UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 2

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

For the fiscal year ended: June 30, 2008

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

For the transition period from __________ to ____________

Commission File Number: 000-51908

SUTOR TECHNOLOGY GROUP LIMITED

(Exact name of registrant as specified in its charter)

Nevada	87-0578370
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

No 8, Huaye Road, Dongbang Industrial Park

Changshu, China, 215534

(Address of principal executive office and zip code)

(86) 512-52680988

(Registrant’s telephone number, including area code)

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

Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, par value $0.0001		NASDAQ Capital Market

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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

Yes x No ¨

Indicate by check mark 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

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

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

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company x

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

Yes ¨ No x

As of December 31, 2007, the aggregate market value of the shares of the Registrant’s common stock held by non-affiliates (based upon the closing price of such shares as reported on the Nasdaq) was approximately $32 million. Shares of the Registrant’s common stock held by each executive officer and director and each by each person who owns 10 percent or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of September 26, 2008, there were 37,955,602 shares of the Registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

Explanatory Note

This Amendment No. 2 to the Annual Report on Form 10-K for the fiscal year ended June 30, 2008 of Sutor Technology Group Limited (the “ Company ”) is being filed to (i) amend Item 1A by adding a risk factor related to our business, (ii) amend the discussion under the section “Liquidity and Capital Resources” in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, (iii) amend the disclosure in Item 9A – Controls and Procedures, (iv) amend the disclosure under Item 11 – Executive Compensation, (v) amend the disclosure under Item 13 – Certain Relationships and Related Party Transactions and Director Independence, (vi) amending the consolidated balance sheets, statements of cash flows and notes 1, 6 and 7 to the financial statements, and (v) amending the exhibit index, all in response to SEC comments.

PART I

ITEM 1A. RISK FACTORS

RISKS RELATED TO OUR BUSINESS

Our level of indebtedness may make it more difficult for us to fulfill all of our debt obligations and may reduce the amount of cash available for maintaining and growing our operations, which could have an adverse effect on our revenues.

Our total debt under existing loans to the Company as of June 30, 2008 was $163.75 million. This substantial indebtedness could impair our financial condition and our ability to fulfill all of our debt obligations, especially during a downturn in our business, in the industry in which we operate or in the general economy. Our indebtedness and the incurrence of any new indebtedness could (i) make it more difficult for us to satisfy our existing obligations, which could in turn result in an event of default on such obligations, (ii) require us to seek other sources of capital to finance cash used in operating activities, thereby reducing the availability of cash for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes, (iii) impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes; (iv) diminish our ability to withstand a downturn in our business, the industry in which we operate or the economy generally, (v) limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, or (vi) place us at a competitive disadvantage compared to competitors that have proportionately less debt. If we are unable to meet our debt service obligations, we could be forced to restructure or refinance our indebtedness, seek additional equity capital or sell assets. We may be unable to obtain financing or sell assets on satisfactory terms, or at all, which could cause us to default on our debt service obligations and be subject to foreclosure on such loans. Additionally, we could incur additional indebtedness in the future and, if new debt is added to our current debt levels, the risks above could intensify.

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

Liquidity and Capital Resources

Our major sources of liquidity for the 2008 and 2007 financial years were borrowings through short-term bank and private loans and the issuance of our capital stock. For the years ended June 30, 2008 and 2007, our operating activities used $34,969,414 and $28,556,487 of cash; therefore external sources of cash flows have been required and will likely continue to be required. At June 30, 2008, our total indebtedness under existing short-term loans was $129,192,870, our short-term notes payable to related parties was $1,311,510, and our long-term notes payable to related parties totaled $7,099,998.

Short-term bank and private loans are likely to continue to be our key sources of liquidity for the foreseeable future, although in the future we may decide to raise additional capital by issuing shares of our capital stock in an equity financing.

Our liquidity and working capital may be affected by a material decrease in cash flow due to factors such as the continued use of cash in operating activities resulting from a decrease in sales due to the current global economic crisis, increased competition, decreases in the availability, or increases in the cost, of raw materials, unexpected equipment failures, or regulatory changes. Please see section entitled “Risk Factors” for a more complete description of risks affecting our business, liquidity, working capital and financial results.

A portion of our operations is funded through short-term bank loans. As these loans become due, we may repay them in full at maturity or elect to refinance them. We are exposed to a variety of risks associated with short-term borrowings including adverse fluctuations in fixed interest rates for short-term borrowings and unfavorable increases in variable interest rates, potential inability to service our short term indebtedness through cash flow from operations and the overall reduction of credit in the current economic environment.

Our liquidity and working capital may also be affected by the substantial amount of our outstanding short-term loans, which represent our primary source of financing in China. Depending on the level of cash used in our operating activities and the level of our indebtedness, (i) it may become more difficult for us to satisfy our existing or future liabilities or obligations, which could in turn result in an event of default on such obligations, (ii) we may have to dedicate a substantial portion of our cash flows from borrowings to our operating activities and to debt service payments, thereby reducing the availability of cash for working capital and capital expenditures, acquisitions, general corporate purposes or other purposes, (iii) our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes may become impaired, (iv) our ability to withstand a downturn in our business, the industry in which we operate or the economy generally may be diminished, (v) we may experience limited flexibility in planning for, or reacting to, changes in our business and the industry in which we operate (vi)we may find ourselves at a competitive disadvantage compared to competitors that have proportionately less debt. If we are unable to meet our debt service obligations, we could be forced to restructure or refinance our indebtedness, seek additional equity capital or sell assets. We may be unable to obtain financing or sell assets on satisfactory terms, or at all, which could cause us default on our debt service obligations and be subject to foreclosure on such loans. Additionally, we could incur additional indebtedness in the future and, if new debt is added to our current debt levels, the risks above could intensify.

As some of our loans become due, we may elect to refinance, rather than repay, the indebtedness. However, there is no assurance that additional financing will become available on terms acceptable to us. We believe that we will have the ability to refinance our indebtedness when and if we elect to do so. While we currently are not in a position to know the terms of such refinancing, we expect to refinance our indebtedness at prevailing market rates and on prevailing market terms.

As of June 30, 2008, we had cash and cash equivalents (excluding restricted cash) of $11.81 million and restricted cash of $59.49 million. The following table provides detailed information about our net cash flow for all financial statement periods presented in this annual report.

Cash Flow

(all amounts in thousands of U.S. dollars)

	For the Fiscal Year Ended June 30,
	2008			2007
Net cash (used in) operating activities	$	(34,969	)	$	(28,556	)
Net cash (used in) investing activities		(37,771	)		(3,567	)
Net cash provided by financing activities		74,573			34,093
Net cash flow	$	2,973		$	2,298

Operating Activities:

Net cash used in operating activities was $34.97 million in fiscal year 2008, an increase of $6.41 million from the $28.56 million net cash used in operating activities in fiscal year 2007. Such increase of net cash used in operating activities was primarily attributable to a $61.34 increase in advances to suppliers-related parties, a $28.62 decrease in advances to suppliers and a $15.55 million increase in inventory which more than offset the increase in net income and advances from customers and the decrease in trade account receivables. The increase in advances to suppliers, inventory and related parties receivable was mainly due to increase in purchase of raw materials made to accommodate the increased production and high market demands for our products.

Investing Activities:

Our main uses of cash for investing activities are payments relating to the acquisition of property, plant and equipment and restricted cash pledged as deposits for bankers’ acceptance bills.

Net cash used in investing activities in fiscal year 2008 was $37.77 million, which is an increase of $34.20 million from net cash used in investing activities of $3.57 million in fiscal year 2007. Such increase of net cash used in investing activities was mainly due to a $32.61 million increase in restricted cash and a $2.02 million increase in purchase of property and equipment in fiscal year 2008. In fiscal year 2008, a large portion of our payments was made through bankers’ acceptance bills rather than cash. As a result, we had more restricted cash deposited in banks as deposits for the acceptance bills.

Financing Activities:

Net cash provided by financing activities in fiscal year 2008 totaled $74.57 million as compared to $34.09 million provided by financing activities in fiscal year 2007. The increase of cash provided by financing activities was mainly attributable to an increase of $24.99 million in proceeds from issuance of notes payable in fiscal year 2008 and $21.04 million in fiscal year 2007 to acquire the 100% equity of our subsidiaries Changshu Huaye and Jiangsu Cold-Rolled.

We believe we currently maintain a good business relationship with many banks. As of June 30, 2008, the amount, maturity date and term of each of our bank loans were as follows. Note that as of September 11, 2008, all loans that matured before such date have been paid off.

(All amounts in million of U.S. dollars)

Banks	Amounts*		Starting Date	Maturity Date	Guarantor**
China Agriculture Bank Changshu Branch	$	1.43	February 1, 2008	August 1, 2008	None
China Industry and Commerce Bank Changshu Branch		2.91	March 10, 2008	September 9, 2008	None
China Agriculture Bank Changshu Branch		1.46	May 20, 2008	November 20, 2008	None
China Agriculture Bank Changshu Branch		0.73	June 27, 2008	December 27, 2008	None
Bank of Jiangsu Xuzhou Branch		11.64	January 11, 2008	July 11, 2008	Shanghai Huaye
China Agriculture Bank Changshu Branch		0.29	January 24, 2008	July 24, 2008	None
China Industry and Commerce Bank Changshu Branch		1.75	February 27, 2008	August 26, 2008	None
China Industry and Commerce Bank Changshu Branch		2.18	March 20, 2008	September 19, 2008	None
China Construction Bank Changshu Branch		8.73	April 2, 2008	October 2, 2008	Shanghai Huaye
Changshu Rural Commercial Bank		1.46	April 14, 2008	October 14, 2008	None
Ever Growing Bank Nanjing Branch		7.28	April 17, 2008	October 17, 2008	Shanghai Huaye
Ever Growing Bank Nanjing Branch		8.73	April 22, 2008	October 22, 2008	Shanghai Huaye
China Agriculture Bank Changshu Branch		1.02	April 30, 2008	October 30, 2008	None
China Agriculture Bank Changshu Branch		4.37	May 26, 2008	November 26, 2008	None
Changshu Rural Commercial Bank		6.40	May 27, 2008	November 27, 2008	Shanghai Huaye
China Agriculture Bank Changshu Branch		0.73	June 5, 2008	December 5, 2008	None
China Agriculture Bank Changshu Branch		4.37	June 10, 2008	December 10, 2008	None
China Citic Bank Wuxi Branch		2.91	August 3, 2007	August 3, 2008	Shanghai Huaye
Bank of Jiangsu Nantong Branch		2.91	August 8, 2007	August 7, 2008	Shanghai Huaye
Bank of China Changshu Branch		1.75	March 12, 2008	September 10, 2008	Shanghai Huaye
Changshu Rural Commercial Bank		1.75	March 20, 2008	September 19, 2008	None
Changshu Rural Commercial Bank		0.73	April 14, 2008	October 13, 2008	None
Changshu Rural Commercial Bank		2.62	April 14, 2008	October 13, 2008	None
China Industry and Commerce Bank Changshu Branch		1.46	April 7, 2008	April 6, 2009	None
China Industry and Commerce Bank Changshu Branch		1.46	April 14, 2008	April 13, 2009	None
China Industry and Commerce Bank Changshu Branch		1.46	May 21, 2008	May 20, 2009	None
Bank of Communications Changshu Branch		2.91	May 30, 2008	November 25, 2008	Shanghai Huaye
China Agriculture Bank Changshu Branch		1.89	February 18, 2008	August 17, 2008	None
China Agriculture Bank Changshu Branch		11.79	March 4, 2008	September 3, 2008	Shanghai Huaye
China Agriculture Bank Changshu Branch		2.91	May 16, 2008	November 15, 2008	Shanghai Huaye/ Changshu Huaye
China Agriculture Bank Changshu Branch		4.37	May 19, 2008	November 18, 2008	Shanghai Huaye/ Changshu Huaye
China Agriculture Bank Changshu Branch		4.37	May 22, 2008	November 21, 2008	Shanghai Huaye/ Changshu Huaye
China Agriculture Bank Changshu Branch		2.91	May 30, 2008	November 29, 2008	Shanghai Huaye/ Changshu Huaye
China Agriculture Bank Changshu Branch		4.37	June 6, 2008	December 5, 2008	Shanghai Huaye/ Changshu Huaye
China Agriculture Bank Changshu Branch		9.60	June 18, 2008	December 17, 2008	Shanghai Huaye/ Changshu Huaye
China Agriculture Bank Changshu Branch		1.46	June 30, 2008	December 28, 2008	Shanghai Huaye/ Changshu Huaye
Chen Lifang		1.31	May 15, 2008	May 15, 2009	None
Chen Lifang		7.10	December 20, 2007	December 20, 2000	None
Total	$	137.60

