UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(mark one)

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

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

Commission file number: 000-27129

DUOYUAN PRINTING, INC.

(fka ASIAN FINANCIAL, INC.)
(Exact name of registrant as specified in its charter)

Wyoming		91-1922225
(State or other jurisdiction of incorporation or		(I.R.S. Employer
organization)		Identification No.)

No. 3 Jinyuan Road
Daxing District Industrial Development Zone
Beijing, People’s Republic of China
102600
(Address of principal executive offices)

+86 10 6021 2222
(Registrant’s telephone number, including area code)

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

Title of class		Name of each exchange on which registered

None.

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

Common Stock, par value
(Title of Class)

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

Yes o       No þ

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

Yes o       No þ

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

Yes þ       No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o       No o

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

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

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

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

Yes o       No þ

State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

Not applicable.

There were 25,000,050 shares of the registrant’s common shares issued and outstanding as of September 14, 2009.

 

 

Explanatory Note

     We are filing this Amendment No. 1 on Form 10-K/A (the “Amended 10-K”) to our Annual Report on Form 10-K for the fiscal year ended June 30, 2009, initially filed with the Securities and Exchange Commission (the “SEC”) on September 14, 2009 (the “Original 10-K”), in response to certain comments received from the staff of the SEC issued in connection with the staff’s review of a Registration Statement we filed on Form S-1, as amended (Reg. No. 333-161813). We are filing this Amended 10-K to supplement the disclosure set forth in “Note 16—Subsequent events” to the audited financial statements for the fiscal year ended June 30, 2009 in response to the staff’s comments, thereby conforming the disclosure in Note 16 to that of the Registration Statement on Form S-1, as amended.

     Except as noted above, none of the items revised herein nor any other item in the Original 10-K have been updated to reflect events, results or developments concerning our business, financial condition or results of operations that occurred subsequent to September 14, 2009, the filing date of the Original 10-K, or to modify or update those disclosures affected by subsequent events. Such events include, among others, the events described in Duoyuan Printing, Inc.’s current reports on Form 8-K and quarterly reports on Form 10-Q that were filed after the date of the Original 10-K.

     Notwithstanding that this Amended 10-K has been revised, where appropriate, to conform to the disclosure set forth in the Registration Statement on Form S-1, as amended, readers should be advised that this Amended 10-K continues to describe conditions as of the date of the Original 10-K.

     Because Duoyuan Printing, Inc. is filing this Amended 10-K, a currently dated consent from Moore Stephens Wurth Frazer and Torbet, LLP has been provided, which is required to be filed by the SEC pursuant to Item 601(b)(23) of Regulation S-K.

     Pursuant to the rules of the SEC, Item 15 of Part IV of the Original 10-K has been amended to contain currently dated certifications from our chief executive officer and chief financial officer, which certifications are filed herewith as Exhibits 31.1, 31.2, and 32.1, respectively.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) The following documents are filed as part of this Amended 10-K:

(1) Financial Statements. The financial statements required to be filed as part of this Annual Report and the Report of Independent Registered Public Accounting Firm are included beginning on page F-1.

(2) Financial Statement Schedules. All Schedules are either included in the Notes to Consolidated Financial Statements or are omitted because they are not applicable.

(3) Exhibits (numbered in accordance with Item 601 of Regulation S-K). The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report and such Exhibit Index is incorporated herein by reference. On the Exhibit Index, a “†” identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report, and such listing is incorporated herein by reference.

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No.1 on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.

EXHIBIT INDEX

Number		Description
2.1		Equity Transfer Agreement dated August 31, 2006 between Asian Financial, Inc. and Duoyuan Investments Limited (Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K (File No. 000-27129) filed with the Securities and Exchange Commission on September 6, 2006).
3.1		Articles of Incorporation, as amended of Asian Financial, Inc. (Incorporated by reference to Exhibit 3.1 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 5, 2007).
3.2		Amended and Restated Bylaws of Asian Financial, Inc. (Incorporated by reference to Exhibit 3.2 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on February 11, 2008).
4.1		Securities Purchase Agreement dated October 24, 2006 between Asian Financial, Inc. and certain Investors indentified therein (Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 5, 2007).
4.2		Amendment to Securities Purchase Agreement dated November 28, 2007 between Asian Financial, Inc. and certain Investors identified therein (Incorporated by reference to Exhibit 4.4 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on February 11, 2008).
4.3		Registration Rights Agreement, dated October 24, 2006, between Asian Financial, Inc. and certain Investors identified therein (Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K (File No. 000-27129) filed with the Securities and Exchange Commission on October 25, 2006).
4.4		Warrant issued to Roth Capital Partners, LLC dated November 2, 2006 (Incorporated by reference to Exhibit 4.2 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on February 11, 2008).
4.5		Form of Warrant dated December 31, 2007 issued to certain investors party to the Securities Purchase Agreement dated October 24, 2006 (filed as exhibit 4.1 hereto) in satisfaction of related party penalties in relation thereto (Incorporated by reference to Exhibit 4.3 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on February 11, 2008)
4.6		Form of Certificate representing the common stock, par value $0.001, of Asian Financial, Inc. (Incorporated by reference to Exhibit 4.5 to Annual Report on Form 10-K (File No. 000-27129) filed with the Securities and Exchange Commission on September 26, 2008).
4.7		Waiver Agreement dated November 18, 2008 (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-27129) filed with the Securities and Exchange Commission on November 19, 2008).
4.8		Investor Warrants Proposal Letter, dated September 19, 2007 (Incorporated by reference to Exhibit 4.8 to Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 10, 2009).
4.9		Form of Investor Warrants Proposal Supplemental Letter, dated October 26, 2007 (Incorporated by reference to Exhibit 4.9 to Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 10, 2009).
4.10		Waiver Agreement, dated as of August 24, 2009, among Asian Financial, Inc. and the Investors (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-27129) filed with the Securities and Exchange Commission on August 31, 2009).
10.1		Lease Agreement between Duoyuan Clean Water Technology Industries (China) Co., Ltd. and Duoyuan Digital Printing Technology Industry (China) Co. Ltd. (Incorporated by reference to Exhibit 10.7 to Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on March 14, 2008).
10.2		English Summary of Form of Employment Agreement (Incorporated by reference to Exhibit 10.8 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on February 11, 2008). †
10.3		Share Transfer Agreement, dated October 16, 2005, between Beijing Huiyuan Duoyuan Digital Printing Technology Research Institute and Duoyuan Digital Printing Technology Industry (China) Co., Ltd. (Incorporated by reference to Exhibit 10.9 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on February 11, 2008).
10.4		Property Lease Agreement, dated December 25, 2002 between Duoyuan Water Environmental Protection Technology Industry (China) Co. Ltd. And Duoyuan Digital Printing Technology Industry (China) Co. Ltd. (Incorporated by reference to Exhibit 10.12 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 5, 2007).
10.5		Property Lease Agreement, dated June 27, 2008, between Duoyuan Information Terminal Manufacture (Langfang) Co., Ltd. and Duoyuan Digital Press Technology Industries (China) Co., Ltd. (Incorporated by reference to Exhibit 10.4 to

