ogAs filed with the Securities and Exchange Commission on September 3, 2010

Registration Statement No. 333-164101

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 3

TO

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

CHANGDA INTERNATIONAL HOLDINGS, INC.

(Exact Name of Registrant in Its Charter)

Nevada	2870	98-0521484
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

10th Floor Chenhong Building

No. 301East Dong Feng Street

Weifang, Shangdong, Peoples Republic of China 261041

Telephone: + 86-536 8513228

 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Laughlin Associates, Inc.

2533 N. Carson Street

Carson City, Nevada  89706

 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Richard A. Friedman, Esq. Sichenzia Ross Friedman Ference LLP 61 Broadway, 32 nd Floor New York, New York 10006 Facsimile: (212) 930-9725 Mitchell S. Nussbaum, Esq. Loeb & Loeb LLP 345 Park Avenue New York, NY 10154 Facsimile: (212) 504-3013

Approximate date of commencement of proposed sale to the public: from time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

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

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

CALCULATION OF REGISTRATION FEE

	Proposed Maximum		Amount of
Title of Each Class of	Aggregate		Registration
Securities to be Registered	Offering Price(1)		Fee
Units, each consisting of one share of Common Stock, $.001 par value, and one Class A Warrant	$	20,700,000	$	1,475.91
Shares of Common Stock included as part of the Units		—		—	(2)
Class A Warrants included as part of the Units		—		—	(2)
Shares of Common Stock underlying the Class A Warrants included in the Units(3)	$	10,350,000	$	737.96
Representative Unit Purchase Option (“Underwriters Units”)
Units underlying the Representative Unit Purchase Option	$	3,105,000	$	221.39
Shares of Common Stock included as part of the Underwriters Units		—		—	(2)
Class A Warrants included as part of the Underwriters Units		—		—	(2)
Shares of Common Stock underlying the Class A Warrants included in the Underwriters Units	$	1,552,500	$	110.69
Total	$	35,707,500	$	2,545.95	(4)

(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended.
(2)	No fee pursuant to Rule 457(g) of the Securities Act of 1933, as amended
(3)	Pursuant to Rule 416, there are also being registered such additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends or similar transactions as a result of the anti-dilution provisions contained in the Class A Warrants.
(4)	Previously Paid.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.

This information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 2010

PRELIMINARY PROSPECTUS

$     

  CHANGDA INTERNATIONAL HOLDINGS, INC.

[_____] Units

We are selling [_____] units, each unit consisting of one share of our common stock and one Class A warrant. Each Class A warrant entitles the holder to purchase one-half a share of our common stock at a price of $[_____], and will expire on [_____], 2015. The Class A warrants will be exercisable [_____] days after issuance.

There is presently no public market for our units or Class A warrants, and no market for the units will exist. Our common stock is currently quoted on the Over-the-Counter Bulletin Board under the symbol "CIHD.OB." On September 1, 2010 , the last reported market price of our common stock on the Over-the-Counter Bulletin Board was $0.52.   We have applied to list our common stock and the Class A warrants on the NYSE Amex. We cannot assure you, however, that our securities will be listed on the NYSE Amex on or before the date of this prospectus.

These are speculative securities. Investing in our securities involves significant risks. You should purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors” beginning on page 6.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

		Per Unit		Total
Public Offering Price	$		$
Underwriting discounts and commissions	$		$
Proceeds to us, before expenses	$		$

(1) This amount does not include a non-accountable expense allowance in the amount of 1% of the gross proceeds, or $      ($      per unit) payable to Chardan Capital Markets, LLC.

This is a firm commitment underwritten offering.  Delivery of the units will be made on or about          , 2010. We have granted the underwriters a 45-day option to purchase up to 15% of the amount being offering of additional units solely to cover over-allotments, if any.

Chardan Capital Markets, LLC

The date of this prospectus is          , 2010

TABLE OF CONTENTS

	Page
Prospectus Summary	1
The Offering	4
Summary Financial Information	5
Risk Factors	6
Special Note Regarding Forward Looking Statement	19
Explanatory Note Regarding Reverse Stock Split	20
Use of Proceeds	20
Market for Common Equity and Related Stockholder Matters	20
Capitalization	21
Dilution	22
Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	33
Business	34
Property	52
Legal Proceedings	53
Management	53
Executive Compensation	57
Security Ownership of Certain Beneficial Owners and Management	59
Certain Relationships and Related Transactions	61
Underwriting	63
Description of Capital Stock	65
Material PRC Income Tax Considerations	67
Material United States Federal Income Tax Considerations	70
Legal Matters	77
Experts	77
Where You Can Find More Information	77
Index to Financial Statements	F-1

You should rely only on the information contained or incorporated by reference to this prospectus in deciding whether to purchase our common stock. We have not authorized anyone to provide you with information different from that contained or incorporated by reference to this prospectus. Under no circumstances should the delivery to you of this prospectus or any sale made pursuant to this prospectus create any implication that the information contained in this prospectus is correct as of any time after the date of this prospectus. To the extent that any facts or events arising after the date of this prospectus, individually or in the aggregate, represent a fundamental change in the information presented in this prospectus, this prospectus will be updated to the extent required by law.

We obtained statistical data, market data and other industry data and forecasts used throughout this prospectus from market research, publicly available information and industry publications. Industry publications generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy and completeness of the information. Nevertheless, we are responsible for the accuracy and completeness of the historical information presented in this prospectus, as of the date of the prospectus and we believe and act as if all the information presented in this prospectus, including market and industry data and estimates, is accurate.

 In this prospectus, unless otherwise specified, all monetary amounts are in U.S. dollars. All renminbi, or RMB, amounts have been translated into U.S. dollars at the December 31, 2009 noon buying rate in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York, being US$1.00 = RMB6.8372.

 PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. It does not contain all of the information that you should consider before investing in our securities. You should read the entire prospectus carefully, including the section entitled “Risk Factors” and our consolidated financial statements and the related notes thereto contained elsewhere in this prospectus. In this prospectus, “we” “our,” the "Company" or “Changda Holdings” refer collectively to Chandga International Holdings, Inc. and its subsidiaries which include our wholly owned subsidiary, Changda International Ltd. (“Changda International”) which conducts its operations through its wholly owned subsidiaries, Weifang Changda Fertilizer Co., Ltd and Weifang Changda Chemical Co., Ltd., in the People’s Republic of China, or PRC.

Unless otherwise indicated, all share amounts and prices assume the consummation of a reverse stock split, at a ratio of 3-for-1 to be effected prior to the effectiveness of the registration statement of which this prospectus is a part, with the exact timing of the reverse stock split to be determined by the Board of Directors.

Overview

We are engaged in developing, manufacturing and the selling of (i) microbial organic and inorganic (chemical) compound fertilizers and (ii) chemical products, primarily consisting of snow melting products. We have more than 10 fertilizer product lines which are sold under the “CHANGDA” and “FENGTAI WOSIDA” brands.  Our proprietary product lines are marketed and sold to distributors which in turn sell our products to farmers. For the three months ended June 30, 2010, 87% of our revenues ($23 million) were derived from our fertilizer products and 13% of our revenues ($3 million) were derived from our chemical products.  For the fiscal year ended December 31, 2009, 86% of our revenues ($63 million) were derived from our fertilizer products and 14% of our revenues ($10 million) were derived from our chemical products.

Fertilizer Products

Our organic and inorganic fertilizer products are classified into the following categories:

· Complex Fertilizers. These fertilizers contain two or three of the primary nutrients of nitrogen, phosphorus and potassium and are made by a process involving only chemical reactions between raw materials and intermediates.

· Compound Fertilizers. Such fertilizers are produced by initiating chemical reactions between the three primary nutrients of nitrogen, phosphorous and potassium during the production process. We have expanded our product offerings to include a microbial organic-inorganic compound fertilizer which (i) helps plants secure nitrogen from the air, (ii) facilitates plants’ absorption of useful minerals such as phosphorus and potassium from the soil and (iii) enhances stress resistance by the plants. The combination of the organic and inorganic elements enhances soil fertility and crop yield respectively.

· Slow-Release Compound Fertilizer. This group of fertilizers allows fertilizer nutrients to be released over a period of time, enabling plants to absorb most of the nutrients and enhance yield rate.  We have also developed controlled-release fertilizers.

Our products sold through our distributor, China Post Logistics (Shandong) Limited, a subsidiary of the China Postal Service, or China Post, under the “FENGTAI WOSIDA” brand.  We have entered into a distribution agreement with China Post whereby China Post has the exclusive right to sell our products under the “FENGTAI WOSIDA” brand in the Shandong Province.  In order to distribute our products throughout the Shandong Province, we have to enter into a sales agency agreement with a local branch of China Post that covers a particular region within the Shandong province.  Currently we have entered into sales agency agreements with 10 local branches of China Post, all of which are on the same terms and expire on December 31, 2010.  While we are not dependent on any one local branch of China Post for the distrubution of our products, any inability to renew any sales agency agreement or if such agreements are, they are renewed on terms less favorable to us, with any local branch of China Post will limit our ability to distribute our product within the Shandong Province and could result have an adverse effect on our financial condition.  We sell our products under two different brand names, including the “CHANGDA” brand, to maximize the sale of our fertilizer products in the same market through a variety of different distribution channels.

Chemical Products

Our principal chemical products are snow melting agents and various other industrial chemicals.  Snow melting agents are de-icing salts, other salts and calcium chloride. The snow melting agents are a white, odorless and soluble solid compound and are used primarily to de-ice airports, roads and golf courses in the winter seasons, spread by winter service vehicles. Our industrial chemical products range includes thiophene, calcium chloride and magnesium chloride.

Competitive Strengths

We believe that, compared with other PRC fertilizer manufacturers, the following principal competitive strengths have contributed to our historical success and will contribute to future prospects:

Experienced management team

Our management team has an average industry experience of over 10 years in production, financial and business management in the agricultural products and specialty chemicals business. We believe the management team possesses the leadership, vision and in-depth industry knowledge to anticipate and take advantage of market opportunities, to formulate sound business strategies, and to execute the strategies in an effective manner to maximize the benefit to our stockholders. Senior management has been able to achieve cost-efficient, organic and acquisitive growth of our business as well as effective integration of management and operations. 

1

Strong distribution channel anchored by an exclusive distribution agreement with China Post

Our sales are primarily in Shandong Province, one of the major agricultural provinces in the PRC, and overseas to Japan. We believe we supplied approximately 6% of snow melting agents used in Japan in 2009.  We have established a broad distribution network, including four exclusive distribution centers in Shandong Province, and an exclusive distribution agreement with China Post, which has a broad network of 80,000 distribution centers in 18 cities in Shandong Province. We are able to obtain information on the identity of end-users, so as to establish on-going and direct business relationships with them, providing technical training and after-sales services. Training seminars are also conducted on a regular basis for end-users, to familiarize them with our products and promote brand presence and enhance market value.  

Ability to develop next generation microbial organic-inorganic compound fertilizers and slow-release compound fertilizers

Prolonged application of synthetic chemical additives to soil leads to deterioration of soil condition and water pollution. Unlike inorganic fertilizers, our microbial organic-inorganic compound fertilizer products may facilitate the preservation of soil fertility and the prevention of some plant diseases. In 1998, the State Council of the PRC launched the “Rich Soil Project” in the PRC, with the objective of improving the deteriorating arable soil condition by promoting the usage of organic fertilizers. Our microbial organic-inorganic compound fertilizer products are consistent with this government policy, and we believe they will contribute to the protection of the environment.

