareholders approval, he has control
      over decisions to enter into any of them, which could result in the approval
      of
      transactions that might not maximize shareholders’ value, and has the ability to
      prevent entry into any of them. In addition, he can control the election of
      members of the Company’s board, have the ability to appoint new members to the
      Company’s management team and control the outcome of matters submitted to a vote
      of the holders of the Company’s common stock. The interests of Mr. Wenhua Guo
      may at times conflict with the interests of our other shareholders.




23




*We
      are required to pay liquidated damages
      to some of the selling shareholders who purchased shares under the Securities
      Purchase Agreement and the amount of such liquidated damages, which cannot
      be
      determined today, may adversely affect our results of
      operation.*




Under
      the
      Registration Rights Agreement, if: (a) the registration statement is not filed
      with or declared effective by the SEC within the prescribed time limit, (b)
      a
      final prospectus is not filed with the SEC one business day after the
      registration statement is declared effective by the SEC, or (c) after it has
      been declared effective, the registration statement ceases to be effective
      for
      more than an aggregate of 45 trading days, (a), (b), (c) each an "Event", then
      on the date of such Event and on its monthly anniversary, we are required to
      pay
      to each investor who purchased our shares in the private placement which closed
      on November 2, 2006 liquidated damages equal to 1% of the aggregate investment
      amount paid by each such investor under the Securities Purchase Agreement,
      the
“Purchase Agreement”; provided however that the total amount of such liquidated
      damages payable by us pursuant to all Events shall be capped at an aggregate
      of
      8% of the aggregate investment amount paid by such investors under the Purchase
      Agreement. In addition, partial liquidated damages shall apply on a daily
      pro-rata basis for any portion of a month prior to the cure of an Event. As
      we
      did not file the registration statement by January 31, 2007, as of the date
      of
      the filing of the registration statement, we were required to pay more than
      2%
      of the aggregate investment amount paid by each investor under the Purchase
      Agreement. In addition, if the registration statement is not declared effective
      by April 2, 2007, we have to pay additional liquidated damages to our investors.
      But in any event, the total amount of liquidated damages payable by us shall
      be
      capped at an aggregate of 8% of the aggregate investment amount paid by the
      investors under the Purchase Agreement. Additionally, the Company agreed to
      cease all related party transactions and to settle all outstanding balance
      due
      to or from related parties by December 31, 2006. Failure to terminate the
      related party transactions will result in a monthly cash penalty of 1% of the
      proceeds with a cap of 4%. For the year ended June 30, 2007, an aggregate amount
      of $2,119,428 was accrued and recorded by the Company as liquidated damage,
      of
      which $1,177,460 was accrued as a penalty for failure to meet the registration
      statement filing deadline, and $941,968 was accrued as a penalty for failure
      to
      terminate all related party transactions by December 31, 2006.





***Risks
      Related to Doing Business in China***





***Because
      our operations are all located outside of the United States and are subject
      to
      Chinese laws, any change of Chinese laws may adversely affect our
      business.***





All
      of
      our operations are outside of the United States and in China, which exposes
      us
      to risks, such as exchange controls and currency restrictions, currency
      fluctuations and devaluations, changes in local economic conditions, changes
      in
      Chinese laws and regulations and exposure to possible expropriation or other
      Chinese government actions. These factors may have a material adverse effect
      on
      our operations, results of operations and financial condition.





***Our
      international expansion plans subject us to risks inherent in doing business
      internationally.***





Our
      long-term business strategy relies on the expansion of our international sales
      by targeting markets outside of China, such as the United States. Risks
      affecting our international expansion include challenges caused by distance,
      language and cultural differences, conflicting and changing laws and
      regulations, foreign laws, international import and export legislation, trading
      and investment policies, foreign currency fluctuations, the burdens of complying
      with a wide variety of laws and regulations, protectionist laws and business
      practices that favor local businesses in some countries, foreign tax
      consequences, higher costs associated with doing business internationally,
      restrictions on the export or import of technology, difficulties in staffing
      and
      managing international operations, trade and tariff restrictions, and variations
      in tariffs, quotas, taxes and other market barriers. These risks could harm
      our
      international expansion efforts, which could in turn materially and adversely
      affect our business, operating results and financial condition.





Because
      Chinese law governs almost all of our material agreements, we may not be able
      to
      enforce our legal rights in China or elsewhere, which could result in a
      significant loss of business, business opportunities, or capital. Chinese
      law governs almost all of our material agreements. There is no assurance that
      we
      will be able to enforce any of our material agreements or that remedies will
      be
      available outside of China. The system of laws and the enforcement of existing
      laws in China may not be as certain in implementation and interpretation as
      in
      the United States. The Chinese judiciary is relatively inexperienced in
      enforcing corporate and commercial law, leading to a higher than usual degree
      of
      uncertainty as to the outcome of any litigation. The inability to enforce or
      obtain a remedy under any of our future agreements could result in a significant
      loss of business, business opportunities or capital.





Additionally,
      substantially all of our assets are located outside of the United States and
      most of our officers and directors reside outside of the United States. As
      a
      result, it may not be possible for United States investors to enforce their
      legal rights, to effect service of process upon our directors or officers or
      to
      enforce judgments of United States courts predicated upon civil liabilities
      and
      criminal penalties of the directors and officers under Federal securities laws.
      Moreover, we have been advised that China does not have treaties providing
      for
      the reciprocal recognition and enforcement of judgments of courts with the
      United States. Further, it is unclear if extradition treaties now in effect
      between the United States and China would permit effective enforcement of
      criminal penalties of the federal securities laws.




24




***We
      may have difficulty establishing adequate management, legal and financial
      controls in China, which could impair our planning processes and make it
      difficult to provide accurate reports of our operating results.***





China
      historically has not followed Western style management and financial reporting
      concepts and practices, and its access to modern banking, computer and other
      control systems has been limited. We may have difficulty in hiring and retaining
      a sufficient number of qualified employees to work in China in these areas.
      As a
      result of these factors, we may experience difficulty in establishing
      management, legal and financial controls, collecting financial data and
      preparing financial statements, books of account and corporate records and
      instituting business practices that meet Western standards, making it difficult
      for our management to forecast the Company’s needs and to present the results of
      operations accurately at all times.





***We
      face risks associated with currency exchange rate fluctuations; any adverse
      fluctuations may adversely affect our operating margins.***





The
      majority of our revenues are in Chinese currency. Conducting business in
      currencies other than U.S. dollars subjects us to fluctuations in currency
      exchange rates that could have a negative impact on our reported operating
      results. Fluctuations in the value of the U.S. dollar relative to other
      currencies impact our revenues, cost of revenues and operating margins and
      result in foreign currency translation gains and losses. Historically, we have
      not engaged in exchange rate hedging activities. Although we may implement
      hedging strategies to mitigate this risk, these strategies may not eliminate
      our
      exposure to foreign exchange rate fluctuations and may involve costs and risks
      of their own, such as ongoing management time and expertise, external costs
      to
      implement the strategy and potential accounting implications.





***If
      relations between the United States and China worsen, our share price may
      decrease and we may have difficulty accessing U.S. capital markets.***





At
      various times during recent years, the United States and China have had
      disagreements over political and economic issues. Controversies may arise in
      the
      future between these two countries. Any political or trade controversies between
      the United States and China could adversely affect the market price of our
      common stock and our ability to access U.S. capital markets.





***The
      Chinese government could change its policies toward private enterprises, which
      could adversely affect our business.***





Our
      business is subject to political and economic uncertainties in China and may
      be
      adversely affected by its political, economic and social developments. Over
      the
      past several years, the Chinese government has pursued economic reform policies
      including the encouragement of private economic activity and greater economic
      decentralization. The Chinese government may not continue to pursue these
      policies or may alter them to our detriment from time to time. Changes in
      policies, laws and regulations, or in their interpretation or the imposition
      of
      confiscatory taxation, restrictions on currency conversion, restrictions or
      prohibitions on dividend payments to shareholders, devaluations of currency
      or
      the nationalization or other expropriation of private enterprises could have
      a
      material adverse effect on our business. Nationalization or expropriation could
      result in the total loss of our investment in China.




25




*Economic,
      political and social conditions
      in China could affect our business.*




All
      of
      our business, assets and operations are located in China. The economy of China
      differs from the economies of most developed countries in many respects,
      including government involvement, level of development, growth rate, control
      of
      foreign exchange, and allocation of resources. The economy of China has been
      transitioning from a planned economy to a more market-oriented economy. Although
      the Chinese government has implemented measures recently emphasizing the
      utilization of market forces for economic reform, the reduction of state
      ownership of productive assets and the establishment of sound corporate
      governance in business enterprises, a substantial portion of productive assets
      in China is still owned by the Chinese government. In addition, the Chinese
      government continues to play a significant role in regulating industry by
      imposing industrial policies. It also exercises significant control over China’s
      economic growth through the allocation of resources, controlling payment of
      foreign currency-denominated obligations, setting monetary policy and providing
      preferential treatment to particular industries or companies. Therefore, the
      Chinese government’s involvement in the economy could adversely affect our
      business operations, results of operations and/or financial
      condition.





***The
      significant but uneven growth in the economy of China in the past 20 years
      could
      have an adverse effect on our business and results of operations.***





The
      Chinese government has implemented various measures from time to time to control
      the rate of economic growth. Some of these measures benefit the overall economy
      of China, but may have a negative effect on the Company.





***Government
      control of currency conversion and future movements in exchange rates may
      adversely affect the Company’s operations and financial results.***





We
      receive substantially all of our revenues in Renminbi, the currency of China.
      A
      portion of such revenues may be converted into other currencies to meet our
      foreign currency obligations. Foreign exchange transactions under our capital
      account, including principal payments in respect of foreign currency-denominated
      obligations, continue to be subject to significant foreign exchange controls
      and
      require the approval of the State Administration of Foreign Exchange in China.
      These limitations could affect our ability to obtain foreign exchange through
      debt or equity financing, or to obtain foreign exchange for capital
      expenditures.





The
      Chinese government controls its foreign currency reserves through restrictions
      on imports and conversion of Renminbi into foreign currency. Although the
      exchange rate of the Renminbi to the U.S. dollar has been stable since January
      1, 1994 to May 15, 2006, and the Chinese government has stated its intention
      to
      maintain the stability of the value of Renminbi, the exchange rate of the
      Renminbi to the U.S. dollar is continuously revalued since 2006 and the exchange
      rates may further change. Our financial condition and results of operations
      may
      also be affected by changes in the value of certain currencies other than the
      Renminbi in which our earnings and obligations are denominated.





***Because
      the Chinese legal system is not fully developed, our legal protections may
      be
      limited.***





The
      Chinese legal system is based on written statutes and their interpretation
      by
      the Supreme People’s Court. Although the Chinese government has introduced new
      laws and regulations to modernize its business, securities and tax systems,
      China does not yet possess a comprehensive body of business law. Because Chinese
      laws and regulations are relatively new, interpretation, implementation and
      enforcement of these laws and regulations involve uncertainties and
      inconsistencies and it may be difficult to enforce contracts. In addition,
      as
      the Chinese legal system develops, changes in such laws and regulations, their
      interpretation or their enforcement may have a material adverse effect on our
      business operations. Moreover, interpretative case law does not have the same
      precedential value in China as in the United States, so legal compliance in
      China may be more difficult or expensive.





***It
      may be difficult to serve us with legal process or enforce judgments against
      us
      or our management.***





All
      our
      assets are located in China. In addition, all of our officers, and all but
      two
      of our directors, are non-residents of the United States, and all or substantial
      portions of the assets of such non-residents are located outside the United
      States. As a result, it may not be possible to effect service of process within
      the United States upon such persons to originate an action in the United States.
      Moreover, there is uncertainty that the courts of China would enforce judgments
      of United States courts against us or our directors and officers based on the
      civil liability provisions of the securities laws of the United States or any
      state, or entertain an original action brought in China based upon the
      securities laws of the United States or any state.




26




**Risks
      Associated with this Offering and Our Common Stock**




***Our
      stock is not traded and shareholders may not be able to liquidate their
      investment at all, or may only be able to liquidate the investment at a price
      less than the Company’s value.***




Our
      common stock currently is not traded on any securities market or
      over-the-counter quotation system, and the price of our common stock if traded
      in the future or transferred in privately negotiated transactions may not
      reflect the value of our company. Consequently, investors may not be able to
      liquidate their investment at all, or if they are able to liquidate it may
      only
      be at a price that does not reflect the value of the business. We plan to apply
      for a quotation of our common stock on the OTC Bulletin Board; however, even
      if
      a trading market of our common stock develops, the trading volume may be very
      thin and the price may be highly volatile. Because the securities price for
      our
      stock, if traded, may be low, many brokerage firms may not be willing to effect
      transactions in the securities. Even if an investor finds a broker willing
      to
      effect a transaction in our stock, the combination of brokerage commissions,
      transfer fees, taxes, if any, and any other selling costs may exceed the selling
      price. Further, many lending institutions will not permit the use of common
      stock like ours as collateral for any loans.





***Because
      we are subject to the Penny Stock Rules, sale of our stock by investors may
      be
      difficult.***




We
      are
      subject to the SEC’s “penny stock” rules. Penny stocks generally are equity
      securities with a price of less than $5.00. The penny stock rules require
      broker-dealers to deliver a standardized risk disclosure document required
      by
      the SEC which provides information about penny stocks and the nature and level
      of risks in the penny stock market. The broker-dealer must also provide the
      customer with current bid and offer quotations for the penny stock, the
      compensation of the broker-dealer and its salesperson, and monthly account
      statements showing the market value of each penny stock held in the customer’s
      account. The bid and offer quotations, and the broker-dealer and salesperson
      compensation information must be given to the customer orally or in writing
      prior to completing the transaction and must be given to the customer in writing
      before or with the customer’s confirmation.




In
      addition, the penny stock rules require that prior to a transaction, the broker
      and/or dealer must make a special written determination that the penny stock
      is
      a suitable investment for the purchaser and receive the purchaser’s written
      agreement to the transaction. The penny stock rules are burdensome and may
      reduce purchases of any offerings and reduce the trading activity for our common
      stock. As long as our common stock is subject to the penny stock rules, the
      holders of such common stock may find it more difficult to sell their
      securities.




***Our
      stock prices could decrease if a substantial number of shares are sold under
      Rule 144.***




A
      substantial majority of our outstanding shares of common stock are “restricted
      securities” within the meaning of Rule 144 under the Securities Act. As
      restricted shares, these shares may be resold only pursuant to an effective
      registration statement or under the requirements of Rule 144 or other applicable
      exemptions from registration under the Securities Act and as required under
      applicable state securities laws. Rule 144 provides in essence that a person
      who
      has held restricted securities for a period of at least one year may, under
      certain conditions, sell every three months, in brokerage transactions, a number
      of shares that does not exceed the greater of 1.0% of our outstanding common
      stock. There is no limit on the amount of restricted securities that may be
      sold
      by a non-affiliate after the restricted securities have been held by the owner
      for a period of two years or more. If a substantial number of shares of our
      stock are sold under Rule 144 or other exemption, it could cause the price
      of
      our stock to go down.




***The
      conversion of outstanding derivative securities could cause your ownership
      in
      the Company to be diluted and may decrease the value of your
      investment.***





Outstanding
      derivative securities and current and future obligations to issue our securities
      to various parties may dilute the value of your investment. As of March 1,
      2007,
      we had issued warrants to Roth Capital Partners, LLC to purchase 1,644,602
      shares (pre-split shares) of common stock. The warrants have a strike price
      equal to $1.57 (pre-split price), have a term of five years starting from July
      1, 2008 and will permit cashless or net exercise at all times. The warrants
      are
      exercisable at any time after June 30, 2008. For the length of time these
      warrants are outstanding and exercisable, the warrant holder will have an
      opportunity to profit from a rise in the market price of our common stock
      without assuming the risks of ownership. This may have an adverse effect on
      the
      terms upon which we can obtain additional capital. It should be expected that
      the warrant holder would exercise the warrants at a time when we would be able
      to obtain equity capital on terms more favorable than the exercise prices
      provided by the warrants. There are no preemptive rights in connection with
      our
      common stock.




27




***We
      do not intend to pay dividends in the foreseeable
      future.***




As
      a
      result, a return on an investment in shares of our common stock may be realized
      only through a sale of such shares if at all. Our Board of Directors does not
      intend to pay any dividends in the foreseeable future. We do not plan on making
      any cash distributions in the manner of a dividend or otherwise. Our Board
      of
      Directors presently intends to follow a policy of retaining all earnings, if
      any, for use in our business operations. The holders of our common stock are
      entitled to receive dividends when, as and if declared by our Board of Directors
      out of funds legally available therefor. To date, we have paid no
      dividends.





***The
      Company has the right to issue additional common stock and preferred stock
      without the consent of shareholders. This would have the effect of diluting
      your
      ownership in the Company and could decrease the value of your
      stock.***




As
      of
      September 1, 2007, we had 100,000,000 common stock authorized for issuance,
      among which only 25,000,050 shares of common stock were issued and outstanding.
      Approximately 74,999,950 authorized shares of common stock are available for
      issuance for any purpose without shareholder approval that would dilute a
      shareholder’s percentage ownership of the Company.




In
      addition, our articles of incorporation authorize the issuance of shares of
      preferred stock, the rights, preferences, designations and limitations of which
      may be set by the Board of Directors. While no preferred stock is currently
      outstanding or subject to be issued, the articles of incorporation have
      authorized issuance of up to 1,000,000 shares of preferred stock in the
      discretion of the board of directors. Such preferred stock may be issued upon
      filing of amended Articles of Incorporation and the payment of required fees;
      no
      further shareholder action is required. If issued, the rights, preferences,
      designations and limitations of such preferred stock would be set by the Board
      of Directors and could operate to the disadvantage of the outstanding common
      stock. Such terms could include, among others, preferences as to dividends
      and
      distributions on liquidation.





**Item
                2.**
            **Properties.**





Hunan
      Duoyuan was granted land use rights from the Chinese government for 231,241
      square meters of land for industrial use located at No. 362 Qinqxi Road
      Shaoyang, Hunan Province, China. The land use rights have a 50-year term and
      will expire on May 19, 2054. In addition to the land use rights, Hunan Duoyuan
      also has ownership of 72,003 square meters of office building and production
      facilities located at this site. Hunan Duoyuan currently does not have
      outstanding mortgage or pledge on the properties located at this site.





Langfang
      Duoyuan was granted land use rights from the Chinese government for 133,333
      square meters of land located at Xiangyun Road, Langfang Economic-Technological
      Development Area, Langfang, Hebei Province, China. The land use rights have
      a
      50-year term and will expire on September 29, 2052. In addition to the land
      use
      rights, Langfang Duoyuan also has ownership of 30,926 square meters of office
      building and production facilities located at this site. Langfang Duoyuan
      currently does not have outstanding mortgage or pledge on the properties located
      at this site.





Duoyuan
      China leases 3,079.86 square meters of space, located at No. 3 Jinyuan Road,
      Daxing District Industrial Development Area, Beijing, China, from Duoyuan Water
      Environment Technology Co., Ltd., a company owned by Mr. Wenhua Guo. The
      property is used as an office building and research and development center.
      The
      lease has a five-year term that runs from January 1, 2003 to December 31, 2007.
      The annual rent is US$136,022.




We
      believe our properties and facilities have been adequately maintained, are
      generally in good condition, and are suitable and adequate for our
      business.




28




**Item
                3.**
            **Legal
                Proceedings.**





Neither
      we nor any of our direct or indirect subsidiaries is a party to, nor is any
      of
      our property the subject of, any legal proceedings other than ordinary routine
      litigation incidental to our respective businesses. There are no proceedings
      pending in which any of our officers, directors, promoters or control persons
      are adverse to us or any of our subsidiaries in which they are taking a position
      or have a material interest that is adverse to us. There are no proceedings
      pending in which any of the officers, directors, promoters or control persons
      of
      ours are adverse to us.





We
      are
      not a party to any administrative or judicial proceeding arising under federal,
      state or local environmental laws or their Chinese counterparts.





**Item
                4.**
            **Submission
                of Matters to a Vote of Security
                Holders.**





None


**PART
      II**




**Item
                5.**
            **Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity
                Securities.**





Currently
      there is no public trading market for the Company’s securities. No dividends
      have been declared or paid on the Company’s securities. As of September 24, 2007
      , the Company had approximately 90 holders of common stock of
      record.





**Item
              6.**
            **Selected
                Financial Data.**





The
      following summary of consolidated financial data should be read in conjunction
      with “Management's Discussion and Analysis of Financial Condition and Results of
      Operations” and our consolidated financial statements and the notes thereto that
      are included elsewhere in this Form 10-K. Historical results are not necessarily
      indicative of the results that may be expected for any future period. Certain
      factors that affect the comparability of the information set forth in the
      following table are described in the notes to those financial statements. When
      you read this historical selected financial data, it is important that you
      read
      along with it the historical financial statements and related notes and
“Management's Discussion and Analysis of Financial Condition and Results of
      Operations” included elsewhere in this Form 10-K.




