**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM 10-Q/A**

**(Amendment      No. 1)**

**(Mark      One)**

**x**
** Quarterly      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act      of 1934**

**o**
** Transition      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act      of 1934**

**Commission      file number 000-23039**

**CHINA      PRECISION STEEL, INC.**

| **Delaware**                                                                 |   | **14-1623047**                                                  |
|------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|
| (State                or other jurisdiction of                incorporation) |   | (IRS                Employer Identification                No.) |

**8th      Floor, Teda Building, 87 Wing Lok Street, Sheungwan**

**Hong      Kong, The People’s Republic of China**

**+852-2543-8223**

----

**EXPLANATORY      NOTE**

**RESTATEMENT      OF FINANCIAL STATEMENTS**

**RESTATEMENTS**

|   | · | to                restate the current income taxes payable                and deferred income tax                sections on the Condensed Consolidated Balance Sheets due to                understatement of provision for enterprise income tax and                overstatement of deferred income tax; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | to                restate current income tax, deferred                income tax, net                income, diluted earnings per share and comprehensive income sections                on                the Condensed Consolidated Statements of Operations and Comprehensive                Income due to overstatement of current                income tax and deferred income tax, and understatement of net                income, diluted earnings per share, and comprehensive income;                and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | to                restate the cash flows from net income, current income taxes and                deferred                income taxes due to understatement of net income and cash inflows                from                current income taxes, and overstatement of cash outflows from deferred                income taxes on the Condensed Consolidated Statements of Cash                Flows. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**China      Precision Steel, Inc.**

**Index      to Quarterly Report**

**on      Form 10-Q**

**Quarter      Ended March 31, 2008**

| Item                1.                              | Financial                Statements                                                                                                                                                                                          | 4      |
|-----------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                |                                                                                                                                                                                                                         |   |
|                                                | Condensed                Consolidated Balance Sheets at, March 31, 2008 (unaudited) and                June 30, 2007 (audited)                                                                                          | 4      |
|                                                |                                                                                                                                                                                                                         |   |
|                                                | Unaudited                Condensed Consolidated Statements of Operations for the three and                nine months ended March 31, 2008 and 2007                                                                     | 5      |
|                                                |                                                                                                                                                                                                                         |   |
|                                                | Unaudited Condensed                Consolidated Statements of Cash Flows for the nine months ended March                31,                2008 and 2007                                                                | 7      |
|                                                |                                                                                                                                                                                                                         |   |
|                                                | Condensed                Consolidated Statements of Changes in Stockholders’ Equity for the year                ended June 30, 2007 (audited) and the nine months ended March 31,                2008 (unaudited) | 6      |
|                                                |                                                                                                                                                                                                                         |   |
|                                                | Notes                to Condensed Consolidated Financial Statements                                                                                                                                                     | 8      |
|                                                |                                                                                                                                                                                                                         |   |
| Item                2.                              | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations                                                                                                    | 23     |
|                                                |                                                                                                                                                                                                                         |   |
| Item                3.                              | Quantitative                and Qualitative Disclosures About Market Risk                                                                                                                                                    | 34     |
|                                                |                                                                                                                                                                                                                         |   |
| Item                4.                              | Controls                and Procedures                                                                                                                                                                                       | 35     |
|                                                |                                                                                                                                                                                                                         |   |
| **Part II                - Other Information** | 36                                                                                                                                                                                                                           |
|                                                |                                                                                                                                                                                                                         |   |
| Item                1.                              | Legal                Proceedings                                                                                                                                                                                             | 36     |
|                                                |                                                                                                                                                                                                                         |   |
| Item                1A.                             | Risk                Factors                                                                                                                                                                                                  | 36     |
|                                                |                                                                                                                                                                                                                         |   |
| Item                2.                              | Unregistered                Sales of Equity Securities and Use of Proceeds                                                                                                                                                   | 36     |
|                                                |                                                                                                                                                                                                                         |   |
| Item                3.                              | Defaults                Upon Senior Securities                                                                                                                                                                               | 36     |
|                                                |                                                                                                                                                                                                                         |   |
| Item                4.                              | Submission                of Matters to a Vote of Security Holders                                                                                                                                                           | 36     |
|                                                |                                                                                                                                                                                                                         |   |
| Item                5.                              | Other                Information                                                                                                                                                                                             | 36     |
|                                                |                                                                                                                                                                                                                         |   |
| Item                6.                              | Exhibits                                                                                                                                                                                                                     | 36     |
|                                                |                                                                                                                                                                                                                         |   |
| Signatures                                          | 37                                                                                                                                                                                                                           |

----

**Part I      - Financial Information**

**ITEM      1. FINANCIAL STATEMENTS.**

| **China                Precision Steel, Inc. and Subsidiaries**         |
|-------------------------------------------------------------------------|
| **Condensed                Consolidated Balance                Sheets** |

|                                                                                                                                                                      |   |      |   | **(Unaudited)**                               |   |              |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|-----------------------------------------------|--------|-------------------|--------|
|                                                                                                                                                                      |   |      |   | **March 31,**                            |   | **June 30,** |   |
|                                                                                                                                                                      |   | **Notes** |   | **2008**                                      |   | **2007**          |   |
|                                                                                                                                                                      |   |      |   | (Restated – seeNoted 19) |   |              |   |
| **Assets**                                                                                                                                                                |   |      |   |                                          |   |              |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Current                assets**                                                                                                                                         |   |      |   |                                          |   |              |   |   |   |   |
| Cash                and equivalents                                                                                                                                       |   |      |   |                                          | $      | 14,295,503        |   | $ | 5,504,862 |   |
| Accounts                receivable                                                                                                                                        |   |      |   |                                          |   |              |   |   |   |   |
| Trade,                net of allowances of $994,313 and $273,461                                                                                                          |   |      |   |                                          |   |              |   |   |   |   |
| at                March 31, 2008 and June 30, 2007, respectively                                                                                                          |   |      |   |                                          |   | 25,406,355        |   |   | 8,242,044 |   |
| Bank                acceptance notes                                                                                                                                      |   |      |   |                                          |   | 4,197,091         |   |   | - |   |
| Other                                                                                                                                                                     |   |      |   |                                          |   | 4,794,735         |   |   | 85,708 |   |
| Inventories                                                                                                                                                               |   |      | 5      |                                          |   | 19,594,824        |   |   | 15,723,704 |   |
| Deposits                                                                                                                                                                  |   |      |   |                                          |   | -                 |   |   | 82,758 |   |
| Prepaid                expenses                                                                                                                                           |   |      |   |                                          |   | 429,556           |   |   | - |   |
| Advances                  to suppliers, net of allowance of $2,466,098 and $3,502,184 at                  March 31,                  2008 and June 30, 2007, respectively |   |      |   |                                          |   | 38,527,179        |   |   | 11,699,918 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Total                current assets**                                                                                                                                   |   |      |   |                                          |   | 107,245,243       |   |   | 41,338,994 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Property                and equipment**                                                                                                                                 |   |      |   |                                          |   |              |   |   |   |   |
| Land                use rights                                                                                                                                            |   |      |   |                                          |   | 1,869,205         |   |   | 1,124,583 |   |
| Property                and equipment, net                                                                                                                                |   |      | 6      |                                          |   | 35,657,690        |   |   | 29,238,227 |   |
| Construction-in-progress                                                                                                                                                  |   |      | 7      |                                          |   | 12,344,841        |   |   | 10,355,763 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
|                                                                                                                                                                      |   |      |   |                                          |   | 49,871,736        |   |   | 40,718,573 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Goodwill**                                                                                                                                                              |   |      |   |                                          |   | 99,999            |   |   | 99,999 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Total                assets**                                                                                                                                           |   |      |   |                                          | $      | 157,216,978       |   | $ | 82,157,566 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Liabilities                and Stockholders' Equity**                                                                                                                   |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Current                liabilities**                                                                                                                                    |   |      |   |                                          |   |              |   |   |   |   |
| Accounts                payable and accrued liabilities                                                                                                                   |   |      |   |                                          | $      | 11,179,505        |   | $ | 4,855,932 |   |
| Advances                from customers                                                                                                                                    |   |      | 8      |                                          |   | 6,896,092         |   |   | 1,720,812 |   |
| Other                taxes payables                                                                                                                                       |   |      |   |                                          |   | 3,102,035         |   |   | 816,553 |   |
| Current                income taxes payable                                                                                                                               |   |      |   |                                          |   | 4,409,571         |   |   | 1,892,866 |   |
| Deferred                income taxes payable                                                                                                                              |   |      |   |                                          |   | -                 |   |   | 1,064,028 |   |
| Amounts                due to directors                                                                                                                                   |   |      | 9      |                                          |   | 2,807,353         |   |   | 408,620 |   |
| Current                portion of long-term debt                                                                                                                          |   |      |   |                                          |   | -                 |   |   | 6,163,445 |   |
| Notes                payable                                                                                                                                              |   |      | 10     |                                          |   | 17,400,194        |   |   | 9,842,520 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Total                current liabilities**                                                                                                                              |   |      |   |                                          |   | 45,794,750        |   |   | 26,764,776 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Long-term                debt, net of current portion shown above**                                                                                                     |   |      | 11     |                                          |   | -                 |   |   | 6,878,714 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Stockholders'                equity:**                                                                                                                                  |   |      |   |                                          |   |              |   |   |   |   |
| Preferred                  stock: $0.001 per value, 8,000,000 shares authorized, no shares                  outstanding at March 31, 2008 and June 30, 2007;              |   |      | 14     |                                          |   |              |   |   |   |   |
| Common                stock: $0.001 par value, 62,000,000 shares                                                                                                          |   |      |   |                                          |   |              |   |   |   |   |
| authorized,                45,896,288 and 37,378,143 issued and                                                                                                           |   |      |   |                                          |   |              |   |   |   |   |
| outstanding                March 31, 2008 and June 30, 2007                                                                                                               |   |      | 14     |                                          |   | 45,896            |   |   | 37,378 |   |
| Additional                paid-in capital                                                                                                                                 |   |      | 14     |                                          |   | 73,643,064        |   |   | 31,867,063 |   |
| Accumulated                other comprehensive income                                                                                                                     |   |      |   |                                          |   | 7,759,973         |   |   | 2,192,160 |   |
| Retained                earnings                                                                                                                                          |   |      |   |                                          |   | 29,973,295        |   |   | 17,008,238 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Total                stockholders' equity**                                                                                                                             |   |      |   |                                          |   | 111,422,228       |   |   | 51,104,839 |   |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Amounts                due from directors**                                                                                                                             |   |      | 9      |                                          |   | -                 |   |   | (2,590,763 | ) |
|                                                                                                                                                                      |   |      |   |                                          |   |              |   |   |   |   |
| **Total                liabilities and stockholders' equity**                                                                                                             |   |      |   |                                          | $      | 157,216,978       |   | $ | 82,157,566 |   |