*Calculated on the basis that $1 = RMB 6.87180

** We do not pay any consideration to Shanghai Huaye or its affiliated companies, which are controlled by our CEO and her spouse, for the guarantees of our loans.

The loan agreements with banks contain debt covenants that require the Company to maintain certain inventory levels. The Company was in compliance with these debt covenants at June 30, 2008.

Our material capital expenditure requirements for fiscal year 2009 are approximately $20 million, which will be used for updating and expansion of our production lines, equipment and facilities. In addition, we expect that an additional $20 million of working capital will be needed to maintain our business operations in the next twelve months which will be raised through bank loans. In the coming 12 months, we have approximately $129.2 million in bank loans that will mature. We plan to replace these loans with new bank loans in approximately the same aggregate amounts.

We believe that our currently available working capital after receiving the aggregate proceeds of Sutor Group’s capital raising activities, the credit facilities referred to above and the expected additional credit facility should be adequate to sustain our operations at our current levels through at least the next twelve months. However, depending on our future needs and changes and trends in the capital markets affecting our shares and the Company, we may determine to seek additional equity or debt financing in the private or public markets.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

Functional Currency and Translating Financial Statements - The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The functional currency of the Company is the Chinese Yuan Renminbi ( “RMB” ); however, the accompanying consolidated financial statements have been expressed in United States Dollars ( “USD” ). The accompanying consolidated balance sheets have been translated into USD at the exchange rates prevailing at each balance sheet date. The accompanying consolidated statements of operations and cash flows have been translated using the weighted-average exchange rates prevailing during the periods of each statement. Transactions in the Company ’s equity securities have been recorded at the exchange rate existing at the time of the transaction.

Principles of Consolidation - The operations of Changshu Huaye and Jiangsu Cold-Rolled have been included in the accompanying consolidated financial statements for all periods presented. The accounts and transactions of Sutor Steel Technology Co., Ltd. have been included from its formation on August 15, 2006. The accounts and transactions of Sutor Technology Group Limited have been included from February 1, 2007. All significant intercompany accounts and transactions have been eliminated in consolidation.

Restricted Cash - The Company has entered into agreements to pay suppliers, which require the Company to maintain cash balances as security for notes payable to the suppliers. These secured cash balances are presented in the consolidated balance sheets as restricted cash.

Advances to Suppliers and from Customers - The Company, as is common practice in the PRC, will often make advance payments to its suppliers for materials, or receive advance payments from its customers. The Company had net advances to suppliers of $28,035,815 and $32,791,928 at June 30, 2008 and 2007, respectively. The Company also had advances from its customers in the amount of $16,871,618 and $8,414,629 at June 30, 2008 and 2007, respectively.

Revenue Recognition - The Company recognizes revenues from the sale of products when they are realized and earned. The Company considers revenue realized or realizable and earned when (1) it has persuasive evidence of an arrangement, (2) delivery has occurred, (3) the sales price is fixed or determinable, and (4) collectibility is reasonably assured. Revenues are not recognized until products have been shipped to the client, risk of loss has transferred to the client and client acceptance has been obtained, client acceptance provisions have lapsed, or the Company has objective evidence that the criteria specified in client acceptance provisions have been satisfied.

As discussed in Note 7 to the consolidated financial statements included elsewhere in this annual report , the Company sells product to affiliates, who in turn sell the product to various other third party customers. The price, terms and conditions on the sales to affiliates are the same as those to third parties. Revenue is considered realized or realizable and earned when the affiliates ship the product to third party customers. A fee of 0.5% of the sale is paid to the affiliate for handling the product. These handling fees have been classified as selling expenses in the statement of operations.

Cost of Revenue - Cost of products sold includes wages, materials, handling charges, and other expenses associated with the manufacture and delivery of product.

Basic and Diluted Earnings per Common Share - The computation of basic earnings per common share is based on income divided by the weighted-average number of common shares outstanding after giving effect of using the if-converted method for qualified participating securities during each period presented where the qualified participating securities are dilutive. Diluted earnings per common share are calculated by dividing income assuming dilution by the weighted-average number of common shares and potential dilutive shares of common stock issuable upon conversion of non-participating shares. The Company does not have any non-participating potentially dilutive securities. The calculations of basic and diluted income per share were as follows:

	For the Years Ended June 30,
	2008		2007		2006
Net income	$	31,135,970	$	20,520,391	$	11,528,200
Weighted-average common shares outstanding		37,955,602		4,181,750		-
Effect of participating convertible Series A and Series B preferred stock		-		30,418,273		29,373,303
Weighted-average basic and dilutive common shares Outstanding		37,955,602		34,600,023		29,373,303

Basic and Diluted Earnings per Common Share	$	0.82	$	0.59	$	0.39

The following table discloses the metrics by which we determine our allowance for doubtful accounts in respect of our accounts receivable:

	Percentage of Account Receivable Included in Allowance for
Term of Outstanding Accounts Receivable	Doubtful Accounts
1-30 days		0.0	%
31-90 days		7.5	%
91-180 days		15.0	%
181-360 days		30.0	%
1-2 years		60.0	%
Over 2 years		100.0	%

ITEM 9A. CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, Ms. Lifang Chen and Yongfei Jiang, respectively, evaluated the effectiveness of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this report, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, Ms. Chen and Mr. Jiang concluded that because of the material weakness in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of June 30, 2008.

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

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

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

Although the Company is not required to have the auditor attestation until June 30, 2010, the Company hired an outside consultant to assist with the evaluation of the Company’s internal controls in effect for fiscal year 2008 and to develop a test plan by which the Company would be able to determine whether the internal controls functioned appropriately and to assist with the implementation of the test plan to determine the effectiveness of the controls. Together with the outside consultant, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2008 based on the framework set forth in the report entitled Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation, management concluded that our internal control over financial reporting as of June 30, 2008 was not effective. Management identified the following material weaknesses as of June 30, 2008:

	·	The absence of a financial reporting manager or other specialist employed by the Company on a full-time basis who is experienced in application of U.S. GAAP
	·	Weakness relating to the Company’s ability to correctly make necessary adjustments to its financial statements in accordance with U.S. GAAP in order to avoid the need for further adjustments.

Material audit adjustments, resulted from the difference between Chinese generally accepted accounting principles and U.S. GAAP, were made to reclassify related party revenues, related party notes payable, related party selling expenses and construction in progress, to record audit adjustments from the prior year, to record unrecorded liabilities and to adjust the allowance account for advances to supplies. The audit adjustments were material to the financial statements.

Although our accounting staff is professional and experienced in accounting requirements and procedures generally accepted in the PRC, management has determined that they require additional training and assistance in U.S. GAAP matters. Until such time as a full-time experienced accountant with knowledge of U.S. GAAP is recruited, the Company will engage a professional firm or individual to assist with the financial reporting.

Our management is not aware that the material weakness in our internal control over financial reporting causes them to believe that any material inaccuracies or errors existed in our financial statement as of June 30, 2008. The reportable conditions and other areas of our internal control over financial reporting identified by us as needing improvement have not resulted in a material restatement of our financial statements. Nor are we aware of any instance where such reportable conditions or other identified areas of weakness have resulted in a material misstatement of omission in any report we have filed with or submitted to the Commission.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management remains committed to improving its internal controls and will continue to work to put effective controls in place. The Company is actively recruiting staff with good knowledge of U.S. GAAP to assist in the Company’s financial reporting.

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

There were no changes in our internal controls over financial reporting during the fourth quarter of our fiscal year ended June 30, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning all compensation awarded to, earned by or paid to our Chief Executive Officer for services during the last two fiscal years in all capacities to us, our subsidiaries and predecessors. No other executive officer received compensation of $100,000 or more for the year ended June 30, 2008.

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Total ($)
Lifang Chen, CEO*	2008		-		-		-		-
	2007		-		-		-		-
Liuhua Guo, former CEO*	2008		88,568		-		-		88,568
	2007		70,424		-		-		70,424

* Mr. Guo resigned as our CEO in May 2008 and Ms. Chen was appointed as a replacement to Mr. Guo.

Employment Contracts

Currently, we do not have an employment agreement with our CEO, Ms. Lifang Chen.

Retirement Benefits

Currently, we do not provide any employees, including our named executive officers any company sponsored retirement benefits other than a state pension scheme in which all of our employees in China participate.

Payment Upon Termination or Change-in Control

The Company does not have change-in-control arrangements with any of its executive officers, and the Company is not obligated to pay severance or other enhanced benefits to executive officers upon termination of their employment.

Director Compensation - 2008

The following table sets forth information concerning all compensation paid to our non-employee directors for services rendered in all capacities for the year ended June 30, 2008.

Name	Fees Earned or Paid in Cash ($)		Total Compensation ($)
Carl Mudd		32,500		32,500
Guoyou Shao		8,572		8,572
Xinchuang Li		8,572		8,572

In February 2008, we entered into agreements with each of the independent directors. Under the terms of the agreements, Mr. Mudd is entitled to $65,000, Mr. Shao is entitled to RMB 120,000 (approximately $17,143) and Mr. Li is entitled to RMB 120,000 (approximately $17,143) as annual compensation for their service as independent directors, and as chairpersons of various board committees, as applicable. Mr. Mudd’s compensation is greater because he has greater responsibilities as the Audit Committee Chairman. Under the terms of the agreements, the independent directors are entitled to indemnification for expenses, judgments, fines, penalties or other amounts actually and reasonably incurred by the independent directors in connection with any proceeding if the independent director acted in good faith and in our best interests. The Company also reimburses our directors for reasonable travel expenses related to attendance at board and committee meetings.