Full scale research and development support with patent coverage over both the fertilizer and chemical key products

Our product range of fertilizers and chemical products are covered by two patents and eight pending patents. We have a strong focus on research and development to ensure that the quality of our products are continuously improved and to accelerate the development of new products.  We believe that our capabilities in developing new products and production processes will allow our products to remain at the forefront of those available in our target markets.

February 2010 Financing

On February 3, 2010, we issued promissory notes in the aggregate principal amount of $900,000 to certain accredited investors (the “February 2010 Notes”).  The notes bear interest at 20% and matured on August 3, 2010 (the “Maturity Date”).  As of the date of this Prospectus, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the February 2010 Notes.

On August 3, 2010, holders of an aggregate of $200,000 of February 2010 Notes entered into an agreement with us pursuant to which the maturity date of the February 2010 Notes held by such persons have been extended until the earlier of (i) December 1, 2010 or (ii) 5 business days after the closing of a public offering of our equity and/or debt securities (the “New Maturity Date”).  In consideration for the extension of the maturity date to the New Maturity Date, we agreed to provide these holders of February 2010 Notes with the following consideration:

(i)	the payment of an additional 5% interest on the February 2010 Notes commencing from August 3, 2010 until the New Maturity Date;
(ii)	a downward adjustment of the exercise price of the warrants issued in connection with the February 2010 Notes from $2.25 to $0.75, the closing price of our common stock as quoted on the Over-the-Counter Bulletin Board on August 2, 2010, the last trading day prior to the date of the agreement;

(iii)	an amendment to the cashless feature of the warrants issued in connection with the February 2010 Notes to make the warrants exercisable on a cashless basis immediately as of the date of the agreement; and
(iv)	the payment of a pro-rata portion of a $25,000 payment of interest on the aggregate principal amount of $900,000 of February 2010 Notes outstanding as of the date of the Letter Agreement.

On August 6, 2010, holders of an aggregate of $500,000 principal amount of February 2010 Notes informed us that we were in default and demanded repayment under the February 2010 Notes.  Pursuant to the terms of the February 2010 Notes, we have five (5) business days to cure an event of default under the February 2010 Notes.  As of the date of this Prospectus, we have not cured the event of default within the applicable cure period under the February 2010 Notes.  Therefore, the holders of the February 2010 Notes are entitled to, among other things (i) the principal amount of the February 2010 Notes along with any interest accrued but unpaid thereon (ii) an additional interest at a rate of 5% per annum upon and during the occurrence of an event of default and (iii) costs and expenses in connection with the collection and enforcement under the February 2010 Notes, including reasonable attorneys’ fees.  While we had cash and cash equivalents of approximately $8.9 mil as of June 30, 2010, we have encountered difficulties in remitting funds out of the PRC.  We are currently working on making arrangements to honor our obligations under the February 2010 Notes, either from our PRC operating subsidiaries or otherwise, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the February 2010 Notes.

Corporate Structure

Our current corporate structure is set forth below:

2

Organizational History of Changda International Holdings, Inc.

We were incorporated on January 25, 2007, in the state of Nevada under the name Promodoeswork.com, Inc.   We subsequently changed our name to Changda International Holdings, Inc. in connection with the reverse acquisition of Changda International Ltd. in February 2009 pursuant to the terms of an exchange agreement.  See “Business – Corporate History.”  

Changda International Ltd. was incorporated on April 2, 2007 in the Republic of Marshall Islands as the holding company of our operating subsidiaries.  Changda International holds, directly or indirectly, equity interests in Weifang Changda Fertilizer Co., Ltd., or Changda Fertilizer, Weifang Changda Chemical Co., Ltd., or Changda Chemical, Shandong Fengtai Fertilizer Co., Ltd., or Shangdong Fengtai, and Heze Changda Fertilizer Co., Ltd., or Changda Heze (collectively, the "PRC Operating Companies").

Our Offices

Our principal business office is located at 10 th Floor, Chenhong Building, No. 301East Dong Feng Street, Weifang, Peoples Republic of China and our telephone number is +86 536 851 3228. Our website address is http://www.changdastock.com. Information contained on our website or any other website does not constitute part of this prospectus.  

 Reverse Stock Split

Our Board of Directors and stockholders holding a majority of our outstanding shares of common stock have approved a proposal to grant discretionary authority to our Board of Directors to effect a reverse stock split of our issued and outstanding shares of common stock at any time within one year after the date action was taken by a majority of our stockholders at a ratio of either (i) one-for-two or (ii) one-for-three, as determined at the discretion of the Board of Directors to be in our best interests without further approval from our stockholders (the “Reverse Stock Split”).

We expect to effect the Reverse Stock Split of our shares of common stock of 1-for-3 prior to or upon the effective date of the registration statement of which this prospectus forms a part. No fractional shares of common stock will be issued in connection with the Reverse Stock Split, and all such fractional interests will be rounded down to the nearest whole number. Issued and outstanding stock options and warrants will be split on the same basis and exercise prices will be adjusted accordingly. All information presented in this prospectus assumes a 1-for-3 reverse stock split of our outstanding shares of common stock, stock options and warrants and, unless otherwise indicated, all such amounts and corresponding share price, per share and stock option and warrant exercise price data set forth in this prospectus have been adjusted to give effect to the assumed Reverse Stock Split.

3

THE OFFERING

Securities Offered	[______] units, each unit consisting of ·   One share of common stock; and ·   One Class A warrant
	Each Class A warrant is exercisable for one-half a share of common stock.  The Class A warrants will be exercisable __ days after issuance. The Class A warrants will expire at 5:00 p.m., New York City time, on ________, 2015.
Number of shares outstanding before the offering	______ shares
Number of shares outstanding after the offering	______ shares
Offering Price	_______
Use of Proceeds	We intend to use the net proceeds of this offering to fund the completion of the construction of a new plant in Heze, the expansion of our Thiophene chemical line, the advancement of research and development and general working capital.
OTC Bulletin Board symbol	CIHD.OB
Proposed NYSE Amex Symbol
Risk Factors	The securities offered by this prospectus are speculative and involve a high degree of risk and investors purchasing securities should not purchase the securities unless they can afford the loss of their entire investment. See “Risk Factors” beginning on page 6.

4

SUMMARY FINANCIAL INFORMATION

The following tables set forth our summary statement of operations data for the fiscal years ended December 31, 2009 and 2008, for the six months ended June 30, 2010 and 2009 and our summary balance sheet as of June 30, 2010. Our statement of operations data for the fiscal years ended December 31, 2009 and 2008 were derived from our audited consolidated financial statements included elsewhere in this prospectus. Our statement of operations data for the six months ended June 30, 2010 and 2009 and our balance sheet data as of June 30, 2010 were derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. In the opinion of management the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of our operating results and financial position for those periods and as of such dates. The results for any interim period are not necessarily indicative of the results that may be expected for a full year.  The results indicated below and elsewhere in this prospectus are not necessarily indicative of our future performance. You should read this information together with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and related notes and our unaudited condensed consolidated financial statements and related notes included elsewhere in this prospectus.

On February 13, 2009, we completed a “reverse acquisition” transaction, pursuant to the terms of an exchange agreement with Changda International Ltd.  wherein the stockholders of Changda International transferred all of the outstanding shares of common stock of Changda International to us in exchange for 15,909,988 newly issued shares of our common stock.  Changda International, as a result, became our wholly-owned subsidiary. The acquisition of Changda International Ltd. was accounted for as a “reverse acquisition,” since the stockholders of Changda International acquired a majority of the outstanding shares of our common stock upon the closing of the transaction.  Changda International was deemed to be the accounting acquirer and, accordingly, the assets and liabilities and the historical operations that are reflected in the financial statements are those of Changda International Ltd.  

The consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States, or US GAAP.

		Year Ended December 31,						For the Six Months Ended June 30,
		2009			2008			2010			2009
Statement of Operations Data:		US$’000						US$’000
Revenue	$	73,073		$	80,958		$	43,682		$	41,801
Cost of Sales		(60,237	)		(67,907	)		(36,658	)		(35,051	)
Gross Profit		12,836			13,051			7,024			6,750
Operating Expenses		(6,543	)		(6,122	)		(2,932	)		(2,717	)
Operating Income		6,293			6,929			4,092			4,033
Income before Income Taxes		6,130			6,576			3,433			3,923
Income Taxes		(1,473	)		(931	)		(927	)		(770	)
Net Income (Loss)	$	4,657		$	5,645		$	2,506		$	3,153
Other Comprehensive Income		14			1,025			122			(238	)
Total Comprehensive Income		4,671			6,670			2,628			2,915
Earnings Per Common Share Data
Basic		0.74			0.95			0.40			0.51
Diluted		0.74			0.95			0.40			0.51
Weighted Average Number of Common Shares Outstanding
Basic		6,256,600			5,955,552			6,321,342			6,203,766
Diluted		6,313,730			5,955,552			6,321,342			6,238,061

	June 30,  2010 US$’000
Balance Sheet Information:
Working capital	$	14,803
Total assets		46,429
Total liabilities		17,043
Additional Paid-In Capital		5,922
Accumulated Profit		19,319
Stockholders’ equity		29,386

5

RISK FACTORS

You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision with regard to our securities. The statements contained in or incorporated into this offering that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Associated with Our Business

Our business will be harmed if China Post, our major distributor, reduces its orders or discontinues doing business with us.

In December 2007, we entered into a five year distribution agreement with China Post which authorizes China Post to be the exclusive distributor of our “FENGTAI WOSIDA” series of fertilizer in the Shandong Province in the PRC.  We have also entered into one year sales agency agreements with various branches of China Post for the sale of our “FENGTAI WOSIDA” series of fertilizer in various regions of the Shandong Province. For the six months ended June 30, 2010 and 2009 and for the fiscal years ended December 31, 2009 and 2008, sales through China Post and its branch offices accounted for approximately 60%, 79%, 67% and 70% of our total sales, respectively.  If there is any disruption in our business relationship with China Post and we fail to secure new distributors with a similar sales network in the PRC, our operations and revenues would be adversely affected. Although we believe that our relationship with China Post is good, we have no long-term distribution agreement with them and they could terminate their relationship with us in favor of competitors with increased production capabilities or offering lower prices or other favorable terms. If China Post reduces their orders or discontinues doing business with us, we could have difficulties finding new distributors to distribute our products and our revenues and net income could in turn decline considerably. Our reliance on China Post could also affect our bargaining power in getting favorable prices for our products. In addition, untimely payments and/or failure to pay by China Post would negatively affect our cash flow.

Because our contracts are individual purchase orders and not long-term agreements, the results of our operations can vary significantly from quarter to quarter.

