U.S. Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 2005

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _______ to _______

SONGZAI INTERNATIONAL HOLDING GROUP, INC.

(Exact name of small business issuer as specified in its charter)

Nevada	43-1932733
(State or other jurisdiction of	(IRS Employer identification No.)
incorporation or organization)

20337 Rimview Place, Walnut, California 91789

(Address of principal executive offices)

(909) 468-2840

(Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 [ ]

Number of shares of common stock outstanding as of August 17, 2005: 68,873,748

Number of shares of preferred stock outstanding as of August 17, 2005: 400,000

INDEX TO FORM 10-QSB
	Page No.
PART I
Item 1.  Financial Statements - Unaudited
Condensed Consolidated Balance Sheet - June 30, 2005	3
Condensed Consolidated Statements of Operations - Three Months and Six Months Ended June 30, 2005 and 2004	4
Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2005 and 2004	5
Notes to Condensed Consolidated Financial Statements	6-9
Item 2.  Management’s Discussion and Analysis of Financial Condition And Results of Operations	10
Item 3.  Quantitative and Qualitative Disclosures on Market Risk	18
Item 4.  Controls and Procedures	18
PART II
Item 1.  Legal Proceedings	21
Item 2.  Changes in Securities	21
Item 3.  Defaults Upon Senior Securities	21
Item 4.  Submission of Matters to a Vote of Security Holders	21
Item 5.  Other Information	21
Item 6.  Exhibits	21

2

ITEM 1.

SONGZAI INTERNATIONAL HOLDING GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
June 30, 2005 (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	25,309
Other receivables and prepayment		412,535
Due from a stockholder		225,562
Current assets of discontinued operations		8,943
TOTAL CURRENT ASSETS		672,349
PROPERTY AND EQUIPMENT, NET		4,839,426
FIXED ASSETS OF DISCONTINUED OPERATIONS		20,417
TOTAL ASSETS	$	5,532,192
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	156,417
Other payables & deposits received		935,589
Taxes payable		16,242
Convertible note payable		41,360
Liabilities of discontinued operations		59,905
TOTAL CURRENT LIABILITIES		1,209,513
COMMITMENTS AND CONTINGENCIES		-
STOCKHOLDERS' EQUITY
Convertible preferred stock ($Nil par value; 8,000,000 shares
authorized, 400,000 shares issued and outstanding)		-
Common stock ($0.001 par value, 1,000,000,000 shares authorized:
68,873,748 issued and outstanding)		68,874
Additional paid-in-capital		4,487,016
Retained earnings (deficit)
Unappropriated		(251,461	)
Appropriated		18,250
TOTAL STOCKHOLDERS' EQUITY		4,322,679
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	5,532,192
The accompanying notes are an integral part of these consolidated financial statements

3

SONGZAI INTERNATIONAL HOLDING GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the three months and six months ended June 30, 2005 and 2004 (Unaudited)
	For the three months ended June 30,						For the six months ended June 30,
	2005			2004			2005			2004
NET SALES	$	680,502		$	-		$	850,165		$	-
COST OF SALES		(470,392	)		-			(668,579	)		-
GROSS PROFIT		210,110			-			181,586			-
OPERATING EXPENSES:
Selling expenses and distribution expenses		11,433			-			13,901
General and administrative expenses		56,891			-			89,760			96,000
Depreciation		1,287						2,574
TOTAL OPERATING EXPENSES		69,611			-			106,235			96,000
INCOME (LOSS) FROM OPERATIONS		140,499			-			75,351			(96,000	)
OTHER INCOME (EXPENSES)											-
Interest expense, net		(5,235	)		-			(11,839	)		-
Other income, net		61,750			-			62,688			-
TOTAL OTHER INCOME		56,515			-			50,849			-
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES		197,014			-			126,200			(96,000	)
INCOME TAX EXPENSE		10,289			-			10,289			-
NET INCOME (LOSS) FROM CONTINUING OPERATIONS		186,725			-			115,911			(96,000	)
DISCONTINUED OPERATIONS
Loss from discontinued operations		-			(54,012	)		-			(73,412	)
NET INCOME (LOSS)	$	186,725		$	(54,012	)	$	115,911		$	(169,412	)
Net income (loss) per share-basic and diluted
Income per common share from continuing operations - basic		**						**
Loss per common share from discontinued operations - basic					**						**
Net income (loss) per common share - basic		**			**			**			**
Net income (loss) per common share - diluted		**			**			**			**
Weighted average number of shares outstanding - basic		68,873,748			68,503,748			68,873,748			68,492,637
Weighted average number of shares outstanding - diluted		108,873,748			68,503,748			108,873,748			68,492,637
** Less than $.01
The accompanying notes are an integral part of these financial statements

