UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

Q

For the fiscal year ended: December 31, 2008



For the transition period from __________ to ____________

Commission File Number:

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED

New York
      13-3874771(State or other jurisdiction of
      (I.R.S. Employer Identification Number)incorporation or organization)


8/F East Area 
Century Golden Resources Business Center 
69 Banjing Road 
Haidian District Beijing, Peoples Republic of China, 100089

86-10-884-52568

Securities registered pursuant to Section 12(b) of the Act:None

Securities registered pursuant to Section 12(g) of the Act:Common Stock, Par Value $0.01

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

Yes £        No Q

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

Yes £        No Q

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.

Yes Q        No £

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Q

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

|Large accelerated
    filer   £ | Accelerated filer   £ | Non-accelerated
    filer   £ | Smaller reporting
    company   Q
|------------------------------- | --------------------- | ----------------------------- | ---------------------------------



Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Act).

Yes £        No Q

As of June 30, 2008, there were 77,655,862 shares of the
Registrants common stock outstanding and the aggregate market value of such
shares held by non-affiliates of the Registrants common stock (based upon the
average bid and asked price of such shares as reported on the Over-the-Counter
Bulletin Board) was approximately $2.22 million. Shares of the Registrants
common stock held by each executive officer and director have been excluded in
that such persons may be deemed to be affiliates of the Registrant. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

As of April 14, 2009, there were 77,655,862 shares of the
Registrants common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None.





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CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED

FORM 10-K 
For the Fiscal Year Ended December 31, 2008

|Number       |                                                                                                                  | Page
|------------ | ---------------------------------------------------------------------------------------------------------------- | ----
|PART
    I  
|ITEM 1.      | BUSINESS                                                                                                         | 2   
|ITEM 1A.     | RISK FACTORS                                                                                                     | 7   
|ITEM 1B.     | UNRESOLVED STAFF COMMENTS                                                                                        | 13  
|ITEM 2.      | PROPERTIES                                                                                                       | 13  
|ITEM 3.      | LEGAL PROCEEDINGS                                                                                                | 13  
|ITEM 4.      | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                                          | 13  
|            
|PART
    II 
|ITEM 5.      | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 14  
|ITEM 6.      | SELECTED FINANCIAL DATA                                                                                          | 15  
|ITEM 7.      | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS                        | 15  
|ITEM 7A.     | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK.                                                  | 19  
|ITEM 8.      | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                      | 20  
|ITEM 9.      | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE                         | 20  
|ITEM 9A(T).  | CONTROLS AND PROCEDURES                                                                                          | 20  
|ITEM 9B.     | OTHER INFORMATION                                                                                                | 21  
|            
|PART
    III
|ITEM 10.     | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE                                                       | 22  
|ITEM 11.     | EXECUTIVE COMPENSATION                                                                                           | 23  
|ITEM 12.     | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS               | 25  
|ITEM 13.     | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE                                    | 26  
|ITEM 14.     | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                           | 27  
|            
|PART
    IV 
|ITEM 15.     | EXHIBITS, FINANCIAL STATEMENTS SCHEDULES                                                                         | 29  



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SPECIAL NOTES REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K, 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-K. 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 Longyi, we, us, our, or the Company are references to the combined business of China Longyi Group International Holdings Limited (formerly known as Minghua Group International
Holdings Limited) and/or its consolidated subsidiaries, as the case may be;
- Top Time are references to Top Time International Limited, our indirect wholly-owned subsidiary, a Hong Kong company;
- Beijing SOD are references to Beijing Longyi Biology Technology Co. Ltd., our indirect, 90% owned subsidiary, a PRC company;
- Chongqing SOD are references to Chongqing JiuZhou Dismutase Biology Technology Co., Ltd., our indirect, majority-owned subsidiary, a PRC company;
- 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 6.8346 (exchange rate used
in the balance sheet) and $1 = RMB 6.9480 (exchange rate used in the statements of operations) for its fiscal year 2008 financial statements, and $1 = RMB 7.6078 for fiscal year 2007 financial statements, which were determined based on the
currency conversion rate in effect at the balance sheet date for each respective quarter);
- Securities Act means the Securities Act of 1933, as amended; and
- Exchange Act means the Securities Exchange Act of 1934, as amended.

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PART I

ITEM 1. BUSINESS

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.

History and Corporate Structure

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.  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, or the Reverse Split, 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.

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.

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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.

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 Group Limited, or 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.

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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).

The following chart reflects our organizational structure as of the date of this report.



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.

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.

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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 of16 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.

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.

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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, 2008, 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.

Expenditures for research and development for the years ended December 31, 2008 and 2007 were $0 and $211 respectively.

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.

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, 2008, 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.

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


Our employees are not represented by a labor organization or
covered by a collective bargaining agreement.  We have not experienced any
work stoppages.  We are required under PRC law to make contributions to the
employee benefit plans at specified percentages of the after-tax profit. 
In addition, we are required by the PRC law to cover employees in China with
various types of social insurance.  We believe that we are in material
compliance with the relevant PRC laws.

We believe that we maintain a satisfactory working
relationship with our employees and we have not experienced any significant
labor disputes or any difficulty in recruiting staff for our operations.

ITEM 1A. 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

The recent financial crisis could negatively affect our business, results of operations, and financial condition.

The recent credit crisis and turmoil in the global financial system may have an impact on our business and our financial condition, and we may face challenges if conditions in the financial markets do not improve. Our ability to access the capital
markets may be restricted at a time when we would like, or need, to raise capital, which could have an impact on our flexibility to react to changing economic and business conditions. In addition, these economic conditions also impact levels of
consumer spending, which have recently deteriorated significantly and may remain depressed for the foreseeable future. Consumer purchases of discretionary items, including our Jiuzhou SOD plant wine, generally decline during recessionary periods and
other periods where disposable income is adversely affected. If demand for our products fluctuates as a result of economic conditions or otherwise, our revenue and gross margin could be harmed.

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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.

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.

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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.

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 ended December 31, 2008 and a report of our management is included under Item 9A(T) of this Annual Report on Form 10-K. 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, 2009. 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:

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- 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.

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.

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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.

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.

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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.

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, Wei Wang, 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.

Ms. Wei Wang, our Director, is the beneficial owner of approximately 80.81% of our outstanding voting securities. As a result, she possesses significant influence over the election of our Board of Directors and significant corporate transactions.
Her 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 Ms. Wang are not in their best interests.

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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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

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 2008.