Number		Description
		Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-141507) filed with Securities and Exchange Commission on March 27, 2009).
10.6		Letter of Trademark Use Authorization dated June 30, 2001, from Duoyuan Water Environmental Protection Technology Industry (China) Co., Ltd. to Duoyuan Technology Industry (China) Co., Ltd. (Incorporated by reference to Exhibit 10.13 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 5, 2007).
10.7		Letter of Patent Use Authorization, dated June 30, 2001, from Beijing Huiyuan Duoyuan Digital Printing Technology Research Institute to Duoyuan Digital Technology Industry (China) Co. Ltd. (Incorporated by reference to Exhibit 10.14 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 5, 2007).
10.8		Framework Agreement on Cooperation in Research and Development of Stability Technology for Offset Printing Machines and New Technologies, dated May 16, 2005, between Duoyuan Digital Printing Technology Industry (China) Co. Ltd and Beijing Aeronautic Manufacturing Technology Research Institute (Incorporated by reference to Exhibit 10.15 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 5, 2007).
10.9		Offset Printing Machine Assembly Line Design Research and Development Contract, dated March 11, 2002, between Duoyuan Digital Printing Technology Industry (China) Co. Ltd and Beijing Printing Machinery Research (Incorporated by reference to Exhibit 10.17 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 5, 2007).
10.10		Assignment of Patent Agreement dated December 26, 2002 between Beijing Huiyuan Duoyuan Digital Technology Institute and Duoyuan Digital Printing Technology Industries (China) Co. Ltd. (Incorporated by reference to Exhibit 10.25 to Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on March 14, 2008).
10.11		Registered Trademark Usage License Agreement, dated October 2008, between Duoyuan Digital Press Technology Industries (China) Co., Ltd. and Duoyuan Investments Limited. (Incorporated by reference to Exhibit 10.8 to Amendment No. 7 to Registration Statement on Form S-1 (File No. 333-141507) filed with Securities and Exchange Commission on March 27, 2009).
10.12		Convertible Promissory Note covering the fiscal years ended December 31, 1995 through 1999 (Incorporated by reference to Exhibit 10.18 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on February 11, 2008).
10.13		Convertible Promissory Note covering the fiscal years ended December 31, 2003 through 2004 (Incorporated by reference to Exhibit 10.19 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on February 11, 2008).
10.14		Employment Agreement between Asian Financial, Inc. and Gene Michael Bennett dated as of July 18, 2007 (Incorporated by reference to Exhibit 10.22 to Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on March 14, 2008). †
10.15		Separation Agreement and Release of All Claims effective December 20, 2007 between Asian Financial, Inc. and Gene Michael Bennett (Incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K (File No. 000-27129) filed with the Securities and Exchange Commission on December 27, 2007). †
10.16		Maximum Amount Mortgage Contract dated July 28, 2007 among Agriculture Bank of China Chongwen Sub-branch, Duoyuan Digital Printing Technology (China) Co. Ltd., and Hunan Duoyuan Printing Machine Co. Ltd. (Incorporated by reference to Exhibit 10.21 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on February 11, 2008).
10.17		Employment Agreement with William Milewski dated as of March 1, 2008 (Incorporated by reference to Exhibit 10.23 to Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on March 14, 2008). †
10.18		Termination of Letter of Patent Use Authorization, from Beijing Huiyuan Duoyuan Digital Printing Technology Research Institute to Duoyuan Digital Technology Industry (China) Co. Ltd. (see Exhibit 10.11) (Incorporated by reference to Exhibit 10.24 to Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on March 14, 2008).
10.19		Separation Agreement and Release of All Claims effective May 21, 2008 between Asian Financial, Inc. and William Edward Milewski (Incorporated by reference Exhibit 10.1 to the Current Report on Form 8-K (File No. 000-27129) filed with the Securities and Exchange Commission on May 27, 2008). †
10.20		Employment Agreement with William D. Suh dated as of September 30, 2008 (Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-27129) filed with the Securities and Exchange Commission on October 1, 2008). †
10.21		English translation of Employment Agreement, dated as of December 26, 2007, between Duoyuan Digital Press Technology Industries (China) Co., Ltd. and Wenhua Guo (Incorporated by reference to Exhibit 10.18 to Amendment No. 8 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on June 12, 2009). †
10.22		English translation of Employment Agreement, dated as of December 26, 2007, between Duoyuan Digital Press Technology Industries (China) Co., Ltd. and Baiyun Sun (Incorporated by reference to Exhibit 10.19 to Amendment No.

Number		Description
		8 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on June 12, 2009). †
10.23		English translation of Employment Agreement, dated as of December 26, 2007, between Duoyuan Digital Press Technology Industries (China) Co., Ltd. and Xiqing Diao (Incorporated by reference to Exhibit 10.20 to Amendment No. 8 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on June 12, 2009). †
10.24		English translation of Employment Agreement, dated as of December 26, 2007, between Duoyuan Digital Press Technology Industries (China) Co., Ltd. and Wenzhong Liu (Incorporated by reference to Exhibit 10.21 to Amendment No. 8 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on June 12, 2009). †
10.25		English translation of Employment Agreement, dated as of December 26, 2007, between Duoyuan Digital Press Technology Industries (China) Co., Ltd. and Yubao Wei (Incorporated by reference to Exhibit 10.22 to Amendment No. 8 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on June 12, 2009). †
10.26		English Translation of Loan Agreement, dated as of July 4, 2008, between Duoyuan Digital Press Technology Industries (China) Co. Ltd. and Agricultural Bank of China (Incorporated by reference to Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 10, 2009).
10.27		English Translation of Loan Agreement, dated as of July 11, 2008, between Duoyuan Digital Press Technology Industries (China) Co. Ltd. and Agricultural Bank of China (Incorporated by reference to Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 10, 2009).
10.28		English Translation of Loan Agreement, dated as of July 18, 2008, between Duoyuan Digital Press Technology Industries (China) Co. Ltd. and Agricultural Bank of China (Incorporated by reference to Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 10, 2009).
10.29		English Translation of Loan Agreement, dated as of July 25, 2008, between Duoyuan Digital Press Technology Industries (China) Co. Ltd. and Agricultural Bank of China (Incorporated by reference to Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 10, 2009).
10.30		English Translation of Loan Agreement, dated as of March 13, 2009, between Duoyuan Digital Press Technology Industries (China) Co. Ltd. and Agricultural Bank of China (Incorporated by reference to Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-141507) filed with the Securities and Exchange Commission on July 10, 2009).
14.1		Code of Business Conduct and Ethics of Asian Financial, Inc. (Incorporated by reference to Exhibit 14.1 to Annual Report on Form 10-K (File No. 000-27129) filed with the Securities and Exchange Commission on September 14, 2009).
21.1		List of Subsidiaries (Incorporated by reference to Exhibit 21.1 to Annual Report on Form 10-K (File No. 000-27129) filed with the Securities and Exchange Commission on September 14, 2009).
23.1		Consent of Moore Stephens Wurth Frazer and Torbet, LLP.*
31.1		Chief Executive Officer Certification required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.*
31.2		Chief Financial Officer Certification required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.*
32.1		Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002.*

ASIAN FINANCIAL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Contents		Page
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Balance Sheets as of June 30, 2009 and 2008			F-3
Consolidated Statements of Income and Other Comprehensive Income for the Years Ended June 30, 2009, 2008 and 2007			F-4
Consolidated Statements of Shareholders’ Equity for the Years Ended June 30, 2009, 2008 and 2007			F-5
Consolidated Statements of Cash Flows for the Years Ended June 30, 2009, 2008 and 2007			F-6
Notes to Consolidated Financial Statements, June 30, 2009			F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Asian Financial, Inc. and Subsidiaries

     We have audited the accompanying consolidated balance sheets of Asian Financial, Inc. and subsidiaries as of June 30, 2009 and 2008, and the related consolidated statements of income and other comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2009. Asian Financial, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Asian Financial, Inc. and subsidiaries as of June 30, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended June 30, 2009 in conformity with accounting principles generally accepted in the United States of America.

/s/ Moore Stephens Wurth Frazer and Torbet, LLP

Brea, California
September 2, 2009

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2009 AND 2008

		2009				2008
ASSETS
CURRENT ASSETS:
Cash		$	31,044,070			$	14,199,700
Accounts receivable, net of allowance for doubtful accounts of $1,401,689 and $1,178,328 as of June 30, 2009 and 2008, respectively			37,259,616				33,184,833
Inventories			25,883,242				23,950,551
Other receivables			26,912				682,084
Total current assets			94,213,840				72,017,168
PLANT AND EQUIPMENT, net			43,123,153				34,130,651
OTHER ASSETS:
Intangible assets, net			3,939,476				4,003,128
Advances on equipment purchases			7,274,677				2,753,610
Total other assets			11,214,153				6,756,738
Total assets		$	148,551,146			$	112,904,557
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Lines of credit		$	14,357,000			$	11,380,200
Accounts payable			756,116				1,489,255
Other liabilities			2,251,419				1,858,112
Taxes payable			1,512,727				1,702,986
Total current liabilities			18,877,262				16,430,553
DERIVATIVE INSTRUMENT LIABILITIES			1,180,477				1,374,824
MINORITY INTEREST			1,761,712				1,292,843
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Preferred shares; $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding as of June 30, 2009 and 2008			—				—
Common shares; $0.001 par value; 100,000,000 shares authorized; 25,000,050 shares issued and outstanding as of June 30, 2009 and 2008			25,000				25,000
Additional paid-in capital			27,263,040				27,263,040
Statutory reserves			9,428,573				6,000,090
Retained earnings			79,226,497				50,058,176
Accumulated other comprehensive income			10,788,585				10,460,031
Total shareholders’ equity			126,731,695				93,806,337
Total liabilities and shareholders’ equity		$	148,551,146			$	112,904,557

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

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED JUNE 30, 2009, 2008 AND 2007

