UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

x              Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007

 ̈             Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from    to  .

Commission file number: 000-51787Asia Electrical Power International Group Inc.(Name of small business issuer in its charter)

|Nevada                                                         | 98-0522960                            
|-------------------------------------------------------------- | --------------------------------------
|(State or other jurisdiction of incorporation or               | (IRS Employer Identification No.)     
|organization)                                                  |                                       
|                                                              
|6130 Elton Avenue, Las Vegas, Nevada                           | 89107                                 
|(Address of principal executive offices)                       | (Zip Code)                            
|                                                              
|Issuer's telephone Number                                      | 1-888-597-8899                        
|Securities registered under Section 12(b) of the Exchange Act: |                                       
|                                                              
|Common Stock, $0.001 par value Common                          | OTCBB                                 
|(Title of class)                                               | (Name of exchange on which registered)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   YES  ̈  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  ̈ 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 Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   YES x  NO  ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form and will not be contained, to the best of the 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 x.

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

|Large accelerated filer   ̈ | Accelerated filer  ̈ | Non-accelerated            | Smaller reporting
|-------------------------- | ------------------- | -------------------------- | -----------------
|                           |                     | filer   ̈                   | company x        
|                           |                     | (Do not check if a smaller |                  
|                           |                     | reporting company)         |                  

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



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|· | State issuer's revenue for its most recent fiscal year: $ 11,671,597 for the fiscal year ended December 31, 2007                                                                                                                                                                                                       
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|· | The aggregate market value of held by non-affiliates and affiliates as of April 10, 2008 was $ 47,515,300 and $ 61,080,459, respectively. For purposes of the foregoing calculation only, directors and executive officers and holders of 10% or more of the issuer's common capital stock have been deemed affiliates.
| 
|· | State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: The registrant had 51,959,693 shares of common stock outstanding as of April 10, 2008.                                                                                                     
| 

·Transitional Small Business Disclosure Format (Check one):   Yes  ̈ ;     No x

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|           | TABLE OF CONTENTS                                                                     |   
|---------- | ------------------------------------------------------------------------------------- | --
|PART I     |                                                                                       |   
|Item 1     | Business                                                                              | 5 
|Item 1A.   | Risk Factors                                                                          | 11
|Item 2     | Properties                                                                            | 15
|Item 3     | Legal Proceedings                                                                     | 16
|Item 4     | Submission of Matters to a Vote of Security Holders                                   | 16
|PART II    |                                                                                       |   
|Item 5     | Market for Registrants Common Equity and Related Stockholder Matters                 | 17
|Item 6     | Selected Financial Data                                                               | 20
|Item 7     | Management's Discussion and Analysis of Financial Condition and Results of Operations | 21
|Item 7A    | Quantitative and Qualitative Disclosure About Market Risk                             | 28
|Item 8     | Financial Statements and Supplementary Data                                           | 29
|Item 9     | Change In and disagreements With Accountants on Accounting and Financial Disclosure   | 44
|Item 9A(T) | Controls and Procedures                                                               | 44
|Item 9B    | Other Information                                                                     | 45
|           |                                                                                       |   
|PART III   |                                                                                       |   
|Item 10    | Directors and Executive Officers                                                      | 45
|Item 11    | Executive Compensation                                                                | 48
|Item 12    | Security Ownership of Certain Beneficial Owners and Management                        | 50
|Item 13    | Certain Relationships and Related Transactions                                        | 50
|Item 14    | Principal Accountant Fees and Services                                                | 51
|Item 15    | Exhibits                                                                              | 52
|          
|           | Signatures                                                                            | 53

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|PART I
|------



|Note regarding forward-looking statements
|-----------------------------------------

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among other things:

|· | general economic and business conditions, both nationally and in our markets,                                         
|- | ----------------------------------------------------------------------------------------------------------------------
| 
|· | our expectations and estimates concerning future financial performance, financing plans and the impact of competition,
| 
|· | our ability to implement our growth strategy,                                                                         
| 
|· | anticipated trends in our business,                                                                                   
| 
|· | advances in technologies, and                                                                                         
| 
|· | other risk factors set forth herein.                                                                                  
| 

In addition, in this report, we use words such as "anticipates," "believes," "plans," "expects," "future," "intends," and similar expressions to identify forward-looking statements.

Asia Electrical Power International Group Inc. ("AEPI" or the "Company") undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Form 10K/A. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

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ITEM 1.BUSINESS



|History
|-------

Asia Electrical Power International Group Inc.("AEPI")was incorporated in the State of Nevada on August 30, 2002 as "Berita International Corporation", for the purpose of producing high and mid-voltage electrical switchgears in PRC. On December 24, 2003, we changed our name to "Keiji International Group Inc."and on September 30, 2004 we changed our name to "Asia Electrical Power International Group Inc.".

On January 23, 2003, we entered into an Asset and Share Exchange Agreement (the "Agreement") with Shenzhen Naiji Electrical Equipment Co., Ltd. ("Naiji"), a PRC Corporation whereby we acquired all the issued and outstanding stock of Naiji for consideration of 24,000,000 shares of our common stock. Please refer to Exhibit 10.1 and 10.2.

In PRC, corporate ownership is determined by each shareholder's proportionate cash contribution instead of proportionate share ownership. There is no authorized capital or amount of outstanding stock established.

As a result, Naiji became our wholly-owned subsidiary. The shareholders of Naiji unanimously agreed to enter into the Agreement for the purposes of restructuring itself in anticipation of becoming listed on the OTC Bulletin Board ("OTCBB"). AEPI was formed by Naiji for this purpose. Prior to entering into the Agreement; we had no assets, liabilities, equity and had not issued any of our shares. As a result of entering into the Agreement; the shareholders of Naiji became the shareholders of AEPI in equal proportion wherein the 24,000,000 shares were allocated based on the capital contributions, or ownership of Naiji. The Agreement therefore was a non-arms length transaction.

Naiji has produced high and mid-voltage electrical switchgears since its inception in 1997.

For the years ended December 31, 2007 and 2006, we generated a loss and profit of $ 946,837 and 426,765, respectively.

We are currently listed on the OTCBB under the trading symbol of "AEPW" effective February 12, 2007.



|Principal Products, Services and Their Markets
|----------------------------------------------

We design, manufacture and market electrical power systems designed to monitor and control the flow of electrical energy and to provide protection to motors, transformers and other electrically powered equipment.

We carry a wide range of products which are generally configured together in various combinations to form a whole electric power and management system. The combinations vary depending on the needs of the customer and design specifications.



|Our produce line is as follows:
|-------------------------------

Switchgearsare use in combination with control, measurement, protection and command devices with which they are associated. Switchgears are commonly used in association with the electric power system, or grid, with the combination of electrical disconnects and/or circuit breakers used to isolate electrical equipment. Switchgear is used both to de-energize equipment to allow work to be done and to clear faults downstream.

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|SRM 16-12/24 SF6 GIS Ring Main Unit
|-----------------------------------

This product is used in conjunction with existing power systems to pass electrical current from one area to another; to allow for continuous flow of electricity. This product uses SF6 sulphurhexaflouride, a non-poisonous electronegative gas as insulation to protect the components. This product also has arc extinguishing properties through the use of circuit breakers. An arc is sparking which results when there are higher than normal levels of current and results in increased temperature in the unit. This occurs when the level of electricity used at one time exceeds a maximum level. The circuit breaker detects excessive power demands in a circuit and self-interrupts the arc when high levels of current occur. It is used primarily in connection with the generation, transmission, distribution and conversion of electric power.

This product consists of the AFL 12/24 D Load Break Switch, VDM6/12, VS1 12/24 and the BP1 Vacuum Circuit Breakers. This product is suitable for end-user or network node.



|AGW 12/24 Outdoor Ring Main Unit
|--------------------------------

This product is the outdoor counterpart of the SRM 16-12/24 SF6 GIS Ring Main Unit with automatic temperature control. This product consists of the VS1-12/24, VDM6-12 and BP series vacuum circuit breakers and the AFL 12/24D Load break switch.



|AGN 12/24 SF6 Ring Main Unit
|----------------------------

This product is similar to the SRM 16-12/24 SF6 GIS Ring Main Unit however it consist of the VS1-12/24, VDM6-12 and BP series vacuum circuit breakers and the AFL 12/24D Load break switch.



|KYN 12/24 Metal Clad Switchgear
|-------------------------------

This product is a complete set of distribution devices with 3.6 -2KV, 24KV used mainly in power plants, and mining industries.

Load Break Switchesinterrupts normal load currents in low voltage distribution networks.



|EK24 GIS Load Break Switch
|--------------------------

This product is an indoor high-voltage SF6 load switch and switchgear with a rated voltage of 12KV/24KV. It consists of SF6 gas as an arc-extinguishing property and insulation medium. This product includes three switch locations for on/off switching suitable for uses requiring controls at different locations. This product is adaptable with outdoor type cable cabinets.



|AFL 12/24D Load Break Switch
|----------------------------

This product is an indoor high-voltage SF6 load switch and switchgear with a rated voltage of 12KV. It consists of SF6 gas as an arc-extinguishing property and insulation medium. This product includes three switch locations for on/off switching suitable for uses requiring controls at different locations. This product is adaptable with outdoor type cable cabinets.



|AFW 12/24 Overhead Load Break Switch
|------------------------------------

This product is an outdoor high-voltage SF6 load switch is the outdoor overhead type distribution equipment with the rated voltage of 12KV and the three-phase alternating current of 50Hz. It is mainly used to make and break rated current or regulate overload current on aerial circuit, which is suitable for systems such as electric network transformer substations and mining and industrial enterprises.

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|AFLA 12/24D SF6 Load Break Switch
|---------------------------------

This product is an indoor high-voltage SF6 load switch and switchgear with a rated voltage of 12KV. It consists of SF6 gas as an arc-extinguishing property and insulation medium. This product includes three switch locations for on/off switching suitable for uses requiring controls at different locations. This product is adaptable with outdoor type cable cabinets however are mainly used indoors.

Circuit Breakersare electric device that, like a fuse, interrupts an electric current in a circuit when the current becomes too high.



|VDM6/12 Vacuum
|--------------

This product is an indoor high voltage vacuum circuit breaker with permanent magnetic mechanism with a rated voltage of 12KV and the three-phase alternating current of 50Hz and is used to switch on/off various types of electrical load. It is suitable for various types of electrical networks however used especially in industries requiring the generation of higher voltages and longer operating times.



|VS1 12/24 Vacuum Circuit Breaker
|--------------------------------

This product is the outdoor counterpart of the VDM6/12 Vacuum.



|AZW 12/24 Outdoor Circuit Breaker
|---------------------------------

This product is an indoor high voltage vacuum circuit breaker with permanent magnetic mechanism with a rated voltage of 12KV-24KV and the three-phase alternating current of 50Hz and is used to switch on/off various types of electrical load. It is suitable for various types of electrical networks however used especially in industries requiring the generation of higher voltages and longer operating times.



|BP1/BP2 Vacuum Circuit Breaker
|------------------------------

This product is not manufactured by the Company and is imported by suppliers in the Ukraine. It has a vacuum circuit breaker with permanent magnetic mechanism with a rated voltage of 10KV/12KV/24KV.



|Branch CabinetsADF 630 Indoor Cable Cabinet
|-------------------------------------------

This product is used for the cable connection and branching connection between various points. The cabinet crust is made of 2 millimeters of stainless steel plate. Electrically charged parts are structured with complete insulation and air tight seal. This product is waterproof and widely used in conjunction with our product line mentioned above.



|ADF 630/2 Outdoor Cable Cabinet
|-------------------------------

This product is the outdoor counter part of the ADF 630 Indoor Cabinet.



|Advertising and marketing strategy
|----------------------------------

Our main marketing strategies to target our markets are based on:

|1. | The efforts of our sales staff in our marketing department and branch offices located throughout the region to obtain new customers. Members of our top management oversee the efforts of our sales staff and make adjustments to our marketing strategy as appropriate in response to market conditions. Top management approves all marketing strategies carried out by our sales staff. Top management, on a monthly basis, reviews
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  



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|   | regional market reports of each branch office and makes adjustments to marketing strategies as market conditions vary in each region if necessary. In addition to marketing to tradition commercial/residential customers, we also keep abreast of news and development in rural areas where contracts will be awarded to supply equipment for all aspects of electrical network implementation by the PRC.        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. | Effective client relations management directed through top management to maintain current customer base and to encourage referrals through these customers. In maintaining customer relations, our sales staff in our branch offices offer technical support, tend to customer service matters and arrange for on site visits from our technical staff to follow up on questions or concerns the customer may have.
|  
|3. | Continuous enhancement product quality and new product development.                                                                                                                                                                                                                                                                                                                                                
|  
|4. | Marketing campaigns launched throughout the PRC through promotional materials, advertising in trade magazines and billboards and at trade exhibitions.                                                                                                                                                                                                                                                             
|  

Management believes that such marketing strategies have been effective in our achieving desired levels of revenues and therefore implementation of these strategies has been consistent.

