UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION

FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
For the fiscal year ended: December 31, 2007

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
For the transition period from ____________ to _____________

Commission File No. 000-30183

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED

|NEW
    YORK                                                       | 13-3874771                              
|------------------------------------------------------------------ | ----------------------------------------
|(State
    or other jurisdiction of incorporation or organization) | (I.R.S.
    Employer Identification No.)

8/F East Area 
Century Golden Resources Business Center 
69 Banjing Road 
Haidian District 
Beijing, People's Republic of China, 100089 
(Address of Principal Executive Offices)

+86-10-884-52568 (Registrant's Telephone Number, Including Area Code)

Securities registered under Section
12(b) of the Exchange Act: NONE

Securities registered under Section
12(g) of the Exchange Act: Common stock, $.01 par value

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

Yes

Check if no disclosure of
delinquent filers in response to Item 405 of Regulation S-B is contained in this
form, and no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[X] Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).

Yes
 ̈                 No

The issuer's revenues for its most
recent fiscal year are 47,454.

The aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference
to the average bid and asked price of such common equity, as of March 24, 2008
is $19,257,328.

The number of shares outstanding of
the issuer's common stock as of March 24, 2008 is 77,655,862.

---

SPECIAL NOTES REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-KSB, including the following
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," contains "forward-looking statements" relating to the business of
China Longyi Group International Holdings Limited and its subsidiary companies.
The forward-looking statements include, among others, statements concerning our
expected financial performance and strategic and operational plans, as well as
all assumptions, expectations, predictions, intentions or beliefs about future
events. These statements are based on assumptions and are subject to known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performances or achievements expressed or implied by the
forward-looking statements. Risks and uncertainties include risks related to new
and existing products; any projections of sales, earnings, revenue, margins or
other financial items; any statements of the plans, strategies and objectives of
management for future operations; any statements regarding future economic
conditions or performance; uncertainties related to conducting business in
China; any statements of belief or intention; and any of the factors mentioned
in the "Risk Factors" section of This annual report on Form 10-KSB. Given these
uncertainties, you should not place undue reliance on these forward-looking
statements. Except as required by law, we assume no obligation to update any
forward-looking statements publicly, or to update the reasons actual results
could differ materially from those anticipated in any forward-looking
statements, even if new information becomes available in the future.USE OF CERTAIN DEFINED TERMS

Except as otherwise indicated by the context, references in
this report to:

- 

"China" and "PRC" are references to the
  People's Republic of China;

"RMB" refers to Renminbi, the legal
  currency of China;

"U.S. dollar," "$" and "US$" are to the
  legal currency of the United States (for all U.S. dollar amounts reported, the
  dollar amount has been calculated on the basis that $1 = RMB
  7
  .3064(exchange rate used in the balance
  sheet) and $1 = RMB7
  .6078 (exchange rate used in the
  statements of operations) for its fiscal year 2007 financial statements, and
  $1 = RMB7
  .80 for fiscal year 2006 financial
  statements, which were determined based on the currency conversion rate in
  effect at the balance sheet date for each respective quarter); and

"Securities Act" means the Securities
  Act of 1933, as amended, and "Exchange Act" means the Securities Exchange Act
  of 1934, as amended.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Background and Recent Developments

We are a New York corporation that was incorporated on
February 29, 1996, as United Network Technologies, Inc. and we changed our name
to Panagra International Corporation on October 2, 1998. From our inception
until 2001, we were relatively inactive with limited operations. To date we have
generated only very limited revenues.On August 2, 2001 we changed our
name to Minghua Group International Holdings Limited and at that time we also
increased the authorized common shares of our common stock from 40,000,000
shares to 200,000,000 shares. On October 16, 2007, we effectuated a 1-for-20
reverse stock split of all our issued and outstanding shares of common stock and
changed our name to China Longyi Group International Holdings Limited.

Reverse Acquisition

In June 2001 we formed Minghua Acquisition Corp., a Delaware
corporation, and acquired all the equity interests of Minghua Group
International Holding (Hong Kong) Limited, or Minghua Hong Kong, a Hong Kong
limited company formed on June 4, 1997, for a purchase price of $1,000,000 in
cash and 28,000,000 (pre reverse split) shares of our common stock. The shares
received by the Minghua Hong Kong shareholders equaled 70% of our issued and
outstanding shares of common stock, resulting in a change of control to the
Minghua Hong Kong shareholders.

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At that time, the sole asset of Minghua Hong Kong was an 85%
equity interest in the Shenzhen Minghua Environmental Protection Vehicle Co.,
Ltd., or Minghua EPV, a PRC corporation. The remaining 15% equity minority
interest in China Minghua EPV was owned by a related party, Asia Key Group
Limited, through its wholly-owned subsidiary Minghua Real Estate (Shenzhen)
Ltd., formerly known as Minghua Investment Co., Ltd., or Minghua Real Estate. On
January 29, 2004, the Company acquired this 15% minority interest held by
Minghua Real Estate, in a related party transaction by paying $990,638 in cash
and issuing 28,210,000 (pre reverse split) shares of our common stock. Through
Minghua EPV, our business became the development and commercialization of mass
transit, hybrid electric vehicles, primarily buses.

Acquisition of the Bus Installation Company

On March 13, 2003, our indirect subsidiary, Ming Hua
Environmental Protection Science and Technology Limited, a Hong Kong limited
company, or Minghua Science, acquired an 89.8% equity interest in the Guangzhou
City View Bus Installation Company, or the Bus Installation Company, through its
acquisition of Good View Bus Manufacturing (Holdings) Company Limited, a Hong
Kong limited company and Eagle Bus Development Limited, a Hong Kong limited
company, which own 23.8% and 66% of the Bus Installation Company, respectively.
The Bus Installation Company manufactured motor coaches for domestic sale in
China and for export under the "Eagle" brand name. We sold 6 standard diesel
buses in 2005 and 5 standard diesel buses in 2004, however, once we sold off the
inventory of diesel buses and parts that we acquired along with our acquisition
of the Bus Installation Company, we no longer sold or manufactured diesel buses.

Acquisition of Beijing Cardinal

On June 16, 2004, Minghua Hong Kong formed a wholly owned
subsidiary in the PRC, named Beijing China Cardinal Real Estate Consulting Co.,
Ltd., or Beijing Cardinal. We intended to use Beijing Cardinal as a vehicle to
make future real estate investments in the PRC. However, at December 31, 2006,
Beijing Cardinal had not begun significant operations.

Sale of Environmental Vehicle Business

Through Minghua Hong Kong, we had been focused on the
development and commercialization of mass transit, hybrid electric vehicles,
primarily buses. However, although prototype hybrid vehicles and a limited
number of other vehicles have been produced, we have not been able to
successfully commercialize these vehicles. As a result, on September 28, 2006,
we disposed of our entire interests in Minghua Hong Kong and Minghua Science to
Messrs. Han Lian Zhong and Niu Rui Cheng for 1 HK$,in exchange for their
assumption of Minghua Hong Kong and Minghua Science's debt. However, we retained
our interests in China Cardinal, which were transferred to our subsidiary,
Euromax International Investments Limited, or Euromax, and in the Guangzhou City
View Bus Installation Company, which was transferred to our subsidiary, Top Team
Holdings Limited (BVI), or Top Team.

Qiang Long Investment

On January 29, 2004, we entered into a subscription agreement
with Qiang Long Real Estate Development Co., Ltd., or Qiang Long, a PRC company,
pursuant to which, as amended and supplemented from time to time, Qiang Long was
obligated to purchase 140,000,000 (pre reverse split) shares of our common
stock, par value $0.01 at an aggregate purchase price of US$29,400,000, or $0.21
per share. An amount equaling US$653,795 was paid to us as a performance bond
and an additional US$632,911 was paid to us in 2006 in exchange for 3,013,862
(pre reverse split) shares. The balance of US$28,113,294 was to be paid in full
by June 30, 2007, for the remaining 136,986,138 (pre reverse split) shares. On
June 29, 2007, we consummated our obligations under the contract, pursuant to a
letter agreement between the Company and Qiang Long. Pursuant to the letter
agreement, we acknowledged our receipt of the final payment in cash from Qiang
Long as fulfillment of Qiang Long's investment obligation, and agreed to issue
50,000,000 (pre reverse split) shares to Qiang Long on or before July 23, 2007,
and the remaining 86,986,138 (pre reverse split) shares within fifteen (15)
business days following the effective date of an amendment to our Certificate of
Incorporation to effect a one-for-twenty reverse split of our outstanding common
stock, which will be equal to 4,349,307 shares post-reverse split. Accordingly,
on August 2, 2007, 50,000,000 shares were issued to Qiang Long.

As a result of the closing of the investment transaction with
Qiang Long, our Chairman, Mr. Changde Li, now beneficially owns and controls
155,000,000 (pre reverse split) shares (7,750,000 shares post-reverse split) or
54.0% of the Company's issued and outstanding common stock, 15,000,000 (pre
reverse split) of which he holds indirectly through Qiang Long, 136,986,137 (pre
reverse split) of which he holds indirectly through Qiang Long's affiliate,
Jolly Concept Management Limited, a BVI company, and 3,013,863 (pre reverse
split) of which he holds through Qiang Long's affiliate, Chinese Dragon Heritage
Investment Management Limited, a PRC company.

3

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Acquisition of Top Time

From the time when we sold the 6 standard diesel buses in the
first quarter of 2005 until November 12, 2007 when we completed the acquisition
transaction with Daykeen, discussed herein, we had limited operations and did
not engage in active business operations other than our search for, and
evaluation of, potential business opportunities for acquisition or
participation.

On November 12, 2007, we completed an acquisition transaction
with Top Time International Limited, a Hong Kong Company, or Top Time, whereby
we paid Daykeen, Top Time's sole shareholder, a total consideration of $54.9
million (RMB 407 million, based on an exchange ratio of $1=RMB 7.414) in
exchange for 100% ownership of Top Time, consisting of $30 million in cash and
$24.9 million in shares of our common stock issuable within 90 days of the
closing. $30 million of cash was paid to Daykeen by three transactions, Beijing
Cardinal, De Qiu Hong, and Mr. Chen Zhiping paid $29 million, $0.4 million, and
$0.6 million on behalf of the Company, respectively. As a result, the Company
offset the same amounts of balance of the three parties' current accounts. The
equity portion of the purchase price amounts to a total of 62,250,000 (post
reverse split) shares of our common stock (based upon $0.02/share, the average
of the closing price of the Company's common stock on the OTCBB for the 365
calendar days prior to May 31, 2007, which was adjusted for our stock split
which occurred on October 16, 2007 and resulted an effective purchase price of
$0.40 per share). Top Time thereby became our wholly owned subsidiary and
Daykeen will become our controlling stockholder upon our issuance to Daykeen of
the equity portion of the purchase price in accordance with the Share Purchase
Agreement.

Top Time was incorporated in Hong Kong in December 2006 and
currently has two subsidiaries: Beijing SOD and Chongqing SOD. Beijing SOD was
incorporated in China in March 2005 and is 90% owned by Top Time and 10% owned
by Ms. Ran Wang. Chongqing SOD was incorporated in China in March 2007 and is
81% owned by Top Time, 10% owned by Mr. Guoqing Tan and 9% owned by Ms. Ran
Wang.

For accounting purposes, the acquisition of Top Time was
treated as a reorganization of entities under common control. When we refer in
this report to business and financial information for periods prior to the
consummation of the acquisition, we are referring to the business and financial
information of Top Time on a consolidated basis unless the context suggests
otherwise.

Sale of Top Team Subsidiaries

Through acquisition of Top Time, our business became the
development, manufacture and sale of SOD products. As a result, on November 28,
2007, we disposed of five subsidiaries held by Top Team Holdings Limited (BVI):
Euromax International Investments Limited, Beijing China Cardinal Real Estate
Consulting Co., Ltd, Eagle Bus Development Limited (HK), Good View Bus
Manufacturing Company Limited (HK), and Guangzhou City View Bus Installation
Company Limited (PRC), to Mr. Zhiping Cheng, for an aggregate sale price of
RMB5,000,000 (approximately $715,000).

Overview of Our Business

We are a holding company that only operates through our
indirect Chinese subsidiaries Beijing SOD and Chongqing SOD. Through our Chinese
subsidiaries, we develop, manufacture and market our SOD products in China. SOD
is a naturally occurring enzyme which may act as a potent antioxidant defense in
cells that are exposed to oxygen. Certain research has shown that under certain
biological conditions, SOD revitalizes cells and reduces the rate of cell
destruction. It neutralizes the most common free radicalsuperoxide radicalby
converting it into hydrogen peroxide and water. Because superoxide is harmful to
human cells, and certain forms of SOD exist naturally in most humans, many
studies show that SOD is valuable in protecting human cells from the harmful
effects of superoxide. SOD is thought to be more powerful than antioxidant
vitamins as it activates the body's productions of its own antioxidants. As a
result, SOD is referred to as the "enzyme of life." Commercially, SOD has a wide
range of applications and is widely applied in foods, drinks, skin care
productions, pharmaceuticals, to combat ailments ranging from sunburn to
rheumatoid arthritis.

Our Industry

The health supplements industry is currently made up of many
small- and medium-sized companies that manufacture and distribute products
generally intended to, or marketed for the purpose of maintaining, and sometimes
improving, the body's health and general well being. In 2004, sales of health
supplements in China reached RMB 34 billion (approximately $4.25 billion) and
according to the China Personal Health & Supplemental Industry Survey 2005,
the annual growth rate of health supplement consumption in China between 15% and
30%, compared with around 13 % in other developed countries.

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According to China Enterprises Association, currently, there
are over 3,000 manufacturers of health supplement products in China, with an
annual production value of over $6.25 billion. Of these manufacturers, large
enterprises with registered capital of over $12.5 million only account for
1.45%; medium-sized enterprises with registered capital under $12.5 million, but
over $6.25 million, make up 38%; and workshop-style enterprises with registered
capital below $12,500 make up 12.5% of the total number of manufacturers.
According to China Personal Health & Supplemental Industry Survey 2005,
the sales of health supplement products in China are expected to reach RMB 70
billion (approximately $ 8.75 billion) in 2009, with a compounded annual growth
rate of 15.24%.

Ever since American scientists Joe McCord and Irwin Fridovich
discovered SOD in cattle erythrocytes in 1969 and hypothesized that it can
protect life molecules from oxygenation and retrogradation, experts in the
fields of biology and medicine and many entrepreneurs and industrialists have
been engaged in research, study, development, application and transformation of
SOD into products that we believe will provide human beings with certain health
and longevity benefits.

Research into the functions and applications of SOD in China
began in the late 1970's. Since then, various centers of research in China,
including universities, the military and private companies, have researched
food, medicinal, and cosmetic applications for SOD. In the 1990's, SOD foods
began to be sold in China, including SOD soy milk, SOD dairy milk, and SOD beer.
Due to technical problems with these first-generation SOD food products and
limited public knowledge of the health benefits of SOD, many were discontinued.
Technical difficulties relating to the commercialization of SOD products in
China have included: (1) lack of methods for efficient harvesting of SOD from
animal and human blood and plants; (2) problems with the maintenance and
stabilization of harvested SOD, the longest shelf life so far being only two
years in China; and (3) technical problems in the effectiveness of SOD in
products, particularly food and other products to be consumed orally. More
recently, however, various SOD food products have reappeared in China, including
SOD milk, SOD wine, and SOD vegetables and fruits. We believe that these and
other types of SOD products will become extremely popular due in part to
innovations in the SOD industry; recognition of SOD technologies as proprietary
intellectual property; government policies encouraging healthier food; the
higher awareness of consumers in China of the health benefits of consuming
products containing SOD; and the growth of the spending power of Chinese
citizens.

In addition, the China Science and Technology Institute has
recognized that SOD product technologies are proprietary intellectual property.
SOD companies, including us, have instituted strict measures to protect their
SOD product technologies from being misappropriated. As such, the SOD product
technologies may be protected by Chinese intellectual property law even if they
are not patented. As a result, companies are encouraged to develop and
commercialize SOD technologies.

The growing wealth of the Chinese public and its related
greater interest in better health and nutrition are also trends in SOD
industry's favor. SOD production and distribution companies have been working
hard to develop innovations to best exploit the commercial potential of SOD,
including our subsidiary, Chongqing SOD. Since 1993, various types of SOD
products have been sold in China, such as Beijing Dabao SOD skin care series,
Wuhan Jiutouniao SOD liquid nutrition drink series, Guizhou Laoliafu SOD liquid
nutrition drink series, Zhejing SOD beer, SOD toothpaste, SOD soy milk. We
believe that the SOD industry in China should expand as Chinese consumers grow
more able and willing to purchase SOD products.

Our Products

Currently we are manufacturing one product, which is Jiuzhou
SOD plant wine which we market under the name "Jiuzhou Holy Wine." Our Jiuzhou
SOD plant wine is a product developed from the zymolysis of natural wide berries
with an alcohol level of 21%. We plan to produce SOD oral liquid and SOD
capsules after our Jiuzhou SOD plant wine products enter into the market and
generate revenues to us. We also plan to produce and sell SOD medicines and skin
care products after we receive manufacturing permits from the State Food and
Drug Administration, or SFDA.

Sales & Marketing Strategy

Our sales and marketing department currently consists of 16
employees. We are developing a diversified sales network which allows us to
effectively market products and services to our customers. In addition to sales
efforts conducted directly by our internal sales team and other employees, we
also use sales agents. We have relationships with 15 sales agents to sell our
products.

In terms of geographic area, our sales network covers 21
cities in China. Our Jiuzhou SOD wine has been listed on the governmental
procurement list of Chongqing City, which will grant us a priority to sell our
SOD products to various governmental agencies in Chongqing City. We also expect
that our SOD products will be listed on the governmental procurement list of
Beijing City within the next 6 months. We plan to expand our sales network to
cover more Chinese cities, including Shenzhen, Guangzhou, Nanjing, Shanghai,
Shijiazhuang, Lhasa and Nanchang.

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We also plan to employ an online order system, which will
cover four major metropolitan areas, such as Beijing, Chengdu, Kuming and
Chongqing, within the next 12 months. Through our website http://www.jiuzhoushengjiu.com/index.asp,
we will be able to offer a complete line of our products to our customers 24
hours a day, seven days a week. This additional sales channel will enable us to
market and sell our products in regions where we do not have retail operations
or have limited operations.

Competition

The health supplementary business both within China and
globally is highly fragmented and intensely competitive. Many of our
competitors, both domestic and international, have significant research and
development capabilities and financial, scientific, manufacturing, marketing and
sales resources. Although our marketing and sales efforts of SOD products are
very limited, we believe that we will compete with our competitors based upon
the price and quality of our products, ability to produce a diverse range of
products and customer services.

In China, we compete principally with Chengdu New Asia
Bioengineering Co., Ltd., Zhuhai Zixing Biological Engineering Co., Ltd. and
Liaoyuan Jinchang Bioengineering Co., Ltd.

We believe that our Jiuzhou SOD wine, made from more than 10
kinds of wild plants, is more efficient to remove superoxide free radicals than
SOD liquid products made by our competitors. In addition, we believe that our
SOD plant compound enzyme can be stored under the normal atmospheric temperature
for more than 10 years, much longer than the life span of many other SOD
products made from animal blood or a single plant.

Intellectual Property

Although none of our products are currently covered by
patents, we already prepared all necessary documents and related materials and
will register patent for SOD mother solution application skill. Furthermore, We
have registered a trademark for our SOD product which we will sell under the
name "Jiuzhou Holy Wine."

In addition, we protect our know how technologies through
confidentiality agreements we entered into with our employees in our production
department.

Research and Development

We currently operate our research and development department
through Beijing SOD. As of December 31, 2007, we have eight research and
development staff (six of whom hold Master/PhD degrees). Our research and
development department is responsible for developing advanced technologies,
developing new SOD products and training. We also plan to establish a "life
technology" research academy for where our staff may research and develop SOD's
application as an antioxidant and energy booster.

During the fiscal years 2007 and 2006, we did not incur any
research and development expenses with respect to our SOD products. We plan to
increase our research and development efforts in 2008.

Regulation

Based on different potential uses, SOD products in China are
classified into three types under the Chinese law and accordingly are subject to
different Chinese laws and regulations.

If the SOD products are sold for manufacturing food, they are
considered as food additives. Under the Chinese law, a company may not produce
SOD products for food additives use without two licenses, the Food Hygiene
License issued by the provincial Administration of Health, or AOH, and the Food
Production License issued by the provincial Administration of Quality
Supervision, Inspection and Quarantine, or AQSIQ. If the SOD products are sold
as raw materials for drugs, the Company should first obtain the Pharmaceutical
Producer License from the provincial AOH and the approval from the provincial
FDA.

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We have already obtained both the Food Hygiene License issued
by the Chongqing AOH and the Food Production License issued by the local AQSIQ.
Since we also plan to produce and sell SOD medicines and skin care products, we
plan to apply for the Pharmaceutical Producer License from the provincial AOH
and the approval from the provincial State Food and Drug Administration, or SFDA.

In addition, we are also subject to PRC's foreign currency
regulations. The PRC government has control over RMB reserves through, among
other things, direct regulation of the conversion or RMB into other foreign
currencies. Although foreign currencies which are required for "current account"
transactions can be bought freely at authorized Chinese banks, the proper
procedural requirements prescribed by Chinese law must be met. At the same time,
Chinese companies are also required to sell their foreign exchange earnings to
authorized Chinese banks and the purchase of foreign currencies for capital
account transactions still requires prior approval of the Chinese government

Employees

As of December 31, 2007, we had a total of 72 full-time
employees. The following table illustrates the allocation of these employees
among the various job functions conducted at our Company.

Department
      
      Number of EmployeesSales
      
      16Administration
      
      8Finance
      
      5SOD
      Production Center
      
      35Research and Development
      
      8Total
      
      72


We believe that our relationship with our employees is good.
The remuneration payable to employees includes basic salaries and allowances. We
have not experienced any significant problems or disruption to our operations
due to labor disputes, nor have we experienced any difficulties in recruitment
and retention of experienced staff.

None of our employees is represented by a labor union
although some of our employees are members of the City View trade union, however
such trade union does not represent our employees in the negotiation of labor
rates or other labor benefits.

Our ability to achieve our operational and financial
objectives depends in part upon our ability to retain key technical, marketing
and operations personnel, and to attract new employees as required to support
growth. Working capital constraints may impair our ability to retain and attract
the staff needed to maintain current operations and meet the needs of
anticipated growth.

In addition, we rely on consultants to a significant extent
to supplement our regular employee staff in certain key functional areas and to
support management in the execution of our business strategy. These consultants
are independent contractors. There can be no assurance that, if one or more of
the consultants were to terminate their services, we would be able to identify
suitable replacements. Failure to do so could materially and adversely affect
our operating and financial results.

As required by applicable Chinese laws, we have entered into
employment contracts with all of our officers, managers and employees.

Our employees in China participate in a state pension scheme
organized by Chinese municipal and provincial governments. We are required to
contribute to the scheme at a rate of 28% of the average monthly salary. In
addition, we are required by Chinese laws to cover employees in China with
various types of social insurance. We have purchased social insurances for all
of our employees.