4

SONGZAI INTERNATIONAL HOLDING GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2005 and 2004 (Unaudited)
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continuing operations	$	115,911		$	(96,000	)
Net loss from discontinued operations		-			(73,412	)
Total net income (loss)		115,911			(169,412	)
Adjusted to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation - cost of sales		112,016			-
Depreciation		2,574			-
Issuance of common stock for services		-			96,000
Imputed interest expense		6,026
Changes in operating assets and liabilities
(Increase) decrease in:
Accounts receivable, net		170,011			-
Other receivables		(191,614	)		-
Increase (decrease) in:
Accounts payable		25,070
Other payables and deposits received		804,311			-
Income tax and other taxes payable		(126,657	)		-
Discontinued operations, net		-			64,880
Net cash provided by (used in) operating activities		917,648			(8,532	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in due from a stockholder		(166,975	)
Purchase of property and equipment		(245,733	)		-
Net cash used in investing activities		(412,708	)		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in convertible note payable		(7,132	)		-
Decrease increase in due to stockholders		(514,982	)		(43,947	)
Net cash used in financing activities		(522,114	)		(43,947	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(17,174	)		(52,479	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		51,396			53,907
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	34,222		$	1,428
Continued operations	$	25,309		$	-
Discontinued operations		8,913			1,428
	$	34,222		$	1,428
SUPPLEMENTAL CASH FLOW DISCLOSURES AND NON-CASH
INVESTING INFORMATION:
Common stock issued to others for services	$	-		$	96,000
Cash paid during the period for interest	$	5,262		$	-
Imputed interest on advances from a shareholder	$	14,971		$	-
Cash paid during the period for income taxes	$	10,289		$	-
The accompanying notes are an integral part of these financial statements

5

SONGZAI INTERNATIONAL HOLDING GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2005 (UNAUDITED)

NOTE 1BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

It the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments consisting only of normal recurring accruals considered necessary to present fairly the Company’s financial position at June 30, 2005, the results of operations for the three months and six months ended June 30, 2005, and cash flows for the six months ended June 30, 2005. The results for the six months ended June 30, 2005 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2005. These financial statements should be read in conjunction with the Company’s annual report on Form 10-KSB as filed with the Securities and Exchange Commission.

NOTE 2ACQUISITION

On September 23, 2004, the Company acquired a 75% interest in Heilongjiang Tong Gong Kuang Ye You Xian Gong Si (“Tong Gong”), an operational coal mine located near Heihe City in the PRC. The Company issued 400,000 shares of “blank check” preferred stock that is convertible into 40,000,000 (post a one for one hundred reverse split) shares of common stock to exchange for a 75% interest in Tong Gong’s registered capital of $4,009,662 (RMB33,200,000). To effect the payment of the purchase price, the Company authorized a class of 8,000,000 convertible preferred shares under Nevada law. In addition to the 75% interest in Tong Gong, Harbin Green Ring Biological Degradation Products Developing Co, Ltd.("Harbin Green") transferred a 25% net profits interest in Tong Gong to the Company. Harbin Green is controlled by Mr. Hong Wen Li, an affiliate of the company.

Subsequently, Harbin Green assigned all of its interest in the registered capital of Tong Gong to the Company. Therefore, the Company now owns 100% interest in the registered capital of Tong Gong.

During October 2004, the Company discontinued the operations of Yong Heng.

NOTE 3PRINCIPLES OF CONSOLIDATION

The accompanying condensed consolidated financial statements for 2005 include the accounts of Songzai and its 100% owned subsidiary Yong Heng (discontinued) and 100% owned subsidiary Tong Gong. The accounts of Yong Heng have been classified as discontinued operations (See Note 6).

The accompanying condensed consolidated financial statements for 2004 include the accounts of Songzai and its 100% owned subsidiary Yong Heng (discountinued)and 100% owned subsidiary Tong Gong. The accounts of Yong Heng have been classified as discontinued operations (See Note 6).

All significant inter-company balances and transactions have been eliminated on consolidation.

NOTE 4USE OF ESTIMATES

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

NOTE 5EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share exclude dilution and are computed by dividing earnings (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share are computed by dividing earnings (loss) available to common shareholders by the weighted average number of common shares outstanding adjusted to reflect potentially dilutive securities.

6

SONGZAI INTERNATIONAL HOLDING GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2005 (UNAUDITED)

NOTE 6DISCONTINUED OPERATIONS

During October 2004, the Company discontinued the operations of Yong Heng. The financial statements for Yong Heng have been classified as discontinued operations at June 30, 2005 (unaudited) and December 31, 2004. The amounts reported as assets and liabilities of net assets held from discontinued operations at June 30, 2005 (unaudited) and December 31, 2004 are as follows:

	2005		2004
Current assets	$	8,943	$	8,943
Property and equipment		20,417		20,417
Assets of discontinued operations		29,360		29,360
Current portion of liabilities of discontinued operations	$	59,905	$	59,905

The operations of Yong Heng have been reclassified as discontinued operations in the accompanying condensed consolidated statements of operations for the six months ended June 30, 2005 and 2004 (unaudited) and are summarized as follows:

	2005		2004
Net revenues	$	-	$	5,188
Cost of sales	$	-	$	1,045
Operating expenses	$	-	$	77,555
Loss from operations	$	-	$	(73,412	)
Net loss	$	-	$	(73,412	)

NOTE 7CONVERTIBLE NOTE PAYABLE

Convertible note payable at June 30, 2005 (unaudited) and December 31, 2004 consisted of the following:

	2005		2004
Convertible note payable	$	41,360	$	48,492

The convertible note payable is unsecured and bears interest at a rate of approximately 9% per annum. The Company scheduled monthly payments, each in the amount of $1,000 starting December 25, 2003 with the balance of $38,000 due and payable on November 25, 2004, at the option of the Company, in cash or in an equivalent amount of Songzai stock.