		2009				2008				2007
REVENUE, net		$	106,590,583			$	89,627,677			$	67,811,867
COST OF REVENUE			50,334,043				44,461,903				37,693,679
GROSS PROFIT			56,256,540				45,165,774				30,118,188
RESEARCH AND DEVELOPMENT EXPENSES			1,768,050				1,683,304				1,045,543
SELLING EXPENSES			9,725,635				8,704,958				7,826,958
GENERAL AND ADMINISTRATIVE EXPENSES			4,473,655				4,472,196				3,078,851
INCOME FROM OPERATIONS			40,289,200				30,305,316				18,166,836
LIQUIDATED DAMAGES, net of settlement			—				235,492				(2,119,428	)
CHANGE IN FAIR VALUE OF DERIVATIVE INSTRUMENTS			194,347				73,112				—
OTHER INCOME (EXPENSE), net
Non-operating (expenses)			(956,936	)			—				—
Interest expense			(1,188,111	)			(729,934	)			(742,083	)
Interest income and other income			175,781				194,878				721,349
Other expense, net			(1,969,266	)			(535,056	)			(20,734	)
INCOME BEFORE MINORITY INTEREST AND PROVISION FOR INCOME TAXES			38,514,281				30,078,864				16,026,674
MINORITY INTEREST			463,553				381,633				240,584
INCOME BEFORE PROVISION FOR INCOME TAXES			38,050,728				29,697,231				15,786,090
PROVISION FOR INCOME TAXES			5,453,924				3,237,707				1,806,943
NET INCOME			32,596,804				26,459,524				13,979,147
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain			328,554				8,199,861				1,834,313
COMPREHENSIVE INCOME		$	32,925,358			$	34,659,385			$	15,813,460
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES			25,000,050				25,000,050				23,041,021
BASIC AND DILUTED EARNING PER SHARE		$	1.30			$	1.06			$	0.61

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

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED JUNE 30, 2009, 2008 AND 2007

																						Accumulated
		Common Shares								Additional				Retained earnings								other
		Number of								paid-in				Statutory								comprehensive
		shares				Amount				capital				reserves				Unrestricted				income				Total
BALANCE, June 30, 2006			17,562,388			$	17,562			$	5,992,339			$	1,871,198			$	13,748,397			$	425,857			$	22,055,353
Shares due to reorganization on August 31, 2006			1,305,040				1,305				(1,305	)															—
Shares issued for cash, $1.43 per share			6,132,622				6,133				21,272,006																21,278,139
Net income																			13,979,147								13,979,147
Adjustment to statutory reserves															1,411,403				(1,411,403	)							—
Foreign currency translation adjustments																							1,834,313				1,834,313
BALANCE, June 30, 2007			25,000,050			$	25,000			$	27,263,040			$	3,282,601			$	26,316,141			$	2,260,170			$	59,146,952
Net income																			26,459,524								26,459,524
Adjustment to statutory reserves															2,717,489				(2,717,489	)							—
Foreign currency translation adjustments																							8,199,861				8,199,861
BALANCE, June 30, 2008			25,000,050			$	25,000			$	27,263,040			$	6,000,090			$	50,058,176			$	10,460,031			$	93,806,337
Net income																			32,596,804								32,596,804
Adjustment to statutory reserves															3,428,483				(3,428,483	)							—
Foreign currency translation adjustments																							328,554				328,554
BALANCE, June 30, 2009			25,000,050			$	25,000			$	27,263,040			$	9,428,573			$	79,226,497			$	10,788,585			$	126,731,695

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

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2009, 2008 AND 2007

		2009				2008				2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	32,596,804			$	26,459,524			$	13,979,147
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Minority interest			463,553				381,633				240,584
Depreciation			2,826,707				2,239,063				882,842
Amortization			80,115				75,297				70,047
Loss on fixed assets disposal			—				1,458				—
Bad debt expense			218,516				589,901				322,305
Change in fair value of derivative instruments			(194,347	)			(73,112	)			—
Liquidated damages penalty			—				706,476				2,119,428
Gain from settlement of liquidated damages			—				(941,968	)			—
Transaction gain			(63,357	)			—				—
Write-off of deferred expenses			661,250				—				—
Changes in operating assets and liabilities
Accounts receivable			(4,156,829	)			(9,740,414	)			(9,452,582	)
Inventories			(2,036,858	)			(1,566,856	)			(2,440,076	)
Other receivables			(5,992	)			51,706				71,457
Other receivables — related parties			—				—				913,154
Deferred expense			—				(661,250	)			—
Other assets			—				42,230				(43,198	)
Accounts payable			(739,264	)			(1,287,681	)			(10,935,839	)
Customer deposits			—				—				(19,265	)
Other payables			—				(104,471	)			(341,354	)
Other payables — related parties			—				(386,960	)			(455,164	)
Other liabilities			388,655				538,634				312,551
Taxes payable			(197,261	)			477,886				576,025
Net cash provided by (used in) operating activities			29,841,692				16,801,096				(4,199,938	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment			(11,678,852	)			(7,925,596	)			(13,314,596	)
Advances on equipment purchases			(4,509,743	)			(2,598,661	)			2,233,885
Net cash used in investing activities			(16,188,595	)			(10,524,257	)			(11,080,711	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placement			—				—				21,278,139
Proceeds from lines of credit			14,363,400				10,739,820				15,050,400
Payments for lines of credit			(11,434,400	)			(13,493,620	)			(15,060,400	)
Payments to settle liquidated damages			—				(436,000	)			—
Restricted cash			—				2,097,490				(2,097,490	)
Net cash provided by (used in) financing activities			2,929,000				(1,092,310	)			19,170,649
EFFECT OF EXCHANGE RATE CHANGES ON CASH			262,273				1,198,810				186,650
INCREASE IN CASH			16,844,370				6,383,339				4,076,650
CASH, beginning of year			14,199,700				7,816,361				3,739,711
CASH, end of year		$	31,044,070			$	14,199,700			$	7,816,361

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

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 1—Organization background and principal activities

     Asian Financial, Inc. (“AFI”) was organized under the laws of the State of Nevada on August 10, 1998. On July 27, 2005, AFI merged with Asian Financial, Inc. (a Wyoming entity) for the purpose of changing its domicile from Nevada to Wyoming. AFI has no operations and generated no revenues since inception. On July 17, 2007, the Company effected a 1-for-2.68189924 reverse stock split of its common stock. All share and per share amounts used in the Company’s consolidated financial statements and notes thereto have been retroactively restated to reflect the 1-for-2.68189924 reverse stock split.

     Duoyuan Investments Limited (“Duoyuan BVI”) is a British Virgin Islands company that owns 100% of the equity interest of Duoyuan Digital Press Technology Industries (China) Co., Ltd. (“Duoyuan China”). Duoyuan China has two subsidiaries, a 99.4% ownership in Hunan Duoyuan Printing Machinery Co., Ltd. and 95% ownership in Langfang Duoyuan Digital Technology Co., Ltd (collectively referred to as the Duoyuan Interest).

     On August 31, 2006, Asian Financial, Inc. entered into a definitive Equity Transfer Agreement with Duoyuan BVI to acquire the “Duoyuan Interest” in exchange for 47,100,462 new shares (pre-split) (equivalent to 17,562,388 post-split shares) of common stock in Asian Financial, Inc. Prior to the acquisition, Asian Financial, Inc. had 3,500,000 shares (pre-split) (equivalent to 1,305,040 post-split shares) of outstanding common stock. Accordingly, at the closing, there were 50,600,462 shares (pre-split) (equivalent to 18,867,428 post-split shares) of common stock outstanding. The Equity Transfer Agreement became effective October 6, 2006. The stock exchange transaction has been accounted as a reverse acquisition and recapitalization of the Company whereby Duoyuan BVI is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). The historical financial statements for periods prior to October 6, 2006 are those of Duoyuan BVI, except that the equity section and earnings per share have been retroactively restated to reflect the reverse acquisition. As a result of the equity transfer, Duoyuan China became Asian Financial, Inc.’s wholly-owned subsidiary, and Mr. Wenhua Guo, the sole shareholder of Duoyuan BVI, became the controlling shareholder.

     Duoyuan Digital Press Technology Industries (China) Co., Ltd. (“Duoyuan China”) was originally established and wholly-owned by Duoyuan Industries (Holding) Inc. (“Duoyuan Industries”), a British Virgin Islands company. In September 2002, Duoyuan Industries entered into an Equity Transfer Agreement with Duoyuan BVI, whereby Duoyuan BVI acquired 100% of the equity in Duoyuan China from Duoyuan Industries. Mr. Wenhua Guo is the sole shareholder of Duoyuan Industries. Duoyuan China was incorporated in the People’s Republic of China (“PRC”) in 2001 with the registered capital of $6,000,000. Subsequently, Duoyuan China increased its registered capital to $19,000,000. As of June 30, 2007, $18,000,000 was contributed to Duoyuan China from the Company, and the remaining $1,000,000 was received in July and August 2007. The capital was raised through a private placement to accredited investors (see Note 14). On August 21, 2007, Duoyuan China received its business license requiring $25,000,000 registered capital. As of June 30, 2009, Duoyuan China owns 95.0% of Langfang Duoyuan Digital Technology Co., Ltd. and 88.0% of Hunan Duoyuan Printing Machinery Co., Ltd.

     Langfang Duoyuan Digital Technology Co., Ltd. (“Langfang Duoyuan”) is located in the city of Langfang, China, and it produces primarily pre-press and small format offset printing presses (in both single and multi colors). Langfang Duoyuan is 95% owned by Duoyuan China and 5% by Beijing Huiyuan Duoyuan Research Institute Co., Ltd. Langfang Duoyuan owns 12% of Hunan Duoyuan Printing Machinery Co. Ltd.

