form10q.htm

10-Q 1 form10q.htm CHINA SHUANGJI CEMENT LTD. FORM 10-Q form10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number: 000-52440

CHINA SHUANGJI CEMENT LTD.

______________________________________________________

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

Delaware		95-3542340
(State or other jurisdiction of incorporation or organization)		(IRS Employer identification No.)

221 Linglong Road, Zhaoyuan City, Shandong Province

People’s Republic of China, 265400

(Address of principal executive offices)

011 - (86) 535-8213217

(Registrant’s telephone number, including area code)

Indicate by check mark 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 □ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes □ No □

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

Large accelerated filer  Accelerated filer

Non-accelerated filer  (Do not check if a smaller reporting company) Smaller reporting company T

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes □ No 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes □ No □

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 29,018,215 shares of common stock, $.0001 par value, were outstanding as of Nov 15, 2010.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36
	PART II
Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	(Removed and Reserved)	38

Item 5.	Other Information	38

Item 6.	Exhibits	38

SIGNATURES		39

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CHINA SHUANGJI CEMENT LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2010


Financial Statements-	4

Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009	5

Consolidated Statements of Income and Comprehensive Income (unaudited) for the three and nine months ended September 30, 2010 and 2009	6

Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2010 and 2009	7

Notes to Consolidated Financial Statements (Unaudited)	8

CHINA SHUANGJI CEMENT LTD.

CONSOLIDATED BALANCE SHEETS

	As of
	September 30, 2010		December 31, 2009
	(US$)		(US$)
ASSETS	(Unaudited)
Current Assets
Cash and cash equivalents	$	32,062	$	47,513.
Accounts receivable, net		3,659,562		3,382,114
Other receivable, net		1,023,742		1,186,481
Inventories		11,219,023		9,215,333
Prepaid expense		84,000		-
Subsidy receivables		5,523,955		5,411,572
Total Current Assets		21,542,344		19,243,013

Plant, property and equipment, net		17,293,671		16,261,527
Machinery and equipment held for sale		877,117		-
Construction in progress		6,752,411		2,958,570
Land use right, net		169,969		169,502
Deferred tax assets		206,091		-
Goodwill		209,642		205,378
Total Assets	$	47,051,245	$	38,837,990
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	764,419	$	735,381
Short-term bank loans		1,253,046		1,227,553
Accrued payroll		209,423		229,687
Other payable		444,297		293,264
Taxes payable		5,400,640		5,025,270
Accruals		20,715		-
Accrued liability		1,086,115		1,064,019
Total Current Liabilities		9,178,655		8,575,174

Long term loans		3,732,402		-
Deferred Revenue		895,776		877,552
Long term payable		2,090,145		2,047,622
Total Long-term liabilities		6,718,323		2,925,174

Total Liabilities		15,896,978		11,500,348
EQUITY Stockholders’ Equity
Preferred Stock, $.0001 par value, 100,000,000 shares authorized, Zero shares issued and outstanding as of September 30, 2010 and December 31, 2009		-		-
Common stock, $.0001 par value, 100,000,000 shares authorized, 29,018,215 and 27,839,346 shares issued and outstanding as of September 30, 2010 and December 31, 2009		2,902		2,784
Additional paid-in capital		18,309,097		17,617,355
Appropriated retained earnings		9,418,306		9,418,306
Unappropriated retained earnings		985,926		(1,168,960	)
Accumulated other comprehensive income		874,877		279,291
Total Stockholders’ Equity		29,591,108		26,148,776
Noncontrolling interest		1,563,159		1,188,866
Total Equity		31,154,267		27,337,642
Total Liabilities and Equity	$	47,051,245	$	38,837,990

See notes to unaudited consolidated financial statements

CHINA SHUANGJI CEMENT LTD.

CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME

(UNAUDITED)

	Nine months ended September 30,
	2010			2009
	(US$)			(US$)
				(Restated)
Sales	$	42,299,070		$	39,289,530
Cost of Sales		35,944,842			33,994,413
Gross Margin		6,354,228			5,295,117

Operating Expenses
Selling expenses		246,238			223,236
General and administrative expenses		1,542,170			831,792
		1,788,408			1,055,028

Income From Operations		4,565,820			4,240,089

Other Income ( Expense)
Interest expense		(94,589	)		(96,597	)
Gain from sale of property		-			11
Impairment loss on assets held for sale		(810,056	)		-
Other income		-			13,023
		(904,645	)		(83,563	)

Operating Income Before Income Tax Expense And Noncontrolling Interest		3,661,175			4,156,526
Income Tax Expense		1,159,229			1,100,360

Net Income		2,501,946			3,056,166
Less: Net income attributable to Noncontrolling Interest		(347,060	)		(146,083	)

Net Income attributable to stockholders		2,154,886			2,910,083

Foreign Currency Translation Gain		595,586			58,842
Foreign Currency Translation Gain attributable to Noncontrolling Interest		27,233			962
Comprehensive Income	$	2,777,705		$	2,969,887
Net Income	$	2,501,946		$	3,056,166
Foreign Currency Translation Gain		622,819			59,804
Comprehensive Income		3,124,765			3,115,970
Less: Comprehensive income attributable to noncontrolling interest		(374,293	)		(147,045	)
Comprehensive income attributable to stockholders	$	2,750,472		$	2,968,925

Earning per share
Basic		0.08			0.20
Diluted	$	0.08		$	0.10
Weighted average number of shares outstanding
Basic		28,321,662			14,744,085
Diluted		28,321,662			27,764,920

See notes to unaudited consolidated financial statements

CHINA SHUANGJI CEMENT LTD.

CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended September 30,
	2010			2009
	(US$)			(US$)
				(Restated)
Sales	$	15,094,990		$	14,125,459
Cost of Sales		12,994,850			12,576,502
Gross Margin		2,100,140			1,548,957

Operating Expenses
Selling expenses		91,755			77,044
General and administrative expenses		337,962			23,802
		429,717			100,846

Income From Operations		1,670,423			1,448,111

Other Income ( Expense)
Interest expense		(40,576	)		(21,215	)
Loss on sale of property		-			(423,472	)
Impairment loss on assets held for sale		(810,056	)		-
		(850,632	)		(444,687	)
Operating Income Before Income Tax Expense And Noncontrolling Interest		819,791			1,003,424

Income Tax Expense		251,951			287,920
Net Income		567,840			715,504

Less: Net income attributable to Noncontrolling Interest		(169,396	)		(127,795	)

Net Income attributable to stockholders		398,444			587,709

Foreign Currency Translation Gain		476,727			26,682
Foreign Currency Translation Gain attributable to Noncontrolling Interest		21,572			745
Comprehensive Income	$	896,743		$	615,136
Net Income	$	567,840		$	715,504
Foreign Currency Translation Gain		498,299			27,427
Comprehensive Income		1,066,139			742,931
Less: Comprehensive income attributable to Noncontrolling Interest		(190,968	)		(128,540	)
Comprehensive income attributable to stockholders	$	875,171		$	614,391

Earning per share
Basic	$	0.01			0.02
Diluted	$	0.01		$	0.02

Weighted Average Number of Shares Outstanding
Basic		28,748,349			26,983,096
Diluted	$	28,748,349		$	27,839,096

See notes to unaudited consolidated financial statements

CHINA SHUANGJI CEMENT LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine months ended September 30,
	2010			2009
	(US$)			(US$)
				(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	2,501,946		$	3,056,166
Adjustments to reconcile net income to net cash provided by operating activities:
Warrant issuance for consulting service		50,647
Stock issuance for consulting service		601,546			88,000
Depreciation		1,660,986			789,705
Amortization		3,675			2,999
Loss on impairment on assets held for sale		824,363			-
Change in operating assets and liabilities
Accounts receivable		(277,448	)		(854,361	)
Other receivable		162,739			(37,779	)
Inventories		(2,003,690	)		565,622
Subsidy receivable		(112,383	)		387
Deferred tax assets		(206,091	)
Prepaid expense		(84,000	)
Accounts payable		29,038			(510,944	)
Accrued payroll		(20,264	)		(43,890	)
Other payable		151,035			(402,565	)
Tax payable		375,370			(41,936	)
Accrual liabilities		22,096			(259	)
Accrual expenses		20,715			(261,720	)
Net cash provided by operating activities	$	3,700,280		$	2,349,425

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property & equipment		(4,394,610	)		(1,655,122	)
Cash acquired in acquisitions					9,650
Construction in progress		(3,793,842	)
Net cash used in investing activities	$	(8,188,452	)	$	(1,645,472	)

CASH FLOWS FROM FINANCING ACTIVITIES
Loan proceeds		3,757,895			-
Loan payments		-			(733,482	)
Net cash provided by (used in) financing activities	$	3,757,895		$	(733,482	)

EFFECT OF EXCHANGE RATE FLUCTUATION ON CASH AND CASH EQUIVALENTS		714,826			7,030
NET DECREASE IN CASH AND CASH EQUIVALENTS		(15,451	)		(22,499	)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		47,513			60,954

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	32,062		$	38,455

SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Income tax payments	$	1,013,639		$	991,519
Interest payments	$	94,410		$	88,326

See notes to unaudited consolidated financial statements

CHINA SHUANGJI CEMENT LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

China Shuangji Cement Ltd. (the “Company”) was incorporated September 15, 1980 in the state of California under the name Trans-Science Corporation. From September 1980 until September 2004 it provided consulting services on the use of high technology products and processes to the construction industry, specializing in earthquake retrofit activities. During the period 2005 through October 3, 2007 the Company was involved in a search for a merger partner.