As of June 30, 2005, the Company is in default on the note repayment schedule and is liable for late interest charge of 5% of the amount of the installment of principal and interest which is paid after the due date and all costs and fees incurred by the note holder as a result of any collection effort thereon. As of June 30, 2005 the default interest due has been accrued. See Note 8 (C).

As of June 30, 2005, an aggregate payment of $13,000 was made by a stockholder of the Company, of which principal was $7,738, interest was $4,132 and late fees were $1,130.

7

SONGZAI INTERNATIONAL HOLDING GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2005 (UNAUDITED)

NOTE 8.COMMITMENTS AND CONTINGENCIES

                (A) Employee benefits

The full time employees of the Company are entitled to employee benefits including medical care, welfare subsidies, unemployment insurance and pension benefits through a Chinese government mandated multi-employer defined contribution plan. The Company is required to accrue for those benefits based on certain percentages of the employees’ salaries and make contributions to the plans out of the amounts accrued for medical and pension benefits. The Chinese government is responsible for the medical benefits and the pension liability to be paid to these employees.

(B)    Contingent liabilities

Pursuant to the default by the Company on the convertible note payable, the Company is contingently liable for all future costs and fees incurred by the note holder as a result of any collection effort. On June 30, 2005 the Company has not received any notification of collection effort by the note holder.

NOTE 9SHAREHOLDERS’ EQUITY

                (A) Stock issuances

During January 2004, the Company issued 400,000 shares of its common stock to consultants for services having a fair value of $96,000. The Company recognized consulting expense of $96,000 for the year ended December 31, 2004.

During July 2004, the Company issued 220,000 shares of its common stock to consultants and legal consultants having a fair value of $143,000. The Company recognized consulting expense and legal expense of $78,000 and $65,000 for the year ended December 31, 2004 respectively.

During July 2004, the Company increased its authorized shares of common stock from 200,000,000 to 1,000,000,000 shares and authorized 8,000,000 shares of “blank check” preferred stock by filing Articles of Amendment with the Secretary of the State of Nevada.

On September 23, 2004, the Company issued 400,000 preferred stock that is convertible into 40,000,000 (post a one for one hundred reverse split) shares of common stock of the Company in exchange for a 75% interest in Heilongjiang Tong Gong Kuang Ye You Xian Gong Si of Tong Gong’s registered capital of $4,009,662 (RMB33,200,000). The Company is currently the owner of 100% interest in registered capital of Tong Gong.

During October 2004, the Company issued 150,000 shares of its common stock to consultants having a fair value of $82,500. The Company recognized consulting expense of $82,500 as of December 31, 2004.

8

SONGZAI INTERNATIONAL HOLDING GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2005 (UNAUDITED)

NOTE 9SHAREHOLDERS’ EQUITY (CONTINUED)

             (A) Stock issuances (continued)

During the six months ended June 30, 2005, the Company didn't have any new stock issuances.

(B)    Appropriated retained earnings

The Company is required to make appropriations to reserves funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the People’s Republic of China (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the entities’ registered capital. Appropriations to the statutory public welfare fund are at 5% to 10% of the after tax net income determined in accordance with the PRC GAAP. The statutory public welfare fund is established for the purpose of providing employee facilities and other collective benefits to the employees and is non-distributable other than in liquidation. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors.

During 2004, the Company appropriated $18,250 to the reserves funds based on its net income under PRC GAAP.

NOTE 10 RELATED PARTY TRANSACTIONS

A Stockholder had advanced funds totaling $0 and $347,052 to the Company as of June 30, 2005 and December 31, 2004 respectively as short-term, unsecured loans and accruing imputed interest at a rate of 6% per annum. The advances are repayable upon demand. Total imputed interest expense included as additional paid in capital amounted to $6,026 and $0 for the six months ended June 30, 2005 and 2004, respectively.

The Company had also advanced funds totaling $225,562 and $0 to a stockholder as of June 30, 2005 and December 31, 2004 respectively as short-term, unsecured loans free of interest payment.

During 2004, the shareholders contributed capital to the Company totaling $27,102.

Subsequently, Harbin Green assigned all of its interest in registered capital of Tong Gong to the Company so that the Company now owns 100% interest in the registered capital of Tong Gong. Harbin Green is controlled by Mr. Hong Wen Li, an affiliate of the company.

9

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

With the exception of historical facts stated herein, the matters discussed in this report are "forward looking" statements that involve risks and uncertainties that could cause actual results to differ materially from projected results. Such "forward looking" statements include, but are not necessarily limited to, statements regarding anticipated levels of future revenues and earnings from operations of the Company. Readers of this report are cautioned not to put undue reliance on "forward looking" statements, which are, by their nature, uncertain as reliable indicators of future performance. The Company disclaims any intent or obligation to publicly update these "forward looking" statements, whether as a result of new information, future events, or otherwise. In addition the uncertainties include, but are not limited to, competitive conditions involving the Company's markets.