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PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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 |   |                    | 
|                                   |   |                    | 
|1stQuarter                         | $ | 2.50               | 
|2ndQuarter                         | $ | 1.25               | 
|3rdQuarter                         | $ | 0.25               | 
|4thQuarter                         | $ | 0.25               | 
|                                   |   |                    | 
|Year Ended
      December 31, 2007 |   |                    | 
|                                   |   |                    | 
|1stQuarter                         | $ | 0.04               | 
|2ndQuarter                         | $ | 0.055              | 
|3rdQuarter                         | $ | 0.36               | 
|4thQuarter                         | $ | 1.10               | 

(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.

Holders

On April 13, 2009, there were approximately 273 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                                                  

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Not Applicable.

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

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 2009, 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.

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.

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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, 2008 Compared to December 31,
2007

The following table summarizes the results of our operations
during the fiscal years ended December 31, 2008 and 2007 and provides
information regarding the dollar and percentage increase or (decrease) from the
2007 fiscal year to the 2008 fiscal year.

|Line Item          |   | December
      31, 
    2008 |   |   | December
      31, 
    2007 |  |   | Increase (Decrease) |   |  | Percentage Increase
    (Decrease) |  
|------------------ | - | ---------------------------- | - | - | ---------------------------- |  | - | ------------------- | - |  | ---------------------------------- | -
|Revenues           | $ | 144,402                      |   | $ | 47,454                       |  | $ | 96,948              |   |  | 204%                               |  
|Cost of Sales      | $ | 97,849                       |   | $ | 33,811                       |  | $ | 64,038              |   |  | 189%                               |  
|Operating Expenses | $ | 2,486,510                    |   | $ | 1,314,806                    |  | $ | 1,171,704           |   |  | 89%                                |  
|Income Taxes       | $ | -                            |   | $ | -                            |  | $ | -                   |   |  | -                                  |  
|Net Income ( Loss) | $ | (2,188,359                   | ) | $ | 3,094,885                    |  | $ | (5,283,244          | ) |  | (171%                              | )

Revenue

Our revenues in fiscal year 2008 amounted to $144,402, which is
$96,948 or approximately 204% more than that of fiscal year 2007, when we had
revenues of $47,454. The increase in revenues was attributable to the increase
of our sales of SOD products during the fiscal year 2008.

Cost of Sales

Our cost of sales in fiscal years 2008 and 2007 was $97,849 and
$33,811, respectively, which accounts for approximately 68% and 71%,
respectively, as a percentage of total revenues. The dollar amount of the cost
of sales increased with the
growth of annual sales. Cost of sales as a percentage of annual revenues decreased by about 3% in 2008 as compared with 2007, which is mainly attributable to the result of economies of scale due to the substantial increase of sales of our SOD
products in 2008.

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Operating Expenses

Our operating expenses for the fiscal year ended December 31, 2008 were $2,486,510, as compared to $1,314,806 for 2007. This increase of $1,171,704 or 89% is primarily the result of acquisition of Top Time in the end of the fiscal year
2007, and we had to increase the General and Administration expenses in order that Beijing and Chongqing subsidiaries were carrying on their business during the fiscal year 2008. Furthermore, we decided to write off the total amount of
$1,777,125 from other receivable account at December 28, 2008 due to the fact that this amount of money could not be collected from debt holders.

Income taxes

We are currently subject to income taxes according to applicable tax laws in the PRC. The tax rates are 25% for both Beijing SOD and Chongqing SOD.

On March 16, 2007, the National Peoples Congress of China passed the new Enterprise Income Tax Law, or EIT Law, and on November 28, 2007, the State Council of China passed the Implementing Rules for the EIT Law, or Implementing Rules, which
took effect on January 1, 2008. The EIT Law and Implementing Rules impose a unified EIT of 25.0% on all domestic-invested enterprises and foreign invested entities, or FIEs, unless they qualify under certain limited exceptions.

Therefore, nearly all FIEs are subject to the new tax rate alongside other domestic businesses rather than benefiting from the FEIT, and its associated preferential tax treatments, beginning January 1, 2008.

Despite these changes, the EIT Law gives the FIEs established before March 16, 2007, or Old FIEs, a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatments. During this five-year grandfather
period, the Old FIEs which enjoyed tax rates lower than 25% under the original EIT Law shall gradually increase their EIT rate within 5 years until the tax rate reaches 25%. In addition, the Old FIEs that are eligible for the two-year
exemption and three-year half reduction or five-year exemption and five-year half-reduction under the original EIT Law, are allowed to remain to enjoy their preference until these holidays expire. The discontinuation of any such
special or preferential tax treatment or other incentives would have an adverse effect on the Companys business, fiscal condition and current operations in China.

In addition to the changes to the current tax structure, under the EIT Law, an enterprise established outside of China with de facto management bodies within China is considered a resident enterprise and will normally be subject to an
EIT of 25.0% on its global income. The Implementing Rules define the term de facto management bodies as an establishment that exercises, in substance, overall management and control over the production, business, personnel,
accounting, etc., of a Chinese enterprise. If the PRC tax authorities subsequently determine that we should be classified as a resident enterprise, then the organizations global income will be subject to PRC
income tax of 25.0%.

We incurred no income taxes in either 2008 or 2007.

Net Income.

Net income decreased $5,283,244, or 171%, to $(2,188,359) for the year ended December 31, 2008, from $3,094,885 for 2007. This decrease in net income was primarily due to the following factors:

- Due to a wide exchange rate range between RMB and US$ in 2008, our transaction exchange gain decreased from $881,643 in the fiscal year 2007 to $137,774 in the fiscal year 2008.
- During the fiscal year 2007, the company disposed several subsidiaries and recognized a gain of $3,385,630, while in 2008 the company did not dispose  any subsidiaries.
- After a risk assessment, we determined that a total $1,777,125 other receivable could not be collected from our debtors. Therefore, we wrote off this amount of money from other receivable account on December 28, 2008. $1,634,715 of this was
from Guangzhou City View.

17

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Liquidity and Capital Resources

General

As of December 31, 2008, we had cash and cash equivalents of
approximately $51,307. The following table provides detailed information about
our net cash flow for all financial statement periods presented in this report.