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ITEM 2. DESCRIPTION OF PROPERTY

All land in China is owned by the State or collectives.
Individuals and companies are permitted to acquire rights to use land or land
use rights for specific purposes. In the case of land used for industrial
purposes, the land use rights are granted for a period of 50 years. This period
may be renewed at the expiration of the initial and any subsequent terms
according to the relevant Chinese laws. Granted land use rights are transferable
and may be used as security for borrowings and other obligations.

Our executive offices are located at 8/F East Area, Century
Golden Resources Business Center, 69 Bangjing Road, Haidian District, Beijing,
People's Republic of China 100089. Our executive offices consist of
approximately 130 square meters consisting entirely of administrative office
space. This lease expired on December 31, 2005 and we continue to occupy this
property on a month-to-month basis.

Our main production facilities are located at Sanjie Village,
Shuanfu Town, Jiangjin City, Chongqing. The total site area is approximately
20,000 square meters. We lease this facility under a lease agreement with
ShuanFu Town Government. The term of the lease is 20 years. We plan to buy the
facility when the lease expires.

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

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits
and legal proceedings which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in these
or other matters may arise from time to time that may harm our business. We are
currently not aware of any such legal proceedings or claims that we believe will
have a material adverse affect on our business, financial condition or operating
results.

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

No matters were submitted to a vote of our security holders
during the fourth quarter of fiscal year 2007.

PART II

ITEM 5. MARKET FOR
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock is quoted and traded from time to time on
the Over-the-Counter Electronic Bulletin Board (OTCBB) under the symbol "CGYG".
The CUSIP number is 16942Q109. The transfer agent of our common stock is
Securities Transfer Corporation whose address is at 2591 Dallas Parkway, Suite
102 Frisco, TX 75034, (469) 633-0101.

The following table sets forth, for the periods indicated,
the high and low bid prices for the common stock as reported on Yahoo.com. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.

|                                       |   | Closing Prices (1)
|-------------------------------------- | - | ------------------
|                                       |   | High              
|Year Ended
    December 31, 2008       |   |                   
|1st
    Quarter (as of March 24, 2008) | $ | 3.00              
|                                       |   |                   
|Year Ended
    December 31, 2007       |   |                   
|1st
    Quarter                        | $ | 0.04              
|2nd Quarter                            | $ | 0.055             
|3rd
    Quarter                        | $ | 0.36              
|4th Quarter                            | $ | 1.10              
|                                       |   |                   
|Year Ended
    December 31, 2006       |   |                   
|1st
    Quarter                        | $ | 0.05              

|2nd Quarter     | $ | 0.003 | $ | 0.017
|--------------- | - | ----- | - | -----
|3rd
    Quarter | $ | 0.02  | $ | 0.015
|4th Quarter     | $ | 0.025 | $ | 0.01 

________________________

(1)The above tables set forth the range
of high and low closing bid prices per share of our common stock as reported by
www.quotemedia.com for the periods indicated.

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Holders

On December 31, 2007, there were approximately 268
stockholders of record of our common stock.

Dividends

We have not paid any cash dividends with respect to our
common stock in the last two fiscal years. We presently intend to retain future
earnings to finance our development and expansion and therefore do not
anticipate the payment of any cash dividends in the foreseeable future. Payment
of future dividends, if any, will depend upon our future earnings and capital
requirements and other factors that our board of directors considers
appropriate. Securities Authorized for Issuance under Equity Compensation Plans

|Plan category                                                  | Number of securities to be
    issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price
    of outstanding options, warrants and rights | Number of securities remaining
    available for future issuance
|-------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------
|                                                               |                                                                                                 |                                                                                 |                                                                 
|Equity compensation plans
    approved by security holders     | -                                                                                               | -                                                                               | 20,000,000                                                      
|                                                               |                                                                                                 |                                                                                 |                                                                 
|Equity compensation plans not
    approved by security holders | 2,000,000                                                                                       | $1.75                                                                           | 0                                                               
|                                                               |                                                                                                 |                                                                                 |                                                                 
|Total                                                          | 2,000,000                                                                                       | -                                                                               | 20,000,000                                                      

Recent Sales of Unregistered Securities

On June 29, 2007, the Company consummated an investment
transaction pursuant to which the Company sold to Qiang Long Real Estate
Development Co., Ltd., 7,000,000 shares of the Company's common stock, for a
purchase price, in the aggregate, of $29,400,000 or $4.20 per share. The
issuance of our shares to Qiang Long was made in reliance upon exemptions from
the registration requirements of the Securities Act pursuant to Regulation S
thereunder.

On November 12, 2007, pursuant to an Equity Transfer
Agreement with Daykeen, the sole owner of Top Time International Limited ("Top
Time"), we agreed to issue 62,250,000 shares of our common stock to Daykeen as
part of the consideration for the acquisition of 100% of the equity interest of
Top Time. The offer and sales of the securities were made in an offshore
transaction pursuant to Regulation S under the Securities Act.

The Company's reliance upon Regulation S was based upon the
following factors (a) the stockholder is neither a U.S. person nor acquiring the
Shares for the account or benefit of any U.S. person, (b) the stockholder agreed
not to offer or sell the Shares (including any pre-arrangement for a purchase by
a U.S. person or other person in the United States) directly or indirectly, in
the United States or to any natural person who is a resident of the United
States or to any other U.S. person as defined in Regulation S unless registered
under the Securities Act and all applicable state laws or an exemption from the
registration requirements of the Securities Act and similar state laws is
available, (c) the stockholder made its subscription from its offices at an
address outside of the United States and (d) the stockholder or its advisor has
such knowledge and experience in financial and business matters that the
stockholder is capable of evaluating the merits and risks of, and protecting its
interests in connection with an investment in the Company.

9

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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION

Overview

This subsection of MD&A is an overview of the important
factors that management focuses on in evaluating our businesses, financial
condition and operating performance, our overall business strategy and our
earnings for the periods covered.

General

We are a holding company that only operates through our
indirect Chinese subsidiaries. Through our Chinese subsidiaries, we develop and
manufacture SOD in China, with a wide range of applications, especially in
foods, medicines and cosmetic products. We plan to market, sell and service our
products nationally through a combination of company-owned offices and
independent sales agents. Currently we have two sales offices, one located in
Chengdu, and the other located in Chongqing, and we plan to establish agents in
additional offices across China. We have targeted our approach to meet local
market conditions which we believe provides the best possible products for our
customers throughout China. In recent years, more and more people are choosing
to eat or drink healthier foods and beverages. During fiscal year 2008, we plan
to not only produce and sell our SOD wine and beverage products, but we plan to
negotiate with local food manufacturing companies to become a supplier of SOD
for use as a food additive.

Our Background and History

We are a New York corporation that was incorporated on
February 29, 1996, as United Network Technologies, Inc. and we changed our name
to Panagra International Corporation on October 2, 1998. From our inception
until 2001, we were relatively inactive with limited operations. To date we have
generated only very limited revenues. On August 2, 2001 we changed our name to
Minghua Group International Holdings Limited and at that time we also increased
the authorized common shares of our common stock from 40,000,000 shares to
200,000,000 shares.

In June 2001, we formed Minghua Acquisition Corp., a Delaware
corporation, and acquired all the equity interests of Minghua Hong Kong, a Hong
Kong limited company formed on June 4,1997, for a purchase price of $1,000,000
in cash and 1,400,000 shares of our common stock. The Minghua Hong Kong
shareholders received 70% of our issued and outstanding shares of common stock,
resulting in a change of control to the Minghua Hong Kong shareholders. At that
time, the sole asset of Minghua Hong Kong was an 85% equity interest in the
Shenzhen Minghua Environmental Protection Vehicle Co., Ltd., or Minghua EPV, a
PRC corporation. The remaining 15% equity minority interest in Minghua EPV was
owned by a related party, Asia Key Group Limited, through its wholly-owned
subsidiary Minghua Real Estate (Shenzhen) Ltd., formerly known as Minghua
Investment Co., Ltd., or Minghua Real Estate. On January 29, 2004, we acquired
the 15% minority interest held by Minghua Real Estate, in a related party
transaction by paying $990,638 in cash and issuing 1,410,500 shares of our
common stock. Through Minghua EPV, our business became the development and
commercialization of mass transit, hybrid electric vehicles, primarily buses.

On March 13, 2003, our indirect subsidiary, Minghua Science,
acquired an 89.8% equity interest in the Guangzhou City View Bus Installation
Company, through its acquisition of Good View Bus Manufacturing (Holdings)
Company Limited, a Hong Kong limited company and Eagle Bus Development Limited,
a Hong Kong limited company, which own 23.8% and 66% of the Bus Installation
Company, respectively. The Bus Installation Company manufactured motor coaches
for domestic sale in China and for export under the "Eagle" brand name. We sold
6 standard diesel buses in 2005 and 5 standard diesel buses in 2004, however,
once we sold off the inventory of diesel buses and parts that we acquired with
the Bus Installation Company, we no longer manufactured diesel buses.

On June 16, 2004, Minghua Hong Kong formed Beijing Cardinal.
We intended to use Beijing Cardinal as a vehicle to make future real estate
investments in the PRC. However, Beijing Cardinal has not begun significant
operations.

Through Minghua Hong Kong, we had been focused on the
development and commercialization of mass transit, hybrid electric vehicles,
primarily buses. However, although prototype hybrid vehicles and a limited
number of other vehicles have been produced, we have not been able to
successfully commercialize these vehicles. As a result, on September 28, 2006,
we disposed of our entire interests in Minghua Hong Kong and Minghua Science to
Messrs. Han Lian Zhong and Niu Rui Cheng for 1 HK$, in exchange for their
assumption of Minghua Hong Kong and Minghua Science's debt. However, the Company
retained its interests in Beijing Cardinal which were transferred to our
subsidiary, Euromax International Investments Limited, and in the Guangzhou City
View Bus Installation Company, which was transferred to our subsidiary, Top Team
Holdings Limited (BVI).

10

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From the time when we sold 6 standard diesel buses during the
first quarter of 2005 until November 12, 2007 when we completed the acquisition
transaction with Top Time, we had limited operations and did not engage in
active business operations other than our search for, and evaluation of,
potential business opportunities for acquisition or participation.

Acquisition of Top Time

On November 12, 2007, we completed an acquisition transaction
with Top Time whereby we paid Daykeen, Top Time's sole shareholder, a total
consideration of $54.9 million, in exchange for 100% ownership of Top Time,
consisting of $30 million in cash and $24.9 million in shares of our common
stock issuable within 90 days of the closing. $30 million of cash was paid to
Daykeen by three transactions, Beijing Cardinal, De Qiu Hong, and Mr. Chen
Zhiping paid $29 million, $0.4 million, and $0.6 million on behalf of the
Company, respectively. As a result, the Company offset the same amounts of
balance of the three parties' current accounts. The equity portion of the
purchase price amounts to a total of 62,250,000 shares of our common stock. The
share number was calculated based upon $0.02/share, the average of the closing
price of the Company's common stock on the OTCBB for the 365 calendar days prior
to May 31, 2007, which was adjusted for our stock split which occurred on
October 16, 2007. As a result, the effective purchase price per share was $0.40.
Although such price is greater than the then trading price of our common stock,
which was $0.145 per share on November 12, 2007, as reported on the OTCBB, the
then trading price did not reflect our 1-for-20 reverse split. The price
reflects the current trading price, which is $0.51 as of February 13, 2008.

As a result of this acquisition transaction, Top Time became
our wholly owned subsidiary and Daykeen will become our controlling stockholder
upon our issuance to Daykeen of the equity portion of the purchase price in
accordance with the Share Purchase Agreement.

Top Time was incorporated in Hong Kong in December 2006 and
currently has two subsidiaries: Beijing SOD and Chongqing SOD. Beijing SOD is
90% owned by Top Time and was incorporated in China in March 2005. Chongqing SOD
was incorporated in China in March 2007 and is wholly owned by Beijing SOD.

Industry Wide Factors that are Relevant to Our Business

We expect several key demographic, healthcare, and lifestyle
trends to drive the growth of our business in the coming future:

- Increased Focus
  on Healthy Living: Our management believes that as China becomes more
  affluent, its citizens are becoming more health conscious. They are leading
  more active lifestyles and becoming increasingly focused on healthy living,
  nutrition, and supplementation.. According to the Nutrition Business
  Journal, a higher percentage of today's global population is involved to
  some degree in health and wellness than a few years ago. We believe that
  growth in the health supplements industry will continue to be driven by
  consumers who increasingly embrace health and wellness as a critical part of
  their lifestyles.
- Aging
  Population: The average age of the Chinese population is increasing.
  According to World Population Prospects: The 2004 Revision(2005), the
  percentage of elderly persons in China is projected to triple between 2006 and
  2050, from 8 percent to 24 percent, a total of 322 million people. We believe
  that these consumers are significantly more likely to use health supplements
  than younger persons and have higher levels of disposable income to pursue
  healthy lifestyles.
- Rising
  Healthcare Costs and Use of Preventive Measures: Healthcare related costs
  have increased substantially in China. A survey released by China's Ministry
  of Health found that the percentage of out-of-pocket health expenditures in
  China has increased from 35.7% in 1990 to 55.5% in 2003. To reduce medical
  costs and avoid the complexities of dealing with the healthcare system, and
  given increasing incidence of medical problems and concern over the use and
  effects of prescription drugs, many consumers take preventive measures,
  including alternative medicines and nutritional supplements.
- Food and
  Beverage Security:Since 2007, food and beverage security has become more
  important to PRC regulators. The PRC government regulates and enforces strict
  food and beverage testing procedures and we are required to obtain licenses
  for the sale of any new food and beverage products from the relevant
  authorities.We currently sell SOD products (SOD WINE ) for
  manufacturing food, and we have already obtained both the Food Hygiene License
  issued by the Chongqing AOH and the Food Production License issued by the
  local AQSIQ. We also plan to produce and sell SOD medicines and skin care
  products, and we have applied for the Pharmaceutical Producer License from the
  provincial AOH and the approval from the provincial State Food and Drug
  Administration, or SFDA. It will take more than half year to get the license
  from AOH and the approval from SFDA for us to sell SOD medicines and skin care
  products.

11

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Weaknesses and Uncertainties that Affect our Financial
Condition

We face certain challenges and risks that may affect our
financial condition. In recent years, low quality products and false
advertisements have given the Chinese cosmetic and health products market a bad
reputation. Consumers are often suspicious of the effects of cosmetics and
health products. Some consumers think that these products cannot induce
substantial beautification or health improvements, while others think these
products may actually be harmful. In a market where efficient and inefficient
markets are mixed up, and consumers have a distrust of the market, we will keep
up our research and development of products, while strengthening our quality
control at the same time. Based on our past high quality control, we believe
that the reputation of our products will be strong.

For accounting purposes, the acquisition of Top Time was
treated as a reorganization of entities under common control. When we refer in
this report to business and financial information for periods prior to the
consummation of the acquisition, we are referring to the business and financial
information of China Longyi on a consolidated basis unless the context suggests
otherwise.

Results of Operations

We are a development stage company. We have only generated
limited revenues from our operations since our inception. Before November 12,
2007, we had limited operations and our purpose was to acquire an operating
business or the valuable assets of an unidentified company. As a result of the
acquisition of Top Time, we changed our business to the development, manufacture
and sale of SOD products.

Fiscal Year Ended December 31, 2007 Compared to December
31, 2006

The following table summarizes the results of our operations
during the fiscal years ended December 31, 2007 and 2006 and provides
information regarding the dollar and percentage increase or (decrease) from the
2006 fiscal year to the 2007 fiscal year.

|                                     |            |            |            | Percentage
|------------------------------------ | ---------- | ---------- | ---------- | ----------
|                                     |            | 12/31/06   | Increase   | Increase  
|Line Item                            | 12/31/07   |            | (Decrease) | (Decrease)
|                                     |            |            |            |           
|Revenues                             | $47,454    | $0.00      | $47,454    | -         
|                                     |            |            |            |           
|Net Income ( Loss)                   | $3,094,885 | ($345,621) | $3,440,506 | 995%      
|                                     |            |            |            |           
|Operating Expenses                   | $1,314,806 | $1,101,349 | $213,457   | 19.38%    
|                                     |            |            |            |           
|Earnings (Loss) per
    common share | 0.21       | ($0.05)    | 0.26       | 520%      

We have only generated very limited revenues from our
operations since our inception. In order to generate revenues, we must raise
enough capital to execute our business plan of manufacturing and selling SOD
products. We believe that if we are able to consummate the financing
arrangements with Qiang Long, we will have enough capital to execute our
business plan.

We had revenues of $47,454 in fiscal year 2007, compared to
revenues of $0 during fiscal year 2006. The revenues in 2007 increased by
$47,454 primarily due to the sale of our new SOD Wine products during December
of the 2007 period.

Our net income (loss) for the year ended December 31, 2007
was $3,094,885, compared to $(345,621) for the prior year. This represents an
increase of $3,440,506 or 995%. This increase in net profit (loss) was primarily
the result of our disposal during November of the 2007 period of five
subsidiaries and our recognized gain of $3,385,630 in connection with this
disposal.

12

---



Our operating expenses for the fiscal year ended December 31,
2007 were $1,314,806, as compared to $1,101,349 during the same period in 2006.
This increase of $213,457 or 19.38% is primarily the result of the following
factors:

- 





Earnings (Loss) per common share for the fiscal year ended
December 31, 2007 was 0.19, as compared to a loss of 0.05 during the same period
of 2006.

Liquidity and Capital Resources

We had $64,547 in cash, cash equivalents and short-term
investments as of December 31, 2007. As of such date, we also had total current
assets of $3, 862, 377 and total assets of $4,830,161. We have total current
liabilities (consisting of accounts payable, accrued liabilities, due to
directors and other payables) in the amount of $924,329. Our stockholder's
equity as of December 31, 2007 was $3,234,070. Since inception, we have
accumulated a deficit of $26,070,415.

On January 29, 2004, we entered into a subscription agreement
with Qiang Long Real Estate Development Co., Ltd., or Qiang Long, a PRC company,
pursuant to which, as amended and supplemented from time to time, Qiang Long was
obligated to purchase 140,000,000 shares of our common stock, par value $0.01 at
an aggregate purchase price of US$29,400,000, or $0.21 per share. An amount
equaling US$653,795 was paid to us as a performance bond and an additional
US$632,911 was paid to us in 2006 in exchange for 3,013,862 shares. The balance
of US$28,113,294 was to be paid in full by June 30, 2007, for the remaining
136,986,138 shares. On June 29, 2007, we consummated our obligations under the
contract, pursuant to a letter agreement between the Company and Qiang Long.
Pursuant to the letter agreement, we acknowledged our receipt of the final
payment in cash from Qiang Long as fulfillment of Qiang Long's investment
obligation, and agreed to issue 50,000,000 shares to Qiang Long on or before
July 23, 2007, and the remaining 86,986,138 shares within fifteen (15) business
days following the effective date of an amendment to our Certificate of
Incorporation to effect a one-for-twenty reverse split of our outstanding common
stock, which will be equal to 4,349,307 shares post-reverse split.

The consummation of the Qiang Long investment obligation
resulted in net cash inflows of approximately $28.1 million, which is an
increase of approximately 853% over net cash inflows during the same period in
2006. As a result of the Qiang Long funding, we believe that we will have enough
capital to execute our business plan to seek the acquisition of one or more
operating companies through stock transactions.

Critical Accounting Policies

Economic and Political Risks

The Company faces a number of risks and challenges as a
result of having primary operations and marketing in the PRC. Changing political
climates in the PRC could have a significant effect on the Company's business.

Foreign Currencies

The company has determined that RMB to be its functional
currency. The accompanying consolidated financial statements are presented in
U.S. dollars. The consolidation financial statements are translated into US
dollars from RMB at year-end exchange rates for assets and liabilities, and
weighted average exchange rates for revenues and expenses. Capital accounts are
translated at their historical exchange rates when the capital transactions
occurred.

Use of Estimates

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

13

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Restrictions on Transfer of Assets Out of the PRC

Dividend payments by Beijing SOD are limited by certain
statutory regulations in the PRC. No dividends may be paid by Beijing SOD
without first receiving prior approval from the Foreign Currency Exchange
Management Bureau. Dividend payments are restricted to 85% of profits, after
tax.

Significant Estimates

Several areas require significant management estimates
relating to uncertainties for which it is reasonably possible that there will be
a material change in the near term. The more significant areas requiring the use
of management estimates related to property and equipment, accrued liabilities
and, the useful lives for depreciation.

Revenue Recognition

Revenues are recognized as earned when the following four
criteria are met: (1) a customer issues purchase orders or otherwise agrees to
purchase products; (2) products are delivered to the customer; (3) pricing is
fixed or determined in accordance with the purchase order or agreement; and (4)
collectibility is reasonably assured.

Inflation

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

Seasonality

We may experience seasonal variations in our future revenues
and our operating costs, however, we do not believe that these variations will
be material.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to investors.

Risk Factors

You should carefully consider the risks described below,
which constitute all of the material risks facing us. If any of the following
risks actually occur, our business could be harmed. You should also refer to the
other information about us contained in this report, including our financial
statements and related notes.

RISKS RELATED TO OUR BUSINESS

We are an early stage development company and we have a
limited operating history of our current business. We have earned only
insignificant revenues and it is uncertain whether we will earn any revenues in
the future or whether we will ultimately be profitable.

We are in the development stage and our future operations are
subject to all of the risks inherent in the establishment of a new business
enterprise. The likelihood of our success must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with the development of SOD products, the utilization
of unproven technology and the competitive environment in which we operate.
There can be no assurance that we will be able to develop, manufacture or market
any products in the future, that future revenues will be significant, that any
sales will be profitable or that we will have sufficient funds available to
complete our marketing and development programs or to market any products which
we may develop. In addition, as a result of our limited operating history even
though we do currently have a marketable product, we expect to incur substantial
operating losses until we can generate sufficient revenues from the sales of our
SOD products to cover our operating costs. We currently have limited sources of
potential operating revenue and there can be no assurance that we will be able
to develop revenue sources or that our operations will ever become profitable.

Our industry is highly fragmented and competitive, and
increased competition could reduce our operating income.

The health supplement business both within China and globally
is highly fragmented and intensely competitive. We compete with a number of
domestic and international manufacturers and distributors that are producing and
marketing products in China that are similar to our products. We may not be able
to effectively compete against them because our existing or potential
competitors may have superior financial, technical, distribution, marketing,
sales and other resources, as well as more significant name recognition and
established positions in the market we serve. Increased competition could force
us to lower our prices or offer services at a higher cost to us, which could
reduce our operating income.

14

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Our products could be subject to product liability claims by
consumers, which would adversely affect our profit margins, results from
operations and stockholder value.