     Hunan Duoyuan Printing Machinery Co., Ltd. (“Hunan Duoyuan”) is located in Hunan, China , and it mainly produces large format offset printing presses (in both single and multi colors). Hunan Duoyuan was established on March 10, 2006, and is 88% owned by Duoyuan China and 12% by Langfang Duoyuan.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies

The reporting entity and principles of consolidation

     The consolidated financial statements of Asian Financial, Inc. and subsidiaries (“the Company”) reflect the activities of Asian Financial, Inc., Duoyuan China—100%, Langfang Duoyuan—95.0%, and Hunan Duoyuan—99.4%. All intercompany balances and transactions have been eliminated in consolidation.

Basis of presentation

     The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, and have been consistently applied.

Use of estimates

     The preparation of financial statements in conformity with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The significant estimates made in the preparation of the Company’s consolidated financial statements relate to allowance for doubtful accounts, reserves for inventory obsolescence, as well as the fair value of its warrants carried as derivative instruments marked to market each reporting period. Management believes that the estimates used in preparing its financial statements are reasonable and prudent. Actual results could materially differ from these estimates upon which the carrying values were based.

Foreign currency translation

     The reporting currency of the Company is the U.S. dollar. The Company uses their local currency Chinese Renminbi (“RMB”), as their functional currency. In accordance with Statement of Financial Accounting Standards (“SFAS”) 52, “Foreign Currency Translation,” results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period, and equity is translated at historical exchange rates.

     Translation adjustments amounted to $10,788,585 and $10,460,031 as of June 30, 2009 and June 30, 2008, respectively. Asset and liability accounts at June 30, 2009 were translated at RMB6.83 to $1.00, as compared to RMB6.85 to $1.00 at June 30, 2008. The average translation rates applied to the consolidated statements of income for the years ended June 30, 2009, 2008 and 2007 were RMB6.83 to $1.00, RMB7.26 to $1.00, and RMB7.81 to $1.00, respectively.

     In accordance with SFAS 95, “Statement of Cash Flows,” cash flows from the Company’s operations is calculated based upon the local currencies using the average translation rates. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.

     Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Gains and losses from foreign currency transactions are included in the results of operations for the periods presented. There were no material transaction gains or losses for the years ended June 30, 2009, 2008 and 2007.

Comprehensive income

     SFAS 130, “Reporting Comprehensive Income,” establishes standards for reporting and display of comprehensive income and its components in financial statements. It requires that all items that are required to be recognized under accounting standards as components of comprehensive income be

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

reported in financial statements that is displayed with the same prominence as other financial statements. The accompanying consolidated financial statements include the provisions of SFAS 130.

Revenue recognition

     The Company recognizes revenue in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” which specifies that revenue is realized or realizable and earned when four criteria are met:

	o		Persuasive evidence of an arrangement exists. (The Company considers its sales contracts to be persuasive evidence of an arrangement.)
	o		Product is shipped or services have been rendered.
	o		The seller’s price to the buyer is fixed or determinable.
	o		Collectability of payment is reasonably assured.

     In accordance with SFAS 48, “Revenue Recognition when Right of Return Exists,” revenue is recorded net of an estimate of markdowns, price concessions and warranty costs. Markdowns represent price adjustments on sale of units whose model is nearing the end of its cycle and the model is planned to be discontinued; price concessions represent price adjustments on contractual agreements for the sale of units; and warranty costs represent costs to repair previously sold units still under warranty for manufacturer’s defects. Such amounts are based on management’s evaluation of historical experience, current industry trends and estimated costs.

     The Company sells its products solely to its distributors. Master distribution agreements are signed with each distributor. The agreements list all terms and conditions with the exception of delivery, price and quantity terms, which are evidenced separately in purchase orders. Title transfers when products are shipped. There are no instances where receivables from distributors are not due and payable until goods purchased from the Company are sold by the distributors. The Company does not sell products to distributors on a consignment basis. Its distributors have a right of return within one month after shipping only if the Company’s products exhibit any manufacturing defects and it cannot be repaired. The Company had no returns during the years ended June 30, 2009, 2008 and 2007 and did not provide for any allowance for sales returns.

     The Company recognizes revenue when the goods are shipped and title has passed. Sales revenue represents the invoiced value of goods, net of a value-added tax (“VAT”). All of the Company’s products that are sold in the PRC are subject to a Chinese VAT at a rate of 17% of the gross sales price or at a rate approved by the Chinese local government. This VAT may be offset by the VAT paid by the Company on raw materials and other materials included in the cost of producing their finished products. The VAT on sales may also be offset by the VAT paid on equipment purchases. The Company’s distributors are all equipped to install the Company’s products and the Company is not contractually obligated to perform any installation services. As a result, there is no substantial performance required on the Company’s part and there is no impact on the Company’s recognition of revenues.

     Purchase prices of products are generally fixed and customers are not allowed to renegotiate pricing after the contracts are signed. The Company’s agreements with its distributors do not include cancellation or termination clauses.

     Credit limits are assigned to each distributor. As a distributor builds a sales and credit history with the Company, the credit limit can be increased. Credit limits are periodically reviewed by management and reductions to credit limits are made if deemed necessary.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

     The Company estimates sales rebates to distributors based on the projected annual sales and corresponding cash receipts. These rebates are paid at the end of each calendar year. The Company accounts for the sales rebates in accordance with Emerging Issues Task Force (“EITF”) Issue 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).” Sales rebates are included as a reduction of revenue and accounts receivable to be received by the Company.

     For the years ended June 30, 2009, 2008, and 2007, the aggregate amount of the aforementioned markdowns, price concessions, warranty costs, and sales rebates were immaterial to the consolidated financial statements taken as a whole for each of those years.

Accounts receivable

     The Company’s business operations are conducted in the PRC. During the normal course of business, the Company extends unsecured credit to its customers by selling on various credit terms from six to nine months. Management reviews its accounts receivable on a quarterly basis to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is recorded in the period of the related sales. The Company’s existing reserve is consistent with its historical experience and considered adequate by management. Known bad debts are written off against allowance for doubtful accounts when identified. The Company recorded an allowance for doubtful accounts for trade accounts receivables aged between nine months and one year at 15%, and currently the Company does not have any outstanding balance aged over one year.

     The following represents the changes of allowance for doubtful accounts:

		June 30,				June 30,
		2009				2008
Balance, beginning of period		$	1,178,328			$	498,648
Provision for bad debts			218,516				589,901
Foreign currency translation adjustments			4,845				89,779
Balance, end of period		$	1,401,689			$	1,178,328

Inventories

     Inventories are stated at the lower of cost (weighted average method) or market. The Company reviews its inventory on a regular basis for possible obsolete goods to determine if any reserves are necessary. As of June 30, 2009 and 2008, the Company determined that no reserves were necessary.

Intangible assets

     All land in the PRC is owned by the government. However, the government grants rights to use the land. Land use rights are valid for a limited period of time, depending on their use. Under PRC regulations, the term of land use rights is 50 years for industrial property. As such, the Company has the right to use the land for 50 years and has elected to amortize the cost of rights over 50 years using the straight-line method.

     Intangible assets of the Company are reviewed each reporting period to determine whether their carrying value has become impaired. The Company considers assets to be impaired if the carrying value exceeds future projected cash flows from related operations. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. As of June 30, 2009, the Company expects these assets to be fully recoverable.

Plant and equipment

     Plant and equipment are stated at cost less accumulated depreciation. Major renewals are charged directly to the plant and equipment accounts, while replacements, maintenance, and repairs which do not

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

improve or extend the respective lives of the assets are expensed currently. Depreciation is computed using the straight-line method over the estimated useful lives of the assets with 5% residual value. Estimated useful lives of the assets are as follows:

		Estimated Useful Life
Buildings		30 Years
Office equipment		3-10 Years
Motor vehicles		4-10 Years
Machinery and equipment		5-10 Years

     Construction-in-progress represents the costs incurred in connection with the construction of buildings or additions to the Company’s plant facilities. Interest incurred during construction is capitalized into construction-in-progress. All other interest is expensed as incurred. No depreciation is provided for construction–in-progress until such time as the assets are completed and are placed into service. The cost and related accumulated depreciation and amortization of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in operations.

     Long-lived assets of the Company are reviewed each reporting period to determine whether their carrying value has become impaired in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of the remaining useful lives of the assets. As of June 30, 2009, the Company expects these assets to be fully recoverable.

Advances on equipment purchases

     The Company makes advances to certain vendors for equipment purchases. The Company transfers the amounts advanced to the equipment accounts upon receipt of the equipment purchased. These advances are classified as noncurrent, as the advances relate to equipment accounts and the ultimate delivery of the equipment may exceed one year from the date the advances are made.