We currently do not have any long-term contracts with our customers for our chemical products.  We have been dependent in each year on a small number of customers who generate a significant portion of our business related to our chemical products, and these customers have changed from year to year.  For the six months ended June 30, 2010, two customers accounted for approximately 36% of our total revenues related to our chemical products, 19% and 17% of which were attributable to Weifang Economic and Trade Co., Ltd., and Only Chemical (Shanghai) Co., Ltd. respectively.  For the fiscal year ended December 31, 2009, four customers accounted for approximately 54% of our total revenues related to our chemical products, 17%, 15%, 11% and 11% were attributable to Weifang Economic and Trade Co., Ltd., Weifang Strong Source Chemical Co., Ltd.  Sun Duqian and Li Kun.  We anticipate that our dependence on a limited number of customers in any given fiscal year will continue for the foreseeable future. There is a risk that existing customers will elect not to do business with us in the future or will experience financial difficulties. There is also a risk that our customers will attempt to impose new or additional requirements on us that reduce the profitability of those customers for us. If we do not develop relationships with new customers, we may not be able to increase, or even maintain, our revenue, and our financial condition, results of operations, business and/or prospects may be materially adversely affected.

Because we may require additional financing, our failure to obtain necessary financing may impair our operations.

As of June 30, 2010, we had working capital of approximately $14,803,000. The completion of our Heze fertilizer plant and the expansion of our thiophene product line will require additional financing. Upon completion of this Offering, we anticipate that we will have sufficient capital to meet our cash requirements for the completion of our Heze fertilizer plant and the expansion of our thiophene product line. To the extent we need to raise additional capital, the failure to obtain the necessary financing could affect both our cash flows and our ability to operate profitably. We cannot assure you that our existing sources of capital will be sufficient to provide us with the funds necessary to enable us to perform our obligations under our contracts and to develop our business. Our failure to obtain any required financing could impair our ability to both serve our existing clients base and develop new clients and could result in both a decrease in revenue and an increase in our loss.

To the extent that we require financing, we would intend to seek funding for our capital needs through the issuance of debt, preferred stock, equity, loan guarantees, or a combination of these types of instruments. We may also seek to obtain financing through a private placement or a public offering, a consequence of which could include the sale or issuance of stock to third parties. To the extent additional funding is required, we cannot assure you that we will be able to get additional financing on any terms acceptable to us, and, if we are able to raise funds, it may be necessary for us to sell our securities at a price which is at a significant discount from the market price and on other terms which may be disadvantageous to us. In connection with any such financing, we may be required to provide registration rights to the investors. The price and terms of any financing which would be available to us could result in the issuance of a significant number of shares.

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The landlord for the property which our Changda Chemical plant is located on lacks the legal right to lease us the property for industrial purposes.

Changda Chemical leases a parcel of land with an area of approximately 22,500 square meters from Xinxing Village Villagers’ Committee, or Committee. Changda Chemical has built manufacturing facilities on the land leased from the Committee. The Committee does not have the right to lease the land to Changda Chemical because the land is collectively-owned land for agricultural purposes and therefore is not permitted to be leased for industrial purposes. Although we have received written certifications from the local authority that Changda Chemical has attended to all relevant procedures using the land and that the land is, according to the municipal planning authority, intended for industrial purposes, the lease may be deemed invalid under PRC law. If the lease is terminated or invalidated, we may be forced to halt all operations on our chemical products without entitlement to any compensation and incur additional costs relating to any relocation and/or building of a new facility to manufacture our chemical products.  If we are forced to halt the production of our chemical products, our revenues and financial position may be adversely effected since our chemical products accounted for approximately 14% of our revenues for the fiscal year ended December 31, 2009.  Moreover, Changda Chemical may also be subject to fines of 5 to 10% of the cost of the construction built by Changda Chemical on the land without first obtaining construction approvals (construction costs were approximately RMB 5.6 million, approximately U.S. $822,751 through June 30, 2010). 

We have a limited operating history.

We have a relatively limited operating history. Changda Chemical and Changda Fertilizer, our PRC operating entities, through which we currently operate our business, commenced operations in April 2003 and December 2000,  respectively.   You should consider our future prospects in light of the risks and uncertainties typically experienced by companies such as ours in evolving industries such as the fertilizer and chemical industries in China and the Asia-Pacific region.  Some of these risks and uncertainties relate to our ability to:

● offer new and innovative products to attract and retain a larger customer base;

● attract additional customers and increase spending per customer;

● increase awareness of our products and brands and continue to develop user and customer loyalty;

● raise sufficient capital to sustain and expand our business;

● maintain effective control of our costs and expenses;

● respond to changes in our regulatory environment;

● respond to competitive market conditions;

● manage risks associated with intellectual property rights;

● integrate any business acquisition properly;

● attract, retain and motivate qualified personnel; and

● upgrade our technology to support additional research and development of new products.

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If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected.

Although our revenues have grown rapidly, we cannot assure you that we will maintain our profitability or that we will not incur net losses in the future. We expect that our operating expenses will increase as we expand. Any significant failure to realize anticipated revenue growth could result in operating losses.

Possible shortage in supply or price fluctuations of raw materials may have a detrimental effect on our profitability.

The purchase price of major raw materials such as urea were extremely volatile in 2009. We expect continued volatility and uncertainty in prices for raw materials. We have not entered into any long-term supply contracts with suppliers of major raw materials and cannot guarantee that we will be able to pass any future increases in raw material purchase prices on to consumers.  Under the influence of volatility in the price of raw materials and economic circumstance, our sales revenue and net revenues for the fiscal year ended December 31, 2009 decreased by $8,000,000 and $1,000,000, respectively, as compared to the fiscal year ended December 31, 2008. In December 2009, management decided that, in order to limit the risks of exposure to market volatility and sudden price increases, it was beneficial to take advantage of the reduced price offered by raw material suppliers and entered into agreements with said suppliers at contracted prices.  This will enable the company to maintain its gross profit ratio despite the likelihood of an increase in the price of raw materials.   In the event that there is a significant shortage or change in the purchase price of raw materials in the future and we are unable to transfer resulting cost increases to our customers, our business operations and profitability may be adversely affected. 

In addition, our operations, like those of other PRC fertilizer companies, are also subject to regulation by PRC government authorities such as the Ministry of Agriculture, the Ministry of Commerce, the State Bureau of Taxation and the local pricing bureaus, which exercise extensive control over various aspects of our operations: pricing mechanisms for our raw materials and main products; industry-specific taxes and fees; and import and export quotas and procedures. As a result, we may face significant constraints on our ability to implement our business strategies or to maximize our profitability. Any price increase in raw materials and any change to the regulation by the PRC government authorities may adversely affect our fertilizer business and our profitability and financial results.

There is no assurance that we will sustain the growth in our business.

Our compound annual growth rate, or CAGR, of sales revenue from 2006 to 2009 was approximately 28.57%, and our CAGR of net income was approximately 30.87% during this same period.

There is no assurance that any growth rate can be sustained or that we can retain and attract qualified management, employees and customers. In the event that we are unable to maintain such attributes, we may have negative growth or stagnant growth, which in turn may impair our business operations and profitability. 

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Our sales have seasonal variations and adverse weather conditions could reduce demand for our products.

Our sales volumes and revenues are derived from two main product lines, fertilizer and chemical products. In the normal course of business, we are exposed to fluctuations in supply and demand and the prices of our products depend on a number of factors, including general economic conditions, cyclical trends in end-user markets, and supply and demand imbalances. In addition, prices of our fertilizer products also depend on weather conditions, which have a greater relevance because of the seasonal nature of fertilizer application. We experience seasonal variations in our revenues and our operating costs due to the farming season. The peak selling seasons for our fertilizer products are the first, second and  fourth quarters of the year. These periods are the planting and crop-growing months, which boost fertilizer sales. The third quarter of the year is harvest season, hence the low demand for fertilizer.  During the fiscal year ended December 31, 2009, approximately 85% of our annual fertilizer sales volume occurred in the first, second and fourth fiscal quarters. We cannot guarantee that our prices will remain at recent or current levels or that they will increase in the future.

We face competition from other fertilizer and chemical producers and sellers. Therefore, business and prospects may be adversely affected if we are not able to compete effectively.

We operate in markets where we compete with domestic chemical and organic fertilizer and chemical producers and sellers of similar or larger size and scale in the PRC. In addition, a number of foreign companies have established fertilizer and chemical manufacturing enterprises in the PRC, and other foreign manufacturers may do so in the future. We also operate in a very competitive international fertilizer market. Such domestic and foreign competitors may have greater access to financial resources, higher levels of vertical integration, better operating efficiency and longer operating histories. If  we are unable to improve product quality, performance and price competitiveness or if we are unable to anticipate and respond to changing market demand, maintain operating efficiency and economies of scale, and control costs in connection with the planned expansion, raw materials and energy, our business and prospects may be adversely affected and we may not be able to compete effectively.

Our business and operations require capital investment. Failure to raise sufficient capital in a timely manner may adversely affect business and results of operations.

In accordance with our development plan, we intend to expand our operations in Heze, Shandong Province of the PRC. Management may from time to time have other business expansion plans that require further capital. If we are unable to obtain such additional funding, we may not be able to pay for the necessary capital expenditures needed for expansion, or to implement proposed business strategies or at all. Any of the above could impede the implementation of our business strategies or prevent us from entering into transactions that would otherwise benefit business on commercially reasonable terms or at all and adversely affect its financial condition and results of operations.

Our business is subject to operation risks beyond our control and could have a detrimental effect on our profitability.

Our financial performance is at all times subject to operational risks which may include factors that are beyond our control. The production process could face unforeseen operating problems and therefore production could be delayed and financial performance would be adversely affected. Unanticipated additional maintenance of the plant would also impact upon production capacity and revenue projections. This potential downtime would impact upon our results.

Operations are subject to hazards and natural disasters that may not be fully covered by our insurance policies.

We make substantial investments in complex manufacturing and production facilities and transportation equipment. Many of the production processes, raw materials and certain finished products are potentially destructive and dangerous in uncontrolled or catastrophic circumstances, including operating hazards, fires and explosions, and natural disasters such as typhoons, floods, earthquakes and major equipment failures for which insurance may not be obtainable at a reasonable cost or at all. Should an accident or natural disaster occur, it may cause significant property damage, disruption to operations and personal injuries and our insurance coverage may be inadequate to cover such loss. Should an uninsured loss or a loss in excess of insured limits occur, we could suffer from damage to our reputation or lose all or a portion of production capacity as well as future revenues anticipated to derive from the relevant facilities. Any material loss not covered by our insurance policies could materially and adversely affect our business, financial condition and operations.

Product liability is not covered under our insurance policies.

We have taken out a basic asset insurance policy with China Continent Property & Casualty Insurance Company Ltd. Our operations could be interrupted by fire, flood, earthquake and other events beyond our control for which we do not carry adequate insurance. While we have property damage insurance, we do not carry business disruption insurance, which is not readily available in China. Any disruption of the operations in our factories would have a significant negative impact on our ability to manufacture and deliver products, which would cause a potential diminution in sales, the cancellation of orders, damage to our reputation and potential lawsuits.

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Furthermore, any defects in our fertilizer and chemical products could result in economic loss, adverse customer reaction, negative publicity, and additional expenditure to rectify the problems and/or legal proceedings instituted against us. We have not maintained any insurance policy against losses that may arise from such claims. Any litigation relating to such liability may be expensive and time consuming, and successful claims against us could result in substantial monetary liability or damage to our business reputation and disruption to our business operations.