Cash Flow

|                                                          |   | For the Fiscal Year Ended December 31, |  
|--------------------------------------------------------- | - | -------------------------------------- | -
|                                                          |   | 2008                                   |  
|Net cash provided by (used in) operating
      activities | $ | (704,158                               | )
|Net cash provided
      by investing activities           |   | 462,566                                |  
|Net cash provided by (used in) financing
      activities |   | 377,494                                |  
|Net cash flow                                             |   | (13,240                                | )

Operating Activities

Net cash used in operating activities was $704,158 for the
fiscal year ended December 31, 2008, which is a decrease of $896,112 from
$191,954 net cash provided by operating activities for 2007. The decrease of the
cash provided by operating activities was mainly attributable to the fact that
we disposed several subsidiaries and recognized a gain of $3,385,630 in the
fiscal year 2007. We did not dispose any subsidiaries during the fiscal year
2008.

Investing Activities

Our primary uses of cash for investing activities are payments
for the acquisition of property, plant and equipment.

Net cash provided by investing activities for the fiscal year
ended December 31, 2008 was $462,566, which is an increase of $73,381 from net
cash provided by investing activities of $389,185 for 2007. The increase of the
cash provided by investing activities was mainly due to the decrease of payments
to acquire equipment in fiscal year 2008 .

Financing Activities

Net cash provided by financing activities for the fiscal year
ended December 31, 2008 was $377,494, while in 2007 we had $892,459 net cash
used in financing activities. Such change was attributable to the fact that the
cash used in payments to stockholders payable was $903,769 in the fiscal year
2007 compared with none in the fiscal year 2008.

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 sustain our operations at our current levels through at least the
next twelve months. However, depending on our future needs and changes and trends in the capital markets affecting our shares and the Company, we may determine to seek additional equity or debt financing in the private or public markets.

18

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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.

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) collectability 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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The full text of our audited consolidated financial statements as of December 31, 2008 and 2007 begins on page F-1 of this Report.

ITEM 9. 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 9A(T). CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, Ms. Jie Chen and Mr. Xinmin Pan, respectively, evaluated the effectiveness of our disclosure controls and procedures. The term disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports,
such as this report, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including
its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, Ms. Chen and Mr. Pan concluded that as of
December 31, 2008, 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.

(b) Managements annual report on internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our chief
executive officer and chief financial officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements
for external purposes in accordance with U.S. GAAP, and includes those policies and procedures that:

|(1) | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;                                                                                                                                           
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                          
|(2) | provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
|    |                                                                                                                                                                                                                                                                                          
|(3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.                                                                                       

20

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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 SEC that permit the Company to provide only managements report in this annual report.

(c) Changes in internal control over financial reporting

There were no changes in our internal controls over financial reporting during the fourth quarter of our fiscal year ended December 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

ITEM 9B. OTHER INFORMATION

None.





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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following sets forth the name and position of each of our current executive officers and directors:

|Name         | Age | Position                            
|------------ | --- | ------------------------------------
|Changde Li   | 52  | Chairman of the Board               
|Jie Chen     | 53  | Chief Executive Officer and Director
|Xinmin Pan   | 63  | Chief Financial Officer             
|Hui Chen     | 39  | Director                            
|Hongliang Li | 47  | Director                            
|Wei Wang     | 38  | Director                            

Changde Liwas 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.

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.

Honliang Li became our 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. In addition, Ms. Wang has 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.

22

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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. Our
current director holds no directorships in any other reporting companies.

Board Composition and Committees

The board of directors is currently composed of five members, Mr. Changde Li, Ms. Jie Chen, Mr. Hui Chen, Mr. Hongliang Li 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.

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.

Family Relationships

There are no family relationships among our directors or officers.

Section 16(A) Beneficial Ownership Reporting Compliance

Under U.S. securities laws, directors, certain executive officers and persons holding more than 10% of our common stock must report their initial ownership of the common stock, and any changes in that ownership, to the SEC. The SEC has designated
specific due dates for these reports. Based solely on our review of copies of such reports filed with the SEC by and written representations of our directors and executive offers, we believe that our directors and executive offers filed the required
reports on time in 2008 fiscal year.

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

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. A copy of the code of ethics has been
filed as Exhibit 14 to our Annual Report on Form 10-KSB for the fiscal year ending December 31, 2003 filed on April 15, 2004.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table  2007 and 2008

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The following table sets forth information concerning all
compensation awarded to, earned by or paid to Our Chief Executive Officer for
services rendered in all capacities during 2007 and 2008. No other executive
officers received total annual salary and bonus compensation in excess of
$100,000 in either fiscal year.

|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 ($) (2) | Total ($)
|--------------------------------- | ---- | ---------- | --------- | ---------------------- | ----------------------- | ------------------------------------------------------------------------ | --------------------------------------------------------- | ------------------------------ | ---------
|                                  |      |            |           |                        |                         |                                                                          |                                                           |                                |          
|Jie Chen, CEO                     | 2007 | 4,732      | N/A       | N/A                    | N/A                     | N/A                                                                      | N/A                                                       | N/A                            | 4,732    
|and Director (1)                  |      |            |           |                        |                         |                                                                          |                                                           |                                |          
|                                  | 2008 | 5,181      | N/A       | N/A                    | N/A                     | N/A                                                                      | N/A                                                       | N/A                            | 5,181    

Narrative to Summary Compensation Table

(1)Ms. Chen was appointed as our Chief Executive
Officer in September 2006. She received total compensation for her compensation
as our Chief Executive Officer amounting to RMB 36,000 or US$5,181 in 2008.

Outstanding Equity Awards at Fiscal Year End

There was no unexercised option, stock that has not vested or
equity incentive plan award for any named executive officer as of December 31,
2008.

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 paid to Mr. Pan RMB 36,000
or $5,181 as his annual salary of the fiscal year 2008.

We have a verbal understanding with our Chief Executive Officer
and Director, Jie Chen, regarding her annual salary of $5,181 for year 2008.

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 and 2008.

Compensation of Directors

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, 2008. In the future, we may adopt a policy of paying independent
directors a fee for their attendance at board and committee meetings. However,
we do reimburse each director for reasonable travel expenses related to such
director's attendance at board of directors and committee meetings.