29




**Year
                  Ended June, 30****2003**
              
              **2004**
              
              **2005**
              
              **2006**
              
              **2007****(unaudited)**(in
                  thousands, except for per share amount)**Statement
                  of operations data:**Revenue
              
              $
              5,512
              
              $
              12,891
              
              $
              26,469
              
              $
              43,747
              
              $
              68,383Cost
                  of sales
              
              
              4,452
              
              
              8,924
              
              
              16,887
              
              
              22,478
              
              
              37,694Gross
                  profit
              
              
              1,060
              
              
              3,967
              
              
              9,582
              
              
              21,269
              
              
              30,689Selling,
                  general and administrative expenses
              
              
              1,696
              
              
              4,364
              
              
              6,111
              
              
              7,686
              
              
              11,628Income
                  (Loss) from operations
              
              
              (636
              )
              
              (397
              )
              
              3,471
              
              
              13,583
              
              
              19,061Liquidated
                  damage expenses
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              2,119Other
                  income (expense), net
              
              
              0
              
              
              36
              
              
              492
              
              
              (239
              )
              
              (915
              )Income
                  before minority interests andprovision
                  for income taxes
              
              
              (636
              )
              
              (361
              )
              
              3,963
              
              
              13,344
              
              
              16,027Minority
                  interest
              
              
              0
              
              
              4
              
              
              86
              
              
              187
              
              
              241Provision
                  for income taxes
              
              
              0
              
              
              0
              
              
              0
              
              
              261
              
              
              1,807Net
                  income (loss)
              
              
              (636
              )
              
              (365
              )
              
              3,877
              
              
              12,896
              
              
              13,979Comprehensive
                  incomeForeign
                  currency translation adjustment
              
              
              0
              
              
              0
              
              
              0
              
              
              426
              
              
              1,834Comprehensive
                  income (loss)
              
              $
              (636
              )
              $
              (365
              )
              $
              3,877
              
              $
              13,322
              
              $
              15,813EPS
                  - basic and diluted
              
              $
              (0.03
              )
              $
              (0.02
              )
              $
              0.21
              
              $
              0.68
              
              $
              0.61Weighted
                  average number of sharesoutstanding
                  - basic and diluted
              
              
              18,867
              
              
              18,867
              
              
              18,867
              
              
              18,867
              
              
              23,041




Year
                  Ended June 30,Consolidated
                  Balance Sheets
              
              2007
              
              2006
              
              2005
              
              2004
              
              2003(Audited)
              
              (Audited)
              
              (Audited)
              
              (Audited)
              
              (Unaudited)Current
                  Assets
              
              $
              51,267,370
              
              $
              34,906,390
              
              $
              22,001,699
              
              $
              16,706,040
              
              $
              7,113,037Total
                  Assets
              
              $
              80,279,865
              
              $
              50,544,359
              
              $
              37,467,181
              
              $
              30,144,508
              
              $
              17,599,363Current
                  Liabilities
              
              $
              20,332,147
              
              $
              27,961,760
              
              $
              28,406,269
              
              $
              25,046,847
              
              $
              12,140,985Total
                  Liabilities
              
              $
              21,132,913
              
              $
              28,489,006
              
              $
              28,733,264
              
              $
              25,288,189
              
              $
              12,377,946Total
                  Stockholder's equity
              
              $
              59,146,952
              
              $
              22,055,353
              
              $
              8,733,917
              
              $
              4,856,319
              
              $
              5,221,417


30




*Exchange
      Rate Information*





As
      of
      September 24, 2007 the latest practicable date, the exchange rate between
      Renminbi and U.S. dollars is 7.5111 .
      The
      following table sets forth certain information concerning exchange rates between
      Renminbi and U.S. dollars for the periods indicated:


Period
              
              Period
                  End
              
              Average
              
              High
              
              Low2001
              
              
              8.2766
              
              
              8.2773
              
              
              8.2776
              
              
              8.27612002
              
              
              8.2773
              
              
              8.2771
              
              
              8.2800
              
              
              8.27652003
              
              
              8.2767
              
              
              8.2771
              
              
              8.2800
              
              
              8.27652004
              
              
              8.2765
              
              
              8.2767
              
              
              8.2774
              
              
              8.27642005
              
              
              8.0702
              
              
              8.1788
              
              
              8.2765
              
              
              8.07022006
              
              
              8.01
              
              
              8.08
              
              
              8.27
              
              
              7.972007/updated
                  to September 24, 2007
              
              
              7.5111
              
              
              7.779
              
              
              7.995
              
              
              7.491




**Item
      7.**  **Management’s
      Discussion and Analysis of Financial Condition and Results of Operations.**





This
      Annual Report on Form 10-K for the annually period ended June 30, 2007 contains
      “forward-looking statements” within the meaning of Section 27A of the Securities
      Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
      as amended. Generally, the words “believes”, “anticipates,” “may,” “will,”
“should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or
      the negative thereof or comparable terminology are intended to identify
      forward-looking statements which include, but are not limited to, statements
      concerning the Company's expectations regarding its working capital
      requirements, financing requirements, business prospects, and other statements
      of expectations, beliefs, future plans and strategies, anticipated events or
      trends, and similar expressions concerning matters that are not historical
      facts. Such statements are subject to certain risks and uncertainties, including
      the matters set forth in this Annual Report or other reports or documents the
      Company files with the Securities and Exchange Commission from time to time,
      which could cause actual results or outcomes to differ materially from those
      projected. Undue reliance should not be placed on these forward-looking
      statements which speak only as of the date hereof. The Company undertakes no
      obligation to update these forward-looking statements. In addition, the
      forward-looking statements in this Annually Report on Form 10-K for the annually
      period ended June 30, 2007 involve known and unknown risks, uncertainties and
      other factors that could cause the actual results, performance or achievements
      of the Company to differ materially from those expressed in or implied by the
      forward-looking statements contained herein. Please see the discussion on risk
      factors in Item 1A of Part II of this annually report on Form 10-K.





GENERAL
      OVERVIEW:





*Recent
      Corporate Restructuring and Private Placement of Our Common
      Stock*





We
      were
      originally organized under the laws of the State of Nevada on August 10, 1998
      to
      engage in any lawful activity. On July 27, 2005, we merged with Asian Financial,
      a Wyoming corporation, for the purpose of changing our domicile from Nevada
      to
      Wyoming. On August 31, 2006, Asian Financial entered into a definitive Equity
      Transfer Agreement with Duoyuan Investments, a British Virgin Islands company
      with operating subsidiaries in the People's Republic of China. In accordance
      with the Equity Transfer Agreement, Asian Financial issued to Duoyuan
      Investments 47,100,462 shares of its common stock to purchase all of the equity
      interest of Duoyuan China, the “Equity Transfer”. This equity transfer agreement
      became effective on October 6, 2007. As a result, Duoyuan China became Asian
      Financial's wholly-owned subsidiary, and Wenhua Guo, the sole shareholder of
      Duoyuan Investments, became the controlling shareholder of Asian Financial.
      Since the inception of Asian Financial and until the Equity Transfer, Asian
      Financial had not commenced operations and had not generated any revenues,
      and
      Asian Financial had no employees other than officers or directors. Upon the
      closing of the Equity Transfer on October 6, 2006, Asian Financial commenced
      its
      present line of business.




31




On
      November 2, 2006, we closed the transactions contemplated by the Securities
      Purchase Agreement dated October 24, 2006 by and among us and certain unrelated
      investors, each a “Purchase Agreement”. In accordance with the Purchase
      Agreements, we issued an aggregate of 16,447,019 shares of our common stock
      for
      a per share purchase price of approximately $1.43 or an aggregate purchase
      price
      of $23,549,200. This private equity financing was made pursuant to the exemption
      from the registration provisions of the Securities Act provided by Section
      4(2)
      of the Securities Act of 1933, as amended, the “Securities Act”, for issuances
      not involving a public offering and Rule 506 of Regulation D promulgated
      thereunder.




*Business
      Overview*




Through
      Duoyuan China and subsidiaries, we are a leading non-government owned offset
      printing equipment manufacturer in China. Our products cover all three stages
      of
      the offset printing process, including prepress, press and post press. Offset
      presses currently generate the majority of our total sales.





*Duoyuan
      China* . 
      Duoyuan China was originally established in the People’s Republic of China (the
“PRC”) in 2001 by Duoyuan Industries, which was incorporated in the British
      Virgin Islands.  In September 2002, Duoyuan Industries entered into an
      Equity Transfer Agreement with Duoyuan Investments, whereby Duoyuan Investments
      acquired 100% of the equity in Duoyuan China from Duoyuan Industries.  Mr.
      Wenhua Guo is the sole shareholder of both Duoyuan Industries and Duoyuan
      Investments.





Duoyuan's
      origin in offset press engineering can be traced back to 1994.  In 1994,
      Duoyuan Electric was established by Mr. Wenhua Guo and Duoyuan Group, a company
      also controlled by Mr. Wenhua Guo in Beijing, which produced its first
      generation of single-color small-format offset presses, among many other
      products.  Duoyuan China only acquired relevant intellectual property and
      know-how about printing presses from Duoyuan Electric, but not the assets and
      liabilities. Duoyuan China is our operating headquarters with strategic
      planning, management, financing, research and development, sales and marketing,
      after-sales service and headquarters administration functions.





*Langfang
      Duoyuan* ***.*** In
      October 2000, Yinghang Yinlu and Huiyuan Duoyuan, both controlled by Mr. Wenhua
      Guo, established Langfang Duoyuan in Langfang, Hebei Province as a production
      base for offset presses.  Yinghang Yinlu and Huiyuan Duoyuan had 5% and 95%
      of the capital interest of Langfang Duoyuan, respectively.





In
      March
      2002, Duoyuan China acquired the 5% capital interest in Langfang Duoyuan that
      was previously held by Yinghang Yinlu.  In October 2005, Duoyuan China
      acquired from Huiyuan Duoyuan 90% capital interest in Langfang Duoyuan. 
After this transaction, Duoyuan China and Huiyuan Duoyuan had 95% and 5% of
      capital interest of Langfang Duoyuan, respectively.  Langfang Duoyuan is
      the manufacturing base for small-format offset presses.  The prepress and
      postpress equipment are currently manufactured at Langfang Duoyuan.




*Hunan
      Duoyuan* . 
      Hunan Duoyuan was established in March 2004, in which Duoyuan China and Langfang
      Duoyuan has 88% and 12% of the capital interest, respectively.  Hunan
      Duoyuan was established with the assets acquired by us in a public auction
      of
      assets of former Hunan Printing Machinery Co., Ltd. Hunan Printing Machinery
      Co., Ltd. was formerly a state-owned enterprise founded in 1969.  Hunan
      Duoyuan was historically one of the three major large-format offset press
      manufacturers in China and was designated to produce multicolor press. 
Duoyuan acquired Hunan Duoyuan to increase the production capacity to meet
      the
      market demand for large-format offset presses.  Hunan Duoyuan now is the
      manufacturing base for large-format offset presses.





We
      are
      one of the leaders in the design and development of offset printing equipment
      and solutions in China. We have two R&D centers located at Langfang Duoyuan
      and Hunan Duoyuan facilities. We believe our R&D centers are equipped with
      some of the best design and test tools and staffed with some of the most
      talented R&D staff in the industry in China, enabling us to continuously
      launch new products with improved quality and functionality with short time
      to
      market.





Our
      sales
      and service network consists of representative offices and agents that covers
      23
      provinces and over 100 cities in China. We believe this is the largest sales
      and
      service network among our competitors in China.




32




Over
      20,000 offset printing companies in China are using our offset presses. We
      estimate we have a 15% market share of currently operating offset presses in
      China. The Print and Print Equipment Industries Association of China, “PPEIAC”,
      ranked us among the top three printing equipment providers in China, in terms
      of
      overall strength.





We
      have
      PRC cost advantages that enable us to offer our products at one-quarter to
      one-third the price of international models. Our small format presses as well
      as
      prepress and postpress solutions are manufactured in our Langfang Duoyuan
      facility and our large format presses are manufactured in our second facility
      -
      Hunan Duoyuan.





RESULTS
      OF OPERATIONS:





**Comparison
      of the Years Ended June 30, 2007 and 2006**





*Net
      Revenue.* Net
      Revenues were $ 68,383,014 for the year ended June 30, 2007, an increase of
      $
      24,636,453, or 56%, compared to $ 43,746,561 for the same period last year.
      This
      increase in net revenue was mainly attributed to increase in the number of
      units
      sold, especially multi-color printing machine item DY 474, DYA452 and PZ4660,
      which are 66% of the total net revenue.




*Cost
      of Sales* .
      Cost of
      sales was $ 37,693,679 for the year ended June 30, 2007, an increase of
      $15,215,774, or 68%, compared to $ 22,477,905 for the same period last year.
      This increase was higher than the increase in net revenue. As a percentage
      of
      net revenue, the costs of sales for the year ended June 30, 2007 and 2006 were
      55% and 51%, respectively. The increase of cost of sales as a percentage of
      net
      revenue was mainly attributed to higher labor cost associated to lower
      productivity as some workers were just shifted to produce large-format
      multicolor printing presses. Also the increase in price of material and
      utilities contributed the increase in cost of sales.




*Gross
      Profit* .
      Gross
      profit was $30,689,335 for the year ended June 30, 2007, an increase of
      $9,420,679, or 44%, compared to $21,268,656 for the same period last year.
      The
      gross profit as a percent of sales fell from 48.6% to 44.9% . This decrease
      in
      gross profit percentage was due to the emphasis on higher end equipment and
      the
      learning curve required to change production form the lower end products and
      single color printers to the larger multi-color printers. The percentage is
      expected to return to the 48% to 50% range.





*Selling,
      General and Administrative Expenses.* Selling, general and administrative expenses were approximately $11,628,005
      for
      the year ended June 30, 2007, an increase of $3,942,155, or 51.3%, compared
      to
      $7,685,850 for the same period last year.  The increase was mainly due to
      increased selling and promotional expenses on trade shows, conferences,
      advertising and commissions related to building up the multicolor press
      distribution network, which had been built in 2006. As a percentage of revenues,
      selling, general and administrative expenses were 17.0%
      and
      17.6% for the
      years ended June 30, 2007 and 2006, respectively.




*Income
      from Operations.*Income from operations was $19,061,330 for the years ended
      June 30, 2007, an increase of 40.3%, compared to $13,582,806 in the same prior
      period last year. The percentage of sales represented by the Income from
      Operations fell from 31% in 2006 to 27.9% in 2007 primarily as a result of
      the
      decrease in the Gross Profit Margin noted in “Gross Profit” above. Management
      expects to return to a margin of 31% in 2008.





*Liquidated
      damage expenses.* We
      booked $2,119,428 in liquidated damage expenses in the year ended June 30,
      2007.
      We did not have such expenses in the same period last year. On October 25,
      2006,
      Asian Financial, Inc. entered into a definitive Security Purchase Agreement
      with
      unrelated investors, each a “Purchase Agreement”. On November 2, 2006, the
      transactions contemplated by the Purchase Agreement closed. In accordance with
      the Purchase Agreements, Asian Financial, Inc. issued an aggregate of 16,447,019
      shares of common stock for a per share purchase price of approximately $1.43
      or
      an aggregate purchase price of $23,549,200. The financing was conducted through
      a private placement to accredited investors and is exempted from registration
      pursuant to Section 4(2) of the Securities Act of 1933, as amended, the
“Securities Act”. In conjunction with the private placement, Asian Financial
      agreed to register the shares with the Securities and Exchange Commission within
      90 days of the closing. Failure to file the registration statement results
      in a
      monthly cash penalty of 1% of the proceeds with a cap of 8%. As of June 30,
      2007, the Company has accrued $1,177,460 for the liquidated damages pursuant
      to
      that agreement. This amount has been included in liquidated damage expenses
      on
      the income statement in accordance with EITF 00-19-2. Additionally, the Company
      agreed to cease all related party transactions and to settle all outstanding
      balance due to or from related parties by December 31, 2006. Failure to cease
      all related party transactions results in a monthly cash penalty of 1% of the
      proceeds with a cap of 4%. The Company began accruing costs associated with
      this
      penalty in January 2007. As of June 30, 2007, the Company has accrued $941,968
      for the ”related party penalty expense” pursuant to that agreement. This amount
      has been included in the income statement in accordance with EITF
      00-19-2.




33




*Other
      Income / (Expense).* Other
      income/(expense) was $(915,228) for the year ended June 30, 2007, an increase
      of
      $676,254 or 283%, compared to $(238,974) for the same period in the prior year.




*Provision
      for Income Taxes.* **** Provision
      for income taxes for the years ended June 30, 2007 and 2006 were $1,806,943
      and
      $261,133, respectively. Duoyuan China started to pay income tax since January
      1,
      2006. The current income tax rate for Duoyuan China is 16.5% of taxable income.
      The current income tax rate will last until December 31, 2008, after which
      the
      income tax rate will be 33% under the prevailing tax rule.





*Net
      Income.* Net
      income was $13,979,147 for the year ended June 30, 2007, an increase of 8.4%,
      compared to $12,895,579 in the same period last year. The % of net income
      decreased from 29.5% for the year ended June 30, 2006 to 20.4% for the year
      ended June 30, 2007. The 9% decrease was mainly attributed to the accrual of
      liquidated damages and the related party transaction penalty which together
      was
      equivalent to over 3% of net revenue. The tax exemption for Duoyuan China ended
      on December 31, 2006. The prior year provision for income tax for the year
      ended
      June 30, 2006 only included six months income tax. Duoyuan China was subjected
      to 15% income tax rate for the year ended June 30, 2006. The income tax
      increased 2.6% of net revenue in 2007. Increase in cost of sale contributed
      2.2%
      decrease in net sales as well.





**Comparison
      of the Years Ended June 30, 2006 and 2005**





*Net
      Revenue* . 
      Net Revenues were $43.7 million for the year ended June 30, 2006, an increase
      of
      $17.2 million, or 65.3%, compared to $26.5 million for the year ended June
      30,
      2005. This increase was mainly attributed to continued increase in sales of
      our
      multicolor offset printing presses as a result of new models offered and growth
      in our sales channels. The demand for higher quality and color-printing service
      continued to grow rapidly during our fiscal year 2006, resulting in continued
      increase in market demand for multicolor printing presses. Due to significantly
      higher technical and capital entry barrier, only a few companies are able to
      supply multicolor presses, which have much higher average unit price than that
      of single-color presses. At the same time, revenue from large-format multicolor
      offset press increased significantly too. It was mainly driven by Duoyuan
      China's acquisition and successful post-acquisition development of Hunan
      Printing Machinery - now Hunan Duoyuan - which is one of the major large-format
      offset press suppliers in China. This acquisition and post-acquisition
      development greatly increased Duoyuan China's production capacity of
      large-format presses and added new models to the product portfolio to meet
      the
      market demand. In single-color press product, the general market condition
      is
      such that the unit price continued to drop during fiscal 2006 due to low
      technical entry barrier and fierce competition in pricing. Relying on the superb
      product quality and established brand, Duoyuan China's strategy is to avoid
      competition at lower end and supply premier products at premier prices. In
      fiscal year 2006, Duoyuan China continued to shift more resources to produce
      and
      market multicolor presses. The number of small-format single-color press unit
      sold decreased. At the same time, Duoyuan China reduced the prices of the old
      models of single-color presses to clear the inventory and prepare for the launch
      of new models. The combined effect of reduced number of unit sold and reduced
      average price resulted in a slight revenue decrease in single-color press
      product.





*Cost
      of Sales* .
      Cost of
      sales was $22.5 million for the year ended June 30, 2006, an increase of $5.6
      million, or 33.1%, compared to $16.9 million for the year ended June 30,
      2005.  This increase was noticeably lower than the increase in the
      revenues.  As a percentage of revenues, the costs of sales for the year
      ended June 30, 2006 and 2005 were 51.4% and 63.8%, respectively.  The
      decrease in cost of sales as a percentage of revenues was mainly attributed
      to
      larger percentage of sales revenue from higher margin multicolor presses and
      increased in-house processing work, and to a lesser extent attributed to the
      decrease of steel prices. Because of the continued strategic shift to produce
      and sell more multicolor presses, our average selling price and gross margin
      continued to increase in fiscal year 2006. After we acquired Hunan Duoyuan,
      we
      now own and continuously improve our in-house casting and molding capability.
      We
      now produce more parts and components by ourselves, instead of outsourcing
      from
      outside suppliers. This helped us to reduce parts and component costs. Our
      printing presses are mainly made of steel. Steel consists of a significant
      part
      of cost of sales for our products. Steel prices in China increased significantly
      during our fiscal year 2005 but dropped to long-term historical average during
      fiscal year 2006, which to certain extent eased the cost pressure in our
      material purchase.




34




*Gross
      Profit* . 
      Gross profit was $21.3 million for the year ended June 30, 2006, an increase
      of
      $11.7 million, or 122.0%, compared to $9.6 million for the year ended June
      30,
      2005.  The overall gross profit margin was 48.6% and 36.2% for the year
      ended June 30, 2006 and 2005, respectively.