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

----

| **China                Precision Steel, Inc. and Subsidiaries**                               |
|-----------------------------------------------------------------------------------------------|
| **Condensed                Consolidated Statements of Operations**                            |
| **For                the Three and Nine Months Ended March 31, 2008 and                2007** |
| **(Unaudited)**                                                                               |

|                                                             |   |       |   | **Three Months Ended**              |       | **Nine Months Ended** |   |
|------------------------------------------------------------------|--------|------------|--------|-----------------------------------------------|------------|---------------------------------|--------|
|                                                             |   |       |   | **March 31,**                            |       | **March 31,**              |   | **March 31,** |   | **March 31,** |   |
|                                                             |   | **Notes**  |   | **2008**                                      |       | **2007**                        |   | **2008** |   | **2007** |   |
|                                                             |   |       |   | (Restated – see Noted19) |       |                            |   | (Restated – seeNoted 19) |   |   |   |
| **Revenues**                                                     |   |       |   |                                          |       |                            |   |   |   |   |   |
| Sales                  revenues                                  |   |       |   |                                          | $          | 18,773,504                      |   | $ | 11,610,673 |   | $ | 59,189,060 |   | $ | 37,121,603 |   |
| Cost                  of goods sold                              |   |       |   |                                          |       | 13,399,010                      |   |   | 8,240,743 |   |   | 42,172,997 |   |   | 26,635,693 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Gross                  profit**                                |   |       |   |                                          |       | 5,374,494                       |   |   | 3,369,930 |   |   | 17,016,063 |   |   | 10,485,910 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |  |   |
| **Operating                  expenses**                          |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| Selling                  expenses                                |   |       |   |                                          |       | 203,477                         |   |   | 92,315 |   |   | 484,926 |   |   | 196,705 |   |
| Administrative                  expenses                         |   |       |   |                                          |       | 699,220                         |   |   | 1,411,106 |   |   | 2,031,816 |   |   | 2,096,031 |   |
| Provision                  for bad debts                         |   |       |   |                                          |       | 10,150                          |   |   | - |   |   | 661,930 |   |   | - |   |
| Depreciation                  and amortization expense           |   |       |   |                                          |       | 17,155                          |   |   | 11,062 |   |   | 46,585 |   |   | 32,324 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Total                  operating expenses**                    |   |       |   |                                          |       | 930,002                         |   |   | 1,514,483 |   |   | 3,225,257 |   |   | 2,325,060 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Income                  from continuing operations**           |   |       |   |                                          |       | 4,444,492                       |   |   | 1,855,447 |   |   | 13,790,806 |   |   | 8,160,850 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Other                  income (expense)**                      |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| Other                  revenues                                  |   |       |   |                                          |       | 152,894                         |   |   | 53,436 |   |   | 945,304 |   |   | 53,436 |   |
| Interest                  and finance costs                      |   |       |   |                                          |       | (415,863                        | )      |   | (196,787 | ) |   | (1,174,864 | ) |   | (514,869 | ) |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Total                  other income (expense)**                |   |       |   |                                          |       | (262,969                        | )      |   | (143,351 | ) |   | (229,560 | ) |   | (461,433 | ) |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Net                  income from continuing operations**       |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **before                  income tax**                           |   |       |   |                                          |       | 4,181,523                       |   |   | 1,712,096 |   |   | 13,561,246 |   |   | 7,699,417 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Provision                  for (benefit from) income tax**     |   |       | 12     |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| Current                                                          |   |       |   |                                          |       | 543,623                         |   |   | 1,196,573 |   |   | 1,660,217 |   |   | 2,091,886 |   |
| Deferred                                                         |   |       |   |                                          |       | -                               |   |   | (880,694 | ) |   | (1,064,028 | ) |   | (966,099 | ) |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| Total                  income tax expense                        |   |       |   |                                          |       | 543,623                         |   |   | 315,879 |   |   | 596,189 |   |   | 1,125,787 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Net                  income before discontinued operations**   |   | 3,637,900  |   |                                          | 1,396,217  |                            |   | 12,965,057 |   |   | 6,573,630 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Net                  income from discontinued operations**     |   |       | 16     |                                          |       | -                               |   |   | - |   |   | - |   |   | 831,448 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Net                  income**                                  |   |       |   |                                          | $          | 3,637,900                       |   | $ | 1,396,217 |   | $ | 12,965,057 |   | $ | 7,405,078 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Basic                  earnings per share**                    |   |       | 15     |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| From                  continuing operations                      |   |       |   |                                          | $          | 0.08                            |   | $ | 0.05 |   | $ | 0.31 |   | $ | 0.26 |   |
| From                  discontinued operations                    |   |       |   |                                          | $          | -                               |   | $ | - |   | $ | - |   | $ | 0.03 |   |
| Total                                                            |   |       |   |                                          | $          | 0.08                            |   | $ | 0.05 |   | $ | 0.31 |   | $ | 0.29 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |  |   |   |   |   |   |   |   |
| **Basic                  weighted average shares outstanding**   |   | 45,896,288 |   |                                          | 28,946,086 |                            |   | 42,088,128 |   |   | 25,815,157 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Diluted                  earnings per share**                  |   |       | 15     |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| From                  continuing operations                      |   |       |   |                                          | $          | 0.08                            |   | $ | 0.05 |   | $ | 0.30 |   | $ | 0.26 |   |
| From                  discontinued operations                    |   |       |   |                                          | $          | -                               |   | $ | - |   | $ | - |   | $ | 0.03 |   |
| Total                                                            |   |       |   |                                          | $          | 0.08                            |   | $ | 0.05 |   | $ | 0.30 |   | $ | 0.29 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Diluted                  weighted average shares outstanding** |   | 46,365,778 |   |                                          | 29,387,360 |                            |   | 42,555,912 |   |   | 25,960,101 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **The                  Components of comprehensive income:**     |   |       |   |                                          |       |                            |   |   |   |   |   |   |
| Net                  income                                      |   |       |   |                                          | $          | 3,637,900                       |   | $ | 1,396,217 |   | $ | 12,965,057 |   | $ | 7,405,078 |   |
| Foreign                  currency translation adjustment         |   |       |   |                                          |       | 3,481,498                       |   |   | 335,929 |   |   | 5,567,813 |   |   | 990,914 |   |
|                                                             |   |       |   |                                          |       |                            |   |   |   |   |   |   |   |   |   |   |
| **Comprehensive                  income**                        |   |       |   |                                          | $          | 7,119,398                       |   | $ | 1,732,146 |   | $ | 18,532,870 |   | $ | 8,395,992 |   |

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

----

| **China                Precision Steel, Inc. and Subsidiaries**                                             |
|-------------------------------------------------------------------------------------------------------------|
| **Condensed                Consolidated Statements of Changes in Stockholders'                Equity**      |
| **For                the Year Ended June 30, 2007 and the Nine Months Ended March 31,                2008** |

|                                                                |   |                     |         |        |   |              |   | **Accumulated** |       |              |   |       |   |
|---------------------------------------------------------------------|--------|--------------------------|--------------|-------------|--------|-------------------|--------|-----------------|------------|-------------------|--------|------------|--------|
|                                                                |   |                     |         |        |   | **Additional**    |   | **Other**       |       |              |   | **Total**  |   |
|                                                                |   | **Ordinary Shares** |         | **Paid-in** |   | **Comprehensive** |   | **Retained**    |       | **Stockholders'** |   |
|                                                                |   | **Share**                |         | **Amount**  |   | **Capital**       |   | **Income**      |       | **Earnings**      |   | **Equity** |   |
| Balance                  at June 30, 2006                           |   |                     | 24,283,725   |        |   | 24,284            |   |            | 1,375,716  |              |   | 745,583    |   |   | 9,535,577 |   |   | 11,681,160 |   |
|                                                                |   |                     |         |        |   |              |   |            |       |              |   |       |   |   |   |   |   |   |   |
| Sale                  of common stock                               |   |                     | 7,451,665    |        |   | 7,451             |   |            | 22,347,543 |              |   | -          |   |   | - |   |   | 22,354,994 |   |
| Syndication                  fees                                   |   |                     | -            |        |   | -                 |   |            | (3,028,116 | )                 |   | -          |   |   | - |   |   | (3,028,116 | ) |
| Stock                  issued for syndication fees                  |   |                     | 2,798,191    |        |   | 2,798             |   |            | (2,798     | )                 |   | -          |   |   | - |   |   | - |   |
| Anti-dilution                  rights stock                         |   |                     | 827,962      |        |   | 828               |   |            | (828       | )                 |   | -          |   |   | - |   |   | - |   |
| Conversion                  of debt to stock                        |   |                     | 2,016,600    |        |   | 2,017             |   |            | 6,773,759  |              |   |       |   |   |   |   |   | 6,775,776 |   |
|                                                                |   |                     |    |        |   |              |   |            |       |              |   |       |   |   |   |   |   |   |   |
| Warrants                  issued for consulting                     |   |                     | -            |        |   | -                 |   |            | 447,993    |              |   | -          |   |   | - |   |   | 447,993 |   |
| Capital                  contribution from                          |   |                     |         |        |   |              |   |            |       |              |   |       |   |   |   |   |   |   |   |
| waiver                  of dividend                                 |   |                     | -            |        |   | -                 |   |            | 3,953,794  |              |   |       |   |   |   |   |   | 3,953,794 |   |
| Foreign                  currency translation                       |   |                     |         |        |   |              |   |            |       |              |   |       |   |   |   |   |   |   |   |
| adjustment                                                          |   |                     | -            |        |   | -                 |   |            | -          |              |   | 1,446,577  |   |   | - |   |   | 1,446,577 |   |
| Net                  income                                         |   |                     | -            |        |   | -                 |   |            | -          |              |   | -          |   |   | 8,304,109 |   |   | 8,304,109 |   |
| Less                  discontinued operations                       |   |                     |         |        |   |              |   |            |       |              |   |       |   |   |   |   |   |   |   |
| sold                  to former shareholder                         |   |                     | -            |        |   | -                 |   |            | -          |              |   | -          |   |   | (831,448 | ) |   | (831,448 | ) |
|                                                                |   |                     |         |        |   |              |   |            |       |              |   |       |   |   |   |   |   |   |   |
| Balance                  at June 30, 2007                           |   |                     | 37,378,143   |        |   | 37,378            |   |            | 31,867,063 |              |   | 2,192,160  |   |   | 17,008,238 |   |   | 51,104,839 |   |
|                                                                |   |                     |         |        |   |              |   |            |       |              |   |       |   |   |   |   |   |   |   |
| Sale                  of common stock                               |   |                     | 7,100,000    |        |   | 7,100             |   |            | 44,498,650 |              |   | -          |   |   | - |   |   | 44,505,750 |   |
| Syndication                  fees                                   |   |                     | -            |        |   | -                 |   |            | (130,468   | )                 |   | -          |   |   | - |   |   | (130,468 | ) |
| Make                  good shares                                   |   |                     | 2,000,000    |        |   | 2,000             |   |            | (2,000     | )                 |   | -          |   |   | - |   |   | - |   |
| Exercise                  of warrants                               |   |                     | 189,205      |        |   | 189               |   |            | (189       | )                 |   | -          |   |   | - |   |   | - |   |
| Cancellation                  of stock                              |   |                     | (771,060     | )           |   | (771              | )      |            | (2,589,992 | )                 |   | -          |   |   | - |   |   | (2,590,763 | ) |
| Foreign                  currency translation                       |   |                     |         |        |   |              |   |            |       |              |   |       |   |   |   |   |   |   |   |
| adjustment                                                          |   |                     | -            |        |   | -                 |   |            | -          |              |   | 5,567,813  |   |   | - |   |   | 5,567,813 |   |
| Net                  income                                         |   |                     | -            |        |   | -                 |   |            | -          |              |   | -          |   |   | 12,965,057 |   |   | 12,965,057 |   |
|                                                                |   |                     |         |        |   |              |   |            |       |              |   |       |   |   |   |   |   |   |   |
| Balance                  at March 31, 2008 (Unaudited and Restated) |   |                     | 45,896,288   |        | $      | 45,896            |   | $               | 73,643,064 |              | $      | 7,759,973  |   | $ | 29,973,295 |   | $ | 111,422,228 |   |