24

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ITEM 12. 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 April 13, 2009 (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.

|Title of Class               |  | Name &
      Address
 of Beneficial Owner                                                                                           |  |  | Office, If Any         |  |  | Amount &Nature of 
    Beneficial 
    Ownership(1) |        |  | Percent of 
    Class(2) | 
|---------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------- |  |  | ---------------------- |  |  | --------------------------------------------------- | ------ |  | ------------------------ | 
|Directors and
      Officers | 
|Common Stock                 |  | Chang-de Li No. 95 Kangxi Road Ba Da Xia
      Industrial Development Zone Yanqing County, Beijing Peoples Republic of
      China |  |  | Chairman               |  |  | 6,034,695                                           | (3)    |  | 7.77%                    | 
|Common Stock                 |  | Jie Chen                                                                                                                            |  |  | CEO and
      Director |  |  | 0                                                   |        |  | *                        | 
|Common Stock                 |  | Xinmin Pan                                                                                                                          |  |  | CFO                    |  |  | 0                                                   |        |  | *                        | 
|Common Stock                 |  | Hui Chen                                                                                                                            |  |  | Director               |  |  | 0                                                   |        |  | *                        | 
|Common Stock                 |  | Hongling Li                                                                                                                         |  |  | Director               |  |  | 0                                                   |        |  | *                        | 
|Common Stock                 |  | Wei Wang                                                                                                                            |  |  | Director               |  |  | 62,750,000                                          | (4)(8) |  | 80.81%                   | 
|                             |  |                                                                                                                                     |  |  |                        |  |  |                                                     |        |  |                          | 
|Common Stock                 |  | All officers and directors as a group (5
      persons named above)                                                                 |  |  |                        |  |  | 68,784,695                                          |        |  | 88.58%                   | 
|                             |  |                                                                                                                                     |  |  |                        |  |  |                                                     |        |  |                          | 
|5% Security
      holders    | 
|Common Stock                 |  | Daykeen Investment Limited 19th Floor, Beverly
      House, Nos. 93- 107 Lockhart Road, Wanchai, Hong Kong                          |  |  |                        |  |  | 62,250,000                                          | (4)    |  | 80.16%                   | 
|Common Stock                 |  | Jolly Concept
      Management Limited 19th Floor, Beverly House, Nos. 93- 107 Lockhart Road, Wanchai, Hong Kong                    |  |  |                        |  |  | 5,134,000                                           |        |  | 6.61%                    | 
|                             |  |                                                                                                                                     |  |  |                        |  |  |                                                     |        |  |                          | 

|* | Less than 1%
|- | ------------
|  |             
|  | (1)         
|  |             
|  | (2)         
|  |             
|  | (3)         
|  |             
|  | (4)         
|  |             
|  | (5)         

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Changes in Control

There are no arrangements known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of the Company.

ITEM 13. 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 last 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.

- Our Chairman Chang-de Li is affiliated with Qiang Long. We entered into a contract, dated January 29, 2004, with Qiang Long, or the Qiang Long Contract, under which, as amended and supplemented from time to time, Qiang Long is obligated to purchase
7,000,000 shares of our common stock at an aggregate purchase price of US$29,400,000, or $4.20 per Share, US$653,795 of which was paid to us as a performance bond at the signing of the Qiang Long Contract, another US$632,911 of which
was paid to us in 2006 in exchange for 150,693 Shares, and the balance of US$28,113,294 of which was to be paid in full by June 30, 2007, for the remaining 6,849,307 Shares. On June 29, 2007, we entered into a letter agreement, or the Letter
Agreement, with Qiang Long, pursuant to which we acknowledged receipt of the balance of US$28,113,294 from Qiang Long as fulfillment of Qiang Longs investment obligation, and agreed to issue the remaining shares to Qiang Long within 15
business days after the completion of our 1-for-20 reverse split, which took place on October 16, 2007.
- 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.
- 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, 2008, the balance of the loan was $75,441.
- 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 80% shareholder. Wei Wang has controlling interests and exercises voting and investment power over shares of our common stock owned by China Cardinal and Daykeen Investment Limited. In
addition, Chang-de Li, our Chairman, was the controlling shareholder of Top Time until December, 2006 when 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 on
Form 8-K 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.

26

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Promoters and Certain Persons

We did not have any promoters at any time during the past five years.

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 Certificate 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 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed for each of the fiscal years ended December 31, 2008 and 2007 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-Q 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 $60,000, respectively.

Accounting Fees

The aggregate fees billed in each of the fiscal years ended December 31, 2008 and 2007 for assurance and related services by the principal accountant that are reasonably related to the performance of audit or review of our financial statements 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, 2008 and 2007 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, 2008 and 2007 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.

27

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Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our Board to assure that such services do not impair the auditors independence from us. In accordance with its
policies and procedures, our Board pre-approved the audit service performed by Bernstein & Pinchuk LLP for our consolidated financial statements as of and for the year ended December 31, 2008.







28

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES

|(a) | The following documents are filed as part of this
      report:
|--- | ---------------------------------------------------------------
|    |                                                                
|    | (1)                                                            
|    |                                                                

| |  | Report of Independent Registered Public Accounting Firm                     | F-2
| | - | --------------------------------------------------------------------------- | ---
| |  | Consolidated Balance Sheets                                                 | F-3
| |  | Consolidated Statements of Operations and Comprehensive Income
      (Loss) | F-4
| |  | Consolidated Statements of Cash Flows                                       | F-5
| |  | Consolidated Statements of Changes in Stockholders Equity
      (Deficit)  | F-6
| |  | Notes
      to Consolidated Financial Statements                            | F-7
| |   |                                                                             |    

| | (2) | Financial Statement Schedules: All Schedules are omitted
because the information called for is not applicable, is not required, or
because the financial information is set forth in the financial statements or
notes thereto.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                
| | (3) | Exhibits                                                                                                                                                                                                                       



Exhibits (including those incorporated by reference).

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]                               
|*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]                                                                                                                                                                

29

---



|Exhibit Number | Description                                                                                                                                                                                                                                                                                                                                                                           
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*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]                                                                                                                                                                                           
|*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]                                                                                                                                                           

30

---



|Exhibit Number | Description                                                                                                                                                                                                                                                                                                                                                       
|-------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*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]                                                                                                                            
|*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]

31

---



|Exhibit Number | Description                                                                                                                                                                                                                                                                                                                     
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*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]                                                                                                         
|*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.                                                                                                                                                                                                             
|32.1           | Certifications of Principal Executive Officer furnished
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.                                                                                                                                                   
|32.2           | Certifications of 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.                                                                                                                                                   

* Incorporated by reference as indicated.