GENERAL DESCRIPTION OF BUSINESS

We were incorporated in the State of Nevada on June 7, 2001. We are a fully-reporting 1934 Act company, with the Company's common stock quoted on the Over-the-Counter Bulletin Board ("OTCBB") under the trading symbol "SGZI". On September 29, 2003, we acquired Harbin Yong Heng Ke Ji Fa Zhan You Xian Ze Ren Gong Si, a corporation organized and existing under the laws of the Peoples' Republic of China ("Yong Heng") pursuant to a Plan of Exchange (the "Agreement"). We discontinued the operations of Yong Heng in October 2004.

 On September 23, 2004, we acquired a 75% interest in Heilongjiang Tong Gong Kuang Ye You Xian Gong Si ("Tong Gong"), a corporation organized and existing under the laws of the Peoples’ Republic of China, and owner of an operational coal mine located near Heihe City in the People's Republic of China, pursuant to a Purchase and Sales Agreement, dated April 5, 2004. In order to acquire 75% of Tong Gong's registered capital of RMB 33,200,000, which is equal to approximate US$4,009,662, the Company issued 400,000 shares of convertible preferred stock which is convertible into 40,000,000 shares of common stock at the ratio of 1:100, which convertible preferred stock was part of a class of 8,000,000 shares of so-called “blank check” preferred that was authorized on July 16, 2004. The 75% interest in Tong Gong was acquired from Mr. Hongwen Li, the Chairman of the Company. In addition to the 75% capital stock of Tong Gong, the Company acquired a 25% interest in the net profits of Tong Gong from the Harbin Green Ring Biological Degradation Products Developing Co., Ltd., a corporation organized and existing under the laws of the Peoples’ Republic of China (“Harbin Green”), and the owner of 25% of the capital stock of Tong Gong. Harbin Green is controlled by Mr. Hongwen Li, the Company’s Chairman.

 After the acquisition of Tong Gong, the focus our business is coal mining in Northern China. Currently, we have the mining rights at the coal mine known as Tong Gong Coal Mine, which is located approximately 175 km southwest of Heihe City of Heilongjiang Province in People's Republic of China with the estimated reserves of approximately 4 million tons.

10

Geology of Tong Gong coal mine

 It's reported by the Provincial Geology and Mineral Bureau of the Peoples’ Republic of China that the Coal-bearing strata in the mine area of Tong Gong is in Jiufengshan Group (K₁j), which is divided into four sections in ascending order: I (K₁j¹), II (K₁j²), III (K₁j³) and IV (K₁j⁴). The coal-bearing zones of interest lie in Sections II and III which are described below.

Section II (K₁j²), containing the No. 2 coal seam, is the major coal-bearing zone. Stratigraphy above the No. 2 coal seam consists primarily of siltstones and mixed medium and fine-grained sandstones. Under the No. 2 coal seam, tuff breccia forms the majority of the lithology with slight amounts of siltstone and packsand. These strata contain coal seams of II_upper1,II_upper2, II_upper3, II and II_lower, etc. This zone thickens from west to east from 80 m to 156 m with little change in the direction of dip.

The No. 1 coal seam lies in the upper part of Section III (K₁j³). Strata consist primarily of packsand and siltstone, but also include medium- and fine-grained sandstones. A thin layer composed of pebbled sandstones is located near the No. 1 coal seam and the No. 1_lower coal horizon. The lower part of the layer is composed of variegated conglomerate of composite components and pebbled sandstone with typical grain diameter of 5 cm to 6 cm. Conglomerate in this layer, also called the “Intermediate Conglomerate,” is a reliable marker for correlation of coal seams ranging in thickness from 10 m to 80 m with typical thickness of 40 m. K₁j³ thickens 120 m to 203 m from west to east.

Situated above the No. 1 Seam, Section IV (K₁j⁴) is a sandy conglomerate zone consisting mainly of sandy conglomerates and hard coarse-grained sandstone, interbedded with fine siltstone and thin coal seams.

The mine area of Tong Gong is located in the middle of the Heibaoshan-Muer gas coal basin, a secondary sedimentary basin. The basin floor is a northeast trending, broad synclinal structure with an axial direction of north-northeast and eastward plunge. Defined by several faults with throws ranging from 20 m to 270 m, the mine field is located on the north wing of the syncline in the form of a monoclinal structure that outcrops along the strike of NE35º; the dip ranges from 16º to 19º, and averages 18º.