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

----

| **China                Precision Steel, Inc. and Subsidiaries**      |
|----------------------------------------------------------------------|
| **Condensed                Consolidated Statements of Cash Flows**   |
| **For                the Nine Months Ended March 31, 2008 and 2007** |
| **(Unaudited)**                                                      |

|                                                                                                                                 |   | **2008**                                            |        | **2007** |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|-------------|----------|--------|
|                                                                                                                                 |   | (Restated – see Noted 19) |        |     |   |
| **Cash                  flows from operating activities**                                                                            |   |                                                |        |     |   |   |   |
| **Net                  Income**                                                                                                      |   | $                                                   | 12,965,057  |     | $      | 7,405,078 |   |
| **Adjustments                    to reconcile net income to net cash provided by (used in) operating                    activities** |   |                                                |        |     |   |   |   |
| Depreciation                                                                                                                         |   |                                                | 1,841,947   |     |   | 1,095,981 |   |
| Less                  income from discontinued operations - Oralabs, Inc                                                             |   |                                                | -           |     |   | (831,448 | ) |
| Allowance                  for bad and doubtful debts                                                                                |   |                                                | 661,930     |     |   | 519,614 |   |
| Warrants                  issued for consulting                                                                                      |   |                                                | -           |     |   | 447,993 |   |
| **Net                  changes in assets and liabilities:**                                                                          |   |                                                |        |     |   |   |   |
| Accounts                  receivable, net                                                                                            |   |                                                | (26,067,887 | )        |   | 8,200,648 |   |
| Inventories                                                                                                                          |   |                                                | (2,616,526  | )        |   | (11,548,066 | ) |
| Deposits                                                                                                                             |   |                                                | 89,361      |     |   | (225,887 | ) |
| Prepayments                                                                                                                          |   |                                                | (429,556    | )        |   | - |   |
| Advances                  to suppliers                                                                                               |   |                                                | (25,893,725 | )        |   | (6,197,997 | ) |
| Accounts                  payable and accrued expenses                                                                               |   |                                                | 5,702,234   |     |   | 1,439,529 |   |
| Advances                  from customers                                                                                             |   |                                                | 5,037,976   |     |   | 984,523 |   |
| Other                  taxes payable                                                                                                 |   |                                                | 2,220,328   |     |   | 108,450 |   |
| Current                  income taxes                                                                                                |   |                                                | 2,365,673   |     |   | 2,513,992 |   |
| Deferred                  income taxes                                                                                               |   |                                                | (1,064,028  | )        |   | (960,262 | ) |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| **Net                  cash (used in) provided by operating activities**                                                             |   |                                                | (25,187,216 | )        |   | 2,952,148 |   |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| **Cash                  flows from investing activities**                                                                            |   |                                                |        |     |   |   |   |
| Purchases                  of property and equipment including construction in                  progress                             |   |                                                | (7,512,290  | )        |   | (10,329,164 | ) |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| **Net                  cash (used in) investing activities**                                                                         |   |                                                | (7,512,290  | )        |   | (10,329,164 | ) |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| **Cash                  flows from financing activities**                                                                            |   |                                                |        |     |   |   |   |
| Sale                  of common stock                                                                                                |   |                                                | 44,375,282  |     |   | 19,416,533 |   |
| Advances                  from directors, net                                                                                        |   |                                                | 2,572,846   |     |   | (3,708,722 | ) |
| Notes                  payable proceeds                                                                                              |   |                                                | 16,446,667  |     |   | 12,280,943 |   |
| Repayments                  of notes payable                                                                                         |   |                                                | (23,757,121 | )        |   | (10,204,006 | ) |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| **Net                  cash provided by financing activities**                                                                       |   |                                                | 39,637,674  |     |   | 17,784,748 |   |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| **Effect                  of exchange rate**                                                                                         |   |                                                | 1,852,473   |     |   | 990,914 |   |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| **Net                  increase in cash**                                                                                            |   |                                                | 8,790,641   |     |   | 11,398,646 |   |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| **Cash                  and cash equivalents, beginning of period**                                                                  |   |                                                | 5,504,862   |     |   | 186,955 |   |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| **Cash                  and cash equivalents, end of period**                                                                        |   | $                                                   | 14,295,503  |     | $      | 11,585,601 |   |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| **Supplemental                  disclosure of cash flow information**                                                                |   |                                                |        |     |   |   |   |
|                                                                                                                                 |   |                                                |        |     |   |   |   |
| Interest                  paid                                                                                                       |   | $                                                   | 1,174,864   |     | $      | 572,089 |   |
| Taxes                  paid                                                                                                          |   | $                                                   | -           |     | $      | - |   |
| Issuance                  of 2,798,191 shares of stock for syndication fees                                                          |   | $                                                   | -           |     | $      | 8,394,573 |   |
| Issuance                  of 100,000 warrants for services                                                                           |   | $                                                   | -           |     | $      | 562,731 |   |
| Issuance                  of 1,300,059 warrants for syndication fees                                                                 |   | $                                                   | -           |     | $      | 2,770,349 |   |
| Fixed                  asset purchases in accounts payable                                                                           |   | $                                                   | 233,885     |     | $      | - |   |

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

----

**China      Precision Steel, Inc.**

**1.   Description      of Business**

**2.          Basis of Preparation of Financial Statements**

----

**3.  **
**Summary      of Significant Accounting Policies**

**Cash      and Equivalents - **
** **

**Accounts      Receivable - **

**Inventory      - **

**Advances      to Suppliers - **

**Property,      Plant and Equipment - **

| Buildings                       |   | 10                years |
|---------------------------------|--------|-------------------------|
| Office                equipment |   | 5                years  |
| Motor                vehicles   |   | 5                years  |
| Machineries                     |   | 10                years |

**Capitalized      Interest -**

----

**Construction-in-Progress**

**Contingent      Liabilities and Contingent Assets**
**-**

**Advances      from customers**
**-**

**Revenue      Recognition - **

**Foreign      Currencies**

**Taxation      - **

**.      **
**.**

*Enterprise      income tax*

----

*Value      added tax*

**Retirement      Benefit Costs**

**Fair      Value of Financial Instruments - **

----

**Use      of Estimates**
**-**

**Reclassifications      - **

**Recent      Accounting Pronouncements**

----

**4.  Concentrations      of Business and Credit Risk**

| **Customers**                                                  |   | **March 31,****2008** |       | **% to****sales** |   | **March 31,****2007** |   | **% to****sales** |      |
|----------------------------------------------------------------|--------|----------------------------|------------|------------------------|--------|----------------------------|--------|------------------------|-----------|
| Shanghai                Changshuo Stainless Steel Company, Ltd |   | $                          | 14,174,957 |                   |   | 24                         |   | $                      | —   |   |   | — |   |
| Shanghai                Bayou Trade Co., Ltd.                  |   |                       | 10,854,529 |                   |   | 18                         |   |                   | —   |   |   | — |   |
| Shanghai                Shengdejia Metal Products Limited      |   |                       | 8,232,801  |                   |   | 14                         |   |                   | —   |   |   | — |   |
| Sinosteel                Company Limited                       |   |                       | —    |                   |   | —                    |   |                   | 4,805,195 |   |   | 13 |   |

**5.  **
**Inventories**

|                            |   | **March 31,****2008** |       | **June 30,****2007** |   |
|---------------------------------|--------|----------------------------|------------|---------------------------|--------|
| Raw                materials    |   | $                          | 9,668,424  |                      | $      | 13,026,530 |   |
| Work                in progress |   |                       | 3,631,070  |                      |   | - |   |
| Finished                goods   |   |                       | 6,295,330  |                      |   | 2,697,174 |   |
|                            |   | $                          | 19,594,824 |                      | $      | 15,723,704 |   |

**6.  **
**Property,      Plant and Equipment**

----

|                                          |   | **March 31,****2008** |       | **June 30,****2007** |   |
|-----------------------------------------------|--------|----------------------------|------------|---------------------------|--------|
| Plant                and machinery            |   | $                          | 19,840,572 |                      | $      | 21,087,245 |   |
| Buildings                                     |   |                       | 21,093,420 |                      |   | 11,361,207 |   |
| Motor                vehicles                 |   |                       | 359,482    |                      |   | 283,534 |   |
| Office                equipment               |   |                       | 78,519     |                      |   | 85,560 |   |
|                                          |   |                       | 41,371,993 |                      |   | 32,817,546 |   |
| Less:                Accumulated depreciation |   |                       | (5,714,303 | )                         |   | (3,579,319 | ) |
|                                          |   | $                          | 35,657,690 |                      | $      | 29,238,227 |   |

**7.  Construction-In-Progress**

|                                                     |   | **March 31,****2008** |       | **June 30,****2007** |   |
|----------------------------------------------------------|--------|----------------------------|------------|---------------------------|--------|
| Construction                costs of plant and machinery |   | $                          | 12,344,841 |                      | $      | 10,355,763 |   |

**8.  **
**Advances      from Customers**

**9.  **
**Transactions      with Related Parties**

| **Name**                      |   | **March 31, 2008** |      | **June 30, 2007** |   |
|-------------------------------|--------|------------------------------|-----------|-----------------------------|--------|
| Wo                Hing Li     |   | $                            | 2,852,704 |                        | $      | (2,590,763 | ) |
| Hai                Sheng Chen |   |                         | (45,351   | )                           |   | 408,620 |   |
|                          |   | $                            | 2,807,353 |                        | $      | (2,182,143 | ) |

----

**10.  Short-Term      Loans**

|                                                                                                                                                                                                                                                                                                                                      |   | **March 31,****2008** |       | **June 30,****2007** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|------------|---------------------------|--------|
| Bank                loan dated September 22, 2005, due December 31, 2007 with a interest                rate                of 15% over the standard market rate set by the People’s Bank of China for                Renminbi loans, secured by land, buildings and machinery                                                      |   | $                          | —    |                      | $      | 9,842,520 |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                       |       |                      |   |   |   |
| Bank                loan dated August 1, 2007, due in one year with a interest rate of                the                Singapore Interbank Offered Rate (SIBOR) plus 3% (5.72% at March                31,                2008)                                                                                                         |   |                       | 5,300,000  |                      |   | — |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                       |       |                      |   |   |   |
| Bank                loan dated August 1, 2007, due in one year with a interest rate of                13%                over the standard market rate set by the People’s Bank of China for                Renminbi loans, secured by land, buildings, plant and machinery (8.44%                at                March 31, 2008) |   |                       | 3,030,029  |                      |   | — |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                       |       |                      |   |   |   |
| Bank                loan dated July 26, 2007, due in one year with a interest rate of                15% over                the standard market rate set by the People’s Bank of China for Renminbi                loans, secured by land, buildings, plant and machinery (8.59% at                March 31,                2008)  |   |                       | 9,070,165  |                      |   | — |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                       |       |                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                                      |   | $                          | 17,400,194 |                      | $      | 9,842,520 |   |