32

---

SIGNATURES

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

| | CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED
| | -------------------------------------------------
| |                                                  
| | By: /s/ Jie Chen                                 
| | Jie Chen                                         
| | Chief Executive Officer                          
| |                                                  
| | Date: April 14, 2009                             

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

Each person whose signature appears below hereby authorizes Jie Chen and Xinmin Pan, or any of them, as attorneys-in-fact to sign on his behalf, individually, and in each capacity stated below, and to file all
amendments and/or supplements to this annual report on Form 10-K.

|SIGNATURE       |  | CAPACITY                             | DATE          
|--------------- |  | ------------------------------------ | --------------
|                |  |                                      |               
|                |  |                                      |               
|/s/Chang-de Li  |  | Chairman                             |               
|                |  |                                      | April 14, 2009
|Chang-de Li     |  |                                      |               
|                |  |                                      |               
|                |  |                                      |               
|/s/Jie Chen     |  | Chief Executive Officer and Director |               
|                |  |                                      | April 14, 2009
|Jie Chen        |  |                                      |               
|                |  |                                      |               
|                |  |                                      |               
|/s/Xinmin Pan   |  | Chief Financial Officer              |               
|                |  |                                      | April 14, 2009
|Xinmin Pan      |  |                                      |               
|                |  |                                      |               
|                |  |                                      |               
|/s/Hui Chen     |  | Director                             |               
|                |  |                                      | April 14, 2009
|Hui Chen        |  |                                      |               
|                |  |                                      |               
|                |  |                                      |               
|/s/Hongliang Li |  | Director                             |               
|                |  |                                      | April 14, 2009
|Hongliang Li    |  |                                      |               
|                |  |                                      |               
|                |  |                                      |               
|/s/Wei Wang     |  | Director                             |               
|                |  |                                      | April 14, 2009
|Wei Wang        |  |                                      |               



---

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]                                                                                                                                      



---

|               |                                                                                                                                                                                                                                                                                                                                                                   
|-------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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]                                                                                           
|*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]                                                                                                                                                



---

|               |                                                                                                                                                                                                               
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number | Description                                                                                                                                                                                                   
|*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.                                                                                           
|32.1           | Certifications of Principal Executive Officer furnished
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.                                 
|32.2           | Certifications of 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.                                 

* Incorporated by reference as indicated.







---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY) 
CONSOLIDATED FINANCIAL STATEMENTS 
DECEMBER 31, 2008 and 2007

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



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



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of China Longyi
Group International Holdings Limited

We have audited the accompanying consolidated balance sheets of
China Longyi Group International Holdings Limited, a development stage company
("the Company") as of December 31, 2008 and 2007, and the related statements of
operations and comprehensive income, stockholders' equity, and cash flows for
the years 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 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 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, 2008 and 2007, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.

/s/Bernstein & Pinchuk LLPNew
York, NY March 15, 2009

F-2

---



|CHINA LONGYI GROUP INTERNATIONAL HOLDINGS
      LIMITED                            |  
|---------------------------------------------------------------------------------- | -
|(A DEVELOPMENT STAGE COMPANY)                                                      |  
|                                                                                   |  
|CONSOLIDATED BALANCE SHEETS                                                        |  
|                                                                                   |  
|                                                                                   |  
|                                                                                   |  
|ASSETS                                                                             |  
|Current assets                                                                     |  
|Cash and
      cash equivalents                                                    | $
|Inventories                                                                        |  
|Other
      receivables                                                            |  
|Interest receivable                                                                |  
|Short
      term investment                                                        |  
|Deposits and prepayments                                                           |  
|Total current assets                                                               |  
|                                                                                   |  
|Due from shareholders                                                              |  
|Property, plant and equipment (net)                                                |  
|                                                                                   | $
|                                                                                   |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                               |  
|Current liabilities                                                                |  
|Accounts
      payable                                                             | $
|Accrued liabilities                                                                |  
|Due to
      directors                                                             |  
|Due to related party                                                               |  
|Other
      payables                                                               |  
|Total current liabilities                                                          |  
|                                                                                   |  
|Minority interest                                                                  |  
|                                                                                   |  
|Stockholders' equity                                                               |  
|Common stock: par value $.01; 200,000,000 shares authorized;                       |  
|77,655,862 shares in 2008 and 77,655,854 shares in 2007 issued and
    outstanding |  
|Additional paid-in capital                                                         |  
|Deficit accumulated
      during the development stage                             |  
|Accumulated other comprehensive income                                             |  
|Total stockholders' equity                                                         |  
|                                                                                   | $
|                                                                                   |  

See notes to consolidated financial statements

F-3

---

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 |  
|--------------------------------------------------------------- | - | ----------------------- | - | - | ---------------------- | -
|                                                                |   | 2008                    |   |   | 2007                   |  
|Revenues                                                        |   |                         |   |   |                        |  
|Sales                                                           | $ | 144,402                 |   | $ | 47,454                 |  
|Cost of sales                                                   |   | 97,849                  |   |   | 33,811                 |  
|Gross margin                                                    |   | 46,553                  |   |   | 13,643                 |  
|Operating expenses                                              |   |                         |   |   |                        |  
|General and administrative expenses                             |   | 2,486,510               |   |   | 1,314,595              |  
|Goodwill impairment loss                                        |   | -                       |   |   | -                      |  
|Write-off inventory and bus licenses                            |   | -                       |   |   | -                      |  
|Research and development costs                                  |   | -                       |   |   | 211                    |  
|                                                                |   | 2,486,510               |   |   | 1,314,806              |  
|Loss from operations                                            |   | (2,439,957              | ) |   | (1,301,163             | )
|Other income (expense)                                          |   |                         |   |   |                        |  
|Interest income                                                 |   | 93,631                  |   |   | 25,916                 |  
|Other income (expense)                                          |   | (37,192                 | ) |   | 34,483                 |  
|Transaction exchange gain                                       |   | 137,774                 |   |   | 881,643                |  
|Gain on asset disposal                                          |   | -                       |   |   | -                      |  
|Gain on debt settlement                                         |   |                         |   |   |                        |  
|Gain on disposal subsidiary                                     |   | -                       |   |   | 3,385,630              |  
|Interest expense                                                |   | -                       |   |   | -                      |  
|                                                                |   | 194,213                 |   |   | 4,327,672              |  
|Loss before income tax expense and minority
      interest      |   | (2,245,744              | ) |   | 3,026,509              |  
|Income tax expense                                              |   | -                       |   |   | -                      |  
|Loss before minority interest                                   |   | (2,245,744              | ) |   | 3,026,509              |  
|Minority interest                                               |   | 57,385                  |   |   | 68,376                 |  
|Net income (loss)                                               | $ | (2,188,359              | ) | $ | 3,094,885              |  
|Foreign currency translation adjustment                         |   | 155,945                 |   |   | 336,246                |  
|Comprehensive income (loss)                                     | $ | (2,032,414              | ) | $ | 3,431,131              |  
|                                                                |   |                         |   |   |                        |  
|Basic and diluted income (loss) per share                       | $ | (0.03                   | ) | $ | 0.19                   |  
|                                                                |   |                         |   |   |                        |  
|Weighted average number of shares outstanding-basic and diluted |   | 77,655,862              |   |   | 16,476,758             |  
|                                                                |   |                         |   |   |                        |  