Additionally, on February 4, 2008, we entered into Indemnification Agreements with each of Messrs. Mudd, Shao and Li. Under the terms of these Indemnification Agreements, the Company agreed to indemnify the independent directors against expenses, judgments, fines, penalties or other amounts actually and reasonably incurred by the independent directors in connection with any proceeding (other than a Proceeding by or in the right of the Company) if the independent director acted in good faith and in the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the independent director’s conduct was unlawful. The Company also agreed to pay any such expenses to an independent director in advance of the final disposition of any such proceeding if the director agrees to repay such amount to the extent it is ultimately determined they are not entitled to indemnification; provided, however, that the Company is not obligated to make any such advance payment if the board of directors determines, in its sole discretion, that it does not appear that such director has met the standards of conduct which make it permissible under applicable law to indemnify such director, and that the advancement of expenses would not be in the best interests of the Company and its stockholders.

Limitation of Liability and Indemnification of Officers and Directors

Our bylaws provide for the indemnification of our present and prior directors and officers or any person who may have served at our request as a director or officer of another corporation in which we own shares of capital stock or of which we are a creditor, against expenses actually and necessarily incurred by them in connection with the defense of any actions, suits or proceedings in which they, or any of them, are made parties, or a party, by reason of being or having been director(s) or officer(s) of us or of such other corporation, in the absence of negligence or misconduct in the performance of their duties. This indemnification policy could result in substantial expenditure by us, which we may be unable to recoup.

Insofar as indemnification by us for liabilities arising under the Securities Exchange Act of 1934, as amended, may be permitted to our directors, officers and controlling persons pursuant to provisions of the Articles of Incorporation and Bylaws, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Additionally, on February 4, 2008, we entered into Indemnification Agreements with each of Messrs. Mudd, Shao and Li, our independent directors. Under the terms of these Indemnification Agreements, the Company agreed to indemnify the independent directors against expenses, judgments, fines, penalties or other amounts actually and reasonably incurred by the independent directors in connection with any proceeding if the independent director acted in good faith and in the best interests of the Company as permitted under applicable state law.

At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding which may result in a claim for such indemnification.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE.

Transactions with Related Persons

The following includes a summary of transactions since the beginning of fiscal year ended June 30, 2007, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at the end of the fiscal years ended June 30, 2007 and 2008 ($2,271,172), and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm's-length transactions.

We paid off a note payable to Shanghai Huaye, which is 100% owned by our CEO Ms. Lifang Chen and her husband Feng Gao, in the amount of $2.33 million in August 2007. The note was incurred by the Company in the normal course of business and was non-interesting bearing.

We sell our products to and buy raw materials from various companies which are owned or controlled by our principal shareholders. The amounts charged for products to our Company by such related party are under the same pricing, terms and conditions as those charged to third parties, and are due upon receipt. These transactions are set forth below:

		Amount of Transaction
Related Party	Nature of Transaction	Fiscal 2007		Fiscal 2008
Changshu Diemate Steel Processing Co. Ltd.	Sale of products by Sutor	$	4,678,204	$	1,453,409
Chengdu Pusidun Steel Trade Co., Ltd.	Sale of products by Sutor		573,674		-
Guangzhou Huaye Steel Processing Co. Ltd.	Sale of products by Sutor		1,669,342		3,022,387
Hangzhou Nanye Material Co. Ltd.	Sale of products by Sutor		-		668,702
Hangzhou Xiaoshan Southern Industry Co., Ltd.	Sale of products by Sutor		1,098,956		-
Huaye (H.K.) Intl Group Co. Ltd.	Sale of products by Sutor		24,643,872		-
Nanjing Huye Iron & Steel Trading Co., Ltd.	Sale of products by Sutor		349,985		-
Ningbo Huaye Steel Processing Co., Ltd.	Sale of products by Sutor		1,880,394		1,690,847
Qingdao Beiye Iron and Steel Trade Co., Ltd.	Sale of products by Sutor		214,510
Shanghai Huaye Steel Processing Co., Ltd.	Sale of products by Sutor		6,913,643		12,477,142
Shanghai Huaye Steel Group Co., Ltd.	Sale of products by Sutor		101,915,699		159,050,906
Tianjin Huaye Weiye Steel Trade Co., Ltd.	Sale of products by Sutor		4,245,905		-
Wuxi Haide Steel Processing Co., Ltd.	Sale of products by Sutor		3,303,600		997,836
Wuxi Huaye Material Co., Ltd.	Sale of products by Sutor		502,459		-
Zhejiang Nanye Metal Cutting & Delivery Co., Ltd.	Sale of products by Sutor		2,361,227		1,492,766

On December 12, 2007, we entered into a purchase agreement with our CEO and Chairperson Ms. Lifang Chen and certain accredited investors, pursuant to which on December 14, 2007, Ms. Chen sold to certain accredited investors 2,000,000 shares of our common stock owned by her at a price of $4.25 per share for a purchase price of $8.5 million. The shares sold by Ms. Chen to these accredited investors are restricted securities and were originally acquired by Ms. Chen in connection with the reverse acquisition of Sutor BVI that was closed on February 1, 2007. Under the purchase agreement, we were obligated to register the shares sold by Ms. Chen within a pre-defined period. Ms. Chen was obligated under the agreement to bear all costs related to the registration of the shares. We fulfilled our obligation by filing the required registration statement in January 2008.

On December 20, 2007, Ms. Chen loaned our Company $7.1 million to be used for working capital purposes. The loan is for a period of 24 months and carries an interest rate of 5%. On May 15, 2008, Ms. Chen loaned our Company $1.3 million to be used for working capital. The loan is for a period of one year and carries no interest.

Some of our notes payables are guaranteed by Shanghai Huaye and its affiliates, as disclosed under the section “Liquidity and Capital Resources” under Item 7. We did not pay any stated or unstated consideration to Shanghai Huaye or its affiliates for their guarantees of our note payables.

Except as set forth in our discussion above, none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

Promoters and Certain Control Persons

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

Director Independence

Carl Mudd, Guoyou Shao, and Xinchuang Li each serves on our board of directors as an “independent director” as defined by Rule 4200(a)(15) of the Marketplace Rules of The Nasdaq Stock Market, Inc., or the “Nasdaq Marketplace Rules.” Our board of directors currently has three standing committees which perform various duties on behalf of and report to the board of directors: (i) audit committee, (ii) compensation committee and (iii) governance and nominating committee. Each of the three standing committees is comprised entirely of these three independent directors.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.

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

Financial Statement are set forth beginning on page F-1 of the Report

·	Report of Independent Registered Public Accounting Firm	F – 2

·	Consolidated Balance Sheets	F – 3

·	Consolidated Statement of Operations and Comprehensive Income	F – 4

·	Consolidated Statement of Stockholders’ Equity	F – 5

·	Consolidated Statement of Cash Flows	F – 6

·	Notes to Consolidated Statements	F – 7

Financial Statement Schedules: All Schedules are omitted because the information called for is not applicable, is not required, or because the financial information is set forth in the financial statements or notes thereto.

Exhibits: See the Exhibits immediately following the signature page of this Annual Report on Form 10-K.

SIGNATURES

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

	SUTOR TECHNOLOGY GROUP LIMITED

	By:	/s/ Lifang Chen
		Lifang Chen
		Chief Executive Officer

		Date: July 8, 2009

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

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

Signature	Capacity	Date

/s/ Lifang Chen	Chief Executive Officer (Principal Executive	July 8, 2009
Lifang Chen	Officer)

/s/ Yongfei Jiang	Chief Financial Officer (Principal Financial Officer	July 8, 2009
Yongfei Jiang	and Principal Accounting Officer)

/s/ Carl Mudd
Carl Mudd	Director	July 8, 2009

/s/ Guoyou Shao
Guoyou Shao	Director	July 8, 2009

/s/ Xinchuang Li
Xinchuang Li	Director	July 8, 2009

EXHIBITS

Exhibit No.		Description

2.1		Share Exchange Agreement, dated September 3, 2007, among BTHC III, Inc., Sutor Steel Technology Co., Ltd. and its stockholders. [Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on November 8, 2007]

2.2		Amendment No. 1 to Share Exchange Agreement, dated February 1, 2007, among the registrant, Sutor Steel Technology Co., Ltd. and its stockholders. [Incorporated by reference to Exhibit 2.2 to the registrant’s current report on Form 8-K filed on February 2, 2007]

3.1		Articles of Incorporation of the registrant as filed with the Secretary of State of Nevada, as amended to date. [Incorporated by reference to Exhibit 3.1 to the registrant’s quarterly report on Form 10Q-SB filed on November 3, 2007, in commission file number 333-83351]

3.2		Amended and Restated Bylaws of the registrant. [Incorporated by reference to Exhibit 3.2 to the registrant’s registration statement on Form SB-2 filed on July 21, 1999, in commission file number 333-83351].

4.1		Certificate of Designation of Series B Voting Convertible Preferred Stock. [Incorporated by reference to Exhibit 4.1 to the registrant’s current report on Form 8-K filed on February 2, 2007]

4.2		Form of Registration Rights Agreement, dated February 1, 2007. [Incorporated by reference to Exhibit 4.2 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.1		Assignment Agreement, dated November 7, 2007, by and among the registrant, BTHC III, Inc., Sutor Steel Technology Co., Ltd. and its stockholders. [Incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed on November 8, 2007]

10.2		Form of the Securities Purchase Agreement, dated February 1, 2007. [Incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.3		Make Good Escrow Agreement, dated February 1, 2007, by and among the registrant, Roth Capital Partners, LLC, Ms. Lifang Chen and Wells Fargo Bank, National Association. [Incorporated by reference to Exhibit 10.3 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.4		Closing Escrow Agreement, dated January 25, 2007, by and among the registrant, Roth Capital Partners, LLC and Thelen Reid Brown Raysman & Steiner LLP. [Incorporated by reference to Exhibit 10.4 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.5		Equity Transfer Agreement, dated August 18, 2006, by and among Shanghai Huaye Iron & Steel Group Co., Ltd., Huaye (Hong Kong) International Group Limited and Sutor Steel Technology Co., Ltd. regarding the acquisition of Changshu Huaye Steel Strip Co., Ltd. [Incorporated by reference to Exhibit 10.6 to the registrant’s current report on Form 8-K filed on February 2, 2007]
10.6		Equity Transfer Agreement, dated August 18, 2006, by and among Shanghai Huaye Iron & Steel Group Co., Ltd., Huaye (Hong Kong) International Group Limited and Sutor Steel Technology Co., Ltd. regarding the acquisition of Jiangsu Cold-Rolled Technology Co., Ltd. [Incorporated by reference to Exhibit 10.5 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.7		Procurement Cooperation Frame Agreement, dated December 7, 2006, by and between Changshu Huaye Steel Strip Co., Ltd. and Shanghai Huaye Iron & Steel Group Co., Ltd. [Incorporated by reference to Exhibit 10.7 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.8		Sales Cooperation Frame Agreement, dated December 7, 2006, by and between Changshu Huaye Steel Strip Co., Ltd. and Shanghai Huaye Iron & Steel Group Co., Ltd. [Incorporated by reference to Exhibit 10.8 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.9		Notification Concerning Licensing the Brand Name of “Huaye” to Changshu Huaye Steel Strip Co., Ltd., dated August 15, 2005, from Shanghai Huaye Iron & Steel Group Co., Ltd. to Changshu Huaye Steel Strip Co., Ltd. [Incorporated by reference to Exhibit 10.9 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.10		Employment Agreement, dated December 26, 2006, by and between Sutor Steel Technology Co., Ltd. and Guoxiang Ni. [Incorporated by reference to Exhibit 10.10 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.11		Employment Agreement, dated December 26, 2006, by and between Sutor Steel Technology Co., Ltd. and Yongfei Jiang. [Incorporated by reference to Exhibit 10.11 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.12		Employment Agreement, dated December 26, 2006, by and between Sutor Steel Technology Co., Ltd. and Liuhua Guo. [Incorporated by reference to Exhibit 10.12 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.13		Consulting Agreement, dated November 1, 2006, by and among Heritage Management Consultants, Inc., Sutor Steel Technology Co., Ltd. and HFG International, Limited. [Incorporated by reference to Exhibit 10.13 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.14		Financial Advisory Agreement, dated July 3, 2006, by and among HFG International, Limited, Changshu Huaye Steel Strip Co., Ltd and Jiangsu Cold-Rolled Technology Co., Ltd. [Incorporated by reference to Exhibit 10.14 to the registrant’s current report on Form 8-K filed on February 2, 2007]