**11.  Long-Term      Debts - Secured**

|                                                                                                                                                                                                                                                                                                    |   | **March 31,****2008** |    | **June 30,****2007** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|---------|---------------------------|--------|
| Long-term                debts:                                                                                                                                                                                                                                                                         |   |                       |    |                      |   |   |   |
|                                                                                                                                                                                                                                                                                                    |   |                       |    |                      |   |   |   |
| Bank                loan dated October 14, 2004, due July 31, 2007, at an interest rate                of 3%                over the 10% of the standard market rate set by the People’s Bank of China                for Renminbi loans, secured by land, buildings and                machinery |   | $                          | — |                      | $      | 6,163,445 |   |
|                                                                                                                                                                                                                                                                                                    |   |                       |    |                      |   |   |   |
| Bank                loan dated September 22, 2005, due August 31, 2009, at an interest                rate of                15% the standard market rate set by the People’s Bank of China for                Renminbi loans, secured by land, buildings and machinery                           |   |                       | — |                      |   | 6,878,714 |   |
|                                                                                                                                                                                                                                                                                                    |   |                       |    |                      |   |   |   |
| Total                long-term debt                                                                                                                                                                                                                                                                     |   |                       | — |                      |   | 13,042,159 |   |
| Less:                Current portion of long-term debts                                                                                                                                                                                                                                                 |   |                       | — |                      |   | 6,163,445 |   |
|                                                                                                                                                                                                                                                                                                    |   |                       |    |                      |   |   |   |
| Long-term                debts                                                                                                                                                                                                                                                                          |   | $                          | — |                      | $      | 6,878,714 |   |

**12.  Income      Tax**

----

|                             |   | **Three months ended****March                31,** |    | **Nine                months ended****March                31,** |   |
|----------------------------------|--------|--------------------------------------------------------------|---------|------------------------------------------------------------------|--------|
|                             |   | **2008**                                                     |    | **2007**                                                         |   | **2008** |   | **2007** |   |
| Tax                savings       |   | $                                                            | 556,675 |                                                             | $      | 315,879 |   | $ | 1,971,827 |   | $ | 1,023,932 |   |
|                             |   |                                                         |    |                                                             |   |   |   |   |   |   |   |   |   |
| Benefit                per share |   |                                                         |    |                                                             |   |   |   |   |   |   |   |   |   |
| Basic                            |   | $                                                            | 0.01    |                                                             | $      | 0.01 |   | $ | 0.05 |   | $ | 0.04 |   |
| Diluted                          |   | $                                                            | 0.01    |                                                             | $      | 0.01 |   | $ | 0.05 |   | $ | 0.04 |   |

| **Deferred tax                assets and liabilities:**              |   | **March  31,****2008** |     | **June 30,****2007** |   |
|--------------------------------------------------------------------------------|--------|----------------------------------|----------|---------------------------|--------|
|                                                                           |   |                             |     |                      |   |
| Book                depreciation in excess of tax depreciation                 |   | $                                | 77,143   |                      | $      | 39,918 |   |
|                                                                           |   |                             |     |                      |   |   |   |
| Temporary                differences resulting from reporting for tax purposes |   |                             | 443,561  |                      |   | (1,103,946 | ) |
|                                                                           |   |                             |     |                      |   |   |   |
| Net                deferred income tax asset (liability)                       |   |                             | 520,704  |                      | $      | (1,064,028 | ) |
| Valuation                allowance                                             |   |                             | (520,704 | )                         |   | - |   |
|                                                                           |   |                             | -        |                      | $      | (1,064,028 | ) |

|                                                                                                        |   | **Three months ended****March 31,** |      | **Nine months ended****March                31,** |   |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|-----------|-------------------------------------------------------------|--------|
|                                                                                                        |   | **2008**                                           |      | **2007**                                                    |   | **2008** |   | **2007** |   |
| Computed                tax at the federal statutory rate of 34%                                            |   | $                                                  | 1,421,718 |                                                        | $      | 582,113 |   | $ | 4,610,824 |   | $ | 2,617,802 |   |
| Less                adjustment to EIT statutory rate of 25% in 2008 and 27% in 2007 and                2006 |   |                                               | (517,760  | )                                                           |   | (119,847 | ) |   | (1,131,579 | ) |   | (538,959 | ) |
| Tax                effect of US losses not deductible in PRC                                                |   |                                               | 229,185   |                                                        |   | 172,733 |   |   | 446,953 |   |   | 172,733 |   |
| Income                not subject to tax                                                                    |   |                                               | -         |                                                        |   | - |   |   | (330,361 | ) |   | - |   |
| Deferred                taxes                                                                               |   |                                               | -         |                                                        |   | (3,241 | ) |   | (1,064,028 | ) |   | (101,857 | ) |
| Benefit                of tax holiday                                                                       |   |                                               | (589,520  | )                                                           |   | (315,879 | ) |   | (1,935,620 | ) |   | (1,023,932 | ) |
|                                                                                                        |   |                                               |      |                                                        |   |   |   |   |   |   |   |  |   |
| Income                tax expense per books                                                                 |   | $                                                  | 543,623   |                                                        | $      | 315,879 |   | $ | 596,189 |   | $ | 1,125,787 |   |

|                                                                 |   | **Three                months ended****March                31,** |    | **Nine months ended****March                31,** |   |
|----------------------------------------------------------------------|--------|-------------------------------------------------------------------|---------|-------------------------------------------------------------|--------|
|                                                                 |   | **2008**                                                          |    | **2007**                                                    |   | **2008** |   | **2007** |   |
| Income                tax expense (benefit) for the current year PRC |   | $                                                                 | 543,623 |                                                        | $      | 1,196,573 |   | $ | 1,660,217 |   | $ | 2,091,886 |   |
| Deferred                income tax expense (benefit) – PRC     |   |                                                              | -       |                                                        |   | (880,694 | ) |   | (1,064,028 | ) |   | (966,099 | ) |
| Income                tax expense per books                          |   | $                                                                 | 543,623 |                                                        | $      | 315,879 |   | $ | 596,189 |   | $ | 1,125,787 |   |

**13.  Blessford      International Limited**

----

**14.  Equity**

| **Exercise****Price** |   | **Outstanding****June 30, 2007** |   | **Granted** |   | **Expired or****Exercised** |      | **Outstanding****March 31,****2008** |   | **Expiration Date** |   |
|-----------------------|--------|--------------------------------------------|--------|-------------|--------|----------------------------------|-----------|-------------------------------------------|--------|--------------------------|--------|
| $                     | 3.00   |                                       |   | 1,300,059   |   |                             | -0-       |                                      |   | (275,000                 | )      |   | 1,025,059 |   |   | 02/22/2011 |   |
| $                     | 3.60   |                                       |   | 100,000     |   |                             | -0-       |                                      |   | -0-                      |   |   | 100,000 |   |   | 02/22/2010 |   |
| $                     | 8.45   |                                       |   | -0-         |   |                             | 1,420,000 |                                      |   | -0-                      |   |   | 1,420,000 |   |   | 11/06/2010 |   |
| $                     | 7.38   |                                       |   | -0-         |   |                             | 225,600   |                                      |   | -0-                      |   |   | 225,600 |   |   | 11/06/2010 |   |

----

**15.  Earnings      Per Share**

|                                                               |   | **Income**      |      | **Shares**        |   | **Per Share** |   |
|--------------------------------------------------------------------|--------|-----------------|-----------|-------------------|--------|--------------------|--------|
|                                                               |   | **(Numerator)** |      | **(Denominator)** |   | **Amount**         |   |
| For                the three months ended March 31, 2008:          |   |            |      |              |   |               |   |   |   |   |
| Net                income                                          |   | $               | 3,637,900 |              |   |               |   |   |   |   |
| Less                Net income from discontinued operations        |   | $               | —   |              |   |               |   |   |   |   |
| Basic                EPS income available to common shareholders   |   | $               | 3,637,900 |              |   | 45,896,288         |   | $ | 0.08 |   |
| Effect                of dilutive securities:                      |   |            |      |              |   |               |   |   |   |   |
| Warrants                                                           |   |            |      |              |   | 469,490            |   |   |   |   |
| Diluted                EPS income available to common shareholders |   | $               | 3,637,900 |              |   | 46,365,778         |   | $ | 0.08 |   |
|                                                               |   |            |      |              |   |               |   |   |   |   |
| For                the three months ended March 31, 2007:          |   |            |      |              |   |               |   |   |   |   |
| Net                income                                          |   | $               | 1,396,217 |              |   |               |   |   |   |   |
| Less                net income from discontinued operations        |   | $               | -         |              |   |               |   |   |   |   |
| Basic                EPS income available to common shareholders   |   | $               | 1,396,217 |              |   | 28,946,086         |   | $ | 0.05 |   |
| Effect                of dilutive securities:                      |   |            |      |              |   |               |   |   |   |   |
| Warrants                                                           |   |            |      |              |   | 441,274            |   |   |   |   |
| Diluted                EPS income available to common shareholders |   | $               | 1,396,217 |              |   | 29,387,360         |   | $ | 0.05 |   |

|                                                               |   | **Income**      |                       | **Shares**        |   | **Per Share** |   |
|--------------------------------------------------------------------|--------|-----------------|----------------------------|-------------------|--------|--------------------|--------|
|                                                               |   | **(Numerator)** |                       | **(Denominator)** |   | **Amount**         |   |
| For                the nine months ended March 31, 2008:           |   |            |                       |              |   |               |   |   |   |   |
| Net                income                                          |   | $               | 12,965,057                 |              |   |               |   |   |   |   |
| Less                Net income from discontinued operations        |   | $               | -                          |              |   |               |   |   |   |   |
| Basic                EPS income available to common shareholders   |   | $               | 12,                965,057 |              |   | 42,088,128         |   | $ | 0.31 |   |
| Effect                of dilutive securities:                      |   |            |                       |              |   |               |   |   |   |   |
| Warrants                                                           |   |            |                       |              |   | 467,784            |   |   |   |   |
| Diluted                EPS income available to common shareholders |   | $               | 12,                965,057 |              |   | 42,555,912         |   | $ | 0.30 |   |
|                                                               |   |            |                       |              |   |               |   |   |   |   |
| For                the nine months ended March 31, 2007:           |   |            |                       |              |   |               |   |   |   |   |
| Net                income                                          |   | $               | 7,405,078                  |              |   |               |   |   |   |   |
| Less                net income from discontinued operations        |   | $               | (831,448)                  |              |   |               |   |   |   |   |
| Basic                EPS income available to common shareholders   |   | $               | 6,573,630                  |              |   | 25,815,157         |   | $ | 0.26 |   |
| Effect                of dilutive securities:                      |   |            |                       |              |   |               |   |   |   |   |
| Warrants                                                           |   |            |                       |              |   | 144,944            |   |   |   |   |
| Diluted                EPS income available to common shareholders |   | $               | 6,573,630                  |              |   | 25,960,101         |   | $ | 0.29 |   |