See notes to consolidated financial statements

F-4

---

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                  |   | Year ended December 31, |   |   | Period from Jun 4, 1997 |  
|----------------------------------------------------------------- | - | ----------------------- | - | - | ----------------------- | -
|                                                                  |   | 2008                    |   |   | 2007                    |  
|Cash flows from operating activities:                             |   |                         |   |   |                         |  
|Net income (loss)                                                 | $ | (2,188,359              | ) | $ | 3,094,885               |  
|Adjustments to reconcile net loss to net cash used in operations: |   |                         |   |   |                         |  
|Depreciation and
      amortization                               |   | 42,386                  |   |   | 62,106                  |  
|Impairment loss on amortization                                   |   | -                       |   |   | -                       |  
|Minority interest                                                 |   | (57,385                 | ) |   | 242,109                 |  
|Write-off goodwill and inventory                                  |   | -                       |   |   | -                       |  
|Stock issued for
      services and debt                          |   | -                       |   |   | -                       |  
|(Gain) loss on disposition in
      subsidiary                    |   | -                       |   |   | (3,385,630              | )
|Research and
      development expenses recorded in organization  |   | -                       |   |   | -                       |  
|Reorganization expenses recorded in
      organization            |   | -                       |   |   | -                       |  
|Changes in operating
      liabilities and assets:                |   |                         |   |   |                         |  
|Other receivables                                                 |   | 1,766,181               |   |   | 3,754,027               |  
|Interest
      receivable                                         |   | (93,253                 | ) |   | 45,701                  |  
|Deposits and prepayment                                           |   | 95,874                  |   |   | 244,470                 |  
|Inventory                                                         |   | 34,088                  |   |   | (459,801                | )
|Other payables                                                    |   | (406,789                | ) |   | -                       |  
|Accounts
      payable and accrued liabilities                    |   | 103,099                 |   |   | (3,405,913              | )
|Net cash provided by
      (used in) operations                   |   | (704,158                | ) |   | 191,954                 |  
|                                                                  |   |                         |   |   |                         |  
|Cash flows from investing activities:                             |   |                         |   |   |                         |  
|Reorganization - net of cash acquired                             |   | -                       |   |   | -                       |  
|Purchase of subsidiaries                                          |   | -                       |   |   | -                       |  
|Redemption (purchase) of short term
      investment              |   | 547,136                 |   |   | 958,300                 |  
|Purchases of intangible assets                                    |   | -                       |   |   | -                       |  
|Purchases of property and equipment                               |   | (2,619                  | ) |   | (481,985                | )
|Purchases of construction in progress                             |   | (81,951                 | ) |   | (87,130                 | )
|Sales of property and equipment                                   |   | -                       |   |   | -                       |  
|Deposit on subsidiary                                             |   | -                       |   |   | -                       |  
|Net cash
      provided by (used in) investing activities         |   | 462,566                 |   |   | 389,185                 |  
|                                                                  |   |                         |   |   |                         |  
|Cash flows from financing activities:                             |   |                         |   |   |                         |  
|Addition of short term loans                                      |   | -                       |   |   | -                       |  
|Collection from shareholders                                      |   | 377,494                 |   |   | -                       |  
|Payments to stockholders                                          |   | -                       |   |   | (903,769                | )
|Proceeds from issuance of stock                                   |   | -                       |   |   | 11,310                  |  
|Proceeds from convertible promissory note                         |   | -                       |   |   | -                       |  
|Dividends paid                                                    |   | -                       |   |   | -                       |  
|Proceeds to notes payable                                         |   | -                       |   |   | -                       |  
|Payments on notes payable                                         |   | -                       |   |   | -                       |  
|Net cash provided by
      (used in) financing activities         |   | 377,494                 |   |   | (892,459                | )
|Effect of foreign exchange rate
      fluctuation                 |   | (149,142                | ) |   | 336,246                 |  
|Increase (decrease) in cash and cash equivalents                  |   | (13,240                 | ) |   | 24,925                  |  
|Cash and cash equivalents, beginning
      of period              |   | 64,547                  |   |   | 39,622                  |  
|Cash and cash equivalents, end of period                          | $ | 51,307                  |   | $ | 64,547                  |  
|                                                                  |   |                         |   |   |                         |  
|Supplemental disclosures of cash flow information:                |   |                         |   |   |                         |  
|Cash paid for interest                                            | $ | -                       |   | $ | -                       |  
|Cash paid for income taxes                                        | $ | -                       |   | $ | -                       |  