We also participate in industry exhibitions and trade fairs to be held in Harbin, Shenyang, Beijing, Guangzhou, Jinan, Nanning and Shanghai.



|Our target markets are:
|-----------------------

|· | Residential and commercial developers or contractors which may require expansion of existing power systems to new areas.                                                                                                                                                          
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  | ·                                                                                                                                                                                                                                                                                 
| 
|  | service any new development projects.                                                                                                                                                                                                                                             
| 
|  | ·                                                                                                                                                                                                                                                                                 
| 
|  | existing customers, or community resources (newspapers, trade magazines, etc.).                                                                                                                                                                                                   
| 
|· | Wholesale manufactures who may make bulk purchases.                                                                                                                                                                                                                               
| 
|  | ·                                                                                                                                                                                                                                                                                 
| 
|  | customers. Manufacturers may keep promotional materials of ours in efforts to promote our products to their customer base.                                                                                                                                                        
| 
|· | Electrical equipment installation companies who may refer us to potential customers.                                                                                                                                                                                              
| 
|  | ·                                                                                                                                                                                                                                                                                 
| 
|  | authorities also have their own customer base from which we may receive referrals                                                                                                                                                                                                 
| 
|  | ·                                                                                                                                                                                                                                                                                 
| 
|  | licenses electricians and by disbursing our installation hires throughout the region; we introduce our products to these electricians who may refer our products to their customers.                                                                                              
| 
|· | Electrical Bureaus of urban and rural cities who may award contracts to us to service various existing or new transportation developments such as airports, subway stations, etc. They may also require certain areas to be networked in order to distribute power to these areas.
| 
|  | -    We keep abreast on new rural and urban developments and bid on contracts to service these areas which require development or expansion.                                                                                                                                      
| 

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The majority of our marketing efforts are tended to generate referrals from existing customers. We place an emphasis on providing what we believe to be a higher lever of customer service, specifically relating to our on site visits, and technical support.



|Sales Network:
|--------------

We have developed an integrated sales network in PRC outside of Guangdong unless otherwise stated:

|Branch Office Location       | Kilometers from Principal Office in Shenzhen
|---------------------------- | --------------------------------------------
|                            
|Guangzhou (Inside Guangdong) | 137                                         
|Nanning                      | 864                                         
|Changsha                     | 1,306                                       
|Huizhou (Inside Guangdong)   | 92                                          
|Kunming                      | 1,867                                       
|Changchun                    | 3,554                                       
|Shanxi                       | 655                                         
|Jinan                        | 2,188                                       
|Beijing                      | 2,639                                       
|Yinchuan and                 | 2,874                                       
|Xi-an                        | 1,980                                       
|Hefei (Anhui)                | *                                           
|Lanzhou (Ganshu)             | *                                           
|Zhengzhou (Henan)            | *                                           

*Our branch offices in Chongqing, Shijiazhuang, Wuhan, Tangshan are located in Hebei province which is approximately 2000 KM from Shenzhen.

Branch offices are solely responsible for all sales and marketing efforts. All sales orders are directed to the operations office in Shenzhen whereby the products are manufactured and assembled.



|Distribution
|------------

Within the Guangdong province, we distribute our products through our own fleet of vans. Approximately 30% of deliveries and sales are within the Guandong province. With sales orders outside of the Guangdong province, we contract out to freight forwarders to deliver our products. The remaining 70% of deliveries and sales are outside of the Guangdong province.

We have a contract with freight forwarders for periods of 1 year. The freight forwarding industry is highly competitive and widely disbursed throughout PRC. We can easily engage other forwarding companies if there is a need.



|Competition
|-----------

We expect to encounter significant competition from other power transmission/distribution equipment companies that have been in the industry for a longer period of time and have a more extensive line of products than us. These industries are populated by many national or international companies, with significantly greater resources than ours.

The major companies in the power transmission/ distribution equipment market are ABB, Siemens, and Schneider Electric. In addition, other smaller manufacturers exist in this market throughout the region.

There are also competitors that carry copyright infringed products, or pirated products which are of lesser quality, resulting in a lower selling price. Pricing is an important factor in methods of competition; however, we believe that customer service from inception of the customer relationship throughout the life of the product purchased is an equal factor in our methods of competition.



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Our competitors may offer a lower price given they may have stronger purchasing power due to economies of scale of their raw materials.

Our selling price includes not only the product, but also encompasses the customer service we provide throughout the life of our product, and consequently our relationship with our customer(s). Our products expected life averages over 20 years and throughout this time we maintain our relationship with our customers and build new relationships through referrals.

Our methods of competition is focused on providing on-site visits to address any questions or concerns the customer may have or just to follow up on whether the customer is satisfied with our product. Most of our competitors, to the best of our knowledge, do not follow up with their customers in this fashion.



|Trends in the market
|--------------------

We expect a high volume of new domestic business from electricity infrastructure investments as a result of the PRC's 11thfive year plan which will:

"Build new socialist rural areas, optimize and upgrade industrial structures, promote concordant development of regions, build a conservation-minded and environment-friendly society, further system reform and enhance opening-up, efficiently practice strategies to invigorate China through science and education and through human resource development, and give impetus to constructing a socialist harmonious society." - Source,www.China.org

With new developments in rural areas, the PRC will be accepting bids to service such areas to establish electrical networks. We anticipate such new developments will increase our sales by 40% per year for fiscal 2007 and 2008 year ends and 30% by fiscal 2009 year end. A majority of our sales are generated through existing customer base by referrals however with these new developments, we expect a substantial amount of our sales to be generated by fulfilling PRC contract bids to service rural areas in 2007 though 2009.



|Intellectual Property
|---------------------



|Patents
|-------

We carry one patent for our SRM 16-12/24 SF6 GIS Ring Main Unit. We obtained this patent from the National Intellectual Property Bureau in April 2000. The patent life is 10 years and expires April 2010.

The significance of carrying a patent on this product is that at the time, we expected to generate the majority of our revenues from this model and wanted protection from any loss of revenue from the pirating of this product by various sources and from sales in illegal markets. However, this product has continuously been pirated despite the patent.

We do not carry any patents for our other products because the cost of obtaining a patent outweighs the benefits as copyright infringement laws in PRC are relatively new and enforcement to our knowledge is rare.

Since PRC joined the World Trade Organization, the Trademark Law was amended in 2001 and Implementing Rules in late 2002, and amended its copyright law.

Enforcement of copyright infringement in PRC has also been addressed, including recent changes that stiffened penalties for patent, trademark or copyright infringement, and the use of preliminary injunctions, and added criminal liability as an available remedy to trademark infringement.

In light of these new amendments, we may apply for patents on the remainder of our products in 2007.



|Trademarks
|----------

We do not have any trademarks on our trade name or logo.

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|Employees
|---------



|Principal Business Office
|-------------------------

We currently have 260 full time employees in our Principal Business Office, filling positions in our Marketing, Quality Control, Research and Development, Productions, Purchasing/Transportation, Administration and Finance Departments. Manufacturing facilities are on this site as well.

The Marketing Department is disbursed throughout the region in both our Principal Business Office and Branch Offices and responsible for launching advertising campaigns, market research and customer service.

The Quality Control Department is located in the Principal Business Office and responsible for outer and inner design specifications, input and output inspection, inventory management, product testing and after installation service support. This department also supervises the production department. Employees in this department consist of engineers and other technical staff.

The Research and Development Department is located in the Principal Business Office and is responsible for innovation of new and improved technologies. The department works closely with the Quality Control Department to ensure new products are constructed within specifications. Employees in this department consist of engineers and other technical staff.

The Production Department is located in the Principal Business Office and is responsible for production, assembly and packaging. The department receives all specifications from the quality control department.

The Purchasing and Transportation Department is located in the Principal Business Office and is responsible for fulfilling inventory orders from the quality control department, inventory management and co-ordination of delivery and installation.

The Administration Department is located in the Principal Business Office and is responsible for human resources, training, and payroll. The department also evaluates all processes to ensure certain levels of efficiency are maintained.

The Finance Department is located in the Principal Business Office and is responsible for compliance with accounting principles and national tax laws, bookkeeping, preparing budgets and analysis of financial reports. Employees in this department consist of senior and junior staff accountants.



|Branch Offices
|--------------

We have a total of 40 employees in our 35 Branch offices located throughout the region. Branch offices were established to integrate an extensive sales network, directly solely for sales and marketing efforts.



|Administrative Branch Office
|----------------------------

We have 2 consultants in our Administrative Branch Offices. Our consultants provide translation and EDGAR filing services. Mr. Guo provides this office space for our consultants rent free.

Management believes that relations with its employees are good.

ITEM 1A.RISK FACTORS

Any of the following risks could materially adversely affect our business, financial condition, or operating results.

Compliance and enforcement of environmental laws and regulations may cause us to incur significant expenditures and resources of which we may not have.

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Extensive national, regional and local environmental laws and regulations in PRC affect our operations. These laws and regulations set various standards regulating certain aspects of health and environmental quality, which provide for user fees, penalties and other liabilities for the violation of these standards. We believe we are currently in compliance with all existing PRC environmental laws and regulations. However, as new environmental laws and legislation are enacted and the old laws are repealed, interpretation, application and enforcement of the laws may become inconsistent. Compliance in the future could require significant expenditures, which may adversely effect our operations. The enactment of any such laws, rules or regulations in the future may have a negative impact on our projected growth, which could in turn decrease our projected revenues or increase our cost of doing business.

We face intense competition which could decrease our market share and result in an inability to maintain our working capital needs indefinitely.

We expect to encounter significant competition from other power transmission/distribution equipment companies, which have been in the industry for a longer period of time and have a more extensive line of products. These industries are populated by many national or international companies, with significantly greater resources than ours.

The major companies in the power transmission/ distribution equipment market are ABB, Siemens, and Schneider Electric. In addition, other smaller manufacturers exist in this market throughout the world.



|These competitors could have:
|-----------------------------

|· | substantially greater financial and technical resources, which may allow them to expand their operations more quickly, offer a broader range of services and offer services at more competitive prices;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|· | more extensive and well developed marketing and sales networks, which may allow them to grow their subscriber bases more quickly and efficiently;                                                      
| 
|· | greater brand recognition, which may influence a subscriber's purchase decision;                                                                                                                       
| 
|· | larger subscriber bases, which may provide economies of scale and operating efficiencies not available to us;                                                                                          
| 
|· | longer operating histories; and                                                                                                                                                                        
| 
|· | more established relationships with government officials, equipment specialists and/or other strategic partners.                                                                                       
| 

We are dependent on a few key personnel, being our officers and directors and the loss of any key personnel could have a material adverse effect on our ability to carry on business.

We are substantially dependent upon the efforts and skills of our executive officers, Mr. Guo and Mrs. Chen. We do not have employment contracts with either Mr. Guo or Ms. Chan and thus they have no obligation to fulfill their capacities as executive officers for any specified period of time. The loss of the services of either of the executive officers could have a material adverse effect on our business.

Our shareholders may not be able to enforce U.S. civil liabilities claims.

Our assets are located outside the United States and are held through a wholly-owned subsidiary incorporated under the laws of Nevada. Our current operations are conducted in PRC and Canada. In addition, our directors and officers are residents of countries other than the United States. All or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. In addition, there is uncertainty as to whether the courts of PRC and Canada would recognize or enforce judgments of United States courts obtained against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in these countries against us or such persons predicated upon the securities laws of the United States or any state thereof.

We do not carry patents for the majority of our products which may result in a continuing decrease in our market share due to existing pirated products on the market.



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Through our experience, obtaining a patent has not prevented our products from being pirated, and enforcement in the industry is considered rare. As a result, we see insufficient value from obtaining patents on our line of products. Currently our products are not used in the US and, thus, obtaining a US patent is unnecessary. In the event that our products are used in the US, we will consider applying for a patent at that time.

When PRC joined the World Trade Organization, it also amended its patent law to expand its scope to deter the infringement of all types of intellectual property. An enforcement organization was created (State Intellectual Property Office) for the purpose of coordinating all enforcement efforts by merging the patent, trademark and copyright offices under one authority. To date, this has not occurred. Until an enforcement structure is in place under one distinct authority, we do not foresee that enforcement of any type of copyright infringement will be achieved.

There will continue to be pirated products in the market until penalties are enforced by the authorities. To our knowledge, enforcement is considered rare and until this perception is changed, industries will continue to lose market share such as we have experienced. As a result, we have focused on providing and maintaining good client relations for our existing and new customers, however, our efforts may not materialize into increased market share.

We carry no insurance policies and are at risk of incurring personal injury claims from our employees and subcontractors, and incurring loss of business due to theft, accidents or natural disasters.

We currently carry no policies of insurance to cover any type of risk to our business except vehicle insurance. It is common practice in PRC not to carry such insurance.

We are required to renew our business license every 10 years and if we do not pass certain government inspections to ensure environmental laws are not breached, as required in the process of obtaining renewal, our business may be discontinued until we have implemented necessary recommendations as a result of inspections.

We obtained our business license on June 20, 2007 for a period of 10 years ended June 20, 2017. After this period expires, we are subject to another inspection in order to extend our business license for another 10 years. The extension of our business license is not guaranteed and we may not have the resources necessary to implement the changes in our business processes to comply with environmental laws in place. This will delay granting of our license and, as a result, our operations would be ceased, causing us to lose not only profits but also irreparable damage to our reputation.

We require the approval for all new products from independent research institutes appointed by government authorities and this process may be delayed due to the need for product refinement requiring additional resources of which we may not have and also delaying the launch of new products which would otherwise generate profits.