Coal Reserves

Fault F₇ and the seam outcrop define the western and northwestern reserve boundary. Fault F₈ defines the eastern and northeastern reserve boundary. Seam thinning cuts off the reserve on the southern edge of the coal property. Tong Gong coal mine reserve base is defined by eight drill holes within the mine property boundary. Based on these drill holes, the No. 1 Seam varies in thickness in the mine area from less than 3 m to nearly 5 m. The seam consists of 2 to 4 plies separated by bands of rock partings with a combined thickness ranging from 0.4 m to 1.4 m. The coal and rock parting breakdown by drill holes is shown as follows:

11

	No. 1 Seam Thickness (Meters)
Drill Hole Number	Coal	Parting	Total
S6 89-12 89-13 89-16 90-16 90-20 91-16 91-21	4.30 3.23 2.90 2.91 2.00 2.50 2.44 3.28	0.56 0.82 0.60 0.57 1.45 0.36 0.84 0.42	4.86 4.05 3.50 3.48 3.45 2.86 3.28 3.70

The mine floor is composed primarily of siltstone with areas of carbonaceous mudstone. Immediate mine roof is composed of siltstone, fine sandstone and carbonaceous mudstone. The main roof is comprised of conglomerate rock and sandy conglomerate.

Geological (or in-place) coal reserves have been estimated by the Heilongjiang No. 5 Geological Exploration Institute of Geology and Mining Ministry for the mine area. Except for the Tong Gong coal mine, no other mining is known to have occurred below the elevation of the F₇ fault line or seam outcrop. Since the coal seam gradient is greater than 15° but less than 60°, the actual coal thickness and the oblique surface area are used to calculate reserves. The coal thickness is determined by arithmetic averaging. A constant specific gravity of 1.41 is assumed for the coal volumes. A 20-m barrier is maintained around the mine area boundary.

The mine area (excluding the existing mine workings) is subdivided into 5 sub-areas for reserve estimate purposes. In-place coal reserves are estimated to be 4,417,000 tons. Reserves by sub-area are as follows:

Reserve Block No.	Mineable Area (m2)	Average Coal Thickness (m)	In-Place Tonnes (000)
112 b-1 112 b-2 112 b-3 112 b-4 112 b-5	99,680 3,574 226,424 391,107 296,037	2.71 2.90 2.86 3.23 3.18	380.9 14.6 913.1 1,781.2 1,327.4
	1,016,822	3.08	4,417.2

Assuming a reserve safety factor of 1.4, the recoverable reserves are estimated at 3,157,000 tons.

Within the mine property boundary, the reserve is divided into a large block where most of the reserve lies and a small block, Block 112 b-1, separated by a fault (F_A) from the main body of reserves. Existing mine workings are situated in the large reserve block (Blocks 112 b-2, b-3, b-4, and b-5), which will be extracted preferentially over the small block.

12

Coal Quality

It is anticipated that the coal will be sold as a raw product from the mine. The only processing is screening to produce sized products. The coal can be sold for steam coal for power generation, cement rotary kiln, industrial coal and house coal purposes. The typical breakdown and use of the size fractions are:

Size	Wt (%)	Market
+50 mm	20	Home use and local cigarette factories
50 mm x 25 mm	20	Local industrial
25 mm x 0	60	Steam coal

Average raw (in situ) coal quality is expected to be:

	Air-Dried Basis
Moisture (%)	4.09
Ash (%)	22.1
Volatile Matter (%)	43.9
Sulfur Content (%)	1.71
Heating (maf) (MJ/kg)	24.95
Phosphorus (%)	0.05

To the extent practicable, coal is selectively separated from the parting bands during the mining process to minimize product contamination.

Gas/Spontaneous Combustion

Gas content of the coal is reported to be relatively low with a typical content of 40% methane, 58% nitrogen and 2% carbon monoxide. Methane content increases with depth. The coal seam is rated as prone to spontaneous combustion. Normal and prudent precautions to handle coal dust are required as coal dust generated from mining operations is explosive if ignited by an open flame source.

Production Schedule

The mine plan projects three entry drivage units and one long wall coal face. The first long wall panel (on the left side of the inclines) begins producing coal in the second quarter after mining operations are initiated. Proposed operating schedule at full production is 330 working days annually, with two coal mining shifts and one preparation/support shift per operating day. Standard shift length is 8 hours. Net hoisting time is projected at 14 to 18 hours per operating-day. Mine design capacity is estimated at 150,000 to 200,000 tpa based on available hoisting capacity and mine operating conditions. The mine has government approval for the 150,000 tpa capacity; increasing capacity will most likely require new government approval. Maximum long wall production is estimated by The John Boyd Company to be 182,000 tpa, assuming 3.1 m of coal thickness, 80 m coal face length, 1.7 m of face retreat per day, and 93% face recovery assuming a 150,000 tpa full production output capacity. Mine service life, based on a recoverable reserve base of 3.157 Mt, is 20 years.

13

 The production schedule proposed for the initial 12 months of mining operations is summarized in the following table by quarters:

	Drivage Unit (meters)				Coal Face		Toyal Coal Output
Period	1	2	3	Total	meters	tonnes	tonnes
Q 1- Coal       - Rock	190 70	180 70	40 150	410 290	-	-	3,490
Q2- Coal      - Rock	80 70	120 90	370 10	570 170	120	13,000	17,850
Q3- Coal      - Rock	350 40	480 -	100 110	930 150	108	34,000	41,900
Q4- Coal      - Rock	525 -	- 160	525 -	1,050 160	108	34,000	42,930
Total-Coal         -Rock	1,145 180	780 320	1,035 270	2,960 770			106,170

Three long wall panels are recovered on the left side before long wall mining begins in the first long wall panel on the right side in Q6 after initiation of mine operations. Initial entry drivage is anticipated in the May/June 2004 time frame.