See notes to consolidated financial statements

F-5



---



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     | )
|                                                           |   |                   |   |   |                |   |   |                |   |   |            |   |   |              |   |   |               |           |   |                |   |   |             |   |   |             |   |   |             |   |  |   |           |   |                |  
|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        |  
|                                                           |   |                   |   |   |                |   |   |                |   |   |            |   |   |              |   |   |               |           |   |                |   |   |             |   |   |             |   |   |             |   |  |   |           |   |                |  
|Shares issued at $.14 for
      debt                       |   |                   |   |   |                |   |   | 5,770,000      |   |   | 57,700     |   |   |              |   |   |               |           |   | 772,400        |   |   |             |   |   |             |   |   |             |   |  |   |           |   | 830,100        |  
|Net loss
      for the year                                |   |                   |   |   |                |   |   |                |   |   |            |   |   |              |   |   |               |           |   |                |   |   | (1,170,770  | ) |   |             |   |   |             |   |  |   |           |   | (1,170,770     | )
|Foreign currency
      translation adjustments             |   | -                 |   |   | -              |   |   | -              |   |   | -          |   |   | -            |   |   | -             |           |   | -              |   |   | -           |   |   | (230,745    | ) |   | -           |   |  | - |           |   | (230,745       | )
|Balance December 31, 2005                                  |   | -                 |   |   | -              |   |   | 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      |   |   | 30,139     |   |   | (3,013,863   | ) |   | (632,911      | )         |   | 602,772        |   |   |             |   |   |             |   |   | 632,911     |   |  |   |           |   | 632,911        |  
|Net loss for the year                                      |   |                   |   |   |                |   |   |                |   |   |            |   |   |              |   |   |               |           |   |                |   |   | (345,621    | ) |   |             |   |   |             |   |  |   |           |   | (345,621       | )
|Foreign
      currency translation adjustments             |   | -                 |   |   | -              |   |   | -              |   |   | -          |   |   | -            |   |   | -             |           |   | -              |   |   | -           |   |   | (25,461     | ) |   | -           |   |  | - |           |   | (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     |  
|Shares subscribed for
      exchange                       |   |                   |   |   |                |   |   | 62,250,000     |   |   | 622,500    |   |   |              |   |   |               |           |   | 24,277,500     |   |   |             |   |   |             |   |   |             |   |  |   |           |   | 24,900,000     |  
|Shares issued at December
      19,2007                    |   |                   |   |   |                |   |   | 1,131,054      |   |   | 11,310     |   |   |              |   |   |               |           |   |                |   |   |             |   |   |             |   |   |             |   |  |   |           |   | 11,310         |  
|Net loss
      for the year                                |   |                   |   |   |                |   |   |                |   |   |            |   |   |              |   |   |               |           |   |                |   |   | 3,094,885   |   |   |             |   |   |             |   |  |   |           |   | 3,094,885      |  
|Foreign currency
      translation adjustment              |   |                   |   |   | -              |   |   | -              |   |   | -          |   |   | -            |   |   | -             |           |   | -              |   |   | -           |   |   | 336,246     |   |   | -           |   |  |   |           |   | 336,246        |  
|Related
      party Acquisition Premium                    |   |                   |   |   |                |   |   |                |   |   |            |   |   |              |   |   |               |           |   | (53,455,161.77 | ) |   |             |   |   |             |   |   |             |   |  |   |           |   | (53,455,161.77 | )
|Balance December 31, 2007                                  |   | -                 |   |   | -              |   |   | 77,655,854     |   |   | 776,558    |   |   | -            |   |   | -             |           |   | 28,877,540     |   |   | (26,070,415 | ) |   | 80,040      |   |   | -           |   |  | - |           |   | 3,663,723      |  
|                                                           |   |                   |   |   |                |   |   |                |   |   |            |   |   |              |   |   |               |           |   |                |   |   |             |   |   |             |   |   |             |   |  |   |           |   |                |  
|Net loss for the year                                      |   | -                 |   |   | -              |   |   | -              |   |   | -          |   |   | -            |   |   | -             |           |   | -              |   |   | (2,188,359  | ) |   | -           |   |   | -           |   |  | - |           |   | (2,188,359     | )
|Shares
    issued to Cede & Co. on January 4, 2008         |   | -                 |   |   | -              |   |   | 8              |   |   | -          |   |   | -            |   |   | -             |           |   | -              |   |   | -           |   |   | -           |   |   | -           |   |  | - |           |   | -              |  
|Foreign
      currency translation adjustment              |   |                   |   |   | -              |   |   | -              |   |   | -          |   |   | -            |   |   | -             |           |   | -              |   |   | -           |   |   | 155,945     |   |   | -           |   |  | - |           |   | 155,945        |  
|Balance December 31, 2008                                  | $ | -                 |   | $ | -              |   | $ | 77,655,862     |   | $ | 776,558    |   | $ | -            |   | $ | -             |           | $ | 28,877,540     |   | $ | (28,258,774 | ) | $ | 235,985     |   | $ | - $         |   |  | - |           | $ | 1,631,309      |  

See notes to consolidated financial statements

F-6

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of American (US GAAP) for financial information and with the instructions to Form 10-K
and Item 310 of Regulation S-B. According, they do not include all of the information and footnotes required by US GAAP for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The accounts of China LongYi Group International Holdings Limited and all of its subsidiaries are included in the consolidated financial statements. All significant intercompany
accounts and transactions have been eliminated in consolidation. The consolidated operating results for the twelve months ended December 31, 2008.

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 198,509,866 to 9,925,493.

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 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 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-7

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

1.

BUSINESS DESCRIPTION AND ORGANIZATION

NAME CHANGE AND REORGANIZATION - Continued

Through 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, in 2007 the company recognized gain of $3,385,630
on the sale of the subsidiaries.

Original investment:Top Team
    
    RMBDue from a Subsidiary - Eagle Bus
    
    11,067,594Investment in Subsidiary - Eagle Bus
      Development Ltd
    
    1Due from a Subsidiary - Good View
    
    5,086,501Investment in Subsidiary - Good View
    
    1Sub total:
    
    16,154,097Top Time Sub total(US$):
    
    2,070,666China Longyi Group
    
    US$Due from Euromax International Investments
      Limited
    
    771,646Investment in Subsidiary -
      Euromax
    
    1Sub total:
    
    771,647Total Original investment
    
    2,842,313Net gain (Loss) as of 12/31,2006
    
    US$TopTeam
    
    1Euromax
    
    (767,207
    )Eagle Bus
    
    (1,568,274
    )Good View Bus
    
    (649,400
    )GZ CityViewBus
    
    (6,309,062
    )Cardinal
    
    (84,987
    )Adjustment
    
    4,017,730Subtotal
    
    (5,361,199
    )Net gain (loss) from 1/1,2007 to date of subsidiary
      sold
    
    US$Euromax
    
    (2,949
    )Eagle Bus
    
    (4,308
    )Good View Bus
    
    (4,083
    )GZ CityViewBus
    
    (161,383
    )Cardinal
    
    (17,773
    )Subtotal
    
    (190,497
    )Purchase price
    
    US$TOPTEAM
    
    155,100CHINA LONGYI GROUP
    
    521,148Subtotal
    
    676,248Gain (Loss) on the sale of the
      subsidiaries (US$)
    
    3,385,630


F-8

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

1.

BUSINESS DESCRIPTION AND ORGANIZATION - Continued

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 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. The equity portion of the purchase price amounts to a total of 62,250,000 shares of our common stock.

On July 27, 2007, Company instructed prior Transfer Agent to issue the 50,000,000 shares of common stock to 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-9

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY) 
Notes to consolidated financial statements 
(Audited)

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 or loss 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-10

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED 
(A DEVELOPMENT STAGE COMPANY) 
Notes to consolidated financial statements 
(Audited)

2.

SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES - Continued

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:

Estimated Useful
      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.

F-11

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

2.

SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES - Continued

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.

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 loss carry forwards allowed under the
Hong Kong and China Governments tax system.

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, 2008 and 2007 were $0 and $211 respectively and
a cumulative amount of $8,850,928 for the period from June 4, 1997 (inception)
to December 31, 2008.