We are dependent upon key personnel and the loss of key personnel, or the inability to hire or retain qualified personnel, could have an adverse effect on our business and operations.

Our success is heavily dependent on the continued active participation of our current executive officers listed under “Management.” Loss of the services of one or more of our officers could have a material adverse effect upon our business, financial condition or results of operations. Further, our success and achievement of our growth plans depend on our ability to recruit, hire, train and retain other highly qualified technical and managerial personnel. Competition for qualified employees among companies in the fertilizer industry is intense, and the loss of any of such persons, or an inability to attract, retain and motivate any additional highly skilled employees required for the expansion of our activities, could have a materially adverse effect on us. The inability on our part to attract and retain the necessary personnel and consultants and advisors could have a material adverse effect on our business, financial condition or results of operations.

As of September 1, 2010, we have a total of approximately 195 employees and skilled labor working in our offices and production facilities in the PRC. However, there can be no assurance that we will be able to maintain a prolonged good relationship with our existing or ex-employees and that no labor disruptions will occur in the future. Should any industrial action or labor unrest occur, our business operations could be adversely affected.

There are differences between PRC and U.S. Generally Accepted Accounting Principles.

Our profits are derived from our subsidiaries established in the PRC. The profits available for distribution for companies established in the PRC are determined in accordance with PRC accounting standards, which may differ from the amounts arrived at under US GAAP.  In the event that the amount of the profits determined under the PRC accounting standard in a given year is less than that determined under the US GAAP, we may not have funds to allow distribution of profits to our stockholders.

We may fail to achieve our outline business objectives.

The future plans as set out in this document have been formulated on the basis of a number of assumptions in relation to future events, which by their nature are subject to changes and uncertainties and may not materialize. Although we will endeavor to execute such plans there is no assurance that our plans will materialize or be executed in accordance with the stated timeframe or that our objectives will be fully accomplished.

Moreover, we expect our business plans to be financed by the net proceeds from the Offering and cash generated from operations. In the event that these funds are insufficient to finance our business plans and we are unable to raise funds through other financing activities, our business plans may not materialize as described in this prospectus.

There is a risk of infringement of our intellectual property rights in the PRC.

All our fertilizer and chemical products are sold under the “CHANGDA” and “FENGTAI WOSIDA” trademarks which are registered as trademarks in the PRC. In addition, two patent applications have been granted and eight patent applications are pending. There can be no assurance that the existing legal protection in the PRC will effectively prevent unauthorized use of our “CHANGDA” and “FENGTAI WOSIDA” trademarks or the misappropriation by third parties of the technology associated with our applied/registered patents.

Policing unauthorized use of our trademarks and the proprietary technology may be difficult, costly and ineffective, and there can be no assurance that any steps taken by us will effectively prevent any such misappropriation or infringement from occurring. Unauthorized use of our trademarks and patented technology could adversely affect our performance and business reputation. Failure to renew our trademarks could also adversely affect our performance and business reputation.

In relation to the eight patent applications which are still pending, should we fail in our application for securing such patents, we may not be able to prevent the unauthorized use of our technology and methods as set out in the applications. In this event, unauthorized use of our production methods and technologies could adversely affect our performance.

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Potential claims alleging infringement of third party’s intellectual property by us could harm our ability to compete and result in significant expense to us and loss of significant rights.

From time to time, third parties may assert patent, copyright, trademark and other intellectual property rights to technologies that are important to our business. Any claims that our products or processes, whether in relation to the specific circumstances set out above or otherwise, infringe the intellectual property rights of others, regardless of the merit or resolution of such claims, could cause us to incur significant costs in responding to, defending, and resolving such claims, and may divert the efforts and attention of our management and technical personnel away from the business. As a result of such intellectual property infringement claims, we could be required or otherwise decide it is appropriate to pay third-party infringement claims; discontinue manufacturing, using, or selling particular products subject to infringement claims; discontinue using the technology or processes subject to infringement claims; develop other technology not subject to infringement claims, which could be time-consuming and costly or may not be possible; and/or license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms. The occurrence of any of the foregoing could result in unexpected expenses or require us to recognize an impairment of our assets, which would reduce the value of the assets and increase expenses. In addition, if we alter or discontinue the production of affected items, our revenue could be negatively impacted.

RISKS RELATING TO THE FERTILIZER AND CHEMICAL INDUSTRIES IN THE PRC

Loss of or refusal of extension for preferential tax treatments.

Changda Chemical enjoys a tax concession of fifteen percent (15%) from the enterprise income tax for the years 2009 to 2011. Shandong Fengtai Fertilizer had a tax concession with full exemption from enterprise income tax for the years 2008 to 2009, and will have a fifty percent exemption from the enterprise income tax for the years 2010 to 2012. All fertilizer production companies enjoy a tax concession from the value added tax. Accordingly, any loss or refusal of an extension for these preferential tax treatments could increase our tax expenditures in the future and could have an adverse effect on our business, operations or financial conditions.

We face significant challenges and changes in government policies, including changes to VAT policies, adjustments of export custom duties and accession to the WTO, which could affect the operational environment of our industry and thus our financial performance.

To ensure a sufficient supply of fertilizers to meet the domestic demand in the PRC, the PRC government has historically adjusted its policies against the export of fertilizers, in particular through the cancellation of VAT refunds and imposition of export tariffs. The PRC government’s policies regarding export tariffs have historically encouraged or discouraged exports, and the PRC government changed its tax regime for exports several times. In addition, the PRC government may from time to time change its VAT refund policies based on the level of supply or demand. While we previously enjoyed VAT refunds for exports of our fertilizer products, we are currently subjected to a seasonal export tariff ranging from 20 percent to 185 percent. Because of such changes in taxes and export tariffs payable on exports of fertilizer products, our sales are primarily domestically focused. We may in the future be subject to further changes in tax liabilities, which may further affect the mix of domestic and export sales and have an adverse impact on our business, results of operations and net profits.

As part of its World Trade Organization, or WTO, concession commitment, the PRC is obliged to open its domestic fertilizer market to foreign participation within five years of December 2006, its accession to the WTO, by allowing foreign participation in the trading and distribution of fertilizers in the PRC. Whereas domestic fertilizer prices are insulated from fluctuations of international market prices prior to the PRC’s WTO accession, we anticipate that international market prices will have an increasingly direct impact on our fertilizer prices as the PRC gradually relaxes its fertilizer trade restrictions.

RISKS RELATING TO DOING BUSINESS IN CHINA

Governmental control of currency conversion may affect the value of your investment.

The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries and our affiliated entity to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from China State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies, repatriation of funds and direct investment. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our stockholders.

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Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. To date, the Company has taken no steps to prevent violations of the FCPA other than the adoption of a code of ethics.  While our code of ethics have been adopted to ensure compliance with the FCPA and Chinese anti-corruption laws by all individuals involved with our company, our employees or other agents may engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. 

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The PRC economy may experience inflationary pressure, which may lead to an increase in interest rates and a slowdown in economic growth.

In response to concerns regarding the PRC’s high rate of growth, the PRC Government has taken measures to slow down economic growth to a more manageable level. Among the measures that the PRC Government has taken are restrictions on bank loans in certain sectors. These measures have contributed to a slowdown in economic growth in the PRC and a reduction in demand for consumer goods. Consequently, these measures and any additional measures, including a possible increase in interest rates, could contribute to a further slowdown in the PRC economy, which in turn could adversely affect the future demand of the our products and our operating results.

Fluctuations in the exchange rate could have a material adverse effect upon our business.

We conduct our business in RMB. To the extent our future revenue are denominated in currencies other than the United States dollars, we would be subject to increased risks relating to foreign currency exchange rate fluctuations which could have a material adverse affect on our financial condition and operating results since our operating results are reported in United States dollars and significant changes in the exchange rate could materially impact our reported earnings.

  Adverse changes in economic and political policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

Substantially all of our business operations are conducted in China. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past 20 years, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. Since early 2004, the PRC government has implemented certain measures to control the pace of economic growth. Such measures may cause a decrease in the level of economic activity in China, which in turn could adversely affect our results of operations and financial condition.

Any deterioration of political relations between the United States and the PRC could impair our operations.

The relationship between the United States and the PRC is subject to sudden fluctuation and periodic tension. Changes in political conditions in the PRC and changes in the state of Sino-U.S. relations are difficult to predict and could adversely affect our operations or cause potential acquisition candidates or their goods and services to become less attractive. Such a change could lead to a decline in our profitability. Any weakening of relations between the United States and the PRC could have a material adverse effect on our operations.

Under the PRC EIT Law, we and/or Changda International Ltd. may be classified as a “resident enterprise” of the PRC. Such classification could result in PRC tax consequences to us, our non-PRC resident enterprise investors and/or Changda International Ltd.

On March 16, 2007, the National People’s Congress approved and promulgated a new tax law, the PRC Enterprise Income Tax Law, or “EIT Law,” which took effect on January 1, 2008. Under the EIT Law, enterprises are classified as resident enterprises and non-resident enterprises. An enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define “de facto management bodies” as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise; however, it remains unclear whether the PRC tax authorities would deem our managing body as being located within China. Due to the short history of the EIT Law and lack of applicable legal precedents, the PRC tax authorities determine the PRC tax resident treatment of a foreign (non-PRC) company on a case-by-case basis.

If the PRC tax authorities determine that we and/or Changda International Ltd. are a “resident enterprise” for PRC enterprise income tax purposes, a number of PRC tax consequences could follow. First, we and/or Changda International Ltd. may be subject to the enterprise income tax at a rate of 25 percent on our and/or Changda International Ltd.’s worldwide taxable income, as well as PRC enterprise income tax reporting obligations. Second, under the EIT Law and its implementing rules, dividends paid between “qualified resident enterprises” are exempt from enterprise income tax. As a result, if we and Changda International Ltd. are treated as “qualified resident enterprises,” all dividends from the PRC Operating Companies to us (through Changda International Ltd.) should be exempt from PRC tax.

If Changda International Ltd. were treated as a PRC “non-resident enterprise” under the EIT Law, then dividends that Changda International Ltd. receives from the PRC Operating Companies (assuming such dividends were considered sourced within the PRC) may be subject to a 10 percent PRC withholding tax. Similarly, if we were treated as a “non-resident enterprise” under the EIT Law and Changda International Ltd. were treated as a “resident enterprise” under the EIT Law, then dividends that we receive from Changda International Ltd. (assuming such dividends were considered sourced within the PRC) may be subject to a 10 percent PRC withholding tax. Any such taxes on dividends could materially reduce the amount of dividends, if any, we could pay to our shareholders.

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Finally, the new “resident enterprise” classification could result in a situation in which a 10 percent PRC tax is imposed on dividends we pay to our enterprise (but not individual) investors that are not tax residents of the PRC (“non-resident investors”) and gains derived by them from transferring our securities, if such income or gain is considered PRC-sourced income by the relevant PRC tax authorities. In such event, we may be required to withhold a 10 percent PRC tax on any dividends paid to our non-resident investors. Our non-resident investors also may be responsible for paying PRC tax at a rate of 10 percent on any gain realized from the sale or transfer of our securities in certain circumstances. We would not, however, have an obligation to withhold PRC tax with respect to such gain under the PRC tax laws.