We are exposed to risks inherent in the packaging and
distribution of health supplement products, such as with respect to adequacy of
warnings, mislabeling and contamination. As a result, there is a risk that
someone using our products may experience significant negative side effects
which may permanently harm them and we could be subject to claims for damages
based on theories of product liability and other legal theories. The costs and
resources to defend such claims could be substantial and, if such claims are
successful, we could be responsible for paying some or all of the damages. Also,
our reputation could be adversely affected, regardless of whether such claims
are successful. We currently intend to obtain product liability insurance at the
appropriate time; however, there can be no assurance that we will be able to
obtain or maintain insurance on acceptable terms for our products or that such
insurance would be sufficient to cover any potential product liability claim or
recall. Any of these results would adversely affect our profit margins, results
from operations and stockholder value.

We may not be able to adequately protect our proprietary
intellectual property and technology, which may harm our competitive position
and result in increased expenses incurred to enforce our rights.

We rely on a combination of copyright, trademark and trade
secret laws, non-disclosure agreements and other confidentiality procedures and
contractual provisions to establish, protect and maintain our proprietary
intellectual property and technology and other confidential information. Some of
these technologies, especially the technology to extract SOD and SOD related
enzyme from wild plants, are important to our business and are not protected by
patents. Despite our efforts, the steps we have taken to protect our proprietary
intellectual property and technology and other confidential information may not
be adequate to preclude misappropriation of our proprietary information or
infringement of our intellectual property rights. Protecting against the
unauthorized use of our products, trademarks and other proprietary rights is
also expensive, difficult and, in some cases, impossible. Litigation may be
necessary in the future to enforce or defend our intellectual property rights,
to protect our trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and diversion of management resources, either of which could harm our business,
operating results and financial condition.

Compliance with environmental regulations can be expensive,
and our failure to comply with these regulations may result in adverse publicity
and may have a material adverse effect on our business.

As a manufacturer, we are subject to various Chinese
environmental laws and regulations on air emission, waste water discharge, solid
wastes and noise. Although we believe that our operations are in substantial
compliance with current environmental laws and regulations, we may not be able
to comply with these regulations at all times as the Chinese environmental legal
regime is evolving and becoming more stringent. Therefore, if the Chinese
government imposes more stringent regulations in the future, we will have to
incur additional and potentially substantial costs and expenses in order to
comply with new regulations, which may negatively affect our results of
operations. If we fail to comply with any of the present or future environmental
regulations in any material aspects, we may suffer from negative publicity and
may be required to pay substantial fines, suspend or even cease operations.
Failure to comply with Chinese environmental laws and regulations may materially
and adversely affect our business, financial condition and results of
operations.

We depend heavily on key personnel, and turnover of key
employees and senior management could harm our business.

Our future business and results of operations depend in
significant part upon the continued contributions of our key technical and
senior management personnel, including Jie Chen, our Chief Executive Officer and
Xinmin Pan, our Chief Financial Officer. They also depend in significant part
upon our ability to attract and retain additional qualified management,
technical, marketing and sales and support personnel for our operations. If we
lose a key employee or if a key employee fails to perform in his or her current
position, or if we are not able to attract and retain skilled employees as
needed, our business could suffer. Significant turnover in our senior management
could significantly deplete our institutional knowledge held by our existing
senior management team. We depend on the skills and abilities of these key
employees in managing the manufacturing, technical, marketing and sales aspects
of our business, any part of which could be harmed by further turnover.

We may be exposed to potential risks relating to our internal
controls over financial reporting and our ability to have the operating effectiveness of our internal controls attested to by our independent
auditors.

15

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As directed by Section 404 of the Sarbanes-Oxley Act of 2002,
or SOX 404, the SEC adopted rules requiring public companies to include a report
of management on the Company's internal controls over financial reporting in
their annual reports on Form 10-K. We are subject to this requirement commencing
with our fiscal year ending December 31, 2007 and a report of our management is
included under Item 8A of this Annual Report on Form 10-KSB. In addition, SOX
404 requires the independent registered public accounting firm auditing a
company's financial statements to also attest to and report on the operating
effectiveness of such company's internal controls. However, this annual report
does not include an attestation report because under current law, we will not be
subject to these requirements until our annual report for the fiscal year ending
December 31, 2008. We can provide no assurance that we will comply with all of
the requirements imposed thereby. There can be no assurance that we will receive
a positive attestation from our independent registered public accountants. In
the event we identify significant deficiencies or material weaknesses in our
internal controls that we cannot remediate in a timely manner or we are unable
to receive a positive attestation from our independent registered public
accountants with respect to our internal controls, investors and others may lose
confidence in the reliability of our financial statements.

Our holding company structure may limit the payment of dividends to our
stockholders.

We have no direct business operations, other than our ownership of our
subsidiaries. While we have no current intention of paying dividends, should we
decide in the future to do so, as a holding company, our ability to pay
dividends and meet other obligations depends upon the receipt of dividends or
other payments from our operating subsidiaries and other holdings and
investments. In addition, our operating subsidiaries, from time to time, may be
subject to restrictions on their ability to make distributions to us, including
as a result of restrictive covenants in loan agreements, restrictions on the
conversion of local currency into U.S. dollars or other hard currency and other
regulatory restrictions as discussed below. If future dividends are paid in RMB,
fluctuations in the exchange rate for the conversion of RMB into U.S. dollars
may reduce the amount received by U.S. stockholders upon conversion of the
dividend payment into U.S. dollars.

Chinese regulations currently permit the payment of dividends only out of
accumulated profits as determined in accordance with Chinese accounting
standards and regulations. Our subsidiaries in China are also required to set
aside a portion of their after tax profits according to Chinese accounting
standards and regulations to fund certain reserve funds. Currently, our
subsidiaries in China are the only sources of revenues or investment holdings
for the payment of dividends. If they do not accumulate sufficient profits under
Chinese accounting standards and regulations to first fund certain reserve funds
as required by Chinese accounting standards, we will be unable to pay any
dividends.

RISKS RELATED TO DOING BUSINESS IN CHINA

Changes in China's political or economic situation could harm
us and our operational results.

Economic reforms adopted by the Chinese government have had a
positive effect on the economic development of the country, but the government
could change these economic reforms or any of the legal systems at any time.
This could either benefit or damage our operations and profitability. Some of
the things that could have this effect are:

- Level of government
  involvement in the economy;
- Control of foreign
  exchange;
- Methods of
  allocating resources;
- Balance of payments
  position;
- International trade
  restrictions; and
- International
  conflict.

The Chinese economy differs from the economies of most
countries belonging to the Organization for Economic Cooperation and
Development, or OECD, in many ways. As a result of these differences, we may not
develop in the same way or at the same rate as might be expected if the Chinese
economy were similar to those of the OECD member countries.

Our business is largely subject to the uncertain legal
environment in China and your legal protection could be limited.

The Chinese legal system is a civil law system based on
written statutes. Unlike common law systems, it is a system in which precedents
set in earlier legal cases are not generally used. The overall effect of
legislation enacted over the past 20 years has been to enhance the protections
afforded to foreign invested enterprises in China. However, these laws,
regulations and legal requirements are relatively recent and are evolving
rapidly, and their interpretation and enforcement involve uncertainties. These
uncertainties could limit the legal protections available to foreign investors,
such as the right of foreign invested enterprises to hold licenses and permits
such as requisite business licenses. In addition, all of our executive officers
are residents of China and not of the U.S., and substantially all the assets of
these persons are located outside the U.S. As a result, it could be difficult
for investors to effect service of process in the U.S., or to enforce a judgment
obtained in the U.S. against us or any of these persons.

16

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The Chinese government exerts substantial influence over the
manner in which we must conduct our business activities.

China only recently has permitted provincial and local
economic autonomy and private economic activities. The Chinese government has
exercised and continues to exercise substantial control over virtually every
sector of the Chinese economy through regulation and state ownership. Our
ability to operate in China may be harmed by changes in its laws and
regulations, including those relating to taxation, import and export tariffs,
environmental regulations, land use rights, property and other matters. We
believe that our operations in China are in material compliance with all
applicable legal and regulatory requirements. However, the central or local
governments of these jurisdictions may impose new, stricter regulations or
interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such
regulations or interpretations.

Accordingly, government actions in the future, including any
decision not to continue to support recent economic reforms and to return to a
more centrally planned economy or regional or local variations in the
implementation of economic policies, could have a significant effect on economic
conditions in China or particular regions thereof, and could require us to
divest ourselves of any interest we then hold in Chinese properties or joint
ventures.

Future inflation in China may inhibit our ability to conduct
business profitably in China.

In recent years, the Chinese economy has experienced periods
of rapid expansion and high rates of inflation. During the past ten years, the
rate of inflation in China has been as high as 20.7% and as low as -2.2%. These
factors have led to the adoption by the Chinese government, from time to time,
of various corrective measures designed to restrict the availability of credit
or regulate growth and contain inflation. High inflation may in the future cause
the Chinese government to impose controls on credit and/or prices, or to take
other action, which could inhibit economic activity in China, and thereby harm
the market for our products.

Any recurrence of severe acute respiratory syndrome, or SARS,
or another widespread public health problem, could harm our operations.

A renewed outbreak of SARS or another widespread public
health problem in China, where our operations are conducted, could have a
negative effect on our operations.

Our operations may be impacted by a number of health-related
factors, including the following:

- quarantines or
  closures of some of our offices which would severely disrupt our operations,
- the sickness or
  death of our key officers and employees, and
- a general slowdown
  in the Chinese economy.

Any of the foregoing events or other unforeseen consequences
of public health problems could damage our operations.

If consumer spending power in China declines, our ability to
market SOD products may weaken.

The success of our SOD products relies in part on the
perception of consumers of the relative necessity of SOD, which is largely
dependent on Chinese consumers' financial ability to afford SOD-enriched
products. If Chinese consumers' spending power declines, whether because of the
reversal of China's economic growth or other causes, then our SOD products may
become less profitable if companies that use its product to enrich their
products stop ordering it.

If health problems relating to SOD products made in China
emerge, then SOD sales may fall or be banned entirely.

In light of recent news pieces about the health problems and
risks of products made in China, the global market and foreign and Chinese
health authorities may be especially sensitive about health problems caused by
or relating to SOD products made in China. If health problems relating to SOD
products made in China become evident, then the market demand for Chinese SOD
producers may be particularly susceptible to a fall. Likewise, such problems
become evident, foreign or Chinese health authorities may ban or impose other
controls or regulations on such SOD products that could harm or eliminate SOD
product sales. As a producer of a SOD product in China, we would be subject to
these risks.

17

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Restrictions on currency exchange may limit our ability to
receive and use our revenues effectively.

The majority of our revenue will be settled in RMB and U.S.
Dollars, and any future restrictions on currency exchanges may limit our ability
to use revenue generated in RMB to fund any future business activities outside
China or to make dividend or other payments in U.S. dollars. Although the
Chinese government introduced regulations in 1996 to allow greater
convertibility of the RMB for current account transactions, significant
restrictions still remain, including primarily the restriction that
foreign-invested enterprises may only buy, sell or remit foreign currencies
after providing valid commercial documents at those banks in China authorized to
conduct foreign exchange business. In addition, conversion of RMB for capital
account items, including direct investment and loans, is subject to governmental
approval in China, and companies are required to open and maintain separate
foreign exchange accounts for capital account items. We cannot be certain that
the Chinese regulatory authorities will not impose more stringent restrictions
on the convertibility of the RMB.

We may be unable to complete a business combination
transaction efficiently or on favorable terms due to complicated merger and
acquisition regulations which became effective on September 8, 2006.

On August 8, 2006, six PRC regulatory agencies, including the
CSRC, promulgated the Regulation on Mergers and Acquisitions of Domestic
Companies by Foreign Investors, which became effective on September 8, 2006.
This new regulation, among other things, governs the approval process by which a
PRC company may participate in an acquisition of assets or equity interests.
Depending on the structure of the transaction, the new regulation will require
the PRC parties to make a series of applications and supplemental applications
to the government agencies. In some instances, the application process may
require the presentation of economic data concerning a transaction, including
appraisals of the target business and evaluations of the acquirer, which are
designed to allow the government to assess the transaction. Government approvals
will have expiration dates by which a transaction must be completed and reported
to the government agencies. Compliance with the new regulations is likely to be
more time consuming and expensive than in the past and the government can now
exert more control over the combination of two businesses. Accordingly, due to
the new regulation, our ability to engage in business combination transactions
has become significantly more complicated, time consuming and expensive, and we
may not be able to negotiate a transaction that is acceptable to our
stockholders or sufficiently protect their interests in a transaction.

The new regulation allows PRC government agencies to assess
the economic terms of a business combination transaction. Parties to a business
combination transaction may have to submit to the Ministry of Commerce and other
relevant government agencies an appraisal report, an evaluation report and the
acquisition agreement, all of which form part of the application for approval,
depending on the structure of the transaction. The regulations also prohibit a
transaction at an acquisition price obviously lower than the appraised value of
the PRC business or assets and in certain transaction structures, require that
consideration must be paid within defined periods, generally not in excess of a
year. The regulation also limits our ability to negotiate various terms of the
acquisition, including aspects of the initial consideration, contingent
consideration, holdback provisions, indemnification provisions and provisions
relating to the assumption and allocation of assets and liabilities. Transaction
structures involving trusts, nominees and similar entities are prohibited.
Therefore, such regulation may impede our ability to negotiate and complete a
business combination transaction on financial terms that satisfy our investors
and protect our stockholders' economic interests.

The value of our securities will be affected by the foreign
exchange rate between U.S. dollars and RMB.

The value of our common stock will be affected by the foreign
exchange rate between U.S. dollars and RMB, and between those currencies and
other currencies in which our sales may be denominated. Currently, RMB is
stronger than U.S. Dollars. For example, to the extent that we need to convert
U.S. dollars into RMB for our operational needs and should RMB appreciate
against the U.S. dollar at that time, our financial position, the business of
the Company, and the price of our common stock may be harmed. Conversely, if we
decide to convert our RMB into U.S. dollars for the purpose of declaring
dividends on our common stock or for other business purposes and the U.S. dollar
appreciates against RMB, the U.S. dollar equivalent of our earnings from our
subsidiaries in China would be reduced.

18

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RISKS RELATED TO THE MARKET FOR OUR STOCK

Our common stock is quoted on the OTC Bulletin Board which
may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTC Bulletin Board. The OTC
Bulletin Board is a significantly more limited market than the New York Stock
Exchange or Nasdaq system. The quotation of our shares on the OTC Bulletin Board
may result in a less liquid market available for existing and potential
stockholders to trade shares of our common stock, could depress the trading
price of our common stock and could have a long-term adverse impact on our
ability to raise capital in the future.

We may be subject to penny stock regulations and restrictions
and you may have difficulty selling shares of our common stock.

The SEC has adopted regulations which generally define
so-called "penny stocks" to be an equity security that has a market price less
than $5.00 per share or an exercise price of less than $5.00 per share, subject
to certain exemptions. If our common stock becomes a "penny stock", we may
become subject to Rule 15g-9 under the Exchange Act, or the "Penny Stock Rule".
This rule imposes additional sales practice requirements on broker-dealers that
sell such securities to persons other than established customers and "accredited
investors" (generally, individuals with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For
transactions covered by Rule 15g-9, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. As a result, this rule may
affect the ability of broker-dealers to sell our securities and may affect the
ability of purchasers to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt,
the rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the SEC relating to the penny stock market.
Disclosure is also required to be made about sales commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stock.

There can be no assurance that our common stock will qualify
for exemption from the Penny Stock Rule. In any event, even if our common stock
were exempt from the Penny Stock Rule, we would remain subject to Section
15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any
person from participating in a distribution of penny stock, if the SEC finds
that such a restriction would be in the public interest.

Our controlling stockholder, Chang-de Li, holds a significant
percentage of our outstanding voting securities and accordingly may make
decisions regarding our daily operations, significant corporate transactions and
other matters that other stockholders may believe are not in their best
interests.

Mr. Chang-de Li, our Chairman, is the beneficial owner of
approximately 54.29% of our outstanding voting securities. As a result, he
possesses significant influence over the election of our Board of Directors and
significant corporate transactions. His ownership may also have the effect of
delaying or preventing a future change in control, impeding a merger,
consolidation, takeover or other business combination or discourage a potential
acquirer from making a tender offer. Other stockholders may believe that these
future decisions made by Mr. Li are not in their best interests.

The Board of Directors obtained an independent valuation from
Asset Appraisal Limited, a Hong Kong-based asset appraisal company regarding the
SOD transaction, which evaluated the financial condition and prospects of Top
Time and determined that a purchase price of $54.9 million (RMB 407 million,
based on an exchange ratio of $1=RMB 7.414) for Top Time was reasonable.
However, the Board of Directors has not obtained a fairness opinion with respect
to the equity part of the purchase price of $54.9 million, which amounts to a
total of 62,250,000 shares of the Company's common stock. The share number was
calculated based upon $0.02/share, the average of the closing price of the
Company's common stock on the OTCBB, for the 365 calendar days prior to May 31,
2007, which was adjusted for our stock split which occurred on October 16, 2007.
As a result, the effective purchase price per share was $0.40. Although such
price is greater than the then trading price of our common stock, which was
$0.145 per share on November 12, 2007, as reported on the OTCBB, the then
trading price did not reflect our 1-for-20 reverse split. The price in fact
reflects the current trading price, which is $0.51 as of February 13, 2008. In
addition, the $0.40 per share purchase price, as well as the current trading
price of our stock on the OTCBB, may be significantly lower than the
pre-acquisition book value per share of the Company. Finally, the book value of
SOD assets being acquired will be significantly less than the acquisition
purchase price.

19

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ITEM 7. FINANCIAL STATEMENTS

See the index to our financial statements and our financial
statements following the Signature Page at the end of this Annual Report on Form
10-KSB.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

On December 21, 2007, Child, Van Wagoner & Bradshaw, PLLC, or
Van Wagoner, resigned as our independent registered public accounting firm. On
the same date, we engaged Bernstein & Pinchuk LLP ("Bernstein") as our
independent registered public accounting firm for the fiscal year ending
December 31, 2007. The decision to change our independent auditor was approved
by our Board of Directors.

Van Wagoner audited our financial statements for the fiscal
years ended December 31, 2005 and 2006 and Van Wagoner's reports are included in
our annual reports on Form 10-KSBs for such periods. Van Wagoner's reports on
the Company's financial statements for the fiscal years ended December 31, 2005
and 2006 or for any subsequent interim period did not contain an adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.

During its tenure as our auditor for the fiscal years ended
December 31, 2005 and 2006 and for the subsequent interim period through to the
date of its resignation, (1) there were no disagreements between us and Van
Wagoner on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to Van Wagoner's satisfaction, would have caused Van Wagoner to make reference to the
subject matter of the disagreement in connection with its report; and (2) Van
Wagoner did not advise us of any reportable events of the type described in Item
304(a)(1)(iv)(B) of Regulation S-B.

ITEM 8A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in
Rules 13a-15(e) under the Exchange Act) that are designed to ensure that
information that would be required to be disclosed in Exchange Act reports is
recorded, processed, summarized and reported within the time period specified in
the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including to the Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.

As required by Rule 13a-15 under the Exchange Act, our
management, including Jie Chen, our Chief Executive Officer, and Xinmin Pan, our
Chief Financial Officer, evaluated the effectiveness of the design and operation
of our disclosure controls and procedures as of December 31, 2007. Based on that
evaluation, Ms. Chen and Mr. Pan concluded that as of December 31, 2007, and as
of the date that the evaluation of the effectiveness of our disclosure controls
and procedures was completed, our disclosure controls and procedures were
effective to satisfy the objectives for which they are intended.

Internal Controls Over Financial Reporting

Management's Annual Report on Internal Control over Financial
Reporting.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that
management document and test the Company's internal control over financial
reporting and include in this Annual Report on Form 10-KSB a report on
management's assessment of the effectiveness of our internal control over
financial reporting. Our management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is
defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with
the participation of our management, including Jie Chen, our Chief Executive
Officer and Xinmen Pan, Chief Financial Officer, we conducted an evaluation of
the effectiveness of our internal control over financial reporting based upon
the framework in Internal ControlIntegrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Based on that
evaluation, our management concluded that our internal control over financial
reporting is effective, as of December 31, 2007.

20

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Company's internal control over financial reporting includes
those policies and procedures that:

- 





All internal control systems, no matter how well designed,
have inherent limitations. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.

Company's management assessed the effectiveness of China
Longyi Group's internal control over financial reporting as of December 31, 2007
based on the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in Internal Control-Integrated Framework (1992)
and International Control over Financial Reporting - Guidance for Smaller Public
Companies (2006). Based on this assessment, management believes that, as of
December 31, 2007, China Longyi Group's internal control over financial
reporting was effective.

This annual report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management's report in this
annual report.

Changes in Internal Controls over Financial Reporting.

During the fiscal year ended December 31, 2007, there were no
changes in our internal control over financial reporting identified in
connection with the evaluation performed during the fiscal year covered by this
report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

None.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Upon the closing of the reverse acquisition, as of November
12, 2007, Yun Dong Luan submitted his resignation letter pursuant to which he
resigned from his position as our director effective immediately. The
resignation of Mr. Luan is not in connection with any known disagreement with us
on any matter. Ms. Wei Wang was appointed to the board of directors at the
effective time of the resignation of Mr. Luan.

The directors and executive officers are as follows:

|Name              | Age | Position                   
|----------------- | --- | ---------------------------
|                  |     |                            
|Chang-de Li       | 51  | Chairman of the Board      
|Jie Chen          | 52  | Chief Executive
    Officer
|Xinmin Pan        | 62  | Chief Financial Officer    
|Hui Chen          | 38  | Director                   
|Li
    Hong Liang | 46  | Director                   
|Wei Wang          | 37  | Director                   

Chang-de Li was appointed Chairman of the Board of
Directors on May 10, 2004. Mr. Li has also served as the President of our
subsidiary, Beijing SOD, since November 8, 2007,and has acted as the chairman of
the Board of Directors of our controlling stockholder, Qiang Long, since 1993.
During his tenure as chairman, he has led the Company to develop many holiday
villages, hotels and business centers throughout China. Furthermore, On November
8, 2007, Mr. Li became our subsidiary Beijing SOD's President.

21

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Jie Chen was appointed Chief Executive Officer of the
Company on September 22, 2006. Prior to her appointment, Ms. Chen served as Vice
President of Public Relations and has been a member of the Board of Directors of
the Company since February 2004. Upon being appointed as Chief Executive Officer
of the Company, Ms. Chen resigned from the office of Vice President of Public
Relations. Ms. Chen is the Vice Secretary of the Zhang Xue-Liang Fund
Association and has held such position and other positions with such Association
over the past five years. The Zhang Xue-Liang Fund Association is in the
business of arranging meetings, conferences and exhibitions. It also provides
public relations and investor relations support to its clients. Prior to joining
the Zhang Xue-Liang Fund Association, Ms. Chen held various key positions with
television stations and public relations companies in China. Ms. Chen holds a
Master's degree in International Finance from Beijing University.

Xinmin Pan became the Company's Chief Financial
Officer on December 4, 2006. Prior to his appointment, Mr. Pan has worked as an
accountant with the Company since October 2006. Before joining the Company Mr.
Pan served as the General Accountant for ZhongFang Investment Holding Ltd. from
March 2006 to October 2006, as the Chief Financial Officer of the Beijing
JinLang Hotel from January 2002 to March 2006, as the Chief Financial Officer of
the Beijing Happy Holiday Hotel from January 2001 to January 2002, and as Chief
Accountant and Chair of the Financing Department of North China Jinghai Industry
Corporation, from November 1990 to January 2001.