Concentration of risk

     Cash includes cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC and an offshore account with DBS Bank. Cash deposits at these financial institutions are not covered by insurance from the U.S. government. Total cash in state-owned banks and DBS Bank at June 30, 2009 and 2008 amounted to $31,036,332 and $14,192,775, respectively. To date, the Company has not experienced any losses in such accounts.

     For the year ended June 30, 2009, one supplier accounted for 11% of the Company’s total purchases. This supplier represents 12% of total accounts payable as of June 30, 2009. For the year ended June 30, 2008, one supplier accounted for approximately 12% of total purchases. This supplier represents 14% of the Company’s total accounts payable as of June 30, 2008.

     For the year ended June 30, 2009, the Company’s top five customers accounted for 13% of the Company’s total sales. These customers represent 14% of total accounts receivable as of June 30, 2009. For the year ended June 30, 2008, the Company’s top five customers accounted for 21.6% of the total sales. These customers represent 15% of total accounts receivable as of June 30, 2008.

     The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Liquidated damages

     The liquidated damages associated with the registration of the shares and the settlement of all outstanding related party balances are treated in accordance with Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) EITF 00-19-2, “Accounting for Registration Payment Arrangement,” which requires the Company to recognize an expense and a liability equal to minimum estimated losses.

Financial instruments

     SFAS 107, “Disclosures about Fair Value of Financial Instruments,” defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. SFAS 157, “Fair Value Measurements,” adopted July 1, 2008, defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and payables qualify as financial instruments and reflect reasonable estimates of fair value because of the short period of time between the origination of such instruments and their expected realization. The three levels of valuation hierarchy are defined as follows:

	o		Level 1 inputs to the valuation methodology which are quoted prices (unadjusted) for identical assets or liabilities in active markets.
	o		Level 2 inputs to the valuation methodology that includes quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, substantially for the full term of the financial instrument.
	o		Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

     The Company analyzes all financial instruments with features of both liabilities and equity under SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” and EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.” In accordance with EITF 00-19, the Company’s warrants were required to be recorded as a liability at fair value and marked to market each reporting period.

     As of June 30, 2009, the outstanding principal on the Company’s short term loans amounted to $14,357,000. Management concluded the carrying value of the short term loans is a reasonable estimate of fair value because the amounts are due within one year and the stated interest rate approximates current rates available.

     As of June 30, 2009, the Company’s management determined that certain inputs to the fair value measurement of the Company’s warrant liability falls under level 3 of the valuation hierarchy, since there was no observable market price for certain inputs significant to the valuation model used to determine the fair value of the warrant liability, and also rendered the fair value calculation thereof under the same classification. The Company’s warrant liability is carried at fair value totaling $1,180,477 as of June 30, 2009.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

Fair Value

Fair Value Measurement

as of

at June 30, 2009

June 30, 2009

using Fair Value Hierarchy

Liabilities

Level 1

Level 2

Level 3

Warrant liability

$

1,180,477

$

1,180,477

     Except for the derivative liabilities and the short term loans, the Company did not identify any other non-recurring assets and liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with SFAS 157.

     SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115,” became effective for the Company on July 1, 2008. SFAS 159 provides the Company with the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis with the difference between the carrying value before election of the fair value option and the fair value recorded upon election as an adjustment to beginning retained earnings. The Company chose not to elect the fair value option.

Income taxes

     The Company accounts for income taxes in accordance with SFAS 109, “Accounting for Income Taxes.” Under the asset and liability method as required by SFAS 109, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Under SFAS 109, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized. Since the Company’s operations are domiciled in the PRC, and the PRC taxable income mirrors that of GAAP income, there are no material temporary differences that would result in deferred tax assets or liabilities. As such, no valuation allowances were necessary at June 30, 2009 and 2008 for taxable income from the PRC. However, the Company has certain deferred taxes as a result of net operating losses for U.S. income tax purposes. (See Note 10.)

     In July 2007, the Company adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109,” which clarifies the accounting and disclosure for uncertain tax positions. FIN 48 prescribes a recognition threshold and measurement attribute for recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

     Under FIN 48, evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. The adoption of FIN 48 did not have a material effect on the Company’s consolidated financial statements.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

China income tax

     The Company’s subsidiaries are governed by the Income Tax Law of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws (the “Income Tax Laws”).

     Beginning on January 1, 2008, the new Enterprise Income Tax (“EIT”) law replaced the existing laws for Domestic Enterprises (“DES”) and Foreign Investment Enterprises (“FIEs”).

     The key changes are:

		a.		The new standard EIT rate of 25% replaced the 33% rate currently applicable to both DES and FIEs, except for High Tech companies who pay a reduced rate of 15%;
		b.		Companies established before March 16, 2007, will continue to enjoy tax holiday treatment approved by local government for a grace period of either for the next five years or until the tax holiday term is completed, whichever is sooner. These companies will pay the standard tax rate as defined in point “a” above when the grace period expires.

     Duoyuan China was established before March 16, 2007, and therefore qualify to continue to enjoy the reduced tax rate as described below.

     Prior to March 16, 2007, upon approval by the PRC tax authorities, FIEs scheduled to operate for a period of 10 years or more and engaged in manufacturing and production may be exempt from income taxes for two years, commencing with their first profitable year of operations, after taking into account any losses brought forward from prior years and thereafter with a 50% reduction for the subsequent three years.

     Duoyuan China has been a wholly foreign-owned enterprise since its inception. This entity status allowed Duoyuan China a two-year income tax exemption and a 50% income tax reduction for the following three years. Duoyuan China also had operating losses prior to the calendar year ended December 31, 2003, and started to generate a net profit for the calendar year ended December 31, 2004. Therefore Duoyuan China had an income tax exemption for the calendar years ended December 31, 2004 and 2005, and 50% income tax reduction for the calendar years ended December 31, 2006, 2007, and 2008. Thus, income tax rate for Duoyuan China for the calendar years ended December 31, 2006 and 2007 was 16.5% and for the calendar year ended December 31, 2008 was 12.5%. Duoyuan China is subject to an income tax rate of 25% starting January 1, 2009, under the newly unified corporate income tax rate.

     Langfang Duoyuan is located in a Special Economic and High Technology Zone and the PRC tax authority has offered a special income tax rate to Langfang Duoyuan for doing business in the special zone. With the approval of the local government, Langfang Duoyuan is exempt from income taxes for five years, commencing with their first profitable year of operations. Langfang Duoyuan has operating losses prior to the calendar year ended December 31, 2002, and started to generate a net profit for the calendar year ended December 31, 2003. Therefore, Langfang Duoyuan had an income tax exemption for the years ended December 31, 2003, through December 31, 2007. Langfang Duoyuan is subject to an income tax rate of 25% starting January 1, 2008, under the newly unified corporate income tax rate.

     Prior to acquiring Hunan Duoyuan, the shareholders negotiated with the Hunan Shaoyang Treasury Department to obtain an income tax exemption benefit. The Treasury Department granted the company a five-year income tax exemption commencing with the first profitable year of operations. In addition, the Treasury Department granted a 50% refund of income taxes based upon the amount of income taxes paid by Hunan Duoyuan. Hunan Duoyuan had an operating loss in the first year of operations ended December 31, 2004, and started to generate a net profit for the calendar year ended December 31, 2005.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

Therefore Hunan Duoyuan has an income tax exemption for the years ended December 31, 2005 through December 31, 2009. Hunan Duoyuan will become subject to income tax at a rate of 25% starting January 1, 2010, under the newly unified corporate income tax rate.

     PRC laws require that before a foreign invested enterprise can legally distribute profits to its partners, it must satisfy all tax liabilities, provide for losses in previous years, and make allocations in proportions made at the discretion of the board of directors, after the statutory reserve. The statutory reserves include the surplus reserve fund and the common welfare fund, and represent restricted retained earnings.

     During the years ended June 30, 2009, 2008 and 2007, the provision for income taxes amounted to approximately $5,454,000, $3,238,000 and $1,807,000, respectively. The estimated tax savings due to this tax exemption for the years ended June 30, 2009, 2008 and 2007 amounted to approximately $4,272,000, $7,865,000 and $4,510,000, respectively. The net effect on earnings per share had the income tax been applied would decrease basic and diluted earnings per share from $1.30 to $1.13, $1.06 to $0.74 and $0.61 to $0.49 for the years ended June 30, 2009, 2008 and 2007, respectively.

     The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the years ended June 30, 2009, 2008 and 2007:

		Year Ended June 30,
		2009				2008				2007
U.S. statutory rates			34	%			34	%			34	%
Foreign income not recognized in the U.S.			-34				-34				-34
China income taxes			25				33				33
China income tax exemption			-11.2				-22.3				-23.2
Other (a)			0.5				0.2				1.6
Effective income tax rates			14.3	%			10.9	%			11.4	%

 

(a)

The 0.5%, 0.2%, and 1.6% represent $1,399,143, $423,888 and $2,720,474 of expenses incurred by the Company that are not subject to China income tax for the years ended June 30, 2009, 2008 and 2007, respectively.