 Moreover, the State Administration of Taxation (“SAT”) released Circular Guoshuihan No. 698 (“Circular 698”) on December 10, 2009 that reinforces the taxation of certain equity transfers by non-resident investors through overseas holding vehicles. Circular 698 addresses indirect equity transfers as well as other issues. Circular 698 is retroactively effective from January 1, 2008. According to Circular 698, where a non-resident investor who indirectly holds an equity interest in a PRC resident enterprise through a non-PRC offshore holding company indirectly transfers an equity interest in the PRC resident enterprise by selling an equity interest in the offshore holding company, and the latter is located in a country or jurisdiction where the actual tax burden is less than 12.5 percent or where the offshore income of its residents is not taxable, the non-resident investor is required to provide the PRC tax authority in charge of that PRC resident enterprise with certain relevant information within 30 days of the transfer. The tax authorities in charge will evaluate the offshore transaction for tax purposes. In the event that the tax authorities determine that such transfer is abusing forms of business organization and a reasonable commercial purpose for the offshore holding company other than the avoidance of PRC income tax liability is lacking, the PRC tax authorities will have the power to re-assess the nature of the equity transfer under the doctrine of substance over form. A reasonable commercial purpose may be established when the overall international (including U.S.) offshore structure is set up to comply with the requirements of supervising authorities of international (including U.S.) capital markets. If the SAT’s challenge of a transfer is successful, it may deny the existence of the offshore holding company that is used for tax planning purposes and subject the seller to PRC tax on the capital gain from such transfer. Since Circular 698 has a short history, there is uncertainty as to its application. We (or a non-resident investor) may become at risk of being taxed under Circular 698 and may be required to expend valuable resources to comply with Circular 698 or to establish that we (or such non-resident investor) should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations (or such non-resident investor’s investment in us).

If any PRC tax applies to a non-resident investor, the non-resident investor may be entitled to a reduced rate of PRC tax under an applicable income tax treaty and/or a deduction for such PRC tax against such investor’s domestic taxable income or a foreign tax credit in respect of such PRC tax against such investor’s domestic income tax liability (subject to applicable conditions and limitations). Investors should consult their own tax advisors regarding the applicability of any such taxes, the effects of any applicable income tax treaties, and any available deductions or foreign tax credits.

For a further discussion of these issues, see the sections of this prospectus captioned “Material PRC Income Tax Considerations” below.

Restrictions on receipt of dividends from, and transfer of funds to, our PRC operating subsidiaries may be imposed.

Changda International Ltd. is incorporated in the Republic of the Marshall Islands and is the holding company of our operating subsidiaries. At present, Changda Fertilizer, Changda Chemical, Changda Heze and Shangdong Fengtai are the only subsidiaries. The ability of Changda Fertilizer, Changda Chemical, Changda Heze and Shangdong Fengtai and any future subsidiaries which are WFOEs to declare dividends and other payments to Changda International may be restricted by factors that include changes in applicable foreign exchange and other laws and regulations in the PRC and in the Marshall Islands.

In particular, under PRC law, profit available for distribution from the PRC operating subsidiaries is determined in accordance with generally accepted accounting principles in the PRC. This calculation may differ from the one performed in accordance with US GAAP. As a result of the potential difference in profit calculation, there is a risk that the PRC subsidiaries may not have sufficient profit to distribute so as to allow distributions to the stockholders in the future. In addition, distributions by our subsidiaries other than as dividends may be subject to governmental approval and taxation.

Any transfer of funds to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, is subject to registration or approval of certain PRC governmental authorities, including the relevant administration of foreign exchange and/or the relevant examining and approval authority. Further, it is not permitted under PRC law for our PRC subsidiaries to lend money to each other/another member. Therefore, it is difficult to change our capital expenditure plans once the relevant funds have been remitted to our PRC subsidiaries. These limitations on the free flow of funds between our companies and our PRC subsidiaries could restrict our ability to act in response to changing market conditions and to reallocate funds from one PRC subsidiary to another in a timely manner.

Uncertainties with respect to the PRC legal system could adversely affect us.

Our operations in China are governed by PRC laws and regulations. We are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to wholly foreign-owned enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value.

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

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 You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us or our management.

Changda International Ltd., our wholly owned subsidiary, is incorporated under the laws of the Marshall Islands.  The provisions of the Marshall Islands Business Corporations Act, or BCA, resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, stockholders may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling stockholders than would stockholders of a corporation incorporated in a U.S. jurisdiction. The Marshall Islands has no bankruptcy laws. In addition, all of our assets are located in, and other than our chief financial officer, all of our other senior executive officers reside within the PRC. As a result, it may be generally difficult to effect service of process within the United States or elsewhere outside China upon our senior executive officers and directors not residing in the United States, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. Moreover, our PRC counsel has advised us that China does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts. As a result, our public stockholders may have substantial difficulty in protecting their interests through actions against our management or directors than would stockholders of a corporation with assets and management members located in the United States.

Due to the nature of our business, we are subject to certain environmental regulation.

Our operations are subject to environmental and safety regulation in the PRC. Such regulation covers a wide variety of matters, including, without limitation, prevention of waste, pollution and protection of the environment, labor regulations and worker safety. On March 29, 2010, Changda Fertilizer, Shandong Fengtai and Changda Chemical received a certification from the Enviromental Protection Bureau of Binhai Economic Development Zone, Weifang, Shandong, stating that all activities of these three entities since inception are in compliance with the current laws and regulations of the PRC.  We could also be subject, under such regulations, to clean up costs and liability for toxic and hazardous substances which may exist on or under any of our properties or which may be produced as a result of our operations. In particular, the acceptable level of pollution and the potential clean up costs and obligations and liability for toxic or hazardous substances for which we may become liable as a result of our activities may be impossible to assess against the current legal framework and current enforcement practices of the PRC. In addition, environmental legislation and permit regime are likely to evolve in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and heightened degree of responsibility for companies and their directors and employees.

The downturn in the economy of the PRC may slow our growth and profitability.

The development of the countryside and agricultural sector is linked China’s overall economic growth. There can be no assurance that a downturn will not have a negative effect on our business, especially if it results in either a decreased use of our products or in pressure on us to lower our prices.  Our fertilizer business is dependent on the ability of the Chinese farmers to afford our products, thus any significant disruptions in the food and agricultural products market might adversely affect our business. Our chemical business is dependent the further development of Chinese consumer safety standards, increased demand for standardized drugs and further creation as well as extension of useable during winter time of infrastructures. Any trends that might lead to lowering of consumer safety standards, decrease spending on pharmacy, lower demand on infrastructure use during winter time or climatic effects leading to warmer winters, might affect our business in a negative way.

We may be subject in the future to new M&A Regulations.

We have not obtained the approval of the China Securities Regulatory Commission, or CSRC, in connection with our listing on the NYSE Amex LLC under the Provisional Regulations on the Merger and Acquisitions of Domestic Enterprises by Foreign Investors, or New M&A Regulations. In the event that such an approval is subsequently deemed to be required, our business, financial results and prospects may be adversely affected. The New M&A Regulations also establish more complex procedures for acquisitions conducted by foreign investors which could make it more difficult to pursue growth through acquisitions.

If the CSRC or other PRC regulatory authorities subsequently determines that we are required to obtain the CSRC’s written approval for listing on any national securities exchange we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory authorities. In such an event, these regulatory authorities may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, or take other actions that could have a material adverse effect on our business, financial conditions, results of operations, reputations and prospects, as well as on the trading price of the Shares.

The New M&A Regulations also established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce, or MOC, be notified in advance of any change-of-control transactions in which a foreign investor takes control of a PRC domestic company. In the future, we may grow our business in part by acquiring other businesses, although currently we do not have any plans to do so. Complying with the requirements of the New M&A Regulations could be time-consuming, and any required approval processes, including obtaining approval from the MOC, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

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PRC regulations relating to the establishment of offshore special purpose companies by PRC residents.

The State Administration of Foreign Exchange in the PRC, or SAFE, issued a public notice, or “Notice 75,” in October 2005 requiring PRC residents and non-PRC residents who habitually reside in the PRC for economic reasons, or PRC Residents, to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies (referred to in the Notice 75 as an “offshore special purpose company”). PRC Residents that are shareholders of offshore special purpose companies established before November 1, 2005 were required to register with the local SAFE branch before March 31, 2006. To further clarify the implementation of Notice 75, SAFE issued Notice 106 on May 9, 2007. Under Notice 106, PRC subsidiaries of an offshore special purpose company are required to coordinate and supervise the filing of SAFE registrations by the offshore holding company’s shareholders who are PRC residents in a timely manner.

Pursuant to the foregoing regulations, the failure of PRC resident shareholders to register with the local SAFE branch for its overseas investment, or to amend their SAFE registrations pursuant to the Notice 75 and Notice 106, or the failure of future shareholders of the Company who are PRC Residents to comply with the registration procedures set forth in the Notice 75 and Notice 106, may subject such beneficial owners to fines and legal sanctions and may also limit our ability to contribute additional capital into the PRC subsidiaries, limit the ability of the PRC subsidiaries to distribute dividends to the Company or otherwise adversely affect the business.

Our PRC legal counsel has advised that we are an overseas company established and controlled by foreign companies and foreign individuals and hence, do not fall within the definition of “offshore special purpose company” for the purposes of the Notice 75. Accordingly, the aforesaid registration requirements are not applicable to us and our PRC resident shareholders. If SAFE or other PRC regulatory authorities subsequently determines that SAFE registration is required for the establishment of the Company, we may suffer in the manner described above.

Foreign Investment in the PRC is subject to Industry restrictions which could adversely affect our growth.

Foreign investment in the PRC is subject to industry-specific restrictions and/or prohibitions set forth in a Catalogue Guiding Foreign Investment in Industry, or Catalogue. Local governments in the PRC may maintain further industry-specific restrictions or prohibitions. The Catalogue distinguishes between different industries in terms of whether foreign investment is “encouraged,” “restricted,” “prohibited” or “permitted” in such industries. The different categories generally indicate the disposition of the MOC and other PRC regulatory authorities to approve foreign investment in a given industry, as well as having certain tax and other implications. Investments in the encouraged and permitted categories are generally eligible for approval with relatively few restrictions. Investment in the “restricted” category is often subject to limitations on the amount of equity that a foreign investor can hold and to other restrictions. Moreover, government approval of investments in the “restricted” category is generally perceived to be harder to secure. Foreign investment in the “prohibited” category is barred altogether. Such restrictions on the nature and terms of the Company’s potential investments in the PRC may limit the opportunities available to us in the PRC.

Failure to make payments for the compulsory social insurance schemes in the PRC may result in late charges or third party claims.

Changda Fertilizer and Changda Chemical are required to make payments for the compulsory social insurance schemes for their employees in accordance with the relevant PRC laws. Upon the failure to make such payments, the employees have the right to claim damages in connection with the non-payment of the social insurance. Although we have made payment of all outstanding premiums, to the extent we do no pay any amounts owed under the social insurance schemes, our operations and financial results may be adversely affected if any claim is made against us.

Our sales are derived almost entirely from the PRC market.