On October 3, 2007 a British Virgin Islands company named China Shuangji Cement Holdings, Ltd. (“Holdings”) purchased 16,000,000 shares of the Company’s common stock, which represented 74% of the total shares of Company stock outstanding. Holdings is owned by a group of shareholders who also own all of the equity interests of ZhaoyuanShuangji Co. Ltd. (“ZhaoyuanShuangji”), a cement manufacturer incorporated in the People’s Republic of China (PRC).

Wenji Song, our Chairman and President, beneficially owns 51.3% of Holdings. In addition, Hongcheng Liu, our Chief Financial Officer, owns 0.34%, Bo Wu, our Secretary and Director, owns 1.2%, Jun Song, our Director, owns 1.7%, Linxin Cui, Director, owns 2.5%, and Shouheng Yuan, our Director and Vice President of Sales, owns 0.9%, respectively of Holdings.

Each of Wenji Song, Jun Song, and Bo Wu is an officer and/or director of Holdings, and each such party is deemed a beneficial owner of the shares of Holdings. Each such party disclaims such beneficial ownership.

On October 31, 2007, the Company consummated a migratory merger whereby the Company re-domiciled to Delaware via a merger with and into a newly formed entity, China Shuangji Cement Ltd., a Delaware corporation. Coincident with the merger, the Company effected a two for one stock split, whereby each share of the outstanding common stock of the Company was exchanged for two common shares of the surviving company and the par value of the common stock became $0.0001 per share.

As part of a plan to effect control of ZhaoyuanShuangji, on December 1, 2007, the Company acquired 100% of the outstanding capital stock of Chine Holdings, Ltd. (“Chine Holdings”), a British Virgin Islands corporation incorporated on June 28, 2007, from Wenji Song for an aggregate purchase price of $16,000. At the closing of the acquisition of Chine Holdings, the Company did not pay a cash consideration of $16,000 but accounted for the purchase price in the form of a $16,000 loan.

Chine Holdings owns 100% of JiliZhaoyuan Investment Consulting Co. Ltd. (“JZIC”), a Wholly Foreign-Owned Entity formed under the laws of the PRC on March 9, 2007. On September 13, 2007, Chine Holdings acquired 100% of the outstanding equity of JZIC from Holdings. As such, as of December 1, 2007, Chine Holdings is a direct wholly-owned subsidiary of the Company, and JZIC is an indirect wholly-owned subsidiary of the Company.

On August 11, 2008, JZIC entered into a number of contractual agreements with ZhaoyuanShuangji, pursuant to which the Company, by way of JZIC, effectively acquired control over ZhaoyuanShuangji. The agreements with ZhaoyuanShuangji include one through which JZIC has the right to manage and operate ZhaoyuanShuangji and collect quarterly management fees; one granting JZIC voting rights in ZhaoyuanShuangji; and one granting JZIC an option to acquire all of the equity interests in ZhaoyuanShuangji. The agreements also give JZIC operating control of ZhaoyuanShuangji and the right to its profits. The Company regards the totality of these transactions as constituting an acquisition of ZhaoyuanShuangji, and requiring consolidation of the Company, Chine Holdings, JZIC, and ZhaoyuanShuangji under the provisions of Financial Accounting Standards (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation.

Because the Company and ZhaoyuanShuangji are under common control since October 3, 2007, we combined ZhaoyuanShuangji’s financial at historical cost with the Company. The accompanying consolidated financial statements include the effect of the acquisition on the financial position of the Company and the results of its operations. The consolidated statements of income for three months andnine months endedSeptember 30, 2010 and 2009 are based on the historical statements of operations of ZhaoyuanShuangji, and the Company and its subsidiaries.

ZhaoyuanShuangji was incorporated in the PRC on March 29, 2002 for the purpose of acquiring and operating cement manufacturing subsidiaries in China. Three such subsidiaries have been acquired, one in Zhaoyuan (a city in Shandong province) and two in the Province of Hainan (one in a city named Danzhou and one in a city named Dongfang).

In September 2008, the City of Zhaoyuan withdrew the rights of ZhaoyuanShuangji to the land on which its Zhaoyuan plant was located and asked ZhaoyuanShuangji to relocate the plant within the City of Zhaoyuan (See Note 4). During the fourth quarter of 2008, Zhaoyuan ceased operations at this plant and began construction of a new plant at a site selected by the City of Zhaoyuan. The new plant is expected to have significantly more capacity than the old plant.

On April 15, 2009, ZhaoyuanShuangji concluded a joint venture agreement with LongkouBahai Cement Co. Ltd (“Bahai”) under which ZhaoyuanShuangji became a 51% owner of a new company named LongkouShuangji Cement Co. Ltd. (“Longkou”). The joint venture was made by the contribution of $1,170,070 in cash by ZhaoyuanShangji and a contribution by Baihai of the net assets formerly owned by Baihai, altogether with a contribution in cash of $290,000. So far the ZhaoyuanShuangji only contributed $570,000 and is committed to contributing additional $600,070 as needed. The new company has an annual capacity to produce 500,000 tons of cement, and will also operate in Shandong Province.

The assets of Longkou have been recorded on the books of the new company at fair market value. The accounts of Longkou have been consolidated in these financial statements; all intercompany transactions have been eliminated.

The Company’s current structure is set forth in the diagram below:

CHINA SHUANGJI CEMENT, LTD.

STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

	Stockholders' Equity
	Common stock Number				Additional		Appropriated		Unappropriated			Accumulated Other
					Paid In		Retained		Retained			Comprehensive		Non-controlling		Total
	Shares		Amount		Capital		Earnings		Earning			Income		Interest		Equity

BALANCE AT DECEMBER 31, 2009		27,839,346	$	2,784	$	17,617,355	$	9,418,306	$	(1,168,960	)	$	279,291	$	1,188,866	$	27,337,642

Issuance of stock for professional services		1,178,869		118		641,095											641,213
																	-
Issuance of warrants						50,647											50,647
																	-
Net income for the nine months ended Sep 30, 2010										2,154,886					347,060		2,501,946
																	-
Accumulative other comprehensive loss													595,586		27,233		622,819

BALANCE AT SEPTEMBER 30, 2010		29,018,215	$	2,902	$	18,309,097	$	9,418,306	$	985,926		$	874,877	$	1,563,159		31,154,267

There were no changes in JZIC’s ownership interest in Zhaoyuan Shuangji during the nine months ended September 30, 2010.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended December 31, 2009. The results of three months and nine months ended September 30, 2010 are not necessarily indicative of the results to be expected for the full year ending December 31, 2010.

a)	Principles of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries- Chine Holdings, Ltd., Jili Zhaoyuan Investment Consulting Co. Ltd. and Zhaoyuan Shuangji Co. Ltd. All significant inter-company accounts and transactions have been eliminated in consolidation.

b)	Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those estimates.

c)	Foreign currency translation and transactions

The reporting currency of the Company is the United States Dollar (“U.S. dollar”). The functional currency of China Shuangji Cement Ltd., Chine Holdings, Ltd. and Jili Zhaoyuan Investment Consulting Co. Ltd. is the U.S. dollar. The functional currency of Zhaoyuan Shuangji Co. Ltd. is the Chinese Yuan or Renminbi (“RMB”).

For financial reporting purposes, the financial statements of the Company’s PRC operating entities, which are prepared using the RMB, are translated into the Company’s reporting currency, the U.S. dollar. Assets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average rates prevailing during each reporting period, and stockholders’ equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in stockholders’ equity.

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. The resulting exchange differences are included in the determination of net income of the consolidated financial statements for the respective periods.

The exchange rates used to translate amounts in RMB into U.S. dollar for the purposes of preparing the consolidated financial statements are as follows:

	As at September 30, 2010		As at September 30, 2009		Year ended December 31, 2009

Balance sheet items, except for equity accounts		6.6981		6.8376		6.8372

Items in the statements of income and comprehensive income, and statements of cash flows for nine months ended		6.8164		6.8425		-
Items in the statements of income and comprehensive income, and statements of cash flows for three months ended		6.7803		6.8411		-

No representation is made that the RMB amounts could have been, or could be converted into U.S. dollar at the above rates.

d)	Cash and cash equivalents

For statement of cash flows purposes, the Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. Cash overdraft as of balance sheet date will be reflected as liabilities in the balance sheet. As of September 30, 2010 and December 31, 2009, cash and cash equivalents amounted to $32,062 and $47,513, respectively.

e)	Accounts receivable and bad debt expense

The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. The Company's policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of September 30, 2010 and December 31, 2009, the Company had accounts receivable of $6,093,884 and $5,766,910, net of allowance for doubtful accounts of $2,434,322 and $2,384,796 respectively. Below are the aging schedules for Account Receivable (AR) and Allowance for Bad Debt (AR Allowance) as of September 30, 2010 and December 31, 2009:

	Up to 6 months		6 months to 1 year		1 year to 2 years		2 to 3 years		3 to 5 years		Total
As of Sep.30, 2010
AR		2,818,371		536,091		305,100		-		2,434,322		6,093,884
AR Allowance		-		-		-		-		2,434,322		2,434,322
Net AR												3,659,562
As of Dec.31, 2009
AR		2,050,918		1,331,196		-		-		2,384,796		5,766,910
AR Allowance		-		-		-		-		2,384,796		2,384,796
Net AR												3,382,114

The Company maintains an allowance of doubtful accounts for estimated loss resulting from the inability of its customers to make required payments. The allowance for doubtful accounts is based on a review of specifically identified accounts and the aging of receivables. The company records a 100% bad debt allowance for accounts receivables with an aging from 3 to 5 years. In order to ensure that revenues are collectible at the time revenue is recognized, judgments are made with respect to the collectability of accounts receivable balances based on historical collection experience, specific customer facts and the current economic conditions. If the Company deems there is a possibility of a collection issue with a customer, the Company will stop shipments to the customer until the delinquent balance is collected .