*Selling,
      General and Administrative Expenses* . 
      Selling, general and administrative expenses were approximately $7.7 million
      for
      the year ended June 30, 2006, an increase of $1.6 million, or 25.8%, compared
      to
      $6.1 million for the prior year.  The increase was mainly due to increased
      selling expenses to expand the sales channel for multicolor offset presses
      and
      the cost associated to prepare for entry into the international offset
      markets.  As a percentage of revenues, selling, general and administrative
      expenses were 17.6% and 23.1% for the year ended June 30, 2006 and 2005,
      respectively.  The decrease in selling, general and administrative expenses
      as a percentage of the revenues for the year ended June 30, 2006 was
      attributable to the significant increase in revenues.





*Income
      from Operations* .
      Income
      from operations was $13.6 million for the year ended June 30, 2006, an increase
      of 291.3%, compared to $3.5 million the prior year for the aforementioned
      reasons.





*Other
      Income / (Expense)* . 
      Other expenses amounted to $238,974 for the year ended June 30, 2006, compared
      to income of $492,287 for the prior year.  In fiscal year 2005, Langfang
      Duoyuan received rental income by leasing part of their plant to a third-party
      manufacturer. In addition, Duoyuan China also had income from the disposal
      of
      scrap steel, generated during the course of press production. In 2006, the
      rental income ceased and the income from scrap steel sales decreased as Duoyuan
      China now recycles more and more of these scrap steel in its own foundry plant.
      Other expenses consisted mainly of interest expense on short-term borrowings
      from local banks.





*Provision
      for Income Taxes* . 
      Provision for income taxes for the year ended June 30, 2006 and 2005 were
      $261,133 and $0, respectively. Duoyuan China started to pay income tax for
      the
      year ended 30, 2006 and was exempted to pay income taxes for year ended 30,
      2005.





*Net
      Income.* Net
      income was $12.9 million for the year ended June 30, 2006, an increase of
      232.6%, compared to $3.9 million in the prior year for the aforementioned
      reasons.




LIQUIDITY
      AND CAPITAL RESOURCES





As
      of
      June 30, 2007 and June 30, 2006, we had cash and cash equivalents of $7.8
      million and $3.7 million, respectively. As of June 30, 2007, our accounts
      receivable amounted to $21.2 million and inventories amounted to $20.1 million.
      Our working capital was approximately $30.9 million and our equity was $59.1
      million.





*Net
      cash provided by (used in) operating activities.* Net cash
      used in operating activities for the year ended June 30, 2007 totaled
      $(1,966,053), compared to net cash provided by operating activities of
      $3,667,520 in the same period last year. The negative operating cash flow was
      mainly due to $11 million decrease in accounts payables and $9 million increase
      in accounts receivables for the year ended June 30, 2007.  Accounts
      payable as of June 30, 2007 and 2006 were $2,572,061 and $13,137,939,
      respectively, a decrease of $10,565,878, or 80.4%. The significant decrease
      in
      accounts payable was because the Company paid off significant amount of accounts
      payable after the Company obtained the funds through the private placement
      in
      October 2006.





*Net
      cash provided by (used in) investing activities.* Our main
      uses of cash for investing activities are payments for the acquisition of
      assets, land use rights, plant and equipment. Net cash used in investing
      activities were $(13,314,596) for the year ended June 30, 2007, compared to
      net
      cash used in investing activities of $(297,559) in the same period last year.
      During the year ended June 30, 2007, we increased our investment in purchasing
      equipment by $13.3 million which accounted for all of the “net cash used in
      investing activities”.





*Net
      cash provided by (used in) financing activities.* Net cash
      provided by financing activities were $19,170,649 for the year ended June 30,
      2007, as a result of partial proceeds from the private placement we completed
      in
      November 2006.





35




As
      of
      June 30, 2007, the maturities for the bank loans are as follows:


June
                  30,
              
              June
                  30,2007
              
              2006Loan
                  from Bank of Agriculture, Chongwen branch dueMarch
                  14, 2008. Quarterly interest only payment at6.138%
                  per annum, secured by plant and machinery
              
              $
              2,630,000
              
              $
              1,252,000Loan
                  from Bank of Agriculture, Chongwen branch dueJune
                  29, 2008. Quarterly interest only payment at6.138%
                  per annum, secured by plant and machinery
              
              
              3,682,000
              
              
              2,504,000Loan
                  from Bank of Agriculture, Chongwen branch dueJuly
                  15, 2007. Monthly interest only payment at6.138%
                  per annum, secured by plant and machinery
              
              
              2,630,000
              
              
              2,504,000Loan
                  from Bank of Agriculture, Chongwen branch dueJuly
                  20, 2007. Monthly interest only payment at6.138%
                  per annum, secured by plant and machinery
              
              
              1,315,000
              
              
              3,505,600Loan
                  from Bank of Agriculture, Chongwen branch dueJuly
                  27, 2007. Quarterly interest only payment at6.138%
                  per annum, secured by plant and machinery
              
              
              2,630,000
              
              
              2,504,000Totals
              
              $
              12,887,000
              
              $
              12,269,600


As
      shown
      in the above table, we had $12.89 million in loans outstanding as of June 30,
      2007.  We plan to either repay this debt as it matures or refinance this
      debt with other debt. On March 15, 2007, we refinanced the bank loan from the
      Bank of Agriculture, Chongwen branch due on February 23, 2007 with a new bank
      loan from the same branch of Bank of Agriculture due on March 14, 2008. The
      new
      bank loan carries the same principal amount and terms as the old bank
      loan.





OFF-BALANCE
      SHEET ARRANGEMENTS





The
      Company had not entered into any off-balance sheet arrangements.




36




COMMITMENTS
      AND CONTINGENCIES





The
      contractual commitments presented in the table below represent our estimates
      of
      future payments under fixed contractual obligations and commitments as of March
      1, 2007. Changes in our business needs or interest rates, as well as actions
      by
      third parties and other factors, may cause these estimates to change. Because
      these estimates are complex and necessarily subjective, our actual payments
      in
      future periods are likely to vary from those presented in the
      table.




**Obligations**
              
              **Total**
              
              **Less**
                  **than
                    1 Year**Long
                  Term Debt Obligations
              
              
              -
              
              
              -Capital
                  Lease Obligations
              
              
              -
              
              
              -Operating
                  Lease Obligations1
              
              $
              71,996
              
              $
              71,996Purchase
                  Obligations
              
              
              -
              
              
              -**Total**
              
              $
              71,996
              
              $
              71,996




Duoyuan
      China has a five years office lease agreement with Duoyuan Water Environment
      (China). This agreement will expire in December 2007. The remaining rent
      commitment is $71,996. We expect to renew our office lease agreement on the
      same
      terms.





We
      plan
      to finance our contractual obligations with cash from operations and from the
      recent fund raised.





SUBSEQUENT
      EVENTS




**Reverse
      Stock Split:**





Effective
      as of July 17, 2007, the Company adopted by unanimous vote a resolution that
      the
      Board believes was in the best interest of the Company and its shareholders
      to
      effect a 1 for 2.68189924 reverse split of the Company’s issued and outstanding
      shares. All share and per share amounts used in the Company's financial
      statements and notes thereto have been retroactively restated to reflect the
      reverse stock split.





The
      outstanding and issued shares of the Company at the date of resolution was
      67,047,481 and upon the effectiveness of the reverse stock split, the
      outstanding and issued shares were 25,000,050 shares.





**Subsequent
      Changes in Officers and Directors:**





Effective
      July 18, 2007, Mr. Gene Michael Bennett resigned as an Independent Director,
      chair of the Audit Committee and member of the Compensation and Nominating
      Committees. Effective
      July 18, 2007, Ms. Baiyun Sun resigned as the Interim Chief Financial Officer. Effective
      July 18, 2007, Mr. Gene Michael Bennett was appointed Chief Financial Officer
      of
      the Company.





**Item
      7A.**  **Quantitative
      and Qualitative Disclosures About Market Risk.**




37




*Exchange
      Rate Sensitivity*





The
      Company maintains its books and records in Renminbi, the currency of the PRC,
      its functional currency.  The exchange rate between US Dollar and Renminbi
      is subject to the foreign exchange quotation publicized by the People's Bank
      of
      China on the specific day.  The conversion between overseas convertible
      foreign currency and Renminbi are reflected using the temporal method. 
Under this method, all monetary items are translated into the functional
      currency at the rate of exchange prevailing at the balance sheet date. 
Non-monetary items are translated at historical rates. Income and expenses
      are
      translated at the rate in effect on the transaction dates.  Transaction
      gains and losses, if any, are included in the determination of net income (loss)
      for the period.





The
      value
      of the Renminbi, the main currency used in the PRC, fluctuates and is affected
      by, among other things, changes in China's political and economic conditions.
      In
      addition, the Renminbi is not readily convertible into US dollars or other
      foreign currencies.  All foreign exchange transactions continue to take
      place either through the Bank of China or other banks authorized to buy and
      sell
      foreign currencies at the exchange rate quoted by the People's Bank of China.
      The conversion of Renminbi into foreign currencies such as the dollar has been
      generally based on rates set by the People's Bank of China, which are set daily
      based on the previous day's interbank foreign exchange market rates and current
      exchange rates on the world financial markets. Until 1994, the Renminbi
      experienced a significant devaluation against US dollars but since then the
      value of the Renminbi relative to the US dollar has remained stable. However,
      China recently adopted a floating rate with respect to the Renminbi, with a
      0.3%
      fluctuation. As a result, the exchange rate of the Renminbi recently rose to
      8.11 against the dollar, amounting to a 2% appreciation of the Renminbi. This
      floating exchange rate, and any appreciation of the Renminbi that may result
      from such rate, could have various adverse effects on our business, as described
      in *Risk
      Factors,* below.





The
      Company's currency exchange rate risks consist primarily of currency from
      financing.  The Company's financing activities were settled in US dollars
      and deposited in its bank account in US dollars, while the Company conducts
      virtually all of its business and investment activity in China and the value
      of
      its business is effectively denominated in Renminbi.  The Company will
      convert US dollars into Renminbi to conduct its investment activities and
      business.  The Company currently does not hedge its Renminbi - US dollar
      exchange rate exposure.





We
      may
      choose to reduce our exposures through financial instruments (hedges) that
      provide offsets or limits to our exposures when considered
      appropriate.





*Exchange
      Controls*





Chinese
      law allows enterprises owned by foreign investors to remit their profits,
      dividends and bonuses earned in China to other countries, and the remittance
      does not require prior approval by the SAFE regulations formerly required
      extensive documentation and reporting, some of which was burdensome and slowed
      payments. If there is a return to payment restrictions and reporting, the
      ability of a Chinese company to attract investors will be reduced. Also, current
      investors may not be able to obtain the profits of the business which they
      own
      as a result of other restrictions that the Chinese government may impose.
 Relevant Chinese law and regulation permit payment of dividends only from
      retained earnings, if any, determined in accordance with Chinese accounting
      standards and regulations. It is possible that the Chinese tax authorities
      may
      require changes in our reported income that would limit our ability to pay
      dividends and other distributions. Chinese law requires companies to set aside
      a
      portion of net income to fund certain reserves which amounts are to
      distributable as dividends. These rules and possible changes could restrict
      a
      company in China from repatriating funds to us and our shareholders as
      dividends.




*Interest
      Rate Risk*




We
      have
      $12,887,000 lines of credit which is subject to interest rate change
      risk.




**Item
      8.**  **Financial
      Statements and Supplementary Data.**


The
      information required by this item is contained in the consolidated financial
      statements listed in Item 15(a) 1 under the caption “Consolidated Financial
      Statements.”





**Item
      9.**  **Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure.**





On
      December 22, 2006, we changed our auditor from Child, Van Wagoner &
Bradshaw, PLLC, “Child”, to Moore Stephens Wurth Frazer and Torbet, LLP, “Moore
      Stephens”. Child audited our financial statements for the years ended December
      31, 2005 and 2004, and the transition period of January 1, 2006 to June 30,
      2006, pursuant to our change in fiscal year from December 31 to June 30. Child
      did not resign or decline to stand for re-election and was not dismissed.
      Rather, they were not re-appointed as our auditors following the completion
      of
      their audit report dated August 18, 2006 for the transition period of January
      1,
      2006 to June 30, 2006, our new fiscal year end.




38




Child’s
      report dated March 29, 2006 on our balance sheet as of December 31, 2005, and
      the related statements of operations, changes in stockholders' deficit and
      cash
      flows for the years ended December 31, 2005 and 2004, did not contain an adverse
      opinion or a disclaimer of opinion, or was qualified or modified as to
      uncertainty, audit scope, or accounting principles, except that the report
      indicated we had suffered net losses since inception and were still considered
      a
      development stage company at that time, as we had not yet obtained revenues
      from
      our planned principle operations; and the report added that these factors raised
      substantial doubt about our ability to meet our obligations and to continue
      as a
      going concern.





In
      addition, Child’s report dated August 18, 2006, on our balance sheet as of June
      30, 2006 and the related statements of operations, changes in stockholders'
      deficit and cash flows for the six months June 30, 2006, and for the period
      of
      January 1, 2002 through June 30, 2006, did not contain an adverse opinion or
      a
      disclaimer of opinion, or was qualified or modified as to uncertainty, audit
      scope, or accounting principles, except that the report indicated we had
      suffered net losses since inception and were still considered a development
      stage company, as we had not yet obtained revenues from our planned principle
      operations; and the report added that these factors raised substantial doubt
      about our ability to meet our obligations and to continue as a going
      concern.





During
      our two most recent fiscal years and the subsequent interim period preceding
      our
      decision not to re-appoint Child, we had no disagreements with Child on any
      matter of accounting principles or practices, financial statement disclosure,
      or
      auditing scope of procedure, which disagreement if not resolved to the
      satisfaction of Child, would have caused it to make reference to the subject
      matter of the disagreement in connection with its report.




The
      decision to change accountants from Child to Moore Stephens was approved by
      our
      board of directors. Moore Stephens was engaged by us as our new independent
      registered accounting firm on December 22, 2006.





During
      our two most recent fiscal years and the subsequent interim period prior to
      retaining Moore Stephens: (1) Neither we nor someone on our behalf consulted
      Moore Stephens regarding (a) either the application of accounting principles
      to
      a specified transaction, either completed or proposed, or the type of audit
      opinion that might be rendered on our consolidated financial statements or (b) any matter that was the subject of a disagreement or a
      reportable event as set forth in Item 304(a)(1)(iv) and (v),
      respectively, of Regulation S-K and (2) Moore Stephens did not  provide us
      with a written  report or oral advice that they concluded was an
      important factor considered by us in reaching a decision as to accounting,
      auditing or financial reporting issue.





**Item
      9A.**  **Controls
      and Procedures.**





(a)    
      EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES





The
      Company's disclosure controls and procedures are designed to ensure that
      information required to be disclosed in the reports filed or submitted under
      the
      Exchange Act of 1934 is recorded, processed, summarized and reported, within
      the
      time periods specified in the rules and forms of the Securities and Exchange
      Commission, the “SEC.  The Company's disclosure controls and procedures are
      also designed to ensure that information required to be disclosed in the reports
      filed under the Exchange Act of 1934, the “Exchange Act”, is accumulated and
      communicated to management, including its principal executive and financial
      officers, as appropriate, to allow timely decisions regarding required
      disclosure.





The
      Company carried out an evaluation, under the supervision and with the
      participation of the Company's management, including its principal executive
      and
      financial officers, of the effectiveness of the design and operation of the
      Company's disclosure controls and procedures as of the end of the period covered
      by this report.  Based upon and as of the date of that evaluation, the
      Company's principal executive and financial officers concluded that the
      Company's disclosure controls and procedures are effective to provide reasonable
      assurance that information the Company is required to disclose in reports that
      it files or submits under the Exchange Act is recorded, processed, summarized
      and reported within the time periods specified in the SEC's rules and forms
      and
      that such information is accumulated and communicated to its management,
      including its chief executive officer and chief financial officer, as
      appropriate, to allow timely decisions regarding required disclosure. It should
      be noted that the design of any system of controls is based in part upon certain
      assumptions about the likelihood of future events, and there can be no assurance
      that any design will succeed in achieving its stated goals under all potential
      future conditions, regardless of how remote.




39




(b)   
      INTERNAL CONTROLS





Effective
      internal controls are necessary for us to provide reliable financial reports
      and
      effectively prevent fraud. Pursuant to Section 404 of the Sarbanes-Oxley Act
      of
      2002, we will be required, beginning with the first fiscal year ending on or
      after July 15, 2007, to assess the effectiveness of our internal control over
      financial reporting and our audited financial statements as of the end of fiscal
      year ending on or after July 15, 2007. We have not completed our assessment
      of
      the effectiveness of our internal controls.





(c)    
      CHANGES IN INTERNAL CONTROLS





There
      was
      no change in the Company's internal control over financial reporting that
      occurred during its last fiscal quarter that has materially affected, or is
      reasonably likely to materially affect, its internal control over financial
      reporting.





**Item
      9B.**  **Other
      Information.**





None


**PART
      III**




**Item
                10.**
            **Directors,
                Executive Officers and Corporate
                Governance.**





The
      following table sets forth information regarding the members of our board of
      directors and executive officers and other significant employees as of September
      24, 2007.  In connection with the closing of the Equity Transfer, Asian
      Financial’s officers and directors resigned and were completely replaced with
      Duoyuan China’s officers and directors. All of the officers and directors were
      appointed on the closing date of the Equity Transfer.  All directors hold
      office for one-year term until the election and qualification of their
      successors.  Officers are elected annually by the board of directors and
      serve at the discretion of the board.  There is no family relationship
      between the directors and executive officers.





Also
      provided herein are brief descriptions of the business experience of each
      director and executive officer during the past five years and an indication
      of
      directorships held by each director in other companies subject to the reporting
      requirements under the Federal securities laws.





**Name**
            
            **Age**
            
            **Position**Wenhua
                Guo
            
            45
            
            Chairman
                of the Board of Directors, Chief Executive OfficerXiqing
                Diao
            
            37
            
            Director,
                Chief Operating OfficerGene
                Michael Bennett
              Christopher
                Patrick Holbert
            
            59
              36
            
            Chief
                Financial Officer
              DirectorLianjun
                Cai
            
            57
            
            DirectorPunan
                Xie
            
            71
            
            DirectorLixin
                Wang
            
            40
            
            Vice
                President of Research and DevelopmentZhiguo
                Hao
            
            43
            
            Vice
                President of ProductionWenzhong
                Liu
            
            39
            
            Vice
                President of Marketing and SalesYinqing
                Zhang
            
            40
            
            Vice
                President of LogisticsLide
                Chen
            
            63
            
            Vice
                President of International Business DevelopmentYongzeng
                Wang
            
            44
            
            Interim
                General Manager of Langfang Duoyuan




***Executive
      Biographies***





The
      biographies of each director and executive officer are as follows:





*Wenhua
      Guo, Chairman of the Board and Chief Executive Officer* . 
      Mr. Guo is the founder of Duoyuan China and has served as its Chairman and
      Chief
      Executive Officer since the commencement of Duoyuan China’s operations in
      2001.  Before Mr. Guo founded Duoyuan China, he was a physics teacher at
      Beijing Chemical Institute.  Mr. Guo is also Chairman of Duoyuan Electric
      Group.  Mr. Guo obtained a bachelor’s degree in physics from Beijing Normal
      University. Mr. Guo devotes approximately 65% of his time to our business and
      about 35% of this time to his other business.




*Gene
      Michael Bennett, Chief Financial Officer.* Mr.
      Bennett had been a Director and audit committee chairman since April 23, 2007
      until he was appointed as Chief Financial Officer on July 18, 2007. He was
      a
      partner at Nexis Investment Consulting Corporation (Beijing) since 2004,
      assisting Chinese companies from its China offices to raise funds and assisting
      US companies in finding the appropriate mergers and acquisitions candidates
      and
      investments. He was a partner at ProCFO, from 2000 to 2004, which provided
      contract CFO service for companies needing an interim CFO. Before that, Mr.
      Bennett taught in California and Hawaii.  Mr. Bennett attended Michigan
      State University (BA, MBA, Finance and Accounting).





*Christopher
      Patrick Holbert, Director.* On
      July
      18, 2007, Mr. Christopher Patrick Holbert was appointed Independent Director
      of
      the Company, chair of the Audit Committee and member of the Compensation and
      Nominating Committees of the Company. Prior to joining the Company, from 2005
      to
      2006, Mr. Holbert was the Director of Finance for CDC Corporation, a company
      that provides enterprise software, online games, mobile services and
      applications, and Internet and media services. From July 2006 to today, Mr.
      Holbert is the chief financial officer of Techfaith Wireless Technology Limited,
      a company that designs and develops customized handset solutions. He is a
      Certified Public Accountant and has 12 years of experience in the field of
      accounting and financial management. ****





*Xiqing
      Diao, Director and Chief Operating Officer.* Mr.
      Diao has been Director and Chief Operating Officer of Duoyuan China since
      November 2005.  He was vice general manager of Duoyuan Water Environment
      Technology Co., Ltd. from August to November 2005, assistant to general manager
      of Duoyuan Electric (Tianjin) Auto Water Pump Co., Ltd. from January to July
      2005, and general manager of operations of Duoyuan Electric Group from January
      2003 to December 2004.  From May 2001 to December 2002, Mr. Diao was
      general manager of No. 1 division of Duoyuan Water Environment Technology Co.,
      Ltd.  Mr. Diao obtained a bachelor’s degree in mechanics from Tianjin
      Textile Technology Institute in July 1993.  He was also an ISO9001:2000
      Internal Auditor, ISO 14000 Internal Auditor and ISO14000 Internal Auditor
      in
      2004.