RELATED PARTY TRANSACTIONS AND STOCKHOLDERS LOAN

The caption Due to Related Party 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 on a month to month basis. Rent expense under this arrangement was
$31,376 in 2008 $28,655 in 2007.

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, 2008.

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

2008
    
    
    2007NUMERATOR FOR BASIC AND DILUTED LPSNet income (loss) to
      common stockholders
    $
    (2,188,359
    )
    $
    3,094,885DENOMINATOR FOR BASIC AND DILUTED LPSWeighted
      average shares of common stock outstanding
    
    77,655,862
    
    
    16,476,758EPS (LPS ) - Basic and diluted
    $
    (0.03
    )
    $
    0.19


There were no potentially dilutive securities outstanding at
December 31, 2008 or 2007.

F-12

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
      Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | 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, 2008 and 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F-13

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

3.

BUSINESS
ACQUISITIONS - Continued

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

Accounts receivable
    
    4,227Inventories
    
    1,714,957Others receivable
    
    523,857Property, plant and equipment
    
    1,295,170Intangible  28 bus licenses
    
    1,018,125Bank 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
    
    1,221,928Goodwill (cost in excess of FMV)
    
    468,546Total 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.

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.

F-14

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

3.

BUSINESS
ACQUISITIONS - Continued

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

Minghua Hong
    
    
    Minghua
    
    
    MinghuaKong
    
    
    Science
    
    
    ChinaUS$
    
    
    US$
    
    
    US$
    
    
    TotalInventories
    $
    -
    
    $
    -
    
    $
    304
    
    $
    304Prepaid expenses
    
    -
    
    
    -
    
    
    66,412
    
    
    66,412Other fixed assets
    
    -
    
    
    -
    
    
    450,424
    
    
    450,424Accumulated depreciation
    
    -
    
    
    -
    
    
    (401,208
    )
    
    (401,208
    )Accounts payable
    
    -
    
    
    -
    
    
    (3,274
    )
    
    (3,274
    )Accrued expenses
    
    (70,902
    )
    
    (4,486
    )
    
    (429,353
    )
    
    (504,741
    )Due to directors
    
    -
    
    
    -
    
    
    (92,779
    )
    
    (92,779
    )Others payable
    
    -
    
    
    -
    
    
    (51,591
    )
    
    (51,591
    )Short-term loan
    
    -
    
    
    -
    
    
    (171,372
    )
    
    (171,372
    )(70,902
    )
    
    (4,486
    )
    
    (632,437
    )
    
    (707,825
    )


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.

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. 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' EQUITYISSUANCE OF COMMON
STOCK

In February 2002, the Company issued 372,807 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.

F-15

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

4.

STOCKHOLDERS' EQUITY 
ISSUANCE OF COMMON STOCK - Continued

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

In November 2002, 1,100,000 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 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 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 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 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 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 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 shares of common stock to Qiang Long.

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.

In January 2004 the Company issued 24,036,269 shares of its common stock to Kingsrich Development Limited in satisfaction of debt in accordance with a prior agreement.

On January 29, 2004 the Company issued 28,210,000 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 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 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.

F-16

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

|4. | STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | ISSUANCE OF COMMON STOCK - Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | 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 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 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):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

CAPITALIZATION STRUCTURE OF THE COMPANY AT VARIOUS
TIMES

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


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.

F-17

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CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

|4. | STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | ISSUANCE OF COMMON STOCK - Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | 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 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 from 3,013,862 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 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | 2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On July 27, 2007, the Company instructed prior Transfer
      Agent to issue the 50,000,000 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On January 4, 2008, there were 8 shares issued to Cede &
      Co.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company's capital structure as of December 31, 2008
      and 2007 was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



Common stock  par value $0.01
    
    Authorized
    
    
    Issued and outstandingDecember 31, 2008
    
    200,000,000
    
    
    77,655,862December 31, 2007
    
    200,000,000
    
    
    77,655,854


F-18

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CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

|4. | STOCKHOLDERS' EQUITY  Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | 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 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 restricted shares under the 2001
      Plan in any one fiscal year.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | 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 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 options
      were forfeited on May 10, 2004 when the chairman resigned.                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|5. | INVESTMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Company has a one year deposit certificate with an
      investment company in the PRC. The certificate earns interest at 5.5% to
      8% per annum. The principal amount for the years ended December 31, 2008
      and 2007 was $1,035,686 and $1,489,472, and was recorded on the balance
      sheet as a short term investment.                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|6. | INVENTORIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Inventories at December 31, 2008 and 2007 consisted
      of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



2008
    
    
    2007Materials
    $
    59,428
    
    $
    81,759Low value consumables
    
    56,086
    
    
    12,430Work in progress
    
    262,496
    
    
    248,943Finished goods
    
    78,756
    
    
    116,669Subtotal
    
    456,766
    
    
    459,801


F-19

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CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

7.

PROPERTY AND
EQUIPMENT

Property and equipment at cost consisted of:

2008
    
    
    2007Transportation equipment
    $
    97,950
    
    $
    91,648Furniture and office equipment
    
    11,066
    
    
    34,654Production equipment
    
    225,952
    
    
    207,570Buildings and improvements
    
    182,825
    
    
    148,113Construction in progress
    
    176,433
    
    
    87,130Subtotal
    
    694,226
    
    
    569,115Less: accumulated depreciation
    
    (76,204
    )
    
    (30,984
    )Net property and equipment
    $
    618,022
    
    $
    538,131


Depreciation expense for the years ended December 31, 2008 and
2007 was $42,386 and $53,472, respectively.

8.

DUE TO
DIRECTORS

Amount due to directors consisted of:

2008
    
    
    2007Due to a Director - Chen Jie
    $
    107,496
    
    $
    106,794Due to a Director - Li Changde
    
    3,884
    
    
    3,859Due to a Director - Wang Wei
    
    9,212
    
    
    9,151Total
    $
    120,592
    
    $
    119,804


9.

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

10.

COMMITMENTS AND
CONTINGENCIES

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.

F-20

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

|11. | 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.                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|12. | NEW ACCOUNTING PRONOUNCEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | 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
ownership 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 Derivative 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | SFAS NoSOP 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.

F-21

---

CHINA LONGYI GROUP INTERNATIONAL HOLDINGS LIMITED (A
DEVELOPMENT STAGE COMPANY) Notes to consolidated financial statements
(Audited)

12.

NEW ACCOUNTING PRONOUNCEMENTS - Continued

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.

F-22

---