----

**16.  Discontinued      Operations**

|                                               |   | **Three months ended:** |   | **Nine                months ended** |   |
|----------------------------------------------------|--------|-----------------------------------|--------|--------------------------------------|--------|
|                                               |   | **March                31,**      |   | **March                31,**         |   | **March                31,** |   | **March                31,** |   |
|                                               |   | **2008**                          |   | **2007**                             |   | **2008**** ** |   | **2007** |   |
|                                               |   |                              |   |                                 |   |   |   |   |   |
| Revenues                                           |   | $                                 | -0-    |                                 | $      | -0- |   | $ | _-0- |   | $ | 9,404,000 |   |
| Income                before tax                   |   |                              | -0-    |                                 |   | -0- |   |   | -0- |   |   | 1,023,000 |   |
| Income                taxes                        |   |                              | -0-    |                                 |   | -0- |   |   | -0- |   |   | 192,000 |   |
| Income                from discontinued operations |   | $                                 | -0-    |                                 | $      | -0- |   | $ | -0- |   | $ | 831,000 |   |

**17.  Commitments**

**18.**
**Other      Events**

**       Restatement **

----

**China      Precision Steel, Inc. and Subsidiaries**

**Condensed      Consolidated Balance Sheets**

|                                                                                                                                                                                                        |   | **March                31,** |        | **March                31,** |   |         |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-------------|------------------------------|--------|--------------|--------|
|                                                                                                                                                                                                        |   | **2008**                     |        | **2008**                     |   | **2008**     |   |
|                                                                                                                                                                                                        |   | **Initial Filing**      |        | **Restatement**              |   | **Restated** |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Assets**                                                                                                                                                                                                  |   |                         |        |                         |   |         |   |   |   |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Current                assets**                                                                                                                                                                           |   |                         |        |                         |   |         |   |   |   |   |
| Cash                and equivalents                                                                                                                                                                         |   | $                            | 14,295,503  |                         | $      | -            |   | $ | 14,295,503 |   |
| Accounts                receivable                                                                                                                                                                          |   |                         |        |                         |   |         |   |   |   |   |
| Trade,                net of allowances of $994,313 and $273,461at March 31, 2008 and June                30,                2007, respectively                                                             |   |                         | 25,406,355  |                         |   | -            |   |   | 25,406,355 |   |
| Bank                acceptance notes                                                                                                                                                                        |   |                         | 4,197,091   |                         |   | -            |   |   | 4,197,091 |   |
| Other                                                                                                                                                                                                       |   |                         | 4,794,735   |                         |   | -            |   |   | 4,794,735 |   |
| Inventories                                                                                                                                                                                                 |   |                         | 19,594,824  |                         |   | -            |   |   | 19,594,824 |   |
| Deposits                                                                                                                                                                                                    |   |                         | -           |                         |   | -            |   |   | - |   |
| Prepaid                expenses                                                                                                                                                                             |   |                         | 429,556     |                         |   | -            |   |   | 429,556 |   |
| Advances                to suppliers, net of allowance of $2,466,098 and $3,502,184 at March                31,                2008 and June 30, 2007,respectively                                          |   |                         | 38,527,179  |                         |   | -            |   |   | 38,527,179 |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Total                current assets**                                                                                                                                                                     |   |                         | 107,245,243 |                         |   | -            |   |   | 107,245,243 |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Property                and equipment**                                                                                                                                                                   |   |                         |        |                         |   |         |   |   |   |   |
| Land                use rights                                                                                                                                                                              |   |                         | 1,869,205   |                         |   | -            |   |   | 1,869,205 |   |
| Property                and equipment, net                                                                                                                                                                  |   |                         | 35,657,690  |                         |   | -            |   |   | 35,657,690 |   |
| Construction-in-progress                                                                                                                                                                                    |   |                         | 12,344,841  |                         |   | -            |   |   | 12,344,841 |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
|                                                                                                                                                                                                        |   |                         | 49,871,736  |                         |   | -            |   |   | 49,871,736 |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Goodwill**                                                                                                                                                                                                |   |                         | 99,999      |                         |   | -            |   |   | 99,999 |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Total                assets**                                                                                                                                                                             |   | $                            | 157,216,978 |                         | $      | -            |   | $ | 157,216,978 |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Liabilities                and Stockholders' Equity**                                                                                                                                                     |   |                         |        |                         |   |         |   |   |   |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Current                liabilities**                                                                                                                                                                      |   |                         |        |                         |   |         |   |   |   |   |
| Accounts                payable and accrued liabilities                                                                                                                                                     |   | $                            | 11,179,506  |                         | $      | (1)          |   | $ | 11,179,505 |   |
| Advances                from customers                                                                                                                                                                      |   |                         | 6,896,092   |                         |   | -            |   |   | 6,896,092 |   |
| Other                taxes payables                                                                                                                                                                         |   |                         | 3,431,415   |                         |   | (329,380     | )      |   | 3,102,035 |   |
| Current                income taxes payable                                                                                                                                                                 |   |                         | 4,373,885   |                         |   | 35,686       |   |   | 4,409,571 |   |
| Deferred                income taxes payable                                                                                                                                                                |   |                         | -           |                         |   | -            |   |   | - |   |
| Amounts                due to directors                                                                                                                                                                     |   |                         | 2,807,353   |                         |   | -            |   |   | 2,807,353 |   |
| Current                portion of long-term debt                                                                                                                                                            |   |                         | -           |                         |   | -            |   |   | - |   |
| Notes                payable                                                                                                                                                                                |   |                         | 17,400,194  |                         |   | -            |   |   | 17,400,194 |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Total                current liabilities**                                                                                                                                                                |   |                         | 46,088,445  |                         |   | (293,695     | )      |   | 45,794,750 |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Long-term                debt, net of current portion shown above**                                                                                                                                       |   |                         | -           |                         |   | -            |   |   | - |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Stockholders'                equity:**                                                                                                                                                                    |   |                         |        |                         |   |         |   |   |   |   |
| Preferred                stock: $0.001 per value, 8,000,000 shares authorized, no shares                outstanding at March 31, 2008 and June 30, 2007;                                                    |   |                         |        |                         |   |         |   |   |   |   |
| Common                stock: $0.001 par value, 62,000,000 shares authorized, 45,896,288                and                37,378,143 issued and outstanding March 31, 2008 and June 30,                2007 |   |                         | 45,896      |                         |   | -            |   |   | 45,896 |   |
| Additional                paid-in capital                                                                                                                                                                   |   |                         | 73,643,064  |                         |   | -            |   |   | 73,643,064 |   |
| Accumulated                other comprehensive income                                                                                                                                                       |   |                         | 7,745,138   |                         |   | 14,835       |   |   | 7,759,973 |   |
| Retained                earnings                                                                                                                                                                            |   |                         | 29,694,435  |                         |   | 278,860      |   |   | 29,973,295 |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Total                stockholders' equity**                                                                                                                                                               |   |                         | 111,128,533 |                         |   | 293,695      |   |   | 111,422,228 |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Amounts                due from directors**                                                                                                                                                               |   |                         | -           |                         |   | -            |   |   | - |   |
|                                                                                                                                                                                                        |   |                         |        |                         |   |         |   |   |   |   |
| **Total                liabilities and stockholders' equity**                                                                                                                                               |   | $                            | 157,216,978 |                         | $      | -            |   | $ | 157,216,978 |   |