*Lianjun
      Cai, Director.* Mr. *Cai* has
      been
      a Director and compensation committee chairman of the Company since April 23,
      2007. Mr. Cai was a Director of Industrial Committee of Daxing Industrial
      Development Zone Beijing from 2001 to 2004. Before that, he was General Manager
      of Management Committee of Daxing Industrial Development Zone. Mr. Cai received
      his bachelor degree in economy management and is the chairman of our
      Compensation Committee.





*Punan
      Xie, Director.* Mr.
      Xie
      has been a Director and nominating committee chairman of the Company since
      April
      23, 2007. Mr. Xie taught at Beijing Institute of Printing from 1978-2001, was
      section chief of the research department, director of faculty of printing
      faculty and assistant to President of Institute 1985-1987 and was sub decanal
      at
      Beijing Institute of Printing, 1987-2001. He was also director of the program
      of
      print engineering of the National Higher Education Committee, vice director
      of
      the National Standard Committee of printing equipment, vice director of
      Educational Committee of China Printing Technical Association, Technical
      committee member of China Printing Equipment and Appliance Association,
      Counselor of the Expert Consultative Committee of Beijing government, Valuator
      of the National Science and Technology Achievement Award and National expert
      of
      evaluation of light-industry products and printing equipments import. Mr. Xie
      obtained a Bachelor of Science in printing mechanism from Moscow Institute
      of
      Printing. Mr. Xie is the chairman of our Nomination Committee.




40




*Zhiguo
      Hao, Vice President of Production.* Mr.
      Hao
      has been Director and Vice President of Production since August 2003. 
On **** April
      23,
      2007, Mr. Hao resigned from the director position. He was general manager of
      the
      customer service center of Duoyuan China from May 2002 to July 2003, vice
      general manager of Duoyuan Electric Electronics Co., Ltd, a subsidiary of
      Duoyuan Electric Group from July 2001 to April 2003, and quality manager of
      the
      research and development center and quality supervision office manager of
      Duoyuan Electric Group from June 1999 to June 2001.  Mr. Hao obtained
      a bachelor’s degree in science from Harbin Electric Engineering Institute in
      July 1985 and a master’s degree in science from Beijing Aeronautics and Aviation
      University in July 1998.  He was certified as an ISO9001 Internal Auditor
      and ISO14000 Internal Auditor in 1998.





*Lixin
      Wang, Vice President of Research and Development.* Mr.
      Wang
      has been Vice President of Research and Development of Duoyuan China since
      October 2005.  Mr. Wang was also a Director of the Company until he
      resigned on April 23, 2007. From June 2001 to September 2005, he was director
      of
      research and development of Duoyuan China.  From January 2001 to May 2001,
      he was director of research and development of Duoyuan Electric Group.  Mr.
      Wang obtained a bachelor’s degree in science from Bengbu Tank Institute in July
      1988 and a master’s degree in signaling and information processing from Fuzhou
      University in January 1997.





*Wenzhong
      Liu, Vice President of Sales.* Mr.
      Liu
      has been Vice President of Sales since November 2005.  He was Assistant
      General Manager of Sales of Duoyuan China from July to October 2005, interim
      general manager of sales of Duoyuan China from November 2004 to June 2005,
      and
      sales representative of Duoyuan China from January 2001 to October 2004. 
Mr. Liu obtained a bachelor’s degree in science from Luoyang Engineering
      Institute in July 1993.





*Yinqing
      Zhang, Vice President of Logistics and Quality Assurance. M* r.
      Zhang
      has been Vice President of Logistics and Quality Assurance of Langfang Duoyuan
      since July 2003.  Prior to that, he was Assistant Director and Vice General
      Manager of the logistics and quality assurance department of Duoyuan China
      from
      June 2001 to July 2003.  Mr. Zhang obtained a bachelor’s degree in
      mechanical designing from Tianjin Textile Technology Institute in July 1986.
        He was certified as an ISO9001 2000 Internal Auditor in 2002 and a
      Quality Engineer in 2003.





*Yongzeng
      Wang, Interim General Manager of Langfang Duoyuan.* Mr.
      Wang
      has been our Interim Manager of the Manufacturing Department of Langfang Duoyuan
      since January 2006.  He was Electric Procurement Manager of the logistics
      department of Duoyuan China from January 2004 to December 2005 and logistics
      and
      procurement department manager of Langfang Duoyuan from June 2001 to December
      2003.  Mr. Wang obtained a bachelor’s degree in science from the Mechanical
      Engineering School of Beijing United University in July 1988.





*Lide
      Chen, Vice President of International Business Development.* Mr.
      Chen
      has been our Vice President of International Business Development since May
      2006.  Mr. Chen served as **** President
      of China National Aero-Technology International Engineering Co., Ltd. since
      1992.  Prior to that, he held various positions at China National
      Aero-Technology Import & Export Corporation, including Deputy Director of
      Spare Parts Export Division, Director of Aircraft and Engine Export Division,
      Managing Director of Aircraft and Engine Sales Division and Assistant to
      President.  Mr. Chen obtained a bachelor’s degree in English from Beijing
      Foreign Language University in 1968, earning “Top Class” distinction, and served
      as an interpreter for key government leaders from 1976 to 1980.





***Involvement
      in Certain Legal Proceedings***





To
      the
      best of our knowledge, during the past five years, none of our directors or
      executive officers was involved in any of the following: (1) 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; (2) any conviction in a criminal proceeding or being
      subject to a pending criminal proceeding (excluding traffic violations and
      other
      minor offenses); (3) being 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/her involvement in any type of business, securities
      or
      banking activities; and (4) being found by a court of competent jurisdiction
      (in
      a civil action), the SEC or the Commodities Futures Trading Commission to have
      violated a federal or state securities or commodities law, and the judgment
      has
      not been reversed,  suspended or vacated.




41




**Item
                11.**
            **Executive
                Compensation.**





The following table sets forth information regarding compensation for the fiscal
      year ended June 30, 2007 received by the individuals who
      served as Duoyuan China’s ,
      the
“Company”, Chief
      Executive Officer and Chief
      Financial Officer as well
      as two
      individuals who served as our executive officers in 2005 but resigned upon
      the
      closing of the Equity Transfer, “Named Executive Officer s”.
      The
      compensation of other executive officers did not exceed $100,000 per
      year.




Name
            Year
            Salary(1)
                (5)
            Bonus
              (1)
            Stock
                Awards(1)
            Option
                Awards
            Nonequity
                Incentive Plan Compensation
            Change
                in Pension Value & Nonqualified Deferred Compensation
            All
                OtherCompensation(3)
            Total(1)CEO
              Guo
                Wenhua
            2007
            $25,615
            $21,500
            0
            0
            0
            0
            0
            $47,115CFO
              Baiyun
                Sun
            2007
            $25,615
            $19,200
            0
            0
            0
            0
            0
            $44,815Dempsey
                Mork (2)
            2007
            0
            0
            0
                (4)
            0
            0
            0
            0
            0(4)Norbert
                LeBouef (2)
            2007
            0
            0
            0
            0
            0
            0
            0
            0





(1)
      Salary, bonus amounts, stock awards and total compensation are reported in
      United States dollars.





(2)
      U pon
      the
      closing of the Equity Transfer in October 2006, Messrs. Mork and LeBoeuf
      resigned from Asian
      Financial, Inc, the public company which became the parent of the
      Company in
      October 2006. N o
      additional amounts are due to the resigned directors and officers.





(3)
      During fiscal year 2007, the executive officers of the Company and of Duoyuan
      China were not granted any perquisites or other personal benefits other
      th an
      an arrangement
      with Duoyuan China for e ach
      of
      the executive officers to use a company car. The total value to
      each
      individual of
      this
      perquisite is less than $10,000, therefore we have not disclosed any amount
      in
      the Summary Compensation Table as permitted under Item
      402(c)(2)(ix)(A).





(4)
      Prior
      to the Equity Transfer, the Compa ny accrued
      $50,000 during fiscal years ended December 31, 1995 through December
      31,1999 for
      management services rendered by the Company’s majority shareholder/President
      pursuant to convertible
      promissory notes. These notes were non-interest bearing and convertible at a rate of $0.05 per share for 1,000,000
      shares of common stock at the option of the holder. Mr. Mork converted the
      note
      to 1,000,000 shares  of
      common
      stock of the Company on September 15, 2006. Also
      prior to the
      Equity Transfer, the Company accrued
      $20,000 during fiscal
      years ended December 31, 2003
      and December
      31,2004 for
      management services rendered by an affiliate of the Company’s majority
      shareholder/President pursuant to the terms of convertible
      promissory notes.
      These notes were non-interest bearing and convertible at a rate of $0.02 per share for 1,000,000
      common shares at
      the
      option of the holder. Mr. Mork converted the note to 1,000,000 shares of common
      stock of the Company on September 15, 2006.





However,
      the notes were assignable, debt obligations issued to Mr. Mork in fiscal years
      1995, 1996, 1997, 1998, 1999, 2003 and 2004 and constituted taxable property
      (as
      cash equivalents) at that time. Therefore, these amounts are not reported as
      compensatory Stock Awards made during this fiscal year in the Stock Award column
      above.





(5)
      The
      amount in the “ Salary”
      column includes the
      contribution of 9% of an individual’s monthly salary paid directly by the
      company with
      regard to
      the
      individual’s pension insurance as
      required under Beijing/Hunan Province local labor regulations .




42




**Compensation
      Discussion and Analysis**





Prior
      to
      becoming a public company in October 2006 and during the period of time
      fol lowing
      the Company ’s
      public
      offering until April 2007, the Company ’s
      compensation decisions were made by a compensation committee consisting of
      the
      persons in the following positions: the human resources manager a representative of the board of Directors, Baiyun Sun , ; and a
      representative of a labor union. The committee reviewed and made recommendations
      with respect to the salary of executive officers and directors. Final approval
      of the committee’s recommendations was made by the CEO. Following the Company ’s
      public
      offering in April 2007, the Board of Directors established a Compensation
      Committee consisting only of Board members, which is responsible for setting the Company ’s
      policies regarding compensation and benefits and administering the Company ’s
      benefit plans. At the end of fiscal year 2007, the Compensation
      Committee consisted of Lianjun Cai (Chairman), Gene Michael Bennett and Punan Xie
      (Director). In July 2007, Mr. Bennett resigned from the Compensation Committee
      in connection with his appointment as CFO of the Company and
      Christopher Patrick Holbert became a member of the compensation committee.
      The Compensation
      Committee has the
      authority to review and approve the amount and form of compensation paid to
      the
      executive officers of the Company and the Company ’s
      compensation procedures.





The
      primar y
      goals
      of our Board Compensation
      Committee with
      respect to executive compensation are to attract and retain highly
      talented and dedicated executives and
      to
      align executives’ incentives with stockholder value creation. The Compensation
      Committee will
      evaluate individual executive performance with a goal of setting compensation
      at
      levels the Compensation
      Committee believes
      are comparable with executiv es
      in
      other companies of similar size and stage of development operating in the
      printing equipment industry. The companies we use to benchmark compensation
      are
      other Chinese public companies in the printing equipment industry, which include
      Bei Ren Printing Machinery Holdings Limited and Shanghai Electric Printing
&
Package Machinery Co., Ltd. In using similarly situated companies to benchmark
      compensation, we continue to take into account our relative performance and
      our
      own strategic goals.




We
      have
      not retained a compensation consultant to review our policies and procedures
      with respect to executive compensation. We will conduct an annual review of
      the
      aggregate level of our executive compensation, as well as the mix of elements
      used to compensate our executive officers. We compare compensation levels with
      amounts currently being paid to executives in the industry of printing machinery
      manufacturing and most importantly with local practices in China. **** We
      are
      satisfied that our compensation levels are competitive with local
      conditions.





*Elements
      of compensation*





Our
      executive compensation consists of following elements:




***Base
      Salary.*** Base
      salaries for our executives are established based on the scope of their
      responsibilities, taking into account competitive market compensation paid
      by
      other companies for similar positions. Generally, we believe that executive
      base
      salaries should be targeted near the median of the range of salaries for
      executives in similar positions with similar responsibilities at comparable
      companies, in line with our compensation philosophy. Base salaries are reviewed
      annually, and adjusted from time to time to realign salaries with market levels
      after taking into account individual responsibilities, performance and
      experience. **** Base
      salaries are generally increased in the event that an individual’s performance
      and accomplishments during the year result in our attainment of specific
      corporate objectives, such as successful accomplishment of internal
      project-related goals in connection with our printing machinery manufacturing
      business and attainment of certain annual revenue or earnings amounts. In 2007
      when our annual business target was met when we attained an important goal
      of
      going public, base salaries were adjusted
      according to the amount of
      fulfillment of the targets. In 2007, a
      business target that was 90-100%
      fulfilled during the year caused an
      annual adjustment of base salary by a factor of 1.2; a business target that was 80-89%
      fulfilled during the year caused an
      annual adjustment of base salary by a factor of 1.0 and a business target that was 70-79%
      fulfilled during the year caused an
      annual adjustment of base salary by a factor of 0.8. For
      example, in 2007 we increased Mr. Guo’s salary from $19,800 to $23,500 because
      we achieved our business goal of going public. Base
      salaries are also adjusted to maintain consistency with other Chinese public
      printing machinery manufacturing companies, such as Bei Ren and Shanghai
      Electric as noted above.




43





The
      compensation committee established a salary structure to determine base salaries
      and initially sets executive officer compensation in employment arrangements
      with each individual. The base salary, included below, reflects our philosophy
      that the base salary should attract experienced individuals who will contribute
      to the success of the company’s business goals and represent cash compensation
      that is commensurate with the compensation of individuals at similarly situated
      companies. Our structure includes a basic annual salary amount for each category
      of directors and officers
      Individuals then receive a salary enhancement in connection with their position.
      Finally, the initial base salary is increased by a “household subsidy” which
      represents a living allowance.




Position
            Basic
                Salary
            Position
                Subsidy
            Household
                SubsidyCEO
            $15,000
            $3,000
            $1,800CFO
            $15,000
            $3,000
            $1,800





***Discretionary
      Annual Bonus.*** The
      compensation committee has the authority to award discretionary annual bonuses
      to our executive officers. Bonuses awarded were intended to compensate officers
      for achieving financial and operational goals and for achieving individual
      annual performance objectives. These objectives vary depending on the individual
      executive, but relate generally to strategic factors such as the financial
      performance, results of operation, per share performance of our common stock
      and
      the level of responsibility of each individual’s position. The actual amount of
      discretionary bonus is determined following a review of each executive’s
      individual performance and contribution to our strategic goals conducted during
      the first quarter of the next fiscal year following the year subject to review.
      The objective that the Company evaluates to determine whether an individual has earned an annual bonus is
      the
      individual contribution of the officer to the Company ’s
      increased revenue from one year to the next. For example, in fiscal year 2007
      Mr. Guo was awarded a bonus of $21,500 because of his significant contributions
      to achieving the Company ’s
      goal
      of going public.





The
      total
      bonus pool amount was calculated based on .62% of annual increase in revenue
      in
      fiscal year 2007. Individual executive officers are eligible to receive a
      distribution from the bonus pool based on a proportionate amount in connection
      with the individual’s position. The compensation committee established an
      internal bonus structure for discretionary distributions to individuals, which
      is included below. Executive officers were paid different bonus amounts during
      the same year because bonuses are awarded to compensate officers for their
      individual contribution to the achievement of the Company ’s
      strategic and financial performance objectives throughout the year. These
      objectives vary depending on the individual executive, but relate generally
      to
      strategic factors such as the financial performance, results of operation and
      per share performance of our common stock. For example, due to the heightened
      responsibilities of the CEO , the CEO
      is assigned a higher proportion than other officers. In fiscal year 2007, we
      paid $21,500
      to Mr. Guo, which is 14% of
      the
      2007 bonus pool because
      of his significant contribution to achieving the Company ’s
      goal
      of going public.




Position
            ProportionCEO
            14%CFO
            12.5%All
                other officers
            8-12.5%





***Options/SAR
      Grants.***  During
      the last fiscal year, neither we nor our subsidiaries granted any stock options
      or stock appreciation rights to any executive officers or other individuals
      listed in the table above. In fiscal year 2007, we made individual grants of
      options to purchase shares to directors, as reported below in the Director
      Compensation Table.





***Aggregated
      Option/SAR Exercises and Fiscal Year-End Option/SAR Value.*** Neither
      our executive officers nor other individuals listed in the tables above
      exercised any options or SARs during the last fiscal year.





***Long-Term
      Incentive Plan Awards.*** We
      currently do not have a stock option plan, stock appreciation rights plan or
      other long-term incentive plans. We may implement a long-term incentive plan
      in
      the future; however because of Chinese tax laws, we currently do not consider
      these types of awards desirable.




44




***Defined
      Benefit or Actuarial Plan.*** We
      contribute 9% from an individual employee’s total amount of monthly salary to
      pension insurance as
      required under Beijing/Hunan Province local labor regulations ,
      which
      has been reflected in the summary compensation table above. Each employee
      contributes 5% from his total amount of monthly salary to the
      same government-sponsored program ,
      although we withhold and pay such percentage on behalf of the employee. However,
      no benefits are determined by final compensation and years of service.





***Other
      Compensation.*** Other
      than the annual salary for our executive officers, the bonus that may be awarded
      to executive
      officers at the
      discretion of the Compensation
      Committee and
      arrangements with executive
      officers for the
      use of a Company car, we
      do not have any other benefits and perquisites for our executive officers.
      However, the Compensation
      Committee in its
      discretion may provide benefits and perquisites to these executive officers
      if
      it deems it advisable.





*Employment
      contracts and termination of employment and change-in-control arrangements*





We
      entered into an employment agreement with Mr. Bennett ,
      Chief
      Financial Officer, in July
      2007. Mr. Bennett is entitled to his monthly base salary for six months upon
      termination of his employment without cause other than for death or disability
      or if he terminates his employment for good reason provided Mr. Bennett signs
      a
      general release of all claims against the company and related parties within
      thirty (30) days of such termination. We intend to enter into individual
      employment agreements with our chief executive officer and chief operating
      officer.





Except
      for the CFO, all of our executive officers have executed standard employment
      agreements with us, which are governed under Chinese law. Other than the amount
      of compensation, the terms and conditions of the employment agreements with
      the
      executive officers are substantially the same as those of our standard
      employment agreements with non-executive employees. Our standard employment agreements are for
      a fixed period of one year and may be renewed upon notice from the employee
      and
      consent . of
      the
      Company. After ten years of
      employment, an employee may enter into an employment agreement with the
      Company for an
      indefinite period of time, subject to the
      Company ’s
      consent. The
      Company may
      terminate an employment agreement for cause, without notice or severance. The
      Company may also
      terminate an employment agreement upon thirty days’
notice if an employee is not suitable for the job due to medical or other
      reasons. If the
      Company lays off
      an employee because of an economic downturn or terminates an employee because
      the employee is not suitable for the job or is not able to work due to sickness
      or injury, it is
      obligated to pay up to twelve months’
salary as severance. An employee may terminate his or her
      employment agreement without cause upon one month’s notice or for cause, without
      notice.





*Security
      ownership guidelines*





We
      do not
      have a stock grant policy or any stock ownership guidelines.





*Accounting
      and tax treatment*





Given
      our
      current levels of compensation, the accounting and tax considerations have
      not
      significantly impacted our forms of compensation. The board considers as one
      factor the impact of accounting and tax treatment on compensation in
      the  *Company* ’s
      compensation programs.





*Material
      changes since fiscal year 2007*





In
      July
      2007, Mr. Bennett resigned from the director’s position upon appointment as CFO.
      At that time, Christopher Patrick Holbert was appointed as an independent
      director.




45




*Director
      Compensation*


Name(2)
            Fees
                Earned or Paid in Cash(1)
            Stock
                Awards
            Options
                Awards(1)
            Non-Equity
                Incentive Plan Compensation
            Change
                in Pension Value and Nonqualified Deferred Compensation
                Earnings
            All
                Other Compensation
            Total(1)Wenhua
                Guo, CEO and Chairman
            -
            -
            -
            -
            -
            -
            -Baiyun
                Sun, CFO and Director (3)
            -
            -
            -
            -
            -
            -
            -Zhiguo
                Hao, Vice President of Production and Director (3)
            $23,500
            0
            0
            0
            0
            0
            $23,500Lixin
                Wang, Vice President of Research and Development and Director
                (3)
            $19,800
            0
            0
            0
            0
            0
            $19,800Gene
                Michael Bennett, Director (3)
            $4,846
            0
            
            0
            0
            0
            $4,846Lianjun
                Cai, Director (3)
            $3,307
            0
            0
            0
            0
            0
            0Punan
                Xie, Director (3)
            $3,307
            0
            0
            0
            0
            0
            0





(1)
      Fees
      earned or paid in cash, value of option awards and total compensation are
      reported in United States dollars.





(2)
      Mr.
      Guo and Ms. Sun are directors but are named executive officers under paragraph
      (a) of Item 402 and the compensation for their service is fully reflected in
      the
      Summary Compensation Table.