Value added tax

     Enterprises or individuals who sell commodities, engage in repair and maintenance or import goods in the PRC are subject to a value added tax in accordance with PRC laws. The VAT standard rate is 17% of the gross sales price. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on sales of the finished products. A credit is also available for VAT paid on the purchases of equipment.

     VAT on sales and VAT on purchases amounted to approximately $32,442,000 and $23,892,000 for the year ended June 30, 2009, approximately $28,937,000 and $20,122,000 for the year ended June 30, 2008 and approximately $19,791,000 and $7,258,000 for the year ended June 30, 2007, respectively. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent because the VAT is not impacted by the income tax holiday.

Shipping and handling

Shipping and handling costs related to goods sold are included in selling expenses. Shipping and handling costs were approximately $1,396,000, $960,000 and $1,128,000 for the years ended June 30, 2009, 2008 and 2007, respectively.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

Advertising costs

     Advertising costs are expensed as incurred and included in selling expenses. Advertising costs were approximately $1,436,000, $1,357,000 and $1,118,000 for the years ended June 30, 2009, 2008 and 2007, respectively.

Research and development costs

     Research and development costs are expensed as incurred. The costs of material and equipment acquired or constructed for research and development activities, and have alternative future uses, either in research and development, marketing, or sales, are capitalized as plant and equipment and depreciated over their estimated useful lives.

Recent accounting pronouncements

     In December 2007, the FASB issued SFAS 141R, “Business Combinations,” which replaces SFAS 141. SFAS 141R retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting as well as requiring the expensing of acquisition-related costs as incurred. Furthermore, SFAS 141R provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company is evaluating the impact, if any, that the adoption of this statement will have on its consolidated results of operations or consolidated financial position.

     In December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51.” SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It is intended to eliminate the diversity in practice regarding the accounting for transactions between equity and noncontrolling interests by requiring that they be treated as equity transactions. Further, it requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. SFAS 160 also establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation, requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated, requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent’s owners and the interests of the noncontrolling owners of a subsidiary, among others. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008, with early adoption permitted, and it is to be applied prospectively. SFAS 160 is to be applied prospectively as of the beginning of the fiscal year in which it is initially applied, except for the presentation and disclosure requirements, which must be applied retrospectively for all periods presented. The Company is evaluating the impact that SFAS 160 will have on its consolidated financial position or consolidated results of operations.

     In February 2008, the FASB issued FSP FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13.” FSP FAS 157-1 indicates that it does not apply under SFAS 13, “Accounting for Leases,” and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under SFAS 13. This scope exception does not apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value under SFAS 141 or SFAS 141R, regardless of whether those assets and liabilities are related to leases.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

     Also in February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB Statement No. 157.” With the issuance of FSP FAS 157-2, the FASB agreed to: (a) defer the effective date in SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), and (b) remove certain leasing transactions from the scope of SFAS 157. The deferral is intended to provide the FASB time to consider the effect of certain implementation issues that have arisen from the application of SFAS 157 to these assets and liabilities.

     In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities – An Amendment of SFAS No. 133.” SFAS 161 is intended to improve financial reporting of derivative instruments and hedging activities by requiring enhanced disclosures to enable financial statement users to better understand the effects of derivatives and hedging on an entity’s financial position, financial performance and cash flows. To achieve this increased transparency, SFAS 161 requires (1) the disclosure of the fair value of derivative instruments and gains and losses in a tabular format; (2) the disclosure of derivative features that are credit risk-related; and (3) cross-referencing within the footnotes. SFAS 161 is effective on January 1, 2009. The Company has adopted SFAS 161.

     In June 2008, the FASB issued EITF 07-5, “Determining whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock.” EITF 07-5 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early application is not permitted. Paragraph 11(a) of SFAS 133 specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. This standard triggers liability accounting on all options and warrants exercisable at strike prices denominated in any currency other than the functional currency in China (Renminbi). The Company will adopt EITF 07-5 effective July 1, 2009. See note 14 which discusses the effect on the Company’s consolidated financial statements.

     In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,” to address the question of whether instruments granted in share-based payment transactions are participating securities prior to vesting. FSP EITF 03-6-1 indicates that unvested share-based payment awards that contain rights to dividend payments should be included in earnings per share calculations. The guidance will be effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the requirements of FSP EITF 03-6-1 and the impact that its adoption will have on the consolidated results of operations or consolidated financial position.

     In October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset in a Market That Is Not Active,” which clarifies the application of SFAS 157 when the market for a financial asset is inactive. Specifically, FSP FAS 157-3 clarifies how (1) management’s internal assumptions should be considered in measuring fair value when observable data are not present, (2) observable market information from an inactive market should be taken into account, and (3) the use of broker quotes or pricing services should be considered in assessing the relevance of observable and unobservable data to measure fair value. The Company is currently evaluating the impact of adoption of FSP FAS 157-3 on the Company’s consolidated financial statements.

     In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” FSP FAS 157-4 amends SFAS 157 and provides additional guidance for estimating fair

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased and also includes guidance on identifying circumstances that indicate a transaction is not orderly for fair value measurements. FSP FAS 157-4 shall be applied prospectively with retrospective application not permitted. FSP FAS 157-4 shall be effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity early adopting FSP FAS 157-4 must also early adopt FSP FAS 115-2 and 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”. Additionally, if an entity elects to early adopt either FSP FAS 107-1 and 28-1, “Interim Disclosures about Fair Value of Financial Instruments” or FSP FAS 115-2 and 124-2, it must also elect to early adopt this FSP. The Company has determined that this new FSP did not have a material impact on the consolidated financial statements.

     In April 2009, the FASB issued FSP FAS 115-2 and 124-2. FSP FAS 115-2 amends SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities,” SFAS 124, “Accounting for Certain Investments Held by Not-for-Profit Organizations,” and EITF 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,” to make the other-than-temporary impairments guidance more operational and to improve the presentation of other-than-temporary impairments in the financial statements. This FSP will replace the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired debt security until recovery with a requirement that management assert it does not have the intent to sell the security, and it is more likely than not it will not have to sell the security before recovery of its cost basis. This FSP provides increased disclosure about the credit and noncredit components of impaired debt securities that are not expected to be sold and also requires increased and more frequent disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. Although this FSP does not result in a change in the carrying amount of debt securities, it does require that the portion of an other-than-temporary impairment not related to a credit loss for a held-to-maturity security be recognized in a new category of other comprehensive income and be amortized over the remaining life of the debt security as an increase in the carrying value of the security. This FSP shall be effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity may early adopt this FSP only if it also elects to early adopt FSP FAS 157-4. Also, if an entity elects to early adopt either FSP FAS 157-4 or FSP FAS 107-1 and 28-1, the entity also is required to early adopt this FSP. The Company has determined that this new FSP did not have a material impact on the consolidated financial statements.

     In April 2009, the FASB issued FSP FAS 107-1 and 28-1. This FSP amends SFAS 107, to require disclosures about fair value of financial instruments not measured on the balance sheet at fair value in interim financial statements as well as in annual financial statements. Prior to this FSP, fair values for these assets and liabilities were only disclosed annually. This FSP applies to all financial instruments within the scope of SFAS 107 and requires all entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments. This FSP shall be effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity may early adopt this FSP only if it also elects to early adopt FSP FAS 157-4 and 115-2 and 124-2. This FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption. The Company is currently evaluating the disclosure requirements of this new FSP.

     In June 2009, the FASB issued SFAS 168, “The FASB Accounting Standards Codification ^TM and the Hierarchy of Generally Accepted Accounting Principles a Replacement of FASB Statement No. 162” (“SFAS 168”). This Standard establishes the FASB Accounting Standards Codification ^TM (the

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 2—Summary of significant accounting policies – (continued)

“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification is effective for interim and annual periods ending after September 15, 2009, and as of the effective date, all existing accounting standard documents will be superseded. The Codification is effective in the third quarter of 2009, and accordingly, the Quarterly Report on Form 10-Q for the quarter ending September 30, 2009 and all subsequent public filings will reference the Codification as the sole source of authoritative literature.

Reclassifications and correction

          Certain prior period amounts have been reclassified for consistent presentation with the current period.

Note 3—Earnings per share

          The Company reports earnings per share in accordance with the provisions of SFAS 128, “Earnings Per Share.” SFAS 128 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

     The following is a reconciliation of the basic and diluted earnings per share computation:

		2009				2008				2007
For the years ended June 30, 2009, 2008 and 2007
Net income for earnings per share		$	32,596,804			$	26,459,524			$	13,979,147
Weighted average shares used in basic computation
Basic and Diluted			25,000,050				25,000,050				23,041,021
Earnings per share:
Basic and Diluted		$	1.30			$	1.06			$	0.61

     At June 30, 2009 and 2008, 1,226,972 warrants, whose weighted average exercise price is $4.95, were excluded from the calculation of diluted earnings per share because of their anti-dilutive effect.