All of our products are tested by the Xi-An High Voltage Apparatus Research Institute located in Shenzhen and must pass all the required tests to obtain a clearance certification granting us approval to launch the product into market. The process of obtaining a clearance certificate is approximately 8 weeks and may be longer depending on the type of product. Delays in obtaining a clearance certificate will impact our cash flows as recouping product development costs and profits generated from the new product will be delayed.

The process of product testing and obtaining a clearance certificate costs up to $60,000 per product; however, we may incur additional costs and resources to refine our product as required. We may not have these resources and we may not be able to obtain the clearance certificate until such resources are available.

If we do not continue to receive shareholder loans we may be unable to meeting our minimum funding requirements.

We have no formalized agreements with our shareholders guaranteeing that certain amounts of funds will be available to us. We may exhaust this source of funding anytime.

If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of its stockholders will be reduced, stockholders may experience additional dilution and such

- 13 -

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securities may have rights, preferences and privileges senior to those of our common stock. There can be no assurance that additional financing will be available on terms favorable or at all. If adequate funds are not available on acceptable terms, we may not be able to fund expansion, take advantage of unanticipated acquisition opportunities, develop or enhance services or products or respond to competitive pressures. In addition, we may be required to lay-off employees. Such inability could have a material adverse effect on its business, results of operations and financial condition.

The average selling price of our product may decrease which will reduce our gross margin.

The industry which we operate in has traditionally experienced a rapid erosion of average selling prices due to a number of factors, including competitive pricing pressures, promotional pricing, technological progress and a slowdown in the economy that has resulted in excess inventory and lower prices as companies attempt to liquidate this inventory. We anticipate that the average selling prices of its products will decrease in the future

in response to competitive pricing pressures, excess inventories, increased sales discounts and new product introductions by it or its competitors. We may experience substantial decreases in future operating results due to the erosion of its average selling prices.

Our performance will depend on the introduction and acceptance of newly developed products.

Our future performance will depend on the successful development, introduction and market acceptance of new and enhanced products that address customer requirements in a timely and cost-effective manner. The introduction of new and enhanced products may cause our customers to defer or cancel orders for existing products. Such actions would substantially hurt sales and negatively affect future profitability.

We must continuously increase the productivity of our distribution and marketing channels to increase revenues.

Our distribution strategy focuses primarily on developing and increasing the productivity of indirect distribution channels through resellers and distributors. If we fail to develop and cultivate relationships with significant resellers, or if these resellers are not successful in their sales efforts, sales of our products may decrease and its operating results could suffer. Many of our resellers also sell products from other vendors that compete with our products. We cannot assure that we will be able to enter into additional reseller and/or distribution agreements or that it will be able to successfully manage its product sales channels. Our failure to do any of these could limit our ability to grow or sustain revenue.

RISKS RELATING TO THE OUR COMMON STOCK

Broker-dealers may be discouraged from effecting transactions in our shares because they are considered penny stocks and are subject to the penny stock rules.

Rules 15g-1 through 15g-9 promulgated under theSecurities Exchange Act of 1934(the "Securities Exchange Act") impose sales practice and disclosure requirements on NASD broker-dealers who make a market in "penny stocks". A penny stock generally includes any non-NASDAQ equity security that has a market price of less than $5.00 per share. Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or "accredited investor" (generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt.

In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt. A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities. Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks.

Our stock is substantially controlled by directors, officers and principal shareholders for the foreseeable future and as a result, will be able to control our overall direction.

- 14 -

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Our insiders, being the directors, officers and 5% shareholders, own an aggregate of approximately 65% of our outstanding shares. Our President holds 100% of 5,000,000 units of our preferred shares with entitles each preferred share to 100 votes. As a result, the insiders will be able to control the outcome of all matters requiring stockholder approval and will be able to elect all of our directors. Such control, which may have the effect of delaying, deferring or preventing a change of control, is likely to continue for the foreseeable future and significantly diminishes control and influence which future stockholders may have in the Company. See"Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters".

ITEM 2PROPERTIES



|Principal Business Office
|-------------------------

Our Principal Business Office was previously located at 28thBuilding, Lishan Industrial Zone, Xinghai Road, Nanshan District, Shenzhen, PRC 518052.

Our office space is 4 floors, with each floor being 2,750 square feet, total 11,000 square feet and is kept in good condition. We lease the operations office from an unrelated and unassociated party for approximately $ 122,725 gross per year which includes an approximation of additional common area costs or recoveries incurred. The lease term is from July 31, 2004 to April 30, 2009. Our manufacturing facilities take up 3 floors and our Marketing, Quality Control, Research and Development, Productions, Purchasing/Transportation, Administration and Finance Departments occupies the remaining floor.

As of September 2007, our principal business offices were moved to our newly constructed manufacturing facilities located at the Asia Electrical Power Industrial Zone, Songgang Road, Bao'an District, Shenzhen. Our office located in the Lishan Industrial Zone is currently not in use. We are currently examining subletting possibilities however have not finalized any sublet agreements.



|Purchase of Land
|----------------

On September 7, 2004, we entered into an agreement with the PRC Government to purchase approximately 3.77 hectares of land ("Leased Land") for the purpose of constructing new manufacturing facilities and office space. The total purchase price is approximately $ 1,078,035 with deposits to be made in intervals. Mr. Guo provided us with shareholder loans for payment of these deposits. The PRC Government is currently making improvements to the property and implementing sewage systems. Improvements will be made to surrounding roads, drainage, electrical and communication systems. Currently the PRC Government has made all such improvements.

As the PRC Government required improvements to the Leased Land and implementation of sewage systems where such work extended beyond the November 30, 2004 deadline, we signed an addendum to the agreement of September 7, 2004 to reflect changes in circumstances affecting the cost and use of the Leased Land. After taking possession of the land, the Company discovered the existence of a water system on the land which restricts use of the land. As a result, the Company withheld $106,815 of the amount due to the former holders of the land use right. The final amount due for the land is being arbitrated; the $106,815 has not been recorded on the Company books.

On January 20, 2006, we entered into an agreement with Shenzhen Land Resource and Real Estate Management Bureau ("Land Resource Bureau"), a division of the PRC Government, for compensation of loss of business to the previous users of the Leased Land. The Leased Land was previously used as farmland for cultivating various crops. The compensation is based on a calculation of area of land use of which the Land Resource Bureau determined to be $ 1,359,885 USD. Full payment was made in June 2007. We received shareholder loans from Mr. Guo for payment of this compensation. The total cost of the Leased Land is $ 2,437,920.

Upon entering into this agreement with the Land Resource Bureau, 2 terms in lease agreement we entered into on September 7, 2004 were changed.

The 1stterm relates the period of the lease which was originally to commence September 7, 2004 was extended to January 20, 2006 for 50 years expiring 2056. The 2ndterm relates to the area of usage of the Lease Land. The original area was 3.77 hectares and has been revised to 3.06 hectares to reflect new city planning agendas for



|- 15 -
|------

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development of expanded transportation routes surrounding the Leased Land. We are currently in negotiations with the PRC Government to request compensation for the decrease in area.

A lease from the PRC Government grants use of land by obtaining a State Owned Land Usage Certificate and a lease obtained through previous lease holders grants use of land by obtaining a Collective Land Usage Certificate. In our case, we were granted a Collective Land Usage Certificate. Land in PRC cannot be owned and the only form of ownership is by way of lease for a period of up to 90 years. A regulation which we must comply with in order to keep the lease is the use of the land as specified in the business license. Any changes in use must be approved by the PRC Government.



|New Manufacturing Facilities
|----------------------------

As of December 31, 2007, we incurred construction costs in the amount of $ 597,557 for constructing dormitories for employees. New manufacturing and office facilities were completed August 2007 and operations commenced late September. Funding for this project was provided by shareholder loans and bank loans. Our new facilities occupy 300,000 square feet with 158,000 square feet of new manufacturing facilities. New facilities are approximately 5 times the size of our old facilities and as such will have the capabilities of meeting production requirements based on our projected levels of sales in the next 3 years. The total cost of the new facilities is approximately $ 3,800,000.



|Branch Office
|-------------

We also have branch offices throughout PRC developed for integrating our sales network with 35 sales and marketing branch offices in Guangzhou, Nanning, Changsha, Huizhou, Kunming, Changchun, Shanxi, Jinan, Beijing, Yinchuan,Xi-an, Chongqing, Shijiazhuang, Wuhan, Hefei, Lanzhou, Tangshan, and Zhengzhou.

Each office employs 2-5 employees and is rented on a month to month basis. The cost per office per month is approximately $150.

We do not have policies regarding the acquisition or sale of real estate assets for the purposes of capital gain or for income. We do not hold any investments or interests in real estate, investments in real estate mortgages or securities of or interests in persons primarily engaged in real estate activities nor do we expect to do so in the future.



|Administrative Branch Office
|----------------------------

Our administrative branch office for North American investor relations and U.S. regulatory reporting is located at 6130 Elton Avenue, Las Vegas, Nevada, 89107.

Our filing agent is located in Vancouver, BC of which provides us with answering and English/Chinese translation services, EDGAR filing services, fax services, reception area and shared office, and boardroom meeting facilities. This office is provided rent free by our President, Yulong Guo and is kept in good condition. There are currently no proposed programs for the renovation, improvement or development of the facilities that we currently use. We believe that this arrangement is suitable given the nature of our current operations, and also believe that we will not need to lease additional administrative offices for at least the next 12 months.

|ITEM 3. | LEGAL PROCEEDINGS                                  
|------- | ---------------------------------------------------
|None.   |                                                    
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At our Annual Meeting of Stockholders held on September 1, 2007, the following individuals were elected unanimously to the Board of Directors to serve until the next Annual Meeting of Stockholders:

|Name       | Age | Position                  | *Period Serving*    | Term  
|---------- | --- | ------------------------- | ------------------- | ------
|Yulong Guo | 45  | CEO, President, Director, | September 1, 2007 - | 1 year
|          
|           |     |                           | - 16 -              |       

---

|                 |    | Treasurer          | August 31, 2008     |       
|---------------- | -- | ------------------ | ------------------- | ------
|                
|Xiaoling Chen    | 41 | Secretary, Chief   | September 1, 2007 - |       
|                 |    | Accounting Officer | August 31, 2008     | 1 year
|                
|Dudley Delapenha | 74 | Director           | December 31, 2007 - |       
|                 |    |                    | August 31, 2008     | 1 year
|                
|Allan Moore      | 72 | Director           | May 31, 2007-       |       
|                 |    |                    | August 31, 2008     | 1 year
|                
|Locksley Samuels | 55 | Director           | May 31, 2007-       | 1 year
|                 |    |                    | August 31, 2008     |       

We approved the appointment of Robert G. Jeffrey as our independent accountants for the fiscal year ended December 31, 2007.



|PART II
|-------

ITEM 5.                  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERSMARKET FOR COMMON EQUITYStockholders of Our Common Shares

As of April 10, 2008, we have 51,959,693 commons shares outstanding and 5,000,000 preferred shares outstanding.

Rule 144 Shares

Under Rule 144 as currently in effect, a person who has beneficially owned shares of a company's common stock for at least one year is entitled to sell within any three month period a number of shares that does not exceed the greater of:

|1. | 1% of the number of shares of the company's common stock then outstanding which, in our case, will equal 240,000 shares as of the date of this prospectus; or        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                      
|2. | the average weekly trading volume of the company's common stock during the four calendar weeks preceding the filing of a notice on form 144 with respect to the sale.
|  

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about the company.

Under Rule 144(k), a person who is not one of the company's affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Stock Option Grants

On April 24, 2007, the Board of Directors of the Company approved the granting of options to purchase a total of 5,000,000 shares of common stock as described in the 2007 Stock Option Plan (the 2007 Plan) to directors, officers, employees and consultants of the Company. The following is intended as a brief description of the 2007 Plan and is qualified in its entirety by the full text of the 2007 Plan.



|- 17 -
|------

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|Administration:
|---------------

The 2007 Plan will be administered by the Board of Directors. The Board of Directors may appoint a committee of the Board of Directors (the Committee) comprised of two or more of directors, each of whom will be a Non-Employee Director within the meaning of Rule 16b-3 under theSecurities Exchange Act of 1934, as amended, and an Outside Director within the meaning of Section 162(m) of the Internal Revenue Code, to administer the 2007 Plan. Subject to the terms of the 2007 Plan, the Board of Directors or the Committee may determine and designate those employees, directors and consultants to whom options should be granted and the nature and terms of the options to be granted.



|Eligibility:
|------------

All of our employees, including our executive officers and directors who are also employees, are eligible to participate in the 2007 Plan. Directors who are not employees, as well as our consultants and advisers, are eligible to receive options under the 2007 Plan, except that such persons may only receive non-qualified options. Additionally, non U.S. residents who receive option grants may also only receive non-qualified options.



|Exercise of Stock Options:
|--------------------------

The exercise price per share for each option granted under the 2007 Plan shall be determined by the Board of Directors or the Committee. The price is payable in cash.

Subject to earlier termination upon termination of employment and the incentive stock option limitations as provided in the 2007 Plan, each option shall expire on the date specified by the Board of Directors or the Committee, which shall be no later than two years from the date of grant.

The options will either be fully exercisable on the date of grant or shall be exercisable thereafter in such installments as the Board of Directors or Committee may specify. Upon termination of employment or other service of an option holder, an option may only be exercised for a period of three months or, in the case of termination due to disability or death, a period of 12 months.