10.15		Consulting Agreement, dated January 8, 2007, by and between the registrant and Heritage Management Consultants, Inc. [Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on January 9, 2007]

10.16		Consulting Agreement, dated January 8, 2007, by and between the registrant and Ye Zong. [Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on January 9, 2007]

10.17		Consulting Agreement, dated January 8, 2007, by and between the registrant and Jingshi Cai. [Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on January 9, 2007]

10.18		Form of Sales Agent Cooperation Agreement. [Incorporated by reference to Exhibit 10.18 to the registrant’s Amendment No. 1 to registration statement on Form S-1 filed on June 4, 2007]

10.19		Employment Agreement, dated July 10, 2007, by and between Sutor Steel Technology Co., Ltd. and Liuhua Guo. [Incorporated by reference to Exhibit 10.21 to the registrant’s registration statement on Form S-1 filed on July 13, 2007]

10.20		Employment Agreement, dated July 10, 2007, by and between Sutor Steel Technology Co., Ltd. and Xun Zhang. [Incorporated by reference to Exhibit 10.22 to the registrant’s registration statement on Form S-1 filed on July 13, 2007]

10.21		Loan Agreement, dated December 20, 2007, by and between Sutor Steel Technology Co., Ltd. and Lifang Chen. [Incorporated by reference to Exhibit 10.23 to the registrant’s registration statement on Form S-1, filed January 28, 2008, in Commission file no. 333-148898.]

10.22		Loan Agreement, dated May 15, 2008, by and between Lifang Chen and Jiangsu Cold-Rolled (English Translation) [Incorporated by reference to Exhibit 99.1 to the registrant’s periodic report on Form 10-Q for the quarter ended September 30, 2008.]
10.23		Loan Agreement, dated July 1, 2008, by and between Lifang Chen and Jiangsu Cold-Rolled (English Translation) [Incorporated by reference to Exhibit 99.2 to the registrant’s periodic report on Form 10-Q for the quarter ended September 30, 2008.]

10.24		Sutor Technology Group Limited Independent Director’s Contract, dated as of February 4, 2008, by and between Sutor Technology Group Limited and A. Carl Mudd [Incorporated by reference to Exhibit 10.1 to the registrant current report on Form 8-K filed on February 8, 2008]

10.25		Sutor Technology Group Limited Independent Director’s Contract, dated as of February 4, 2008, by and between Sutor Technology Group Limited and Guoyou Shao [Incorporated by reference to Exhibit 10.2 to the registrant current report on Form 8-K filed on February 8, 2008]

10.26		Sutor Technology Group Limited Independent Director’s Contract, dated as of February 4, 2008, by and between Sutor Technology Group Limited and Xinchuang Li [Incorporated by reference to Exhibit 10.3 to the registrant current report on Form 8-K filed on February 8, 2008]

10.27		Indemnification Agreement, dated as of February 4, 2008, by and between Sutor Technology Group Limited and A. Carl Mudd [Incorporated by reference to Exhibit 10.4 to the registrant current report on Form 8-K filed on February 8, 2008]

10.28		Indemnification Agreement, dated as of February 4, 2008, by and between Sutor Technology Group Limited and Guoyou Shao [Incorporated by reference to Exhibit 10.5 to the registrant current report on Form 8-K filed on February 8, 2008]

10.29		Indemnification Agreement, dated as of February 4, 2008, by and between Sutor Technology Group Limited and Xinchuang Li [Incorporated by reference to Exhibit 10.6 to the registrant current report on Form 8-K filed on February 8, 2008]

14		Amended and Restated Business Ethics Policy and Code of Conduct. [Incorporated by reference to Exhibit 14 to the registrant’s current report on Form 8-K filed on February 2, 2007]

21		List of subsidiaries of the registrant. [Incorporated by reference to Exhibit 21 to the registrant’s current report on Form 8-K filed on February 2, 2007]

24		Power of Attorney (included on the signature page of this annual report).

31.1		Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certifications Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets as of June 30, 2008 and 2007		F-3

Consolidated Statements of Operations and Comprehensive Income for the Years Ended June 30, 2008, 2007 and 2006		F-4

Consolidated Statements of Stockholders’ Equity for the Years Ended June 30, 2006, 2007 and 2008		F-5

Consolidated Statements of Cash Flows for the Years Ended June 30, 2008, 2007 and 2006		F-6

Notes to Consolidated Financial Statements		F-7

F-1

HANSEN, BARNETT & MAXWELL, P.C.

A Professional Corporation

CERTIFIED PUBLIC ACCOUNTANTS

5 Triad Center, Suite 750

Salt Lake City, UT 84180-1128

Phone: (801) 532-2200

Fax: (801) 532-7944

www.hbmcpas.com

Registered with the Public Company

Accounting Oversight Board

A Member of the Forum of Firms

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and the Stockholders

Sutor Technology Group Limited

We have audited the accompanying consolidated balance sheets of Sutor Technology Group Limited and subsidiaries as of June 30, 2008 and 2007, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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 audits 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 of designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sutor Technology Group Limited and subsidiaries as of June 30, 2008 and 2007 and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2008, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1, the accompanying consolidated financial statements have been restated for the effects of correcting the classification of notes payable as of June 30, 2008.

HANSEN, BARNETT & MAXWELL, P.C.

Salt Lake City, Utah

September 19, 2008, except for Note 1 regarding the restatement of financial statements, as to which the date is July 2, 2009

F-2

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30,		June 30,
	2008		2007
ASSETS
Current Assets:
Cash and cash equivalents	$	11,806,101	$	8,832,942
Restricted cash		59,489,508		27,799,475
Trade accounts receivable, net of allowance for doubtful accounts of $70,653 and $2,947, respectively		6,268,858		14,768,954
Other receivables		100,271		44,226
Advances to suppliers, related parties		76,118,544		-
Advances to suppliers, net of allowance of $1,472,828 and $499,842, respectively		28,035,815		32,791,928
Inventory		51,315,521		22,703,304
Notes receivable		130,970		203,546
Deferred taxes		288,976		-
Total Current Assets		233,554,564		107,144,375
Property and Equipment, net of accumulated depreciation of $12,019,445 and $6,726,756, respectively		59,736,612		47,571,353
Intangible Assets, net of accumulated amortization of $285,888 and $188,132, respectively		3,238,931		2,988,589
TOTAL ASSETS	$	296,530,107	$	157,704,317

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	6,003,898	$	3,916,596
Advances from customers		16,871,618		8,414,629
Other payables and accrued expenses		3,265,860		2,707,473
Short-term notes payable		129,192,870		50,954,916
Short-term notes payable - related party		1,311,510		2,325,802
Total Current Liabilities		156,645,756		68,319,416
Long-Term Notes Payable - Related Party		7,099,998		-
Total Liabilites		163,745,754		68,319,416

Minority Interest in Net Assets of Subsidiary		34,697		32,812
Stockholders' Equity
Undesignated preferred stock - $0.001 par value; 1,000,000 shares authorized; no shares outstanding		-		-
Common stock - $0.001 par value; 500,000,000 shares authorized; 37,955,602 shares outstanding		37,955		37,955
Additional paid-in capital		37,170,164		37,170,164
Statutory reserves		12,586,995		7,748,269
Retained earnings		65,772,975		39,475,731
Accumulated other comprehensive income		17,181,567		4,919,970
Total Stockholders' Equity		132,749,656		89,352,089
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	296,530,107	$	157,704,317

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

F-3

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

	For the Years Ended June 30,
	2008			2007			2006
Revenue:
Revenue	$	237,494,371		$	147,466,726		$	45,941,894
Revenue from related parties		180,535,469			155,972,011			144,652,445
		418,029,840			303,438,737			190,594,339
Cost of Revenue
Other cost of revenue		266,149,352			115,285,842			57,220,341
Purchases from related parties		106,960,453			157,615,325			117,436,244
		373,109,805			272,901,167			174,656,585

Gross Profit		44,920,035			30,537,570			15,937,754

Operating Expenses:
Selling expense		2,237,957			2,319,728			1,894,452
General and administrative expense		3,749,453			4,735,973			1,254,613
Total Operating Expenses		5,987,410			7,055,701			3,149,065
Income from Operations		38,932,625			23,481,869			12,788,689

Other Income (Expense):
Interest income		943,466			566,469			467,443
Other income		188,273			298,488			185,664
Interest expense		(6,253,098	)		(2,258,425	)		(923,673	)
Other expense		(756,943	)		(874,651	)		(155,497	)
Total Other Income (Expense)		(5,878,302	)		(2,268,119	)		(426,063	)

Income Before Taxes and Minority Interest		33,054,323			21,213,750			12,362,626
Provision for income taxes		(1,916,468	)		(696,754	)		(858,940	)
Minority interest in loss of consolidated subsidiary		(1,885	)		3,395			24,514

Net Income	$	31,135,970		$	20,520,391		$	11,528,200

Basic and Diluted Earnings per Common Share	$	0.82		$	0.59		$	0.39

Net Income	$	31,135,970		$	20,520,391		$	11,528,200
Foreign currency translation adjustment		12,261,597			3,488,320			1,440,146
Comprehensive Income	$	43,397,567		$	24,008,711		$	12,968,346

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

F-4

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED JUNE 30, 2006, 2007 AND 2008

																								Accumulated
	Series A Voting Convertible						Series B Voting Convertible										Additional							Other			Total
	Preferred Stock						Preferred Stock						Common Stock				Paid in			Statutory		Retained		Comprehensive			Stockholders’
	Shares			Amount			Shares			Amount			Shares		Amount		Capital			Reserves		Earnings		Income (Loss)			Equity
Balance, June 30, 2005		-		$	-			279,415.53		$	22,586,429			-	$	-	$	-		$	3,163,599	$	12,011,810	$	(8,496	)	$	37,753,342
Issuance for cash, December		-			-			24,767.20			1,999,668			-		-		-			-		-		-			1,999,668
Net income for the year		-			-			-			-			-		-		-			2,501,290		9,026,910		-			11,528,200
Foreign currency translation adjustment		-			-			-			-			-		-		-			-		-		1,440,146			1,440,146