----

**       Restatement (continued)**

**Unaudited      Condensed Consolidated Statements of Operations**

**For      the Three Months Ended March 31, 2008**

|                                                                                      |   |   |   |  **Three Months Ended March 31, 2008** |   | **Nine Months Ended March 31, 2008** |   |
|-------------------------------------------------------------------------------------------|--------|--------|--------|----------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                                                                      |   |   |   |  **Initial Filing**                                        |   | **Restatement**                                               |   | **Restated** |   | **Initial Filing** |   | **Restatement** |   | **Restated** |   |
|                                                                                      |   |   |   |                                                            |   |                                                          |   |   |   |   |   |   |   |   |   |
| **Revenues**                                                                              |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales                revenues                                                             |   |   |   |                                                                 | $      | 18,723,842                                                    |   | $ | 49,662 |   | $ | 18,773,504 |   | $ | 59,189,060 |   | $ | - |   | $ | 59,189,060 |   |
| Cost                of goods sold                                                         |   |   |   |                                                                 |   | 13,399,010                                                    |   |   | - |   |   | 13,399,010 |   |   | 42,172,998 |   |   | (1 | ) |   | 42,172,997 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Gross                profit**                                                           |   |   |   |                                                                 |   | 5,324,832                                                     |   |   | 49,662 |   |   | 5,374,494 |   |   | 17,016,062 |   |   | 1 |   |   | 17,016,063 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                expenses**                                                     |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                expenses                                                           |   |   |   |                                                                 |   | 203,477                                                       |   |   | - |   |   | 203,477 |   |   | 484,926 |   |   | - |   |   | 484,926 |   |
| Administrative                expenses                                                    |   |   |   |                                                                 |   | 699,221                                                       |   |   | (1 | ) |   | 699,220 |   |   | 2,031,816 |   |   | - |   |   | 2,031,816 |   |
| Provision                for bad debts                                                    |   |   |   |                                                                 |   | 10,150                                                        |   |   | - |   |   | 10,150 |   |   | 661,930 |   |   | - |   |   | 661,930 |   |
| Depreciation                and amortization expense                                      |   |   |   |                                                                 |   | 17,155                                                        |   |   | - |   |   | 17,155 |   |   | 46,585 |   |   | - |   |   | 46,585 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                operating expenses**                                               |   |   |   |                                                                 |   | 930,003                                                       |   |   | (1 | ) |   | 930,002 |   |   | 3,225,257 |   |   | - |   |   | 3,225,257 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                from continuing operations**                                      |   |   |   |                                                                 |   | 4,394,829                                                     |   |   | 49,663 |   |   | 4,444,492 |   |   | 13,790,805 |   |   | 1 |   |   | 13,790,806 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                income (expense)**                                                 |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                revenues                                                             |   |   |   |                                                                 |   | 152,894                                                       |   |   | - |   |   | 152,894 |   |   | 945,304 |   |   | - |   |   | 945,304 |   |
| Interest                and finance costs                                                 |   |   |   |                                                                 |   | (415,863                                                      | )      |   | - |   |   | (415,863 | ) |   | (1,174,864 | ) |   | - |   |   | (1,174,864 | ) |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                other income (expense)**                                           |   |   |   |                                                                 |   | (262,969                                                      | )      |   | - |   |   | (262,969 | ) |   | (229,560 | ) |   | - |   |   | (229,560 | ) |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                income from continuing operations before income                tax** |   |   |   |                                                                 |   | 4,131,860                                                     |   |   | 49,663 |   |   | 4,181,523 |   |   | 13,561,245 |   |   | 1 |   |   | 13,561,246 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Provision                for (benefit from) income tax**                                |   |   | 12     |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                                                                                   |   |   |   |                                                                 |   | 1,598,777                                                     |   |   | (1,055,154 | ) |   | 543,623 |   |   | 2,047,911 |   |   | (387,694 | ) |   | 1,660,217 |   |
| Deferred                                                                                  |   |   |   |                                                                 |   | (2,089,956                                                    | )      |   | 2,089,956 |   |   | - |   |   | (1,172,863 | ) |   | 108,835 |   |   | (1,064,028 | ) |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                income tax expense                                                   |   |   |   |                                                                 |   | (491,179                                                      | )      |   | 1,034,802 |   |   | 543,623 |   |   | 875,048 |   |   | (278,859 | ) |   | 596,189 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                income before discontinued operations**                              |   |   |   |                                                                 |   | 4,623,039                                                     |   |   | (985,139 | ) |   | 3,637,900 |   |   | 12,686,197 |   |   | 278,860 |   |   | 12,965,057 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                income from discontinued operations**                                |   |   | 16     |                                                                 |   | -                                                             |   |   |   |   |   | - |   |   | - |   |   |   |   |   | - |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                income**                                                             |   |   |   |                                                                 | $      | 4,623,039                                                     |   | $ | (985,139 | ) | $ | 3,637,900 |   | $ | 12,686,197 |   | $ | 278,860 |   | $ | 12,965,057 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                earnings per share**                                               |   |   | 15     |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| From                continuing operations                                                 |   |   |   |                                                                 | $      | 0.10                                                          |   | $ | (0.02 | ) | $ | 0.08 |   | $ | 0.30 |   | $ | 0.01 |   | $ | 0.31 |   |
| From                discontinued operations                                               |   |   |   |                                                                 | $      | -                                                             |   |   |   |   | $ | - |   | $ | - |   |   |   |   | $ | - |   |
| Total                                                                                     |   |   |   |                                                                 | $      | 0.10                                                          |   | $ | (0.02 | ) | $ | 0.08 |   | $ | 0.30 |   | $ | 0.01 |   | $ | 0.31 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                weighted average shares outstanding**                              |   |   |   |                                                                 |   | 45,896,288                                                    |   |   | - |   |   | 45,896,288 |   |   | 42,088,128 |   |   | - |   |   | 42,088,128 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                earnings per share**                                             |   |   | 15     |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| From                continuing operations                                                 |   |   |   |                                                                 | $      | 0.10                                                          |   | $ | (0.02 | ) | $ | 0.08 |   | $ | 0.30 |   | $ | 0.01 |   | $ | 0.30 |   |
| From                discontinued operations                                               |   |   |   |                                                                 | $      | -                                                             |   |   |   |   | $ | - |   | $ | - |   |   |   |   | $ | - |   |
| Total                                                                                     |   |   |   |                                                                 | $      | 0.10                                                          |   | $ | (0.02 | ) | $ | 0.08 |   | $ | 0.30 |   | $ | 0.01 |   | $ | 0.30 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                weighted average shares outstanding**                            |   |   |   |                                                                 |   | 46,365,778                                                    |   |   | - |   |   | 46,365,778 |   |   | 42,555,912 |   |   | - |   |   | 42,555,912 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **The                Components of comprehensive income:**                                |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                 |   |   |   |                                                                 | $      | 4,623,039                                                     |   | $ | (985,139 | ) | $ | 3,637,900 |   | $ | 12,686,197 |   | $ | 278,860 |   | $ | 12,965,057 |   |
| Foreign                currency translation adjustment                                    |   |   |   |                                                                 |   | 3,548,639                                                     |   |   | (67,141 | ) |   | 3,481,498 |   |   | 5,552,978 |   |   | 14,835 |   |   | 5,567,813 |   |
|                                                                                      |   |   |   |                                                                 |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Comprehensive                income**                                                   |   |   |   |                                                                 | $      | 8,171,678                                                     |   | $ | (1,052,280 | ) | $ | 7,119,398 |   | $ | 18,239,175 |   | $ | 293,695 |   | $ | 18,532,870 |   |

----

**Unaudited      Condensed Consolidated Statements of Cash Flows**

**For      the Three Months Ended March 31, 2008**

|                                                                                                                         |   | **Initial Filing** |        | **Restatement** |   | **Restated** |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|-----------------|--------|--------------|--------|
|                                                                                                                         |   |                    |        |            |   |         |   |
| **Cash                flows from operating activities**                                                                      |   |                    |        |            |   |         |   |   |   |   |
| **Net                Income**                                                                                                |   | $                       | 12,686,197  |            | $      | 278,860      |   | $ | 12,965,057 |   |
| **Adjustments                to reconcile net income to net cash provided by (used in) operating                activities** |   |                    |        |            |   |         |   |   |   |   |
| Depreciation                                                                                                                 |   |                    | 1,841,947   |            |   | -            |   |   | 1,841,947 |   |
| Less                income from discontinued operations - Oralabs, Inc                                                       |   |                    | -           |            |   |         |   |   | - |   |
| Allowance                for bad and doubtful debts                                                                          |   |                    | 661,930     |            |   | -            |   |   | 661,930 |   |
| Warrants                issued for consulting                                                                                |   |                    |        |            |   |         |   |   |   |   |
| **Net                changes in assets and liabilities:**                                                                    |   |                    |        |            |   |         |   |   |   |   |
| Accounts                receivable, net                                                                                      |   |                    | (26,067,887 | )               |   | -            |   |   | (26,067,887 | ) |
| Inventories                                                                                                                  |   |                    | (2,616,526  | )               |   | -            |   |   | (2,616,526 | ) |
| Deposits                                                                                                                     |   |                    | 89,361      |            |   | -            |   |   | 89,361 |   |
| Prepayments                                                                                                                  |   |                    | (429,556    | )               |   | -            |   |   | (429,556 | ) |
| Advances                to suppliers                                                                                         |   |                    | (25,893,725 | )               |   | -            |   |   | (25,893,725 | ) |
| Accounts                payable and accrued expenses                                                                         |   |                    | 5,702,234   |            |   | -            |   |   | 5,702,234 |   |
| Advances                from customers                                                                                       |   |                    | 5,037,976   |            |   | -            |   |   | 5,037,976 |   |
| Other                taxes payable                                                                                           |   |                    | 2,657,687   |            |   | (437,359     | )      |   | 2,220,328 |   |
| Current                income taxes                                                                                          |   |                    | 2,329,987   |            |   | 35,686       |   |   | 2,365,673 |   |
| Deferred                income taxes                                                                                         |   |                    | (1,148,927  | )               |   | 84,899       |   |   | (1,064,028 | ) |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| **Net                cash (used in) provided by operating activities**                                                       |   |                    | (25,149,302 | )               |   | (37,914      | )      |   | (25,187,216 | ) |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| **Cash                flows from investing activities**                                                                      |   |                    |        |            |   |         |   |   |   |   |
| Purchases                of property and equipment including construction in                progress                         |   |                    | (7,512,290  | )               |   | -            |   |   | (7,512,290 | ) |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| **Net                cash (used in) investing activities**                                                                   |   |                    | (7,512,290  | )               |   | -            |   |   | (7,512,290 | ) |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| **Cash                flows from financing activities**                                                                      |   |                    |        |            |   |         |   |   |   |   |
| Sale                of common stock                                                                                          |   |                    | 44,375,282  |            |   | -            |   |   | 44,375,282 |   |
| Advances                from directors, net                                                                                  |   |                    | 2,464,868   |            |   | 107,978      |   |   | 2,572,846 |   |
| Notes                payable proceeds                                                                                        |   |                    | 16,446,667  |            |   | -            |   |   | 16,446,667 |   |
| Repayments                of notes payable                                                                                   |   |                    | (23,757,121 | )               |   | -            |   |   | (23,757,121 | ) |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| **Net                cash provided by financing activities**                                                                 |   |                    | 39,529,696  |            |   | 107,978      |   |   | 39,637,674 |   |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| **Effect                of exchange rate**                                                                                   |   |                    | 1,922,537   |            |   | (70,064      | )      |   | 1,852,473 |   |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| **Net                increase in cash**                                                                                      |   |                    | 8,790,641   |            |   | -            |   |   | 8,790,641 |   |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| **Cash                and cash equivalents, beginning of year**                                                              |   |                    | 5,504,862   |            |   | -            |   |   | 5,504,862 |   |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| **Cash                and cash equivalents, end of year**                                                                    |   | $                       | 14,295,503  |            | $      | -            |   | $ | 14,295,503 |   |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| **Supplemental                disclosure of cash flow information**                                                          |   |                    |        |            |   |         |   |   |   |   |
|                                                                                                                         |   |                    |        |            |   |         |   |   |   |   |
| Interest                paid                                                                                                 |   | $                       | 1,174,864   |            | $      | -            |   | $ | 1,174,864 |   |
| Taxes                paid                                                                                                    |   | $                       | -           |            |   |         |   | $ | - |   |
| Issuance                of 2,798,191 shares of stock for syndication fees                                                    |   | $                       | -           |            |   |         |   | $ | - |   |
| Issuance                of 100,000 warrants for services                                                                     |   | $                       | -           |            |   |         |   | $ | - |   |
| Issuance                of 1,300,059 warrants for syndication fees                                                           |   | $                       | -           |            |   |         |   | $ | - |   |
| Fixed                asset purchases in accounts payable                                                                     |   | $                       | 233,885     |            | $      | -            |   | $ | 233,885 |   |

----

**ITEM      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATION**

*This      Quarterly Report on Form 10-Q contains statements that constitute “forward      looking statements” within the meaning of Section 21E of the Securities      Exchange Act of 1934, as amended, and Section 27A of the Securities Act of      1933, as amended. The words “may,” “will,” “expect,” “anticipate,” “continue,”“estimate,” “project,” “intend,” and similar expressions are intended to      identify forward-looking statements. These statements appear in a number of      places in this document and include statements regarding the intent, belief      or      expectation of the Company, its directors or its officers with respect to      events, conditions, and financial trends that may affect the Company’s future      plans of operations, business strategy, operating results, and financial      position. Persons reviewing this Quarterly Report on Form 10-Q are      cautioned that any forward-looking statements are not guarantees of future      performance and are subject to risks and uncertainties and that actual results      may differ materially from those included within the forward-looking statements      as a result of various factors. More information on these risks and      uncertainties, many of which are beyond the Company’s control, is set forth      under Part II, Item 1A, “Risk Factors,” in the Company’s Form 10-K filed on      October 26, 2007.*

*While      these forward-looking statements, and any assumptions upon which they are based,      are made in good faith and reflect the Company’s current judgment regarding the      direction of its business, actual results will almost always vary, sometimes      materially, from any estimates, predictions, projections, assumptions or other      future performance suggested herein. The Company undertakes no responsibility      or      obligation to update publicly these forward-looking statements, but may do      so in      the future in written or oral statements. Investors should take note of any      future statements made by or on behalf the Company.*