Transferability:

Options granted under the 2007 Plan may not be transferred except by will or the laws of the descent and distribution and, during his or her lifetime, options may be exercised only by the optionee.



|Certain Adjustments:
|--------------------

In the event of any change in the number or kind of our outstanding common shares by reason of a stock dividend, stock split, recapitalization, combination, subdivision, rights issuance or other similar corporate change, the Committee of the Board shall make such adjustment in the number of common shares that may be issued under the 2007 Plan, and the number of common shares subject to, and the exercise price of, each then-outstanding option, as it, in its sole discretion, deems appropriate.



|Amendments or Discontinuance:
|-----------------------------

The Board may amend or discontinue the 2007 Plan, provided that no amendment may, without an optionees consent, materially and adversely affect any rights under any option previously granted to the optionee under the 2007 Plan. Additionally, the approval of our shareholders is required for any amendment that would increase or decrease the number of common shares that may be issued under the 2007 Plan; or materially modify the requirements as to eligibility for participation in the 2007 Plan.

Securities Authorized For Issuance Under Equity Compensation Plans

The Company did not have an equity compensation plan in place as of December 31, 2007.

- 18 -

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|DIVIDEND POLICY
|---------------

We have not declared or paid any cash dividends on its common stock or other securities and does not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant.



|Recent Sales of Unregistered Securities
|---------------------------------------

On June 1, 2007, we entered into a Share Subscription Agreement (the Agreement) with Century International Group Inc. (herein referred to as Century) to purchase 872,447 shares of our shares for a price of $ 3.00 per share for total proceeds of $ 2,617,343. The shares were allotted and issued on June 1, 2007.

Century is a Belize company 100% owned by Liping Zheng, a minority shareholder holding less than 5% of our outstanding capital. Mr. Zheng remains a minority shareholder through his indirect ownership of the 872,447 shares through Century and in addition to his direct ownership of his shareholdings of the Company.

A finders fee of 10% of the Shares purchased by Century, or 87,246, was issued to Port Mercantile Capital Inc., (herein referred to as PMC). PMC was a minority shareholder holding less than 5% of the outstanding capital of the Registrant prior to the Registrant entering into the Agreement with Century. PMC remains a minority shareholder subsequent to the Agreement.

As a result of the aforesaid share issuances, the issued and outstanding share capital of the Company is now 51,959,693 common shares (51,000,000+872,447+87,246) and 5,000,000 shares of preferred stock.

The offer and sale of the shares were exempt from registration pursuant to section 4(2) of the Securities Act, Rule 701 and Rule 506 of Regulation D promulgated thereunder. We limited the manner of the offering and provided disclosure regarding the offering and our company to the stockholders. We believe that these sales were also exempt under Regulation S under the Securities Act, as such sales were made in offshore transactions to a non-U.S. persons.



|DESCRIPTION OF SECURITIES
|-------------------------

Please also refer to Recent Sales of Unregistered Securities above. As of April 10, 2008, our total authorized capital is 150,000,000 common shares with a par value of $0.001 per share.

24,000,000 common shares are issued to 21 shareholders on January 23, 2003 wherein we entered into an Asset and Share Exchange Agreement (the "Agreement") Naiji whereby we acquired all its issued and outstanding stock for consideration of 24,000,000 shares of our common stock.

Of this total, 7,290,000 shares of common stock are were registered under Regulation S on Form SB2 effective January 27, 2007. The offered selling price was $0.02 per share.

On December 21, 2007, the company approved a stock split wherein the number of authorized common stock with a par value $0.001 was to be increased on a two for one basis. The total authorized capital increased from 75,000,000 to 150,000,000. Accordingly, the number of issued common stock increased from 24,000,000 to 48,000,000. The Company also approved the establishment of a new class of preferred shares with a $ 0.001 par value with an authorized capital of 5,000,000 preferred shares.

On December 22, 2006, 5,000,000 shares of preferred stock, par value $0.001, were allotted and issued to our President, Yulong Guo for repayment of shareholder loans.

A further 2,500,000 shares of common stock were allotted and issued to Yulong Guo and 500,000 shares issued to Xiaoling Chen. These shares were issued for repayment of shareholder loans.

All of our authorized common shares are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets. Holders of shares are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders.



|- 19 -
|------

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All of our authorized preferred shares are of the same class and once issued, are restricted from being publicly traded, have no dividend rights and are not entitled to the participation in assets in the event of dissolution of the Company. Preferred shares are entitled to 100 votes per share.

Dividends may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available. However, our present intention is not to pay any cash dividends to holders of shares but to reinvest earnings, if any. In the event of our liquidation, dissolution or winding up the holders of shares are entitled to share pro-rata in all assets remaining after payment of liabilities.

Our common and preferred shares have no pre-emptive, conversion or other subscription rights. There are no redemption or sinking fund provisions applicable to the shares.

Our articles and by-laws do not contain any provisions that would delay, defer or prevent our change in control.

Item 6.                           SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data with respect to fiscal years 2003 through 2007 have been derived from the Companys audited Consolidated Financial Statements. The information should be read in conjunction with the Consolidated Financial Statements and Notes thereto that appear elsewhere in this Annual Report on Form 10 K and Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations.

|                                 | Fiscal Year
|-------------------------------- | -----------
|                                 |            
|                                
|Consolidated Statements of       |            
|Income Information:              |            
|Revenue                          | $ 4,934,276
|Cost of goods sold               |            
|Gross profit                     |            
|Operating expenses:              |            
|Selling & administrative         |            
|expenses                         |            
|Option issued for services       |            
|Total operating expenses         |            
|Operating income (loss)          |            
|Total other income (expense)     |            
|Income before provision for      |            
|income taxes                     |            
|Provision for income taxes       |            
|Net income                       |            
|Per share information           |            
|diluted(a):                      |            
|Net income per share             |            
|Diluted weighted average         |            
|number of shares                 |            
|Balance Sheet Information (as of |            
|end of fiscal year):             |            
|Cash and cash equivalents        |            
|Working capital                  |            
|Total assets                     |            
|Total debt                       |            
|Total noncurrent liabilities     |            
|(including debt)                 |            
|Stockholders equity             |            

- 20 -

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ITEM 7.                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Notice Regarding Forward Looking Statements

We desire to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. This filing contains a number of forward-looking statements which reflect management's current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words "believe," "expect," "intend," "anticipate," "estimate," "may," variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

Readers should not place undue reliance on these forward-looking statements, which are based on management's current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks to be discussed in our next Annual Report on form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.



|OVERVIEW.
|---------



|Critical Accounting Estimates
|-----------------------------

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The application of GAAP involves the exercise of varying degrees of judgment. The resulting accounting estimates will not always precisely equal the related actual results. Management considers an accounting estimate to be critical if:

|· | assumptions are required to be made; and                                      
|- | ------------------------------------------------------------------------------
| 
|· | changes in estimates could have a material effect on our financial statements.
| 

The following table presents information about our most critical accounting estimates and the effects of hypothetical changes in the assumptions used when making such estimates:

- 21 -

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|Balance    |                             |                                                              |                                   |                            
|---------- | --------------------------- | ------------------------------------------------------------ | --------------------------------- | ---------------------------
|Sheet      | There is a risk of Change   | How did we arrive at these                                   | How Accurate have we been in      | How Likely to change in    
|Account    | because?                    | Estimates?                                                   | the past?                         | the future?                
|          
|Accounts   | We provide an Allowance     | AFDA are made on accounts                                    | These estimates of AFDA have      | This method of             
|Receivable | For Doubtful Accounts       | older than 2 years. It is                                    | been accurate in the past as the  | determining AFDA will      
|           | (AFDA) based on the         | Common in the industry for                                   | majority of accounts older than   | likely not change as we    
|           | credit ratings of customers | Accounts less than 2 years to be 2 years belong to customers | have been able to collect        
|           | and age of the account.     | considered current. Collection                               | who have become bankrupt.         | on the majority of         
|           | Uncollectible accounts are  | mostly occurs within 1.5 years.                              | Collection continues to occur     | accounts within 1.5 years  
|           | also written off,           | Accounts older than 2 years are                              | within 1.5 years. There are       | and write off uncollectible
|           | particularly when           | reasonably likely to be                                      | situations where bankruptcy       | account which normally     
|           | bankruptcy occurs. The      | uncollectible and AFDA are                                   | occurs on more current            | occurs on accounts older   
|           | allowance we provide is     | Provided for the sum of these                                | accounts where the account        | than 2 years. We may       
|           | an estimate based on        | Accounts.                                                    | will be written off. Current      | adjust the method of       
|           | historical information and  |                                                              | accounts of which become          | determining AFDA on        
|           | may not reflect current     |                                                              | bankrupt would not have been      | potential bankrupt clients 
|           | conditions as to whether    |                                                              | included in previous estimates    | however to date; we do     
|           | the account may be          |                                                              | of AFDA.                          | not foresee the need as we 
|           | collectible.                |                                                              |                                   | expect to collect account  
|           |                             |                                                              |                                   | within the normal time     
|           |                             |                                                              |                                   | period of 1.5 years.       
|          
|          
|Inventory  | We review the net           | The cost of our inventory                                    | Our selling prices have           | We do not foresee to       
|           | realizable value of our     | (including manufacturing                                     | remained stable and, as a result; | decrease our selling price 
|           | inventory to ensure that it | Overhead) is compared to net                                 | we have not required writing      | to a level that would cause
|           | is recorded at a lower of   | Realizable value in the market.                              | down of inventory. Market         | net realizable value to be 
|           | cost or market value. At    | Selling prices have remained                                 | conditions may force the          | less than cost of our      
|           | this time, any obsolete     | stable despite market                                        | selling price down amongst        | inventory. We have         
|           | inventory is written off.   | conditions.                                                  | competitors; however; we will     | continued to generate      
|           | The market value could      |                                                              | continue to maintain our selling  | sales based on these       
|           | change due to the success   |                                                              | prices as we compensate the       | selling prices despite     
|           | of technical innovation on  |                                                              | difference in price by provided   | fluctuation in market      
|           | our part or by competitors  |                                                              | technical support after           | conditions.                
|           | Within the switchgear       |                                                              | installation and what we          |                            
|           | Market.                     |                                                              | believe to be a higher lever of   |                            
|           |                             |                                                              | customer service.                 |                            

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|Fixed Assets | We calculate our            | The estimated lives of fixed       | Our fixed assets are currently     | We do not foresee any     
|------------ | --------------------------- | ---------------------------------- | ---------------------------------- | --------------------------
|             | depreciation using the      | assets are based on guidelines     | being utilized last for the length | changes.                  
|             | straight line method based  | Provided by Chinese tax            | of the lives we are using for      |                           
|             | on useful lives of the      | authorities. These guidelines      | depreciation.                      |                           
|             | assets. The useful lives of | reflect the actual useful lives of |                                    |                           
|             | the asset could change due  | the assets.                        |                                    |                           
|             | to technical innovation     |                                    |                                    |                           
|             | and or other factors and    |                                    |                                    |                           
|             | we may write off or write   |                                    |                                    |                           
|             | down obsolete assets.       |                                    |                                    |                           
|            
|Accrued      | We are subject to income    | Income tax provision is            | Our estimates currently have       | Taxes payable calculations
|Liabilities  | taxes in China. The         | calculated based on the            | been in line with the actual       | are based on a fixed rate 
|(Income Tax) | determination of the tax    | Statutory tax rate and level of    | assessment in our tax liability.   | which we do not foresee   
|             | liability is based on       | operating income. Operating        | Income tax provisions are          | to be changed. However,   
|             | calculations which are      | income is based on various         | calculated monthly.                | our estimates may change  
|             | Further based on estimates  | estimates we make regarding        |                                    | from time to time and this
|             | such as, for example        | the above mentioned items          |                                    | may affect the income tax 
|             | allowances for bad debt.    | which may differ from actual       |                                    | provision. We may under   
|             | These estimates may         | results. This calculation is       |                                    | or over remit our         
|             | change from time to time    | Provided monthly and               |                                    | installments based on how 
|             | and the final tax outcome   | installments are made toward       |                                    | our estimates differ from 
|             | may increase or decrease    | the tax liability.                 |                                    | actual results.           
|             | our income tax expense      |                                    |                                    |                           
|             | provision made.             |                                    |                                    |                           

Management's Discussion and Analysis of Financial Condition and Results of Operation

The following is an analysis of our revenues and gross profit, details and analysis of components of expenses, and variance from December 31, 2007 compared to December 31, 2006.

|                   | 2007        | % Sales | 2006        | % Sales
|------------------ | ----------- | ------- | ----------- | -------
|Sales              | $11,671,597 | 100%    | $ 8,074,012 | 100%   
|Cost of Goods Sold | 9,724,800   | 83%     | 6,777,408   | 84%    
|Gross Profit       | $1,946,797  | 17%     | $ 1,296,604 | 16%    

Our revenues increased as a result of the change in market conditions as a result of the PRC Government encouraging business development in the province and thus the development of electrical networks to be established. The increase was also as a result of marketing strategies we implement throughout our branch offices located in various regions. The majority of our sales are generated from referrals from existing customers. So as long as we sustain our marketing strategies at currently levels which consist also of providing what we believe to be a higher level of customer service, we foresee we will continue to receive referrals through our customers, and resulting increase in revenues. The effectiveness of our strategies also allows us to maintain our selling prices at levels which sustain our working capital needs.