Balance, June 30, 2006		-			-			304,182.73			24,586,097			-		-		-			5,664,889		21,038,720		1,431,650			52,721,356
Issuance for cash, July		-			-			18,578.48			1,500,000			-		-		-			-		-		-			1,500,000
Issuance for cash, November		-			-			619.29			21,059,950			-		-		-			-		-		-			21,059,950
Capital distributions		-			-			-			(21,036,767	)		-		-		-			-		-		-			(21,036,767	)
Issuance for cash, February		-			-			39,473.56			10,570,762			-		-		-			-		-		-			10,570,762
Issuance to acquire Bronze Marketing, Inc.		135,000			-			-			-			150,000		150		(150	)		-		-		-			-
Issuance for services		20,122			528,077			-			-			-		-		-			-		-		-			528,077
Conversion of Series A Preferred Stock into common stock		(155,122	)		(528,077	)		-			-			1,520,196		1,520		526,557			-		-		-			-
Conversion of Series B Preferred Stock into common stock		-			-			(362,854.06	)		(36,680,042	)		36,285,406		36,285		36,643,757			-		-		-			-
Net income for the year		-			-			-			-			-		-		-			2,083,380		18,437,011		-			20,520,391
Foreign currency translation adjustment		-			-			-			-			-		-		-			-		-		3,488,320			3,488,320

Balance, June 30, 2007		-			-			-			-			37,955,602		37,955		37,170,164			7,748,269		39,475,731		4,919,970			89,352,089
Net income for the year		-			-			-			-			-		-		-			4,838,726		26,297,244		-			31,135,970
Foreign currency translation adjustment		-			-			-			-			-		-		-			-		-		12,261,597			12,261,597
Balance, June 30, 2008		-		$	-			-		$	-			37,955,602	$	37,955	$	37,170,164		$	12,586,995	$	65,772,975	$	17,181,567		$	132,749,656

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

F-5

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended June 30,
	2008			2007			2006
Cash Flows from Operating Activities:
Net income	$	31,135,970		$	20,520,391		$	11,528,200
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization		4,384,418			2,708,805			1,836,727
Minority interest in loss of consolidated subsidiary		1,885			(3,395	)		(24,514	)
Deferred income taxes		(272,375	)		-			-
Stock based compensation		-			528,077			-
Gain on sale of property and equipment		(2,844	)		-			-
Changes in current assets and liabilities:
Trade accounts receivable, net		9,537,171			(13,596,643	)		(694,786	)
Other receivables, net		(48,258	)		(41,539	)		62,895
Advances to suppliers		7,869,743			(20,747,998	)		355,095
Inventories		(24,623,639	)		(9,075,799	)		4,236,357
Accounts payable		1,562,872			395,630			(5,429,417	)
Advances from customers		7,102,064			490,208			7,140,491
Other payables and accrued expenses		257,455			802,466			856,622
Related party receivables or payables		(71,873,877	)		(10,536,690	)		10,625,951
Net Cash Provided by (Used in) Operating Activities		(34,969,415	)		(28,556,487	)		30,493,621

Cash Flows from Investing Activities:
Changes in notes receivable		89,430			(126,402	)		(69,593	)
Purchase of property and equipment, net of value added tax refunds received		(10,872,302	)		(8,850,305	)		(18,963,778	)
Proceeds from sale of property and equipment		10,369			-			-
Purchase of land use rights		-			(198,301	)		167,530
Net change in restricted cash		(26,998,292	)		5,607,772			(9,573,358	)
Net Cash Used in Investing Activities		(37,770,795	)		(3,567,236	)		(28,439,199	)

Cash Flows from Financing Activities:
Proceeds from issuance of notes payable		160,238,315			136,558,731			22,210,230
Payments on notes payable		(91,833,084	)		(112,004,593	)		(15,037,160	)
Proceeds from issuance of Series B preferred stock		-			33,130,712			1,999,668
Proceeds from issuance of notes payable - related party		8,411,508			-			-
Payments on notes payable - related party		(2,244,164	)		-			-
Payments on long-term debt		-			(2,554,598	)		(6,187,169	)
Capital distribution to shareholders		-			(21,036,767	)		-
Net Cash Provided by Financing Activities		74,572,575			34,093,485			2,985,569

Effect of Exchange Rate Changes on Cash		1,140,794			328,687			(63,894	)

Net Change in Cash		2,973,159			2,298,449			4,976,097
Cash and Cash Equivalents at Beginning of Year		8,832,942			6,534,493			1,558,396
Cash and Cash Equivalents at End of Year	$	11,806,101		$	8,832,942		$	6,534,493

Supplemental Cash Flow Information
Cash paid during the period for interest	$	5,952,002		$	2,258,425		$	923,673
Cash paid during the period for taxes	$	3,746,316		$	2,436,656		$	156,991

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

F-6

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND OPERATIONS

Organization and Basis of Presentation - On January 17, 2003, Changshu Huaye Steel Strip Co., Ltd. (“Changshu Huaye”) was organized under the laws of the People’s Republic of China (the “PRC”) and on August 28, 2003, Jiangsu Cold-Rolled Technology Co., Ltd. (“Jiangsu Cold-Rolled”) was organized under the laws of the PRC. Both were organized by Huaye (H.K.) International Group Company Limited (“Hong Kong Huaye”) and Shanghai Huaye Iron & Steel Co., Ltd., (“Shanghai Huaye”). Hong Kong Huaye and Shanghai Huaye are each owned 41% and 59%, respectively, by two individuals (the “Principal Shareholders”).

On August 15, 2006, the Principal Shareholders formed Sutor Steel Technology Co., Ltd. (“Sutor Steel”) under the laws of the British Virgin Islands and agreed to purchase and were issued 50,000 shares of Sutor Steel’s common stock (before the recapitalization described below) for $50,000. However, by November 13, 2006, the Principal Shareholders had made capital contributions of cash in the amount of $21,059,950 instead of the $50,000 previously agreed upon. By November 13, 2006, Sutor Steel had received a business license from the government of the PRC permitting the acquisition of Changshu Huaye and Jiangsu Cold-Rolled, and on November 13, 2006, Sutor Steel acquired all of the outstanding ownership interest in Changshu Huaye and Jiangsu Cold-Rolled from Shanghai Huaye and Hong Kong Huaye in exchange for cash payments of $21,036,767.

The acquisition of Changshu Huaye and Jiangsu Cold-Rolled by Sutor Steel was the transfer of net assets in exchange for common stock between entities under common control and the assets and liabilities transferred remained at their historical carrying amounts at the date of transfer. The reorganization of Changshu Huaye and Jiangsu Cold-Rolled into Sutor Steel was accounted for as a recapitalization of Changshu Huaye and Jiangsu Cold-Rolled in a manner similar to a stock split and the accompanying consolidated financial statements have been restated to reflect the 50,000 shares of common stock issued to the Principal Shareholders as outstanding for all periods presented (before the recapitalization described below). The $21,059,950 received from the Principal Shareholders and the $21,036,767 cash payments made to Shanghai Huaye and Hong Kong Huaye were recognized as capital contributions and capital distributions, respectively, on the date they occurred.

On November 7, 2006, Bronze Marketing, Inc., a Nevada corporation, (“Bronze”) entered into an assignment agreement with BTHC III, Inc., an unrelated third-party, Sutor Steel and Sutor Steel’s shareholders (the Principal Shareholders), whereby Bronze assumed all rights and obligations of BTHC III, Inc. pursuant to a Share Exchange Agreement dated September 7, 2006. On February 1, 2007, the Share Exchange Agreement, as amended, (the “Exchange Agreement”) was consummated and Bronze acquired 100% of the equity interest of Sutor Steel from the Principal Shareholders in exchange for the issuance of 323,380.50 shares of Series B voting convertible preferred stock (the “Series B Preferred Stock”) and the Principal Shareholders received a majority of the voting equity interests of Bronze. The reorganization of Sutor Steel into Bronze under the Exchange Agreement was accounted for as the recapitalization of Sutor Steel at historical cost. The accompanying consolidated financial statements have been restated on a retroactive basis to reflect the 323,380.50 shares of Series B Preferred Stock issued to the Principal Shareholders as outstanding for all periods presented.

On January 31, 2007, a majority of the Bronze shareholders approved an amendment to the Bronze articles of incorporation to change its name to Sutor Technology Group Limited and to increase the authorized common stock from 100,000,000 shares to 500,000,000 shares. The amendment to the articles of incorporation became effective on March 6, 2007.

F-7

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

References herein to the “Company” or “Sutor Steel” refer both to Sutor Steel Technology Co., Ltd., a private company, and its subsidiaries for the periods prior to February 1, 2007, and to Sutor Technology Group Limited (formerly Bronze Marketing, Inc.), a public company, and its subsidiaries for the periods following February 1, 2007. References to “Bronze” refer solely to the corporate entity for the periods prior to February 1, 2007.

Nature of Operations - The operations of Changshu Huaye are located in the PRC. Changshu Huaye manufactures hot-dip galvanized steel (“HDG Steel”) and pre-painted galvanized steel (“PPGI”). In addition, Changshu Huaye owns a 90% interest in a consolidated subsidiary, Changshu Dongbang Sewage Treatment Co., Ltd. which is also located in the PRC. For the year ended June 30, 2008, approximately 93.8% of Changshu Huaye revenue is derived from sales within the PRC of steel products. A significant portion of the purchases and revenues of Changshu Huaye consist of transactions between Shanghai Huaye, which is owned by the Principal Stockholders, and its subsidiaries.

The operations of Jiangsu Cold-Rolled are also located in the PRC. Jiangsu Cold-Rolled operates several production lines that refines products such as cold-rolled steel and acid pickled steel through the use of various high-technology machines. For the year ended June 30, 2008 all of Jiangsu Cold-Rolled revenue is derived from sales of steel products within the PRC.

Restatement of Financial Statements – During June 2009, the Company concluded that a short-term note payable to a related party had been classified with short-term notes payable. As a result, the June 30, 2008 consolidated financial statements needed to be revised to correct an overstatement of short-term notes payable and an understatement of short-term notes payable - related party in the amount of $1,311,510. The correction of these balances had no effect on the previously reported net income. The effects of the restatements were as follows:

	As Previously Reported		Effect of Restatement			As Restated
Consolidated Balance Sheet As of June 30, 2008
Short-term notes payable	$	130,504,380	$	(1,311,510	)	$	129,192,870
Short-term notes payable - related party		-		1,311,510			1,311,510
Total Current Liabilities		156,645,756		-			156,645,756
Total Liabilities		163,745,754		-			163,745,754

Consolidated Statement of Cash Flows
For the year ended June 30, 2008
Proceeds from issuance of notes payable	$	161,549,825	$	(1,311,510	)	$	160,238,315
Proceeds from issuance of notes payable - related party		7,099,998		1,311,510			8,411,508
Net Cash Provided by Financing Activities		74,572,575		-			74,572,575
Net Change in Cash		2,973,159		-			2,973,159

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Functional Currency and Translating Financial Statements - The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The functional currency of the Company is the Chinese Yuan Renminbi (“RMB”); however, the accompanying consolidated financial statements have been expressed in United States Dollars (“USD”). The accompanying consolidated balance sheets have been translated into USD at the exchange rates prevailing at each balance sheet date. The accompanying consolidated statements of operations and cash flows have been translated using the weighted-average exchange rates prevailing during the periods of each statement. Transactions in the Company’s equity securities have been recorded at the exchange rate existing at the time of the transaction.