Account balances are written off against the allowance after all means of collection efforts have been exhausted and the potential for recovery is considered remote. The Company also records a reserve for doubtful accounts for all other customers based on a variety of factors including; the length of time the receivables are past due, the financial health of the customer, macroeconomic considerations and historical experience with the customer. If circumstances related to specific customers change, the Company's estimates of the recoverability of receivables could be further adjusted.

The company’s payment terms to their customers are from 270 days to 360 days. The Company’s payment terms have not changed since the inception of the business.The Company’s process for monitoring customer’s outstanding receivables is to identify potentially problematic accounts receivable balances through the monthly review of the accounts receivable aging. These accounts are then contacted, so that the Company can identify the timing and likelihood of receipt of the accounts receivable balance.

f)	Inventories

Inventory is valued at the lower of cost (determined on a weighted average basis) or net realizable value. Management compares the cost of inventory with the net realizable value and an allowance is made for writing down the inventory to its net realizable value, if lower than the cost.

g)	Property, plant and equipment and construction-in-progress

Property, plant and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of property, plant, and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.

Depreciation is computed using the straight line method, with lives of forty years for buildings, twelve years for production equipment, ten years for vehicles, and five years for office furniture and equipment.

Construction-in-progress consists of amounts expended for the construction of Zhaoyuan Shuangji's new cement plant in Zhaoyuan city. Once building construction is completed the cost accumulated in construction in progress is transferred to property, plant and equipment.

h)	Impairment

The Company applies the provisions of ASC topic 360, "Accounting for the Impairment or Disposal of Long-Lived Assets") issued by the Financial Accounting Standards Board ("FASB"). ASC 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

The Company tests long-lived assets, including property, plant and equipment and intangible assets subject to periodic amortization, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary.

There was a provision for impairment loss on assets held for sale of $810,056 for the three and nine month periods ended September 30, 2010. There was no impairment of long-lived assets for the three and nine month periods ended September 30, 2009.

i)	Assets Held for Sale

An asset or business is classified as held for sale when:

		- management commits to a plan to sell and it is actively marketed; and
		- it is available for immediate sale and the sale is expected to be completed within one year.

In isolated instances, assets held for sale may not be sold within the expected one year period due to events or circumstances beyond the Company’s control. Upon being classified as held for sale, the recoverability of the carrying value must be assessed. Evaluating the recoverability of the assets of a business classified as held for sale follows a defined order in which property and intangible assets subject to amortization are considered only after the recoverability of goodwill and other assets are assessed. After the valuation process is completed, the assets held for sale are reported at the lower of the carrying value or fair value less cost to sell and the assets are no longer depreciated or amortized. The assets and related liabilities are aggregated and reported on separate lines of the balance sheet.

j)	Goodwill and purchased intangible assets

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is reviewed for impairment at least annual in accordance with ASC topic 350 The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with ASC topic 805, “Business Combinations”. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed and no impairment was deemed necessary.

k)	Revenue recognition

The Company's revenue recognition policies are in compliance with ASC topic 605 (formerly Staff Accounting Bulletin (SAB) 104). Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as advances from customers.

The Company's revenue consists of invoiced value of goods, net of a value-added tax (VAT). No product return or sales discount allowance is made as products delivered and accepted by customers are normally not returnable and sales discounts are normally not granted after products are delivered.

l)	Income taxes

The Company utilizes ASC topic 740 (formerly SFAS No. 109 “Accounting for Income Taxes”) which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Beginning January 1, 2008, the new Enterprise Income Tax (“EIT”) law replaced the existing laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of 25% replaced the 33% rate currently applicable to both DES and FIEs.

m)	Fair values of financial instruments

ASC topic 820, "Disclosures about Fair Value of Financial Instruments", requires that the Company disclose estimated fair values of financial instruments.

The Company's financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables, advances to suppliers, accounts payable, other payable, tax payable, and related party advances and borrowings.

As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.

n)	Statement of cash flows

In accordance with ASC topic 825, "Statement of Cash Flows," cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

o)	Earnings Per Share

ASC 420, “Earnings per share” requires the presentation of basic earnings per share and diluted earnings per share. Basic and diluted earnings per share computations are presented by the Company conform to the standard and are based on the weighted average number of shares of Common Stock outstanding during the year.

Basic earnings per share is computed by dividing net income or loss by the weighted average number of shares outstanding for the year. “Diluted” earnings per share is computed by dividing net income or loss by the total of the weighted average number of shares outstanding, and the dilutive effect of convertible shares and outstanding stock options and warrants (applying the treasury stock method).

p)	Recent accounting pronouncements

In April 2010, the FASB issued ASU 2010-13, Compensation-Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades - a consensus of the FASB Emerging Issues Task Force. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Earlier application is permitted. The Company does not expect the provisions of ASU 2010-13 to have a material effect on the financial position, results of operations or cash flows of the Company.

In May 2010, the FASB issued ASU 2010-19, Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as of the announcement date of March 18, 2010. The Company does not expect the provisions of ASU 2010-19 to have a material effect on the financial position, results of operations or cash flows of the Company.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

3. INVENTORIES

Inventories consist of the following as of September 30, 2010 and December 31, 2009:

	As of
	September 30,		December 31,
	2010		2009
	Unaudited
Raw materials	$	8,572,135	$	7,341,966
Work in progress		1,204,928		962,999
Finished goods		1,441,960		910,368

Totals	$	11,219,023	$	9,215,333

4. PROPERTY, PLANT AND EQUIPMENT, AND CONSTRUCTION IN PROGRESS

Property, plant and equipment consist of the following as of September 30, 2010 and December 31, 2009:

	As of
	September 30,			December 31,
	2010			2009
	Unaudited
Building and improvements	$	17,222,413		$	15,716,586
Vehicles		372,506			364,928
Machinery and equipment		36,587,868			33,706,663
Total		54,182,787			49,788,177
Less: impairment		(824,363	)		-
Less: accumulated depreciation		(35,187,636	)		(33,526,650	)
Less: machinery and equiptment held for sale		(877,117	)		-
Total property, plant and equipment, net	$	17,293,671		$	16,261,527

Depreciation expenses for the three and nine month periods ended September 30, 2010 was $400,355 and $947,993, respectively. Depreciation expenses for the three and nine month periods ended September 30, 2009 was $297,457 and $789,705 respectively.

Construction in Progress:

As of September 30, 2010 and December 31, 2009, construction in progress, representing construction for a new plant, amounting to $6,752,411 and $2,958,570, respectively.

5. INTANGIBLE ASSETS

LAND USE RIGHTS

As disclosed in footnote 8 in regards to the involuntary conversion related to the relocation of the Zhaoyuan plant, the City of Zhaoyuan withdrew the rights of ZhaoyuanShuangji to the land on which the Zhaoyuan plant was located and asked ZhaoyuanShuangji to relocate the plant to a new site within the City of Zhaoyuan.

The Company has used the land of the new site since March 2009 but has not yet paid for the related land use right as of September 30, 2010. The Company expects to pay for the land use right of the new land with the corresponding government subsidy before the end of the year 2010. Upon receiving the certificate of the new land use right, the Company will assess the cost of the new land use right and record the adjusted cost to the carrying value of the asset. . Currently, the carrying value of the land use right disclosed in the financial statements are related to the land use right of the prior location of the Zhaoyuan Plant.

The land use right consists of the following as of September 30, 2010 and December 31, 2009:

	As of
	September 30,			December 31,
	2010			2009
	Unaudited
Land use rights	$	203,556		$	199,414
Less: accumulated amortization		(33,587	)		(29,912	)
Total	$	169,969		$	169,502

Total amortization expense of intangible assets for the three and nine month periods ended September 30, 2010 amounted to $1,005 and $3,675, respectively. Total amortization expense of intangible assets for the three and nine month periods ended September 30, 2009 amounted to $996 and 2,999, respectively.

Amortization expenses of intangible assets for the next five years after September 30, 2010 are as follows:

September 30, 2011	$	3,986
September 30, 2012		3,986
September 30, 2013		3,986
September 30, 2014		3,986
September 30, 2015		3,986
Thereafter		147,276
Total	$	167,206

6. SHORT-TERM BANK LOANS

As of September 30, 2010 and December 31, 2010, the loans payable were as follows:

	As of
	September 30,		December 31,
	2010		2009
Short term bank loans:	Unaudited
Zhaoyuan City State Assets Management Co., Ltd., interest at 5.3% annually, due by September 30, 2011	$	152,384	$	149,284
China Industrial & Commercial Bank, interest at 3.7% annually, due by December 31, 2010		247,479		242,444
China Industrial & Commercial Bank, interest at 5.3% annually, due by May 31, 2011		37,578		36,813
China Construction Bank, interest at 8.9% annually, due by December 17, 2010		-		475,048
Agricultural Bank, interest at 8.9% annually, due by December 17, 2010		-		323,964
Zhaoyuan Rural Credit Cooperation, interest at 8.9% annually, due by December 17, 2010		815,605		-

Total	$	1,253,046	$	1,227,553

The interest expense was $68,880 and $175,202 for the three and nine months ended September 30, 2010, and $21,218 and $94,410 for the three and nine months ended September 30 2009, respectively.

7. TAXES PAYABLE

Taxes payables consist of the following as of September 30, 2010 and December 31, 2009:

	As of
	September 30,			December 31,
	2010			2009
	Unaudited
Value added tax payable	$	156,277		$	135,882
Income tax payable		5,245,759			4,890,755
Other levies		(1,396	)		(1,367	)
Total	$	5,400,640		$	5,025,270

The Company has accrued income taxes related to the debt forgiveness associated with the involuntary conversion of the Zhaoyuan plant of $4.6 million.