From the date of inception to June 30, 2005, the total production was 98,758.13 tons, of which 58,704.42 tons in 2004 and 40,053.71 tons in the six months ended June 30, 2005.

Markets

We have identified several markets for Tong Gong mining production:

Power Plants

Current Market Potential - 200,000 tpa

Coal Quality Requirement:

Heating value: > 5000/kg

-Volatile: 35% - 45%

-Total moisture: <10%

-Ash: <25%

Cement Factory

Current Market Potential - 100,000 tpa

Coal Quality Requirement:

-Heating value: > 5500/kg

-Volatile: 35% - 45%

-Total moisture: <8%

-Ash: <23%

-Sulfur: <2%

-Phosphorus: <0.09%

Home Use

Current Market Potential - 500,000 tpa

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The industrial and home use coal is sold at the mine, and buyer provides required transportation. Steam coal is trucked approximately 15 km to the nearest rail siding and sold f.o.b. railcar.

The railroad is being extended and will pass within 500 m of the mine by 2006. At that time, a siding will be installed with direct access from the mine via belt conveyor, and the cost of trucking will be eliminated.

Environmental Plans

Recognizing the mine’s setting and need for environmental protection, several actions are planned to minimize the impact of the mine’s operation on the surrounding area and to comply with government standards:

·   Installing water sprays at coal loading and transfer sites to suppress fugitive dust.

·   Installing noise reduction boards to minimize noise level of surface fan operation.

·   Installing a dust removal chamber between the boiler house and chimney house to reduce dust emissions.

·   Planting trees and vegetation around the industrial site.

·   Constructing settling ponds for mine water discharge prior to release into the river.

The mine is expected to generate approximately 20,000 tons of waste rock annually including ash and boiler slag. During the early years of operation, present plans are to store the waste rock in a temporary stockpile near the pit mouth. In time, as opportunities for disposal are identified, the waste rock would be transported by truck to alternative disposal sites such as road paving, industrial site base material, backfilling low-lying areas for land reclamation, backfilling surface subsidence depressions, etc.

COMPETITION

We expect to encounter intense competition from other entities having a business objective similar to us. Competition in the coal industry is based on many factors, including price, production capacity, coal quality and characteristics, transportation capability and costs, blending capability and brand name. Many of our competitors are well-established and have extensive experience in connection with identifying and effecting business combinations directly or through affiliates. They possess greater financial, marketing, technical, personnel and other resources than us and there can be no assurances that we will have the ability to compete successfully. However, the strong demand for coal in the Northeast of China, the location of our coal mine, gives us a competitive advantage with respect to transportation capability and costs. Most of our competitors are located in Shanxi Province and Inner Mongolia of China, suffering the insufficient rail capacity for the transportation of coal. Furthermore, management believes that our status as a reporting public entity could give us another competitive advantage over privately held entities having a similar business objective, with significant growth potential on favorable terms.

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Critical Accounting Policies and Estimates

We have identified one policy area as critical to the understanding of our consolidated financial statements. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of sales and expenses during the reporting periods. With respect to net realizable value of the Company’s accounts receivable and inventories, significant estimation judgments are made and actual results could differ materially from these estimates.

The Company does not have any reserves against its accounts receivable or inventories at June 30, 2005 and 2004. Management’s estimation that there are no reserves is based on the current facts that there are no significant aged accounts receivable and the current inventory turnover is sufficient to realize the current carrying value of the inventories. In making their judgment, management has assumed that there will be continued demand for their products in the future, thereby maintaining adequate turnover of the inventories. Additionally, management has assumed that customers will continue to pay their outstanding invoices timely, and that their customers’ financial positions will not deteriorate significantly in the future, which would result in their inability to pay their debts to the Company. While the Company’s management currently believes that there is little likelihood that the actual results of their current estimates will differ materially from its current estimates, if customer demand for its products decreases significantly in the near future, or if the financial position of its customers deteriorates in the near future, the Company could realize significant write downs for slow moving inventories or uncollectible accounts receivable.

We believe the following is among the most critical accounting policies that impact our consolidated financial statements. We suggest that our significant accounting policies, as described in or consolidated financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We recognize revenue in accordance with Staff Accounting Bulletin (“SAB”) No. 104. All of the following criteria must exist in order for us to recognize revenue:

1.   Persuasive evidence of an arrangement exists;

2.   Delivery has occurred or services have been rendered;

3.   The seller’s price to the buyer is fixed or determinable; and

4.   Collectibility is reasonably assured.

The majority of the Company’s revenue results from sales contracts with distributors and revenue is generated upon the shipment of goods. The Company’s pricing structure is fixed and there are no rebate or discount programs. Management conducts credit background checks for new customers as a means to reduce the subjectivity of assuring collectibility. Based on these factors, the Company believes that it can apply the provisions of SAB 104 with minimal subjectivity.