Accounting Estimates - The preparation of financial statements in conformity with Generally Accepted Accounting Principals in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

F-8

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents - Cash and cash equivalents include interest bearing and non-interest bearing bank deposits, money market accounts, and short-term certificates of deposit with original maturities of three months or less.

Fair Values of Financial Instruments - The carrying amounts reported in the consolidated balance sheets for trade accounts receivable, other receivables, advances to suppliers, notes receivable, receivable from related parties, accounts payable, short-term notes payable, other payables and accrued expenses, advances from customers, and amounts due to related parties approximate fair value because of the immediate or short-term maturity of these financial instruments.

Credit Risk - The carrying amounts of trade accounts receivable and other non-trade receivables included in the consolidated balance sheets represent the Company’s exposure to credit risk in relation to its financial assets. The Company performs ongoing credit evaluations of each customer’s financial condition. The Company maintains allowances for doubtful accounts and such allowances in the aggregate did not exceeded management’s estimations.

Trade Accounts, Other Receivables and Allowance for Doubtful Accounts - Trade accounts receivables and other receivables are carried at original invoiced amounts less an allowance for doubtful accounts. Other receivables consist of amounts advanced to suppliers, but subsequently not used, resulting in a receivable.

Inventory - Inventory is valued at the lower of cost or market, with cost computed on a first-in-first-out basis.

Valuation of Long-lived Assets - The carrying values of the Company's long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that they may not be recoverable. When such an event occurs, the Company projects the undiscounted cash flows to be generated from the use of the asset and its eventual disposition over the remaining life of the asset. If projections were to indicate that the carrying value of the long-lived asset will not be recovered, the carrying value is reduced by the estimated excess of the carrying value over the projected discounted cash flows.

Property and Equipment - Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided on a straight line basis over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred and major improvements are capitalized. Gains or losses on sales, trade-ins, or retirements are recognized in income. Interest is capitalized on significant construction projects.

Intangible Assets - Acquisition costs of land use rights are capitalized and amortized using the straight-line method over their estimated useful lives.

F-9

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As discussed in Note 7, the Company sells product to affiliates, who in turn sell the product to various other third party customers. The price, terms and conditions on the sales to affiliates are the same as those to third parties. Revenue is considered realized or realizable and earned when the affiliates ship the product to third party customers. A fee of 0.5% of the sale is paid to the affiliate for handling the product. These handling fees have been classified as selling expenses in the statement of operations.

Cost of Revenue - Cost of products sold includes wages, materials, handling charges, and other expenses associated with the manufacture and delivery of product.

Shipping and Handling Costs - Shipping and handling costs are billed to customers and are recorded as revenue and the associated costs are included in cost of revenues.

Retirement Benefit Plans - Full time employees of subsidiaries of the Company participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, employee housing fund, and other welfare benefits are provided to employees. Chinese labor regulations require that the subsidiaries of the company make contributions to the government for these benefits based on a certain percentages of employees’ salaries. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were $492,804, $315,821 and $114,211 for the years ended June 30, 2008, 2007 and 2006, respectively.

F-10

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	For the Years Ended June 30,
	2008		2007		2006

Net income	$	31,135,970	$	20,520,391	$	11,528,200

Weighted-average common shares outstanding		37,955,602		4,181,750		-
Effect of participating convertible Series B Preferred Stock		-		30,418,273		29,373,303
Weighted-Average Basic and Dilutive Common Shares Outstanding		37,955,602		34,600,023		29,373,303
Basic and Diluted Earnings per Common Share	$	0.82	$	0.59	$	0.39

Accumulated Other Comprehensive Income - Accumulated other comprehensive income presented in the accompanying consolidated financial statements consists of foreign currency translation adjustments.

Recently Enacted Accounting Standards - In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued FASB Staff Position (FSP FIN) No. 157-2 that extended the effective date for certain nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. The adoption of the portions of SFAS No. 157 that were not postponed by (FSP FIN) No. 157-2 did not have a material impact on the Company’s consolidated financial statements. The Company does not expect the adoption of the postponed portions of SFAS No. 157 to have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141(R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a non-controlling interest in a subsidiary should be reported as equity in the consolidated financial statements, consolidated net income shall be adjusted to include the net income attributed to the non-controlling interest and consolidated comprehensive income shall be adjusted to include the comprehensive income attributed to the non-controlling interest. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141(R) and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. SFAS No. 141(R) and SFAS No. 160 are not expected to have a material impact on the Company’s results of operations or financial position.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities"(“SFAS 161”), an amendment of SFAS No. 133. SFAS 161 applies to all derivative instruments and non-derivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 37 and 42 of SFAS 133 and related hedged items accounted for under SFAS 133. SFAS 161 requires entities to provide greater transparency through additional disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and how derivative instruments and related hedged items affect an entity's financial position, results of operations, and cash flows. SFAS 161 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2008. The Company does not expect SFAS 161 to have a material impact on its results of operations or financial position.

F-11

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS 162 will provide framework for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. SFAS 162 will be effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411. The Company does not expect the adoption of SFAS 162 will have a material impact on its financial condition or results of operation.

NOTE 3 – INVENTORY

Inventory consisted of the following:

	June 30,
	2008		2007
Raw materials	$	32,840,857	$	9,719,288
Finished goods		18,474,664		12,984,016
Total Inventory	$	51,315,521	$	22,703,304

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment includes value-added tax paid. Foreign invested enterprises and foreign enterprises doing business in the PRC are generally able to receive a refund of the value-added tax paid on property and equipment purchased and manufactured within the PRC. The Company recognizes refunds of value-added tax as a reduction of property and equipment when the refunds are collected. The decrease of office and other equipment is due to the value-added tax refunded by the government. The refunds are a long-term asset as it can take up to three years to collect them from the PRC government. Investment tax credits are realized upon collection from the government. For further discussion regarding the investment tax credit, see Note 8.

Property and equipment consisted of the following:

	June 30,
	2008			2007
Buildings and plant	$	17,525,800		$	15,713,151
Machinery		40,119,643			36,575,299
Office and other equipment		789,968			609,633
Vehicles		217,883			143,600
Construction in process		13,102,763			1,256,426
Total		71,756,057			54,298,109
Less accumulated depreciation		(12,019,445	)		(6,726,756	)
Net property, plant and equipment	$	59,736,612		$	47,571,353

F-12

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, as follows:

	Life
Buildings and plant		20 years
Machine		10 years
Office and other equipment		5 years
Vehicles		5 years

Depreciation expense for the years ended June 30, 2008, 2007 and 2006 was $4,311,708, $2,653,422 and $1,777,788, respectively.

NOTE 5 - INTANGIBLE ASSETS

The Company’s intangible assets consist of several land use rights, which are amortized over the 50-year life of those rights. Amortization expense for the years ended June 30, 2008, 2007, and 2006 was $72,710, $55,383 and $58,939, respectively. Intangible information by segment is presented below:

As of June 30, 2008	Steel Coating and Plating			Cold Rolled Steel Production			Total
Gross Carrying Amount	$	2,150,222		$	1,374,597		$	3,524,819
Accumulated Amortization		(195,493	)		(90,395	)		(285,888	)
	$	1,954,729		$	1,284,202		$	3,238,931

As of June 30, 2007	Steel Coating and Plating			Cold Rolled Steel Production			Total
Gross Carrying Amount	$	1,937,874		$	1,238,847		$	3,176,721
Accumulated Amortization		(131,441	)		(56,691	)		(188,132	)
	$	1,806,433		$	1,182,156		$	2,988,589

The following schedule sets forth the estimated amortization expense for the periods presented:

Estimated Amortization Expense
For the year ending June 30, 2009	$	72,710
For the year ending June 30, 2010		72,710
For the year ending June 30, 2011		72,710
For the year ending June 30, 2012		72,710
For the year ending June 30, 2013		72,710

F-13

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - NOTES PAYABLE

The Company’s notes payable consist of short and long-term debt. All short-term notes payable were due to banks. The following schedules sets forth the Company’s notes payable and notes payable – related party as of the dates presented:

Short-term notes were comprised of the following:

	Maturity Date		June 30, 2008		June 30, 2007
Short-term notes payable, no interest rate, secured by cash deposits, guaranteed by related parties		12/27/2008	$	65,455,921	$	24,724,719
Note payable at 6.39% interest, secured by inventory		matured		-		5,246,039
Note payable at 6.84% interest, guaranteed by related party		8/7/2008		2,910,446		-
Note payable at 7.52% interest, guaranteed by related party		8/3/2008		2,910,446		-
Note payable at 6.57% interest, secured by property		9/19/2008		1,746,267		-
Note payable at 6.57% interest, secured by property		10/13/2008		3,347,012		-
Note payable at 6.57% interest, secured by related party		9/3/2008		11,787,305		-
Note payable at 8.22% interest, secured by inventory		5/20/2009		4,509,381		-
Note payable at 6.90% interest, secured by inventory		9/10/2008		1,746,267		-
Note payable at 6.57% interest, secured by related party		11/25/2008		2,910,446		-
Note payable at 6.57% interest, secured by related party		8/17/2008		1,891,790		-
Note payable at 6.57% interest, secured by related party		12/5/2008		18,917,896		-
Note payable at 6.90% interest, secured by property		12/28/2008		11,059,693		-
Note payable at 6.12% interest, secured by inventory		matured		-		1,311,510
Note payable at 6.39% interest, secured by inventory		matured		-		2,623,020
Note payable at 6.23% interest, guaranteed by related party		matured		-		3,672,227
Note payable at 7.25% interest, guaranteed by related party		matured		-		1,573,812
Note payable at 5.58% interest, secured by inventory		matured		-		2,623,020
Note payable at 6.25% interest, guaranteed by related party		matured		-		2,623,020
Note payable at 5.75% interest, guaranteed by related party		matured		-		6,557,549
Total Short-Term Notes Payable			$	129,192,870	$	50,954,916

Note payable to related party, no interest rate		5/15/2009	$	1,311,510	$	—
Notes payable to related parties no interest rate, secured by cash deposits		matured		-		2,325,802
			$	1,311,510	$	2,325,802

Long-term notes were comprised of the following:

	Maturity Date		June 30, 2008		June 30, 2007
Long-term notes payable to related party at 5.00% interest, unsecured - See Note 7		12/20/2009	$	7,099,998	$	-
Total long-term debt			$	7,099,998	$	-

The Company has notes payable that indicate that they have a zero interest rate. The Company intends to repay these notes as they mature. Interest-free loans are common in China; therefore, the company does not impute interest on these loans.

The Company’s debt agreements contain debt covenants which require the Company to maintain certain inventory levels. The Company was in compliance with these debt covenants at June 30, 2008.

F-14

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - RELATED PARTIES

The Company sells it products to and buys raw materials from various companies which are owned or controlled by the Principal Shareholders. These other companies are composed of 20 sister companies with which the Company conducts significant transactions. Revenues related to these transactions are shown separately in the accompanying consolidated statements of operations. For the years ended June 30, 2008, 2007, and 2006, costs of revenue include purchases from these related parties of $106,960,453, $157,615,325 and $117,436,244, respectively.