8. SUBSIDY RECEIVABLES, ACCURED LIABILITY, LONG-TERM PAYABLE, DEFERRED REVENUE, INCOME FROM INVOLUNTARY CONVERSION

In September 2008 the City of Zhaoyuan ordered Zhaoyuan Shuangji to relocate its plant which is expected to last 2 years. This transaction was termed as involuntary conversion. Details see following.

INVOLUNTARY CONVERSION

In September 2008, the City of Zhaoyuan withdrew the rights of Zhaoyuan Shuangji to the land on which the Zhaoyuan plant was located and asked Zhaoyuan Shuangji to relocate the plant to a new site within the City of Zhaoyuan. During the fourth quarter of 2008, Zhaoyuan Shuangji ceased operations at the plant and began construction of a new plant at a site selected by the City.

As consideration for this involuntary conversion, the City agreed to pay Zhaoyuan Shuangji $13,860,115 in installments over the relocation period. Of the $13,860,115 to be paid by the City, $5,106,358 and $3,342,185 were received by Zhaoyuan Shuangji during 2008 and 2009. The City of Zhaoyuan has specified usage of subsidy proceeds. The receipt of $5,106,358 in 2008 was specified to repay the bank loan of Zhanyuan Shuangji. The receipt of $3,342,185 in 2009 was specified to compensate for the relocation loss due to disposal of fixed assets.

				As of
				September 30,		December 31,
	As of Sep			2010		2009
	30, 2008		Recorded in	Unaudited
Subsidy from local government		13,860,115	Subsidy receivables		5,523,955		5,411,572
Specific usage:
Loan payment		5,106,358	Subsidy income		-		-
Compensation for loss of relocation		5,835,838	Accrued liabilities		1,086,115		1,064,019
Payment to purchase new land use right		2,042,543	Long-term payable		2,090,145		2,047,622
Compensation for purchase of new fixed assets		875,376	Deferred revenue		895,776		877,552

The increases of Subsidy Receivable, Accrued Liabilities, Long-term Payable and Deferred Revenue from December 31, 2009 to September 30, 2010 were due to the appreciation of the Company’s functional currency. Chinese Yuan Renminbi (RMB) against the Company’s reporting currency, US Dollar (USD), during the nine months period. There were no changes in the RMB balances during the period.

Income from involuntary conversion: Zhaoyuan Shuangji received $5,106,358 in 2008 and $3,229,802 in 2009 from City of Zhaoyuan to repay its bank loan.

Accrued liability: Equipment from the old plant will be reconditioned and moved to the new plant. The balance of the equipment of the old plant will be sold or scrapped. The company accrued $5,835,838 liabilities for the disposal of fixed assets and loss of inventories during the relocation periods as of December 31, 2008, when $4,771,819 was reversed due to actual loss from disposal of fixed assets and inventories during 2009.

Long-term payable: Zhaoyuan Shuangji is obligated to pay $2,042,543 to purchase the land rights to the new plant, which is recorded as long term payable amounted to $2,090,145 and $2,047,622 as of September 30, 2010 and December 31, 2009, respectively. This liability would be settled after receipt of subsidy proceeds from City of Zhaoyuan.

Deferred revenue: The subsidy was recorded as deferred revenue in compensation for future purchase of new fixed asset.

9. INCOME TAXES

The Company utilizes ASC topic 740 which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

i) The Company is incorporated in the state of Delware. Under the current law the company is not subject to state corporate income tax. The Company become a holding company and does not conduct any substantial operations of its own. No provision for federal corporate income tax have been made in the financial statements as the Company has no assessable profits for the nine months ended September 30, 2010 and 2009, respectively.

ii) Chine Holdings was incorporated in the British Virgin Islands (“BVI”). Under the current law of the BVI, the Company is not subject to tax on income or capital gains. Additionally, upon payments of dividends by the Company to its shareholders, no BVI withholding tax will be imposed.

iii) The Company’s PRC operating entities, being incorporated in the PRC, are governed by the income tax law of the PRC and is subject to PRC enterprise income tax (“EIT”). Effective from January 1, 2008, the EIT rate of PRC was changed from 33% of to 25%, and applies to both domestic and foreign invested enterprises.

The provision for income taxes for the nine months ended September 30, 2010 and 2009 consisted of the following:

	For the nine months
	Ended September 30,
	2010		2009
	Unaudited
Current income tax - Provision for China income	$	1,159,229	$	1,100,360
Deferred taxes		-		-
Total provision for income taxes	$	1,159,229	$	1,100,360

	For the three months
	Ended September 30,
	2010		2009
	Unaudited
Current income tax - Provision for China income	$	251,951	$	287,920
Deferred taxes		-		-
Total	$	251,951	$	287,920

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the nine months ended September 30, 2010 and 2009:

	2010		2009
Tax at statutory rate	34	%	34	%
Foreign tax rate difference	(9)	%	(9)	%
Tax at statutory rate	25	%	25	%

10. ACQUISITIONS AND IMPAIRMENT OF INTANGIBLE ASSETS

On April 15, 2009, Zhaoyuan Shuangji concluded a joint venture agreement with Longkou Bahai Cement Co. Ltd (“Bahai”) under which Zhaoyuan Shuangji became a 51% owner of a new company named Longkou Shuangji Cement Co. Ltd. (“Longkou”). The joint venture was made by the contribution of $1,170,070 in cash by Zhaoyuan Shuangji and a contribution by Baihai of the net assets formerly owned by Baihai, altogether with a contribution in cash of $290,000. So far Zhaoyuan Shuangji only contributed $570,000 and is committed to contributing additional $600,070 as needed. The new company has an annual capacity to produce 500,000 tons of cement, and will also operate in Shandong Province.

The following table summarizes total purchase price allocated to the fair value of the Company’s share of the net assets acquired as of the acquisition date:

	April 15, 2009
Consideration	$	1,170,070

Allocation of purchase price
Cash		4,921
Account Receivable, net		42,015
Other Receivable, net		318,029
Inventories		73,521
Fixed assets		638,493
Total assets acquired		1,076,979
Current Liabilities		(112,287	)
Net assets acquired		964,692
Goodwill		205,378
Total	$	1,170,070

Unaudited Pro Forma Consolidated Financial Information Disclosure for the nine months ended September 30, 2009

The following un-audited pro forma consolidated financial information for the nine months ended September 30, 2009, as presented below, reflects the results of operations of the Company assuming the Longkou acquisition occurred on January 1, 2009. These pro forma results have been prepared for information purposes only and do not purport to be indicative of what operating results would have been had the acquisition actually taken place on January 1, 2009, and may not be indicative of future operating results.

	For the nine months ended September 30,
	2009 (US$)
	Unaudited
	Restated
Sales	$	44,164,206
Cost of Sales		38,719,351
Gross Margin		5,444,855

Operating Expenses
Selling expenses		241,792
General and administrative expenses		891,760
		1,133,552

Income From Operations		4,311,303

Other Income ( Expense)
Interest expense		(96,874	)
Gain from sale of property		11
Other income		13,023
		( 83,840	)

Operating Income Before Income Tax Expense And Non-controlling Interest		4,227,463
Income Tax Expense		1,118,094

Net Income		3,109,369

Less: Net income attributable to Noncontrolling Interest		(26,069	)
Net Income attributable to shareholders		3,083,300

Earning per share
Basic	$	0.21
Diluted	$	0.11

Noncontrolling interest

	September 30, 2010
Share capital	$	(2,925,174	)
Statuary reserve		(106,090	)
Retained earnings		1,139,712
Net equity as of acquisition date		(1,891,552	)
Acquisition of 49% of noncontrolling interest		(926,860	)
Net income transfer to noncontrolling interest(May 2009-Dec 2009)		(258,492	)
Foreign Currency Translation Gain attributable to MI		(3,514	)
Total		(1,188,866	)
Net income transfer to noncontrolling interest(Jan – Sep, 2010)		(347,060	)
Foreign Currency Translation Gain attributable to MI		(27,233	)
Noncontrolling interest balance	$	1,563,159

Impairments of Goodwill

The Company evaluates intangible assets and other long-lived assets for impairment, at a minimum, on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and goodwill is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss. The Company assessed the carrying value of intangible assets in accordance with the requirements of ASC topic 350 There was no impairment of long-lived assets for the three months and nine months ended September 30, 2010 and 2009, respectively.

11. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

The Company's operations are all carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy.

The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

MAJOR CUSTOMERS AND VENDORS

There was one vender from which the Company purchased more than 10% of its raw material for the nine months ended September 30, 2010 with accounting for about 11%. Account payable to this vender amounted to $0 as of September 30, 2010.

There were no vendors from which the Company purchased more than 10% of its raw materials for the nine months ended September 30, 2009.

There was no major customer that accounted for over 10% of the total sales for the nine months ended September 30, 2010 and 2009, respectively.

12. SHAREHOLDERS’ EQUITY

COMMON STOCK

On July 14, 2010, the Company issued 400,000 shares of common stock to a consulting firm in exchange for consulting services to be rendered to the Company. The shares were valued at a total of $240,000.

On August 18, 2010, the Company issued 87,805 shares of common stock to a law firm in exchange for legal services to be rendered to the Company. The shares were valued at a total of $36,000.

On September 12, 2010, the Company issued 205,714 shares of common stock to an investment relation firm in exchange for consulting services to be rendered to the Company. The shares were valued at a total of $72,000.

On September 13, 2010, the Company issued 5,350 shares of common stock to a website development firm in exchange for services related to website development to be rendered to the Company. The shares were valued at a total of $2,194.