Hui Chen was appointed to the Board of Directors on
and effective December 2, 2005. Since 1999, Mr. Chen has also served as the
Assistant General Manager of our controlling stockholder, Qiang Long, a real
estate development and investment company. Mr. Chen graduated from Xi'an
University of Architecture and Technology in 1991.

Li Hong Liang became a director on May 10, 2004.
Prior to joining us, Mr. Li acted as vice general manager of Beijing JiuFa
Industry Ltd., a company engaged in commerce and trade, from 1994 to 2003 and
served as Assistant General Manager of one of our stockholders, China Cardinal
Limited, from 2003 to 2004. China Cardinal Limited is engaged in the business of
acting as an investment company.

Wei Wang became a director on November 12, 2007. Ms.
Wang has also served since 2005, as the Chairperson of China Cardinal Limited,
since January 2007. Ms. Wang also served as the Chairperson of Daykeen and Top
Time since 2006 and as the President and Chairperson of Beijing SOD from January
2007 until November 8, 2007. Prior to joining our Company, Ms. Wang served as a
director of Manchuria Tianrui Investment Co., Ltd from 1999 to 2005. Ms. Wang
graduated from Saint Petersburg National Technology University of Russia in
1998.

There are no agreements or understandings for any of our
executive officers or directors to resign at the request of another person and
no officer or director is acting on behalf of nor will any of them act at the
direction of any other person.

Involvement in Certain Legal Proceedings

To the best of our knowledge, except as set forth in our
discussion below in "Certain Relationships and Related Transactions", none of
our directors, director nominees or executive officers has been involved in any
transactions with us or any of our directors, executive officers, affiliates or
associates which are required to be disclosed pursuant to the rules and
regulations of the SEC. None of the directors, director designees or executive
officers to our knowledge has been convicted in a criminal proceeding, excluding
traffic violations or similar misdemeanors, or has been a party to any judicial
or administrative proceeding during the past five years that resulted in a
judgment, decree or final order enjoining the person from future violations of,
or prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws, except for matters
that were dismissed without sanction or settlement

Board Composition and Committees

The board of directors is currently composed of five members,
Mr. Chang-de Li, Ms. Jie Chen, Mr. Hui Chen, Mr. Li Hong Liang and Ms. Wei Wang.
All board action requires the approval of a majority of the directors in
attendance at a meeting at which a quorum is present.

We currently do not have standing audit, nominating or
compensation committees. Our entire board of directors handles the functions
that would otherwise be handled by each of the committees. We intend, however,
to establish an audit committee, a nominating committee and a compensation
committee of the board of directors as soon as practicable. We envision that the
audit committee will be primarily responsible for reviewing the services
performed by our independent auditors, evaluating our accounting policies and
our system of internal controls. The nominating committee would be primarily
responsible for nominating directors and setting policies and procedures for the
nomination of directors. The nominating committee would also be responsible for
overseeing the creation and implementation of our corporate governance policies
and procedures. The compensation committee will be primarily responsible for
reviewing and approving our salary and benefit policies (including stock
options), including compensation of executive officers.

22

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None of our directors is an audit committee financial expert.
Upon the establishment of an audit committee, the board will determine whether
any of the directors qualify as an audit committee financial expert.

Director Compensation

During the 2007 fiscal year, we did not pay our directors any
compensation for their services as our directors. In the future, we may adopt a
policy of paying independent directors a fee for their attendance at board and
committee meetings. We do reimburse each director for reasonable travel expenses
related to such director's attendance at board of directors and committee
meetings.

Family Relationships

There are no family relationships among our directors or
officers.

Code of Ethics

On March 8, 2004, our board of directors adopted a code of
ethics that our principal financial officer, principal accounting officer or
controller and any person who may perform similar functions is subject to. We
have incorporated the code of ethics herein by reference to exhibit 14 to our
Annual Report on Form 10-KSB for the fiscal year ending December 31, 2003.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth information concerning all
compensation awarded to, earned by or paid to the following persons for services
rendered in all capacities during 2007: Chang-de Li, our former Chief Executive
Officer and Jie Chen, our current Chief Executive Officer, who became our Chief
Executive Officer upon the resignation of Mr. Li. No other executive officers
received total annual salary and bonus compensation in excess of $100,000.

Summary Compensation Table

|Name and Principal Position | Year | Salary 
    ($) | Bonus
    ($) | Stock Awards
    ($) | Option
    Awards
    ($) | Non-
    Equity
    Incentive
    Plan
    Compensation
    Earnings 
    ($) | Non-
    qualified
    Deferred
    Compensation
    Earnings
    ($) | All Other
    Compensation
    ($)(3) | Total
    ($)
|--------------------------- | ---- | --------------- | ------------- | -------------------- | ------------------------- | ----------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------------------------------------- | -------------
|Chang-de Li,                | 2006 | 0               | N/A           | N/A                  | N/A                       | N/A                                                                           | N/A                                                                   | N/A                                   | 0            
|Chairman (1)                | 2007 | 0               | N/A           | N/A                  | N/A                       | N/A                                                                           | N/A                                                                   | N/A                                   | 0            
|Jie Chen, CEO               | 2006 | 15,354          | N/A           | N/A                  | N/A                       | N/A                                                                           | N/A                                                                   | N/A                                   | 15,354       
|and Director                | 2007 | 4,732 (2)       | N/A           | N/A                  | N/A                       | N/A                                                                           | N/A                                                                   | N/A                                   | 4,732        
|Wei Wang,                   | 2006 | N/A             | N/A           | N/A                  | N/A                       | N/A                                                                           | N/A                                                                   | N/A                                   | N/A          
|Director                    | 2007 | 0               | N/A           | N/A                  | N/A                       | N/A                                                                           | N/A                                                                   | 100,000(3)                            | 100,000      

23

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Narrative to Summary Compensation Table

(1)

Outstanding Equity Awards at Fiscal Year End

None of our executive officers received any equity awards,
including, options, restricted stock or other equity incentives, during the
fiscal year ended December 31, 2007.

Additional Narrative Disclosure

We have an employment agreement with Mr. Xinmin Pan who
became our Chief Financial Officer in December 2006 after serving as our
accountant from October 2006 to December 2006. We are obligated to pay him an
annual salary of RMB 72,000, or $13,500. However, in 2007, we changed the
employment agreement with Mr. Pan to pay him an annual salary of RMB 36,000 or
$4,732 due to company's limited revenue in the fiscal year 2007.

We have a verbal understanding with our Chief Executive
Officer and director, Jie Chen, regarding her annual salary of $4,732 for year
2007.

Although we have a verbal understanding with our Chairman,
Chang-de Li regarding the payment to him of an annual salary in amount of
$107,692, based on a verbal agreement between Mr. Li and the Company, Mr. Li did
not receive any compensation in 2007. Furthermore, On November 8, 2007, Mr. Li
became our subsidiary Beijing SOD's President, and he did not receive any
compensation from Beijing SOD in 2007.

Our subsidiary Beijing SOD also has an employment agreement
with its former President, Ms. Wei Wang. Ms. Wang's employment agreement became
effective as of June 1, 2007 and terminated on November 8, 2007. There is no
compensation provision in this employment agreement. Ms. Wang did not receive
any compensation from Beijing SOD in 200

Compensation of Directors

The following table sets forth information concerning all
cash and non-cash compensation awarded to, earned by or paid to our directors
for services rendered during our last completed fiscal year.

|Name          | Fees
    Earned or
    Paid in
    Cash
    ($) | Stock
    Awards
    ($) | Option
    Awards
    ($) | Non-Equity
    Incentive Plan
    Compensation
    ($) | Change in Pension
    Value and
    Nonqualified
    Deferred
    Compensation
    Earnings 
    ($) | All Other
    Compensation 
    ($) | Total
    ($)
|------------- | ----------------------------------------------- | ------------------------ | ------------------------- | ------------------------------------------------------ | ---------------------------------------------------------------------------------------------------- | ----------------------------------- | -------------
|Wei Wang      | N/A                                             | --                       | --                        | --                                                     | --                                                                                                   | 100,000                             | 100,000      
|Chang De Li   | N/A                                             | --                       | --                        | --                                                     | --                                                                                                   | N/A                                 | N/A          
|Jie Chen      | 4,732                                           | N/A                      | N/A                       | N/A                                                    | N/A                                                                                                  | N/A                                 | 4,732        
|Hui Chen      | N/A                                             | N/A                      | N/A                       | N/A                                                    | N/A                                                                                                  | N/A                                 | N/A          
|Li Hong Liang | N/A                                             | N/A                      | N/A                       | N/A                                                    | N/A                                                                                                  | N/A                                 | N/A          

24

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Narrative to Director Compensation Table

On November 12, 2007, we completed the acquisition
transaction with Top Time whereby we paid Ms. Wei Wang, the Chairman of Daykeen,
$100,000 as the compensation in connection with the Top Time purchase price.

The compensation paid to Mr. Li and Ms. Wang, who also serve
as our Chairman and as the president of our subsidiary, respectively, is
reported in the Summary Compensation Table above. They do not receive any
additional compensation for their service as directors.

Other than as set forth herein, there have been no fees
earned or paid in cash for services to our directors. No stock or stock options
or other equity incentives were awarded to our directors for their services as
directors during the fiscal year ended December 31, 2007.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED SHAREHOLDER MATTERS

Security Ownership of Certain Beneficial Owners

The following table sets forth information regarding
beneficial ownership of our common stock as of December 31, 2007 (i) by each
person who is known by us to beneficially own more than 5% of our common stock;
(ii) by each of our officers and directors; and (iii) by all of our officers and
directors as a group.

Unless otherwise specified, the address of each of the
persons set forth below is in care of China Longyi Group International Holdings
Limited, 8B 8/F East Area, Century Golden Resources Business Center, 69 Banjing
Road, Haidian District, Beijing, and People's Republic of China 100097.

|                       |                                           |            | Amount &        |           
|---------------------- | ----------------------------------------- | ---------- | --------------- | ----------
|                       |                                           |            | Nature of       |           
|Title of               | Name & Address of
    Beneficial          | Office, If | Beneficial      | Percent of
|Class                  | Owner                                     | Any        | Ownership(1)    | Class(2)  
|Directors and Officers
|                       |                                           |            |                 |           
|Common Stock           | Chang-de Li                               | Chairman   | 7,750,000 (3)   | 54.29%    
|                       | No.
    95 Kangxi Road                    |            |                 |           
|                       | Ba
    Da Xia Industrial Development      |            |                 |           
|                       | Zone                                      |            |                 |           
|                       | Yanqing County, Beijing                   |            |                 |           
|                       | People's Republic of China                |            |                 |           
|                       |                                           |            |                 |           
|Common Stock           | Jie Chen                                  | CEO        | 0               | *         
|                       |                                           |            |                 |           
|Common Stock           | Xinmin Pan                                | CFO        | 0               | *         
|                       |                                           |            |                 |           
|Common Stock           | Hui Chen                                  | Director   | 0               | *         
|                       |                                           |            |                 |           
|Common Stock           | Li
    Hong Liang                         | Director   | 0               | *         
|                       |                                           |            |                 |           
|Common Stock           | Wei Wang                                  | Director   | 500,000
    (8) | 5.04%     
|                       |                                           |            |                 |           
|Common Stock           | All
    officers and directors as a group |           | 8,250,000       | 59.33%    
|                       | (1
    person named above)                |            |                 |           
|                       |                                           |            |                 |           
|5% Securityholders    
|                       |                                           |            |                 |           
|Common Stock           | Beijing Qiang Long Real Estate            |            | 5,099,307 (4)   | 35.72%    
|                       | Development Co. Ltd.                      |            |                 |           
|                       | No.
    95 Kangxi Road                    |            |                 |           
|                       | Ba
    Da Xia Industrial Development      |            |                 |           

| | Zone                       |  | 
| | -------------------------- |  | 
| | Yanqing County, Beijing    |  | 
| | People's Republic of China |  | 

25

---



|             |                                            |                 |       
|------------ | ------------------------------------------ | --------------- | ------
|Common Stock | Jolly Concept Management Limited           | 2,500,000       | 25.19%
|             | 19th
    Floor, Beverly House, Nos. 93-107 |                 |       
|             | Lockhart Road, Wanchai, Hong Kong          |                 |       
|             |                                            |                 |       
|Common Stock | Trinity Creation Int'l
    Ltd.            | 1,300,000 (5)   | 13.10%
|             | Room 708, 7/F, Dannies
    House           |                 |       
|             | 20 Lua Rd., Wan Chai,
    Hong Kong        |                 |       
|             |                                            |                 |       
|Common Stock | Yue
    Ke International Development,      | 810,000         | 8.16% 
|             | Limited                                    |                 |       
|             | Guangdong Bian Fang Building,              |                 |       
|             | 10th
    Floor                             |                 |       
|             | Futian District, Shenzhen, 518033          |                 |       
|             | People's Republic of China                 |                 |       
|             |                                            |                 |       
|Common Stock | Chuquan Li                                 | 910,000
    (6) | 9.1%  
|             | Guangdong Bian Fang
    Building,          |                 |       
|             | 10th Floor                                 |                 |       
|             | Futian District,
    Shenzhen, 518033      |                 |       
|             | People's Republic of
    China             |                 |       
|             |                                            |                 |       
|Common Stock | Kingsrich Development Limited              | 730,000         | 7.35% 
|             | Sincere Insurance Building                 |                 |       
|             | 4 -
    6 Hennessey Road                   |                 |       
|             | Wanchai, Hong Kong                         |                 |       
|             |                                            |                 |       
|Common Stock | Li Guanglian                               | 730,000
    (7) | 7.35% 
|             | Sincere Insurance
    Building             |                 |       
|             | 4 - 6 Hennessey Road                       |                 |       
|             | Wanchai, Hong Kong                         |                 |       
|             |                                            |                 |       
|Common Stock | China Cardinal Limited                     | 500,000         | 5.04% 
|             | Flat/Rm 708, 7th Floor                     |                 |       
|             | Dunnies House                              |                 |       
|             | 20
    Luard Road                          |                 |       
|             | Wanchai, Hong Kong                         |                 |       
|             |                                            |                 |       
|Common Stock | Wang Wei                                   | 500,000
    (8) | 5.04% 
|             | Flat/Rm 708, 7th
    Floor                 |                 |       
|             | Dunnies House                              |                 |       
|             | 20 Luard Road                              |                 |       
|             | Wanchai, Hong Kong                         |                 |       
|             |                                            |                 |       
|Common Stock | Gold
    Source Investments Limited        | 550,000         | 5.54% 
|             | Flat/Rm 708, 7th Floor                     |                 |       
|             | Dunnies House                              |                 |       
|             | 20
    Luard Road                          |                 |       
|             | Wanchai, Hong Kong                         |                 |       
|             |                                            |                 |       
|Common Stock | Cong Xiao Long                             | 600,000
    (9) | 6.05% 
|             | Flat/Rm 708, 7th
    Floor                 |                 |       
|             | Dunnies House                              |                 |       
|             | 20 Luard Road                              |                 |       
|             | Wanchai, Hong Kong                         |                 |       

26

---



(1)

Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. For each
beneficial owner above, any options exercisable within 60 days have been
included in the denominator.

(2)

Based on
9,925,493 shares of our common stock issued and outstanding as of November 12,
2007.

(3)

Includes 750,000
shares owned by Beijing Qiang Long Real Estate Development Co. Ltd., or Qiang
Long, 150,693 shares owned by Chinese Dragon Heritage Investment Management
Limited, 2,500,000 shares owned by Jolly Concept Management Limited and
4,349,307 shares that the Company has agreed to issue to Qiang Long or its
designee following the reverse split. Chang-de Li owns 100% of the equity
interests of each of Beijing Qiang Long Real Estate Development Co., Ltd.,
Chinese Dragon Heritage Investment Management Limited and Jolly Concept
Management Limited and exercises voting and investment power over the shares
owned by each such entity.

(4)

Includes 750,000
shares owned by Qiang Long and 4,349,307 shares that we have agreed to issue to
Qiang Long or its designee following the reverse split.

(5)

Hongliang Li
exercises voting and investment power over the shares owned by Trinity Creation
Int'l Ltd.

(6)

Includes 100,000
held directly by Mr. Chuquan Li and 810,000 shares owned indirectly through Yue
Ke International Development Limited, or Yue Ke, of which he has controlling
interests and exercises voting and investment power over the shares owned by Yue
Ke.

(7)

Includes 730,000
shares owned by Kingsrich Development Limited, or Kingsrich. Li Guanglian has
controlling interests and exercises voting and investment power over the shares
owned by Kingsrich.

(8)

Includes 500,000
shares owned by China Cardinal Limited, or China Cardinal. Wei Wang has
controlling interests and exercises voting and investment power over the shares
owned by China Cardinal.

(9)

Includes 50,000
shares held directly by Cong Xiao Long and 550,000 shares held indirectly
through Gold Source Investments Limited, or Gold Source. Cong Xiao Long has
controlling interests and exercises voting and investment power over the shares
owned by Gold Source.

Upon the consummation of all the transactions contemplated by
the Stock Purchase Agreement, Daykeen, the former stockholder of Top Time owns
80.16% of the total outstanding shares of our capital stock and 80.16% of the
total voting power of all our outstanding voting securities. Daykeen is
beneficially owned and controlled by our director Wei Wang.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE

Certain Relationships and Related Transactions

The following includes a summary of transactions since the
beginning of the 2007 fiscal year, or any currently proposed transaction, in
which we were or are to be a participant and the amount involved exceeded or
exceeds $120,000, and in which any related person had or will have a direct or
indirect material interest (other than compensation described under "Executive
Compensation"). We believe the terms obtained or consideration that we paid or
received, as applicable, in connection with the transactions described below
were comparable to terms available or the amounts that would be paid or
received, as applicable, in arm's-length transactions.

- 

Prior to December 2006, Qianglong Real
  Estate Co., Ltd., or Qianglong, an entity controlled by our chairman and
  controlling shareholder, Changde Li was a 51% stockholder of Beijing SOD, Top
  Time's majority-owned subsidiary. On December 22, 2006, Top Time completed an
  equity transfer agreement with the then stockholders of Beijing SOD, including
  Qianglong, pursuant to which, Qianglong transferred its 51% equity interest in
  Beijing SOD to Top Time for a purchase price of $30,960,000. The purchase
  price was payable in three installments, due within 3 months, 6 months and 1
  year of the amendment to Beijing SOD's license, respectively. An English
  translation of the equity transfer agreement is filed herewith as Exhibit
  10.6.

27

---



- Pursuant to
  certain agreements, dated December 22, 2006 and December 27, 2006, Daykeen
  assumed Top Time's obligation to pay Qianglong for the acquisition of Beijing
  SOD under the December 22, 2006 agreement in exchange for 5,482 shares of Top
  Time. An English translation of each of these agreements is filed herewith as
  Exhibits 10.7 and 10.8, herewith.
- During the six months ended June 30,
  2007, Top Time loaned money to its shareholder, Guo Qing Tan. The loan bears
  no interest and does not have fixed repayment terms. As of December 31, 2007,
  the balance of the loan was $114,852.
- On November 12,
  2007, we completed an acquisition transaction with Top Time whereby we paid
  Daykeen, Top Time's sole shareholder, a total consideration of $54.9 million (RMB
  407 million, based on an exchange ratio of $1=RMB 7.414), in exchange for 100%
  ownership of Top Time, consisting of $30 million in cash and $24.9 million in
  shares of our common stock issuable within 90 days of the closing. The equity
  portion of the purchase price amounts to a total of 62,250,000 shares of our
  common stock (based upon $0.02/share, the average of the closing price of the
  Company's common stock on the OTCBB for the 365 calendar days prior to May 31,
  2007, which was adjusted for our stock split which occurred on October 16,
  2007 and resulted an effective purchase price of $0.40 per share). Beijing SOD
  thereby became our 90% indirectly owned subsidiary and Daykeen will become our
  controlling stockholder upon our issuance to Daykeen of the equity portion of
  the purchase price in accordance with the Stock Purchase Agreement.

Daykeen is owned and controlled by
Wei Wang, our director and 5% shareholder. Wei Wang is the chairman and
beneficial owner of China Cardinal, the holder of 5% of our shares of common
stock. In addition, Chang-de Li, our Chairman and controlling shareholder was
the controlling shareholder of Top Time until December, 2006when he transferred his ownership interest in Top Time to Daykeen. In
light of Mr. Li's prior involvement with Top Time and Mr. Wang's current
ownership of Daykeen, our board of directors determined that it was in the best
interest of the shareholders to obtain an independent valuation of Top Time. We
obtained an independent valuation from Asset Appraisal Limited, a Hong
Kong-based asset appraisal company, that evaluated the financial condition and
prospects of Top Time and determined that a purchase price of $54.9 million for
Top Time was reasonable. The valuation report is attached as Exhibit 99 to the
Current Report of the Company filed on November 12, 2007. The board determined
that it would be in the Company's best interests to pay the purchase price in a
combination of cash and stock.

Director Independence

Our Board is currently composed of five members, none of whom
are "independent" directors, as that term is defined under the NASDAQ listing
standards. All actions of the board of directors require the approval of a
majority of the directors in attendance at a meeting at which a quorum is
present. Our directors have a duty of to act in good faith with a view to our
interests. In fulfilling their duty of care to us, our directors must ensure
compliance with our Articles of Incorporation, as amended and our Bylaws. Board
action requires the approval of a majority of the directors in attendance at a
meeting at which a quorum is present.