Note 4—Supplemental disclosure of cash flow information

     Cash paid for interest amounted to $1,186,225, $957,684 and $750,736 for the years ended June 30, 2009, 2008 and 2007, respectively.

     Cash paid for income taxes amounted to $4,970,955, $2,831,179 and $1,355,095 for the years ended June 30, 2009, 2008 and 2007, respectively.

Note 5—Inventories

     Inventories consist of the following:

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 5—Inventories – (continued)

		June 30,				June 30,
		2009				2008
Raw materials		$	6,494,433			$	7,282,772
Work-in-process			13,125,837				10,984,027
Finished goods			6,262,972				5,683,752
Totals		$	25,883,242			$	23,950,551

Note 6—Plant and equipment

     Plant and equipment consist of the following:

		June 30,				June 30,
		2009				2008
Buildings		$	13,699,189			$	13,643,084
Office equipment			928,051				924,251
Motor vehicles			382,372				322,447
Plant and machinery			32,008,907				20,305,152
Construction-in-progress			4,286,527				4,268,971
Total			51,305,046				39,463,905
Less: accumulated depreciation			(8,181,893	)			(5,333,254	)
Plant and equipment, net		$	43,123,153			$	34,130,651

     Depreciation expense for the years ended June 30, 2009, 2008 and 2007 amounted to approximately $2,827,000, $2,239,000 and $883,000, respectively.

     Interest costs totaling approximately $141,000 was capitalized into construction-in-progress for the year ended June 30, 2008. No interest costs were capitalized into construction-in-progress for the years ended June 30, 2009 and 2007.

Note 7—Intangible assets

     Intangible assets consist of the following:

		June 30,				June 30,
		2009				2008
Intangible – land use rights		$	4,457,876			$	4,439,619
Less: accumulated amortization			(518,400	)			(436,491	)
Total		$	3,939,476			$	4,003,128

     Total amortization expense for the years ended June 30, 2009, 2008 and 2007 amounted to $80,115, $75,297 and $70,047, respectively.

Note 8—Related party transactions

     The Company leased office space from Duoyuan China Water Recycle Technology Industry Co., a related party. On June 30, 2008, the Company and Duoyuan Water Recycle Technology Industry Co. terminated the lease pursuant to a termination agreement. The title of property transferred to Duoyuan Information Terminal Manufacture (Langfang) Co., Ltd., a related party, which Mr. Wenhua Guo is the sole shareholder. On July 1, 2008, the Company entered into a lease agreement with Duoyuan Information Terminal Manufacture (Langfang) Co., Ltd., from July 1, 2008 to December 31, 2009. For the years ended June 30, 2009, 2008 and 2007, rental expense related to this office lease amounted to $164,610 $154,784 and $143,992 (See Note 12).

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 8—Related party transactions – (continued)

          The Company had a lease agreement to rent part of its manufacturing plant located in Lanfang Duoyuan with Duoyuan Water Treatment Equipment Manufacturing (Langfang) Co., Ltd. (lessee), a company 80% owned by Mr. Wenhua Guo, from October 1, 2004 to September 30, 2009. On May 25, 2007, the Company and the lessee terminated the lease pursuant to a termination agreement. Total rental income related to this lease for the year ended June 30, 2007 was approximately $447,000, and is included in other income in the accompanying consolidated statement of income. There was no such rental income for the years ended June 30, 2009 and 2008.

Note 9—Lines of credit

     The lines of credit represent short-term loan amounts due to a bank which are due normally within one year. These loans can be renewed with the bank. The loans were comprised of the following:

		June 30,				June 30,
		2009				2008
Loan from Bank of Agriculture, Chongwen branch due March 12, 2010, interest rate of 5.841% per annum, interest only paid quarterly, secured by land use rights and buildings		$	1,465,000			$	—
Loan from Bank of Agriculture, Chongwen branch due March 13, 2009 , interest rate of 8.570% per annum, interest only paid quarterly, secured by land use rights and buildings			—				1,459,000
Loan from Bank of Agriculture, Chongwen branch due July 3, 2009, interest rate of 8.217% per annum, interest only paid quarterly, secured by land use rights and buildings			2,930,000				—
Loan from Bank of Agriculture, Chongwen branch due July 10, 2009, interest rate of 8.217% per annum, interest only paid quarterly, secured by land use rights and buildings			2,930,000				2,918,000
Loan from Bank of Agriculture, Chongwen branch due July 17, 2009, interest rate of 8.217% per annum, interest only paid quarterly, secured by land use rights and buildings			4,102,000				4,085,200
Loan from Bank of Agriculture, Chongwen branch due July 24, 2009, interest rate of 8.217% per annum, interest only paid quarterly, secured by land use rights and buildings			2,930,000				2,918,000
Total		$	14,357,000			$	11,380,200

     As of June 30, 2009 and 2008, the carrying value of the collateralized fixed assets amounted to $4,206,000 and $4,304,772, respectively.

     Total interest expense for the above short term loans, net of capitalized interest, amounted to approximately $1,186,000, $817,000 and $751,000 for the years ended June 30, 2009, 2008 and 2007, respectively.

Note 10—Taxes payable

     Asian Financial, Inc. was incorporated in the U.S. and has incurred net operating losses for income tax purposes for the year ended June 30, 2009. The net operating loss carryforwards for U.S. income taxes is $2,862,715 which may be available to reduce future years’ taxable income. These carryforwards will expire, if not utilized, starting in 2027 through 2028. Management believes that the realization of

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 10—Taxes payable – (continued)

the benefits from these losses appears uncertain due to the Company’s limited operating history and continuing losses for U.S. income tax purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. Management reviews the valuation allowance periodically and makes adjustments as warranted.

     Taxes payable consisted of the following:

		June 30,				June 30,
		2009				2008
VAT (credit) payable		$	(313,382	)		$	359,725
Income tax payable			1,740,765				1,253,988
Others			85,344				89,273
Total taxes payable		$	1,512,727			$	1,702,986

          The Company has cumulative undistributed earnings of foreign subsidiaries of approximately $84.6 million as of June 30, 2009, which is included in retained earnings on the consolidated balance sheets and will continue to be indefinitely reinvested in international operations. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of these earnings, nor has it been determined to be practicable to estimate the amount of income taxes that would have to be provided if we concluded that such earnings will be remitted in the future.

          Significant components of the Company’s deferred tax assets and liabilities at June 30, 2009 were as follows (tax-effected amounts shown):

		U.S.				China				Total
Deferred tax assets (liabilities):
Net operating loss carryforwards		$	973,323			$	—			$	973,323
Deferred tax assets, net			973,323				—				973,323
Valuation allowance			(973,323	)			—				(973,323	)
Net deferred tax assets		$	—			$	—			$	—

          Significant components of the Company’s deferred tax assets and liabilities at June 30, 2008 were as follows (tax-effected amounts shown):

		U.S.				China				Total
Deferred tax assets (liabilities):
Net operating loss carryforwards		$	428,545			$	—			$	428,545
Deferred tax assets, net			428,545				—				428,545
Valuation allowance			(428,545	)			—				(428,545	)
Net deferred tax assets		$	—			$	—			$	—

Note 11—Statutory reserves and dividends

     The laws and regulations of the PRC require that before a foreign-invested enterprise can legally distribute profits, it must first satisfy all tax liabilities, provide for losses in previous years, and make allocations in proportions determined at the discretion of the board of directors, after the statutory reserve. The statutory reserves include the surplus reserve fund and the enterprise fund. Additionally, the Chinese government restricts distributions of registered capital and the additional investment amounts required by a foreign-invested enterprise. Approval by the Chinese government must be obtained before distributions of these amounts can be returned to the shareholders.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 11—Statutory reserves and dividends – (continued)

Statutory surplus reserve fund

          The Company is required to transfer 10% of its net income, as determined in accordance with the PRC accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reaches 50% of the Company’s registered capital.

          The transfer to this reserve must be made before distribution of any dividends to shareholders. For the years ended June 30, 2009, 2008 and 2007, the Company transferred $3,428,483, $2,717,489 and $1,411,403 , respectively, to this reserve. The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any. It may also be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.

          The remaining reserve to fulfill the 50% registered capital requirement amounted to approximately $4,640,000 and $8,900,000 as of June 30, 2009 and 2008, respectively.

Enterprise fund

          The enterprise fund may be used to acquire fixed assets or to increase the working capital to expend on production and operation of the business. No minimum contribution is required and, to date, the Company has not made any contributions to this fund.