(3)
      Effective April 23, 2007, Ms. Baiyuan Sun, Mr. Zhiguo Hao and Mr. Lixin Wang
      resigned as directors of the Company. Effective July 18, 2007, Ms. Sun resigned
      as an interim CFO of the Company.





On
      April
      23, 2007, the Board appointed Mr. Gene Michael Bennett, Mr. Lianjun Cai and
      Mr.
      Punan Xie, each as an independent director to serve on the Board until his
      successor is duly elected and qualified or until his/her earlier death,
      resignation or removal; and the Board appointed Mr. Gene Michael Bennett, Mr.
      Lianjun Cai and Mr. Punan Xie to serve on the Audit Committee, the Compensation
      Committee and the Nominating Committee. Each independent director will receive
      a
      gross pay of $12,000 per year, except that Gene Michael Bennett will receive
      a
      gross pay of $20,000 as director and chairman of the Audit
      Committee .
      In
      addition, the independent directors will receive $1,000 for attending each
      meeting of the Board of Directors at which there is a quorum, whether in person
      or by telephone, up to a maximum of $5,000 per fiscal year. There will be no
      other fees or reimbursements.





The
      amounts reported for Mr. Bennett, Mr. Cai and Mr. Xie are earned but not paid
      in
      fiscal year 2007.





Mr.
      Bennett resigned from the director’s position upon his appointment as the
      Company’s CFO on July 18, 2007, and Christopher Patrick Holbert was appointed
      the independent director and Audit
      Committee chairman
      on the same date.




46




*Compensation
      Committee Report*




The Compensation Com mittee of the Board of Directors of
      Duoyuan China has reviewed and discussed the Compensation Discussion and
      Analysis contained in this 10-K with management. Based on our Compensation Committee ’s
      review
      of and the discussions with management with respect to the Compensation
      Discussion and Analysis, our Compensation
      Committee recommended to t he Board of Directors that the
      Compensation Discussion and Analysis be included in this 10-K for filing with
      the SEC.




The
      foregoing report is provided by the following directors, who constitute the Compensation
      Committee : Mr.
      Lianjun Cai, Mr.
      Punan
      Xie, and
      Mr.
      Christopher Patrick Holbert.




**Board
      Committees**





In
      April,
      2007 the Board established audit, nominating and compensation committees. Three
      of the five directors of the Company are independent directors under the rules
      of the SEC and the listing standards of the Nasdaq Stock Market: Gene Michael
      Bennett, Lianjun Cai and Punan Xie. Mr. Bennett had been a director and audit
      committee chairman since April, 2007 until he was appointed as the Company's
      Chief Financial Officer on July 18, 2007. On July 18, 2007, Mr. Christopher
      Patrick Holbert was appointed independent director, chairman of the audit
      committee and member of the compensation and nominating committees.




*Audit
      Committee.* At the
      end of fiscal year 2007, the audit committee consisted of Gene
      Michael Bennett (chairman), Lianjun Cai and Punan Xie. The Board has determined
      that all members of the audit committee are independent directors under the
      rules of the Nasdaq Stock Market and each of them is able to read and understand
      fundamental financial statements. The Board had determined that Gene Michael
      Bennett qualified as an “audit committee financial expert” as defined by the
      rules of the Securities and Exchange Commission. The purpose of the audit
      committee is to oversee the accounting and financial reporting processes of
      the
      Company and audits of its financial statements. The responsibilities of the
      audit committee include appointing and providing the compensation of the
      independent accountants to conduct the annual audit of our accounts, reviewing
      the scope and results of the independent audits, reviewing and evaluating
      internal accounting policies, and approving all professional services to be
      provided to the Company by its independent accountants. The audit committee
      oversees the accounting and financial reporting processes of the Company and
      audits of its financial statements. The audit committee operates under a written
      charter adopted by the Board of Directors.





*Compensation
      Committee.* At the
      end of fiscal year 2007, the c ompensation
      committee consisted of Lianjun Cai, Gene Michael Bennett and Punan Xie. The Board has
      determined that all members of the c ompensation
      committee are
      independent directors under the rules of the Nasdaq Stock Market. The
      c ompensation
      committee administers the Company’s benefit plans, reviews and administers all
      compensation arrangements for executive officers, and establishes and reviews
      general policies relating to the compensation and benefits of our executive officers ,
      consultants and
      employees.




*Nominating
      Committee.* At the
      end of fiscal year 2007, the nominating committee consisted of Punan Xie
      (chairman), Gene Michael Bennett and Lianjun Cai, each of whom the Board had
      determined was an independent director under the rules of the Nasdaq Stock
      Market. The nominating committee’s responsibilities include recommending to the
      Board of Directors nominees for possible election to the Board of Directors
      and
      providing oversight with respect to corporate governance.




The
      Company’s Board of Directors met once during the fiscal year ended June 30,
      2006. The audit, nominating and compensation committees were not established
      until after the end of fiscal 2006. Each member of the Board attended 75% or
      more of the Board meetings.




*Compensation
      Committee Interlocks and Insider Participation*





Neither
      we nor Duoyuan China had a compensation committee of its respective board of
      directors during fiscal 2006 or 2005. Wenhua Guo deliberated on the compensation
      payable to officers and employees of Duoyuan China and its subsidiaries during
      2005 and prior to the Equity Transfer, during which time they were private
      companies not subject to these requirements.




47




No
      executive officer of Asian Financial or Duoyuan China served as a member of
      the
      compensation committee or the equivalent of another entity during fiscal year
      2005, 2006 or 2007. No executive officer of Asian Financial or Duoyuan China
      served as a director of another entity, other than affiliates of Duoyuan China,
      during fiscal year 2005, 2006 and 2007.




**Item
                12.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters.**





As
      used
      in this section, the term beneficial ownership with respect to a security is
      defined by Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
      as
      consisting of sole or shared voting power (including the power to vote or direct
      the vote) and/or sole or shared investment power (including the power to dispose
      of or direct the disposition of) with respect to the security through any
      contract, arrangement, understanding, relationship or otherwise, subject to
      community property laws where applicable.





As
      of
      September 1, 2007, we had a total of 25,000,050 shares of common stock
      outstanding, which are our only issued and outstanding voting equity securities.





The
      following table sets forth, as of September 1, 2007: (a) the names and addresses
      of each beneficial owner of more than five percent (5%) of our common stock
      known to us, the number of shares of common stock beneficially owned by each
      such person, and the percent of our common stock so owned; and (b) the names
      and
      addresses of each director and executive officer, the number of shares our
      common stock beneficially owned, and the percentage of our common stock so
      owned, by each such person, and by all of our directors and executive officers
      as a group. Each person has sole voting and investment power with respect to
      the
      shares of our common stock, except as otherwise indicated. Beneficial ownership
      consists of a direct interest in the shares of common stock, except as otherwise
      indicated.




**Name
                  and Address of Beneficial Owner**
              
              **Amount
                  of Beneficial Ownership**
              
              **Percentage
                  Ownership**Pinnacle
                  China Fund, L.P.
              
              
              1,300,002
              
              
              5.2
              %Barry
                  M. Kitt (1)
              
              
              1,300,002
              
              
              5.2
              %Duoyuan
                  Investments Limited (2)
              
              
              17,562,353
              
              
              70.25
              %Wenhua
                  Guo (2) (CEO)
              
              
              17,562,353
              
              
              70.25
              %
                (3)Gene
                  Michael Bennett (CFO, former director)
              
              
              0
              
              
              0
              %Lianjun
                  Cai (director)
              
              
              0
              
              
              0
              %Punan
                  Xie (director)
              
              
              0
              
              
              0
              %Christopher
                  Patrick Holbert (director)
              
              
              0
              
              
              0
              %Xiqing
                  Diao (director, COO)
              
              
              0
              
              
              0
              %Zhiguo
                  Hao (VP)
              
              
              0
              
              
              0
              %Lixin
                  Wang (VP)
              
              
              0
              
              
              0
              %Wenzhong
                  Liu (VP)
              
              
              0
              
              
              0
              %Yingqing
                  Zhang (VP)
              
              
              0
              
              
              0
              %Lide
                  Chen (VP)
              
              
              0
              
              
              0
              %Yongzeng
                  Wang (Interim General Manager of Langfang Duoyuan)
              
              
              0
              
              
              0
              %Dempsey
                  Mork (4)
              
              
              27,966
              
              
              *Norbert
                  L. LeBoeuf (4)
              
              
              10,627
              
              
              *Millennium
                  Group, Inc. (4)55051
                  Riviera Dr. La Quinta, California 92253
              
              
              372,871
              
              
              1.5
              %MCC
                  Profit Sharing Plan (4)69930
                  Highway 111, Suite 100Rancho
                  Mirage, CA 92270
              
              
              372,871
              
              
              1.5
              %17,562,353
              
              
              70.25
              %


*
      indicates less than 1%


(1)
      Pinnacle China Advisers, L.P., “Advisers”, is the general partner of Pinnacle
      China Fund, L.P., “Pinnacle”. Pinnacle China Management, LLC, “Management”, is
      the general partner of Advisers. Kitt China Management LLC is the manager of
      Management. Mr. Barry M. Kitt is the manager of Kitt China Management LLC.
      As of September 1, 2007, Pinnacle was the beneficial owner of 1,300,002 shares
      of common stock. Mr. Kitt may be deemed to be the beneficial owner of the
      shares of common stock beneficially owned by Pinnacle. Mr. Kitt expressly
      disclaims beneficial ownership of all shares of common stock beneficially owned
      by Pinnacle.




(2)
      Mr.
      Wenhua Guo is the sole shareholder of Duoyuan Investments, as such he may be
      viewed as having beneficial ownership over all 17,562,353 shares owned by
      Duoyuan Investments.





(3)
      Of
      the 17,562,353 shares of common stock beneficially owned by Mr. Wenhua Guo,
      6,899,177 shares were deposited in escrow according to the Share Purchase
      Agreement dated October 24, 2006. Mr. Wenhua Guo retains the voting power and
      dividend rights of the escrow shares before such shares are delivered to the
      investors, if ever. The Company has satisfied the performance benchmark for
      the
      fiscal year ended June 30, 2006, therefore 1/3 of the escrow shares have been
      returned to Mr. Guo.





(4)
      Dempsey Mork and his son Jonathan Mork have investment control over the shares
      of Magellan Capital Defined Benefits Plan and Magellan Capital Profit Sharing
      Plan, as such they may be viewed as having beneficial ownership over the
      aggregate amount of 745,742 shares owned by the two Plans.





**Item
                13.**
            **Certain
                Relationships and Related Transactions, and Director
                Independence.**





Prior
      to
      the Equity Transfer, we had accrued $10,000 per year for management services
      rendered by the Company’s majority shareholder and President **** pursuant
      to a five-year convertible promissory note covering years 1998 through 2002
      for
      a total balance of $50,000 at December 31, 2004. This note was non-interest
      bearing and convertible at a rate of $0.05 per share for 1,000,000 common shares
      (pre-split shares) at the option of the holder. The note was converted to
      1,000,000 shares (pre-spit shares) of common stock of the Company on September
      15, 2006.





Prior
      to
      the Equity Transfer, we had accrued $20,000 during 2003 and 2004 for management
      services rendered by an affiliate of the Company’s majority shareholder and
      President pursuant to the terms of a convertible promissory note. This note
      was
      non-interest bearing and convertible at a rate of $0.02 per share for 1,000,000
      common shares (pre-split shares) at the option of the holder. The note was
      converted to 1,000,000 shares (pre-split shares) of common stock on September
      15, 2006.





The
      total
      number of shares issued upon the two note conversions was 2,000,000 shares
      (pre-split shares).





Prior
      to
      the Equity Transfer, our officers and directors have resolved to provide for
      various minimal expenses incurred by the Company without repayment until such
      time that a merger candidate is found. These expenses consisted of, but are
      not
      limited to, office space, accounting, filing requirements, and management
      services.




Duoyuan
      China leases 4,500 square meters of space, located at No. 3 Jinyuan Road, Daxing
      District Industrial Development Area, Beijing, China, from Duoyuan Water
      Environment Technology Co., Ltd., of which Mr. Wenhua Guo, our CEO and 70%
      shareholder is a sole shareholder. The property used as an office building
      and
      research and development center. The lease has a five-year term which runs
      from
      January 1, 2003 to December 31, 2007. The annual rent is $136,022. The aggregate
      amount of all rental payments due as of June 30, 2007 was $369,564. The Company
      had paid $369,564 payment in July 2007.





Duoyuan
      China uses the trademark “Duoyuan” under a license agreement with Duoyuan Water
      Environment Company, of which Mr. Wenhua Guo is a sole shareholder. The
      trademark license does not have a term. As the cost of obtaining the trademark
      is immaterial, the license is provided to Duoyuan China at no charge.




48




Duoyuan
      China uses the patent, “an automatic offset press printing oil supply quick
      clearing devise” under a license agreement with Huiyuan Duoyuan, of which Mr.
      Wenhua Guo is a sole shareholder. The patent license does not have a term.
      As
      the cost of obtaining the trademark is immaterial, the license is provided
      to
      Duoyuan China at no charge.




Duoyuan
      China used to use Tianjin Automobile Water Pump Co., Ltd., of which Mr. Wenhua
      Guo, our CEO and 70% shareholder, is the sole shareholder, as supplier of
      certain key parts of the offset presses, such as frame panels and rollers.
      Duoyuan pre-paid Tianjin Automobile Water Pump Company for these key parts.
      As
      at June 30, 2007, Duoyuan has paid $1,576,424 to Tianjin Automobile Water Pump
      Co., Ltd. and there was $0 remaining with Tianjin Automobile Water Pump Company
      as related party receivables.





After
      Langfang Duoyuan built its plant, there were construction materials worth
      $442,019 remaining. When Duoyuan Langfang Water Recycle Equipment Manufacturing
      Co., Ltd., of which Mr. Wenhua Guo is the sole shareholder, needed to build
      its
      own plant, Langfang Duoyuan sold these construction materials to the Company
      at
      cost. As of June 30, 2007, these payables had been reduced to $0.





When
      Langfang Duoyuan was established and was building its plant, Duoyuan China
      Information Technology Industry Co., Ltd., of which Mr. Wenhua Guo is the sole
      shareholder, paid on behalf of Langfang Duoyuan the municipal infrastructure
      allocation fee utilities bills and other expenses incurred during the
      construction of the plant. The total amount accumulated amounted to $4,598,000,
      which became related-party payable by Duoyuan China to Duoyuan China Information
      Technology Industry Co., Ltd. As of June 30, 2007, these payables had been
      reduced to $0.





Duoyuan
      China rents an office building from Duoyuan China Water Recycle Technology
      Industry Co., Ltd., of which Mr. Guo is a sole shareholder. During the term
      of
      the lease, Duoyuan China Water Recycle Technology Industry Co., Ltd. paid
      Duoyuan China’s portion of electricity and water bill associated with the office
      lease. The amount of electricity and water bill became Duoyuan China’s payable
      to Duoyuan China Water Recycle Technology Co., Ltd. In addition, Duoyuan China
      transferred some of its employees to Duoyuan China Water Recycle Technology
      Industry Co., Ltd. The social welfare tax associated with these employees
      occurred before their transfer and became Duoyuan China’s payable to Duoyuan
      China Water Recycle Technology Industry Co., Ltd. As of June 30, 2007, Duoyuan
      China’s aggregate payments to Duoyuan China Recycle Technology Industry Co.,
      Ltd. amounted to $367,564. During 2007, Duoyuan China paid to Duoyuan Water
      Recycle Technology Industry Co., Ltd. $3,505,292. The electricity and water
      bills are included in the rent.





During
      2006, Duoyuan China made various cash advances and short term loans to Duoyuan
      China Water Recycle Technology Industry Co., Ltd. of which Mr. Guo is a sole
      shareholder. These receivables are recurring transactions. The Company does
      not
      charge interest on these receivables. As of June 30, 2007, the aggregate related
      party receivable from Duoyuan China Water Recycle Technology Industry Co. Ltd.
      amounted to $0.





The
      Company agreed to cease all related party transactions and to settle all
      outstanding balance due to or from related parties by December 31, 2006. Failure
      to do so will result in a monthly liquidated damage of 1% of the proceeds with
      a
      cap of 4%. As of June 30, 2007, the Company had accrued penalties in an
      aggregate amount of $941,968 ****** for
      failure to terminate related party transactions. The Company began accruing
      costs associated with this liquidated damage in January 2007 but has not paid
      any penalty so far.





The
      Company has contractual obligation that starting from December 31, 2006, the
      Company should no longer be a party to, or take part in, any related party
      transactions, except for those existing related party transactions and those
      that may derive from the Company’s efforts to complete, terminate or settle
      those transactions. This requirement is evidenced in the Securities Purchase
      Agreement dated October 24, 2006 among the Company and certain unrelated
      investors in a private placement. As provided in our Audit Committee Charter
      adopted on April 23, 2007, all the related party transactions must be approved
      by the audit committee. Going forward, we will conduct a review of all related
      party transactions for potential conflict of interest situations on an ongoing
      basis and all such transactions relating to executive officers and directors
      must be approved by the audit committee.




49




Indebtedness
      of Management




*None*





**Director
      Independence**





Although
      our securities are not listed on any national securities exchange or in any
      inter-dealer quotation system, our Board of Directors is comprised of a majority
      of “independent directors,” as such term is defined in the Marketplace Rules of
      the NASDAQ Stock Market and the Exchange Act Rule 10A-3. As of June 30, 2007,
      among our five directors, Gene Michael Bennett, Lianjun Cai and Punan Xie met
      the Nasdaq and the Exchange Act standards for independent directors. In July
      2007, Gene Michael Bennett resigned to become our chief financial officer and
      Christopher Patrick Holbert was appointed a director and he meets the Nasdaq
      and
      the Exchange Act standards for independent director. The other two directors,
      Wenhua Guo and Xiqing Diao are our executive officers and are not independent
      directors. Our Audit Committee is comprised of three independent directors,
      Gene
      Michael Bennett (chairman), replaced by Christopher Patrick Holbert in July,
      2007, Lianjun Cai and Punan Xie. Our Compensation Committee is comprised of
      three independent directors, Lianjun Cai (chairman), Gene Michael Bennett,
      replaced by Christopher Patrick Holbert, and Punan Xie. Our Nomination Committee
      is comprised of three independent directors, Punan Xie (chairman), Gene Michael
      Bennett, replaced by Christopher Patrick Holbert, and Lianjun Cai.





Management
      has reviewed the directors’ responses to a questionnaire asking about their
      transactions, relationships and arrangements with the Company, and those of
      their immediate family members, and other potential conflicts of interest.
      After
      reviewing this information, our Board of Directors has determined that all
      of
      our directors are independent directors within the meaning of the NASDAQ and
      the
      Exchange Act rules, except for Wenhua Guo, our CEO and Xiqing Diao, our COO.
      Our
      independent directors do not have any transaction, relationship or arrangement
      with the Company.





**Item
                14.**
            **Principal
                Accountant Fees and
                Services.**





All
      audit
      and related services are approved by the Board of Directors, the acting audit
      committee, prior to the rendering of services.





Audit
      Fees





The
      fees
      incurred during the one year ended June 30, 2007 for professional services
      rendered by our principal accountant, Moore
      Stephens Wurth Frazer and Torbet, LLP, for the
      audits of our annual financial statements and review of our quarterly financial
      statements is $160,000 and $60,000, respectively.




Audit-Related
      Fees





The
      Company did not incur any fees for the twelve months ending June 30, 2007 for
      professional services that are reasonably related to the audit or review of
      our
      financial statements that are not covered in the Audit Fees disclosure
      above.





Tax
      Fees





The
      Company incurred $6,000 fees for professional services rendered for tax
      compliance, tax advice, and tax planning for the fiscal year ended June 30,
      2007.





All
      Other
      Fees





There
      were no fees billed for the year ending June 30, 2007 for professional services
      rendered by our auditors for all other services not disclosed
      above.




50




**PART
      IV**




**Item
      15.**  **Exhibits
      and Financial Statement Schedules.**




(a) The
      following documents are filed as part of this report:




(1) Financial
      Statements and Report of Moore Stephens Wurth Frazer and Torbet, LLP




(2) Financial
      Statement Schedules




(3) Exhibits
      (numbered in accordance with Item 601 of Regulation S-K)


23.1   Consent
        of Auditors


31.1 Rule
      13a-14(a) Certification (CEO)


31.2 Rule
      13a-14(a) Certification (CFO)


32.1 Section
      1350 Certification (CEO)


32.2 Section
      1350 Certification (CFO)





51


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




******Asian
                Financial, Inc.**Date:September
                28, 2007
            
            By:
            /s/
                Wenhua GuoWenhua
                Guo
              Chairman
                of the Board and Chief Executive Officer****Date:September
                28, 2007
            
            By:
            /s/
                Gene Michael BennettGene
                Michael Bennett
              Chief
                Financial Officer****






**POWER
      OF ATTORNEY**




KNOW
      ALL
      PERSONS BY THESE PRESENTS, that each person whose signature appears below
      constitutes and appoints Wenhua
      Guo **** and Gene
      Michael Bennett ,
      jointly
      and severally, his or her attorneys-in-fact, each with the power of
      substitution, for him or her in any and all capacities, to sign any amendments
      to this Report on Form 10-K, and to file the same, with exhibits thereto and
      other documents in connection therewith with the Securities and Exchange
      Commission, hereby ratifying and confirming all that each of said
      attorneys-in-fact, or his or her substitute or substitutes may do or cause
      to be
      done by virtue hereof.