We intend on maintaining our marketing strategies and will monitor, review, and adjust such marketing strategies as market conditions change.

The following is a summary of the expenses we incurred during the period. Most expenses increased in line with the increase in sales except as otherwise noted:



|- 23 -
|------

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|                               |             | % of Total | % of Total |              | % of Total | % of Total
|------------------------------ | ----------- | ---------- | ---------- | ------------ | ---------- | ----------
|                               | 2007        | Sales      | Expenses   | 2006         | Sales      | Expenses  
|                              
|Salaries, benefits and dues    | 435,834     | 4%         | 40%        | $ 253,899    | 3%         | 33%       
|Travel/Entertainment/Promotion | 188,566     | 2%         | 18%        | 150,092      | 2%         | 20%       
|Occupancy                      | 27,723      | *          | 3%         | 57,750       | *          | 7%        
|Depreciation and amortization  | 197,331     | 2%         | 19%        | 64,653       | 1%         | 8%        
|Technical Support              | 33,566      | *          | 3%         | 23,980       | *          | 3%        
|Other                          | 180,529     | 1%         | 17%        | 217,581      | 3%         | 29%       
|Total Expenses                 | $ 1,063,509 | 9%         | 100%       | **$767,955** | 9%         | 100%      
|                              
|* Less than 1%                 |             |            |            |              |            |           

Salaries and benefitsincreased as a result of our expansion into our new facilities wherein we retaining additional staff in our various departments and also as a result of rewarding bonuses to staff. Salary benefits consist of social insurance and union fees.

Traveling and entertainment/promotioncosts increased as a result of the increase in the number of sales staff hired and their respective travel to promote our product line to prospective customers. Sales staff traveled mostly to regions outside of the Guangdong province. Promotion costs consist of functions held for current and prospective customers for the purpose of maintaining good client relations with current customers and provide an opportunity to generate interest by prospective customers. The increase was also due to the increase in gas prices. We hope to generate referrals through our existing customer base. We expect such costs to remain at this level in the next coming fiscal year.

We also incurred expenses to hold staff functions during the year in conjunction with training purposes. These expenses are examined periodically and are reduced when deemed necessary by management.

Occupancy expensesdecreased as a result of moving into our new facilities on September 2007. Previous facilities are leased from July 31, 2004 until April 30, 2007.

Technical support and warrantyincreased as a result of our efforts expended on quality control measures. We encourage our clients to contact us with any questions, concerns, comments they have about their product and the level of our customer service. We have taken the input provided by our clients and made improvements to our product line and services which has contributed to the decrease in number of warranty claims.

Technical support costs are incurred installation wherein we provide information that we believe to be helpful in understanding their new system and assess and remedy and problems themselves, should they arise.

Over the next 12 months, we expect our expenses to remain relatively the same with the exception of transportation, travel and entertainment/promotion, and marketing. Given highly competitive market conditions, we will provide more on-site visits to our customers and provide all necessary support through either our sales staff or technicians to provide customer satisfaction. Marketing expenses may increase depending on our levels of revenues. We may have to alter our strategies in response to the changing market conditions as dictated by the industry.

Interest Expense, net (2007 - $ 45,397 vs. 2006 - $ 36,630)

Interest expense, net increased as a result of a credit facility obtained from the Shenzhen Business Bank which we could borrow up to $ 2,300,000 at the basic rate as determined by the China Central Bank. The facility expired in 2007 and was not renewed.

Other income (2007-$ 43,531 vs. 2006 - $ 42,613) and Other expenses (2007-$10,720 vs. 2006 - $ 12,784)

Other income consists of amounts received from suppliers for compensation of faulty products sold to us. The compensation consists of amounts reimbursed for defective materials and loss of business. The matter was settled privately.



|- 24 -
|------

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Other expenses mainly consist of bad debts incurred on various accounts older than 3 years.



|Performance indicators
|----------------------

We measure our performance per the following indicators as set forth below. Our performance is affected by trends and uncertainties which we have experienced thus far or that we foresee may occur.

|1. | Achieve sales levels consistently of $ 12,500,000 each fiscal year. We expect our sales to increase by approximately 30% as a result of the PRC's 11th5 year plan implemented effective 2007. Please see above "Trends in the Market".                                                                                                                                                                                                                                                                                      
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | We project that we will reach our goal by increasing the number of our branches offices by a further 10 and employing 2-5 sales staff in each office per year.                                                                                                                                                                                                                                                                                                                                                              
|  
|2. | Cash flows generated from collection of accounts receivables and customer advances (unearned revenues) of $450,000 per month.                                                                                                                                                                                                                                                                                                                                                                                               
|  
|3. | Age of accounts receivable average 3 months. It is common in the industry to consider accounts receivables within one year old to be current. This is a common perception not only in the industry in which we operate but also among other industries. Therefore, decreasing our collection period from its current period of approximately 1.5 years to three months will be a challenge. However, we may use other tactics such as offering discounts to encourage prepayments on contracts in order to meet these goals.
|  
|4. | Increase number of our customers to 500. We currently have approximately 400 customers.                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|5. | Increase our referral ratio of customers to current customers to two. (For every two customers, we receive one referral.)                                                                                                                                                                                                                                                                                                                                                                                                   
|  

We estimate that approximately 90% of the customers we service retain us for future contracts. Our goal is to obtain referrals from our customers, specifically manufacturers and electrical installation companies that are licensed by the government. These customers have their own client bases and, should our products and our customer services be satisfactory, we anticipate referrals from these sources.



|Current trends in the industry
|------------------------------

Since 2003 we experienced a decrease in our sales due to the increased supply of lower grade pirated products being produced. We expect this trend to continue and, in order for us to regain our market share and increase and surpass revenues levels previously achieved, we will have to regain our competitive edge by directing resources into product innovation and refinement, research and development, marketing and advertising. We will also focus on maintaining good customer relations by providing what we believe to be a higher level of customer service. We wish to attract new customers by providing this level of service consistently throughout the life of the contract.

We have been able to regain our market share and expect to increase our customer base and level of sales with our existing methods of marketing, sales staff and customer service we provide. We view customer service as the most important factor in our marketing mix.

As mentioned above "Trends in the Market", with new developments in rural areas, the PRC will be accepting bids to service such areas to establish electrical networks. We anticipate such new developments will increase our sales by 40% per year for fiscal 2007 and 2008 year ends and 30% by fiscal 2009 year end. A majority of our sales are generated through existing customer base by referrals however with these new developments, we expect a substantial amount of our sales to be generated by fulfilling PRC contract bids to service rural areas in 2007 though 2009.

- 25 -

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|Liquidity and Capital ResourcesWorking Capital Needs:
|-----------------------------------------------------

As of December 31, 2007 we had a working capital of $ 1,882,145. Over the next 12 months, we will require approximately $8,800,000 to sustain our working capital needs as follows based on projected sales of $ 12,500,000:

|Materials, Labor, Overhead                   | $ 7,800,000
|-------------------------------------------- | -----------
|Selling Expenses and Administrative Expenses | 1,000,000  
|Total                                        | $ 8,800,000
|                                            

We expect our revenues generated to absorb these costs; however, if additional capital is needed, we will explore financing options such as shareholder loans. Shareholder loans are without stated terms of repayment with interest at the rate of 6% per annum. We will not be considering taking on any long-term or short-term debt from financial institutions in the next 12 months. Shareholders loans are granted from time to time as required to meet current working capital needs. We have no formal agreement that ensures that we will receive such loans. We may exhaust this source of funding at any time.

In the past, we have normally been able to sustain our working capital needs that have surpassed the revenues from sales through shareholder loans. We expect this source of funding to continue; however, in the event shareholder loans are no longer granted to us, we may obtain long or short term financing.

We have a credit facility with Shenzhen Business Bank under which we can borrow up to $2,300,000, with interest at the Basic Rate (a rate which is promulgated periodically by the China central bank - Peoples Bank of China). The facility expires October 11, 2007. The principal balance on this facility at December 31, 2007 was $827,600. The facility is collateralized by the land use right and by a cash deposit with the bank equal to 30% of the outstanding balance of the facility ($255,955 at December 31, 2007).

We may also receive capital contributions from our shareholders.



|Plans for Expansion:
|--------------------

Given sufficient funding, we expect to expand our operations throughout the region by establishing up to 20 more branch offices devoted to marketing efforts. Each branch office will have approximately 3-10 full time and part time employees. To sustain new branch offices for 12 months, we will require a total of $200,000 of which $164,000 will be allocated to salaries and $36,000 allocated to rent. The need for the $200,000 for expansion is not included in the $ 8,800,000 we require to meet working capital needs.

We do not know of any trends, events or uncertainties that are likely to have a material impact on our short-term or long-term liquidity other than those factors discussed above.

- 26 -

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|Cash FlowsOperating Activities:
|-------------------------------

Cash flows of $ 3,433,168 were generated by operating activities during 2007. In 2006, operating activities added cash in the amount of $ 44,946. The following summarizes the inflow and outflow of cash for these periods:

|                                               | 2007       | 2006     
|---------------------------------------------- | ---------- | ---------
|Net Income (loss)                              | $(946,837) | $ 426,765
|Options issued for services                    | 1,908,333  | -        
|Decrease (increase) in accounts receivable     | 254,051    | (355,588)
|Increase in advances to suppliers              | (25,762)   | (44,218) 
|Increase in inventory                          | (715,277)  | (526,371)
|Increase in accounts payable                   | 1,393,769  | 299,983  
|Increase (decrease) in advances from customers | 215,785    | (21,172) 
|Increase in other payables                     | 1,419,200  | 115,943  
|Other                                          | (70,094)   | 149,604  
|Net Cash Provided By Operating Activities      | $3,433,168 | $ 44,946 

Cash flow from accounts receivable decreased as we settled several customers of which had accounts older than 1 year. These accounts are on average outstanding for 1 year and it is common in the industry to consider such accounts current. We normally have these accounts settled between 1.5 years and 2 years.

Expenditures from advances to suppliers and accounts payable increased as a result of the increase in inventory.

We increased our levels of raw materials in inventory to meet our current and projected production needs.

Our advances from customers increased as a various customers securing their orders for completion at a later date. The increase in other payables was as a result of the completion of



|Investing Activities:
|---------------------

Our cash consumed by investing activities was $ 3,545,718 in 2007 and $ 3,308,132 in 2006. The increase was mainly as a result of the increase in constructing in progress costs which we incurred for constructing new dormitories, office and manufacturing facilities. Construction in progress costs incurred are for land construction costs consisting of removal of previous facilities and other relevant costs required for preparation of the land.



|Financing Activities:
|---------------------

Cash flows provided by financing activities was $ 2,045,698 in 2007 and $ 3,973,468 in 2006. We received the proceeds from sale of common stock in the amount of $ 2,617,343. Please refer to Recent Sales of Unregistered Securities above. The remaining balance consists of borrowings made under the credit facility as discussed above.



|Material Commitments
|--------------------

We do not have any material commitments for capital expenditures other than what discussed relating to construction of our new facilities. We have title to all our capital assets consisting of production equipment, automobiles, and office equipment.



|Seasonal Aspects
|----------------



|- 27 -
|------

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Our business is seasonal in that sales are particularly low in February, due to the Chinese New Year holiday, during which time our business is closed up to 2 weeks. Sales in March are usually higher than usual levels as a result.



|Off Balance Sheet ArrangementsWe have no off balance sheet arrangements.
|------------------------------------------------------------------------

Item 7A.                   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse changes in market prices, including interest rate risk, foreign currency exchange rate risk, security market risk, commodity price risk, and other relevant market rate or price risks. We do not have any significant risks related to equity investments, security markets or derivative financial instruments as we do not have equity investments in privately held companies, security markets or derivative financial instruments. Nor do we have any significant interest rate risk, as we do not have bank loans, and its promissory notes and loans to related parties have fixed interest rates. We are exposed to foreign currency exchange rate risk, commodity price risk and credit risk.

Although our reporting currency is the U.S. dollar, the financial records of our operating subsidiaries are maintained in their local currency, the RMB, which is our functional currency. 100% of our revenues and costs and expenses for the year ended December 31, 2007 are denominated in RMB, with the balance denominated in U.S. dollars. Approximately 99% of our assets were denominated in RMB as of December 31, 2007. Assets and liabilities of our operating subsidiaries are translated into U.S. dollars at the exchange rate at the balance sheet date, their equity accounts are translated at historical exchange rate and their income and expenses items are translated using the average rate for the period. Any resulting exchange differences are recorded in accumulated other comprehensive income or loss. We have not reduced our exposure to exchange rate fluctuations by using hedging transactions. While we may choose to do so in the future, the availability and effectiveness of any hedging transactions may be limited and we may not be able to successfully hedge our exchange rate risks. Accordingly, we may experience economic losses and negative impacts on earnings and equity as a result of foreign exchange rate fluctuations. If the RMB depreciates against the U.S. dollar, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. During the year 2007, the foreign currency translation adjustment to our comprehensive income was $ 8,651 as a result of the RMB depreciating U.S. dollar.



|Credit Risk
|-----------

We are exposed to credit risk from our cash at bank and contract receivables. At December 31, 2007, we had a credit risk exposure of cash at bank of approximately $2,920,073. The credit risk on cash at bank is limited because the bank in which our cash is deposited is a very reputable bank and it is not expected to have significant credit risk. We do not require collateral or other securities to support financial instruments that are subject to credit risk. We grant credit to our customers in China. Accounts receivables are subject to credit evaluations. We periodically record a provision for doubtful collections based on an evaluation of the collectibility of contract receivables by assessing, among other factors, the customer's willingness or ability to pay, repayment history, general economic conditions and our ongoing relationship with the customers. Our customers have good payment history and our accounts are current, and we currently do not have significant bad debt provision.