**Introduction**

|  | · | **Overview                of the Company’s Business**                -                This section provides a general description of the Group’s business, as                well as recent developments that have either occurred during the                nine                months ended March 31, 2008 and are important in understanding the                results                of operations and financial condition or disclose known                trends. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Results                of Operations**                -                This section provides an analysis of our results of operations for                the                three and nine months ended March 31, 2008 and 2007. This discussion                includes a brief description of significant transactions and events                that                have an impact on the comparability of the results being                analyzed. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Liquidity                and Capital Resources**                -                This section provides an analysis of the Group’s cash flows for the nine                months ended March 31, 2008 and 2007. Included in this section is a                discussion of the Group’s outstanding debt and the financial capacity                available to fund the Group’s future commitments and                obligations. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Overview      of the Company’s Business**

----

**Results      of Operations**

***Three      Months Ended March 31, 2008 Compared to Three Months Ended March 31,      2007***

***Gross      Profit***

***Sales      Revenues.***

----

** **

|                                         |   | **Three Months Ended March 31,** |    |                    |   |
|----------------------------------------------|--------|------------------------------------------------------|---------|-------------------------|--------|
|                                         |   | **2008**                                             |    | **2007**                |   | **Period-on-period** |   |
| **Product category**                    |   | **Quantity****(tons)**                               |    | **$  Amount** |   | **% of sales** |   | **Quantity****(tons) ** |   | **$**** Amount** |   | **% of****sales** |   | **Qty.****        Variance         ** |   |
|                                         |   |                                                 |    |                    |   |   |   |   |   |   |   |   |   |   |   |
| Low                      carbon cold-rolled  |   |                                                 | 7,196   |                    |   | 5,362,597 |   |   | 28.6 |   |   | 8,739 |   |   | 5,233,213 |   |   | 45.0 |   |   | (1,543 | ) |
| Low                      carbon hard rolled  |   |                                                 | 5,178   |                    |   | 3,562,724 |   |   | 19.0 |   |   | 378 |   |   | 262,340 |   |   | 2.3 |   |   | 4,800 |   |
| High-carbon                      cold-rolled |   |                                                 | 3,270   |                    |   | 4,011,039 |   |   | 21.4 |   |   | 2,309 |   |   | 3,583,283 |   |   | 30.9 |   |   | 961 |   |
| High-carbon                      hot-rolled  |   |                                                 | 1,592   |                    |   | 1,447,782 |   |   | 7.7 |   |   | 4,511 |   |   | 2,334,225 |   |   | 20.1 |   |   | (2,919 | ) |
| Sales                      of scrap metal    |   |                                                 | — |                    |   | 346,524 |   |   | 1.8 |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Subcontracting                      income   |   |                                                 | 7,037   |                    |   | 4,042,838 |   |   | 21.5 |   |   | — |   |   | — |   |   | — |   |   | 7,037 |   |
| High                      end cold- rolled   |   |                                                 | — |                    |   | — |   |   | — |   |   | 173 |   |   | 197,612 |   |   | 1.7 |   |   | (173 | ) |
| Total                                        |   |                                                 | 24,273  |                    |   | 18,773,504 |   |   | 100.0 |   |   | 16,110 |   |   | 11,610,673 |   |   | 100 |   |   |  |   |

|                                   |   | **Three Months Ended ****March 31,** |    |
|----------------------------------------|--------|----------------------------------------------------------|---------|
| **Average selling prices**   |   | **2008**                                                 |    | **2007** |   | **Variance** |   |
|                                   |   | **$**                                                    |    | **$** |   | **$** |   | **%** |   |
| Low-carbon                cold-rolled  |   |                                                     | 745     |   |   | 599 |   |   | 146 |   |   | 24.4 |   |
| Low-carbon                hard rolled  |   |                                                     | 688     |   |   | 694 |   |   | (6 | ) |   | (0.9 | ) |
| High-carbon                cold-rolled |   |                                                     | 1,227   |   |   | 1,552 |   |   | (325 | ) |   | (20.9 | ) |
| High-carbon                hot-rolled  |   |                                                     | 909     |   |   | 517 |   |   | 392 |   |   | 75.8 |   |
| Subcontracting                income   |   |                                                     | 575     |   |   | — |   |   | 575 |   |   | 100 |   |
| High-end                cold-rolled    |   |                                                     | — |   |   | 1,142 |   |   | (1,142 | ) |   | (100 | ) |

----

|                                                                                                      |   | **Three Months Ended March 31** |         |
|-----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------------|
| **Customers**                                                                                             |   | **2008 ($)**                                   |         | **% to sales** |   | **2007 ($)** |   | **% to sales** |   |
|                                                                                                      |   |                                                |         |   |   |   |   |   |   |
| Shanghai                  Baosteel Stainless Steel Processing and Distribution Co.,                  Ltd. |   |                                                | 3,906,047    |   |   | 21 |   |   |   | * |   |   | *  |
| Shanghai                  Bayou Trading Co., Ltd                                                          |   |                                                | 1,628,451    |   |   | 9 |   |   |   | *  |   |   | *  |
| Shanghai                  Shengdejia Metal Products Co., Ltd.                                             |   |                                                | 1,223,316    |   |   | 7 |   |   |   | *  |   |   | *  |
| Shanghai                  Changshuo Stainless Steel Processing Co. Ltd.                                   |   |                                                | 706,998      |   |   | 4 |   |   |   | *  |   |   | *  |
| Unimax                  & Far Corporation                                                             |   |                                                | 526,322      |   |   | 3 |   |   |   | *  |   |   | *  |
| Sinosteel                  Company Limited                                                                |   |                                                |         | *  |   |   | *  |   | 1,585,399 |   |   | 14 |   |
| Hangzhou                  Relian Company Limited                                                          |   |                                                |         | *  |   |   | * |   | 1,373,785 |   |   | 12 |   |
| Nuoying                  International (HK) Co. Limited                                                   |   |                                                |         | *  |   |   | * |   | 1,411,803 |   |   | 12 |   |
| Hubei                  Dafan Vehicle Enterprise Co. Limited                                               |   |                                                |         | *  |   |   | *  |   | 475,908 |   |   | 4 |   |
| Shanghai                  Bayou Industrial Limited                                                        |   |                                                |    | * |   |   | *  |   | 319,957 |   |   | 3 |   |
|                                                                                                      |   |                                                | 7,991,134    |   |   | 43 |   |   | 5,166,852 |   |   | 45 |   |
| Others                                                                                                    |   |                                                | 10,782,370   |   |   | 57 |   |   | 6,443,821 |   |   | 55 |   |
| **Total**                                                                                                 |   |                                                | 18,773,504   |   |   | 100 |   |   | 11,610,673 |   |   | 100 |   |

----

**      Not      major customers for the relevant periods*

***Cost      of Sales***
*.      *

|                                              |   | **Three Months Ended March 31,** |       |
|---------------------------------------------------|--------|------------------------------------------------------|------------|
|                                              |   | **2008**                                             |       | **2007** |   | **Variance** |   |
|                                              |   | **$**                                                |       | **$** |   | **$** |   | **%** |   |
| **Cost                of sales**                  |   |                                                 |            |   |   |  |   |   |  |   |   |  |   |
| -                Raw materials                    |   |                                                 | 10,685,196 |   |   | 6,781,677 |   |   | 3,903,519 |   |   | 57.6 |   |
| -                Direct labor                     |   |                                                 | 134,404    |   |   | 128,675 |   |   | 5,729 |   |   | 4.5 |   |
| -                Factory overhead                 |   |                                                 | 2,579,410  |   |   | 1,330,391 |   |   | 1,249,019 |   |   | 93.9 |   |
|                                              |   |                                                 | 13,399,010 |   |   | 8,240,743 |   |   | 5,158,267 |   |   | 62.6 |   |
|                                              |   |                                                 |            |   |   |  |   |   |  |   |   |  |   |
| **Cost                per unit sold**             |   |                                                 |            |   |   |  |   |   |  |   |   |   |   |
| Total                units sold (tons)            |   |                                                 | 24,273     |   |   | 16,110 |   |   | 8,163 |   |   | 50.7 |   |
| Average                cost per unit sold ($/ton) |   |                                                 | 552        |   |   | 512 |   |   | 40 |   |   | 7.8 |   |

|  | · | significant                increase in sales of 5,178 tons of low-carbon hard-rolled steel (compared                to 378 tons for the three months ended March 31, 2007) was generated                at an average selling price of $688 per ton for the three months                ended                March 31, 2008. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | sales                of 3,270 tons of high-carbon cold-rolled steel (compared to 2,309                tons for                the three months ended March 31, 2007) was generated at an average                selling price of $1227 per ton (compared to $1,552 per ton for the                three                months ended March 31, 2007) for the three months ended                March 31, 2008; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | sales                of low-carbon cold-rolled steel at a lower 7,196 tons (compared to                8,739                tons for the three months ended March 31, 2007) was generated at an                average selling price of $745 per ton (compared to $599 for the three                months ended March 31, 2007) for the three months ended                March 31, 2008;          |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Expenses.***

** **

***Nine      Months Ended March 31, 2008 Compared To Nine Months Ended March 31,      2007***

***Gross      Profit***

***Sales      Revenues***

----

|                                     |   | **2008**               |   | **2007**              |   | **Period-on-period**     |   |
|------------------------------------------|--------|------------------------|--------|-----------------------|--------|--------------------------|--------|
| **Product category**                |   | **Quantity****(tons)** |   | **$**** Amount** |   | **% of sales** |   | **Quantity****(tons)** |   | **$**** Amount** |   | **% of****sales** |   | **Qty.****       Variance        ** |   |
|                                     |   |                   |   |                  |   |                     |   |   |   |   |   |   |   |   |   |
| Low                  carbon cold-rolled  |   |                   | 24,958 |                  |   | 19,561,692               |   |   | 33.0 |   |   | 26,558 |   |   | 16,046,675 |   |   | 43.2 |   |   | (1,600 | ) |
| Low                  carbon hard rolled  |   |                   | 12,462 |                  |   | 8,235,950                |   |   | 13.9 |   |   | 2,344 |   |   | 436,242 |   |   | 1.2 |   |   | 10,118 |   |
| High-carbon                  cold-rolled |   |                   | 15,726 |                  |   | 21,523,894               |   |   | 36.4 |   |   | 4,116 |   |   | 8,164,065 |   |   | 22.0 |   |   | 11,610 |   |
| High-carbon                  hot-rolled  |   |                   | 6,846  |                  |   | 3,620,677                |   |   | 6.1 |   |   | 12,026 |   |   | 7,226,249 |   |   | 19.5 |   |   | (5,180 | ) |
| Low                  carbon acid wash    |   |                   | -      |                  |   | -                        |   |   | - |   |   | 14 |   |   | 5,686 |   |   | 0.0 |   |   | (14 | ) |
| High                  end cold-rolled    |   |                   | -      |                  |   | -                        |   |   | - |   |   | 545 |   |   | 5,242,686 |   |   | 14.1 |   |   | (545 | ) |
| Sales                  of Scrap Metal    |   |                   | -      |                  |   | 781,238                  |   |   | 1.3 |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Subcontracting                  income   |   |                   | 17,659 |                  |   | 5,465,609                |   |   | 9.3 |   |   | - |   |   | - |   |   | - |   |   | 17,659 |   |
| Total                                    |   |                   | 77,651 |                  |   | 59,189,060               |   |   | 100.0 |   |   | 45,603 |   |   | 37,121,603 |   |   | 100.0 |   |   |   |   |

|                                   |   | **Nine                months Ended****March                31,** |    |
|----------------------------------------|--------|-----------------------------------------------------------------------|---------|
| **Average selling prices**   |   | **2008**                                                              |    | **2007** |   | **Variance** |   |
|                                   |   | **$**                                                                 |    | **$** |   | **$** |   | **%** |   |
| Low-carbon                cold-rolled  |   |                                                                  | 784     |   |   | 604 |   |   | 180 |   |   | 29.8 | % |
| Low-carbon                hard rolled  |   |                                                                  | 661     |   |   | 186 |   |   | 475 |   |   | 255.4 | % |
| High-carbon                cold-rolled |   |                                                                  | 1,369   |   |   | 1,983 |   |   | (614 | ) |   | (31.0 | )% |
| High-carbon                hot-rolled  |   |                                                                  | 529     |   |   | 601 |   |   | (72 | ) |   | (12.0 | )% |
| Low-carbon                acid wash    |   |                                                                  | — |   |   | 406 |   |   | (406 | ) |   | (100.0 | )% |
| High                end cold-rolled    |   |                                                                  | — |   |   | 9,620 |   |   | (9,620 | ) |   | (100.0 | )% |
| Subcontracting                income   |   |                                                                  | 310     |   |   | — |   |   | 310 |   |   | 100.0 | % |