13. STATUTORY RESERVE

As stipulated by the Company Law of the People's Republic of China (PRC), net income after taxation can only be distributed as dividends after appropriation has been made for the following:

Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital;

Allocations of 10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and Statutory common welfare fund is no longer required per the new cooperation law executed in 2006.

14. RESTATEMENTS

The Company’s financial statements have been restated to reflect corrections and changes in presentation of the financial statements required reclassification of certain accounts. Effects on previously issued financial statements for the nine months ended September 30, 2009 as follows:

Decrease in sales	$	(17,487)
Decrease in cost of sales		(479,487)
Increase of selling and administrative expenses		215,138
Increase of interest expense		(277)
Increase of gain from sale of property		11
Non Controlling Interest		(1,574)
Income tax effect of restatement		86,722
Increase in net income for the nine months ended September 30, 2009		158,300

The effect on the Company’s previously issued financial statements for the nine months ended September 30, 2009 in summarized as follows:

STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

	Previously Reported			Net Change			Restated
	2009						2009

Sales	$	39,307,017			(17,487	)	$	39,289,530
Cost of Sales		34,473,900			(479,487	)		33,994,413	a
Gross Profit		4,833,117			462,000			5,295,117

Selling expenses and general and administrative expenses		839,890			215,138			1,055,028	b

Operating Income		3,993,227			246,862			4,240,089
Other Income (Expense):
Interest expense		(96,320	)		(277	)		(96,597	)
Gain from sale of property					11			11
Other income		13,023						13,023
		(83,297	)		(266	)		(83,563	)
Non Controlling Interest		(144,509	)		(1,574	)		(146,083	)
Income Before Income Taxes		3,765,421			245,022			4,010,443

Provision for Income Taxes:
Current Provision		1,013,638			86,722			1,100,360	c

Net Income for the Period		2,751,783			158,300		$	2,910,083
Other Comprehensive Income		1,722,018			(1,662,214	)		59,804
Comprehensive Income	$	4,473,801			(1,503,914	)	$	2,969,887
Earning per share
Basic		0.19			0.01			0.20
Diluted		0.19			(0.09	)		0. 10
Weighted average number of shares outstanding
Basic		14,744,031			54			14,744,085
Diluted		14,744,031			13,020,889			27,764,920

a & b) Correction of errors to decrease cost of sales and increase selling and administrative expenses:

Upon further review of the calculation of overhead allocatios , the Company deemed the portion of depreciation expense allocated to cost of sales for the nine months ended September 30, 2010 were overstated. Therefore, the Company proposed to reclass the portion of depreciation expense from cost of sales to selling and administrative expense.

Moreover, the company did not properly calculate depreciation expense related to its fixed assets according to their fixed asset policy, which resulted in an overstatement of depreciation expense for the nine months ended September 30, 2009. As a result, the Company recalculated depreciation expense and reduced overstated depreciation expense from selling and administrative expenses.

Since the amount of depreciation expense being reclassed from cost of sales into selling and administrative expense is greater than the reduction of depreciation, the net effect is a decrease of cost of sales and an increase in selling and administrative expenses.

c) Correction of error to record proper income tax expense:

The net effect of the restatement adjustments for the nine months ended September 30, 2009 is an increase of net income before tax. Therefore, the Company proposed an increase to income tax expense according to the tax provision calculation for the nine months ended September 30, 2009.

STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009

	Previously Reported			Net Change			Restated
	2009						2009
Sales	$	14,160,489			(35,030	)	$	14,125,459
Cost of Sales		12,525,294			51,208			12,576,502		a
Gross Profit		1,635,195			(86,238	)		1,548,957

Selling expenses and general and administrative expenses		373,002			(272,156	)		100,846		b

Operating Income		1,262,193			185,918			1,448,111
Other Income (Expense):

Interest expense		(22,006	)		79			(21,215	)
Loss on sale of property					(423,472	)		(423,472	)
Other income		(235	)		235
		(22,241	)		(422,446	)		(444,687	)
Non Controlling Interest		(119,238	)		(8,557	)		(127,795	)


Income Before Income Taxes		1,120,714			(245,085	)		875,629

Provision for Income Taxes:
Current Provision		312,887			(24,967	)		287,920		c


Net Income for the Period		807,827			(220,118	)		587,709
Other Comprehensive Income		1,511,736			(1,484,310	)		27,426
Comprehensive Income	$	2,319,563			(1,704,428	)	$	615,135
Earning per share
Basic	$	0.03			(0.01	)		0.02
Diluted	$	0.03			(0.01	)		0.02
Weighted average number of shares outstanding
Basic		26,983,042			54			26,983,096
Diluted		26,983,042			856,054			27,839,096

a & b) Correction of errors to increase cost of sales and decrease selling and administrative expenses:

The company did not properly calculate depreciation expense related to its fixed assets according to their fixed asset policy, which resulted in an overstatement of depreciation expense for the nine months ended September 30, 2009. As a result, the Company recalculated depreciation expense and reduced overstated depreciation expense from selling and administrative expenses.

Moreover, a portion of depreciation expense was directly related to overhead of the manufacturing process and thus should be allocated to cost of sales instead of selling and administrative expense. Therefore, the Company proposed to reclass that portion of depreciation expense from selling and administrative expense to cost of sales.

c) Correction of error to record proper income tax expense:

The net effect of the restatement adjustments for the three months ended September 30, 2009 is a decrease of net income before tax. Therefore, the Company proposed a decrease to income tax expense according to the tax provision calculation for the three months ended September 30, 2009.

STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

	Previously Reported			Net Change			Restated
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income	$	2,751,783		$	304,383		$	3,056,166
Adjustments to reconcile net income to net cash provided by operating activities:
Charges and credits not involving the use of cash:
Stock issuance for consulting service		-			88,000			88,000
Non-controlling interest in net income of subsidiarty		144,509			(144,509	)		-
Gain from sale of property		-			(11	)		(11	)
Depreciation and Amortization		1,059,010			(266,295	)		792,715
Changes in assets and liabilities:
Increase in accounts receivable		1,043,534			(1,897,895	)		(854,361	)
Increase (decrease) in other receivables		2,027,990			(2,065,769	)		(37,779	)
Decrease in inventory		(110,996	)		676,618			565,622
Increase in subsidy receivable		-			387			387
Increase in accounts payable		(78,133	)		(432,811	)		(510,944	)
Decrease in accrued payroll		-			(43,890	)		(43,890	)
Increase (decrease) in other payables		(780,963	)		378,398			(402,565	)
Decrease in accrual liabilities		-			(259	)		(259	)
Increase in tax payable		-			(41,936	)		(41,936	)
Incease (decrease) in accrued expenses		(242,845	)		(18,875	)		(261,720	)
Net Cash Provided By Operating Activities	$	5,813,889		$	(3,464,464	)	$	2,349,425

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property & equipment		(1,651,171	)		(3,951	)		(1,655,122	)
Cost of acquisition of Longkou		(569,966	)		569,966			-
Returns of business loans		9,642			8			9,650
Increase in CIP		(4,530,502	)		4,530,502			-
Additions tobusiness loans		(563,685	)		563,685			-
Cash proceeds of PP&E		1,877,693			(1,877,693	)
Cash proceeds of inventory		673,891			(673,891	)		-
Net Cash Provided(Consumed) By Investing Activities	$	(4,753,998	)	$	3,108,526		$	(1,645,472	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of bank loans		(1,012,180	)		278,698			(733,482	)
Net Cash Consumed By Financing Activities	$	(1,012,180	)	$	278,698		$	(733,482	)
EFFECT ON EXCHANGE RATE CHANGES	$	4,261		$	2,769		$	7,030
NET INCREASE (DECREASE) OF CASH AND CASH EQUIVALENTS	$	51,972		$	(74,471	)	$	(22,499	)
CASH AND CASH EQUIVALENTS BEGINING BALANCE	$	504,599		$	(443,645	)	$	60,954
CASH AND CASH EQUIVALENTS	$	556,571		$	(518,116	)	$	38,455

15. BASIC AND DILUTED EARNINGS PER SHARE

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares comprise shares issuable upon the exercise of share based awards, using the treasury stock method. The reconciliation of the numerators and denominators of the basic and diluted EPS computations for income is shown as follows:

	Nine months ended September 30,
	2010		2009
	Unaudited		Unaudited
			Restated
Numerator for basic and diluted earnings per share:
Net income attributable to stockholders	$	2,154,886	$	2,910,083
Denominator for basic earnings per share—weighted average shares outstanding		28,321,662		14,744,085
Dilutive effect of and warrants		-		13,020,835
Denominator for diluted earnings per share		28,321,662		27,764,920
Basic earnings per share	$	0.08	$	0.20
Diluted earnings per share	$	0.08	$	0.10

16. SUBSEQUENT EVENTS

Securities Purchase Agreement

On November 2, 2010 (the “Closing Date”), China Shuangji Cement, Ltd. (the “Company”) entered into and closed on two private placement financings pursuant to securities purchase agreements (the “Purchase Agreements”) with certain accredited investors (the “Investors”), whereby the Investors purchased an aggregate of 1,578,948 shares of our series A convertible preferred stock (“Series A Preferred Stock”) with attached warrants to purchase an aggregate of 1,578,948 shares of our common stock (the “Warrants”) for an aggregate purchase price of $600,000 (the “Purchase Price”). The Series A Preferred Stock is convertible into 1,578,948 shares of our common stock.