ITEM 13. EXHIBITS

The following exhibits are filed as part of this report or
incorporated by reference:

|Exhibit Number | Description                                                                                                                                                                                                                                                                                                                                             
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                                                                                                         
|*2.1           | Stock Purchase Agreement, dated October 21, 2004, between the Company and Mr. Sin Keung Kok relating to the acquisition of Mr. Sin Keung Kok’s equity interest in Ming Hua Environmental Protection Science and Technology Limited [Incorporated by reference to Exhibit 10 of the Form 8-K filed on October 27, 2004 in Commission file number 0-30183]
|*2.2           | Stock Purchase Agreement, dated January 19, 2004, among the Company, Minghua Group International Holding (Hong Kong) Limited and Li Jinmou relating to the acquisition of Asia Key Group Limited [Incorporated by reference to Exhibit 10.3 of the Form 8-K filed on February 12, 2004 in Commission file number 0-30183]                               

28

---



|Exhibit Number | Description
|-------------- | -----------
|               |            

|*2.3  | Stock Purchase Agreement, dated April 27, 2001, among the Company, Minghua Acquisition Corp., Li Chuquan and Chan Kuen Kwong [Incorporated by reference to Exhibit 2.1 of the Form 8-K filed on May 3, 2001 in Commission file number 0-30183]                               
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*3.1  | Certificate of Incorporation of the Company [Incorporated by reference to Exhibit 3.1 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]                                                                                                          
|*3.2  | Certificate of Amendment of Certificate of Incorporation of the Company [Incorporated by reference to Appendix A of the Definitive Proxy Statement of the Company filed on July 3, 2001 in Commission file number 0-30183]                                                   
|*3.3  | Amended and Restated Bylaws of the Company [Incorporated by reference to Exhibit 3.3 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183 in Commission file number 0-30183]                                                                         
|*3.4  | Certificate of Amendment of Certificate of Incorporation of the Company filed with the Secretary of State of the State of New York on October 16, 2007 [Incorporated by reference to Exhibit 3.4 of the Form 8-K filed on December 5, 2007 in Commission file number 0-30183]
|*4.1  | Warrant to Purchase Common Stock, dated April 2, 2001, between the Company and First Pacific Capital, Ltd. [Incorporated by reference to Exhibit 10.9 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                         
|*4.2  | Registration Rights Agreement, dated June 22, 2001, among the Company, Li Chuquan and Chan Kuen Kwong [Incorporated by reference to Exhibit 4.2 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]                                                
|*4.3  | Registration Rights Agreement, dated July 23, 2001, among the Company and the stockholders of the Company named in the Registration Rights Agreement [Incorporated by reference to Exhibit 4.2 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183] 
|*4.4  | Form of Regulation D Subscription Agreement [Incorporated by reference to Exhibit 4.2 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]                                                                                                          
|*4.5  | Form of Regulation S Subscription Agreement [Incorporated by reference to Exhibit 4.2 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]                                                                                                          
|*10.1 | Letter Agreement, dated as of October 29, 2004, between the Company and Qiang Long Real Estate Development Co., Ltd. [Incorporated by reference to Exhibit 10 of the Form 8-K filed on November 3, 2004 in Commission file number 0-30183]                                   
|*10.2 | Loan Agreement, dated May 10, 2004, between ShenZhen Ruichijuntong Industry Co., Ltd. and Minghua Environment Protection Vehicles Ltd. [Incorporated by reference to Exhibit 10.1 of the Form 10-QSB filed on August 23, 2004 in Commission file number 0-30183]             
|*10.3 | Guangzhou City View Bus Installation Company Limited Agreement
[Incorporated by reference to Exhibit 10.1 of the Form 8-K filed on March 28, 2003 in Commission file number 0-30183]                                                                                         
|*10.4 | Kingsrich Development Limited Loan Agreement [Incorporated by reference to Exhibit 10.2 of the Form 8-K filed on March 28, 2003 in Commission file number 0-30183]                                                                                                           
|*10.5 | Kingsrich Development Limited Convertible Promissory Note [Incorporated by reference to Exhibit 10.3 of the Form 8-K filed on March 28, 2003 in Commission file number 0-30183]                                                                                              

29

---



|Exhibit Number | Description
|-------------- | -----------
|               |            

|*10.6  | Registration Rights Agreement, dated March 17, 2003, between the Company and Kingsrich Development Limited [Incorporated by reference to Exhibit 10 of the Form 10-QSB filed on August 28, 2003 in Commission file number 0-30183]                                                                                                                            
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.7  | Regulation S Subscription Agreement, dated September 29, 2003, between the Company and Beijing Qiang Long Real Estate Development Company, Ltd. relating to subscription rights for 15,000,000 shares of the Company's Common Stock [Incorporated by reference to Exhibit 10.1 of the Form 10-QSB filed on December 2, 2003 in Commission file number 0-30183]
|*10.8  | Contract, dated January 29, 2004, between Beijing Qiang Long Real Estate Development Co. Ltd. and the Company [Incorporated by reference to Exhibit 10.1 of the Form 8-K filed on February 12, 2004 in Commission file number 0-30183]                                                                                                                        
|*10.9  | Contract, dated January 13, 2004, between China Cardinal Limited and the Company [Incorporated by reference to Exhibit 10.2 of the Form 8-K filed on February 12, 2004 in Commission file number 0-30183]                                                                                                                                                     
|*10.10 | Employment/Co-Operation Agreement, dated April 10, 2002, between the Company and Albert Wong [Incorporated by reference to Exhibit 99.1 of the Form 8-K filed on May 2, 2002 in Commission file number 0-30183]                                                                                                                                               
|*10.11 | Employment Agreement, dated July 11, 2001, between the Company and Li Chuquan [Incorporated by reference to Exhibit 10.1 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                                       
|*10.12 | Non-Qualified Stock Option Agreement, dated July 11, 2001, between the Company and Li Chuquan [Incorporated by reference to Exhibit 10.2 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                       
|*10.13 | Stock Option Agreement, dated July 11, 2001, between the Company and Li Chuquan [Incorporated by reference to Exhibit 10.3 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                                     
|*10.14 | Employment Agreement, dated April 5, 2001, between the Company and Ronald C. H. Lui [Incorporated by reference to Exhibit 10.4 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                                 
|*10.15 | Incentive Stock Option Agreement, dated April 5, 2001, between the Company and Ronald C. H. Lui [Incorporated by reference to Exhibit 10.5 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                     
|*10.16 | Non-qualified Stock Option Agreement, dated April 5, 2001, between the Company and Ronald C. H. Lui [Incorporated by reference to Exhibit 10.6 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                 
|*10.17 | Amendment to Stock Option Agreements, dated April 16, 2001, between the Company and Ronald C. H. Lui [Incorporated by reference to Exhibit 10.7 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                
|*10.18 | Consulting Agreement, dated  April 2, 2001, between the Company and First Pacific Capital Ltd. [Incorporated by reference to Exhibit 10.8 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                      
|*10.19 | Letter Agreement, dated April 5, 2001, between the Company and First Pacific Capital Ltd. [Incorporated by reference to Exhibit 10.10 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                          

30

---



|Exhibit Number | Description
|-------------- | -----------
|               |            

|*10.20 | 2001 Stock Plan [Incorporated by reference to Appendix B of our Definitive Proxy Statement on Schedule 14A filed on July 3, 2001 in Commission file number 0-30183]                                                                                                                                                                       
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.21 | Placement Agency Agreement, dated July 23, 2001, between the Company and Chicago Investment Group Incorporated [Incorporated by reference to Exhibit 10.11 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]                                                                                                  
|*10.22 | Letter Agreement repayment of stockholder loan, dated December 11, 2001, between the Company and Li Chuquan [Incorporated by reference to Exhibit 99.1 of the Form 8-K filed on December 20, 2001 in Commission file number 0-30183]                                                                                                      
|*10.23 | Technology Development Contract, dated February 15, 2004, between Tsinghua University and the Company. [Incorporated by reference to Exhibit 10.23 of the Form 10-KSB filed on April 16, 2007 in Commission file number 0-30183]                                                                                                          
|*10.24 | Sales Contract of Guangzhou Cityview Bus Installation Co., Ltd., dated August 6, 2004, between Changsha United Electric Power Science and Technology Co., Ltd. and Guangzhou Cityview Bus Installation Co., Ltd. [Incorporated by reference to Exhibit 10.24 of the Form 10-KSB filed on April 16, 2007 in Commission file number 0-30183]
|*10.25 | Lease Agreement, dated May 30, 2004, between Liu Gui Zhi and Beijing China Cardinal Real Estate Consulting Ltd. [Incorporated by reference to Exhibit 10.25 of the Form 10-KSB filed on April 16, 2007 in Commission file number 0-30183]                                                                                                 
|*10.26 | Lease Agreement, dated May 20, 2004, between Shenzhen Minghua Environmental Protection Vehicle Co., Ltd. and Richard Zhang. [Incorporated by reference to Exhibit 10.26 of the Form 10-KSB filed on April 16, 2007 in Commission file number 0-30183]                                                                                     
|*10.27 | Letter Agreement, dated as of June 29, 2007, between Minghua Group International Holdings Limited and Qiang Long Real Estate Development Co., Ltd. [incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K of the Company filed on July 6, 2007 in Commission file number 0-30183].                                  
|*10.28 | Share Purchase Agreement, between the Company and Daykeen, dated November 12, 2007. [Incorporated by reference to Exhibit 10.1of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]                                                                                                                              
|*10.29 | Employment Agreement, dated June 1, 2007, by and between Beijing SOD and Wei Wang. [Incorporated by reference to Exhibit 10.5of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                           

31

---



|Exhibit Number | Description
|-------------- | -----------
|               |            

|*10.30 | Equity Transfer Agreement, dated December 22, 2006, by and between Beijing Qiang Long and Top Time. [Incorporated by reference to Exhibit 10.6 of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.31 | Loan Agreement, dated December 22, 2006, by and between Top Time and Daykeen. [Incorporated by reference to Exhibit 10.7of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]                       
|*10.32 | Agreement, dated December 27, 2006, by and between Top Time and Daykeen. [Incorporated by reference to Exhibit 10.8 of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]                           
|*14    | Code of Ethics [incorporated by reference to Exhibit 14 of the Annual Report on Form 10-KSB of the Company for the fiscal year ended December 31, 2003]                                                                      
|21     | A description
  of the subsidiaries of the registrant.                                                                                                                                                                       
|31.1   | Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                
|31.2   | Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                
|32     | Certifications of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                            
|       |                                                                                                                                                                                                                              

*

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed for each of the fiscal years ended
December 31, 2007 and 2006 for professional services rendered by the principal
accountant for the audit of our annual financial statements and review of the
financial statements included in our Form 10-QSB or services that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for those fiscal years were $60,000 and $46,154 respectively.

Accounting Fees

The aggregate fees billed in each of the fiscal years ended
December 31, 2007 and 2006 for accounting services by the principal accountant
and are not reported under the paragraph captioned "Audit Fees" above are
$38,585 and $38,585 respectively.

Tax Fees

The aggregate fees billed in each of the fiscal years ended
December 31, 2007 and 2006 for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning were $0 and $0,
respectively.

All Other Fees

The aggregate fees billed in each of the fiscal years ended
December 31, 2007 and 2006 for products and services provided by the principal
accountant, other than the services reported above under other captions of this
Item 14 are $0 and $0, respectively.

32

---

Pre-Approval Policies and Procedures

Our board of directors has adopted resolutions in accordance
with the Sarbanes-Oxley Act of 2002 requiring pre-approval of all auditing
services and all audit related, tax or other services not prohibited under the
Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our
auditors must be approved in advance by our audit committee to assure that such
services do not impair the auditors' independence from us. We have not yet
established an audit committee, however, in accordance with its policies and
procedures, our board of directors pre-approved the audit service performed by
Bernstein & Pinchuk for our consolidated financial statements as of and for
the year ended December 31, 2007.







33

---

SIGNATURES

In accordance with Section 13 or
15(d) of the Exchange Act, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

CHINA LONGYI GROUP INTERNATIONAL
      HOLDINGS LIMITEDBy: /s/ Jie ChenJie ChenChief Executive Officer


In accordance with the Exchange Act, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.

|SIGNATURE        | CAPACITY                             | DATE              
|---------------- | ------------------------------------ | ------------------
|                 |                                      |                   
|/s/Chang-de Li   |                                      |                   
|Chang-de Li      | Chairman                             | April
    11, 2008
|                 |                                      |                   
|/s/Jie Chen      |                                      |                   
|Jie Chen         | Chief Executive Officer and Director | April
    11, 2008
|                 |                                      |                   
|/s/Xinmin Pan    |                                      |                   
|Xinmin Pan       | Chief Financial Officer              | April
    11, 2008
|                 |                                      |                   
|/s/Hui Chen      |                                      |                   
|Hui Chen         | Director                             | April
    11, 2008
|                 |                                      |                   
|/s/Li Hong Liang |                                      |                   
|Li Hong Liang    | Director                             | April
    11, 2008
|                 |                                      |                   
|/s/Wei Wang      |                                      |                   
|Wei Wang         | Director                             | April
    11, 2008



34

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CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 and 2006











---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                         | PAGE
|------------------------------------------------------------------------ | ----
|                                                                         |     
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                               | F-2 
|                                                                         |     
|REPORT OF INDEPENDENT
    REGISTERED PUBLIC ACCOUNTING FIRM              | F-3 
|                                                                         |     
|CONSOLIDATED BALANCE SHEETS                                              | F-4 
|                                                                         |     
|CONSOLIDATED
    STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(LOSS) | F-5 
|                                                                         |     
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                    | F-6 
|                                                                         |     
|CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) | F-7 
|                                                                         |     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                               | F-9 

F-2

---

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
To the Board of Directors and Stockholders of 
China Longyi Group International Holdings Limited

We have audited the accompanying consolidated balance sheet
of China Longyi Group International Holdings Limited, a development stage
company ("the Company") as of December 31, 2007, and the related statements of
operations and comprehensive income, stockholders' equity, and cash flows for
the year then ended. The Company's management is responsible for these financial
statements. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2007, and the results of its operations and its cash flows
for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.
/S/ Bernstein & Pinchuk LLP 
March 10, 2008



F-3

---

Report of Independent Registered Public Accounting Firm

To the Board of Directors 
China Longyi Group International Holdings Limited (fka Minghua Group
International Holdings Limited) 
New York
We have audited the consolidated balance sheet of China
Longyi Group International Holdings Limited (fka Minghua Group International
Holdings Limited), (a New York development stage company) as of December 31,
2006, and the related consolidated statements of operations and comprehensive
loss, changes in stockholders' equity (deficit), and cash flows for the year
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement.
The company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of China Longyi Group International Holdings Limited (fka Minghua Group
International Holdings Limited) as of December 31, 2006, and the results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the consolidated financial statements, the Company has
incurred substantial recurring losses. This raises substantial doubt about the
Company's ability to meet its obligations and to continue as a going concern.
Management's plans in regard to this matter are described in Note 1. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/S/ Child, Van Wagoner & Bradshaw, PLLC 
Salt Lake City, Utah 
March 15, 2007



F-4

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS

|                                                                       |   | December 31, |   | December 31,
|---------------------------------------------------------------------- | - | ------------ | - | ------------
|ASSETS                                                                 |   | 2007         |   | 2006        
|Current assets                                                         |   |              |   |             
|Cash and cash equivalents                                              | $ | 64,547       | $ | 39,622      
|Deposits and prepayments                                               |   | 121,258      |   | -           
|Other receivable                                                       |   | 1,688,967    |   | 25,702      
|Interest income receivable                                             |   | 38,332       |   | 84,033      
|Short term investment                                                  |   | 1,489,472    |   | 1,922,067   
|Inventories                                                            |   | 459,801      |   | -           
|Total current assets                                                   |   | 3,862,377    |   | 2,071,424   
|Due from stockholder                                                   |   | 429,653      |   | -           
|Property, plant and
    equipment (net)                                |   | 538,131      |   | 1,073,155   
|Intangible assets                                                      |   | -            |   | 6,193       
|Total assets                                                           | $ | 4,830,161    | $ | 3,150,772   
|                                                                       |   |              |   |             
|LIABILITIES AND
    STOCKHOLDERS' EQUITY                               |   |              |   |             
|Current liabilities                                                    |   |              |   |             
|Accounts payable                                                       | $ | 70,701       | $ | 1,685,964   
|Accrued liabilities                                                    |   | 162,917      |   | 558,466     
|Due to directors                                                       |   | 119,804      |   | 29,276      
|Other payables                                                         |   | 570,907      |   | 213,916     
|Total current
    liabilities                                          |   | 924,329      |   | 2,487,622   
|                                                                       |   |              |   |             
|Minority interest                                                      |   | 242,109      |   | -           
|                                                                       |   |              |   |             
|Stockholders' equity                                                   |   |              |   |             
|                                                                       |   |              |   |             
|Common stock: par value $.01; 200,000,000 shares                       |   | 776,558      |   | 74,255      
|authorized; 77,655,854 and 7,425,494 shares issued and
    outstanding |   |              |   |             
|Common stock subscribed                                                |   | -            |   | 28,767,089  
|Additional paid in capital                                             |   | 28,877,540   |   | 26,534,918  
|Deficit accumulated during the development stage                       |   | (26,070,415) |   | (29,165,300)
|Translation adjustment                                                 |   | 80,040       |   | (256,206)   
|Less: stock subscription receivable                                    |   | -            |   | (28,113,294)
|Total stockholders'
    equity                                         |   | 3,663,723    |   | 663,150     
|Total liabilities and stockholders' equity                             | $ | 4,830,161    | $ | 3,150,772   

F-5

The accompanying notes are an integral part of the
consolidated financial statements.

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS

|                                                                |   | Year ended December 31, | Period from Jun. 4,1997
|--------------------------------------------------------------- | - | ----------------------- | -----------------------
|                                                                |   | 2007                    |                        
|Revenues                                                        |   |                         |                        
|Sales revenues                                                  | $ | 47,454                  | $                      
|Cost of sales                                                   |   | 33,811                  |                        
|Gross profit                                                    |   | 13,643                  |                        
|Operating expenses                                              |   |                         |                        
|General and administrative expenses                             |   | 1,314,595               |                        
|Goodwill impairment loss                                        |   |                         |                        
|Write-off inventory and bus licenses                            |   | -                       |                        
|Research and development costs                                  |   | 211                     |                        
|Total operating expenses                                        |   | 1,314,806               |                        
|Loss
    from operations                                        |   | (1,301,163)             |                        
|Other income (expense)                                          |   |                         |                        
|Interest income                                                 |   | 25,916                  |                        
|Other income (expense)                                          |   | 34,483                  |                        
|Transactions exchange gain                                      |   | 881,643                 |                        
|Gain on asset disposal                                          |   | -                       |                        
|Gain on debt settlement                                         |   |                         |                        
|Gain on disposal of subsidiaries                                |   | 3,385,630               |                        
|Interest expense                                                |   | -                       |                        
|Total other income (expense)                                    |   | 4,327,672               |                        
|Income (loss) before income taxes and minority interest         |   | 3,026,509               |                        
|Provision for income taxes                                      |   | -                       |                        
|Income (loss) before minority interest                          |   | 3,026,509               |                        
|Minority interest                                               |   | (68,376)                |                        
|Net
    income (loss)                                           | $ | 3,094,885               | $                      
|Foreign currency translation adjustment                         |   | 336,246                 |                        
|Comprehensive income (loss)                                     | $ | 3,362,755               | $                      
|Basic and diluted net loss per
    share                        | $ | 0.19                    | $                      
|Weighted average number of shares outstanding-basic and diluted |   | 16,476,758              |                        

F-6

The accompanying notes are an integral part of the
consolidated financial statements.

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                                                  |   | Year ended       |   | Period from Jun. 4,1997        
|--------------------------------------------------------------------------------------------------------------------------------- | - | ---------------- | - | -------------------------------
|                                                                                                                                  |   | December
    31, |   | (inception) to 
    12. 30,2007
|                                                                                                                                  |   | 2007             |   | 2006                           
|Cash
    flows from operating activities:                                                                                         |   |                  |   |                                
|Net income (loss)                                                                                                                 | $ | 3,094,885        | $ | (345,621)                      
|Adjustments to reconcile net loss to net cash
    used in operations:                                                             |   |                  |   |                                
|Depreciation and amortization                                                                                                     |   | 62,106           |   | 190,235                        
|Impairment loss on amortization                                                                                                   |   |                  |   |                                
|Minority interest                                                                                                                 |   | 242,109          |   |                                
|Write-off goodwill and inventory                                                                                                  |   |                  |   | 354,851                        
|Stock issued for services and debt                                                                                                |   |                  |   |                                
|(Gain) loss on disposition in subsidiary                                                                                          |   | (3,385,630)      |   | (707,825)                      
|Research and development expenses recorded in
    organization                                                                    |   |                  |   |                                
|Reorganization expenses recorded in organization                                                                                  |   |                  |   |                                
|Changes in operating liabilities and assets:                                                                                      |   |                  |   |                                
|Other receivable                                                                                                                  |   | 3,754,027        |   | 45,328                         
|Prepaid expense and deposits                                                                                                      |   | 244,470          |   | 11,172                         
|Inventories                                                                                                                       |   | (459,801)        |   | -                              
|Accounts payable and accrued liabilities                                                                                          |   | (3,405,913)      |   | 93,440                         
|Net cash provided by (used in) operations                                                                                         |   | 146,252          |   | (358,420)                      
|                                                                                                                                  |   |                  |   |                                
|Cash flows from
    investing activities:                                                                                         |   |                  |   |                                
|Interest income receivables                                                                                                       |   | 45,701           |   | 35,003                         
|Reorganization - net of cash acquired                                                                                             |   |                  |   |                                
|Sales (purchases) of intangible assets                                                                                            |   | -                |   |                                
|Purchase of subsidiaries                                                                                                          |   |                  |   |                                
|Redemption (purchase) of short term investment                                                                                    |   | 958,300          |   | (132,873)                      
|Purchases of intangible assets                                                                                                    |   |                  |   |                                
|Purchases of property and equipment                                                                                               |   | (481,985)        |   | (71,643)                       
|Purchases of construction in progress                                                                                             |   | (87,130)         |   | -                              
|Sales of property and equipment                                                                                                   |   |                  |   |                                
|Deposit on subsidiary                                                                                                             |   | -                |   | (10,922)                       
|Net cash provided by (used in) investing
    activities                                                                           |   | 434,886          |   | (180,435)                      
|                                                                                                                                  |   |                  |   |                                
|Cash
    flows from financing activities:                                                                                         |   |                  |   |                                
|Addition of short term loans                                                                                                      |   | -                |   | 1,612                          
|Advance from stockholders payable                                                                                                 |   |                  |   |                                
|Payments to stockholders payable                                                                                                  |   | (903,769)        |   | (49,669)                       
|Proceeds from issuance of stock                                                                                                   |   | 11,310           |   | 632,911                        
|Proceeds from convertible promissory note                                                                                         |   | -                |   | -                              
|Dividends paid                                                                                                                    |   | -                |   | -                              
|Proceeds to notes payable                                                                                                         |   | -                |   | -                              
|Payments to notes payable                                                                                                         |   | -                |   | -                              
|Net cash provided by (used in) financing
    activities                                                                           |   | (892,459)        |   | 584,854                        
|Effect of foreign exchange rate changes                                                                                           |   | 336,246          |   | (54,594)                       
|Increase (decrease) in cash and cash equivalents                                                                                  |   | 24,925           |   | (8,595)                        
|Cash and cash equivalents, beginning of period                                                                                    |   | 39,622           |   | 48,217                         
|Cash and cash equivalents, end of period                                                                                          | $ | 64,547           | $ | 39,622                         
|                                                                                                                                  |   |                  |   |                                
|Supplemental
    disclosures of cash flow information:                                                                            |   |                  |   |                                
|Cash paid for interest                                                                                                            | $ | -                | $ | -                              
|Cash paid for income taxes                                                                                                        | $ | -                | $ | -                              
|Major transaction not affecting cash                                                                                              |   |                  |   |                                
|Acquisition
    of subsidiary for 62,250,000 shares of common stock and assignment of
    related party receivable of $30,000,000 |   |                  |   |                                

F-7

The accompanying notes are an integral part of the
consolidated financial statements.