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Results of Operations

Net Income / Loss

We had a net income of $186,725, or less than $.01 per common share, and $115,911, or less than $.01 per common share, for the three-month and six-month periods ended June 30, 2005, respectively, versus a net loss of $54,012, or less than $.01 per common share, and $169,412, or less than $.01 per common share, for the same periods ended June 30, 2004, respectively. The increase in net income in the second quarter of 2005 was due primarily to the increase in coal production, which increased by 19,762.91 tons to 29,908.31 tons in the second quarter of 2005 from 10,145.40 tons in the first quarter of 2005. The acquisition of Tonggong Coal Mine was not completed until September of 2004. Thus, the net loss for the same periods ended June 30, 2004 was in connection with the gift card business of Yong Heng, which was discontinued during October of 2004.

Revenue

There were sales revenues of $680,502 and $850,165 for the three-month and six-month periods ended June 30, 2005. There were no sales revenues shown for the same periods ended June 30, 2004 due to the accounting adjustments reflecting the discontinued operations of Yong Heng. The coal mining information was not included due to the fact that our coal mining business did not significantly commence until September 2004. Since the prices for our products were generally based on market price or were determined on a contract basis, the increase in revenue will depend on the increase of our coal production in the future.

Cost of Goods Sold.

There were costs of sales of $470,392, or approximately 69% of the sales, and $668,579, or approximately 79% of the sales for the three-month and six-month periods ended June 30, 2005. There was no cost of sales for the same periods ended June 30, 2004 due to the accounting adjustments reflecting the discontinued operations of Yong Heng and the fact that our coal mining business did not significantly commence until September 2004. The cost of sales for the six months ended June 30, 2005 included the depletion of the two coal wells in connection with production, which was approximately $81,319 from the date of inception to June 30, 2005. Other components of cost of coal production such as equipment installation, inspection and shipping fees, etc, didn't have significant changes.

Cost of sales as a percentage of sales is higher than initially anticipated (around 50%) for fiscal year 2005. If we can successfully reduce the production cost and grow the revenues through coal sales, the cost of sales as a percentage of sales should be lower in future periods. In addition, high demand for coal in China will assist us in achieving sales growth in the future, which will further reduce the cost of sales as a percentage of sales.

Expenses

Operating expenses for the three-month and six-month periods ended June 30, 2005 were $69,611 and $106,235, respectively. The operating expenses in the six months ended June 30, 2004 were primarily due to the consulting fees of $96,000, which was paid by common stock of the Company. The operating expenses in the six months ended June 30, 2005 included the amortization of the train platform rental fees, which was $4,690 for the first six months of 2005. The increase in operating expenses in the second quarter of 2005 was due primarily to the fees charged by the government in connection with the coal mining industry, which was approximately $11,130.

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Impact of Inflation.

We believe that inflation has had a negative impact on our results of operations since inception. Until we are able to significantly increase our production and generate revenue we will be unable to pass on inflationary increases in our expenses through increases in revenue.

Liquidity and Capital Resources

On June 30, 2005, we had cash of $25,309 and working capital deficiency of $547,400. The working capital deficiency was due primarily to advances from customers, which were $740,256 on June 30, 2005.

Net cash flows provided by operating activities were $917,648 for the six months ended June 30, 2005 as compared with net cash flows used in operating activities of $8,532 for the same period in 2004. The cash provided by operations was primarily attributable to the decrease in accounts receivable of $170,011, advances from customer of $740,256 and the net income of $115,911, partially offset by the increase in other receivables and the decrease in taxes payable for the six months ended June 30, 2005. The cash used in operations was small for the same period in 2004 due to the limited operations.

Net cash flows used in investing activities were $412,708 for the six months ended June 30, 2005, versus no cash flows from investing activities in the period in 2004. The cash used in investment in the first six months of 2005 was primarily due to the purchase of property and equipment and the increase in due from a stockholder.

Net cash flows used in financing activities were $522,114 for the six months ended June 30, 2005, versus the net cash flows used in financing activities of $43,947 for the same period in 2004. The cash used in financing activities in the six months ended June 30, 2005 was primarily attributable to the payments to shareholder loan and the convertible promissory note. The cash used in financing activities in the same period of 2004 was due to the net of discontinued operations of Yong Heng.

Overall, we have sufficient cash to continue our current business throughout 2005 due to the increase in sales revenue and net income. We had an amount due from a stockholder of $225,562 in the second quarter of 2005, which is expected to get paid back within the third quarter of 2005. However, if we would like to enhance our business via proposed coal mine acquisition, we need to rely on financing from outside sources through debt or equity transactions. Failure to obtain such financing could have a material adverse effect on our business expansion.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not have any material risk with respect to changes in foreign currency exchange rates, commodities prices or interest rates. We do not believe that we have any other relevant market risk with respect to the categories intended to be discussed in this item of this report.