For the six months ended June 30, 2010 and 2009, 98% and 99% of our total sales were derived from the PRC market, respectively.  For the fiscal years ended December 31, 2009 and 2008, 98% and 94% of our total sales were derived from the PRC market, respectively.   We expect that domestic sales will continue to account for a significant portion of our total sales. If there is any material adverse change in political, economic or legal conditions in the PRC market, our sales and profitability may be adversely affected.

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RISKS RELATING TO AN INVESTMENT IN OUR SECURITIES

Our common stock has historically been thinly traded and you may be unable to sell at or near ask prices or at all if you desire to liquidate your shares.

Our common stock is currently traded on the Over-the-Counter Bulletin Board.  The market price for our common stock is particularly volatile given our status as a relatively small company with a small and thinly traded “float” that could lead to wide fluctuations in our share price. The price at which you purchase our common stock may not be indicative of the price that will prevail in the trading market. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.

The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common stock have historically been sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common stock are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our fluctuating level of revenues or profits to date and uncertainty of future market acceptance for our current and potential products. As a consequence of this enhanced risk, more risk-averse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. The following factors may add to the volatility in the price of our common stock: actual or anticipated variations in our quarterly or annual operating results; adverse outcomes; and additions or departures of our key personnel, as well as other items discussed under this “Risk Factors” section, as well as elsewhere in this registration statement. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain their current market prices, or as to what effect that the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.

The market price for our common stock may be volatile.

The market price for our common stock is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:

- actual or anticipated fluctuations in our quarterly operating results,

- announcements of new products by us or our competitors,

- changes in financial estimates by securities analysts,

- changes  in the  economic  performance  or market  valuations  of other  companies involved in the same industry,

- announcements by our competitors of significant acquisitions, strategic  partnerships, joint ventures or capital commitments,

- additions or departures of key personnel,

- potential litigation, or

- conditions in the market.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies.   These market fluctuations may also materially and adversely affect the market price of our common stock.

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Because certain of our stockholders control a significant number of shares of our common stock, they may have effective control over actions requiring stockholder approval.

Currently, our directors, executive officers and principal stockholders, and their respective affiliates, beneficially own approximately 50.5% of our outstanding shares of common stock. Following this offering, our directors, executive officers and principal stockholders, and their respective affiliates, will beneficially own approximately ___% of our outstanding shares of common stock. As a result, these stockholders, acting together, would have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets.  In addition, these stockholders, acting together, would have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of our common stock by:

· delaying, deferring or preventing a change in corporate control;

· impeding a merger, consolidation, takeover or other business combination involving us; or

· discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act, subject to certain limitations. Any substantial sale of our common stock pursuant to Rule 144 or pursuant to any resale prospectus (including sales by investors of securities acquired in connection with this offering) may have a material adverse effect on the market price of our common stock.

We may be subject to "penny stock" regulations.

The Securities and Exchange Commission, or SEC, has adopted rules that regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and our sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for stock that becomes subject to those penny stock rules. These additional sales practice and disclosure requirements could impede the sale of our securities. Whenever any of our securities become subject to the penny stock rules, holders of those securities may have difficulty in selling those securities.

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If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of our internal controls over financial reporting.

Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

The elimination of monetary liability against our directors and officers under Nevada law and the existence of indemnification rights to our directors and officers may result in substantial expenditures by our company and may discourage lawsuits against our directors and officers.

Pursuant to our articles of incorporation, we are obligated to indemnify our directors and officers for monetary damages to our company and our stockholders to the extent provided by Nevada law. We also have contractual indemnification obligations under our employment agreements with our chief executive officer and chief financial officer. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and stockholders.

We have no present intention to pay dividends.

We have never paid dividends or make other cash distributions on our common stock, and we do not expect to declare or pay any dividends in the foreseeable future. We intend to retain any future earnings for working capital and to finance current operations and expansion of our business.

 SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This prospectus contains forward-looking statements. Such forward-looking statements include statements regarding, among other things, (a) our projected sales and profitability, (b) our growth strategies, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for working capital. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Prospectus Summary,” “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Business,” as well as in this prospectus generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this prospectus generally. This prospectus may contain market data related to our business, which may have been included in articles published by independent industry sources. We are responsible for the accuracy and completeness of the historical information contained in this market data as of the date of this prospectus. However, this market data also includes projections that are based on a number of assumptions. If any one or more of these assumptions turns out to be incorrect, actual results may differ materially from the projections based on these assumptions. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this prospectus will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

Each forward-looking statement should be read in context with, and with an understanding of, the various other disclosures concerning our company and our business made elsewhere in this prospectus as well as other pubic reports which may be filed with the United States Securities and Exchange Commission. You should not place undue reliance on any forward-looking statement as a prediction of actual results or developments. We are not obligated to update or revise any forward-looking statement contained in this prospectus to reflect new events or circumstances, unless and to the extent required by applicable law. Neither the Private Securities Litigation Reform Act of 1995 nor Section 27A of the Securities Act of 1933, as amended, provides any protection for statements made in this prospectus.

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EXPLANATORY NOTE REGARDING REVERSE STOCK SPLIT

Our Board of Directors and stockholders holding a majority of our outstanding shares of common stock have approved a proposal to grant discretionary authority to our Board of Directors to effect a reverse stock split of our issued and outstanding shares of common stock at any time within one year after the date action was taken by a majority of our stockholders at a ratio of either (i) one-for-two or (ii) one-for-three, as determined at the discretion of the Board of Directors to be in our best interests without further approval from our stockholders (the “Reverse Stock Split”).

We expect to effect the Reverse Stock Split of our shares of common stock of 1-for-3 prior to or upon the effective date of the registration statement of which this prospectus forms a part. No fractional shares of common stock will be issued in connection with the Reverse Stock Split, and all such fractional interests will be rounded down to the nearest whole number. Issued and outstanding stock options and warrants will be split on the same basis and exercise prices will be adjusted accordingly. All information presented in this prospectus assumes a 1-for-3 reverse stock split of our outstanding shares of common stock, stock options and warrants and, unless otherwise indicated, all such amounts and corresponding share price, per share and stock option and warrant exercise price data set forth in this prospectus have been adjusted to give effect to the assumed Reverse Stock Split.

USE OF PROCEEDS

We estimate the gross proceeds from the offering, prior to deducting underwriting discounts and commissions and the estimated offering expenses payable by us, will be approximately ________. This estimate is based on an assumed offering price of $___.   The proceeds from the sale of the Units sold to cover over-allotment and the shares underlying the option granted to the underwriter will be used for working capital and general corporate purposes.  Assuming no exercise of our underwriters’ over-allotment option, we intend to use the net proceeds of the offering as follows:

	US$ (in millions)
Completion of our Heze Plant
Machinery
Plant
Warehouse
Office
Other Supporting Facilities
Expansion of our Thiophene product line
Machinery
Plant
Exhaust Gas Treatment Facility
Other Supporting Facilities
Research and Development
Working Capital and General Corporate Purposes

The amount of proceeds allocated to working capital may be used for purposes other than working capital and will vary depending on a number of factors, including the costs associated with the Heze Plant and research and development which may require additional capital.  Accordingly, if additional capital is needed for any of the items set forth above, our management has discretion to allocate working capital for those capital needs.  Further, our management may decide, if it is in our best interest , to use proceeds allocated to working capital to invest in additional capital projects.

 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock began quoting on the OTC Bulletin Board on July 24, 2008 under the symbol “PDWK.OB.”  In February 2009, our symbol was changed to “CIHI.OB” in connection with our name change.  On November 17, 2009, our symbol was changed to “CIHD.OB” when our 3 for 1 reverse stock split became effective.   The prices, as presented below, represent the highest and lowest intra-day prices for our common stock as quoted on the OTC Bulletin Board which does not reflect the assumed 1-for-3 reverse stock split of our shares of common stock set forth elsewhere in this prospectus. Such over-the-counter market quotations may reflect inter-dealer prices, without markup, markdown or commissions and may not necessarily represent actual transactions.

Quarter Ended	High ($)		Low ($)
Third Quarter (Beginning 7/24/08)		.06		.06
Fourth Quarter 2008		.06		.06
First Quarter 2009		1,500.015		.06
Second Quarter 2009		6.00		3.12
Third Quarter 2009		6.15		1.65
Fourth Quarter 2009		2.90		1.40
First Quarter 2010		3.50		2.00
Second Quarter 2010		2.48		0.61
Third Quarter 2010 (through September 1, 2010)		0.80		0.52

The closing price of our common stock on the OTC Bulletin Board on September 1, 2010 was $0.52.

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Number of Stockholders

As of  September 1,  2010 , there were approximately 285 holders of record of our common stock.

Dividend Policy

Holders of our common stock are entitled to receive dividends if and when declared by our Board of Directors out of funds legally available for distribution. Any such dividends may be paid in cash, property or shares of our common stock.

We have not paid any dividends since its inception, and it is not likely that any dividends on its common stock will be declared in the foreseeable future. Any dividends will be subject to the discretion of our Board of Directors, and will depend upon, among other things, our operating and financial condition and our capital requirements and general business conditions.

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2010 on an actual basis and on an adjusted basis to reflect our receipt of estimated net proceeds from the sale of ______ Units, less the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

This table should be considered in conjunction with the sections of this prospectus captioned “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as the financial statements and related notes included elsewhere in this prospectus.

	Actual		As Adjusted
	(audited)		(unaudited)
Current and long-term obligations		$		$
Stockholders’ equity (deficit):
Common Stock, $0.001 par value: 300,000,000 shares authorized (actual); [_______] shares issued and outstanding (actual); unlimited number of shares authorized (as adjusted): [________] shares issued and outstanding (as adjusted)
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity (deficit)
Total capitalization				$

This table assumes no exercise by the representative of the underwriters of their option to purchase up to an additional [_____] units from us to cover over-allotments.

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DILUTION

The net tangible book value of our common stock on June 30, 2010 was $[____] or $[____] per share of common stock. The net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of common stock outstanding.

After giving effect to our sale of [_____] common stock in this offering at an assumed public offering price of $[___] per share (excluding the underwriter’s over-allotment option), and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value would be approximately $[____], or approximately $[____] per share. This represents an immediate increase in net tangible book value of $[____] per share to existing stockholders and an immediate dilution in pro forma net tangible book value of $[____] per share to new investors purchasing our common stock in this offering.

The following table illustrates the per share dilution:

Assumed public offering price per share	$
Net tangible book value per share as of  June 30, 2010	$
Increase in net tangible book value per share attributable to this offering	$
Net tangible book value per share as adjusted after this offering	$
Dilution per share to new investors	$

If the underwriters over-allotment option is exercised in full, there will be an increase in as adjusted net tangible book value to $[___] per share to existing stockholders and an immediate dilution in as adjusted net tangible book value of $[___] per share to new investors in this offering.

The following table sets forth, on the pro forma basis discussed above as of June 30, 2010, the differences between the number of common stock purchased from us (excluding the underwriter’s over-allotment option), the total price and average price per share paid by our existing stockholders and by the new investors, before deducting the underwriting discounts and commissions and estimated offering expenses payable by us, using the estimated public offering price of $[___] per share.