The Series A Preferred Stock pays annual 10% dividends on a quarterly basis, with the initial year of dividends paid in advance on the Closing Date, and shall not have any voting rights except as required by law. The Series A Preferred Stock is convertible at the option of the holder, except that upon the occurrence of the earlier of any of the following events, the Series A Preferred Stock shall be automatically converted: (i) the date that the Company’s common stock begins to trade on a national securities exchange; (ii) the trading of the Company’s common stock at 225% of the then-effective conversion price for 20 out of 30 consecutive trading days while there is an effective Registration Statement on file with the U.S. Securities and Exchange Commission for the shares underlying the Series A Preferred Stock; or (iii) the third year anniversary of the issuance of the Series A Preferred Stock.

The Warrants are exercisable for a period of five years from the date of issuance at an initial exercise price of $0.418. Both the conversion price of the Series A Preferred Stock and the exercise price of the Warrants are subject to customary adjustments provisions for stock splits, stock dividends, recapitalizations and the like. The shares underlying the Series A Preferred Stock and Warrants are also subject to piggyback registration rights.

The Investors have contractually agreed to restrict their ability to convert the Series A Preferred Stock and exercise the Warrants and receive shares of our common stock such that the number of shares of the Company common stock held by them and their affiliates after such conversion or exercise does not exceed 4.99% of the Company’s then issued and outstanding shares of common stock.

The Investors have also agreed that they shall convert the Series A Preferred Stock or exercise the Warrants so that at all times after the Closing Date they shall collectively own 4.99% of the Company’s outstanding voting securities, provided, that the Investors will not be required to comply with such provision if, in the aggregate, they collectively hold less that 4.99% of the Company’s outstanding voting securities after conversion of all the Series A Preferred Stock and upon exercise of the Warrants.

The Company will use the net proceeds from the sale of the Series A Preferred Stock and the exercise of the Warrants, after payment of legal fees and other closing costs, as working capital for its operating entity, Zhaoyuan Shuangji Co, Ltd. Of the $600,000 in net proceeds, the Company paid $12,000 in cash to Hampton Growth Resources, LLC for certain investor relations and financial consulting services rendered. Additionally, Desmond Holdings Limited received $50,000 in cash from the financing proceeds and a Warrant to purchase 65,790 shares of common stock as compensation for certain business consulting services rendered.

Make Good Securities Escrow Agreement

As an inducement for the Investors to enter into the Purchase Agreements, on November 2, 2010, the Company entered into a Make Good Securities Escrow Agreement with Sichenzia Ross Friedman Ference LLP (the “Escrow Agent”), Wenji Song, the Company’s principal shareholder, and each of the Investors, whereby the Mr. Song agreed to place an aggregate of 1,578,948 shares of common stock (the “Make Good Shares”) in escrow, to be distributed to the Investors on a pro-rata basis in the event the Company fails to achieve certain financial performance thresholds for the 12-month periods ended December 31, 2010 and December 31, 2011.

Item 2. Management’s Discussion and Analysis or Plan of Operation

Cautionary Notice Regarding Forward-Looking Statements

In this quarterly report, references to “China Shuangji Cement,” “CSGJ,” “the Company,” “we,” “our,” “us,” and the Company’s variable interest entity, “Zhaoyuan Shuangji Co. Ltd.,” refer to China Shuangji Cement Ltd.

We make certain forward-looking statements in this report. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our services, and other statements of our plans, beliefs, or expectations, including the statements contained under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” as well as captions elsewhere in this document, are forward-looking statements. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can”, “could,” “may,” “should,” “will,” “would,” and similar expressions. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. You are cautioned not to place undue reliance on such forward-looking statements. These risks and uncertainties, together with the other risks described from time to time in reports and documents that we file with the SEC should be considered in evaluating forward-looking statements.

The nature of our business makes predicting the future trends of our revenue, expenses, and net income difficult. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. The risks and uncertainties involved in our business could affect the matters referred to in any forward-looking statements and it is possible that our actual results may differ materially from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the following:

·	the effect of political, economic, and market conditions and geopolitical events;

·	legislative and regulatory changes that affect our business;

·	the availability of funds and working capital;

·	the actions and initiatives of current and potential competitors;

·	investor sentiment; and

·	our reputation.

We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by any forward-looking statements.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this Report.

Executive Summary

We are a supplier of high-grade portland cement to the industrial sector in the Shandong and Hainan provinces of the People’s Republic of China (PRC). Our processed cement products are primarily purchased by the cement industry for the purpose of making the cement required for the construction of buildings, roads, and other infrastructure projects. Our products have been sold nationally (in the PRC) and internationally in 10 countries. We own and operate four cement plants in the PRC, with a total capacity of approximately 1.5 million MT.

We wholly-own Chine Holdings Ltd., a company incorporated in the British Virgin Islands; which owns Jili Zhaoyuan Investment Consulting Co., Ltd. (“JZIC”), a Wholly Foreign-Owned Enterprise (“WFOE”) established under the laws of the PRC. Through contractual agreements in place between our affiliates and other commonly controlled entities, we control the operating cement company Zhaoyuan Shuangji Co. Ltd, a PRC company (“Zhaoyuan Shuangji”).

Except for our contractual rights related to the operations of Zhaoyuan Shuangji, we have no other operations or assets. As a result, all the information presented in this discussion is based on the operations of Zhaoyuan Shuangji.

Results of Operations

Comparison of the Three Months Ended September 30, 2010 and 2009

Sales. Revenue for the three months ended September 30, 2010 increased $969,531, or 7%, to $15,094,990 from $14,125,459 for the comparable period in 2009. During the three months ended September 30, 2010, our cement sales increased from 329,832 metric tons to 361,562 metric tons, representing a 10% increase from the comparable period in 2009. The increase in revenue was primarily due to an increase of sales quantity.

Cost of Sales. The cost of sales for the three months ended September 30, 2010 increased $418,348, or 3%, to $12,994,850 from $12,576,502 for the comparable period in 2009. The increase was primarily due to the increase in sales.

Gross Margin. Gross profit for the three months ended September 30, 2010 increased $555,183, or 36%, to $2,100,140 from $1,548,957 for the comparable period in 2009. The increase was primarily due to fact that the increase in average unit price of cement was greater than the increase in raw material prices.

Income from Operations. Income from operations for the three months ended September 30, 2010 increased $222,312, or 15%, to $1,670,423 from $1,448,111 for the comparable period in 2009. The increase was primarily due to an increase in sales.

Selling Expenses and General and Administrative Expenses. Selling expenses and general and administrative expenses for the three months ended September 30, 2010 increased $328,871, or 326%, to $429,717 from $100,846 for the comparable period in 2009. The increase was primarily due to issuances of stock and warrants as consideration for certain consulting and professional services.

Other Income (Expense). Other income (expenses) for the three months ended September 30, 2010 increased $405,945, or 91%, to $ 850,632 from $444,687 for the comparable period in 2009. The increase was primarily due to the impairment loss occurred in 2010.

Operating Income Before Income Tax Expense And Non-Controlling Interest. Operating income before income taxes for the three months ended September 30, 2010 decreased $183,633, or 18%, to $819,791 from $1,003,424 for the comparable period in 2009. The decrease was primarily due to an increase of other expense.

Income Tax Expense. Income taxes for the three months ended September 30, 2010 decreased $35,969, or 12%, to $251,951 from $287,920 for the comparable period in 2009. The decrease was primarily due to a decrease of operating income before income tax expense because of an increase of other expense.

Net Income Attributable to Stockholders. Net income for the three months ended September 30, 2010 decreased $189,265, or 32%, to $398,444 from $587,709 for the comparable period in 2009. The decrease was primarily due to the increase in other expense.

Comparison of the Nine months ended September 30, 2010 and 2009

Sales. Revenue for the nine months ended September 30, 2010 increased $3,009,540, or 8%, to $42,299,070 from $39,289,530 for the comparable period in 2009. During the nine months ended September 30, 2010, our cement sales increased from 1,007,932 metric tons to 1,031,684 metric tons, representing a 2% increase from the comparable period in 2009. The increase in revenue was primarily due to production from the new Longkou Cement plant that was acquired in April 2009.

Cost of Sales. The cost of sales for the nine months ended September 30, 2010 increased $1,950,429, or 6%, to $35,944,842 from $33,994,413 for the comparable period in 2009, the increase was primarily due to increase in sales.

Gross Margin. Gross profit for the nine months ended September 30, 2010 increased $1,059,111, or 20%, to $6,354,228 from $5,295,117 for the comparable period in 2009. The increase was primarily due to the fact that increase in average unit price of cement was greater than the increase in raw material prices.

Income from Operations. Income from operations for the nine months ended September 30, 2010 increased $325,731, or 8%, to $4,565,820 from $4,240,089 for the comparable period in 2009. The increase was primarily due to increase in sales.

Selling Expenses and General and Administrative Expenses. Selling expenses and general and administrative expenses for the nine months ended September 30, 2010 increased $733,380, or 70%, to $1,788,408 from $1,055,028 for the comparable period in 2009. The increase was primarily due to issuances of stock and warrants as consideration for certain consulting and professional services.

Other Income (Expense). Other income (expenses) for the nine months ended September 30, 2010 increased $821,082, or 983%, to $ 904,645 from $83,563 for the comparable period in 2009. The increase was primarily due to the impairment loss occurred in 2010.

Operating Income Before Income Tax Expense And Non-controlling Interest. Operating income before income taxes for the nine months ended September 30, 2010 decreased $495,351, or 12%, to $3,661,175 from $4,156,526 for the comparable period in 2009. The decrease was primarily due to increase of the other expenses.

Income Tax Expense. Income taxes for the nine months ended September 30, 2010 increased $58,869, or 5%, to $1,159,229 from $1,100,360 for the comparable period in 2009. The increase was primarily due to the increase in sales and operating income before income tax.

Net Income Attributable to Stockholders. Net income for the nine months ended September 30, 2010 decreased $755,197, or 26%, to $2,154,886 from $2,910,083 for the comparable period in 2009. The decrease was primarily due to the increase in other expense.