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.




**Signature**
            **Title**
            **Date**/s/Wenhua
                Guo
            (Principal
                Executive Officer and Director)
            September
              28,
              2007**Name:**Wenhua
                Guo/s/
                Gene Michael Bennett
            (Principal
                Financial and Accounting Officer)
            September
              28,
              2007**Name:**Gene
                Michael Bennett/s/****Xiqing
                Diao
            Director
            September
              28,
              2007**Name:**Xiqing
                Diao/s/
                Christopher Patrick Holbert
            Director
            September
              28,
              2007**Name:**Christopher
                Patrick Holbert/s/
                Lianjun Cai
            Director
            September
              28,
              2007**Name:**Lianjun
                Cai/s/
                Punan Xie
            Director
            September
              28,
              2007**Name:**Punan
                Xie




52


**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
  To
        the
        Board of Directors of
 Asian
        Financial Inc. and Subsidiaries
  We
        have
        audited the accompanying consolidated balance sheets of Asian Financial Inc.
        and
        subsidiaries as of June 30, 2007 and 2006, and the related consolidated
        statements of income, and other comprehensive income, shareholders' equity,
        cash
        flows for each of the years in the three-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 audits 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 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 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 audits provide 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 Asian Financial Inc.
        and
        subsidiaries as of June 30, 2007 and 2006, and the results of their operations
        and their cash flows for each of the years in the three-year period ended
        June
        30, 2007, in conformity with accounting principles generally accepted in
        the
        United States of America.
 
  /s/
        Moore
        Stephens Wurth Frazer and Torbet, LLP
 
 Walnut,
        California
 
 September
        13, 2007
  F-1


ASIAN
                  FINANCIAL INC. AND SUBSIDIARIESCONSOLIDATED
                  BALANCE SHEETSAS
                  OF JUNE 30, 2007 AND 2006A
                  S S E T S2007
              
              2006CURRENT
                  ASSETS:Cash
              
              $
              7,816,361
              
              $
              3,739,711Restricted
                  cash
              
              
              2,097,490
              
              
              -Accounts
                  receivable, net of allowance of $498,648 and $159,725as
                  of June 30, 2007 and 2006, respectively
              
              
              21,170,423
              
              
              11,231,897Inventories
              
              
              20,074,605
              
              
              16,727,833Other
                  receivables
              
              
              68,160
              
              
              130,914Other
                  receivables-related parties
              
              
              -
              
              
              892,552Other
                  assets
              
              
              40,331
              
              
              -Advances
                  on inventory purchases
              
              
              -
              
              
              2,183,483Total
                  current assets
              
              
              51,267,370
              
              
              34,906,390PLANT
                  AND EQUIPMENT, net
              
              
              25,332,554
              
              
              12,065,863OTHER
                  ASSETS:Intangible
                  assets, net
              
              
              3,679,941
              
              
              3,572,106Total
                  assets
              
              $
              80,279,865
              
              $
              50,544,359L
                  I A B I L I T I E S  A N D  S H A R E H O L D E R S'  E Q U
                  I T YCURRENT
                  LIABILITIES:Lines
                  of credit
              
              $
              12,887,000
              
              $
              12,269,600Accounts
                  payable
              
              
              2,572,061
              
              
              13,137,939Accrued
                  liabilities
              
              
              1,107,591
              
              
              752,666Other
                  payables
              
              
              198,000
              
              
              522,167Other
                  payables - related parties
              
              
              369,564
              
              
              796,753Customer
                  deposits
              
              
              -
              
              
              18,830Taxes
                  payable
              
              
              1,078,503
              
              
              463,805Liquidated
                  damages payable
              
              
              2,119,428
              
              
              -Total
                  liabilities
              
              
              20,332,147
              
              
              27,961,760MINORITY
                  INTEREST
              
              
              800,766
              
              
              527,246COMMITMENTS
                  AND CONTINGENT LIABILITIES
              
              
              -
              
              
              -SHAREHOLDERS'
                  EQUITY:Preferred
                  stock; $0.001 par value;1,000,000 shares authorized;no
                  shares issued and outstanding
              
              
              -
              
              
              -Common
                  stock; $0.001 par value;100,000,000 shares authorized;25,000,050
                  and 18,867,436 shares issued and outstandingat
                  June 30, 2007 and 2006
              
              
              25,000
              
              
              18,867Additional
                  paid-in capital
              
              
              27,263,040
              
              
              5,991,034Statutory
                  reserves
              
              
              3,282,601
              
              
              1,871,198Retained
                  earnings
              
              
              26,316,141
              
              
              13,748,397Accumulated
                  other comprehensive income
              
              
              2,260,170
              
              
              425,857Total
                  shareholders' equity
              
              
              59,146,952
              
              
              22,055,353Total
                  liabilities and shareholders' equity
              
              $
              80,279,865
              
              $
              50,544,359




The
        accompanying notes are an integral part of these consolidated
        statements.
 See
        report
        of independent registered public accounting firm.




F-2




ASIAN
                  FINANCIAL INC. AND SUBSIDIARIESCONSOLIDATED
                  STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOMEFOR
                  THE YEARS ENDED JUNE 30, 2007, 2006 AND 20052007
              
              2006
              
              2005REVENUES
              
              $
              68,383,014
              
              $
              43,746,561
              
              $
              26,468,783COST
                  OF SALES
              
              
              37,693,679
              
              
              22,477,905
              
              
              16,886,926GROSS
                  PROFIT
              
              
              30,689,335
              
              
              21,268,656
              
              
              9,581,857RESEARCH
                  AND DEVELOPMENT
              
              
              1,045,543
              
              
              1,036,570
              
              
              680,270SELLING,
                  GENERAL AND ADMINISTRATIVE EXPENSES
              
              
              10,582,462
              
              
              6,649,280
              
              
              5,430,623INCOME
                  FROM OPERATIONS
              
              
              19,061,330
              
              
              13,582,806
              
              
              3,470,964LIQUIDATED
                  DAMAGE EXPENSES
              
              
              2,119,428
              
              
              -
              
              
              -OTHER
                  INCOME (EXPENSE), net
              
              
              (915,228
              )
              
              (238,974
              )
              
              492,287INCOME
                  BEFORE MINORITY INTEREST ANDPROVISION
                  FOR INCOME TAXES
              
              
              16,026,674
              
              
              13,343,832
              
              
              3,963,251MINORITY
                  INTEREST
              
              
              240,584
              
              
              187,120
              
              
              85,653INCOME
                  BEFORE PROVISION FOR INCOME TAXES
              
              
              15,786,090
              
              
              13,156,712
              
              
              3,877,598PROVISION
                  FOR INCOME TAXES
              
              
              1,806,943
              
              
              261,133
              
              
              -NET
                  INCOME
              
              
              13,979,147
              
              
              12,895,579
              
              
              3,877,598OTHER
                  COMPREHENSIVE INCOMEForeign
                  currency translation gain
              
              
              1,834,313
              
              
              425,857
              
              
              -COMPREHENSIVE
                  INCOME
              
              $
              15,813,460
              
              $
              13,321,436
              
              $
              3,877,598BASIC
                  AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES
              
              
              23,041,021
              
              
              18,867,436
              
              
              18,867,436BASIC
                  AND DILUTED EARNING PER SHARE
              
              $
              0.61
              
              $
              0.68
              
              $
              0.21




The
        accompanying notes are an integral part of these consolidated
        statements.
 See
        report
        of independent registered public accounting firm.




F-3




ASIAN
                  FINANCIAL INC. AND SUBSIDIARIESCONSOLIDATED
                  STATEMENTS OF SHAREHOLDERS' EQUITYFOR
                  THE YEARS ENDED JUNE 30, 2007, 2006 AND 2005Common
                  Stock
              
              
              
              Retained
                  EarningsNumber
                  of Shares
              
              Amount
              
              Additional
                  Paid in Capital
              
              Statutory
                  Reserves
              
              Unrestricted
              
              Accumulated
                  Other Comprehensive Income
              
              TotalsBALANCE,
                  July 1, 2004
              
              
              18,867,436
              
              $
              18,867
              
              $
              5,991,034
              
              $
              -
              
              $
              (1,153,582
              )
              $
              -
              
              $
              4,856,319Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,877,598
              
              
              
              
              
              3,877,598Adjustment
                  to statutory reserves
              
              
              
              
              
              
              
              
              
              
              
              581,640
              
              
              (581,640
              )
              
              
              
              
              -Foreign
                  currency translation adjustments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              -BALANCE,
                  June 30, 2005
              
              
              18,867,436
              
              $
              18,867
              
              $
              5,991,034
              
              $
              581,640
              
              $
              2,142,376
              
              $
              -
              
              $
              8,733,917Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              12,895,579
              
              
              
              
              
              12,895,579Adjustment
                  to statutory reserves
              
              
              
              
              
              
              
              
              
              
              
              1,289,558
              
              
              (1,289,558
              )
              
              
              
              
              -Foreign
                  currency translation adjustments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              425,857
              
              
              425,857BALANCE,
                  June 30, 2006
              
              
              18,867,436
              
              $
              18,867
              
              $
              5,991,034
              
              $
              1,871,198
              
              $
              13,748,397
              
              $
              425,857
              
              $
              22,055,353Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              13,979,147
              
              
              
              
              
              13,979,147Adjustment
                  to statutory reserves
              
              
              
              
              
              
              
              
              
              
              
              1,411,403
              
              
              (1,411,403
              )Shares
                  issued for cash, $1.43 per share
              
              
              6,132,614
              
              
              6,133
              
              
              21,272,006
              
              
              
              
              
              
              
              
              
              
              
              21,278,139Foreign
                  currency translation adjustments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,834,313
              
              
              1,834,313BALANCE,
                  June 30, 2007
              
              
              25,000,050
              
              $
              25,000
              
              $
              27,263,040
              
              $
              3,282,601
              
              $
              26,316,141
              
              $
              2,260,170
              
              $
              59,146,952




The
        accompanying notes are an integral part of these consolidated
        statements.
 See
        report
        of independent registered public accounting firm.


F-4




ASIAN
                    FINANCIAL INC. AND SUBSIDIARIESCONSOLIDATED
                    STATEMENTS OF CASH FLOWSFOR
                    THE YEARS ENDED JUNE 30, 2007, 2006 AND 20052007
                
                2006
                
                2005CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    income
                
                $
                13,979,147
                
                $
                12,895,579
                
                $
                3,877,598Adjustments
                    to reconcile net income to cashprovided
                    by (used in) operating activities:Minority
                    interest
                
                
                240,584
                
                
                187,120
                
                
                85,653Depreciation
                
                
                882,842
                
                
                590,635
                
                
                515,284Amortization
                
                
                70,047
                
                
                67,821
                
                
                66,896Bad
                    debt expense
                
                
                322,305
                
                
                -
                
                
                25,361Liquidated
                    damage penalties
                
                
                2,119,428
                
                
                -
                
                
                -(Increase)
                    decrease in assets:Accounts
                    receivable
                
                
                (9,452,582
                )
                
                (6,010,258
                )
                
                (845,359
                )Inventories
                
                
                (2,440,076
                )
                
                (1,390,188
                )
                
                (4,688,238
                )Other
                    receivables
                
                
                71,457
                
                
                -
                
                
                -Other
                    receivables - related parties
                
                
                913,154
                
                
                5,289
                
                
                (181,621
                )Advances
                    on inventory purchases
                
                
                2,233,885
                
                
                (1,265,352
                )
                
                (411,093
                )Other
                    assets
                
                
                (43,198
                )
                
                36,625
                
                
                171,371Increase
                    (decrease) in liabilities:Accounts
                    payable
                
                
                (10,935,839
                )
                
                4,361,870
                
                
                620,281Customer
                    deposits
                
                
                (19,265
                )
                
                18,653
                
                
                -Other
                    payables
                
                
                (341,354
                )
                
                286,617
                
                
                43,957Other
                    payables - related parties
                
                
                (455,164
                )
                
                (6,518,709
                )
                
                (9,327,799
                )Accrued
                    liabilities
                
                
                312,551
                
                
                69,749
                
                
                212,309Taxes
                    payable
                
                
                576,025
                
                
                332,069
                
                
                (47,326
                )Net
                    cash (used in) provided by operating activities
                
                
                (1,966,053
                )
                
                3,667,520
                
                
                (9,882,726
                )CASH
                    FLOWS FROM INVESTING ACTIVITIES:Purchase
                    of equipment
                
                
                (13,314,596
                )
                
                (190,422
                )
                
                (2,609,193
                )Payments
                    for construction in progress
                
                
                -
                
                
                (107,137
                )
                
                -Net
                    cash used in investing activities
                
                
                (13,314,596
                )
                
                (297,559
                )
                
                (2,609,193
                )CASH
                    FLOWS FROM FINANCING ACTIVITIES:Proceeds
                    from line of credit
                
                
                15,050,400
                
                
                -
                
                
                11,858,000Payment
                    for line of credit
                
                
                (15,060,400
                )
                
                -
                
                
                -Proceeds
                    from private placement
                
                
                21,278,139
                
                
                -
                
                
                -Restricted
                    cash
                
                
                (2,097,490
                )
                
                -
                
                
                -Net
                    cash provided by financing activities
                
                
                19,170,649
                
                
                -
                
                
                11,858,000EFFECT
                    OF EXCHANGE RATE CHANGES ON CASH
                
                
                186,650
                
                
                75,316
                
                
                -INCREASE
                    (DECREASE) IN CASH
                
                
                4,076,650
                
                
                3,445,277
                
                
                (633,919
                )CASH,
                    beginning of year
                
                
                3,739,711
                
                
                294,434
                
                
                928,353CASH,
                    end of year
                
                $
                7,816,361
                
                $
                3,739,711
                
                $
                294,434




The
        accompanying notes are an integral part of these consolidated
        statements.
 See
        report of independent registered public accounting firm.




F-5




ASIAN
        FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007




**Note
        1 - Organization background and principal activities**
 
 **Asian
        Financial, Inc. (“AFI”)** was
        organized under the laws of the State of Nevada on August 10, 1998. On July
        27,
        2005, AFI merged with Asian Financial, Inc. (a Wyoming entity) for the purpose
        of changing its domicile from Nevada to Wyoming. AFI has no operations and
        generated no revenues since inception.
 
 Duoyuan
        Investments Limited (“Duoyuan BVI”) is a British Virgin Islands company that
        owns 100% of the equity interest of Duoyuan Digital Printing Technology Industry
        (China) Co., Ltd. (“Duoyuan China”). Duoyuan China has two subsidiaries, a 99.4%
        ownership in Hunan Duoyuan Printing Machinery Co., Ltd. and 95% ownership
        in
        Langfang Duoyuan Digital Technology Co., Ltd (collectively referred to as
        the
        Duoyuan Interest).
 
 On
        August
        31, 2006, Asian Financial entered into a definitive Equity Transfer Agreement
        with Duoyuan BVI to acquire the “Duoyuan Interest” in exchange for 47,100,462
        new (pre-split) shares of common stock in Asian Financial that were issued
        to
        Duoyuan BVI. Prior to the acquisition, Asian Financial had 3,500,000 (pre-split)
        shares of outstanding common stock. Accordingly, at the closing, there were
        50,600,462 (pre-split) shares outstanding. The Equity Transfer Agreement
        became
        effective October 6, 2006. Because the acquisition is treated as a reverse
        acquisition, the financial statements of the Company have been retroactively
        adjusted to reflect the acquisition from the beginning of the reported period
        included in the Registration Statement. The stock exchange transaction has
        been
        accounted as a reverse acquisition and recapitalization of the Company whereby
        Duoyuan BVI is deemed to be the accounting acquirer (legal acquiree) and
        the
        Company to be the accounting acquiree (legal acquirer). The historical financial
        statements for periods prior to October 6, 2006 are those of Duoyuan BVI,
        except
        that the equity section and earnings per share have been retroactively restated
        to reflect the reverse acquisition.
 
 As
        a
        result of the equity transfer, Duoyuan China became Asian Financial’s
        wholly-owned subsidiary, and Mr. Wenhua Guo, the sole shareholder of Duoyuan
        BVI, became our controlling shareholder.
 
 **Duoyuan
        Digital Printing Technology Industry (China) Co., Ltd. (“Duoyuan
        China”)** was
        originally established and wholly owned by Duoyuan Industries (Holding) Inc.
        (“Duoyuan Industries”), a British Virgin Islands company. In September 2002,
        Duoyuan Industries entered into an Equity Transfer Agreement with Duoyuan
        BVI,
        whereby Duoyuan BVI acquired 100% of the equity in Duoyuan China from Duoyuan
        Industries. Mr. Wenhua Guo is the sole shareholder of both Duoyuan Industries
        and Duoyuan BVI. Duoyuan China was incorporated in the People’s Republic of
        China (“PRC”) in 2001 with the registered capital $6,000,000. Duoyuan China has
        increased its registered capital by $19,000,000. As of June 30, 2007,
        $18,000,000 was contributed to Duoyuan China from the Company, and the remaining
        $1,000,000 was received in July and August 2007. The capital was raised through
        a private placement to accredited investors, see Note 12. On August 21, 2007,
        Duoyuan China received its business license requiring $25,000,000 registered
        capital. As of June 30, 2007, Duoyuan China owns 95.0% of Langfang Duoyuan
        Digital Technology Co., Ltd. and 88.0% of Hunan Duoyuan Printing Machinery
        Co.,
        Ltd.
  See
          report of independent registered public accounting firm .
 F-6
 ASIAN
            FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
            30,
            2007
 **Langfang
        Duoyuan Digital Technology Co., Ltd.** **(“Langfang Duoyuan”)** is
        located in the city of Langfang, China and manufactures digital printing
        products. Langfang Duoyuan was originally called Langfang Duoyuan Digital
        Printing Technology Co., Ltd. when Beijing Huiyuan Duoyuan Research Institute
        Co., Ltd. (“Huiyuan Institute”) owned 95% and Beijing Yinlu Advertising Co.,
        Ltd. (Yinlu) owned 5%. On March 21, 2002, Yinlu transferred its 5% ownership
        to
        Duoyuan China. On October 16, 2005, Huiyuan Institute transferred 90% of
        the
        equity of Langfang Duoyuan to Duoyuan China whereby Duoyuan China holds 95%
        of
        the equity of Langfang Duoyuan while Huiyuan Institute remains the holder
        of 5%
        of the Langfang Duoyuan equity. The consolidated financial statements have
        been
        presented as if the acquisition of the subsidiary occurred at the beginning
        of
        2003 due to common management and ownership. As
        of
        June 30, 2007, Langfang Duoyuan owns 12.0% of Hunan Duoyuan Printing Machinery
        Co., Ltd.
 
 **Hunan
        Duoyuan Printing Machinery Co., Ltd. (“Hunan Duoyuan”)** is
        located in Hunan, China and manufactures printing equipment. Hunan Duoyuan
        was
        established by Duoyuan China and Langfang Duoyuan on March 10,
        2004.
 
 Hunan
        Duoyuan Printing Machinery Ltd. formerly known as HuNan Printing Machinery
        was a
        state-owned company with initial registered capital of RMB 92.35 million. HuNan
        Printing Machinery had suffered operating losses for many years. On December
        1,
        2003, HuNan Printing Machinery was reorganized by the state government. All
        liabilities were assumed by the state government and the company with its
        remaining assets which consisted of fixed assets, land use rights and inventory
        were offered for sale at a public auction. Duoyuan China and Langfang Duoyuan
        successfully acquired HuNan Printing Machinery for the price of RMB 38,000,000.
 
 The
        Company allocated the purchase price of the assets pursuant to Statement
        of
        Financial Accounting Standards (SFAS) No. 141. None of the purchase price
        was
        allocated to goodwill. The excess purchase price was allocated to the
        non-current assets. An
        appraisal report dated April 23, 2004 assessed the fair market value of the
        acquired assets at RMB 105.9 million, approximately $13 million. Pursuant
        to
        SFAS 141, the excess of fair value of acquired net assets over cost was
        allocated as a pro rata deduction of the amount of Hunan Duoyuan’s fixed assets
        and intangible assets that would have been assigned to those assets. The
        Fair
        value of net assets acquired over cost was allocated as listed
        below:
 
 Original
                      Allocated
                  
                  Re-allocatedItem
                  
                  Fair
                      Value
                  
                  Fair
                      ValueCurrent
                      assets
                  
                  $
                  2,693,118
                  
                  $
                  2,693,118Property,
                      plant and equipment
                  
                  
                  3,131,890
                  
                  
                  589,262Intangible
                      assets
                  
                  
                  6,992,427
                  
                  
                  1,315,619Total
                      assets
                  
                  $
                  12,817,435
                  
                  $
                  4,597,999
 After
        the
        auction, Duoyuan China and Langfang Duoyuan owned 88% and 12%, respectively.
        The
        company’s name was changed to Hunan Duoyuan Printing Machinery Ltd. and a new
        business license was obtained on March 10, 2004 with an operating term of
        30
        years. The company's initial registered capital was stated at RMB 105.9
        million.
  See
        report of independent registered public
        accounting firm.
  F-7
 ASIAN
            FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
            30,
            2007
   On
        July
        17, 2007, the Company effected a 1-for-2.68189924 reverse stock split of
        its
        common stock. All share and per share amounts used in the Company's financial
        statements and notes thereto have been retroactively restated to reflect
        the
        1-for-2.68189924 reverse stock split.
 