The amounts due to related parties are non-interest bearing and were incurred in the normal course of business. Receivables from, advances to suppliers, sales to, payables from advanced sales deposits, and payables from purchases from related parties have been netted due to the right of offset. At June 30, 2008 and 2007, the net amounts due from and (due to) related parties were $76,118,544 and $(2,325,802), respectively. The amounts charged for products to the Company by the related parties are under the same pricing, terms and conditions as those charged to third parties, and are due upon receipt. Amounts receivable from related parties are also due upon delivery. Advances to suppliers to related parties are relieved once the goods are received.

During May 2008, Ms. Chen loaned the company $1.31 million. The note is due on demand and bears no interest and is included in the accompanying balance sheet at June 30, 2008 under the caption short-term notes payable – related party.

On December 20, 2007, Ms. Chen loaned the Company $7.1 million. The loan is for a period of 24 months, carries an interest rate of 5% and is included in the accompanying balance sheet at June 30, 2008 under the caption “long term notes payable – related party.”

Some of the Company’s notes payables are guaranteed by related parties as described in Note 6.

NOTE 8 - INCOME TAXES

Before the implementation of the new Enterprise Income Tax Law (“EIT Law”) as discussed below, Foreign Invested Entities (“FIE”) established in the PRC were generally subject to an enterprise income tax (“EIT”) rate of 33.0%, which includes a 30.0% state income tax and a 3.0% local income tax. FIEs established in Coastal Open Economic Zones, Special Economic Zones or Economic and Technical Development Zones, such as the Company’s PRC subsidiaries Changshu Huaye and Jiangsu Cold-Rolled, are subject to an EIT rate of 24.0% of the assessable profits. As approved by the local tax authority in the PRC, Changshu Huaye was entitled to a two-year exemption from EIT followed by 50% tax exemption for the next three calendar years, commencing from the first cumulative profit-making year in the calendar of 2004. Accordingly, Changshu Huaye was exempt from EIT for the calendar year of 2004 and 2005 and was and would be subject to a tax rate of 12% for the calendar years 2006, 2007 and 2008. The Company’s other subsidiary, Jiangsu Cold-Rolled had the same two-year full tax exemption for the calendar years 2006 and 2007, followed by 50% tax exemption for the next three years.

In addition, Changshu Huaye, being a FIE, was entitled to a special tax concession that allows an amount up to 40% of the qualifying domestic capital expenditures (as defined and approved under the relevant PRC income tax rule) to be used as an offset against the excess of the current year’s EIT over the prior year’s EIT.

On March 16, 2007, the National People’s Congress of China passed the new EIT Law, and on December 6, 2007, the State Council of China passed the Implementing Rules for the EIT Law (“Implementing Rules”) which took effect on January 1, 2008. The EIT Law and Implementing Rules impose a unified EIT of 25.0% on all domestic-invested enterprises and FIEs, unless they qualify under certain limited exceptions. Therefore, nearly all FIEs are subject to the new tax rate alongside other domestic businesses rather than benefiting from the old FIE tax laws, and its associated preferential tax treatments, beginning January 1, 2008.

F-15

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Despite these pending changes, the EIT Law gives existing FIEs a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatments. Changshu Huaye is subject to an EIT rate of 12.5% for the calendar year of 2008 and will be subject to EIT rate of 25% for 2009 and beyond. Jiangsu Cold-Rolled is exempt from EIT for the calendar year 2008 and will be subject to EIT of 12.5% for the calendar years 2009, 2010 and 2011. Jiangsu Cold-Rolled will be subject to an EIT of 25% for the calendar year 2012 and beyond. The discontinuation of any such special or preferential tax treatment or other incentives would have an adverse affect on the Company’s business, fiscal condition and current operations in China.

During the years ended June 30, 2008 and 2007, the PRC tax authorities approved the application of Changshu Huaye for a tax credit on certain domestic purchases of machinery in the PRC. The credit is based upon 40% of certain eligible assets for specific industries in the PRC, and is payable at the government’s discretion. The credit is recorded when the refund for the tax credit is collected. As a result of being granted the credit, the Company recorded a reduction in its income tax provision in the amount of $1,385,711 and $1,889,992 for the years ended June 30, 2008 and 2007.

Taxes payable are a component of other payables and accrued expenses in the accompanying consolidated balance sheets and consisted of:

	June 30,
	2008		2007
Value added tax	$	339,849	$	698,619
Income tax		1,035,182		904,377
Surtax, insurance, other		115,046		81,345
Total Taxes	$	1,490,077	$	1,684,341

Due to the change in tax rate during the fiscal year, the statutory tax rate for June 30, 2008 is a blended rate of approximately 30%, which was calculated as 33% during the six months ended December 31, 2007 and 25% during the six months ended June 30, 2008. For the years ended June 30, 2007 and 2006 the statutory rate was 33%.

Following is a reconciliation of income taxes at the calculated statutory rates:

	For the Years Ended June 30,
	2008			2007			2006

Income tax calculated at statutory rates	$	10,003,860		$	7,000,538		$	4,079,667
Investment tax credit		(1,385,711	)		( 1,889,992	)		-
Benefit of favorable rates		(1,640,703	)		( 1,886,627	)		(1,132,418	)
Benefit of tax holiday		(5,008,137	)		( 2,615,685	)		(2,160,841	)
Tax effect of change in tax rates		165,585			-			-
Tax effect of parent and sewer losses		(218,426	)		88,520			72,532
Provision for income taxes	$	1,916,468		$	696,754		$	858,940

F-16

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred taxes are comprised of the following:

	June 30,
	2008		2007

Allowance for doubtful trade receivables	$	16,105	$	-
Allowance for doubtful advances to suppliers		272,871		-
Total deferred income tax assets		288,976		-
Valuation allowance		-		-
Net deferred income tax asset	$	288,976	$	-

The provision for income taxes is comprised of the following:

	For the Years Ended June 30,
	2008			2007		2006
Current	$	2,205,444		$	696,754	$	858,940
Deferred		(288,976	)		-		-
Provision for (benefit from) income taxes	$	1,916,468		$	696,754	$	858,940

If the Company had not been granted a “tax holiday” during the years ended June 30, 2008, 2007, and 2006, the provision for income taxes would have been $6,924,605, $3,312,439, and $3,019,781, respectively. Net income after income tax for the years ended June 30, 2008, 2007, and 2006 would have been $26,127,833, $17,904,706 and $9,367,359, respectively. Basic and diluted earnings per common share for the years ended June 30, 2008, 2007, and 2006 diluted earnings per common share would have been $0.69, $0.52 and $0.32, respectively.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Economic environment - Since most of the Company’s operations are conducted in the PRC, the Company is subject to special considerations and significant risks. These risks include, among others, the political, economic and legal environments and foreign currency exchange rates. The Company’s results from operations may, among other things, be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to: laws and regulations, anti-inflationary measures, currency conversions and remittances abroad, and rates and methods of taxation.

Foreign currency remittance - The Company’s revenue is either earned in the PRC or remitted to banks within the PRC and is denominated in the PRC’s currency of RMB. The transfer of currencies outside of the PRC must be converted into other currencies. Both the conversion of RMB into foreign currencies and the remittance of those currencies outside the PRC require approval of the PRC government.

F-17

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitment under Make Good Agreement - On February 1, 2007, the Company issued 39,473.56 shares of Series B Preferred Stock in a private placement offering for $10,570,762 of cash, net of $720,000 of commissions and other costs of $709,238. In connection with the private placement offering, a Principal Shareholder delivered 39,473.68 shares of Series B voting convertible preferred stock into an escrow pursuant to the terms of a Make Good Agreement. Upon conversion, as described below, the Series B Preferred Stock held in the escrow was exchanged for 3,947,368 shares of common stock. Under the terms of the Make Good Agreement, the escrow agent will release a portion of the escrowed shares to the investors under the private placement offering if the Company’s net income is not at least $18,900,000 and $23,500,000 for the years ending June 30, 2007 and 2008, respectively. The number of shares to be released at each year end is computed as 50 percent of the escrowed shares times the ratio of the deficiency in net income divided by the required net income. In accordance with EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,” the private placement investors received a contingent beneficial conversion option that will require the Company to record (upon each release of shares from the escrow) a dividend to the private placement investors of $3.04 per share of common stock released. On December 7, 2007, the escrow agent returned 1,973,684 shares to the Principal Shareholder because the contingent issuance related to June 30, 2007 was not fulfilled as the Company achieved the net income requirement of the agreement for that period. The remaining shares will be delivered to the principal shareholders after verification by the escrow agent.

NOTE 10 - STOCKHOLDERS’ EQUITY

Preferred Stock - On February 3, 2006, the articles of incorporation were amended to authorize 1,000,000 shares of preferred stock with a par value of $0.001 per share. The Company may issue the preferred stock in one or more series with such rights, preferences and designations as determined by its Board of Directors. On November 3, 2006, and amended on January 24, and January 25, 2007, the Board of Directors designated 185,000 shares of Series A voting convertible preferred stock and 500,000 shares of Series B preferred stock. All shares of Series A preferred stock and Series B preferred stock have been converted into common shares. There are 315,000 shares of preferred stock that remain undesignated.

Series A Voting Convertible Preferred Stock - The shares of Series A Preferred Stock ranked equal to all outstanding shares of common stock with respect to rights on liquidation, dissolution and winding up and are treated as though the shares of Series A Preferred Stock had been converted into common stock. Shares of Series A Preferred Stock were not entitled to any preferential dividends but were treated as though the shares of Series A Preferred Stock had been converted into common stock and shared equally in any dividend granted to shareholders of common stock, unless the holders of Series A Preferred Stock waived such rights in writing. The holders of Series A Preferred Stock were entitled to 9.8 votes per share and voted together with the common shareholders as one class on all matters submitted to a vote of common stockholders of the Company. The Series A Preferred Stock was convertible into common stock on the basis of one share of Series A Preferred Stock for 9.8 shares of common stock.

On January 8, 2007, the Company entered into a consulting agreement through Bronze with three parties for the purpose of obtaining assistance in completing the obligations assumed in the Exchange Agreement described in Note 1, and in consideration for those services, the Company issued 20,122 shares of Series A Preferred Stock to the three parties, which shares were valued at $528,077, or $26.24 per share, based on the equivalent value the Company received in net proceeds on February 1, 2007 as described below. The related consulting expense was recognized upon issuance and was charged to general and administrative expense.

F-18

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As further described in Note 1, Sutor Steel consummated a share exchange agreement with Bronze Marketing, Inc. on February 1, 2007. As of February 1, 2007, Bronze had no assets, liabilities or operations. Bronze had 155,122 shares of Series A Preferred Stock outstanding (including the 20,122 shares described in the preceding paragraph) and 150,000 shares of common stock outstanding, and was a shell corporation. The reverse acquisition of Bronze was recognized by Sutor Steel as the constructive issuance of 135,000 shares of Series A Preferred Stock and 150,000 shares of common stock that remained outstanding for no consideration. Since there were no proceeds received from the constructive issuance of the Series A Preferred Stock, no value was assigned to the beneficial conversion option received by the Series A Preferred Stock stockholders.

On March 9, 2007, the 155,122 shares of Series A Preferred Stock outstanding were converted into 1,520,196 shares of common stock on the basis of 9.8 shares of common stock for one share of Series A Preferred Stock.