----

|                                                                                                         |   | **Nine months Ended March                    31** |       |
|--------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|------------|
| **Customers**                                                                                                |   | **2008 ($)**                                                |       | **% to sales** |   | **2007 ($)** |   | **% to sales** |   |
|                                                                                                         |   |                                                             |       |   |   |   |   |   |   |
| Shanghai                    Changshuo Steel Company Ltd                                                      |   |                                                             | 14,174,957 |   |   | 24 |   |   |   | * |   |   | * |
| Shanghai                    Bayou Trade Co. Ltd.                                                             |   |                                                             | 10,854,529 |   |   | 18 |   |   |   | *  |   |   | * |
| Shanghai                    Shengdejia Metal Products Co., Ltd                                               |   |                                                             | 8,232,801  |   |   | 14 |   |   |   | *  |   |   | * |
| Shanghai                    Baosteel Stainless Steel Processing and Distribution Co.,                    Ltd |   |                                                             | 4,113,827  |   |   | 7 |   |   |   | *  |   |   | * |
| Shanghai                    Wozi Jintian Saw Blade Co., Ltd                                                  |   |                                                             | 1,429,622  |   |   | 2 |   |   |   | *  |   |   | * |
| Sinosteel                    Company Limited                                                                 |   |                                                             |       | * |   |   | * |   | 4,805,195 |   |   | 13 |   |
| Hangzhou                    Relian Company Limited                                                           |   |                                                             |       | * |   |   | * |   | 3,308,317 |   |   | 9 |   |
| Nuoying                    International (HK) Co. Limited                                                    |   |                                                             |       | * |   |   | * |   | 3,120,068 |   |   | 8 |   |
| Weitu                    Technology(Shanghai) Co., Ltd                                                       |   |                                                             |       | * |   |   | * |   | 953,509 |   |   | 3 |   |
| Hubei                    Dafan Vehicle Enterprise Co. Limited                                                |   |                                                             |       | * |   |   | * |   | 947,010 |   |   | 2 |   |
|                                                                                                         |   |                                                             | 38,805,736 |   |   | 65 |   |   | 13,134,099 |   |   | 35 |   |
| Others                                                                                                       |   |                                                             | 20,383,324 |   |   | 35 |   |   | 23,987,504 |   |   | 65 |   |
| **Total**                                                                                                    |   |                                                             | 59,189,060 |   |   | 100 |   |   | 37,121,603 |   |   | 100 |   |

----

**        Not        major customers for the relevant periods*

***Cost        of Sales***

|                                                |   | **Nine months Ended March                  31,** |       |
|-----------------------------------------------------|--------|-----------------------------------------------------------------|------------|
|                                                |   | **2008**                                                        |       | **2007** |   | **Variance** |   |
|                                                |   | $                                                               |       | $ |   | $ |   | % |   |
| **Cost of                  sales**             |   |                                                            |       |   |   |   |   |   |   |   |   |   |   |
| -                  Raw materials                    |   |                                                            | 35,954,929 |   |   | 23,116,946 |   |   | 12,837,983 |   |   | 55.5 |   |
| -                  Direct labor                     |   |                                                            | 484,871    |   |   | 465,067 |   |   | 19,804 |   |   | 4.3 |   |
| -                  Factory overhead                 |   |                                                            | 5,733,197  |   |   | 3,053,680 |   |   | 2,679,517 |   |   | 87.7 |   |
|                                                |   |                                                            | 42,172,997 |   |   | 26,635,693 |   |   | 15,537,304 |   |   | 58.3 |   |
|                                                |   |                                                            |       |   |   |   |   |   |   |   |   |   |   |
| **Cost                  per unit sold**             |   |                                                            |       |   |   |   |   |   |   |   |   |   |   |
| Total                  units sold (tons)            |   |                                                            | 77,651     |   |   | 45,603 |   |   | 32,048 |   |   | 70.3 |   |
| Average                  cost per unit sold ($/ton) |   |                                                            | 543        |   |   | 584 |   |   | (41 | ) |   | (7.0 | ) |

----

|  | · | sales                  of 15,726 tons of high-carbon cold-rolled steel (compared to 4,116                  tons                  for the nine months ended March 31, 2007) was generated at an average                  selling price of $1,369 per ton (compared to $1,983 per ton for                  the nine                  months ended March 31, 2007) for the nine months ended March 31,                  2008;                  and |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | sales                  of 12,462 tons of low-carbon hard-rolled steel (compared to 2,344                  tons at                  an average selling price of $186 for the nine months ended March31,                  2007)                  was generated at an average selling price of $661 per ton for the                  nine                  months ended March 31, 2008. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Expenses.***

**Liquidity        and Capital Resources**

----

** **

***Current        Assets***

***Current        Liabilities***

***Capital        Expenditures***
*.*
* *

**Off-Balance        Sheet Arrangements**

**Contractual        Obligations**

|                                      |   | **At March 31, 2008****Payments Due By Period** |       |
|-------------------------------------------|--------|-------------------------------------------------------------------------------|------------|
| **(in thousands)**                   |   | **Total**                                                                     |       | **Fiscal Year****2008** |   | **Fiscal****Years****2009-2010** |   | **Fiscal****Years****2011-2012** |   | **Fiscal Year****2013and****Beyond** |   |
| Contractual obligations:             |   |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt                  Obligations         |   | $                                                                             | 17,734,713 |   | $ | 17,734,713 |   | $ | - |   | $ | - |   | $ | - |   |
| Construction                  Commitments |   |                                                                          | 4,235,722  |   |   | 4,235,722 |   |   | - |   |   | - |   |   | - |   |
|                                      |   | $                                                                             | 21,970,435 |   | $ | 21,970,435 |   | $ | - |   | $ | - |   | $ | - |   |

----

**Loans**

***Short-term        bank loans***

***Long-term        bank loans***

**Land        Use Rights**

**Inflation**

**Critical        Accounting Policies and Estimates**

|  | · | *Functional                  Currency and Translating Financial Statements*—                  The consolidated financial statements have been prepared in accordance                  with accounting principles generally accepted in the United States                  of                  America. Our functional currency is Chinese Renminbi; however,                  the                  accompanying consolidated financial statements have been expressed                  in USD.                  The consolidated balance sheets have been translated into USD at                  the                  exchange rates prevailing at each balance sheet date. The consolidated                  statements of operations and cash flows have been translated using                  the                  weighted-average exchange rates prevailing during the periods of                  each                  statement. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Advances                  to Suppliers and from Customers*-                  As is common practice in China, Chengtong will often make advance                  payments                  to its suppliers for materials, or receive advance payments from                  its                  customers. In some cases, the same party may be both a supplier                  to, and                  customer of, Chengtong. In such cases, Chengtong may make an advance                  to a                  third party as supplier and receive an advance from the same party                  as a                  customer. Chengtong’s practice is to offset such amounts against each                  other. We have established an allowance for doubtful accounts as                  a reserve                  against advances made to suppliers to the extent that the related                  goods                  are not received within ninety (90) days of the contract delivery                  date. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Other                  Policies*                  -                  Other accounting policies used by the Company are set forth in                  the notes                  accompanying our financial                  statements. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Recent        Accounting Pronouncements**

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**ITEM        3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET        RISK**

**Foreign        Currency Exchange Rates**

**Interest        Rates**

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**Commodity        Prices**

**ITEM        4.**
**CONTROLS        AND PROCEDURES.**

**(a)        Evaluation of Disclosure Controls and Procedures.**
** **

**(b)        Changes in Internal Control over Financial Reporting. **

** **

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**PART II        - OTHER INFORMATION**

**ITEM        1A. RISK FACTORS.**

**ITEM        1.**
**LEGAL        PROCEEDINGS.**

**ITEM        2.**
**UNREGISTERED        SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

** **

**ITEM        3.**
**DEFAULTS        UPON SENIOR SECURITIES**

**ITEM        4.**
**SUBMISSION        OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**ITEM        5.**
**OTHER        INFORMATION**

**ITEM        6.**
**EXHIBITS**

| **Exhibit No.** |   | **Exhibit:**                                                                                                                                                                                                                       |
|----------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                                                                                                                                               |
| 31.1                 |   | Certification                  of President pursuant to Rule13a-14(a)/15d-14(a)of the Securities                  Exchange                  Act*                                                                                   |
|                 |   |                                                                                                                                                                                                                               |
| 31.2                 |   | Certification                  of Chief Financial Officer pursuant to Rule13a-14(a)/15d-14(a)of                  the                  Securities Exchange Act*                                                                     |
|                 |   |                                                                                                                                                                                                                               |
| 32                   |   | Certification                  of President and Chief Financial Officer Pursuant to 18 U.S.C.                  Section1350, as adopted pursuant to Section906 of the Sarbanes-Oxley                  Act                  of 2002* |

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|                                    | **CHINA                  PRECISION STEEL, INC.** |
|-----------------------------------------|--------------------------------------------------|
|                                    |                                             |   |
| Date:September15,                  2008 | By:                                              | /s/                  Wo Hing Li |
|                                    |                                             | Wo                  Hing Li |
|                                    |                                             | President |

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| **Exhibit No.** |   | **Exhibits**                                                                                                                                                                                                                      |
|----------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                                                                                                                                              |
| 31.1                 |   | Certification                  of President pursuant to Rule13a-14(a)/15d-14(a)of the Securities                  Exchange                  Act                                                                                   |
|                 |   |                                                                                                                                                                                                                              |
| 31.2                 |   | Certification                  of Chief Financial Officer pursuant to Rule13a-14(a)/15d-14(a)of                  the                  Securities Exchange Act                                                                     |
|                 |   |                                                                                                                                                                                                                              |
| 32                   |   | Certification                  of President and Chief Financial Officer Pursuant to 18 U.S.C.                  Section1350, as adopted pursuant to Section906 of the Sarbanes-Oxley                  Act                  of 2002 |

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