	Shares Purchased	Total Consideration				Average Price Per Share
Our existing stockholders	%	%			$
New investors
Total	%		$	%

 If the underwriters exercise their over-allotment option in full to purchase [_______] additional common stock in this offering, the pro forma net tangible book value per share after the offering would be $[___] per share, the increase in pro forma net tangible book value per share to existing stockholders would be $[___] per share and the dilution to new investors purchasing shares in this offering would be $[___] per share.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of the results of operations of Changda International Holdings, Inc. and it subsidiaries (the "Company") and should be read in conjunction with our financial statements and related notes contained elsewhere herein. The discussion contains forward looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this prospectus, our actual results may differ materially from those anticipated in these forward-looking statements.

Historical Overview

On February 13, 2009, we completed a “reverse acquisition” transaction pursuant to which the stockholders of Changda International transferred all of the issued and outstanding shares of common stock of Changda International to us in exchange for 5,303,329 newly issued shares and 652,222 shares transferred from our stockholders.  Upon closing of the reverse acquisition, Changda International became our wholly owned subsidiary, with Changda International’s former stockholders acquiring a majority of the outstanding shares of our common stock. The acquisition of Changda International was accounted for as a “reverse acquisition”, since the stockholders of Changda International acquired a majority of the outstanding shares of our common stock immediately following the closing of the transaction.  Changda International was deemed to be the accounting acquirer upon such closing of the transaction and, accordingly, the assets and liabilities and the historical operations that is reflected in the financial statements are those of Changda International.

Overview of the Business

We are engaged in developing, manufacturing and the selling of (i) microbial organic and inorganic compound fertilizers and (ii) chemical products, primarily consisting of snow melting products. We have more than 10 fertilizer product lines which are sold under the “CHANGDA” and “FENGTAI WOSIDA” brands.  Our proprietary product lines are marketed and sold to distributors which in turn sell our products to farmers. For the quarter ended June 30, 2010, 87% of our revenues ($23 million) were derived from our fertilizer products and 13% of our revenues ($3 million) were derived from our chemical products.  For the fiscal year ended December 31, 2009, 86% of our revenues ($63 million) were derived from our fertilizer products and 14% of our revenues ($10 million) were derived from our chemical products.

In accordance with ASC Topic 280, Segment Reporting and based on the nature of revenue, we are organized into two business segments, consisting of (i) fertilizer products and (ii) chemical products, which includes mainly snow melting agent, thiophene, flame retardant, calcium chloride and magnesium chloride.

Product Pricing

Our products that account for a substantial amount of our sales are fertilizers and de-icing salt.  The establishment of the sales price of these products are influenced primarily by the cost of the raw materials, economic conditions which affect the price and demand for agricultural products, China’s export tariffs which impact the price of products domestically, and weather conditions.

From the end of 2009 through the first quarter of 2010, prices of fertilizer raw materials dropped at a rate lower than what occurred from 2008 to 2009.   While prices of raw materials continued to drop during the first quarter of 2010, based upon presentation made at the 78th Fertilizer Industry Association Annual Conference on Fertilizer Outlook 2010 -2014 made in Paris, France in June 2010, management believes that this trend is going to stop and is anticipated that prices will begin to increase in 2010 as the demand for fertilizer products increases.

Seasonality of Sales

We experience seasonal variations in our revenues and our operating costs due to the farming season. The peak selling seasons for our fertilizer products are the first, second and fourth quarters of the year. These periods are the planting and crop-growing months, which boost fertilizer sales. The third quarter of the year is harvest season, hence the low demand for our fertilizer products.  During the fiscal year ended December 31, 2009, approximately 85% of our annual fertilizer sales volume occurred in the first, second and fourth fiscal quarters.  The peak selling seasons for our chemical products are the first and fourth quarters of the year.  The third quarter of the year is typically our slowest due to the low demand for our chemical products.These quarters are the winter season in China, hence the strong demand for deicing salt, calcium chloride and salt.  During the fiscal year ended December 31, 2009, approximately 76% of our annual chemical sales volume occurred in the first and fourth fiscal quarters.  This was primarily a result of the extreme winter months of 2009 which saw some of the coldest temperatures and volume of snow in the last decade and which resulted in the increase in the use of three of our products: calcium chloride, deicing salt and salt which are all used for snow-melting purposes.

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Fertilizer Products

Our organic and inorganic fertilizer products are classified into the following categories:

· Complex Fertilizers. These fertilizers contain two or three of the primary nutrients of nitrogen, phosphorus and potassium and are made by a process involving only chemical reactions between raw materials and intermediates.

· Compound Fertilizers. Such fertilizers are produced by initiating chemical reactions between the three primary nutrients of nitrogen, phosphorous and potassium during the production process. We have expanded our product offerings to include a microbial organic-inorganic compound fertilizer which (i) helps plants secure nitrogen from the air, (ii) facilitates plants’ absorption of useful minerals such as phosphorus and potassium from the soil and (iii) enhances stress resistance by the plants. The combination of the organic and inorganic elements enhances soil fertility and crop yield respectively.

· Slow-Release Compound Fertilizer. This group of fertilizers allows fertilizer nutrients to be released over a period of time, enabling plants to absorb most of the nutrients and enhance yield rate.  We have also developed controlled-release fertilizers.

Our products sold through our distributor, China Post, under the “FENGTAI WOSIDA” brand.  We have entered into a distribution agreement with China Post whereby China Post has the [exclusive] right to sell our products under the “FENGTAI WOSIDA” brand in the Shandong Province.  In order to distribute our products throughout the Shandong Province, we have to enter into a sales agency agreement with a local branch of China Post that covers a particular region within the Shandong province.  Currently we have entered into sales agency agreements with 10 local branches of China Post, all of which are on the same terms and expire on December 31, 2010.  While we are not dependent on any one local branch of China Post for the distrubution of our products, any inability to renew any sales agency agreement or if such agreemets are, they are renewed on terms less favorable to us, with any local branch of China Post will limit our ability to distribute our product within the Shandong Province and could result have an adverse effect on our financial condition.  We sell our products under two different brand names, including the “CHANGDA” brand, to maximize the sale of our fertilizer products in the same market through a variety of different distribution channels. 

For the quarter ended June 30, 2010, our top ten selling fertilizers were as follows:

Ranking	Products	Type of Fertilizer	Revenues (US$)	Percent in total Revenues of our Fertilizer Products
1	Specialty Fertilizer	S-Compound	4,478,289	19%
2	Silicon calcium and magnesium soil conditioner 8-6-10-5-15	Soil Conditioner	2,546,989	11%
3	S15-15-15	S- Compound	2,142,356	9%
4	New Compound chat (release) 24-8-8	Slow Compound	1,904,454	8%
5	Silicon calcium and magnesium soil conditioner 10-5-20	Soil Conditioner	1,639,545	7%
6	Chlorine 24-8-8	Cl-Compound	1,559,849	7%
7	S15-5-12	S-Compound	1,264,583	6%
8	Compound Fertilizer (biological) 12-5-8	M-O Compound	1,242,559	5%
9	Organic and inorganic fertilizer (bio) 15-7-8	M-O Compound	1,187,623	5%
10	New type of compound fertilizer (slow release)  16-8-16	Slow Compound	1,149,561	5%

Our fertilizers sold under the “FENGTAI WOSIDA” and “CHANGDA” brands had sales volumes for the three months ended June 30, 2010 of $9,315,000 and $13,794,000, respectively or 40% and 60% of our revenues .

24

For the fiscal year ended December 31, 2009, our top ten selling fertilizers were as follows:

Ranking	Products	Type of Fertilizer	Revenues (US$)	Percent in total Revenues of our Fertilizer Products
1	Specialty Fertilizer	S-Compound	7,945,436	13%
2	Silicon calcium and magnesium soil conditioner 8-6-10-5-15	Soil Conditioner	7,551,501	12%
3	Organic and inorganic fertilizer (bio) 15-7-8	M-O Compound	6,184,702	10%
4	New type of compound fertilizer (slow release) 18-9-18	Slow Compound	5,109,660	8%
5	Silicon calcium and magnesium soil conditioner 10-5-20	Soil Conditioner	5,066,287	8%
6	S15-15-15	S-Compound	4,793,935	8%
7	Compound Fertilizer (biological) 12-5-8	M-O Compound	4,696,845	7%
8	New Compound chat (release) 24-8-8	Slow Compound	3,636,230	6%
9	S15-5-15	S-Compound	3,522,276	6%
10	New type of compound fertilizer (slow release) 16-8-16	Slow Compound	3,383,126	5%

Our fertilizers sold under the “CHANGDA” and “FENGTAI WOSIDA” brands had sales volumes for the fiscal year ended December 31, 2009 of $14,436,530 and $48,681,230, respectively, or 23% and 77% of our revenues.

Chemical Products

Products

Our principal chemical products are snow melting agents and various other industrial chemicals.  Snow melting agents are de-icing salts, other salts and calcium chloride. The snow melting agents are a white, odorless and soluble solid compound and are used primarily to de-ice airports, roads and golf courses in the winter seasons, spread by winter service vehicles. Our industrial chemical products range includes thiophene, calcium chloride and magnesium chloride.

Our principal chemical products for the fiscal year ended December 31, 2009 were as follows: thiophene; snow-melting agents; calcium chloride; magnesium chloride; ordinary coke; flame retardant; leather curing agent; salt; whisker; and seratrodast.

Our chemical products, which had the highest sales volumes for the quarter ended June 30, 2010, are listed below:

Ranking	Product Names	Revenues (US$)	Percent in total Revenues of our Chemical Products
1	Flame Retardant	1,507,767	45%
2	Calcium Chloride	973,556	29%
3	Magnesium Chloride	416,501	12%
4	De-icing Salt	400,026	12%

The following chemical products had the highest sales volumes for the fiscal year ended December 31, 2009:

Ranking	Product Names	Revenues (US$)	Percent in total Revenues of our Chemical Products
1	De-icing Salt	4,803,903	48%
2	Calcium Chloride	2,805,377	28%
3	Magnesium Chloride	1,122,263	11%
4	Thiophene	882,889	9%

For the quarter ended June 30, 2010, our new flame retardant product became one of our highest selling products as a result of our increased marketing efforts to promote the product.

25

February 2010 Financing

On February 3, 2010, we issued promissory notes in the aggregate principal amount of $900,000 to certain accredited investors (the “February 2010 Notes”).  The notes bear interest at 20% and matured on August 3, 2010 (the “Maturity Date”).  As of the date of this Prospectus, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the February 2010 Notes.

On August 3, 2010, holders of an aggregate of $200,000 of February 2010 Notes entered into an agreement with us pursuant to which the maturity date of the February 2010 Notes held by such persons have been extended until the earlier of (i) December 1, 2010 or (ii) 5 business days after the closing of a public offering of our equity and/or debt securities (the “New Maturity Date”).  In consideration for the extension of the maturity date to the New Maturity Date, we agreed to provide these holders of February 2010 Notes with the following consideration:

(i)	the payment of an additional 5% interest on the February 2010 Notes commencing from August 3, 2010 until the New Maturity Date;
(ii)	a downward adjustment of the exercise price of the warrants issued in connection with the February 2010 Notes from $2.25 to $0.75, the closing price of our common stock as quoted on the Over-the-Counter Bulletin Board on August 2, 2010, the last trading day prior to the date of the agreement;

(iii)	an amendment to the cashless feature of the warrants issued in connection with the February 2010 Notes to make the warrants exercisable on a cashless basis immediately as of the date of the agreement; and
(iv)	the payment of a pro-rata portion of a $25,000 payment of interest on the aggregate principal amount of $900,000 of February 2010 Notes outstanding as of the date of the Letter Agreement.