Note 12—Operating leases

          The Company entered into a lease arrangement for an office space with Duoyuan China Water Recycle Technology Industry Co. from January 1, 2008 to December 31, 2008. On June 30, 2008, the title of leased property transferred to Duoyuan Information Terminal Manufacture (Langfang) Co., Ltd., a related party (see Note 8), and the lease arrangement with Duoyuan China Water Recycle Technology Industry Co. was terminated on that date. On July 1, 2008, the Company entered into a lease agreement with Duoyuan Information Terminal Manufacture (Langfang) Co. Ltd. with annual lease payments totaling $164,610.

          In addition, the Company leases sixteen sales offices in sixteen different Chinese provinces with various terms with latest office lease due to expire in December 2010. The monthly lease amounts for these offices are de minimis.

          Total lease expense for the years ended June 30, 2009, 2008 and 2007 was $236,421, $154,784 and $143,992, respectively. Total future minimum lease payments at June 30, 2009, are as follows:

Years ending June 30,		Amount
2010		$	200,039
2011			33,696
Thereafter			—

Note 13—Retirement plan

          The Company’s retirement plan includes two parts: the first to be paid by the Company is 20% of the employee’s actual salary in the prior year. The other part, paid by the employee, is 8% of the actual salary. The Company’s contributions amounted to approximately $1,103,000, $891,000 and $503,000 for the years ended June 30, 2009, 2008 and 2007.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 14—Shareholders’ equity

          On October 25, 2006, Asian Financial, Inc. entered into a definitive Security Purchase Agreement with unrelated investors (the “Purchase Agreement”). The transaction closed on November 2, 2006. In accordance with the Purchase Agreement, Asian Financial, Inc. issued 6,132,622 shares of common stock for a purchase price of approximately $3.84 per share or a total of $23,549,200.

          The financing was conducted through a private placement to accredited investors and is exempted from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). In conjunction with the private placement, the Company agreed to register the shares with the SEC within 90 days of the closing. The Company also agreed to make the registration statement effective no later than the 150th day following the closing date or the fifth trading day following the date on which the Company is notified by the SEC that such registration statement will not be reviewed or is no longer subject to further review and comments, whichever date is earlier. If the registration statement is not filed or declared effective pursuant to the above timeline or if the registration statement ceases to be effective for more than an aggregate of 45 trading days, the Company is required to pay the investors monthly liquidated damages equal to 1% of the aggregate investment amount. The total amount of the liquidated damages payable by the Company was capped at 8% of the total investment amount paid by the investors. Additionally, pursuant to the Purchase Agreement, the Company agreed to cease all related party transactions and to settle all outstanding balances due to or from related parties by December 31, 2006. Failure to terminate the related party transactions was to result in a monthly cash penalty of 1% of the proceeds with a cap of 4%. Penalties were expensed as incurred and totaled $2,119,428 through December 31, 2007. During the year ended June 30, 2008, the Company paid cash of $436,000 and issued 576,425 warrants valued at $1,447,936, and the investors agreed to waive all future penalties under the registration rights related to obtaining timely effectiveness of the registration statement. The fair value of the warrants was calculated using the Cox-Ross-Rubinstein (“CRR”) binomial model with the following assumptions: market price $5.76, 5-year term, volatility of 42%, risk free interest rate of 2.09% and no dividends. Pursuant to SFAS 133 and EITF 00-19, the warrants explicitly provide the holder with the right to request the Company to cash-settle the warrants. Therefore, the warrants did not meet the criteria established under EITF 00-19 and triggered liability accounting. As such, the Company recorded liability of $1,447,936 on December 31, 2007, the grant date. As of June 30, 2009, the fair value of these warrants was $1,180,477 and the Company recorded a gain of $194,347 for the change of fair value for the year then ended.

     The changes in the fair value of derivative instrument liabilities were as follows:

		Amount
Balance, June 30, 2007		$	—
Value of warrant liability on grant date			1,447,936
Change in fair value of derivative instruments			(73,112	)
Balance, June 30, 2008			1,374,824
Change in fair value of derivative instruments			(194,347	)
Balance, June 30, 2009		$	1,180,477

          As discussed above, the Company incurred liquidated damages for failure to register the resale of securities as well as to terminate all related party transactions pursuant to the Purchase Agreement. In November 2007, the Company reached a settlement with the investors who agreed to waive all penalties due in exchange for warrants or cash payments of $1,883,936.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 14—Shareholders’ equity – (continued)

          The following is a reconciliation of liquidated damages for the year ended June 30, 2008:

Liquidated damages expense accrued at June 30, 2007		$	2,119,428
Settlement payments with warrants and cash payments			(1,883,936	)
Net gain from reversal of liquidated damages expense at June 30, 2008		$	235,492

          The Company had no gain or loss from the liquidated damages during the year ended June 30, 2009, since an agreement was reached and settled during the year ended June 30, 2008.

          At closing, as part of the compensation to the placement agent, Roth Capital Partners, LLC (“Roth Capital”), the Company issued to Roth Capital warrants to acquire 613,260 shares of common stock, exercisable at any time after June 30, 2008. The warrants have a strike price equal to $ 4.21. In addition, the Company issued to CCG, an investor relations firm, warrants to acquire 37,287 shares of common stock. The warrants have a strike price equal to $4.61. The warrants have a term of five years starting from July 1, 2008, and will permit cashless or net exercise at all times. The shares underlying the warrants will have registration rights. The warrant contains a standard antidilution provision for stock dividends, stock splits, stock combination, recapitalization and a change of control transaction. The warrants meet the conditions for equity classification pursuant to SFAS 133 and EITF 00-19. Therefore, these warrants were classified as equity and accounted for as common stock issuance cost.

										Weighted				Average
		Warrants				Warrants				Average				Remaining
		Outstanding				Exercisable				Exercise Price				Contractual Life
Balance, June 30, 2007			650,547				—			$	4.23				—
Granted			576,425				576,425				5.76				5.00
Forfeited			—				—				—				—
Exercised			—				—				—				—
Balance, June 30, 2008			1,226,972				1,226,972			$	4.95				5.00
Granted			—				—				—				—
Forfeited			—				—				—				—
Exercised			—				—				—				—
Balance, June 30, 2009			1,226,972				1,226,972			$	4.95				4.25

          As discussed in Note 2 under recent accounting pronouncements, in June 2008, the FASB issued EITF 07-5. EITF 07-5 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early application is not permitted. This standard triggers liability accounting on all options and warrants exercisable at strike prices denominated in any currency other than the functional currency in China (Renminbi). Accordingly, 613,260 warrants issued to Roth Capital and 37,287 warrants issued to CCG will be recorded as a liability beginning fiscal year ending June, 30, 2010, and interim periods within that fiscal year. The fair value of the warrants will be calculated using the Cox-Ross-Rubinstein (“CRR”) binomial model with the following assumptions: market price $5.76, 5-year term, volatility of 42%, risk free interest rate of 2.09% and no dividends. Currently, the estimated liability of approximately $1,732,000 as of June 30, 2009, will be recorded during the fiscal year ending June 30, 2010 and the off-setting entry will be against stockholders’ equity. This adjustment will have no impact on the Company’s earnings.

See report of independent registered public accounting firm.

ASIAN FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

Note 15—Commitments and contingencies

Equipment purchase agreement

          In August 2008, Langfang Duoyuan entered into a packing material equipment purchase agreement with Beijing Jingneng Mechanical & Electrical Equipments Ltd. As of June 30, 2009, $382,877, or 5% of the total commitment, remains outstanding on this agreement.

Litigation

          The Company is subject to various legal matters in the ordinary course of business. After taking into consideration the Company’s legal counsels’ evaluation of these matters, the Company has determined that the resolution of these matters will not have a material adverse effect on the Company’s consolidated financial statements.

Note 16—Subsequent events

          On July 3, 2009, the Company renewed the $2,930,000 bank loan due on July 3, 2009 from Bank of Agriculture, Chongwen branch. The new loan is due on July 2, 2010, with an interest rate of 5.841% per annum, secured by land use rights and buildings.

          On July 10, 2009, the Company renewed the $2,930,000 bank loan due on July 10, 2009 from Bank of Agriculture, Chongwen branch. The new loan is due on July 9, 2010, with an interest rate of 5.841% per annum, secured by land use rights and buildings.

          On July 17, 2009, the Company renewed the $4,102,000 bank loan due on July 17, 2009 from Bank of Agriculture, Chongwen branch. The new loan is due on July 16, 2010, with an interest rate of 5.841% per annum, secured by land use rights and buildings.

          On July 24, 2009, the Company renewed the $2,930,000 bank loan due on July 24, 2009 from Bank of Agriculture, Chongwen branch. The new loan is due on July 23, 2010, with an interest rate of 5.841% per annum, secured by land use rights and buildings.

          On August 26, 2009, the Company announced the appointment of Mr. Christopher Patrick Holbert to serve as the new Chief Executive Officer of the Company, effective August 26, 2009.

          The Company has performed an evaluation of subsequent events through September 2, 2009, the date these consolidated financial statements were issued.

See report of independent registered public accounting firm.