Series B Voting Convertible Preferred Stock - Shares of Series B Preferred Stock were entitled to vote on an as-converted basis along with the common stock on all matters presented to a vote of the security holders. Shares of Series B Preferred Stock had anti-dilution protection in the event of any restructuring of the Company. Upon liquidation of the net assets of the Company, each share of Series B Preferred Stock was entitled to receive an amount equal to the stated value per share of the Series B Preferred Stock, subject to any adjustments in the stated value, outstanding prior to any distribution or payment to holders of any junior securities. With respect to rights on liquidation, dissolution and winding up, the shares of Series B Preferred Stock ranked equal to all outstanding shares of common stock. Holders of Series B Preferred Stock were not entitled to any preferential dividends but the shares were treated as though they had been converted into common stock and shared equally in any dividend granted to shareholders of common stock. Each share of Series B Preferred Stock was convertible into 100 shares of common stock.

On February 1, 2007, the Company issued 39,473.56 shares of Series B Preferred Stock in a private placement offering for $10,570,762 of cash, net of $720,000 of commissions and other costs of $709,238. In connection with the private placement offering, a Principal Shareholder delivered 39,473.68 shares of Series B voting convertible preferred stock into an escrow pursuant to the terms of a Make Good Agreement. Upon conversion, as described below, the Series B Preferred Stock held in the escrow was exchanged for 3,947,368 shares of common stock. Under the terms of the Make Good Agreement, the escrow agent will release a portion of the escrowed shares to the investors under the private placement offering if the Company’s net income is not at least $18,900,000 and $23,500,000 for the years ending June 30, 2007 and 2008, respectively. The number of shares to be released at each year end is computed as 50 percent of the escrowed shares times the ratio of the deficiency in net income divided by the required net income. In accordance with EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,” the private placement investors received a contingent beneficial conversion option that will require the Company to record (upon each release of shares from the escrow) a dividend to the private placement investors of $3.04 per share of common stock released.

Statutory Reserves - According to the articles of association of Changshu Huaye and Jiangsu Cold-Rolled, the Company is required to transfer a certain portion of its net profits, as determined under PRC accounting regulations, from net income to both the surplus reserve fund and the public welfare fund.

NOTE 11 - SEGMENT INFORMATION

The Company has two reportable segments represented by its two subsidiaries Changshu Huaye and Jiangsu Cold-Rolled, as described in Note 1. Changshu Dongbang Sewage Treatment Co., Ltd. has been included with Changshu Huaye as its operations are insignificant and do not meet any of the quantitative thresholds for discrete presentation.

F-19

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Factors Management Used to Identify the Enterprise’s Reportable Segments - The Company’s reportable segments are business units that offer different products and are managed separately and require reporting to the various regulatory jurisdictions. Changshu Huaye mainly produces HDG products and PPGI products, while Cold-Rolled offers cold-rolled steel strips and acid pickled steel products.

Certain segment information is presented below:

			Jiangsu Cold-		Inter-Segment and
At June 30, 2008 and for the year then ended	Changshu Huaye		Rolled		Reconciling Items			Total
Revenue	$	260,528,089	$	157,501,751	$	-		$	418,029,840
Total operating expenses		4,635,428		665,992		685,990			5,987,410
Interest revenue		832,179		111,287		-			943,466
Interest expense		1,944,739		4,120,647		187,712			6,253,098
Depreciation and amortization expense		2,024,644		2,359,774		-			4,384,418
Provision for income taxes		1,916,468		-		-			1,916,468
Net income		26,169,281		5,840,391		(873,702	)		31,135,970
Capital expenditures, net of VAT refunds		455,198		10,417,104		-			10,872,302
Total assets		196,192,239		101,176,306		(838,438	)		296,530,107

At June 30, 2007 and for the year then ended	Changshu Huaye			Jiangsu Cold- Rolled		Inter-Segment and Reconciling Items			Total
Revenue	$	257,707,856		$	45,730,881	$	-		$	303,438,737
Total operating expenses		4,424,360			1,293,103		1,338,238			7,055,701
Interest revenue		544,467			5,104		16,898			566,469
Interest expense		2,093,320			165,105		-			2,258,425
Depreciation and amortization expense		1,793,356			915,449		-			2,708,805
Provision for income taxes		696,754			-		-			696,754
Net income		21,286,961			834,850		(1,601,420	)		20,520,391
Capital expenditures, net of VAT refunds		(498,378	)		9,348,683		-			8,850,305
Total assets		99,195,391			59,362,560		(853,634	)		157,704,317

At June 30, 2006 and for the year then ended	Changshu Huaye		Jiangsu Cold- Rolled			Inter-Segment and Reconciling Items		Total
Revenue	$	190,594,339	$	-		$	-	$	190,594,339
Total operating expenses		2,937,183		211,882			-		3,149,065
Interest revenue		467,443		-			-		467,443
Interest expense		920,005		3,668			-		923,673
Depreciation and amortization expense		1,809,275		27,452			-		1,836,727
Provision for income taxes		858,940		-			-		858,940
Net income (loss)		11,743,752		(215,552	)		-		11,528,200
Capital expenditures		975,661		17,988,117			-		18,963,778
Total assets		85,264,844		19,699,443			-		104,964,287

NOTE 12 - GEOGRAPHIC INFORMATION

Changshu Huaye derives a portion of its revenue from sources outside of the PRC. The following schedule summarizes the sources of the Company’s revenue by geographic regions for the years ended June 30, 2008, 2007, and 2006:

F-20

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Years Ended June 30,
Geographic Area	2008		2007		2006
People's Republic of China	$	401,872,120	$	272,460,649	$	182,796,152
Hong Kong		470,456		24,968,006		7,422,731
Other Countries		15,687,264		6,010,082		375,456
Total	$	418,029,840	$	303,438,737	$	190,594,339

NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables are a summary of unaudited quarterly financial information for the years ended June 30, 2008, 2007 and 2006.

	Three Months Ended
	September 30,		December 31,		March 31,		June 30,
	2007		2007		2008		2008
Revenues	$	99,490,092	$	114,892,021	$	98,101,235	$	105,546,492
Income from Operations		8,320,903		8,658,641		10,179,585		11,773,496
Net Income		6,619,990		6,687,792		7,792,258		10,035,930
Basic and Diluted Earnings Per Common Share		0.17		0.18		0.21		0 .26

	Three Months Ended
	September 30,		December 31,		March 31,		June 30,
	2006		2006		2007		2007
Revenues	$	61,397,183	$	78,610,889	$	71,283,941	$	92,146,724
Income from Operations		3,437,274		5,134,447		4,978,618		9,931,530
Net Income		3,032,156		4,464,447		3,885,959		9,137,829
Basic and Diluted Earnings Per Common Share		0.09		0.14		0.11		0.25

	Three Months Ended
	September 30,		December 31,		March 31,		June 30,
	2005		2005		2006		2006
Revenues	$	46,068,330	$	45,148,232	$	34,338,456	$	65,039,321
Operating Income		4,095,601		2,988,173		1,672,998		4,031,917
Net Income		3 ,910,765		2,301,333		1,324,850		3,991,252
Basic and Diluted Earnings Per Common Share		0.14		0.08		0.04		0.13

NOTE 14 – SUBSEQUENT EVENTS

Subsequent to June 30, 2008, the Company entered into a loan for $2,910,446 at an interest rate of 8.217% due August 14, 2009. The loan is guaranteed by a related party. The proceeds of this note were used to repay a matured note

NOTE 15 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Basis of presentation

For the purpose of presenting parent company only condensed financial information, the basis used in this presentation assumes the reorganization and the change of the reporting entity had taken place for all periods presented. The investment in the unconsolidated subsidiaries, which occurred on February 1, 2007, is recorded under the equity method of accounting as prescribed in APB opinion No. 18, The Equity Method of Accounting for Investments in Common Stock . Under PRC laws and regulations, there are restrictions on the Company’s ability to transfer substantially all of its assets out of the PRC, regardless of the form of such transfer (dividends, loans, advances) (See Note 9).

F-21

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUTOR TECHNOLOGY GROUP LIMITED

CONDENSED BALANCE SHEETS

	June 30,
	2008		2007
ASSETS
Current Assets:
Cash and cash equivalents	$	63,666	$	27,611
Total Current Assets		63,666		27,611

Investment in unconsolidated subsidiaries		139,973,700		89,504,471

TOTAL ASSETS	$	140,037,366	$	89,532,082

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accrued liabilities	$	187,712	$	-
Note payable - related party		7,099,998		179,993
Total Current Liabilities		7,287,710		179,993

Stockholders' Equity
Series A voting convertible preferred stock - $0.001 par value; 185,000 shares authorized; no shares outstanding		-		-
Series B voting convertible preferred stock - $0.001 par value; 500,000 shares authorized; no shares outstanding		-		-
Undesignated preferred stock - $0.001 par value; 315,000 shares authorized; no shares outstanding		-		-
Common stock -$0.001 par value; 500,000,000 shares authorized; 37,955,602 shares outstanding		37,955		37,955
Additional paid-in capital		37,170,164		37,170,164
Statutory reserves		12,586,995		7,748,269
Retained earnings		65,772,975		39,475,731
Accumulated other comprehensive income		17,181,567		4,919,970
Total Stockholders' Equity		132,749,656		89,352,089

TOTAL LIABILITES AND STOCKHOLDERS' EQUITY	$	140,037,366	$	89,532,082

F-22

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUTOR TECHNOLOGY GROUP LIMITED

CONDENSED STATEMENTS OF OPERATIONS

	For the Years Ended June 30,
	2008			2007			2006
Loss from Operations	$	(873,702	)	$	(1,321,340	)	$	-
Equity in earnings of unconsolidated subsidiaries		32,009,672			21,841,731			11,528,200

Net Income	$	31,135,970		$	20,520,391		$	11,528,200

SUTOR TECHNOLOGY GROUP LIMITED

CONDENSED STATEMENTS OF CASHFLOWS

	For the Years Ended June 30,
	2008			2007			2006
Cash Flows from Operating Activities:
Net income	$	31,135,970		$	20,520,391		$	11,528,200
Stock based compensation		-			528,077			-
Adjustments to reconcile net income to net cash provided by (used in) operating activitites:
Earnings of subsidiaries		(32,009,672	)		(21,841,731	)		(11,528,200	)
Changes in current assets and liabilities:
Other payables and accrued expenses		187,712			-			-
Net Cash Used in Operating Activities		(685,990	)		(793,263	)		-

Cash Flows from Investing Activities
Investment in subsidiaries		(6,377,953	)		(9,953,064	)		-
Net Cash Used in Investing Activities		(6,377,953	)		(9,953,064	)		-

Cash Flows from Financing Activities:
Proceeds from issuance of notes payable		7,099,998			179,993			-
Proceeds from issuance of Series B preferred stock		-			10,570,762
Cash contributed by shareholders		-			21,059,950			-
Cash distributed to shareholders		-			(21,036,767	)		-
Net Cash Provided by Financing Activities:		7,099,998			10,773,938			-

Net increase in cash and cash equivalents		36,055			27,611			-
Cash at beginning of period		27,611			-			-
Cash and Cash Equivalents at End of Period	$	63,666		$	27,611		$	-

F-23