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIT)

|                                                         |                   |                |                |         |              |               |              | Development  | Accumulated |          |     |            
|-------------------------------------------------------- | ----------------- | -------------- | -------------- | ------- | ------------ | ------------- | ------------ | ------------ | ----------- | -------- | --- | -----------
|                                                         |                   |                |                |         | Common Stock | Additional    | Stage        | Other        |             |          |    
|                                                         | Common Stock      | Common Stock   | Subscribed     | Paid In | Accumulated  | Comprehensive | Subscription | Due from     |            
|                                                         | $.12834 Par Value | $.01 Par Value | $.01 Par Value | Capital | Deficit      | Income        | Receivable   | stockholder  | Total      
|                                                         |                   |                |                |         |              |               |              |              |             |          |     |            
|Common stock
    issued - June 4, 1997                   | 10,000            | 1,283          | $-             | $
    - | $
    -      | $
    -       | $
    -      | $
    -      | $
    -     | $ -      | $ - | $ 1,283    
|Net loss for
    the period                              | -                 | -              | -              | -       | -            | -             | -            | (289)        | -           | -        | -   | (289)      
|Balance
    December 31, 1997                            | 10,000            | 1,283          | -              | -       | -            | -             | -            | (289)        | -           | -        | -   | 994        
|                                                         |                   |                |                |         |              |               |              |              |             |          |     | -          
|Net loss for
    the year                                | -                 | -              | -              | -       | -            | -             | -            | (3,209)      | -           | -        | -   | (3,209)    
|Balance
    December 31, 1998                            | 10,000            | 1,283          | -              | -       | -            | -             | -            | (3,498)      | -           | -        | -   | (2,215)    
|                                                         |                   |                |                |         |              |               |              |              |             |          |     |            
|Shares issued
    at par value Mar 30                    | 990,000           | 127,057        |                |         |              |               |              |              |             |          |     | 127,057    
|Net loss for
    the period                              | -                 | -              | -              | -       | -            | -             | -            | (302)        | -           | -        | -   | (302)      
|Balance
    December 31, 1999                            | 1,000,000         | 128,340        | -              | -       | -            | -             | -            | (3,800)      | -           | -        | -   | 124,540    
|                                                         |                   |                |                |         |              |               |              |              |             |          |     |            
|Net loss for
    the year                                | -                 | -              | -              | -       | -            | -             | -            | (9,876,193)  | -           | -        | -   | (9,876,193)
|Balance
    December 31, 2000                            | 1,000,000         | 128,340        | -              | -       | -            | -             | -            | (9,879,993)  | -           | -        | -   | (9,751,653)
|                                                         |                   |                |                |         |              |               |              |              |             |          |     |            
|Shares issued
    at $.20 Apr 5                          |                   |                | 385,685        | 3,857   |              |               | 73,280       |              |             |          |     | 77,137     
|Shares issued
    at $.20 Apr 17                         |                   |                | 7,500,000      | 75,000  |              |               | 1,425,000    |              |             |          |     | 1,500,000  
|Shares at par
    value Jun 22                           |                   |                | 28,000,000     | 280,000 |              |               |              |              |             |          |     | 280,000    
|Recapitalization Jun 22                                  | (1,000,000)       | (128,340)      | 3,600,000      | 36,000  |              |               | (498,280)    |              |             |          |     | (590,620)  
|Dividend paid
    Jun 22                                 |                   |                |                |         |              |               | (1,000,000)  |              |             |          |     | (1,000,000)
|Shares issued
    at $2.00 Jul 23                        |                   |                | 473,500        | 4,735   |              |               | 942,265      |              |             |          |     | 947,000    
|Shares issued
    at $2.00 Oct 1                         |                   |                | 10,000         | 100     |              |               | 19,900       |              |             |          |     | 20,000     
|Shares issued
    for debt conversion                    |                   |                | 8,500,000      | 85,000  |              |               | 8,415,000    |              |             |          |     | 8,500,000  
|Capital
    contributed debt to equity conversion        |                   |                |                |         |              |               | 1,500,000    |              |             |          |     | 1,500,000  
|Net loss for
    the year                                | -                 | -              | -              | -       | -            | -             | -            | (2,492,318)  | -           | -        |     | (2,492,318)
|Balance
    December 31, 2001                            | -                 | -              | 48,469,185     | 484,692 | -            | -             | 10,877,165   | (12,372,311) | -           | -        | -   | (1,010,454)
|                                                         |                   |                |                |         |              |               |              |              |             |          |     |            
|Shares issued
    at $.20 Feb 20                         |                   |                | 372,807        | 3,728   |              |               | 70,833       |              |             | (74,561) |     | -          
|Shares issued
    at par option exercise Apr 24 for svcs |                   |                | 540,260        | 5,403   |              |               | 410,597      |              |             |          |     | 416,000    
|Shares issued
    at $.13 Nov 27 for services            |                   |                | 1,100,000      | 11,000  |              |               | 132,000      |              |             |          |     | 143,000    
|Net loss for
    the year                                | -                 | -              | -              | -       | -            | -             | -            | (2,490,990)  | -           | -        | -   | (2,490,990)
|Balance
    December 31, 2002                            | -                 | -              | 50,482,252     | 504,823 | -            | -             | 11,490,595   | (14,863,301) | -           | (74,561) | -   | (2,942,444)

F-8

The accompanying notes are an integral part of the
consolidated financial statements.

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIT) -Continued -

|                                                       |                   |                |                |           |              |               |              | Development  | Accumulated |              |   |             
|------------------------------------------------------ | ----------------- | -------------- | -------------- | --------- | ------------ | ------------- | ------------ | ------------ | ----------- | ------------ | - | ------------
|                                                       |                   |                |                |           | Common Stock | Additional    | Stage        | Other        |             |              |  
|                                                       | Common Stock      | Common Stock   | Subscribed     | Paid In   | Accumulated  | Comprehensive | Subscription | Due from     |            
|                                                       | $.12834 Par Value | $.01 Par Value | $.01 Par Value | Capital   | Deficit      | Income        | Receivable   | stockholder  | Total      
|Balance
    December 31, 2002                          | -                 | -              | 50,482,252     | 504,823   | -            | -             | 11,490,595   | (14,863,301) | -           | (74,561)     |   | (2,942,444) 
|                                                       |                   |                |                |           |              |               |              |              |             |              |   |             
|Shares issued
    at $.12 Mar 31                       |                   |                | 1,513,969      | 15,139    |              |               | 166,537      |              |             |              |   | 181,676     
|Shares
    subscribed at $.40 Sep 29                   |                   |                |                |           | 15,000,000   | 6,000,000     |              |              |             | (6,000,000)  |   | -           
|Shares issued
    at $.40 Oct 3                        |                   |                | 1,511,488      | 15,115    | (1,511,488)  | (604,595)     | 589,480      |              |             | 1,209,482    |   | 1,209,482   
|Net loss for
    the year                              | -                 | -              | -              | -         | -            | -             | -            | (1,761,393)  | -           | -            | - | (1,761,393) 
|                                                       |                   |                |                |           |              |               |              |              |             |              |   |             
|Balance
    December 31, 2003                          | -                 | -              | 53,507,709     | 535,077   | 13,488,512   | 5,395,405     | 12,246,612   | (16,624,694) | -           | (4,865,079)  | - | (3,312,679) 
|                                                       |                   |                |                |           |              |               |              |              |             |              |   |             
|Shares issued
    at $.40 Jan 9 Qian Long              |                   |                | 3,023,998      | 30,240    | (3,023,998)  | (1,209,599)   | 1,179,359    |              |             | 604,712      |   | 604,712     
|Shares issued
    at $.13 for debt conversion          |                   |                | 24,036,269     | 240,363   |              |               | 2,887,862    |              |             |              |   | 3,128,225   
|Shares
    subscribed at $.21 Jan 29 Qian Long         |                   |                |                |           | 140,000,000  | 29,400,000    |              |              |             | (29,400,000) |   | -           
|Shares
    subscribed at $.14 Jan 13 China Cardinal    |                   |                |                |           | 16,483,514   | 2,307,692     |              |              |             | (2,307,692)  |   | -           
|Shares issued
    at $.14 May 28 China Cardinal        |                   |                | 4,733,229      | 47,332    | (4,733,229)  | (662,652)     | 615,320      |              |             | 662,652      |   | 662,652     
|Shares issued
    at $.14 May 28 China Cardinal        |                   |                | 11,750,285     | 117,503   | (11,750,285) | (1,645,040)   | 1,527,537    |              |             | 1,645,040    |   | 1,645,040   
|Shares issued
    at $.14 Mar 31 purch of Asia Key     |                   |                | 28,210,000     | 282,100   |              |               | 3,667,300    |              |             |              |   | 3,949,400   
|Options
    exercised at $.12 in lieu of salary        |                   |                | 2,500,000      | 25,000    |              |               | 275,000      |              |             |              |   | 300,000     
|Options
    exercised at $.12 in lieu of salary        |                   |                | 500,000        | 5,000     |              |               | 55,000       |              |             |              |   | 60,000      
|Options
    exercised at $.12 in lieu of salary        |                   |                | 1,000,000      | 10,000    |              |               | 110,000      |              |             |              |   | 120,000     
|Qian Long
    subscription at $.40 Dec 12              |                   |                | 10,464,514     | 104,645   | (10,464,514) | (4,185,806)   | 4,081,161    |              |             | 4,839,601    |   | 4,839,601   
|2002 stock
    subscription deemed to be uncollectible |                   |                |                |           |              |               | (74,561)     |              |             | 74,561       |   | -           
|Net loss for
    the year                              | -                 | -              | -              | -         | -            | -             | -            | (11,024,215) | -           | -            | - | (11,024,215)
|                                                       |                   |                |                |           |              |               |              |              |             |              |   |             
|Balance
    December 31, 2004                          | -                 | -              | 139,726,004    | 1,397,260 | 140,000,000  | 29,400,000    | 26,570,590   | (27,648,909) | -           | (28,746,205) | - | 972,736     

F-9

The accompanying notes are an integral part of the
consolidated financial statements.

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIT) -Continued -

|                                                     |                   |                |                |             |                |               |              | Development    | Accumulated |                |     |                
|---------------------------------------------------- | ----------------- | -------------- | -------------- | ----------- | -------------- | ------------- | ------------ | -------------- | ----------- | -------------- | --- | ---------------
|                                                     |                   |                |                |             | Common Stock   | Additional    | Stage        | Other          |             |                |    
|                                                     | Common Stock      | Common Stock   | Subscribed     | Paid In     | Accumulated    | Comprehensive | Subscription | Due from       |            
|                                                     | $.12834 Par Value | $.01 Par Value | $.01 Par Value | Capital     | Deficit        | Income        | Receivable   | stockholder    | Total      
|Balance
    December 31, 2004                        | $ -               | $ -            | 139,726,004    | $ 1,397,260 | 140,000,000    | $ 29,400,000  | $ 26,570,590 | $ (27,648,909) | $ -         | $ (28,746,205) |     | $ 972,736      
|                                                     |                   |                |                |             |                |               |              |                |             |                |     |                
|Shares issued
    at $.14 for debt                   |                   |                | 5,770,000      | 57,700      |                |               | 772,400      |                |             |                |     | 830,100        
|Net loss for
    the year - restated                 |                   |                |                |             |                |               |              | (1,170,770)    |             |                |     | (1,170,770)    
|Foreign
    currency translation adjustment          | -                 | -              | -              | -           | -              | -             | -            | -              | (230,745)   | -              |     | (230,745)      
|Balance
    December 31, 2005 - restated             | -                 | -              | 145,496,004    | 1,454,960   | 140,000,000    | 29,400,000    | 27,342,990   | (28,819,679)   | (230,745)   | (28,746,205)   |     | 401,321        
|                                                     |                   |                |                |             |                |               |              |                |             |                |     |                
|Shares issued
    at $.21 December 18 Qiang Long     |                   |                | 3,013,862.00   | 30,139.00   | (3,013,863.00) | (632,911.00)  | 602,772.00   |                |             | 632,911.00     |     | 632,911        
|Net loss for
    the year                            |                   |                |                |             |                |               |              | (345,621.00)   |             |                |     | (345,621)      
|Foreign
    currency translation adjustment          | -                 | -              | -              | -           | -              | -             | -            | -              | (25,461.00) | -              | -   | (25,461)       
|Balance
    December 31, 2006                        | -                 | -              | 148,509,866    | 1,485,099   | 136,986,137    | 28,767,089    | 27,945,762   | (29,165,300)   | (256,206)   | (28,113,294)   | -   | 663,150        
|                                                     |                   |                |                |             |                |               |              |                |             |                |     |                
|Items applied
    retroactively:                     |                   |                |                |             |                |               |              |                |             |                |     |                
|Reverse stock
    split - October 16, 2007           | -                 | -              | (141,084,373)  | (1,410,844) | (130,136,830)  | (27,328,734)  | 28,739,578   | -              | -           | -              |     | -              
|Shares issued
    at $.21 June 29,2007, 50mil shares |                   |                | 6,849,307      | 68,493      | (6,849,307)    | (1,438,355)   | 1,369,862    |                |             | 28,113,294     |     | 28,113,294.07  
|Shares
    subscribed for exchange                   |                   |                | 62,250,000     | 622,500     |                |               | 24,277,500   |                |             |                |     | 24,900,000.00  
|Shares issued
    at December 19,2007                |                   |                | 1,131,054      | 11,310      |                |               |              |                |             |                |     | 11,310.00      
|Net loss for
    the year                            |                   |                |                |             |                |               |              | 3,094,885      |             |                |     | 3,094,885.00   
|Foreign
    currency translation adjustment          | -                 | -              | -              | -           | -              | -             | -            | -              | 336,246     | -              |     | 336,246.31     
|Related party
    Acquisition Premium                |                   |                |                |             |                |               | (53,455,162) |                |             |                |     | (53,455,161.77)
|Balance
    December 31, 2007                        | $ -               | $ -            | 77,655,854     | $ 776,558   | -              | $ -           | $ 28,877,540 | $ (26,070,415) | $ 80,040    | $ -            | $ - | $ 3,663,724    

F-10

The accompanying notes are an integral part of the
consolidated financial statements.

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

1. BUSINESS DESCRIPTION AND ORGANIZATION

NAME CHANGE AND REORGANIZATION

The consolidated financial statement of China LongYi Group
International Holdings Limited ("the Company"), include the accounts of the
parent company and its wholly-owned and majority-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation. We amended our certificate of incorporation on October 16, 2007
and changed our name from Minghua Group International Holdings Limited ("Minghua
USA") to China LongYi Group International Holdings Limited. At the same time, we
implemented a 1 for 20 reverse stock split of issued and outstanding shares of
our common stock which reduced the number of our issued and our outstanding
shares from 148,509,866 to 7,425,493.

Minghua USA, formerly Panagra International Corporation ("Panagra"),
was incorporated under the laws of the State of New York on February 29, 1996
under the name, United Network Technologies, Inc. On August 2, 2001, an
amendment to the certificate of incorporation was made changing the name from
Panagra to Minghua USA. This amendment also increased the authorized common
shares of Minghua USA from 40,000,000 shares to 200,000,000 shares.

In June 2001, Panagra and its subsidiary, Minghua Acquisition
Corp. acquired all the outstanding shares of Minghua Group International Holding
(Hong Kong) Limited ("Minghua Hong Kong"). The acquisition was effected by
paying to the shareholders of Minghua Hong Kong $1,000,000 and issuing
28,000,000 (pre reverse stock split) additional Minghua USA common shares that
resulted in the Minghua Hong Kong shareholders owning approximately 70% of the
outstanding shares of Minghua USA and having control of Minghua USA after this
transaction. For financial reporting purposes, this transaction was recorded as
a recapitalization of Minghua Hong Kong. Minghua Hong Kong was deemed to be the
continuing, surviving entity for accounting purposes, but through
reorganizations, was deemed to have adopted the capital structure of Minghua
USA.

At that time, the sole asset of Minghua Hong Kong was an 85%
equity interest in the Shenzhen Minghua Environmental Protection Vehicle Co.,
Ltd. ("Minghua China"), a Peoples Republic of China (PRC) corporation. The
remaining 15% equity minority interest in Minghua China was owned by a related
party, Asia Key Group Limited, through its wholly-owned subsidiary Minghua Real
Estate (Shenzhen) Ltd, formerly known as Minghua Investment Co., Ltd. ("Minghua
Real Estate"). On January 29, 2004, Minghua USA acquired this 15% minority
interest held by Minghua Real Estate, in a related party transaction by paying
$990,638 in cash and issuing 28,210,000 (pre reverse stock split) common shares
of Minghua USA. In September 2006, Minghua USA disposed of its entire interests
in Minghua Hong Kong and Minghua China.

On November 12, 2007, we entered into a share purchase
agreement, or the Share Purchase Agreement, with Daykeen Group Limited ("Daykeen"),
a BVI company, or Daykeen, pursuant to which we acquired 100% ownership of Top
Time International Limited ("Top Time"), a Hong Kong company. Daykeen is the
sole shareholder of Top Time. Top Time owns 90% equity interest of Beijing
Longyi Biology Technology Co. Ltd ("Beijing SOD"), which is a holding company
that owns 90.05% equity interest of Chongqing JiuZhou Dismutase Biology
Technology Co. Ltd ("Chongqing SOD"), a corporation incorporated in China.
Chongqing SOD is a manufacturer of superoxide dismutase, or SOD products. As a
result of this acquisition transaction, Top Time became our wholly owned
subsidiary and Daykeen became our controlling stockholder upon our issuance to
Daykeen of the equity portion of the purchase price in accordance with the Share
Purchase Agreement. Top Time was incorporated in Hong Kong in December 2006 and
currently has two subsidiaries: Beijing SOD and Chongqing SOD. Beijing SOD is
90% owned by Top Time and was incorporated in China in March 2005. Chongqing SOD
was incorporated in China in March 2007 and is 90.05% owned by Beijing SOD.

F-11

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)
Notes to consolidated financial statementsThrough acquisition of Top Time, we changed our business to
develop, manufacture and sell SOD products. As a result, on November 28, 2007,
one of our subsidiaries, Top Team Holdings Limited (BVI), disposed five
subsidiaries including Euromax International Investments Limited, Beijing China
Cardinal Real Estate Consulting Co., Ltd, Eagle Bus Development Limited (HK),
Good View Bus Manufacturing Company Limited (HK), and Guangzhou City View Bus
Installation Company Limited (PRC) to Mr. Chen, Zhiping for RMB5, 000,000.
In aggregate, the company recognized gain of $3,385,630 on the sale of the
subsidiaries.
The table shows why the gain of $3,385,630 on the sale of the subsidiaries.
US$Purchase price
    676,247.92Original investment
    2,842,313.42Net
    gain(loss) as of 12/31, 2006
    (5,361,198.57)Net gain(loss) from
    1/1,2007 to date of subsidiary sold
    (190,497.00)Gain(loss) on the sale of the subsidiaries
    3,385,630.06



F-12

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

CAPITAL RESOURCES AND BUSINESS RISKS

The Company remains in the development stage and all future
business operations are subject to all of the risks inherent in the
establishment of a new business enterprise. The Company has no proven revenue
stream from the sales of its products. Additional capital resources through
current and future offerings of securities will be needed in order to accomplish
the Company's present marketing, development and manufacturing plans. The
manufacturing facility and other operations in China, as well as the business
financial conditions and results of operations are, to a significant degree,
subject to economic, political and social events in China.

The Company had incurred incomes (losses) since inception and
had little working capital until June 29, 2007. However, the substantial doubt
about its ability to continue as a going concern, which contemplated the
realization of assets and the payment of liabilities in the ordinary course of
business, was alleviated on June 29, 2007, when management obtained $28,113,294
in funding through the issuance of additional stock to one of the Company's
shareholders. On November 12, 2007, we completed an acquisition transaction with
Top Time whereby we paid Daykeen, Top Time's sole shareholder, a total
consideration of $54.9 million, in exchange for 100% ownership of Top Time,
consisting of $30 million in cash and $24.9 million in shares of our common
stock issuable within 90 days of the closing. $30 million of cash was paid to
Daykeen by three transactions, Beijing Cardinal, De Qiu Hong, and Mr. Chen
Zhiping paid $29 million, $0.4 million, and $0.6 million on behalf of the
Company, respectively. As a result, the Company offset the same amounts of
balance of the three parties' current accounts. The equity portion of the
purchase price amounts to a total of 62,250,000 (post reverse split) shares of
our common stock.

On July 27, 2007, Company instructed prior Transfer Agent to
issue the 50,000,000 (pre reverse split) shares of common stock to deliverable
Qiang Long in the name of Jolly Concept Management Limited, in accordance with
Qiang Long's instructions. On December 14, 2007, Company instructed present
Transfer Agent to issue the replacement certificate showing the new name of the
company and the correct number of shares, post reverse-split, and the remaining
4,349,307 shares of common stock issuable to Qiang Long, to Jolly Concept
Management Limited and to Zhang, Lifang. The company also agreed to issue
1,131,026 shares of common stock post-reverse-split to Luck Pond Enterprises
Limited or its designee, for its services as finder in connection with the Qiang
Long investment. On December 14, 2007, company instructed present Transfer Agent
to issue the total amount of 62,250,000 shares of the Company's common stock,
post-reverse-split, issuable to Daykeen, to Daykeen Investment Limited.

RESTRICTIONS ON TRANSFER OF ASSET OUT OF CHINA

Dividend payments by the Company's operating subsidiaries are
limited by certain statutory regulations in China. No dividends may be paid by
these subsidiaries without first receiving prior approval from the Foreign
Currency Exchange Management Bureau. Dividend payments are restricted to 85% of
profits, after tax. Repayments of loans or advances from subsidiaries to China
Longyi, unless certain conditions are met, will be restricted by the Chinese
government.

CONTROL BY PRINCIPAL STOCKHOLDERS

The directors, executive officers, affiliates and related
parties own, beneficially and in the aggregate, the majority of the voting power
of the outstanding shares of the common stock of the Company. Accordingly, if
they voted their shares uniformly, directors, executive officers and affiliates
would have the ability to control the approval of most corporate actions,
including increasing the authorized capital stock of China Longyi and the
dissolution, merger or sale of the Company's assets.

F-13

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The consolidated financial statements for all periods
presented include the financial statements of China Longyi Group International
Holding Limited, Top Team Holdings Limited, Full Ample Group Limited (Daykeen
Group, BVI), Top Time International Limited (HK), Beijing Longyi Biology
Technology Co. Ltd, and Chongqing JiuZhou Dismutase Biology Technology Co. Ltd.
The consolidated statements have been prepared in accordance with US GAAP. All
significant intercompany transactions have been eliminated.

The Company has determined the People's Republic of China
Chinese Yuan Renminbi ("RMB") to be its functional currency. The accompanying
consolidated financial statements are presented in United States (US) dollars.
The consolidated financial statements are translated into US dollars from RMB at
year-end exchange rates for assets and liabilities, and weighted average
exchange rates for revenues and expenses. Capital accounts are translated at
their historical exchange rates when the capital transactions occurred.

RMB is not freely convertible into the currency of other
nations. All such exchange transactions must take place through authorized
institutions. There is no guarantee the RMB amounts could have been, or could
be, converted into US dollars at rates used in translation.