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ITEM 8.                     FINANCIAL STATEMENTS & SUPPLEMENTARY DATA

December 31, 2007 and 2006

|                                                               | Page
|-------------------------------------------------------------- | ----
|                                                              
|Accountant's Audit Report                                      | F-1 
|Consolidated Balance Sheets                                    | F-2 
|Consolidated Statements of Operations and Earnings Accumulated | F-3 
|Consolidated Statements of Changes in Stockholders' Equity     | F-4 
|Consolidated Statements of Cash Flows                          | F-5 
|Notes to Consolidated Financial Statements                     | F-6 

- 29 -

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of DirectorsAsia Electrical Power International Group, Inc.

We have audited the accompanying consolidated balance sheet of Asia Electrical Power International Group, Inc. as of December 31, 2007, and the related consolidated statements of income (loss)and comprehensive income (loss), changes in stockholders equity, and cash flows for the years ended December 31, 2007 and 2006. These financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted the audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate under 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 Asia Electrical Power International Group, Inc. as of December 31, 2007, and the results of its operations and cash flows for the years ended December 31, 2007 and 2006 in conformity with U.S. generally accepted accounting principles.



|/s/Robert G. Jeffrey
|--------------------



|-F1-
|----

- 30 -

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|ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC.
|----------------------------------------------
|CONSOLIDATED BALANCE SHEET                    
|December 31, 2007                             
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              

The accompanying notes are an integral part of these financial statements.

-F2-



|- 31 -
|------

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ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. 
CONSOLIDATED STATEMENTS OF INCOME(LOSS) AND COMPREHENSIVE INCOME(LOSS)For the Years Ended December 31, 2007 and 2006

|                                                                           | 2007        | 2006      
|-------------------------------------------------------------------------- | ----------- | ----------
|                                                                          
|Revenue                                                                    | $11,671,597 | $8,074,012
|Cost of sales                                                              | 9,724,800   | 6,777,408 
|Gross Profit                                                               | 1,946,797   | 1,296,604 
|                                                                          
|Expenses:                                                                  |             |           
|Selling and administrative expenses                                        | 1,063,509   | 767,955   
|Options issued for services                                                | 1,908,333   | -         
|Total operating expenses                                                   | 2,971,842   | 767,955   
|Operating income (loss)                                                    | (1,025,045) | 528,649   
|                                                                          
|Other Income and Expense:                                                  |             |           
|Other income                                                               | 43,531      | 46,756    
|Interest income                                                            | 85,024      | -         
|Interest and financial expense                                             | (39,627)    | (36,630)  
|                                                                          
|                                                                          
|Other expense                                                              | (10,720)    | (19,439)  
|Income (Loss) Before Income Taxes                                          | (946,837)   | 519,336   
|                                                                          
|Provision for Income Taxes:                                                |             |           
|Return of refunds of prior periods                                         | -           | 60,574    
|Adjustment of previously accrued deferred tax asset                        | -           | 31,997    
|Net tax provision                                                          | -           | 92,571    
|                                                                          
|Net income (loss)                                                          | (946,837)   | 426,765   
|                                                                          
|Other comprehensive income (loss)  foreign currency                       |             |           
|translated adjustments                                                     | (8,651)     | 1,693     
|                                                                          
|Total comprehensive income (loss)                                          | $(955,488)  | $428,458  
|                                                                          
|Income (Loss) Per Share -                                                  |             |           
|Basic and Diluted                                                          | $ (0.02)    | $ 0.01    
|                                                                          
|Weighted average                                                           |             |           
|Number of shares                                                           |             |           
|Outstanding                                                                | 51,559,821  | 48,024,658
|                                                                          
|The accompanying notes are an integral part of these financial statements.
|-F3-                                                                      

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|ASIA ELECTRICAL POWER INTERNATIONAL GROUP, INC.           
|----------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|For the Years Ended December 31, 2007, and 2006           
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|Balance, December 31, 2005                                
|Shares issued for stock split                             
|Issuance of common shares                                 
|Interest imputed shareholder loans                        
|Net income for period                                     
|Allocation of statutory reserve                           
|Balance, December 31, 2006                                
|Issuance of common shares                                 
|Options issued for services                               
|Net loss for period                                       
|Balance, December 31, 2007                                

The accompanying notes are an integral part of these financial statements.



|-F4-
|----

- 33 -

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|ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC.                           
|-------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                    
|For the Years Ended December 31, 2007 and 2006                           
|                                                                         
|CASH FLOWS FROM OPERATIONS:                                              
|Net income (loss)                                                        
|Charges (credits) not involving the receipt or outlay of cash:           
|Depreciation and amortization                                            
|Options issued for services                                              
|Interest imputed on shareholder advances                                 
|Accrual of deferred tax asset                                            
|Changes in assets and liabilities:                                       
|Decrease (increase) in accounts receivable                               
|Decrease (increase) in other receivables                                 
|Increase in advances to suppliers                                        
|Increase in inventory                                                    
|Increase in accounts payable                                             
|Increase (decrease) in advances from customers                           
|Decrease in accrued liabilities                                          
|Increase in other payables                                               
|Net Cash Provided By                                                     
|Operating Activities                                                     
|                                                                         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    
|                                                                         
|Expenditures for construction in progress                                
|Purchases of fixed assets                                                
|Increase in deposits                                                     
|Acquisition of land use right                                            
|Net Cash Consumed By                                                     
|Investing Activities                                                     
|                                                                         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    
|Advances from shareholders                                               
|Repayments of shareholder advances                                       
|Issuances of common stock                                                
|Borrowings under bank credit facility                                    
|Repayment of borrowings under bank credit facility                       
|Funds set aside in collateral account                                    
|Return of funds set aside in collateral account                          
|Net Cash Provided By                                                     
|Financing Activities                                                     
|                                                                         
|Effect of exchange rate changes on cash                                  
|Net change in cash                                                       
|Cash balance, beginning of period                                        
|Cash balance, end of period                                              
|                                                                         
|The accompanying notes are an integral part of these financial statements
|-F5-                                                                     

- 34 -

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ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2007



|1.          ORGANIZATION and BUSINESS
|-------------------------------------



| | Organization of Company
| | -----------------------

The Company was incorporated in the State of Nevada on August 30, 2002 as Berita International Corporation, for the purpose of producing high and mid-voltage electrical switchgears in the People's Republic of China (China). On December 24, 2003, the Company changed its name to Keiji International Group Inc. (Keiji) and on September 30, 2004 the Company changed its name to Asia Electrical Power International Group Inc. (the Company).

On January 23, 2003, the Company entered into a Share Exchange Agreement (the Agreement) to exchange 24,000,000 of its common shares for all of the equity interests of Shenzhen Naiji Electrical Equipment Co., Ltd. (Naiji), a company incorporated in China. This transaction has been accounted for as a reverse merger, with Naiji treated as the acquiring company. As a result of the merger, prior financial information has been restated. Subsequent to that date, the operations of the Company reflect the combined operations of the Company and Naiji. The Company had no assets or liabilities on the date of the merger, so no allocation of the purchase price was made. As a further result of the merger, the shareholders of Naiji became the shareholders of the Company.



| | Business
| | --------

Naiji was incorporated in June 1997. All of its operations and sales are within China. The Company has produced high and mid-voltage electrical switchgears since its inception. Prior to the merger with Naiji, the Company had no operating history and had no assets, liabilities, or equity and had not issued any of its shares. As a result of entering into the Agreement, the shareholders of Naiji became the shareholders of the Company.



| | Risks and Uncertainties
| | -----------------------

The Company operates under authority of a business license which was granted June 20, 1997 and expires in the year 2022. Renewal of the license depends on the result of government inspections which are made to ensure environmental laws are not breeched.

The officers of the Company control, through a combination of direct ownership and a shareholder trust, most of the outstanding stock of the Company. As a result, insiders will be able to control the outcome of all matters requiring stockholder approval and will be able to elect all of the Company directors.

-F6-

- 35 -

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ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2007

2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



| | Consolidated Statements
| | -----------------------

The consolidated financial statements include the accounts of the Company, and its wholly owned subsidiary, Naiji. All significant intercompany balances and transactions have been eliminated in consolidation.



| | Cash
| | ----

For purposes of the statements of cash flows, the Company considers all short term debt securities purchased with an original maturity of three months or less to be cash equivalents.



| | Concentrations Of Credit Risk
| | -----------------------------

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash. However, all Company assets are located in China, and Company cash balances are on deposit at financial institutions in China, the currency of which is not free trading. Foreign exchange transactions are required to be conducted through institutions authorized by the Chinese government and there is no guaranty that Chinese currency can be converted to U.S. or other currencies.



| | Recognition Of Revenue
| | ----------------------

Revenue is recognized when product is delivered to customers. In determining delivery, consideration is given to the following: whether an arrangement exists with the buyer; whether delivery has occurred; whether the price to the buyer is fixed or determinable; and that collection is reasonably assured. No provision is made for any right of return that may exist as the criteria specified in Statement of Financial Accounting Standards (SFAS) No. 48 have been met.



| | Fair Value Of Financial Instruments
| | -----------------------------------

The carrying amounts of the Companys financial instruments, which include cash, accounts receivable, other receivables, advances to suppliers, accounts payable, accrued liabilities, and other liabilities, approximate their fair values at December 31, 2007.



|-F7-
|----

- 36 -

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ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2007

2.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)



|Inventories
|-----------

Inventories are valued at the lower of cost or market, with cost being determined on the first in, first out, basis.

At December 31, 2007 inventories consisted of the following:

|Raw materials   | $1,419,201
|--------------- | ----------
|Work in process | 622,462   
|Finished goods  | 500,295   
|Total           | $2,541,958



|Fixed Assets
|------------

Fixed assets are recorded at cost. Depreciation is computed using the straight line method, with lives of twenty years for buildings, ten years for production equipment, and five years for office furniture and equipment and for automobiles.



|Taxes
|-----

Naiji generates its income in China where Value Added Tax, Income Tax, City Construction and Development Tax and Education Surcharge taxes are applicable. Neither the Company, nor Naiji conduct any of its operations in the U.S.; therefore, U.S. taxes are not applicable.



|Use Of Estimates
|----------------

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



|Common Stock
|------------

Common stock of the Company is occasionally issued in return for services. Values are assigned to these issuances equal to the market value of the common stock at measurement date. Measurement date is defined under EITF 96-18 which states the criteria to be used for the valuation of stock issued for goods and services.



|Stock Options
|-------------

Stock options are valued at fair value on the dates of issuance using a Black Scholes valuation model, in accordance with the provisions of SFAS No. 123R.





|-F8-
|----

- 37 -

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ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2007

2.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)



|Allowance For Doubtful Accounts
|-------------------------------

Provisions are periodically made for doubtful accounts based on evaluation of the ages of the items making up the accounts receivable balances and their creditworthiness.



|Other Comprehensive Income
|--------------------------

The Company reports as other comprehensive income revenues, expenses, and gains and losses that are not included in the determination of net income. Resultant losses and gains during the years 2007 or 2006 amounted to ($8,651) and $1,693, respectively.



|Foreign Currency Translation
|----------------------------

All Company assets are located in China. These assets and related liabilities are recorded on the books of the Company in the currency of China (Renminbi). They are translated into US dollars as follows:

|(a) | Current assets, current liabilities, and long term monetary assets and liabilities, at the rate of exchange in effect as at the balance sheet date;  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) | Non-monetary assets and liabilities, at the exchange rates prevailing at the time of the acquisition of the assets or assumption of liabilities; and,
|   
|(c) | Revenues and expenses, at the average rate of exchange for the year.                                                                                 
|   

Gains and losses arising from this translation of foreign currency are included in other comprehensive income.



|Product Warranties
|------------------

The Company provides product warranties for approximately ten percent of the products sold. The cost of servicing these warranties has not been significant and it is recorded only as incurred.



|Net Income Per Share
|--------------------

The Company computes net income (loss) per common share in accordance with SFAS No. 128, Earnings Per Share and SEC Staff Accounting Bulletin No. 98 (SAB 98). Under the provisions of SFAS No. 128 and SAB 98, basic and diluted net income per common share are computed by dividing the net income available to common shareholders for the period by the weighted average number of shares of common stock outstanding during the period. The number of weighted average shares outstanding as well as the amount of net income per share are the same for basic and diluted per share calculations for all periods reflected in the accompanying financial statements. At December 31, 2007, options to purchase 5,000,000 shares of company common stock were outstanding. These options have not been included in the calculation of earnings per share for the year 2007, as to do so would have an anti dilutive effect.



|-F9-
|----

- 38 -

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ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2007

2.             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)



|Segment Reporting
|-----------------

Management treats the operations of the Company as one segment.



|Research and Development
|------------------------

Research costs are expensed as incurred. Development costs are also expensed unless, in the Company's view, they meet specific criteria related to technical, market and financial feasibility, in which case they are deferred and amortized. Amortization is calculated on a straight-line basis over the expected lives of the related products. Through December 31, 2007, the Company had not incurred any research costs which would be required to be amortized. Research and development expenses in 2006 were approximately $27,000and in 2006 were approximately $16,000.3.              STATUTORY RESERVE

As required by the Chinese law that governs accounting, the Company allocates 10% of its previous year's after tax profits, if any, to the Statutory Reserve Fund and 5% to the Statutory Public Welfare Fund as determined from year to year. These funds are allocated appropriately until reserves reach 50% of Paid inCapital.



|4.              ACCOUNTS RECEIVABLE
|-----------------------------------

The balance of accounts receivable has been reduced by a provision for doubtful accounts in the amount of$322,533.



|5.              LAND USE RIGHT
|------------------------------

On September 7, 2004, Naiji entered into an agreement to lease 3.77 hectares of land from the Government of China for a period of 50 years. The total lease price at the time was $ 1,359,855. Later, Naiji was required to make additional payment to compensate the former holders of this right for loss of business use of the land. As a result, the total cost, including fees and other costs, was increased to $2,429,518. This amount has been fully paid. This transaction closed during 2006 and the lease term expires January 19, 2056.