Liquidity and Capital Resources

As of September 30, 2010, we had current assets of $21,542,344, compared with $19,243,013 as of December 31, 2009. The increase is primarily due to an increase in inventories.

We have historically financed our operations from bank loans and cash flow from operations.

Net cash provided by operating activities for the nine months ended September 30, 2010 increased $1,350,855, or 57%, to $3,700,280 from $2,349,425 for the comparable period in 2009. The increase was primarily due to the timing of collection for Accounts Receivable and payments made to Accounts Payable.

Net cash used in investing activities for the nine months ended September 30, 2010 increased $6,542,980, or 398%, to $8,188,452 from $1,645,472 for the comparable period in 2009. The increase was primarily due to the increase in purchases of property and equipment and contruction projects in progress.

Net cash provided by financing activities for the nine months ended September 30, 2010 increased $4,491,377, or 612%, to $3,757,895 from $(733,482) for the comparable period in 2009. The increase was primarily due to proceeds from Loans Payable.

Short term loans

At September 30, 2010, the Company had a loan payable of $152,384 to Zhaoyuan City State Assets Management Co., Ltd. with an annual interest rate of 5.3%, and due on September 30, 2011. The loan is secured by the land use right of the Company.

At September 30, 2010, the Company had a loan payable of $247,479 to China Industrial & Commercial Bank, with an annual interest rate of 3.7%, and due on December 31, 2010. The loan is secured by the land use right of the Company.

At September 30, 2010, the Company had a loan payable of $37,578 to China Industrial & Commercial Bank, with an annual interest rate of 5.3%, and due on May 31, 2011 The loan is secured by the land use right of the Company.

At September 30, 2010, the Company had a loan payable of $815,605 to Zhaoyuan Rural Credit Cooperation, with an annual interest rate of 8.9%, and due on December 17, 2010. The loan is secured by the land use right of the Company.

We believe that our liquidity will be adequate to satisfy our obligations for the foreseeable future. Future requirements for our business needs, including the funding of capital expenditures and debt service for outstanding financings are expected to be financed by a combination of internally generated funds, the proceeds from the sale of our securities, borrowings and other external financing sources. However, we may not be able to generate sufficient operating cash flow and external financing sources may not be available in amounts or on terms sufficient to meet our liquidity needs. Our opinion concerning our liquidity is based on current information. If this information proves to be inaccurate, or if circumstances change, we may not be able to meet our liquidity needs.

Long term loans

On June 21, 2010, Zhaoyuan Shuangji entered into a loan agreement with Jiping Wen for the amount of RMB 25,000,000 (US$3,732,402). The loan was obtained for the purpose of constructing Zhaoyuan Shuangji’s new cement plant in Zhaoyuan city. The duration of the loan is ten years.

Interest shall be paid at 10% per year, to be calculated from January 1, 2011 to December 31, 2020, and to be paid every six months on June 30 and December 31 of each year. Zhaoyuan Shuangji shall be subject to a 10% penalty charge in the event of default on interest payments for two consecutive years.

Taxes payable

The amount of taxes payable is the accrued income tax of approximately $5.4 million from the one-time net income of USD $18,422,205 in debt forgiveness related to the involuntary conversion of the Zhaoyuan plant. In regards to the income tax resulted from the debt forgiveness, we are currently applying for a tax exemption with State Tax Bureau.

The payment terms of the remaining tax payable is less than one year. Since the balance is insignificant, the timing of these payments will not significantly impact our liquidity.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

The following table sets forth our contractual obligations (refer to the abve short term loans) to make future payments as of September 30, 2010.

	Payments due
	Total		< 1 year		1-3 years		3-5 years		> 5 years
Bank Loans		1,253,046		1,253,046		-		-		-
Personal Loans		-		-		-		-		3,732,402
Total obligations:		1,253,046		1,253,046		-		-		3,732,402

Other than as stated herein, we did not have any long-term debt obligations, operating lease obligations or purchase obligations as of September 30, 2010.

Off-Balance Sheet Commitments and Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Critical accounting policies and estimates

Consolidation of Variable Interest Entities

In June 2009, the FASB issued new guidance that amended the existing criteria for consolidating variable interest entities (“VIEs”). The Company adopted Financial Accounting Standards (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, which established new standards governing the accounting for and reporting of non-controlling interests (“NCI”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. The new consolidation criteria requires an ongoing qualitative assessment of which entity has the power to direct matters that most significantly impact the activities of a VIE and has the obligation to absorb losses or benefits that could be potentially significant to the VIE.

VIEs are those entities in which the Company, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with ownership of the entities, and therefore the company is the primary beneficiary of these entities. The results of subsidiaries or variable interest entities acquired during the year are included in the consolidated income statements from the effective date of acquisition.

ACCOUNTING OF VIE - accounting for the assets, liabilities, and non-controlling interest of a consolidated variable interest entity are accounted for as if the entity were consolidated based on voting interests and the usual accounting rules for which the VIE operates are applied as they would to a consolidated subsidiary as follows:

·	carrying amounts of the VIE are consolidated into the financial statements of the Company as the primary beneficiary (referred as "Primary Beneficiary" or "PB");

·	inter-company transactions and balances, such as revenues and costs, receivables and payables between or among the Primary Beneficiary and the VIE(s) are eliminated in their entirety

The Company is currently organized using an offshore holding structure commonly used by foreign investors with operations in China. As a Delaware corporation, the Company wholly-own Chine Holdings Ltd. (“Chine Holdings”), a company incorporated in the British Virgin Islands; which owns Jili Zhaoyuan Investment Consulting Co., Ltd. (“JZIC”), a Wholly Foreign-Owned Enterprise (WFOE) established under the laws of the PRC. Through contractual agreements in place between WFOE and Zhaoyuan Shuangji, since August 2008 the Company has substantial control over the daily operations and financial affairs, election of senior executives, and all matters requiring shareholder approval for Zhaoyuan Shuangji Co. Ltd, a PRC company (“Zhaoyuan Shuangji.”) Zhaoyuan Shuangji produces high-grade cement to the industrial sectors in the PRC and internationally.

The abovementioned contractual arrangements include a series of agreements, including a Strategic Consulting Service Agreement and Operating Agreement, through which JZIC has the right to advise, consult, manage and operate Zhaoyuan Shuangji for a fee. In order to further reinforce JZIC’s rights to control and operate Zhaoyuan Shuangji and to collect consulting and services fees provided by JZIC to Zhaoyuan Shuangji, Zhaoyuan Shuangji’s shareholders have granted JZIC the exclusive right and option to acquire all of their equity interests and voting rights in Zhaoyuan Shuangji through an Exclusive Option Agreement and Authorization Agreements. Pursuant to these agreements, JZIC operates and controls the business of Zhaoyuan Shuangji. Under the present structure, the Company’s agreements with Zhaoyuan Shuangji have a term of ten years with an option to renew.

According to ASC 810-10-25-42, for purposes of determining whether the reporting company is the primary beneficiary of a VIE, a reporting entity with a variable interest shall treat variable interests in that same VIE held by its related parties as its own interests. The related party includes an officer, employee, or member of the governing board of the reporting entity. The operating entity VIE is held by certain related parties including officers of the reporting entity China Shuangji Cement. From the company’s current structure below, China Shuangji Cement Holding Ltd. (“Holdings”) owns 76% of the reporting entity and 24% of the reporting entity is owned by the public float. Wenji Song, our Chairman and President, beneficially owns 51.3% of Holdings. Wenji Song in trust owns 48.7% of Holdings, and the trust includes all the other 197 shareholders of operating entity. Out of those 197 shareholders, Bo Wu, our Secretary and Director, owns 1.2%, Jun Song, our Director, owns 1.7%, Linxin Cui, Director, owns 2.5%, and Shouheng Yuan, our Director and Vice President of Sales, owns 0.9%, respectively, of Holdings. The operating company “Zhaoyuan Shuangji” is owned by the same 198 shareholders which includes Wenji Song and directors. Since the operating company “Zhaoyuan Shuangji” is 100% owned by the same shareholders who owned 76% of the reporting company, the operating company and the reporting company have common ownership. Also, the operating company “Zhaoyuan Shuangji” and the reporting entity have the identical management which they have the same chairman, officers and board of directors.

The consulting service agreement, operating support agreement, exclusive option agreement, and authorization agreement give JZIC the control over Zhaoyuan Shuangji’s daily operations and financial affairs, election of their senior executives and all matters requiring shareholder approval that most significantly impact Zhaoyuan Shuangji’s performance. The legal implication of the those agreements give JZIC the obligation to absorb the majority of losses and the right to receive the majority benefit from the operating entity Zhaoyuan Shuangji. In conjunction with the facts that the operating company Zhaoyuan Shuangji and the reporting entity having the identical management and the common ownership, and that JZIC, through these contractual agreements, effectively controls the operating entity, JZIC is considered to be the primary beneficiary of the operating entity Zhaoyuan Shuangji pursuant to ASC 810. The following key provisions in the agreements show that the Company has a controlling financial interest in Zhaoyuan Shuangji and entitle the Company’s power to direct matters that most significantly impact the activities of Zhaoyuan Shuangji and have the obligation to absorb losses or benefits that could be potentially significant to Zhaoyuan Shuangji:

(1)	The power to direct the activities of a VIE that most significantly impact the VIE’s economic performance:

According to the Authorization and Complementary Agreement of Operating Support Agreement (“Complementary Agreement”) dated August 11, 2008, Jili Zhaoyuan Investment Consulting Co., Ltd. (“JZIC”) maintains the right to make decisions about Zhaoyuan Shuangji Co. Ltd. (“Zhaoyuan Shuangji”)’s daily operations, financial management and transactions as stated below:

(a)	Article 1.1 of the Authorization Agreement:

“Party C (refers to Wenji Song) hereby irrevocably authorizes Party A (refers to JZIC) to undertake and exercise all of his rights as a holder and owner of registered capital of Party B (refers to Zhaoyuan Shuangji) pursuant to the laws of the PRC and the organization documents of Party B……”

(b)	Article 2 of the Complementary Agreement:

“Party B (refers to Zhaoyuan Shuangji) shall not conduct any transaction which may materially affect its assets, obligations, rights or operation unless Party A (refers to JZIC) provides its prior written consent……”

(c)	Article 3 of the Complementary Agreement:

“Party B together with its shareholders Party C (refers to Wenji Song) and Party D (refers to Wenji Song (in trust) )hereby jointly agree to accept, from time to time, the corporate policy advice and guidance provided by Party A in connection with the company’s daily operations and financial management and the recruitment, retention and dismissal of the company’s employees.”