MINORITY INTEREST IN SUBSIDIARIES

The Company owns 90% of the equity interests in the Beijing
LongYi Biology Technology Co. Ltd, and the remaining 10% is owned by Miss Ran
Wang. Therefore, the Company records minority interest expense to allocate 10%
of the earnings of the Beijing Longyi Biology Technology limited to Miss Ran
Wang, its minority shareholder.

The company owns 81% of the equity interests in the Chongqing
JiuZhou Dismutase Biology Technology Co. Ltd, and remaining 9% is owned by Miss
Ran Wang, and another 10% is owned by Mr. Guoqing Tan. Therefore, the company
records minority interest expense to allocate 19% of the earnings of the
Chongqing JiuZhou Dismutase Biology Technology Co. Ltd to Miss Ran Wang and Mr.
Guoqing Tan, its minority shareholder.

USE OF ESTIMATES

The preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

SIGNIFICANT ESTIMATES

Several areas require significant management estimates
relating to uncertainties for which it is reasonably possible that there will be
a material change in the near term. The more significant areas requiring the use
of management estimates related to the valuation of acquired companies,
equipment, patent rights, accrued liabilities and stock options, and the useful
lives for amortization and depreciation.

REVENUE RECOGNITION

Revenues are recognized as earned when the following four
criteria are met: (1) a customer issues a purchase order or otherwise agrees to
purchase products; (2) products are delivered to the customer; (3) pricing is
fixed or determined in accordance with the purchase order or agreement; and (4)
collectability is reasonably assured.

F-14

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

CASH AND CASH EQUIVALENTS

The Company invests idle cash primarily in money market
accounts, certificates of deposits and short-term commercial paper. Money market
funds and all highly liquid debt instruments with an original maturity of three
months or less are considered cash equivalents.

PROPERTY AND EQUIPMENT

Impairment of long-lived assets is recognized when events or
changes in circumstances indicate that the carrying amount of the asset, or
related groups of assets, may not be recoverable. Under the provisions of SFAS
No. 144, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", the Company recognizes an "impairment charge" when
the expected net undiscounted future cash flows from an asset's use and eventual
disposition are less than the asset's carrying value and the asset's carrying
value exceeds its fair value. Measurement of fair value for an asset or group of
assets may be based on appraisal, market values of similar assets or estimated
discounted future cash flows resulting from the use and ultimate disposition of
the asset or assets.

Expenditures for maintenance, repairs and betterments, which
do not materially extend the normal useful life of an asset, are charged to
operations as incurred. Upon sale or other disposition of assets, the cost and
related accumulated depreciation are removed from the accounts and any resulting
gain or income (loss) is reflected in income.

Depreciation and amortization are provided for financial
reporting purposes primarily on the straight-line method over the estimated
useful lives of the respective assets as follows:

EstimatedUseful LifeTransportation
      equipment
      5 yearsOffice,
      computer software and equipment
      5 yearsFurniture and
      fixtures
      5 yearsProduction
      equipment
      10 yearsBuilding and
      improvements
      20 yearsConstruction
      in progress
      20 years


INTANGIBLE ASSETS

The Company adopted the provisions of SFAS No. 142, Goodwill
and Other Intangible Assets (SFAS 142), effective January 1, 2002. Under SFAS
142, goodwill and indefinite lived intangible assets are not amortized, but are
reviewed annually for impairment, or more frequently, if indications of possible
impairment exist. The Company has performed the requisite annual transitional
impairment tests on intangible assets and made the impairment adjustments as
necessary. Amortization expense totaled$ 8,634 and $44,068 for the years ended
2007 and 2006.

ADVERTISING COSTS

All costs associated with advertising are expenses in the period incurred. Advertising expense was $102,346 and $2,903
for the years ended December 31, 2007 and 2006, respectively and $404,733 for
the period from June 4, 1997 (inception) to December 31, 2007.

INCOME TAXES

Income tax expense is based on reported income before income
taxes. Deferred income taxes reflect the effect of temporary differences between
assets and liabilities that are recognized for financial reporting purposes and
the amounts that are recognized for income tax purposes. In accordance with
Statement of Financial Accounting Standard ("SFAS") No. 109, "Accounting for
Income Taxes," these deferred taxes are measured by applying currently enacted
tax laws.

F-15

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

The Company did not provide any current or deferred income
tax provision or benefit for any period presented to date because it has
experienced operating incomes (losses) since inception. The benefit of any tax
income (loss) carry forwards is fully offset by a valuation allowance, as there
is a more than fifty percent chance that the Company will not realize those
benefits.

There are net operating income (loss) carry forwards allowed
under the Hong Kong and China Governments' tax system. In Hong Kong, prior
years' net operating incomes (losses) can be carried forward indefinitely to
offset future taxable income. Although Top Team has gain of $3,385,630 from the
sale of the subsidiaries, the related income tax can be fully offset.

RESEARCH AND DEVELOPMENT COSTS

Company sponsored research and development costs, related to
both present and future products, are charged to operations when incurred and
are included in operating expenses. Expenditures for research and development
for the years ended December 31, 2007 and 2006 were $211 and $7,174 respectively
and a cumulative amount of $8,850,928 for the period from June 4, 1997
(inception) to December 31, 2007.

RELATED PARTY TRANSACTIONS AND STOCKHOLDER'S LOAN

The caption "Due to Related Company" are loans that are
unsecured, non-interest bearing and have no fixed terms of repayment, therefore,
deemed payable on demand. The Company rents office space from the related
company.

INCOME (LOSS) PER SHARE

Basic income (loss) per common share ("LPS") is calculated by
dividing net income (loss) by the weighted average number of common shares
outstanding during the year. Diluted earnings per common share are calculated by
adjusting the weighted average outstanding shares, assuming conversion of all
potentially dilutive stock options. There were no stock options outstanding at
December 31, 2007.

The numerator and denominator used in the basic and diluted
LPS of common stock computations are presented in the following table:

|                                                                      |   | Year ended December 31,
|--------------------------------------------------------------------- | - | -----------------------
|                                                                      |   | 2007                   
|NUMERATOR FOR BASIC
    AND DILUTED EPS                               |   |                        
|Net
    income (loss) to common stockholders                          | $ | 3,094,885              
|                                                                      |   |                        
|DENOMINATOR FOR BASIC
    AND DILUTED EPS                             |   |                        
|Weighted average shares of common stock outstanding-basic and diluted |   | 16,476,758             
|                                                                      |   |                        
|EPS - Basic and
    diluted                                           | $ | 0.19                   

There were no potentially dilutive securities outstanding at December 31,
2007.

EQUITY BASED COMPENSATION

The Company accounts for employee stock options in accordance
with SFAS 123(R), "Share-Based Payment." Under SFAS 123(R) the Company is
required to recognize share-based compensation expense at fair valued. "The
Company had no such compensation expense for the years ended December 31, 2007
and 2006.

COMPREHENSIVE INCOME (LOSS)

The accompanying financial statements are presented in United
States (US) dollars. The functional currency is the Renminbi (RMB). The
financial statements are translated into US dollars from RMB at year-end
exchange rates for assets and liabilities, and weighted average exchange rates
for revenues and expenses. Capital accounts are translated at their historical
exchange rates when the capital transactions occurred. Currency translation
adjustments are presented as other comprehensive income.

F-16

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

RMB is not freely convertible into the currency of other
nations. All such exchange transactions must take place through authorized
institutions. There is no guarantee the RMB amounts could have been, or could
be, converted into US dollars at rates used in translation.

3. BUSINESS ACQUISITIONS

On March 13, 2003, Minghua USA's indirect subsidiary, Minghua
Environmental Protection Science and Technology Limited, a Hong Kong limited
company ("Minghua Science"), entered into the Acquisition Agreement with Good
View Bus Manufacturing (Holdings) Company Limited, a Hong Kong limited company
(Good View), Eagle Bus Development Limited, a Hong Kong limited company (Eagle),
and Mr. Sin Keung Kok (Mr. Kok), relating to the acquisition of an 89.8% equity
interest in the Guangzhou City View Bus Installation Company, a People's
Republic of China limited company (the Guangzhou Bus Installation Company). The
Guangzhou Bus Installation Company manufactured motor coaches for domestic sale
in China and for export under the "Eagle" brand name.

The acquisition of the equity interest was effective on
January 2004 after obtaining certain governmental approvals. The parties to the
Acquisition Agreement entered into, and simultaneously consummated the
transactions contemplated by, a supplemental agreement (the Supplemental
Agreement), which replaced the original Acquisition Agreement. Pursuant to the
Supplemental Agreement, instead of acquiring the Guangzhou Bus Installation
Company directly, Minghua Science acquired a controlling interest in the
entities that control the Guangzhou Bus Installation Company. More specifically,
Minghua Science acquired Good View (which owned 23.8% of the Guangzhou Bus
Installation Company) and Eagle (which owned 66% of the Guangzhou Bus
Installation Company), respectively. Therefore, Minghua USA became the indirect
owner of an 89.8% equity interest in the Guangzhou Bus Installation Company. The
remaining 10.2% was held by Guangzhou Public Automobile No. 2 Company.

The purchase price of RMB14, 000,000 (US$1,690,474) was
determined by the parties based upon the market value of the assets and business
potential of Guangzhou Bus Installation Company.

The purchase price was allocated to assets and liabilities as
follows on the designated effective date on January 1, 2004:

|Accounts receivable               | $ | 4,227      
|--------------------------------- | - | -----------
|Inventories                       |   | 1,714,957  
|Others receivable                 |   | 523,857    
|Property, plant and
    equipment |   | 1,295,170  
|Intangible - 28 bus licenses      |   | 1,018,125  
|Bank note payable                 |   | (66,425)   
|Accounts payable                  |   | (2,055,941)
|Accrued liabilities               |   | (816,482)  
|Due
    to related parties        |   | (281,131)  
|Due to director                   |   | (84,519)   
|Others payable                    |   | (29,910)   
|Subtotal                          |   | 1,221,928  
|Goodwill (cost in excess of FMV)  |   | 468,546    
|Total purchase price
    paid     |   | 1,690,474  

Goodwill in the amount of $468,546 was written to zero at 2004 and was
reported as goodwill impairment loss.

F-17

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

In January 2004, Minghua Hong Kong entered into a stock
purchase agreement with Jinmou Li, the son of Minghua USA's former Chairman, to
acquire 100% of the equity in Asia Key Group Limited ("Asia Key") a Hong Kong
corporation, in which Jinmou Li was the sole shareholder. Asia Key's only asset
at the time was a 15% equity interest in Shenzhen Minghua Environmental
Protection Vehicle Co., Ltd. ("Minghua China"). Upon the consummation of this
acquisition, Minghua China become a 100% wholly-owned subsidiary of Minghua USA.
The acquisition required $990,638 in cash and issuance of 28,210,000 shares of
common stock at US$0.14 per share of Minghua USA for an aggregate price of
$3,949,400. The book value of the net assets transferred at the time of
acquisition had a negative balance. In this regard, the purchase of the 15%
minority interest was recorded to goodwill. Minghua USA subsequently recorded
the entire amount as impairment loss. In September 2006, Minghua USA disposed of
its entire interests in Minghua Hong Kong and Minghua China.

On June 16, 2004, Minghua Hong Kong formed a wholly-owned
subsidiary in the PRC, name Beijing China Cardinal Real Estate Consulting Co.,
Ltd. ("Beijing Cardinal Real Estate"). Minghua USA intends to use Beijing
Cardinal Real Estate as a vehicle to make future real estate investments in the
PRC. At December 31, 2006, Beijing Cardinal Real Estate had not begun
significant operations.

During August 2006, Minghua USA restructured ownership of
certain assets between its indirectly owned subsidiaries in preparation for the
disposition of Minghua Science along with its wholly-owned subsidiary, Minghua
China and Minghua Hong Kong. The transfers of ownership within Minghua USA's
subsidiaries are listed as follows:

(a) Minghua USA transferred Beijing Cardinal Real Estate from Minghua Hong
Kong to Euromax International Investments Limited; and

(b) Minghua USA transferred Good View and Eagle from Minghua Science to Top
Team Holdings Limited (BVI).

During September 2006, Minghua disposed of its entire
interests in Minghua Hong Kong, Minghua Science to Messrs. Han Lian Zhong and
Niu Rui Cheng in exchange for their assumption of Minghua Hong Kong and Minghua
Science's debt.

In aggregate, Minghua USA recognized gains of $707,825 on the sale of the
subsidiaries.

|                         | Minghua   | Minghua  | Minghua |        
|------------------------ | --------- | -------- | ------- | -------
|                         | Hong Kong | Science  | China  
|                         | US$       | US$      | US$     | Total  
|Inventories              | $         |          | $       |        
|Prepaid expenses         |           |          |         |        
|Other fixed assets       |           |          |         |        
|Accumulated depreciation |           |          |         |        
|Accounts payable         |           |          |         |        
|Accrued expenses         |           | (70,902) |         | (4,486)
|Due to directors         |           |          |         |        
|Others payable           |           |          |         |        
|Short-term loan          |           |          |         |        
|                         |           | (70,902) |         | (4,486)

On October 16, 2007, Minghua USA changed its name to China
Longyi Group International Holdings Limited. At the same time, the Company
implemented a 1 for 20 reverse stock split of issued and outstanding shares of
our common stock which reduced the number of our issued and our outstanding
shares form 198,509,866 to 9,925,493.

On November 12, 2007, the Company entered into a share
purchase agreement, with Daykeen Group Limited, a BVI company, pursuant to which
company acquired 100% ownership of Top Time International Limited, a Hong Kong
company. Daykeen is the sole shareholder of Top Time. Top Time owns 90% equity
interest of Beijing SOD, which is a holding company that owns 90% equity of
Chongqing SOD, a corporation incorporated in China. Chongqing SOD is a
manufacturer of superoxide dismutase, or SOD products.

F-18

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

The Company completed an acquisition transaction with Top
Time whereby we paid Daykeen, Top Time's sole shareholder, a total consideration
of $54.9 million (RMB 407 million, based on an exchange ratio of $1=RMB 7.414)
in exchange for 100% ownership of Top Time, consisting of $30 million in cash
and $24.9 million in shares of our common stock issuable within 90 days of the
closing. $30 million of cash was paid to Daykeen by three transactions, Beijing
Cardinal, De Qiu Hong, and Mr. Chen Zhiping paid $29 million, $0.4 million, and
$0.6 million on behalf of the Company, respectively. As a result, the Company
offset the same amounts of balance of the three parties' current accounts. The
equity portion of the purchase price amounts to a total of 62,250,000 shares of
our common stock (based upon $0.02/share, the average of the closing price of
the Company's common stock on the OTCBB for the 365 calendar days prior to May
31, 2007, which was adjusted for our stock split which occurred on October 16,
2007 and resulted an effective purchase price of $0.40 per share). Top Time
thereby became our wholly owned subsidiary and Daykeen became our controlling
stockholder upon our issuance to Daykeen of the equity portion of the purchase
price in accordance with the Share Purchase Agreement.

Top Time was incorporated in Hong Kong in December 2006 and
currently has two subsidiaries: Beijing SOD and Chongqing SOD. Beijing SOD is
90% owned by Top Time and was incorporated in China in March 2005. Chongqing SOD
was incorporated in China in March 2007. Chongqing SOD is 90% owned by Beijing
SOD. For accounting purposes, the acquisition of Top Time was treated as a
reorganization of entities under common control.

4. STOCKHOLDERS' EQUITY ISSUANCE OF COMMON STOCK

In February 2002, the Company issued 372,807 (pre reverse
split) shares of the Company's common stock at $.20 per share in a private
placement. The total amount due of $74,561 was determined to be uncollectible
during 2004 and was charged to additional paid in capital.

In April 2002, 540,260 (pre reverse split) options were
exercised by a former director at a cashless exercise amount of $416,000. The
balance of the 2,000,000 (pre reverse split) options granted to this former
director was forfeited in 2002.

In November 2002, 1,100,000 (pre reverse split) shares were issued to the
Board of Directors at $.13 per share, for a total consideration of $143,000, for
services provided to the Company in 2002.

In March 2003, the Company issued 1,513,969 (pre reverse
split) shares of common stock for $.12 per share, for a total consideration of
$181,676 to settle various debts with third party vendors and a loan payable to
a former Director of the Company.

On September 29, 2003, the Company entered into its first
stock subscription agreement with the Beijing Qiang Long Real Estate Development
Co., Ltd. ("Qiang Long"), relating to the purchase of 15,000,000 (pre reverse
split) shares of the Company's common stock at a purchase price of $.40 per
share, for an aggregate consideration amount of $6,000,000. In October 2003,
1,511,488 (pre reverse split) shares of stock were purchased according to the
subscription agreement for $604,595. In addition to $604,595, $604,887 was
received in advance for the stocks issued in January 2004. Total amount received
was $1,209,482 during October 2003. In January 2004, 3,023,998 (pre reverse
split) shares of stock were purchased under the same agreement for a price of
$1,209,599. Amount received was $604,712 which was $1,209,482 less $604,887. In
2004, 10,464,514 (pre reverse split) shares of stock were purchased under the
subscription agreement for an aggregate consideration of $ 4,185,806.
Accordingly, the Company has received all the payments from the first stock
subscription receivable.

On January 29, 2004 a second stock subscription agreement was
entered into with Qiang Long. The second agreement calls for the purchase of
140,000,000 (pre reverse split) shares of the Company's common stock at a
purchase price of $.21 per share, for an aggregate consideration of $29,400,000.
Qiang Long will become the controlling stockholder of the Company as a result of
this second agreement. During 2004 the Company collected $653,795 as a partial
payment toward the stock subscription receivable, however, no stocks were
issued. In December 2006, pursuant to this agreement, Qiang Long Real Estate
Development Co. Ltd., paid $632,911 in partial fulfillment of the agreement.
Company issued 3,013,862 (pre reverse split) shares of common stock to Qiang
Long.

During Dec Prior to the issuance of the shares, the Company
is required to hold a stockholders meeting to increase the number of common
shares authorized, in order to have enough common shares to satisfy its stock
obligations to Qiang Long. Qiang Long does not have the right to cancel its
subscription and the consideration is not refundable.

F-19

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

In January 2004 the Company issued 24,036,269 (pre reverse
split) shares of its common stock to Kingsrich Development Limited in
satisfaction of debt in accordance with a prior agreement. See Note 8 for
details of the transaction.

On January 29, 2004 the Company issued 28,210,000 (pre
reverse split) shares of its common stock in the acquisition of the 15% minority
interest in Minghua China. The shares were valued at $.14 per share. The
transaction is further discussed in Note 1.

In February 2004, the Company issued 4,000,000 (pre reverse
split) shares of its common stock in exercise of stock options. The exercise
price was paid in services to the Company. Compensation expense of $480,000 was
charged to current expense as a result of the transaction.

During May of 2004 the Company issued 16,483,514 (pre reverse
split) shares of its common stock to China Cardinal Limited, of Hong Kong, in
satisfaction of a subscription agreement. The stock was sold at a price of $.14
per share, for an aggregate amount of $2,307,692.

Luck Pond Enterprises Limited by Hong Kong ("Luck Pond") had
provided consulting services and acted as a finder in connection with the
above-mentioned two subscription agreements with Qiang Long and an investment
that was made in January 2004 by China Cardinal Limited of Hong Kong. In
consideration of those services, Luck Pond will receive a ten percent commission
on the total investment proceeds from both investors, payable in common stock of
the Company and was determined by management to be equivalent to 28,390,531 (pre
reverse split) common shares. This commission is contingent upon final funding
of 100% of all the three above-mentioned subscription agreements. During 2004,
at the completion of two of the agreements, the Company charged $830,100 to
expense. The amount was included in accrued liabilities at December 31, 2004,
and in January 2005, the Company issued 5,770,000 (pre reverse split) shares of
its common stock in payment of the liability.

On June 29, 2007, the Board of Directors of Company
unanimously approved, subject to the Majority Shareholders approval, the
1-for-20 Reverse Split of company's issued and outstanding Common Stock, which
will be effectuated in conjunction with the adoption of the Certificate of
Amendment. The Majority Shareholders also approved this action in the Written
Consent.

The Reverse Split reduce the number of issued and outstanding
shares of Company's Common Stock and effectively increase the number of
authorized and unissued shares of our Common Stock available for future
issuance. The Reverse Split will become effective on the Effective Date, which
occurs when the Certificate of Amendment is filed with the Secretary of Sate for
the State of New York following the expiration of the 20-day period mandated by
Rule 14c of the Exchange Act.

Effect of Reverse Split on Common Stock

The table below sets forth, as of the Record Date and as of the Effective
Date the following information both before and after the proposed Reverse Split
(subject to slight adjustments resulting rounding of fractional shares):

- The number of issued and outstanding
  shares of Common Stock
- The number of authorized and
  reserved shares of Common Stock;
- The number of umber of authorized
  but unissued and unreserved shares of Common Stock.

CAPITALIZATION STRUCTURE OF THE COMPANY AT VARIOUS TIMES

|                                                                  | Capital Structure   | Capital Structure  
|----------------------------------------------------------------- | ------------------- | -------------------
|                                                                  | Pre-Reverse Split   | Post-Reverse Split 
|                                                                  | (As of Record Date) | (On Effective Date)
|                                                                  |                     |                    
|Issued and outstanding
    shares of Common Stock                 | 198,509,866         | 9,925,493          
|Authorized and reserved shares of Common
    Stock                | 0                   | 0                  
|Authorized but unissued and
    unreserved shares of Common Stock | 1,490,134           | 190,074,507        

F-120

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

As shown in the table above, the Reverse Split of the
outstanding shares of our Common Stock will reduce the number of issued and
outstanding shares of our Common Stock and effectively increase the number of
authorized and unissued shares of our Common Stock available for future
issuance.

On January 29,2004, company entered into a certain contract
with Qiang Long Real Estate Development Co., Ltd., under which, as amended and
supplemented from time to time, Qiang Long is obligated to purchase 140,000,000
(pre reverse split) shares of the Company's common stock, par value $0.01 at an
aggregate purchase price of US$ 29,400,000, or $0.21 per Share, US$ 653,795 of
which was paid to the Company as a performance bond at the signing of the
Agreement, US$ 632,911 of which was paid to the Company in 2006 in exchange for
3,013,862 (pre reverse split) Shares, and the balance of US$ 28,113,294 (the
"Final Installment") of which was to be paid in full by June 30, 2007, for the
remaining 136,986,138 (pre reverse split) Shares.

On June 29, 2007, the Company and Qiang Long entered into a
letter agreement (the "letter Agreement"), pursuant to which the Company and
Qiang Long acknowledged their consummation of the Qiang Long Contract. Pursuant
to the Letter Agreement, the Company acknowledged its receipt of the Final
Installment in cash from Qiang Long as fulfillment of Qiang Long's investment
obligation, and agreed to issue the remaining Shares to Qiang Long as follows:

1. The Company will
  issue 50,000,000 (pre reverse split) of the Shares to Qiang Long on or before
  July 23, 2007, the date that is fifteen business days after the Company
  receives the Final Installment from Qiang Long; and
2. Within fifteen (15)
  business days following the effective date of an amendment to the Company's
  Certificate of Incorporation to effect a one-for-twenty reverse split of the
  Company's outstanding Common Stock (the "Amendment"), the Company will issue
  the remaining 86,986,138 (pre reverse split) Shares to Qiang Long, which will
  be equal to 4,349,307 Shares post-reverse split.