 **Note
        2 - Summary of significant accounting policies**
 
 The
        reporting entity
 
 The
        consolidated financial statements of Asian Financial Inc. and subsidiaries
        (“the
        Company”) reflect activities of Asian Financial Inc., Duoyuan China - 100%,
        Langfang Duoyuan - 95.0%, and Hunan Duoyuan - 99.4%. The consolidated financial
        statements have been presented as if the acquisition of Duoyuan China occurred
        at the beginning of fiscal 200 5
        due to
        the reverse acquisition on October 6, 2006. The consolidated financial
        statements have been presented as if the acquisition of Langfang Duoyuan
        occurred at the beginning of fiscal 2005 due to common management and
        ownership.
 
 Basis
        of presentation
 
 The
        accompanying consolidated financial statements have been prepared in accordance
        with accounting principles generally accepted in the United States of America.
        All material inter-company transactions and balances have been eliminated
        in the
        consolidation. The accompanying consolidated financial statements include
        the
        accounts of Duoyuan Digital Printing Technology Industry (China) Co., Ltd.
        and
        its subsidiaries (referred to as the “Company”). All material intercompany
        transactions and balances have been eliminated in the consolidation. Note
        - 1
        Organization background and principal activities has more detail
        descriptions.
 
 Foreign
        currency translation
 
 The
        reporting currency of the Company is the US dollar. The Company uses their
        local
        currency RMB, as their functional currency. Results of operations and cash
        flows
        are translated at average exchange rates during the period, assets and
        liabilities are translated at the unified exchange rate as quoted by the
        People’s Bank of China at the end of the period, and equity is translated at
        historical exchange rates.
 
 Translation
        adjustments amounted to $2, 260,170
        and $425,857 as of June 30, 2007 and 2006, respectively. Asset and liability
        accounts at June 30, 2007 were translated at 7.60 RMB to $1.00 USD as compared
        to 7.99 RMB at June 30, 2006. Equity accounts were stated at their historical
        rate. The average translation rates applied to income statements for the
        year
        ended June 30, 2007 and 2006 were 7.81 RMB and 8.06 RMB, respectively. In
        accordance with Statement of Financial Accounting Standards No. 95, "Statement
        of Cash Flows," cash flows from the Company's operations is calculated based
        upon the local currencies using the average translation rate. As a result,
        amounts related to assets and liabilities reported on the statement of cash
        flows will not necessarily agree with changes in the corresponding balances
        on
        the balance sheet.
  See
        report of independent registered public
        accounting firm.
 F-8
 ASIAN
            FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
            30,
            2007
 Transaction
        gains and losses that arise from exchange rate fluctuations on transactions
        denominated in a currency other than the functional currency are included
        in the
        results of operations as incurred. Gains and losses from foreign currency
        transactions are included in the results of operation, total transaction
        loss
        amounted to $0 and $0 for the years ended June 30, 2007 and 2006, respectively.
 
 Revenue
        recognition
 
 The
        Company recognizes revenue in accordance with SAB 104, which specifies that
        revenue is realized or realizable and earned when four criteria are met:
 
 ·
              Persuasive
                  evidence of an arrangement exists. (The Company considers its sales
                  contracts to be pervasive evidence of an
                  arrangement.)
 ·
              Delivery
                  has occurred or services have been rendered.
 ·
              The
                  seller’s price to the buyer is fixed or determinable.
 ·
              Collectibility
                  payment is reasonably assured.
 
 The
        Company sells its products solely to its distributors. Master distribution
        agreements are signed with each distributor. The agreements list all terms
        and
        conditions with the exception of delivery, price and quantity terms, which
        are
        evidenced separately in purchase orders. There are no instances where
        receivables from distributor are not due and payable until goods purchased
        from
        the Company are sold by the distributor. The Company does not sell products
        to
        distributors on a consignment basis. There is no right of return after shipping
        and the Company has never experienced any returns. Titles are transferred
        after
        the products are shipped.
 
 The
        Company recognizes revenue when the goods are delivered and titles have passed.
        Sales revenue represents the invoiced value of goods, net of a value-added
        tax
        (VAT). All of the Company’s products that are sold in the PRC are subject to a
        Chinese value-added tax at a rate of 17% of the gross sales price or at a
        rate
        approved by the Chinese local government. This VAT may be offset by the VAT
        paid
        by the Company on raw materials and other materials included in the cost
        of
        producing their finished product. The Company’s distributors are able to install
        our products without our assistance. As a result, there is no substantial
        performance required on the Company’s part.
 
 Purchase
        prices of our products are fixed and customers are not allowed to renegotiate
        pricing after the contracts are signed. The Company’s agreements with its
        distributors do not include cancellation or termination clauses.
 
 Credit
        limits are assigned to each distributor. As a distributor builds a sales
        history
        with the Company, the credit limit can be increased. Credit limits are reviewed
        by management and reductions are made if deemed necessary.
  See
        report of independent registered public
        accounting firm.
 F-9
 ASIAN
          FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2007
 Distributors
        are all not granted sales returns. Our distributors are all equipped to install
        our products. We are not contractually obligated to perform any installation
        services. As a result, our revenue recognition is not impacted.
 
 Shipping
        and handling costs related to costs of goods sold are included in selling,
        general and administrative costs. Shipping and handling costs amounted to
        $1,127,745, $623,323, and $437,971, respectively, for the years ended June
        30,
        2007, 2006 and 2005.
 
 Use
        of
        estimates
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles of the United States of America requires management
        to
        make estimates and assumptions that affect the amounts reported in the
        consolidated financial statements and accompanying notes. For
        example, the Company estimates the allowance for doubtful accounts. Management
        believes that the estimates utilized in preparing its financial statements
        are
        reasonable and prudent. Actual results could differ from these
        estimates.
 
 Land
        use rights
 
 All
        land
        in the People’s Republic of China is owned by the government and cannot be sold
        to any individual or company. However, the government grants the user a “land
        use right” (the Right) to use the land. Land
        use
        rights are valid for a limited period of time, depending on their use. Based
        upon PRC regulations, land use rights last for 50 years for industrial property.
        The Company has the right to use the land for 50 years and elected to amortize
        the cost of rights over 50 years using the straight-line method. At June
        30,
        2007 and 2006, accumulated amortization amounted to $321,498 and $231,374.
 
 The
        land
        use rights consisted of the following:
 June
                    30,
                
                June
                    30,2007
                
                2006Intangible
                    - Land Use right
                
                $
                4,001,439
                
                $
                3,583,667Idle
                    intangible - Land use right
                
                
                -
                
                
                219,8134,001,439
                
                
                3,803,480(321,498)
                
                
                (231,374)Less
                    Accumulated amortization
                
                $
                3,679,941
                
                $
                3,572,106Totals
  Intangible
        assets of the Company are reviewed annually as to whether their carrying
        value
        has become impaired. The Company considers assets to be impaired if the carrying
        value exceeds the future projected cash flows from related operations. The
        Company also re-evaluates the periods of amortization to determine whether
        subsequent events and circumstances warrant revised estimates of useful lives.
        As of June 30, 2007, the Company expects these assets to be fully
        recoverable.
  See
        report of independent registered public
        accounting firm.
 F-10
  ASIAN
        FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007
   Total
        amortization expense for the year ended June 30, 2007, 2006 and 2005 amounted
        to
        $70,047, $67,821 and $66,896, respectively.
 
 Plant
        and equipment
 
 Plant
        and
        equipment are stated at cost less accumulated depreciation. Depreciation
        is
        computed using the straight-line method over the estimated useful lives of
        the
        assets with 5% residual value. Estimated useful lives of the assets are as
        follows:
  EstimatedUsefule
                    LifeBuildings
                30
                yearsMachinery
                    and equipment
                5-10
                yearsOther
                    equipment
                5-10
                yearsFurniture
                    and Fixtures
                3-5
                yearsMotor
                    Vehicles
                4-10
                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. Maintenance, repairs and minor renewals
        are charged directly to expenses as incurred. Major additions and betterment
        to
        property and equipment are capitalized.
 
 The
        cost
        and related accumulated depreciation and amortization of assets sold or
        otherwise retired are eliminated from the accounts and any gain or loss is
        included in the statement of operations.
 
 Long-lived
        assets of the Company are reviewed annually as to whether their carrying
        value
        has become impaired. The Company considers assets to be impaired if the carrying
        value exceeds the future projected cash flows from related operations. The
        Company also re-evaluates the periods of amortization to determine whether
        subsequent events and circumstances warrant revised estimates of useful lives.
        As of June 30, 2007, the Company expects these assets to be fully
        recoverable.
 
 Plant
        and
        equipment consist of the following:
  See
        report of independent registered public
        accounting firm.
  F-11
  ASIAN
        FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007
   June
                    30,
                
                June
                    30,2007
                
                2006Buildings
                
                $
                8,201,747
                
                $
                5,866,081Office
                    equipment
                
                
                797,941
                
                
                595,049Motor
                    vehicles
                
                
                292,989
                
                
                99,634Plant
                    and machinery
                
                
                18,709,322
                
                
                4,956,060Construction
                    in progress
                
                
                -
                
                
                2,227,673Total
                
                
                28,001,999
                
                
                13,744,497Less:
                    accumulated depreciation
                
                
                (2,669,445
                )
                
                (1,678,634
                )Plant
                    and equipment, net
                
                $
                25,332,554
                
                $
                12,065,863
  The
        depreciation expense for the year ended June 30, 2007, 2006 and 2005 amounted
        to
        $882,842, $590,635 and $515,284, respectively.
 
 Cash
        and concentration of risk
 
 Cash
        includes cash on hand and demand deposits in accounts maintained with
        state-owned banks within the People’s Republic of China and offshore banking
        account with DBS bank. Total cash in state-owned banks and DBS bank at June
        30,
        2007 and 2006 amounted to $7,764,148 and $3,739,711, respectively of which
        no
        deposits are covered by insurance. The Company has not experienced any losses
        in
        such accounts and believes it is not exposed to any risks on its cash in
        bank
        accounts.
 
 Restricted
        cash
 
 Restricted
        cash represents cash held in escrow in connection with the November 2006
        private
        placement. As of June 30, 2007, total of $ 2,097,490 was held in
        escrow.
 
 Inventories
 
 Inventories
        are recorded at the lower of cost or market, using the weighted average method
        and consist of the following:
 June
                    30,
                
                June
                    30,2007
                
                2006Raw
                    materials
                
                $
                5,118,566
                
                $
                6,526,691Work
                    in process
                
                
                9,265,459
                
                
                6,690,862Finished
                    goods
                
                
                5,690,580
                
                
                3,510,280Totals
                
                $
                20,074,605
                
                $
                16,727,833
 The
        Company reviews its inventory on a regular basis for possible obsolete goods
        to
        determine if any reserves are necessary. As
        of
        June 30, 2007 and June 30, 2006, the Company determined that no reserves
        were
        necessary.
   See
        report of independent registered public
        accounting firm.
 F-12
 ASIAN
          FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2007
 Liquidated
        damages
 
 The
        liquidated damages associated with the registration of the shares and the
        settlement of all outstanding related party balances are treated in accordance
        with EITF 00-19-2. The
        registration penalty meets the definition of a registration payment arrangement
        as defined in EITF 00-19-2. In accordance with EITF 00-19-2 paragraph 7 the
        contingent obligation to make future payments or otherwise transfer
        consideration under a registration payment arrangement is recognized and
        measured separately. In accordance with FIN14, the Company has recorded an
        expense and a liability equal to the minimum estimated loss.
 
 Impairment
        of long-lived assets, including intangible assets and fixed
        assets
 
 The
        Company reviews its long-lived assets for impairment whenever events or changes
        in circumstances indicate that the carrying amount of an asset may no longer
        be
        recoverable. Then these events occur, the Company measures impairment by
        comparing the carrying value of the long-lived assets to the estimated
        undiscounted future cash flows expected to result from the use of the assets
        and
        their eventual disposition. If the sum of the expected undiscounted cash
        flow is
        less than the carrying amount of the assets, the Group would recognize an
        impairment loss based on the fair value of the assets. The company has not
        suffered any impairment of long-lived assets.
 
 Major
        suppliers
 
 For
        the
        years ended June 30, 2007 and 2006, five suppliers accounted for approximately
        69% and 60%, respectively, of the Company's purchases. These five suppliers
        represent 41% and 48% of the Company's total accounts payable as of June
        30,
        2007 and 2006.
 
 Financial
        instruments
 
 Statement
        of Financial Accounting Standards No. 107 (SFAS 107), “Disclosures about Fair
        Value of Financial Instruments” requires disclosure of the fair value of
        financial instruments held by the Company. SFAS 107 defines the fair value
        of
        financial instruments as the amount at which the instrument could be exchanged
        in a current transaction between willing parties. The Company considers the
        carrying amount of cash, accounts receivable, other receivables, accounts
        payable, accrued liabilities, other payables and line of credit 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.
 
 Accounts
        receivable, trade and allowance for doubtful accounts
 
 The
        Company’s business operations are conducted in the People’s Republic of China.
        During the normal course of business, the Company extends unsecured credit
        to
        its customers by selling on various credit terms. Management reviews its
        accounts receivable on a quarterly basis to determine if the allowance for
        doubtful accounts is adequate. An estimate for doubtful accounts is recorded
        when collection of the full amount is no longer probable. The Company’s existing
        reserve is consistent with its historical experience and considered adequate
        by
        the management.
  See
        report of independent registered public
        accounting firm.
  F-13
  ASIAN
        FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007
   Accounts
        receivable, trade net of allowance for doubtful accounts outstanding at June
        30,
        2007 and 2006 amounted to $21,170,423 and $11,231,897, respectively. Management
        reviews its accounts receivable on a regular basis to determine if the allowance
        for doubtful accounts is adequate.
  An
        estimate for doubtful accounts is recorded when collection of the full amount
        is
        no longer probable. The Company has recorded an allowance for doubtful accounts
        for trade accounts receivables aged over nine months that have not been
        collected. As of June 30, 2007 and 2006, allowances for doubtful accounts
        were
        $498,648 and $159,725, respectively. The following represents the changes
        of
        allowance for doubtful accounts:
  June
                    30,2007
                
                2006Balance,
                    beginning of year
                
                $
                159,725
                
                $
                159,725Additions
                    to the reserve
                
                
                452,617
                
                
                -Recovery
                    of amounts previously reserved
                
                
                (113,694
                )
                
                -Balance,
                    end of year
                
                $
                498,648
                
                $
                159,725  Income
          taxes
 
 The
        Company adopted Statement of Financial Accounting Standards No. 109, “Accounting
        for Income Taxes” (SFAS 109 )
        that
        requires recognition of deferred income tax liabilities and assets for the
        expected future tax consequences of temporary differences between income
        tax
        basis and financial reporting basis of assets and liabilities. Provision
        for
        income taxes consist of taxes currently due plus deferred taxes. Since the
        Company had no operations within the United States there is no provision
        for US
        income taxes and there are no deferred tax amounts as of June 30, 2007 and
        2006.
 
 The
        charge for taxation is based on the results for the year as adjusted for
        items,
        which are non-assessable or disallowed. It is calculated using tax rates
        that
        have been enacted or substantively enacted by the balance sheet
        date. Deferred
        tax is accounted for using the balance sheet liability method in respect
        of
        temporary differences arising from differences between the carrying amount
        of
        assets and liabilities in the financial statements and the corresponding
        tax
        basis used in the computation of assessable tax profit. In principle, deferred
        tax liabilities are recognized for all taxable temporary differences, and
        deferred tax assets are recognized to the extent that it is probably that
        taxable profit will be available against which deductible temporary differences
        can be utilized.
 
 Deferred
        tax is calculated at the tax rates that are expected to apply to the period when
        the asset is realized or the liability is settled. Deferred tax is charged
        or
        credited in the income statement, except when it related to items credited
        or
        charged directly to equity, in which case the deferred tax is also dealt
        with in
        equity. Deferred tax assets and liabilities are offset when they relate to
        income taxes levied by the same taxation authority and the Company intends
        to
        settle its current tax assets and liabilities on a net basis.
   See
        report of independent registered public
        accounting firm.
 F-14
  ASIAN
        FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007
 
 The
        Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income
        Taxes” (“FIN 48”), as of January 1, 2007. A tax position is recognized as a
        benefit only if it is “more likely than not” that the tax position would be
        sustained in a tax examination, with a tax examination being presumed to
        occur.
        The amount recognized is the largest amount of tax benefit that is greater
        than
        50% likely of being realized on examination. For tax positions not meeting
        the
“more likely than not” test, no tax benefit is recorded. The adoption had no
        affect on the Company’s financial statements.
 
 Chinese
        Income Tax
 
 The
        Company’s subsidiaries are governed by the Income Tax Law of the People’s
        Republic of China (PRC) concerning Foreign Investment Enterprises and Foreign
        Enterprises and various local income tax laws (the Income Tax Laws).
 
 Beginning
        January 1, 2008, the new Enterprise Income Tax (“EIT”) law will replace the
        existing laws for Domestic Enterprises (“DEs”) and Foreign Invested Enterprises
        (“FIEs”). The new standard EIT rate of 25% will replace the 33% rate currently
        applicable to both DEs and FIEs. The Company is currently evaluating the
        impact
        that the new EIT will have on its financial condition.
 
 Under
        the
        existing Chinese Income Tax Laws, foreign investment enterprises (“FIEs”)
        generally are subject to an income tax at an effective rate of 33% (30% state
        income taxes plus 3% local income taxes) on income as reported in their
        statutory financial statements after appropriate tax adjustments unless the
        enterprise is located in specially designated regions for which more favorable
        effective tax rates apply. Starting on January 1, 2008, China will unify
        the
        corporate income tax rule on foreign invested enterprises and domestic
        enterprises. The unified corporate income tax rate is 25%.
 
 Upon
        approval by the PRC tax authorities, FIE's scheduled to operate for a period
        of
        10 years or more and engaged in manufacturing and production may by exempt
        from
        income taxes for two years, commencing with their first profitable year of
        operations, after taking into account any losses brought forward from prior
        years, and thereafter with a 50% reduction for the subsequent three
        years.
 
 Duoyuan
        China has become a wholly foreign owned enterprise since its inception. This
        entity status allows Duoyuan China a two-year income tax exemption and a
        50%
        income tax reduction for the following three years. Duoyuan China also had
        operating losses prior to the calendar year ended December 31, 2003 and started
        to generate a net profit for the calendar year ended December 31, 2004.
        Therefore Duoyuan China has an income tax exemption for the calendar years
        ending December 31, 2004 and 2005 and 50% income tax reduction for the calendar
        years ending December 31, 2006, 2007 and 2008.
  See
        report of independent registered public
        accounting firm.
 F-15
  ASIAN
        FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007
   Langfang
        Duoyuan is located in a Special Economic and High Technology Zone and the
        PRC
        tax authority has offered a special income tax rate to Langfang Duoyuan for
        doing business in the special zone. With the approval of the local government,
        Langfang Duoyuan is exempt from income taxes for five years, commencing with
        their first profitable year of operations. Langfang Duoyuan has operating
        losses
        prior to the calendar year ended December 31, 2002 and started to generate
        a net
        profit for the calendar year ending December 31, 2003. Therefore Langfang
        Duoyuan has an income tax exemption for the years ending December 31, 2003,
        through December 31, 2007. We believe Langfang Duoyuan will become subject
        to an
        income tax rate of 25% starting January 1, 2008, under the newly unified
        corporate income tax rate.
 
 Prior
        to
        acquiring Hunan Duoyuan, the shareholders negotiated with Hunan Shaoyang
        Treasure Department to obtain an income tax exemption benefit. The Treasure
        Department granted the company a five-year income tax exemption commencing
        with
        the first profitable year of operations. In addition, the Treasure Department
        granted a 50% refund of income taxes based upon the amount of income taxes
        paid
        by Hunan Duoyuan. Hunan Duoyuan suffered an operating loss in the first year
        of
        operations ending December 31, 2004 and started to generate a net profit
        for the
        calendar year ended December 31, 2005. Therefore Hunan Duoyuan has an income
        tax
        exemption for the years ending December 31, 2005, through December 31, 2009.
        We
        believe Hunan Duoyuan will become subject to income tax at rate of 25% starting
        January 1, 2010, under the newly unified corporate income tax rate.
 
 PRC
        law
        requires that before a foreign invested enterprise can legally distribute
        profits to its partners, it must satisfy all tax liabilities, provide for
        losses
        in previous years, and make allocations, in proportions made at the discretion
        of the board of directors, after the statutory reserve. The statutory reserves
        include the surplus reserve fund and the common welfare fund and represent
        restricted retained earnings.
 
 During
        the year ending June 30, 2007 and 2006 the provision for income taxes amounted
        to $1,806,943 and $261,133 respectively. The estimated tax savings due to
        this
        tax exemption for the year ending June 30, 2007 and 2006 amounted to $4,509,810
        and $4,154,255, respectively.
 