After taking possession of the land, the Company discovered the existence of a water system on the land which restricts use of the land. As a result, the Company withheld $106,815 of the amount due to the former holders of the land use right. The final amount due for the land is being arbitrated.

The cost of the land use right is being amortized over its 50 year term; this amortization was capitalized during the period of construction of the office and production facilities, which were completed during 2007.

-F10-

- 39 -

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ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2007



|6.              CONSTRUCTION IN PROGRESS
|----------------------------------------

Construction began during 2006 of new office and manufacturing facilities on land which is leased (Note 6). The work was completed in September 2007, at a total cost of $3,800,000.



|7.              RELATED PARTY TRANSACTIONS
|------------------------------------------

Capital stock of 3,000,000 common shares and 5,000,000 preferred shares was issued during 2006 to the Company president and its secretary, who are also substantial Company shareholders. Consideration for these issuances was principally the elimination of shareholder advances. These shareholders had made loans to Naiji which at December 26, 2006 totaled $4,199,540. These loans were supplemented by $162,392 of interest which had previously accrued on the shareholder loans and a $388,062 advance to the shareholders.

The president of Naiji provides office space in Vancouver without charge. If rent were charge for this space, it would be insignificant.

The Company accrued $31,905 of interest on shareholder loans in 2006. This amount was not paid and was used as part of the consideration for common and preferred shares issued during 2006  see above.

The president of the Company, who is also a significant shareholder, owns 39% of the equity interests of a major supplier. The Company made purchases from that supplier of approximately $3,046,000 during 2007 and $1,500,000 during 2006. There was an outstanding balance due to that supplier at December 31, 2007 of $457,544.



|-F11-
|-----

- 40 -

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ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2007



|8.              RENTALS UNDER OPERATING LEASES
|----------------------------------------------

The Company conducts its operations from its principal business office in Shenzhen China. Until September 2007, this space was leased under an operating lease which expired in 2007. The Company also has administrative branch offices throughout the China region and this space is rented from month to month. Rental expense during 2007 and 2006 was $78,061 and $101,962, respectively.



|9.               NOTES PAYABLE
|------------------------------

The Company had a credit facility with Shenzhen Business Bank under which it could borrow up to $2,300,000, with interest at the Basic Rate (a rate which is promulgated periodically by the China central bank  Peoples Bank of China). The facility expired during 2007 and was not renewed. The principal balance on this facility at December 31, 2006 was $827,600. The facility was collateralized by the land use right (Note 6) and by a cash deposit with the bank equal to 30% of the outstanding balance of the facility ($255,955 at December 31, 2006).



|10.              INCOME TAXES
|-----------------------------

During 2006, the legal status of the Company within China was changed from a private company to a foreign investment company. That change in status entitles the Company to preferential income tax treatment. During the years 2006 and 2007, the Company was exempt from income taxes; during the years 2008, 2009, and 2010, the Company will have a 50% exemption from income taxes. As a condition of these exemptions, the Company was required to return refunds it had received for the years 2004 and 2005. These totaled $60,219. Additionally, the Company had previously accrued deferred tax assets of $31,997. The length of the new tax exemption makes less certain the recoverability of these deferrals, so a valuation reserve was provided during 2006 to offset these deferred tax assets.

A reconciliation of the tax calculated by applying the Chinese statutory tax rate to pretax income with the provisions for income taxes is presented below.

|                                               | 2007     | 2006    
|---------------------------------------------- | -------- | --------
|Tax calculated using statutory rate            | $173,069 | $ 77,950
|Increase attributable to nondeductible expense | -        | 8,411   
|Return of refunds of prior periods             | -        | 60,219  
|                                               | 173,069  | 146,580 
|Less, tax exemption                            | 173,069  | 86,006  
|Tax provision                                  | -        | 60,574  
|Adjustment for deferred tax                    | -        | 31,997  
|                                              
|Net provision                                  | $-       | $ 92,571
|                                              



-F12-

- 41 -

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ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2007



|10.              INCOME TAXES (CONTD)
|--------------------------------------

Under Statement of Financial Accounting Standards No. 109, recognition of deferred tax assets is permitted unless it is more likely than not that the asset will not be realized. The Company provided in 2005 for a number of expenses on the books which are different in timing from their deductibility for income taxes. The principal item among them is a provision for bad debts. The tax effects of these expenses have been accrued as deferred tax assets. As described above, a valuation reserve was provided during 2006 to offset these deferred tax assets, as follows:

|Deferred tax assets | $31,997
|------------------- | -------
|Valuation reserve   | 31,997 
|Balance             | $-     



|11.               EXPENSES
|--------------------------

Major items included in Selling & Administrative expenses were the following:

|                               |            | 2007     | 2006
|------------------------------ | ---------- | -------- | ----
|                              
|Travel and Promotion           | $188,526   | $150,092
|Technical Support and warranty | 33,566     | 23,980  
|Salaries and benefits          | 435,834    | 253,899 
|Depreciation and amortization  | 197,331    | 64,653  
|Occupancy                      | 27,723     | 57,750  
|Other                          | 180,529    | 217,581 
|Total Expenses                 | $1,063,509 | $767,955
|                              

There was no cash paid for interest during either of the years presented.

Cash was paid for income taxes in the amounts of $58,522 in 2007 and $ 22,355 in 2006. Capital stock was issued during 2006 in return for the cancellation of shareholder loans totaling $4,361,932, of which $3,401,823 represented cash added during 2006. These issuances included 3,000,000 shares of common stock and 5,000,000 shares of preferred stock.

Options to purchase 5,000,000 shares of common stock were issued for services during 2007. These were valued at $1,908,333 and were charged to expense.

The provisions for amortization of the land use rights were capitalized as part of construction in progress. These amounted to $83,128 in 2007 and $46,727 in 2006.

Common shares were issued during 2007 as a finders fee in connection with the issuance of 872,447 shares. These amounted to 87,246 shares, valued at $262,000, which was charged to paid in capital.

-F13-

- 42 -

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ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2007

13.                RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

Management believes that none of the recently adopted accounting pronouncements will have a material affect on the Company financial position, results of operations, or cash flows.



|14.               CONTINGENCIES
|-------------------------------

Consistent with business practices in China, the Company carries no insurance except for auto insurance.



|-F14-
|-----

- 43 -

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ITEM 9                 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



|None.
|-----



|ITEM 9A(T)       CONTROLS AND PROCEDURES
|----------------------------------------

Evaluation of Disclosure Controls and Procedures. The Securities and Exchange Commission defines the term "disclosure controls and procedures" to mean a company's controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Our chief executive officer and chief financial officer have concluded, based on the evaluation of the effectiveness of the disclosure controls and procedures by our management, with the participation of our chief executive officer and chief financial officer, as of the end of the period covered by this report, that our disclosure controls and procedures were effective for this purpose, except as noted below under "Changes in Internal Controls."

Managements Report on Internal Control Over Financial Reporting

The management of Asia Electrical Power International Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. The Companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

As of December 31, 2007, management assessed the effectiveness of the Companys internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control- Integrated Framework, issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Managements assessment including an evaluation of the design of the Companys internal control over financial reporting and testing the operational effectiveness of its internal control over financial reporting.

Based on this assessment, management determined that, as of December 31, 2007, the Companys internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

This Report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting. The disclosure contained under this Item 9A was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only the disclosure under this Item 9A in this Report.

Changes in Internal Controls. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that as of the end of the period covered by this Annual Report on Form 10-K our disclosure controls and procedures were effective to enable us to accurately record, process, summarize and report certain information required to be included in the Company's periodic SEC filings within the required time periods, and to accumulate and communicate to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Prior to the issuance of our financial statements, we completed the account reconciliations, analyses and our management review such that we can certify that the information contained in our financial statements for the year ended December 31, 2007, fairly presents, in all material respects, the financial condition and results of operations of the Company.

Limitations on Effectiveness of Controls and Procedures. Our management, including our Chief Executive Officer and Chief Accounting Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also 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. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

- 44 -

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|ITEM 9B. | OTHER INFORMATION            
|-------- | -----------------------------
|None.    |                              
|PART III |                              
|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS

The following table sets forth certain information regarding our directors, executive officers and certain key employees as of December 31, 2007:

|Name             | Age | Position                  | Period Serving      | *Term*
|---------------- | --- | ------------------------- | ------------------- | ------
|Yulong Guo       | 45  | CEO, President, Director, | September 1, 2007 - | 1 year
|                 |     | Treasurer                 | August 31, 2008     |       
|                
|Xiaoling Chen    | 41  | Secretary, Chief          | September 1, 2007 - |       
|                 |     | Accounting Officer        | August 31, 2008     | 1 year
|                
|Dudley Delapenha | 74  | Director                  | December 31, 2007 - |       
|                 |     |                           | August 31, 2008     | 1 year
|                
|Allan Moore      | 72  | Director                  | May 31, 2007-       |       
|                 |     |                           | August 31, 2008     | 1 year
|                
|Locksley Samuels | 55  | Director                  | May 31, 2007-       | 1 year
|                 |     |                           | August 31, 2008     |       

Duties, Responsibilities and Experience

Yulong Guois our CEO, President, Director, and Treasurer. Mr. Guo was appointed as President in August 2002 and is responsible for implementing our investment projects, financial budgets and forecasts, overseeing research and development and human resources and marketing.

Mr. Guo is also responsible for our overall direction and various initiatives as needed from time to time in maintaining our company. Mr. Guo is currently overseeing our marketing and public relations efforts in maintaining current customers and attracting new clientele.

From our inception in 1997 to August 2002, Mr. Guo was our General Manager and was responsible for research and development.

From November 1983 through May 1992 Mr. Guo worked with Shenzhen Far East Biscuit (China) Company as the Manager of Delivery and Storage Department responsible for logistics. The company was engaged in production and sales of the "Kangyuan" brand biscuit.

From March 1993 through May 1997 Mr. Guo worked with Shenzhen Tongke Real Estate Co., Ltd. as General Manager and was responsible for running day-to-day operations and the company's financial management.

Mr. Yulong Guo received his associate degree in Electrical Mechanisms in 1980 from the Military Collage of the Chinese People's Liberation Army.

- 45 -

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Xiaoling Chenis our Secretary and Chief Accounting Officer. Mrs. Chen has been our Administrative Manager since 2000. Her responsibilities include general and administrative
work, marketing and communications, and human resources. Mrs. Chen also manages the staff and is also responsible for ensuring that operations are run efficiently.

From September 1995 to September 2000 Mrs. Chen worked for Shenzhen Libao Electronic Equipment Development Co., Ltd. as the General Office Director. The company was engaged in production, assembling and sales of
closed-circuit monitor equipment. Her responsibilities included general administrative work, marketing and communications and human resources.

From August 1985 to August 1995 Mrs. Chen worked for Shenzhen Far East Biscuit (China) Co. Ltd., as the General Office Director along with Mr. Guo. Her responsibilities included general administrative work,
communications-specifically with government agencies, and human resources.

Mrs. Chen received an associate degree in Business Administration from the University of Zhongshang in 1994. In 1995 Mrs. Chen held the "Political and Ideological" post, a certification of Office Administration Procedures and Communications and continues to hold this post to date.

There are no arrangements or understandings between any of our directors or executive officers, pursuant to which either was selected to be a director or executive officer, nor are there any family relationships among any
of our directors and officers. Directors and executive officers are elected by the Board of Directors on an annual basis.

Dudley Delapenhawas appointed as a director effective December 21, 2007. Mr. Delapenha is currently performing the equivalent functions of an audit committee, who has not been
determined to be an "audit committee financial expert." See below.

From 1998 to 2000, Mr. Delapenha was the marketing director for Avani Water Corporation, of Vancouver, British Columbia, a bottled water manufacturer company, where he was responsible for all marketing initiatives for the
organization. From 2001 through 2003, Mr. Delapenha was the President of Key Elements Consulting, specializing in marketing and business plans preparation for various clients.

Mr. Delphenha does not have a family relationship with any other director or executive officer of the Company.

Effective May 31, 2007, Mr. Allan Moore and Mr. Locksley Samuels were appointed directors of the Registrant.