On July 27, 2007, the Company instructed prior Transfer Agent
to issue the 50,000,000 (pre reverse split) shares of common stock to
deliverable Qiang Long in the name of Jolly Concept Management Limited, in
accordance with Qiang Long's instructions.

On December 14, 2007, according to Qiang Long's request,
company instructed present Transfer Agent to issue the replacement certificate
showing the new name of the Company and the correct number of shares, post
reverse-split, and the remaining 4,349,307 shares of common stock issuable to
Qiang Long, to Jolly Concept Management Limited and to Zhang, Lifang. The
Company also agreed to issue 1,131,026 shares of common stock post-reverse-split
to Luck Pond Enterprises Limited or its designee, for its services as finder in
connection with the Qiang Long investment.

On November 12, 2007, the Company completed an acquisition
transaction with Top Time whereby we paid Daykeen, Top Time's sole shareholder,
a total consideration of $54.9 million, in exchange for 100% ownership of Top
Time, consisting of $30 million in cash and $24.9 million in shares of our
common stock issuable within 90 days of the closing. The equity portion of the
purchase price amounts to a total of 62,250,000 shares of our common stock. The
share number was calculated based upon $0.02/share, the average of the closing
price of the Company's common stock on the OTCBB for the 365 calendar days prior
to May 31, 2007, which was adjusted for our stock split which occurred on
October 16, 2007. As a result, the effective purchase price per share was $0.40.

On December 14, 2007, the Company instructed present Transfer
Agent to issue the total amount of 62,250,000 shares of the Company's common
stock, post-reverse-split, issuable to Daykeen, to Daykeen Investment Limited.

The Company's capital structure as of December 31, 2007 and 2006 was as
follows:

|Common stock
    - par value $0.01 | Authorized  | Issued and
    outstanding   
|---------------------------------- | ----------- | -----------------------------
|                                   |             |                              
|December 31, 2007                  | 200,000,000 | 77,655,854                   
|                                   |             |                              
|December 31,
    2006              | 200,000,000 | 7,425,494(post reverse split)

STOCK OPTION PLAN

On April 5, 2001, the Company's 2001 Stock Option Plan (the
"2001 Plan") was adopted by the board of directors and was approved by the
Company's shareholders at the stockholders' annual meeting on August 2, 2001.
Pursuant to the 2001 Plan, the Company may grant incentive and non-statutory
(nonqualified) stock options to key employees and directors of the Company. A
total of 20,000,000 (pre reverse split) shares of common stock have been
reserved for issuance under the 2001 Plan. No employee may be granted options
for more than 2,000,000 (pre reverse split) restricted shares under the 2001
Plan in any one fiscal year.

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)
Notes to consolidated financial statements
The maximum term of options granted under the 2001 Plan is ten years. Options
granted are nontransferable and generally expire within three months after the
termination of the grantee's services.
The exercise price of incentive stock options must not be
less than the fair value of the common stock on the date of the grant. The
authority to grant new options under the 2001 Plan will terminate on April 5,
2011, unless the 2001 Plan is terminated prior to that time by the board of
directors.
In 2001, the Company granted 2,000,000 (pre reverse split)
nonqualified stock options under the 2001 Plan to the Chairman with a 5-year
expiration date, and an exercise price of $1.75 per share. However, all
2,000,000 (pre reverse split) options were forfeited on May 10, 2004 when the
chairman resigned.
5. INVESTMENT
The Company has a one year deposit certificate with a
financial institution in the PRC. The certificate earns interest at 5.5% to 8%
per annum. The principal amount for the years ended December 31, 2007 and 2006
was $1,489,472 and $1,922,067, and was recorded on the balance sheet as a short
term investment.
6. INVENTORIES
Inventories at December 31, 2007 and 2006 consisted of:

|                                   |   | 2007    |   | 2006       
|---------------------------------- | - | ------- | - | -----------
|Materials                          | $ | 81,759  | $ | 589,012    
|Low value consumables              |   | 12,430  |   | 36,452     
|Costs of production                |   | 248,943 |   | 502,781    
|Finished goods                     |   | 116,669 |   | 229,900    
|Subtotal                           |   | 459,801 |   | 1,358,145  
|Less: reserve for
    obsolescence |   | -       |   | (1,358,145)
|Net
    inventories                | $ | 459,801 | $ | -          

7.

Property and equipment at cost consisted of:

|                                   |   | 2007     |   | 2006       
|---------------------------------- | - | -------- | - | -----------
|Transportation equipment           | $ | 91,648   | $ | 199,109    
|Furniture and office
    equipment |   | 34,654   |   | 137,975    
|Production equipment               |   | 207,570  |   | 199,737    
|Buildings and
    improvements     |   | 148,113  |   | 1,649,186  
|Construction in progress           |   | 87,130   |   | -          
|Idle equipment                     |   | -        |   | 32,393     
|Subtotal                           |   | 569,115  |   | 2,218,400  
|Less: accumulated
    depreciation |   | (30,984) |   | (1,145,245)
|Net
    property and equipment     | $ | 538,131  | $ | 1,073,155  

Depreciation expense for the years ended December 31, 2007 and 2006 was
$53,472 and $146,167, respectively.

---



CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)

Notes to consolidated financial statements

8. INCOME TAXES

The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes.

Income tax expense is based on reported income before income
taxes. Deferred income taxes reflect the effect of temporary differences between
assets and liabilities that are recognized for financial reporting purposes and
the amounts that are recognized for income tax purposes. In accordance with SFAS
No. 109, "Accounting for Income Taxes", these deferred income taxes are measured
by applying currently enacted tax laws.

The Company has a United States federal net operating income
(loss) carryforward of approximately $(5.24) million expiring in the years 2021
- 2025. The tax benefit of this net operating income (loss) has been offset by a
full valuation allowance. A portion of the net operating income (loss)
carryforward will be subject to a limitation due to the "Change of ownership
provisions" under Section 382 of the Internal Revenue Code and similar state
provisions.

Net operating income (loss) carry forwards are allowed under
the Hong Kong and Chinese governments' tax systems. In China, the previous five
years' net operating incomes (losses) are allowed to be carried forward to
offset future taxable income. In Hong Kong, net operating incomes (losses) can
be carried forward indefinitely to offset future taxable income.

9.

From time to time, the Company has disputes that arise in the
ordinary course of its business. Currently, according to management, there are
no material legal proceedings to which the Company is a party to or to which any
of their property is subject that will have a material adverse effect on the
Company's financial condition.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments" ("SFAS 107") requires
entities to disclose the fair values of financial instruments except when it is
not practicable to do so. Under SFAS No. 107, it is not practicable to make this
disclosure when the costs of formulating the estimated values exceed the benefit
when considering how meaningful the information would be to financial statement
users. As a result of the difficulties presented in the valuation of the loans
payable to related entities/parties because of their related party nature,
estimating the fair value of these financial instruments is not considered
practical. The fair values of all other assets and liabilities do not differ
materially from their carrying amounts. None of the financial instruments held
are derivative financial instruments and none were acquired or held for trading
purposes in 2007 and 2008.

11. NEW ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"), which
provides enhanced guidance for using fair value to measure assets and
liabilities. This standard also responds to investors' requests for expanded
information about the extent to which companies measure assets and liabilities
at fair value, the information used to measure fair value, and the effect of
fair value measurements on earnings. The standard applies whenever other
standards require (or permit) assets or liabilities to be measured at fair
value. The standard does not expand the use of fair value in any new
circumstances. SFAS 157 is effective for financial statements issued for fiscal
years beginning after November 12, 2007, and interim periods within those fiscal
years. Early adoption is permitted. We are currently evaluating whether the
adoption of SFAS157 will have a material effect on our consolidated results of
operations and financial condition.

In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 158, "Employer's Accounting for Defined Benefit Pension
and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88,
106, and 132(R)" ("SFAS 158"). SFAS 158 requires an employer to recognize the
overfunded or underfunded status of a defined benefit postretirement plan (other
than a multiemployer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity or
changes in unrestricted net assets of a not-for-profit organization. The
standard also requires an employer to measure the funded status of a plan as of
the date of its year-end statement of financial position, with limited
exceptions. An employer with publicly traded equity securities is required to
initially recognize the funded status of a defined benefit postretirement plan
and to provide the required disclosures as of the end of the fiscal year ending
after December 15, 2006. An employer without publicly traded equity securities
is required to recognize the funded status of a defined benefit postretirement
plan and to provide the required disclosures as of the end of the fiscal year
ending after June 15, 2007. We do not expect the adoption of SFAS 158 to have a
material impact on our consolidated results of operations and financial
condition.

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY)
Notes to consolidated financial statements
SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities - Including an amendment of FASB Statement No. 115. This
Statement provides all entities with an option to report selected financial
assets and liabilities at fair value. The Statement is effective as of the
beginning of an entity's first fiscal year beginning after November 15, 2007,
with early adoption available in certain circumstances.
SFAS No. 141 (Revised), Business Combinations. SFAS No. 141R
broadens the guidance of SFAS No. 141, extending its applicability to all
transactions and other events in which one entity obtains control over one or
more other businesses. It broadens the fair value measurement and recognition of
assets acquired, liabilities assumed, and interests transferred as a result of
business combinations. SFAS No. 141R expands on required disclosures to improve
the statement users' abilities to evaluate the nature and financial effects of
business combinations.
SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements - an amendment of ARB No. 51. SFAS No. 160 requires that
ownership interests in subsidiaries held by parties other than the parent are to
be included in the equity section of the balance sheet, but apart from the
parent's equity. All changes in the parent's ownerhsip interest in a subsidiary
are to be accounted for as equity transactions. Any retained noncontrolling
equity interest in a deconsolidated subsidiary is to be initially measured at
fair value, with any gain or loss on consolidation measured using this fair
value. SFAS No. 161,Disclosures about Deriviative Instruments and Hedging
Activities - an amendment of FASB Statement No. 133. SFAS No. 161 requires
enhanced disclosures for all derivative instruments and hedging activities
covered by SFAS No. 133.
SOP No. 07-01, Clarification of the Scope of the Audit and
Accounting Guide "Investment Companies" and Accounting by Parent Companies and
Equity Method Investors for Investments in Investment Companies. SOP 07-01
provides guidance for determining whether an entity is within the scope of the
AICPA Audit and Accounting Guide Investment Companies. The provisions of the SOP
are effective for fiscal years beginning on or after December 15, 2007, with
earlier application encouraged. As of December 1, 2007 the FASB has proposed an
indefinite deferral of this SOP.
EITF Issue No. 06-11, Accounting for Income Tax Benefits of
Dividends on Share-Based Payment Awards. In this Issue, a consensus was reached
that a realized income tax benefit from dividends or dividend equivalents that
are charged to retained earnings and are paid to employees for equity-classified
nonvested equity shares, nonvested equity share units, and outstanding equity
share options should be recognized as an increase in additional paid-in capital.
This Issue should be applied prospectively to the income tax benefits that
result from dividends on equity-classified employee share-based payment awards
that are declared in fiscal years beginning after December 15, 2007, and interim
periods within those fiscal years. Early application is permitted.
FSP No. FAS 158-1, Conforming Amendments to the Illustrations
in FASB Statements No. 87, No. 88, and No. 106 and to the Related Staff
Implementation Guides. This FSP provides conforming amendments to the
illustrations in FASB Statements No. 87, 88, and 106 and to related staff
implementation guides as a result of the issuance of FASB Statement No. 158. The
conforming amendments made by this FSP are effective as of the effective dates
of Statement No. 158. The unaffected guidance that this FSP codifies into
Statements No. 87, 88, and 106 does not contain new requirements and therefore
does not require a separate effective date or transition method.
FSP No. FIN 46(R)-7, Application of FASB Interpretation No.
46(R) to Investment Companies. This FSP addresses the application of FASB
Interpretation (FIN) No. 46 (revised December 2003), Consolidation of Variable
Interest Entities, by an entity that accounts for its investments in accordance
with the specialized accounting guidance in the AICPA Audit and Accounting
Guide, Investment Companies. The provisions of the FSP are effective when the
entity adopts SOP 07-01.
SEC Staff Accounting Bulletin No. 109, Written Loan
Commitments Recorded at Fair Value Through Earnings. SAB 109 expresses the
current view of the staff that the expected net future cash flows related to the
associated servicing of the loan should be included in the measurement of all
written loan commitments that are accounted for at fair value through earnings.
SEC registrants are expected to apply the views in Question 1 of SAB 109 on a
prospective basis to derivative loan commitments issued or modified in fiscal
quarters beginning after December 15, 2007.
EXHIBITS

Exhibit Number
  Description*2.1
  Stock Purchase Agreement, dated October 21, 2004, between the Company and Mr. Sin Keung Kok relating to the acquisition of Mr. Sin Keung Kok’s equity interest in Ming Hua Environmental Protection Science and Technology Limited [Incorporated by reference to Exhibit 10 of the Form 8-K filed on October 27, 2004 in Commission file number 0-30183]*2.2
  Stock Purchase Agreement, dated January 19, 2004, among the Company, Minghua Group International Holding (Hong Kong) Limited and Li Jinmou relating to the acquisition of Asia Key Group Limited [Incorporated by reference to Exhibit 10.3 of the Form 8-K filed on February 12, 2004 in Commission file number 0-30183]

|*2.3  | Stock Purchase Agreement, dated April 27, 2001, among the Company, Minghua Acquisition Corp., Li Chuquan and Chan Kuen Kwong [Incorporated by reference to Exhibit 2.1 of the Form 8-K filed on May 3, 2001 in Commission file number 0-30183]                               
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*3.1  | Certificate of Incorporation of the Company [Incorporated by reference to Exhibit 3.1 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]                                                                                                          
|*3.2  | Certificate of Amendment of Certificate of Incorporation of the Company [Incorporated by reference to Appendix A of the Definitive Proxy Statement of the Company filed on July 3, 2001 in Commission file number 0-30183]                                                   
|*3.3  | Amended and Restated Bylaws of the Company [Incorporated by reference to Exhibit 3.3 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183 in Commission file number 0-30183]                                                                         
|*3.4  | Certificate of Amendment of Certificate of Incorporation of the Company filed with the Secretary of State of the State of New York on October 16, 2007 [Incorporated by reference to Exhibit 3.4 of the Form 8-K filed on December 5, 2007 in Commission file number 0-30183]
|*4.1  | Warrant to Purchase Common Stock, dated April 2, 2001, between the Company and First Pacific Capital, Ltd. [Incorporated by reference to Exhibit 10.9 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                         
|*4.2  | Registration Rights Agreement, dated June 22, 2001, among the Company, Li Chuquan and Chan Kuen Kwong [Incorporated by reference to Exhibit 4.2 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]                                                
|*4.3  | Registration Rights Agreement, dated July 23, 2001, among the Company and the stockholders of the Company named in the Registration Rights Agreement [Incorporated by reference to Exhibit 4.2 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183] 
|*4.4  | Form of Regulation D Subscription Agreement [Incorporated by reference to Exhibit 4.2 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]                                                                                                          
|*4.5  | Form of Regulation S Subscription Agreement [Incorporated by reference to Exhibit 4.2 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]                                                                                                          
|*10.1 | Letter Agreement, dated as of October 29, 2004, between the Company and Qiang Long Real Estate Development Co., Ltd. [Incorporated by reference to Exhibit 10 of the Form 8-K filed on November 3, 2004 in Commission file number 0-30183]                                   
|*10.2 | Loan Agreement, dated May 10, 2004, between ShenZhen Ruichijuntong Industry Co., Ltd. and Minghua Environment Protection Vehicles Ltd. [Incorporated by reference to Exhibit 10.1 of the Form 10-QSB filed on August 23, 2004 in Commission file number 0-30183]             

---



|Exhibit Number | Description
|-------------- | -----------
|               |            
|               |            

|*10.3 | Guangzhou City View Bus Installation Company Limited Agreement
[Incorporated by reference to Exhibit 10.1 of the Form 8-K filed on March 28, 2003 in Commission file number 0-30183]
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.4 | Kingsrich Development Limited Loan Agreement [Incorporated by reference to Exhibit 10.2 of the Form 8-K filed on March 28, 2003 in Commission file number 0-30183]                  
|*10.5 | Kingsrich Development Limited Convertible Promissory Note [Incorporated by reference to Exhibit 10.3 of the Form 8-K filed on March 28, 2003 in Commission file number 0-30183]     

|*10.6  | Registration Rights Agreement, dated March 17, 2003, between the Company and Kingsrich Development Limited [Incorporated by reference to Exhibit 10 of the Form 10-QSB filed on August 28, 2003 in Commission file number 0-30183]                                                                                                                            
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.7  | Regulation S Subscription Agreement, dated September 29, 2003, between the Company and Beijing Qiang Long Real Estate Development Company, Ltd. relating to subscription rights for 15,000,000 shares of the Company's Common Stock [Incorporated by reference to Exhibit 10.1 of the Form 10-QSB filed on December 2, 2003 in Commission file number 0-30183]
|*10.8  | Contract, dated January 29, 2004, between Beijing Qiang Long Real Estate Development Co. Ltd. and the Company [Incorporated by reference to Exhibit 10.1 of the Form 8-K filed on February 12, 2004 in Commission file number 0-30183]                                                                                                                        
|*10.9  | Contract, dated January 13, 2004, between China Cardinal Limited and the Company [Incorporated by reference to Exhibit 10.2 of the Form 8-K filed on February 12, 2004 in Commission file number 0-30183]                                                                                                                                                     
|*10.10 | Employment/Co-Operation Agreement, dated April 10, 2002, between the Company and Albert Wong [Incorporated by reference to Exhibit 99.1 of the Form 8-K filed on May 2, 2002 in Commission file number 0-30183]                                                                                                                                               
|*10.11 | Employment Agreement, dated July 11, 2001, between the Company and Li Chuquan [Incorporated by reference to Exhibit 10.1 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                                       
|*10.12 | Non-Qualified Stock Option Agreement, dated July 11, 2001, between the Company and Li Chuquan [Incorporated by reference to Exhibit 10.2 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                       
|*10.13 | Stock Option Agreement, dated July 11, 2001, between the Company and Li Chuquan [Incorporated by reference to Exhibit 10.3 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                                     
|*10.14 | Employment Agreement, dated April 5, 2001, between the Company and Ronald C. H. Lui [Incorporated by reference to Exhibit 10.4 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                                 
|*10.15 | Incentive Stock Option Agreement, dated April 5, 2001, between the Company and Ronald C. H. Lui [Incorporated by reference to Exhibit 10.5 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                     
|*10.16 | Non-qualified Stock Option Agreement, dated April 5, 2001, between the Company and Ronald C. H. Lui [Incorporated by reference to Exhibit 10.6 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                 
|*10.17 | Amendment to Stock Option Agreements, dated April 16, 2001, between the Company and Ronald C. H. Lui [Incorporated by reference to Exhibit 10.7 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]                                                                                                                                

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|Exhibit Number | Description
|-------------- | -----------
|               |            

|*10.18 | Consulting Agreement, dated  April 2, 2001, between the Company and First Pacific Capital Ltd. [Incorporated by reference to Exhibit 10.8 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.19 | Letter Agreement, dated April 5, 2001, between the Company and First Pacific Capital Ltd. [Incorporated by reference to Exhibit 10.10 of the Form 10-QSB filed on August 20, 2001 in Commission file number 0-30183]    

|*10.20 | 2001 Stock Plan [Incorporated by reference to Appendix B of our Definitive Proxy Statement on Schedule 14A filed on July 3, 2001 in Commission file number 0-30183]                                                                                                                                                                       
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.21 | Placement Agency Agreement, dated July 23, 2001, between the Company and Chicago Investment Group Incorporated [Incorporated by reference to Exhibit 10.11 of the Form 10-KSB filed on April 15, 2002 in Commission file number 0-30183]                                                                                                  
|*10.22 | Letter Agreement repayment of stockholder loan, dated December 11, 2001, between the Company and Li Chuquan [Incorporated by reference to Exhibit 99.1 of the Form 8-K filed on December 20, 2001 in Commission file number 0-30183]                                                                                                      
|*10.23 | Technology Development Contract, dated February 15, 2004, between Tsinghua University and the Company. [Incorporated by reference to Exhibit 10.23 of the Form 10-KSB filed on April 16, 2007 in Commission file number 0-30183]                                                                                                          
|*10.24 | Sales Contract of Guangzhou Cityview Bus Installation Co., Ltd., dated August 6, 2004, between Changsha United Electric Power Science and Technology Co., Ltd. and Guangzhou Cityview Bus Installation Co., Ltd. [Incorporated by reference to Exhibit 10.24 of the Form 10-KSB filed on April 16, 2007 in Commission file number 0-30183]
|*10.25 | Lease Agreement, dated May 30, 2004, between Liu Gui Zhi and Beijing China Cardinal Real Estate Consulting Ltd. [Incorporated by reference to Exhibit 10.25 of the Form 10-KSB filed on April 16, 2007 in Commission file number 0-30183]                                                                                                 
|*10.26 | Lease Agreement, dated May 20, 2004, between Shenzhen Minghua Environmental Protection Vehicle Co., Ltd. and Richard Zhang. [Incorporated by reference to Exhibit 10.26 of the Form 10-KSB filed on April 16, 2007 in Commission file number 0-30183]                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                           

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|Exhibit Number | Description
|-------------- | -----------
|               |            

|*10.27 | Letter Agreement, dated as of June 29, 2007, between Minghua Group International Holdings Limited and Qiang Long Real Estate Development Co., Ltd. [incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K of the Company filed on July 6, 2007 in Commission file number 0-30183].
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.28 | Share Purchase Agreement, between the Company and Daykeen, dated November 12, 2007. [Incorporated by reference to Exhibit 10.1of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]                                                                                            
|*10.29 | Employment Agreement, dated June 1, 2007, by and between Beijing SOD and Wei Wang. [Incorporated by reference to Exhibit 10.5of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]                                                                                             

|*10.30 | Equity Transfer Agreement, dated December 22, 2006, by and between Beijing Qiang Long and Top Time. [Incorporated by reference to Exhibit 10.6 of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.31 | Loan Agreement, dated December 22, 2006, by and between Top Time and Daykeen. [Incorporated by reference to Exhibit 10.7of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]                       
|*10.32 | Agreement, dated December 27, 2006, by and between Top Time and Daykeen. [Incorporated by reference to Exhibit 10.8 of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]                           
|*14    | Code of Ethics [incorporated by reference to Exhibit 14 of the Annual Report on Form 10-KSB of the Company for the fiscal year ended December 31, 2003]                                                                      
|21     | A description of the subsidiaries of the registrant. [Incorporated by reference to Exhibit 21of the Form 8-K/A filed on December 5, 2007 in Commission file number 0-30183]                                                  
|31.1   | Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                
|31.2   | Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                
|32     | Certifications of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                            
|       |                                                                                                                                                                                                                              

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