 The
        following table reconciles the U.S. statutory rates to the Company’s effective
        tax rate for the year ended June 30, 2007 and 2006:
  2007
                
                2006U.S.
                    Statutory rates
                
                
                34.0
                %
                
                34.0
                %Foreign
                    income not recognized in USA
                
                
                (34.0
                )
                
                (34.0
                )China
                    income taxes
                
                
                33.0
                
                
                33.0China
                    income tax exemption
                
                
                (16.5
                )
                
                (33.0
                )Effective
                    income tax rates
                
                
                16.5
                %
                
                -
                %
   See
        report of independent registered public
        accounting firm.
 F-16
  ASIAN
        FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007
  Value
        added tax
  Enterprises
        or individuals who sell commodities, engage in repair and maintenance or
        import
        and export goods in the PRC are subject to a value added tax, VAT, in accordance
        with Chinese laws. The VAT standard rate is 17% of the gross sales price.
        A
        credit is available whereby VAT paid on the purchases of semi-finished products
        or raw materials used in the production of the Company’s finished products can
        be used to offset the VAT due on sales of the finished product.
 
 VAT
        on
        sales and VAT on purchases amounted to $19,791,244 and $7,258,360 for the
        year
        ended June 30, 2007 and $12,931,347 and $9,326,775 for the year ended June
        30,
        2006, respectively. Sales and purchases are recorded net of VAT collected
        and
        paid as the Company acts as an agent because the VAT taxes are not impacted
        by
        the income tax holiday.
 
 Both
        Langfang Duoyuan and Hunan Duoyuan get 12.5% and 5% refund respectively,
        on the
        VAT amount paid for the first five years of the operations.
 
 Advertising
        costs
 
 The
        Company expenses the cost of advertising as incurred in selling, general
        and
        administrative costs. Advertising costs were $1,118,480, $597,611 and $220,640
        for the years ended June 30, 2007, 2006 and 2005, respectively.
 
 Research
        and development costs
 
 Research
        and development costs are expensed as incurred. The costs of material and
        equipment that are acquired or constructed for research and development
        activities, and have alternative future uses, either in research and
        development, marketing, or sales, are classified as property and equipment
        or
        depreciated over their estimated useful lives. Research
        and development expense amounted to $1,045,543, $1,036,570 and $680,270 for
        the
        years ended June 30, 2007, 2006 and 2005, respectively.
 
 Recently
        issued accounting pronouncements
 
 In
        June
        2006, the Emerging Issues Task Force (EITF) reached a consensus on EITF No.
        06-3, How Taxes Collected from Customers and Remitted to Governmental
        Authorities Should Be Presented in the Income Statement (EITF No. 06-3).
        EITF
        No. 06-3 permits that such taxes may be presented on either a gross basis
        or a
        net basis as long as that presentation is used consistently. The adoption
        of
        EITF No. 06-3 on January 1, 2007 did not impact our consolidated financial
        statements. We present the taxes within the scope of EITF No. 06-3 on a net
        basis.
 
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, “Accounting for
        Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109”
(“FIN 48”). The Company adopted Interpretation No. 48 on January 1, 2007. (See
        Note 2)
   See
        report of independent registered public
        accounting firm.
 F-17
 ASIAN
          FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2007
 In
        September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
        which
        addresses the measurement of fair value by companies when they are required
        to
        use a fair value measure for recognition or disclosure purposes under GAAP.
        SFAS
        No. 157 provides a common definition of fair value to be used throughout
        GAAP
        which is intended to make the measurement of fair value more consistent and
        comparable and improve disclosures about those measures. SFAS No. 157 will
        be
        effective for an entity's financial statements issued for fiscal years beginning
        after November 15, 2007. The Company is currently evaluating the effect SFAS
        No.
        157 will have on its consolidated financial position, liquidity, or results
        of
        operations.
 
 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.
 
 Reclassifications
 
 Certain
        prior period amounts have been reclassified to conform to current period
        presentation. These reclassifications have no effect on net income or cash
        flows.
 
 Company
        reporting year end
 
 For
        US
        financial statement reporting purposes beginning from 2003, the Company has
        adopted June 30 as its fiscal year end.
 
 **Note
        3 - Earnings per share**
 
 The
        Company reports earnings per share in accordance with the provisions of SFAS
        No.
        128, “Earnings Per Share.” SFAS No. 128 requires presentation of basic and
        diluted earnings per share in conjunction with the disclosure of the methodology
        used in computing such earnings per share. Basic earnings per share excludes
        dilution and is computed by dividing
        income available to common stockholders by the weighted average common shares
        outstanding during the period. Diluted earnings per share takes into account
        the
        potential dilution that could occur if securities or other contracts to issue
        common stock were exercised and converted into common stock.
 
 All
        share
        and per share amounts used in the Company's financial statements and notes
        thereto have been retroactively restated to reflect the 1-for-2.68189924
        reverse
        stock split, which occurred on July 17, 2007.
   See
        report of independent registered public
        accounting firm.
 F-18
  ASIAN
        FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007
  
 All
        per
        share data including earnings per share has been retroactively restated to
        reflect the merger on August 31, 2006 as if it had occurred at the beginning
        of
        fiscal year 2006. For the year ended June 30, 2007, 2006 and 2005, basic
        and
        diluted earning per share amount to $0.61 and $0.68 and $0.21,
        respectively.
 
 The
        following is a reconciliation of the basic and diluted earnings per share
        computation for the years ended June 30, 2007, 2006 and 2005:
 
 2007
                
                2006
                
                2005Net
                    income for earnings per share
                
                $
                13,979,147
                
                $
                12,895,579
                
                $
                3,877,598Weighted
                    average shares used in basic computation
                
                
                23,041,021
                
                
                18,867,436
                
                
                18,867,436Diluted
                    effect of warrants
                
                
                -
                
                
                -
                
                
                -Weighted
                    average shares used in diluted computation
                
                
                23,041,021
                
                
                18,867,436
                
                
                18,867,436Earnings
                    per share:Basic
                
                $
                0.61
                
                $
                0.68
                
                $
                0.21Diluted
                
                $
                0.61
                
                $
                0.68
                
                $
                0.21
  At
        June
        30, 2007, 1,644,702 warrants, whose exercise price is $1.57 was excluded
        from
        the calculation because of their antidilutive nature.
 
 **Note
        4 - Supplemental disclosure of cash flow information**
 
 Interest
        expense paid amounted to $750,736, $721,764 and $505,636 for the years ended
        June 30, 2007, 2006 and 2005, respectively.
 
 Income
        tax payments paid amounted to $1,355,095, $0 and $0 for the years ended June
        30,
        2007, 2006 and 2005, respectively.
 
 In
        fiscal
        2006, the Company received land use rights totaling $224,965 that was prepaid
        in
        prior year.
 
 **Note
        5 - Advances on inventory purchases**
 
 Advances
        on inventory purchases are monies advanced to vendors for purchases. The
        inventory is normally delivered within six months after the monies have been
        advanced. The total outstanding amount was $0 and $2,183,483 as of June 30,
        2007
        and 2006, respectively.
 
 **Note
        6 - Related party transactions**
 
 Mr.
        Guo
        Wenh ua
        is the
        Company’s controlling shareholder and chief executive. The following is a
        summary of the amounts due from and to related parties:
   See
        report of independent registered public
        accounting firm.
 F-19
 ASIAN
          FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2007
 June
                    30,
                
                June
                    30,Other
                    receivable - related parties
                
                2007
                
                2006Tianjin
                    Automobile Water Pump Co., Ltd. - Mr. Guo
                  Wenhau
                    is the sole shareholder
                
                $
                -
                
                $
                231,603Duoyuan
                    China Water Recycle Technology Industry
                  Co.,
                    Ltd. - Mr. Guo Wenhua is the sole shareholder
                
                
                -
                
                
                660,949Totals
                
                $
                -
                
                $
                892,552Other
                    payable - related partiesDuoyuan
                      China Water Recycle Technology IndustryCo., Ltd. - Mr. Guo
                    Wenhua is the sole shareholder
                
                $
                369,564
                
                $
                796,753
 
 Other
        receivables from related parties are generated by the Company making various
        cash advances and short term loans and allocation of various expenses to
        related parties.
        These are recurring transactions. The Company does not charge interest on
        these
        receivables. All related parties outstanding balances will be settled in
        the
        manner of cash payments.
 
 The
        Company has short term loans from related parties of $0 and $796,753 as of
        June
        30, 2007 and 2006, respectively. These amounts were loaned to the Company
        for
        business operations. These amounts are short-term and are non-interest bearing.
 
 The
        Company leases office space from Duoyuan China Water Recycle Technology Industry
        Co., a related party. See Note 10.
 
 **Note
        7 - Lines of credit**
 
 The
        lines
        of credit represent amounts due to various banks which are due on demand
        or
        normally within one year. These loans can be renewed with the banks. The
        Company
        had a total of $12,887,000 and $12,269,600 outstanding on these lines of
        credit
        as of June 30, 2007 and 2006, respectively. The loans consisted of the
        following:
   See
        report of independent registered public
        accounting firm.
 F-20
 ASIAN
          FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2007
  June
                      30
                  
                  ,
                      June 30,2007
                  
                  2006Loan
                      from Bank of Agriculture, Chongwen branch dueMarch
                      14, 2008. Quarterly interest only payment at6.138%
                      per annum, secured by plant and machinery
                  
                  $
                  2,630,000
                  
                  $
                  1,252,000Loan
                      from Bank of Agriculture, Chongwen branch dueJune
                      29, 2008. Quarterly interest only payment at6.138%
                      per annum, secured by plant and machinery
                  
                  
                  3,682,000
                  
                  
                  2,504,000Loan
                      from Bank of Agriculture, Chongwen branch dueJuly
                      15, 2007. Monthly interest only payment at6.138%
                      per annum, secured by plant and machinery
                  
                  
                  2,630,000
                  
                  
                  2,504,000Loan
                      from Bank of Agriculture, Chongwen branch dueJuly
                      20, 2007. Monthly interest only payment at6.138%
                      per annum, secured by plant and machinery
                  
                  
                  1,315,000
                  
                  
                  3,505,600Loan
                      from Bank of Agriculture, Chongwen branch dueJuly
                      27, 2007. Quarterly interest only payment at6.138%
                      per annum, secured by plant and machinery
                  
                  
                  2,630,000
                  
                  
                  2,504,000Totals
                  
                  $
                  12,887,000
                  
                  $
                  12,269,600
  Total
        interest expense for the years ended June 30, 2007, 2006 and 2005 amounted
        to
        $750,736, $721,764 and $505,636, respectively.
 
 **Note
        8 - Taxes**
 
 The
        Company is organized in the United States and no tax benefit is expected
        from
        tax credits in the future.
 
 Beginning
        January 1, 2008, the new Enterprise Income Tax (“EIT”) law will replace the
        existing laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises
        (“FIEs”).
 The
        key
        changes are:
 
 a.
              The
                  new standard EIT rate of 25% will replace the 33% rate currently
                  applicable to both DES and FIEs, except for High Tech companies
                  who pays a
                  reduced rate of 15%;
 
 b.
              Companies
                  established before March 16, 2007 will continue to enjoy tax holiday
                  treatment approved by local government for a grace period of either
                  for
                  the next 5 years or until the tax holiday term is completed, whichever
                  is
                  sooner. These companies will pay the standard tax rate as defined
                  in point
                  “a” above when the grace period expires.
   See
        report of independent registered public
        accounting firm.
 F-21
 ASIAN
          FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2007
 The
        Company and its subsidiaries were established before March 16, 2007 and
        therefore are qualified to continue enjoying the reduced tax rate as described
        before. Since the detailed guidelines of the new tax law were not publicized
        yet, the Company can not determine what the new tax rate (15% or 25%) will
        be
        applicable to the Company and its subsidiaries after the end of their respective
        tax holiday terms.
 
 Under
        the
        existing Income Tax Laws of PRC, the Company is generally subject to an income
        tax at an effective rate of 33% (30% state income taxes plus 3% local income
        taxes) on income reported in the statutory financial statements after
        appropriate tax adjustments, unless the enterprise is located in a specially
        designated region where it allows foreign enterprises a two-year income tax
        exemption and a 50% income tax reduction for the following three years.
 
 Taxes
        payable consisted of the following as of June 30:
  2007
                
                2006VAT
                    payable
                
                $
                256,175
                
                $
                158,173Income
                    tax payable
                
                
                751,081
                
                
                263,617Others
                
                
                71,247
                
                
                42,015Total
                    taxes payable
                
                $
                1,078,503
                
                $
                463,805
  **Note
        9 - Reserves and dividends**
 
 The
        laws
        and regulations of the People’s Republic of China require that before foreign
        invested enterprise can legally distribute profits, it must first satisfy
        all
        tax liabilities, provide for losses in previous years, and make allocations,
        in
        proportions determined at the discretion of the board of directors, after
        the
        statutory reserve. The statutory reserves include the surplus reserve fund
        and
        the common welfare fund.
 
 Statutory
        surplus reserve fund
 
 The
        Company is required to transfer 10% of its net income, as determined in
        accordance with the PRC accounting rules and regulations, to a statutory
        surplus
        reserve fund until such reserve balance reaches 50% of the Company’s registered
        capital.
 
 The
        transfer to this reserve must be made before distribution of any dividends
        to
        shareholders. For the years ended June 30, 2007 and 2006, the Company
        transferred $1,411,403 and $1,289,558 to this reserve which represents 10%
        of
        the current year’s net income determined in accordance with PRC accounting rules
        and regulations. The surplus reserve fund is non-distributable other than
        during
        liquidation and can be used to fund previous years’ losses, if any, and may be
        utilized for business expansion or converted into share capital by issuing
        new
        shares to existing shareholders in proportion to their shareholding or by
        increasing the par value of the shares currently held by them, provided that
        the
        remaining reserve balance after such issue is not less than 25% of the
        registered capital.
   See
        report of independent registered public
        accounting firm.
 F-22
  ASIAN
        FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007
 
 Common
        welfare fund
 
 The
        Company was required to transfer 5% to 10% of its net income, as determined
        in
        accordance with the PRC accounting rules and regulations, to the statutory
        common welfare fund through 2005. This fund can only be utilized on capital
        items for the collective benefit of the Company’s employees, such as
        construction of dormitories, cafeteria facilities, and other staff welfare
        facilities. This fund is non-distributable other than upon liquidation. The
        transfer to this fund must be made before distribution of any dividend to
        shareholders. Effective from January 1, 2006, the common welfare fund reserve
        is
        no longer required by the Chinese regulation.
 
 The
        Chinese government restricts distributions of registered capital and the
        additional investment amounts required by a foreign invested enterprise.
        Approval by the Chinese government must be obtained before distributions
        of
        these amounts can be returned to the shareholders.
 
 **Note
        10 - Operating leases**
 
 The
        Company leases office space from Duoyuan China Water Recycle Technology Industry
        Co., a related party, which Mr. Guo Wenhua is the sole shareholder.
  Total
        lease expense for the years ended June 30, 2007 and 2006 was $143,992 and
        $136,022, respectively. Total future minimum lease payments at June, 2007,
        are
        as follows:
  Year
                    ended June 30,
                
                Amount2008
                
                $
                71,996Thereafter
                
                
                -
  **Note
        11 - 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.
   See
        report of independent registered public
        accounting firm.
 F-23
 ASIAN
          FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2007
 
 **Note
        12 - Shareholders' equity**
 
 On
        October 25, 2006, Asian Financial, Inc. entered into a definitive Security
        Purchase Agreement with unrelated investors (the “Purchase Agreement”). On
        November 2, 2006, the transactions contemplated by the Purchase Agreement
        closed. In accordance with the Purchase Agreement, Asian Financial, Inc.
        issued
        an aggregate of 16,447,019 (pre-split) shares of common stock for a purchase
        price of approximately $1.43 per share or an aggregate purchase price of
        $23,549,200.
 
 A
        total
        of $2,097,490 of the proceeds is being held in escrow until the Company appoints
        a majority of independent directors and the restricted cash has been released
        to
        the Company on July 18, 2007.
 
 The
        financing was conducted through a private placement to accredited investors
        and
        is exempted from registration pursuant to Section 4(2) of the Securities
        Act of
        1933, as amended (the “Securities Act”). In conjunction with the private
        placement, Asian Financial agreed to register the shares with the Securities
        and
        Exchange Commission within 90 days of the closing. The Company also agreed
        to
        make the registration statement effective no later than the 150th day following
        the closing date or the fifth trading day following the date on which the
        Company is notified by the Securities and Exchange Commission that such
        registration statement will not be reviewed or is no longer subject to further
        review and comments, whichever date is earlier. If the registration statement
        is
        not filed or declared effective pursuant to the above timeline or if the
        registration statement ceases to be effective for more than an aggregate
        of 45
        trading days, the Company will be required to pay the investors a monthly
        liquidated damage equal to 1% of the aggregate investment amount. The total
        amount of the liquidated damages payable by the Company is capped at 8% of
        the
        total investment amount paid by the investors.
 
 The
        Company filed its registration statement on March 22, 2007, as of June 30, 2007,
        the registration statement was still not declared effective. Therefore, the
        Company accrued $1,177,460 for liquidated damages pursuant to that agreement.
        The accrued amount is calculated at 1% of the net proceeds raised in the
        2006
        private placement ($23,549,200). This amount has been included in liquidated
        damage expenses on the income statement in accordance with EITF 00-19-2.
        Since
        none of the estimates is better than the other, in accordance with FIN14,
        the
        Company has recorded an expense and a liability equal to the minimum estimated
        loss.
 
 Under
        the
        terms of the Agreement, the Company is required to meet various performance
        targets for the next two years. If the Company fails to meet those targets,
        the
        Company’s controlling shareholder and CEO, agreed to transfer his personal
        shares in the Company stock to each shareholder party to a Purchase Agreement
        up
        to 112% of the number of shares issued to such shareholder in the private
        placement.
 
 Additionally,
        the Company agreed to cease all related party transactions and to settle
        all
        outstanding balance due to or from related parties by December 31, 2006.
        Failure
        to terminate the related party transactions will result in a monthly cash
        penalty of 1% of the proceeds with a cap of 4%. The Company began accruing
        costs
        associated with this penalty in January 2007. The 4% cap applies only to
        the
        penalty for having outstanding related party transaction at December 31,
        2006,
        not to the delay in filing registration statement. As of June 30, 2007, the
        Company had accrued $941,968 for such liquidated damages pursuant to that
        agreement but had not paid any amount of such damages. The accrued amount
        is
        calculated at 1% of the net proceeds raised in the 2006 private placement
        ($23,549,200). This amount has been included in liquidated damage expenses
        on
        the income statement in accordance with EITF 00-19-2. Since none of the
        estimates is better than the other, in accordance with FIN14, the Company
        has
        recorded an expense and a liability equal to the minimum estimated loss.
   See
        report of independent registered public
        accounting firm.
 F-24
  ASIAN
        FINANCIAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007
 
 At
        the
        closing, as part of the compensation to the placement agent, Roth Capital
        Partners, LLC, Asian Financial, Inc. issued to Roth Capital warrants to acquire
        1,644,702 shares of common stock, exercisable at any time after June 30,
        2008.
        The warrants have a strike price equal to $1.57, have a term of five years
        starting from July 1, 2008 and will permit cashless or net exercise at all
        times. The shares underlying the warrants will have registration rights,
        but
        they are not covered by this Registration Statement. The warrant contains
        a
        standard adjustment provisions upon stock dividend, stock split, stock
        combination, recapitalization and a change of control transaction. The warrants
        meet the conditions for equity classification pursuant to FAS 133 “Accounting
        for Derivatives” and EITF 00-19, “Accounting for Derivative Financial
        Instruments Indexed to, and Potentially Settled in, a Company's Own Stock”.
        Therefore, these warrants were classified as equity and accounted as common
        stock issuance cost.
  WeightedWarrants
                
                Warrants
                
                Average
                    Exercise
                
                AverageRemainingOutsanding
                
                Exercisable
                
                Price
                
                Contractual
                    LifeOutstanding,
                    June 30, 2006
                
                
                -
                
                
                -
                
                
                -
                
                
                -Granted
                
                
                1,644,702
                
                
                1,644,702
                
                $
                1.57
                
                
                4.75Forfeited
                
                
                -
                
                
                -
                
                
                -
                
                
                -Exercised
                
                
                -
                
                
                -
                
                
                -
                
                
                -Outstanding,
                    June 30, 2007
                
                
                1,644,702
                
                
                1,644,702
                
                $
                1.57
                
                
                4.75
  **Note
        13 - Subsequent Events**
 
 Reverse
        stock split
 
 Effective
        as of July 17, 2007, Asian Financial, Inc. adopted by unanimous written consent
        of the Board, the Company effected a 1-for-2.68189924 reverse stock split
        on
        July 17, 2007.
 
 The
        outstanding and issued shares of the Company at the date of resolution was
        67,047,481 and upon the effectiveness of the reverse stock split, the
        outstanding and issued shares shall be approximately 25,000,050 shares.
   See
        report of independent registered public
        accounting firm.
 F-25