Allan Mooreage 72 is currently the President of AS Moor Consulting Ltd. ("ASMCL") providing
consultation services in areas of environmental audits, developing environmental management systems, and sourcing alternative fuels for cement and lime industries. Mr. Moore has been the President of ASMCL since its inception in 1999.

Mr. Moore has received a Masters of Business Administration degree from Simon Fraser University of British Columbia, Canada in 1986, a Masters of Science degree from the University of Wisconsin in 1958, and a Bachelors of
Science degree from the Philander Smith College of Arkansas in 1956.

Locksley Samuelsage 55 is currently the President of Eurotrend Manufacturing Co., Ltd., ("Eurotrend")
providing services for design, manufacturing and installation of custom kitchen cabinetry. Mr. Samuels has been the President of Eurotrend since its inception in 1984.

Mr. Samuels obtained his Bachelors of Applied Sciences degree in Chemical Engineering from the University of Waterloo in Ontario, Canada in 1975.

Mr. Moore and Mr. Samuels do not have family relationships with any other director or executive officer of the Registrant, and neither have been a party to any transaction with the Registrant during the past fiscal year
ended December 31, 2006. The Registrant currently does not have an employment agreement with Mr. Moore or Mr. Samuels.

- 46 -

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Prior to being appointed directors of the Company, Mr. Moore and Mr. Samuels assisted the Company in performing market research in the Caribbean area. Both were granted 100,000 stock options each on April 24, 2007 for their efforts.



|Family Relationships
|--------------------

There are no family relationships among any of our directors and executive officers.



|Involvement In Legal Proceedings
|--------------------------------

To the best of our knowledge, there is no material proceeding to which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company or any of its subsidiaries.

To the best of our knowledge, during the past five years, none of our directors or executive officers were involved in any of the following: (1) any bankruptcy petition filed by or against any property or 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 involvement in any type of business, securities or banking activities; or (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.



|Investor Relations
|------------------

On January 23, 2007, we engaged Nexus Investor Relations for strategic investor relations efforts.



|Audit Committee
|---------------

We do not currently have a standing audit committee. The Company's Chief Executive Officer is actively researching candidates for membership on the Board of Directors who would be "independent" and who, accordingly, could serve on an audit committee. The board member who is currently performing the equivalent functions of an audit committee is Dudley Delapenha, who has not been determined to be an "audit committee financial expert."



|Audit Committee Financial Expert
|--------------------------------

We do not have an audit committee financial expert serving on the audit committee. Under the applicable Securities and Exchange Commission standards, an audit committee financial expert means a person who has the following attributes:

|· | An understanding of generally accepted accounting principles and financial statements;                                                                                                                                                                                                                                                                                                          
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|· | The ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;                                                                                                                                                                                                                                                        
| 
|· | Experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant's financial statements, or experience actively supervising one or more persons engaged in such activities;
| 
|· | An understanding of internal controls and procedures for financial reporting; and                                                                                                                                                                                                                                                                                                               
| 

- 47 -

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| | · An understanding of audit committee functions.
| | ------------------------------------------------

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a)of the Exchange Act requires our officers and directors, and persons who own more than 10% of the its common stock, to file reports of ownership and changes of ownership of such securities with the United States Securities and Exchange Commission. As of the year ended December 31, 2007, our officers and directors and person who own more than 10% of our common stock filed timely section 16 related forms.



|Code of Ethics
|--------------



|We do not have a code of ethics.
|--------------------------------

Material Changes to Nominations by Security Holders of Director Candidates

In the past fiscal year, there has been no material change to the procedures by which security holders may recommend nominees to the small business issuer's board of directors.



|DIRECTORS' COMPENSATION
|-----------------------

Our Directors are paid on a salary basis and do not receive compensation for serving on the Board of Directors. Directors are reimbursed for any expenses incurred on behalf of the Company.

ITEM 11.EXECUTIVE COMPENSATION

The table below summarizes all compensation awarded to, earned by, or paid to our executive officers by any person for all services rendered in all capacities to us for the fiscal year ended December 31, 2007 and December 31, 2006.

|         |            |      |        |       |        |          |                   | NON QUALIFIED |             
|-------- | ---------- | ---- | ------ | ----- | ------ | -------- | ----------------- | ------------- | ------------
|         |            |      |        |       |        |          | NON EQUITY        | DEFERRED      |             
|         |            |      |        |       | STOCK  | OPTIONS  | INCENTIVE         | COMPENSATION  | ALL OTHER   
|NAME     | TITLE      | YEAR | SALARY | BONUS | AWARDS | AWARDED  | PLAN COMPENSATION | EARNINGS      | COMPENSATION
|        
|Yulong   | President, | 2007 | $5,800 | -0-   | -0-    | $381,667 | -0-               | -0-           | -0-         
|Guo      | CEO and    |      |        |       |        |          |                   |               |             
|         | Director   | 2006 | $5,800 | -0-   | -0-    | -0-      | -0-               | -0-           | -0-         
|        
|Xiaoling | Secretary, | 2007 | $4,400 | -0-   | -0-    | $95,417  | -0-               | -0-           | -0-         
|Chen     | CAO and    |      |        |       |        |          |                   |               |             
|         | Director   | 2006 | $4,400 | -0-   | -0-    | -0-      | -0-               | -0-           | -0-         

- 48 -

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In 2006 Mr. Guo received 5,000,000 preferred shares and 2,500,000 common shares as repayment of shareholder loans. On June 13, 2007, the Company granted 1,000,000 non qualified stock options to Mr. Guo.

In 2006 Ms. Chen received 500,000 common shares as repayment of shareholder loans. On June 13, 2007, the Company granted 250,000 non qualified stock options to Ms. Chen.

The stock options granted expire June 13, 2009 and are 90% vested in year 1 and 10% vested in year 2.

We presently do not have any compensation agreement with either Mrs. Guo or Ms. Chen. We do not pay to our directors any compensation for each director serving as a director on our board of directors.

The salaries paid to Mr. Guo and Mrs. Chen were initially based upon salary industry guidelines determined by the market; however, as market rates for such salaries increased over time, Mr. Guo and Mrs. Chen waived their salary increases for the purpose of retaining funds in the Company in order to meet working capital needs.



|Stock Option Grants
|-------------------

Please refer to ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTER under stock option grants.



|Consulting Agreements
|---------------------

We do not have any employment or consulting agreement with any of our officers or directors and we will not pay our directors any amount for acting on the Board of Directors.

- 49 -

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ITEM 12.             SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth as of April 10, 2008 certain information regarding the beneficial ownership of our common stock by:

|1. | each person who is known us to be the beneficial owner of more than 5% of the common stock,
|-- | -------------------------------------------------------------------------------------------
|  
|2. | each of our directors and executive officers, and                                          
|  
|3. | all of our directors and executive officers as a group.                                    
|  

The persons or entities listed below have sole voting and investment power with respect to all shares of common stock beneficially owned by them, except to the extent such power may be shared with a spouse. No change in control is currently being contemplated.

As of April 10, 2008, 51,959,693 shares with a par value of $0.001 per share were issued and outstanding. We are authorized to issue 150,000,000 shares with a par value of $0.001 per share.

|Title of Class                                                   | Name and Address Beneficial Owner | of Amount and Nature of 
  Beneficial Owner | % Class (1)
|---------------------------------------------------------------- | --------------------------------- | ------------------------------------------- | -----------
|
|
|Officers and Directors:                                          |                                   |                                            
|Common Stock                                                     | XiaoLing Chen                     | 5,300,000                                   | 10%        
|                                                                
|                                                                
|Common Stock                                                     | YuLong Guo                        | 23,925,100                                  | 46%        
|                                                                
|                                                                
|Officers and Directors as a Group                                | 29,225,100                        | 56%                                        
|                                                                
|5% Shareholder:                                                  |                                   |                                             |            
|Common Stock                                                     | Ying Yang                         | 4,600,000                                   | 9%         
|                                                                
|Total Officers, Directors and                                    | 33,825,100                        | 65%                                        
|5% shareholder                                                   |                                   |                                             |            
|                                                                
|(1) Based on 51,959,693 shares outstanding as of April 10, 2008. |                                   |                                            
|                                                                
|                                                                

On January 23, 2003, we entered into the Agreement with Naiji, whereby we acquired all the issued and outstanding stock of Naiji in return for 24,000,000 shares of our common stock. As a result, Naiji became our wholly-owned subsidiary. The shareholders of Naiji unanimously agreed to enter into the Agreement for the purposes of restructuring itself in anticipation of becoming listed on the OTC Bulletin Board. AEPI was formed by Naiji for this purpose and prior to entering into the Agreement; we had no assets, liabilities, equity and had not issued any of our shares. As a result of entering into the Agreement; the shareholders of Naiji became the shareholders of AEPI in equal proportion

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wherein the 24,000,000 shares were allocated based on the capital contributions, or ownership of Naiji. The Agreement therefore was a non-arms length transaction.

On December 22, 2007, 5,000,000 shares of preferred stock, par value $0.001, were allotted and issued to our President, Yulong Guo for repayment of shareholder loans.

A further 2,500,000 shares of common stock were allotted and issued to Yulong Guo and 500,000 shares issued to Xiaoling Chen. These shares were issued for repayment of shareholder loans.



|Corporate Governance - Director Independence
|--------------------------------------------

The Company's stock is quoted on the Over The Counter Bulletin Board, which does not have director independence requirements. Under Item 407(a) of Regulation S-B, the Company has chosen to measure the independence of its directors under the definition of independence used by the American Stock Exchange, which can be found in the AMEX Company Guide, 121(A)(2) (2007). Under such definition, none of the directors of the Company is independent, because the Company's board of directors cannot affirmatively determine that any of its directors does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

ITEM 14.             PRINCIPAL ACCOUNTANT FEES AND SERVICES



|Pre-Approval Policies and Procedures
|------------------------------------

Prior to engaging our accountants to perform a particular service, our board of directors obtains an estimate for the service to be performed. All of the services described above were approved by the board of directors in accordance with its procedures.

Below is the aggregate amount of fees billed for professional services rendered by our principal accountants with respect to the Company's last two fiscal years:

|                   | 2007    | 2006   
|------------------ | ------- | -------
|Audit fees         | $24,000 | $24,000
|Audit-related fees | 5,000   | 5,000  
|Tax fees           | -       | -      
|All other fees     | 5,000   | 5,000  
|                  
|Total              | $34,000 | $34,000

All of the professional services rendered by principal accountants for the audit of the our annual financial statements that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for last two fiscal years were approved by our board of directors.



|Maintaining Principal Accountant's Independence
|-----------------------------------------------

The board of directors has considered whether the provision of the services described below are compatible with maintaining the principal accountant's independence and believes that such services do not compromise that independence.

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|ITEM 15.                                                    | EXHIBITS    |                                                                                        
|----------------------------------------------------------- | ----------- | ---------------------------------------------------------------------------------------
|Exhibit Number                                              | Description
|3.1                                                         |             | Certificate of Incorporation, dated August 30, 2002-Berita International Corporation(1)
|3.2                                                         |             | Certificate of Incorporation, dated December 24, 2003-Keiji International Group Inc.(1)
|3.3                                                         |             | Certificate of Incorporation, dated September 30, 2004-Asia Electrical Power           
|                                                            |             | International Group Inc.(1)                                                            
|3.4                                                         |             | Articles of Incorporation, dated August 26, 2002-Berita International Corporation(1)   
|3.5                                                         |             | Certificate Amending Articles of Incorporation dated December 24, 2003 changing our    
|                                                            |             | name to "Keiji International Group Inc."(1)                                            
|3.6                                                         |             | Certificate Amending Articles of Incorporation dated September 30, 2004 changing our   
|name to "Asia Electrical Power International Group Inc."(1)
|3.7                                                         |             | Bylaws, effective September 3, 2002(1)                                                 
|23.1                                                        |             | Consent Letter from Robert Jeffrey, CPA                                                
|31.1                                                        |             | CEO Section 302 Certification                                                          
|31.2                                                        |             | CAO Section 302 Certification                                                          
|32.1                                                        |             | CEO Section 906 Certification                                                          
|32.2                                                        |             | CAO Section 906 Certification                                                          
|99.1                                                        |             | 2007 Stock Option Plan(3)                                                              

(1)Incorporated by reference from our Form SB-2 that was originally filed with the SEC on October 29, 2004.

(2)Incorporated by reference from our Form SB -2, Amendment No. 1 that was originally filed with the SEC on February 14th, 2005.

(3) Incorporated by reference from Form 8K that was originally filed with the SEC on May 30, 2007

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| | SIGNATURES
| | ----------

In accordance with section 13 and 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.

ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC.



|Date: April 10, 2008
|--------------------



|By: /s/ Yulong Guo**Yulong Guo**                                                             President, Chief Executive Officer and Director
|--------------------------------------------------------------------------------------------------------------------------------------------



|
|



|By: /s/ Xiaoling Chen**Xiaoling Chen**                                         Secretary, Chief Accounting Officer
|------------------------------------------------------------------------------------------------------------------



|
|

In accordance with the Securities Exchange Act of 1934, this Annual Report on Form 10-K 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/ Yulong Guo    | President, Chief Executive Officer   | April 10, 2008
|Yulong Guo        | and Director                         |               
|                 
|/s/ Xiaoling Chen | Secretary & Chief Accounting Officer | April 10, 2008
|Xiaoling Chen     |                                      |               

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