(d)	Article 4 of the Complementary Agreement:

“Party B together with its shareholders Party C and Party D hereby jointly agree that Party C and Party D shall cooperate to appoint the person recommended by Party A as the directors of Party B, and Party B shall appoint Party A’s senior managers as Party B’s General Manager, Chief Financial Officer, and other senior officers.”

(2) The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE:

According to the Complementary Agreement, JZIC serves as guarantor of Zhaoyuan Shuangji and bears the operating risks and losses of Zhaoyuan Shuangji:

(a)	Article 1 of the Complementary Agreement:

“Party A agrees to serve as guarantor for Party B in the contracts, agreements or transactions in connection with Party B’s operation between Party B and any other third party, to provide full guarantee for the performance of such contracts, agreements or transactions by Party B.”

According to the Strategic Consulting Service Agreement (“Service Agreement”), JZIC can receive consulting fees from Zhaoyuan Shuangji.

(a) Article 3.1 (b) of the Service Agreement:

“Party B (refers to Zhaoyuan Shuangji) hereby agrees to pay Party A (refers to JZIC) a consulting fee (“Consulting Fee”). The amount of the Consulting Fee shall be decided and settled by Party A and Party B in writing according to the Consulting Services being provided by Party A upon request of Party B on quarterly basis, and be paid within three (3) months after the settlement.”

Therefore, pursuant to the ASC 810, the Company, as the primary beneficiary, is required to consolidate its VIE. Accordingly, the VIE (Zhaoyuan Shuangji) was consolidated through JZIC from the date of the acquisition.

NON-CONTROLLING INTEREST

The accompanying consolidated financial statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with GAAP. On April 15, 2009, Zhaoyuan Shuangji concluded a joint venture agreement with Longkou Bahai Cement Co. Ltd (“Bahai”) under which Zhaoyuan Shuangji became a 51% owner of a new company named Longkou Shuangji Cement Co. Ltd. (“Longkou”). The remaining 49% equity interest represents non-controlling interest amounting to $1,185,353 and $1,563,159 as at December 31, 2009 and September 30, 2010, respectively.

Accounts receivable

The Company's policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.

Inventories

Property, plant and equipment

Machinery and equipment held for sale

In the third quarter of fiscal year 2010, the Company determined that certain machinery and equipment at the Dongfang location would not be in use and thus would not be providing any benefit in the future. The Company identified certain items that are salable and intended to abandon the remaining items. As a result, machinery and equipment in the amount of $877,117 were listed as held for sale at September 30, 2010.

We annually assess whether the cost of our long-lived assets is recoverable or whether the remaining useful lives may warrant revision. We perform this assessment more frequently when specific events or circumstances have occurred that suggest the recoverability of the cost of the long-lived assets is at risk.

When such events or circumstances occur, we assess the recoverability of these assets by determining whether the carrying value will be recovered through expected cash flows from the operating division or estimated selling price or the estimated fair value of these assets. An impairment charge is recognized as the difference between the carrying amount and the estimated fair value if such estimated fair value is less than the carrying amount of the asset.

In making these cash flow projections or estimating fair value, various factors such as the timing of the cash flows and the discount rate are based upon the best information available at the time such projection or estimate is made. The estimated fair value is also based on management’s experience and the condition of the assets. Changes in these factors could materially affect the cash flow projections or the estimated fair value and result in the later recognition of an impairment charge.

There was a provision for impairment loss on assets held for sale of approximately $810,056 for the three and nine months ended September 30, 2010. Management concluded that its estimate in connection with this impairment loss was conservative and reasonable.

A deferred tax assets associated with the impairment loss was calculated and recorded based on 25% of the impairment loss.

Property, plant and equipment

Construction in-progress

Business combinations

The Company accounts for its business combinations using the purchase method of accounting in accordance with ASC topic 805 (formerly FASB Statement No. 141 “Business Combinations”.) This method requires that the acquisition cost to be allocated to the assets and liabilities of the Company acquired based on their fair values. The Company makes estimates and judgments in determining the fair value of the acquired assets and liabilities, based on valuations using management’s estimates and assumptions including its experience with similar assets and liabilities in similar industries. If different judgments or assumptions were used, the amounts assigned to the individual acquired assets or liabilities could be materially different.

Goodwill and purchased intangible assets

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is reviewed for impairment at least annual in accordance with ASC topic 350 (formerly FASB Statement No. 142, “Goodwill and Other Intangible Assets”.) The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with FASB statement No. 141, “Business Combinations”. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed.

Revenue recognition

The Company's revenue recognition policies are in compliance with ASC topic 605. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as advances from customers.

Income taxes

The Company utilizes ASC topic 740, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

New Financial Accounting Pronouncements

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

N/A.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports filed under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to the Company’s management, including the Company’s chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2010, such controls and procedures were ineffective.

During the course of internal evaluation, our accounting staff found a number of misstatements in our previously reported financial statements for the fiscal year ended December 31, 2008 that required correction. It also found a number of misstatements in our previously reported financial statements for the periods ended March 31, 2009, June 30, 2009, and September 30, 2009. Our management determined that these misstatements arose due to the lack of a sufficient number of personnel with an appropriate level of U.S. GAAP knowledge and experience appropriate to its financial reporting requirements at that time.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting 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 generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations 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 our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company's ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company's annual or interim financial statements that is more than inconsequential will not be prevented or detected.

Management has conducted an assessment of the effectiveness of our internal control over financial reporting as of September 30, 2010. In making its assessment of internal control over financial reporting, management used the criteria in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). During the course of internal evaluation, our accounting staff found a number of misstatements in our previously reported financial statements for the fiscal year ended December 31, 2008 that required correction. Our management determined that these misstatements arose due to the lack of a sufficient number of personnel with an appropriate level of U.S. GAAP knowledge and experience appropriate to its financial reporting requirements at that time and that such conditions gave rise to a material weakness in the Company’s internal controls over financial reporting as of December 31, 2008. Additionally, in the course of preparation of this Quarterly Report on Form 10-Q, the Company’s management also found a number of misstatements in our previously reported financial statements for the periods ended March 31, 2009, June 30, 2009, and September 30, 2009.

In light of this material weakness, we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the nine months ended September 30, 2010 on Form 10-Q were fairly stated in accordance with US GAAP. Accordingly, management believes that despite our material weaknesses in prior periods, our consolidated financial statements for the period ended September 30, 2010 are fairly stated, in all material respects, in accordance with US GAAP.

The Company intends to file amendments to the above-mentioned Forms 10-Q for the interim periods in 2009 and its Form10-K for the fiscal year ended December 31, 2008 to restate the relevant financial statements as soon as practicable and intends to strengthen its accounting and compliance procedures further in 2010.

Changes in Internal Control over Financial Reporting

The term "internal control over financial reporting" (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company's internal control over financial reporting that occurred during the nine months ended September 30, 2010, and they have concluded that other than as disclosed above, there was no change to the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings.

To our knowledge, there is no material litigation pending or threatened against us.

Item 1A.

Risk Factors.

N/A.

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds.

On April 12, 2010, the Company issued 2,500 shares of common stock to a consultant in exchange for consulting services to be rendered to the Company. The shares were valued at a total of $3,425.

On June 11, 2010, the Company issued 120,000 shares of common stock to an investment relation firm in exchange for consulting services to the Company. The shares were valued at a total of $72,000.

On June 23, 2010, the Company issued 400,000 shares of common stock to a consulting firm in exchange for consulting services to be rendered to the Company. The shares were valued at a total of $248,000.

In connection with the foregoing, we relied upon the exemption from securities registration afforded by Rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933, and transfers of such shares were restricted by Southern Sauce in accordance with the requirements of the Securities Act. All of the above-referenced persons were provided with access to our Securities and Exchange Commission filings.

Item 3.

Defaults Upon Senior Securities.

To our knowledge, there are no material defaults upon senior securities.

Item 4.

(Removed and Reserved).

Item 5.

Other Information.

None.

Item 6.

Exhibits.

(a)

Exhibits

31.1		Certification Required Under Section 302 of Sarbanes-Oxley Act of 2002.
31.2		Certification Required Under Section 302 of Sarbanes-Oxley Act of 2002.
32.1		Certification Required Under Section 906 of Sarbanes-Oxley Act of 2002.
32.2		Certification Required Under Section 302 of Sarbanes-Oxley Act of 2002.

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.


	CHINA SHUANGJI CEMENT LTD.

Dated: November 22, 2010	By:	/s/ Jun Song
		Name: Jun Song
		Title: Chief Executive Officer


Dated: November 22, 2010	By:	/s/ Kaiye He
		Name: Kaiye He
		Title: Chief Financial Officer