ITEM 4.CONTROLS AND PROCEDURES

Quarterly Evaluation of Controls

As of the end of the period covered by this quarterly report on Form 10-Q, we evaluated the effectiveness of the design and operation of (i) our disclosure controls and procedures ("Disclosure Controls"), and (ii) our internal control over financial reporting ("Internal Controls"). This evaluation ("Evaluation") was performed by President, Li, Hong Jun ("President"), who acting as our principal accounting officer ("CFO"). In this section, we present the conclusions of our President based on and as of the date of the Evaluation, (i) with respect to the effectiveness of our Disclosure Controls, and (ii) with respect to any change in our Internal Controls that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect our Internal Controls.

President and CFO Certifications

Attached to this quarterly report, as Exhibits 31.1 and 31.2, are certain certifications of the President and CFO, which are required in accordance with the Exchange Act and the Commission's rules implementing such section (the "Rule 13a-14(a)/15d-14(a) Certifications"). This section of the quarterly report contains the information concerning the Evaluation referred to in the Rule 13a-14(a)/15d-14(a) Certifications. This information should be read in conjunction with the Rule 13a-14(a)/15d-14(a) Certifications for a more complete understanding of the topic presented.

Disclosure Controls and Internal Controls

Disclosure Controls are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed with the Commission under the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported within the time period specified in the Commission's rules and forms. Disclosure Controls are also designed with the objective of ensuring that material information relating to the Company is made known to the President and the CFO by others, particularly during the period in which the applicable report is being prepared. Internal Controls, on the other hand, are procedures which are designed with the objective of providing reasonable assurance that (i) our transactions are properly authorized, (ii) our assets are safeguarded against unauthorized or improper use, and (iii) our transactions are properly recorded and reported, all to permit the preparation of complete and accurate financial statements in conformity with accounting principals generally accepted in the United States.

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Limitations on the Effectiveness of Controls

Our management does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud. A control system, no matter how well developed and operated, can provide only reasonable, but not absolute assurance that the objectives of the control system are met. Further, the design of the control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances so of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of a system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Scope of the Evaluation

The President and CFO's evaluation of our Disclosure Controls and Internal Controls included a review of the controls' (i) objectives, (ii) design, (iii) implementation, and (iv) the effect of the controls on the information generated for use in this quarterly report. In the course of the Evaluation, the President and CFO sought to identify data errors, control problems, acts of fraud, and they sought to confirm that appropriate corrective action, including process improvements, was being undertaken. This type of evaluation is done on a quarterly basis so that the conclusions concerning the effectiveness of our controls can be reported in our quarterly reports on Form 10-QSB and annual reports on Form 10-KSB. The overall goals of these various evaluation activities are to monitor our Disclosure Controls and our Internal Controls, and to make modifications if and as necessary. Our external auditors also review Internal Controls in connection with their audit and review activities. Our intent in this regard is that the Disclosure Controls and the Internal Controls will be maintained as dynamic systems that change (including improvements and corrections) as conditions warrant.

Among other matters, we sought in our Evaluation to determine whether there were any significant deficiencies or material weaknesses in our Internal Controls, which are reasonably likely to adversely affect our ability to record, process, summarize and report financial information, or whether we had identified any acts of fraud, whether or not material, involving management or other employees who have a significant role in our Internal Controls. This information was important for both the Evaluation, generally, and because the Rule 13a-14(a)/15d-14(a) Certifications, Item 5, require that the President and CFO disclose that information to our Board (audit committee), and to our independent auditors, and to report on related matters in this section of the quarterly report. In the professional auditing literature, "significant deficiencies" are referred to as "reportable conditions". These are control issues that could have significant adverse affect on the ability to record, process, summarize and report financial data in the financial statements. A "material weakness" is defined in the auditing literature as a particularly serious reportable condition where the internal control does not reduce, to a relatively low level, the risk that misstatement cause by error or fraud may occur in amounts that would be material in relation to the financial statements and not be detected within a timely period by employee in the normal course of performing their assigned functions. We also sought to deal with other controls matters in the Evaluation, and in each case, if a problem was identified, we considered what revisions, improvements and/or corrections to make in accordance with our ongoing procedures.

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Conclusions

Based upon the Evaluation, our President and CFO have concluded that, subject to the limitations noted above, our Disclosure Controls are effective to ensure that material information relating to us is made known to management, including the President and CFO, particularly during the period when our periodic reports are being prepared, and that our Internal Controls are effective to provide reasonable assurance that our financial statements are fairly presented inconformity with accounting principals generally accepted in the United States. Additionally, there has been no change in our Internal Controls that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to affect, our Internal Controls.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Changes in Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

31.1 Certifications of President pursuant to Section 302

31.2 Certifications of CFO pursuant to Section 302 (included in Exhibit 31.1)

32.1 Section 1350 Certifications of President

32.2 Section 1350 Certifications of CFO (included in Exhibit 32.1)

(b) Reports on Form 8-K

(1) On April 15, 2005, we filed a current report on Form 8-K in order to report the completion of Tong Gong coal mine acquisition.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SONGZAI INTERNATIONAL HOLDING GROUP, INC. (Registrant)
Date: August 17, 2005	By:	/s/ Li, Hong Jun
		Li, Hong Jun President

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