On August 6, 2010, holders of an aggregate of $500,000 principal amount of February 2010 Notes informed us that we were in default and demanded repayment under the February 2010 Notes.  Pursuant to the terms of the February 2010 Notes, we have five (5) business days to cure an event of default under the February 2010 Notes.  As of the date of this Prospectus, we have not cured the event of default within the applicable cure period under the February 2010 Notes.  Therefore, the holders of the February 2010 Notes are entitled to, among other things (i) the principal amount of the February 2010 Notes along with any interest accrued but unpaid thereon (ii) an additional interest at a rate of 5% per annum upon and during the occurrence of an event of default and (iii) costs and expenses in connection with the collection and enforcement under the February 2010 Notes, including reasonable attorneys’ fees.  While we had cash and cash equivalents of approximately $8.9 mil as of June 30, 2010, we have encountered difficulties in remitting funds out of the PRC.  We are currently working on making arrangements to honor our obligations under the February 2010 Notes, either from our PRC operating subsidiaries or otherwise, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the February 2010 Notes.

Results of Operations

Three and Six months ended June 30,2010 as compared to the three and six months ended June 30, 2009

The following tables set forth our summary statement of operations data for the three and six months ended June 30, 2010 and 2009, and our summary balance sheet as of June 30, 2010 and 2009. Our statement of operations and balance sheet data for the three and six months ended June 30, 2010 and 2009 were derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The results indicated below and elsewhere in this prospectus are not necessarily indicative of our future performance. You should read this information together with our consolidated financial statements and related notes and our unaudited condensed consolidated financial statements and related notes included elsewhere in this prospectus.

The consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States, or US GAAP.

Selected Balance Sheet Data							As of June 30,
							2010			2009
Balance Sheet Information:							US$'000
Working capital							$	14,803		$	8,699
Total assets								46,429			40,082
Total liabilities								17,043			14,639
Additional Paid-In Capital								5,922			5,471
Accumulated Profit								19,319			17,254
Stockholders’ equity								29,386			25,443
	Six Months Ended						Three Months Ended
Selected Statement of Operations Data:	June 30,						June 30,
	2010			2009				2010			2009
	US$'000						US$'000
INCOME
Operating revenues
Chemical		5,374			4,960			3,367			1,618
Fertilizer		38,308			36,841			23,107			20,000
Total	$	43,682		$	41,801		$	26,474		$	21,618
COST OF SALES
Chemical		4,160			4,040			2,752			1,468
Fertilizer		32,498			31,011			19,424			16,825
Total	$	36,658		$	35,051		$	22,176		$	18,293
GROSS PROFIT
Chemical		1,214			920			615			150
Fertilizer		5,810			5,830			3,683			3,175
Total	$	7,024		$	6,750		$	4,298		$	3,325
OPERATING EXPENSES
Administrative expenses		2,932			2,717			1,424			1,125
Finance expense		682			146			143			74
Other expenses (income)		(23	)		(36	)		(18	)		(25	)
Tax		927			770			617			398
Total Operating Expenses	$	3,591		$	2,827		$	1,549		$	1,174
NET INCOME	$	2,506		$	3,153		$	2,132		$	1,753

26

Operating Revenues

Revenues for the quarter ended June 30, 2010 of approximately $26,474,000 increased approximately $4,856,000, or 22.5%, from approximately $21,618,000 for the quarter ended June 30, 2009.  Chemical sales volume for the quarter ended June 30, 2010 of approximately 14,789 tonnes  represent an increase of approximately 5,215 tonnes or 54.5% from sales volume of approximately 9,574 tonnes for the quarter ended June 30, 2009.  Sales of chemical products increased by approximately $1,749,000 or 108.1% mainly due to the increase in the volume of sales of flame retardant as a consequence of a strong demand for the new product, which has a high sales price per tonne, as well as of calcium chloride and magnesium chloride. Another significant reason for the increase in sales volume is that 3,668 tonnes of de-icing salt were sold in the second quarter 2010 due to the unusual snow that occurred in April 2010. Concurrent with the increase in sales volume, the sales price of calcium chloride and flame retardant increased approximately 10.1% and 40.8%, respectively. Fertilizer sales volume for the quarter ended June 30, 2010 of approximately 72,890 tonnes  represents an increase of approximately 13,005 tonnes or 21.7% from sales volume of approximately 59,885 tonnes for the quarter ended June 30, 2009.  Sales of fertilizer products increased by approximately $3,107,000 or 15.5% due primarily to the increase in the sales volume resulting from the growth in demand for fertilizer products.  Although sales prices for the quarter ended June 30, 2010 were still lower than those for the quarter ended June 30, 2009, the prices increased compared to the quarter ended March 31, 2010. The increase in sales volume for our fertilizer products offset the effect of reduced sales price.

Revenues for the six months ended June 30, 2010 of approximately $43,682,000 increased approximately $1,881,000 or 4.5% from approximately $41,801,000 for the six months ended June 30, 2009.  Chemical sales volume for the six months ended June 30, 2010 of approximately 37,015 tonnes represent an decrease of approximately 1,503 tonnes or 3.9% from the sales volume of approximately 38,518 tonnes for the six months ended June 30, 2009.  Sales of chemical products increased by approximately $414,000 or 8.3% mainly due to the increase in the volume of sales of flame retardant as a consequence of a strong demand for the new product, which has a high sales price per tonne, which offset the effect of reduced sales volume.  Fertilizer sales volume for the six months ended June 30, 2010 of approximately 122,178 tonnes  represents an increase of approximately 13,871 tonnes or 12.8% from sales volume of approximately 108,307 tonnes for the six months ended June 30, 2009.  Sales of fertilizer products increased by approximately $1,467,000 or 4% due primarily to the increase in the sales volume resulting from the growth in demand for fertilizer products.  Although sales prices for the six months ended June 30, 2010 were still lower than those for the six months ended June 30, 2009, the increase in sales volume for our fertilizer products offset the effect of reduced sales price.

Cost of Sales

Total cost of sales for the quarter ended June 30, 2010 was approximately $22,176,000 or 83.8% of operating revenues compared to approximately $18,293,000 or 84.6% of operating revenues for the quarter ended June 30, 2009.  Cost of sales for our chemical products for the quarter ended June 30, 2010 was approximately $2,752,000 or 81.7% of chemical operating revenues.  Cost of sales for our chemical products for the quarter ended June 30, 2009 was approximately $1,468,000 or 90.7% of chemical operating revenues. The increase in the cost of sales of chemical products of approximately $1,284,000 resulted from the increase in sales volume and in the cost per tonne of calcium chloride and the new flame retardant product.  Cost of sales for our fertilizer products for the quarter ended June 30, 2010 was approximately $19,424,000 or 84.1% of fertilizer operating revenues. Cost of sales for our fertilizer products for the quarter ended June 30, 2009 was approximately $16,825,000 or 84.1% of fertilizer operating revenues. The increase in the cost of sales of fertilizer products of approximately $2,599,000 between the corresponding periods resulted from the increase in sales volume coupled with the increase in the cost of the major raw materials used in production.

Total cost of sales for the six months ended June 30, 2010 was approximately $36,658,000 or 83.9% of operating revenues compared to approximately $35,051,000 or 83.8% of operating revenues for the six months ended June 30, 2009.  Cost of sales for our chemical products for the six months ended June 30, 2010 was approximately $4,160,000 or 77.4% of chemical operating revenues.  Cost of sales for our chemical products for the six months ended June 30, 2009 was approximately $4,040,000 or 81.4% of chemical operating revenues. The increase in the cost of sales of chemical products of approximately $120,000 resulted from the increase in sales volume and in the cost per tonne of calcium chloride and the new flame retardant product.  Cost of sales for our fertilizer products for the six months ended June 30, 2010 was approximately $32,498,000 or 84.8% of fertilizer operating revenues. Cost of sales for our fertilizer products for the six months ended June 30, 2009 was approximately $31,011,000 or 84.2% of fertilizer operating revenues. The increase in the cost of sales of fertilizer products of approximately $1,487,000 between the corresponding periods resulted from the increase in sales volume coupled with the increase in the cost of the major raw materials used in production.

Gross Profit

Total gross profit for the quarter ended June 30, 2010 was approximately $4,298,000 or 16.2% of operating revenues compared to approximately $3,325,000 or 15.4% of operating revenues for the quarter ended June 30, 2009. Gross profit for our chemical products for the quarter ended June 30, 2010 was approximately $615,000 or 18.3% of chemical operating revenues.  Gross profit for our chemical products for the quarter ended June 30, 2009 was approximately $150,000 or 9.3% of chemical operating revenues. The increase in the gross profit of chemical products of approximately $465,000 or 310% between the corresponding periods resulted from the increase in sales volume of the new product flame retardant, and from the sale of de-icing salt due to unusual snowy weather in April, 2010. Another factor that increased the gross profit for our chemical products was the increase in the sales price of calcium chloride and flame retardant.  Gross profit for our fertilizer products for the quarter ended June 30, 2010 was approximately $3,683,000 or 15.9% of fertilizer operating revenues. Gross profit for our fertilizer products for the quarter ended June 30, 2009 was approximately $3,175,000 or 15.9% of fertilizer operating revenues. The increase in the gross profit of fertilizer products of approximately $508,000 between the corresponding periods resulted mainly from the increase in sales volume for most of the fertilizer products.

Total gross profit for the six months ended June 30, 2010 was approximately $7,024,000 or 16.1% of operating revenues compared to approximately $6,750,000 or 16.1% of operating revenues for the six months ended June 30, 2009. Gross profit for our chemical products for the six months ended June 30, 2010 was approximately $1,214,000 or 22.6% of chemical operating revenues.  Gross profit for our chemical products for the six months ended June 30, 2009 was approximately $920,000 or 18.5% of chemical operating revenues. The increase in the gross profit of chemical products of approximately $294,000 or 32% between the corresponding periods resulted mainly from the increase in sales volume of the new product flame retardant., Another factor that increased the gross profit for our chemical products was the increase in the sales price of flame retardant and calcium chloride.  Gross profit for our fertilizer products for the six months ended June 30, 2010 was approximately $5,810,000 or 15.2% of fertilizer operating revenues. Gross profit for our fertilizer products for the six months ended June 30, 2009 was approximately $5,830,000 or 15.8% of fertilizer operating revenues. The minimal decrease in the gross profit of fertilizer products of approximately $20,000 between the corresponding periods resulted mainly from the decrease in average sales price in 2010.

Operating Expenses

Operating expenses consist primarily of transportation expenses, commission, promotion and advertising expenses, freight charges and general and administrative expenses. Operating expenses amounted to approximately $1,424,000, or 5.4% of operating revenues for the quarter ended June 30, 2010 as compared to approximately $1,125,000 or 5.2 % of operating revenues for the quarter ended June 30, 2009.   The increase was primarily due to the costs incurred in 2010 pertinent to the S-1 registration for the proposed public offering.

Operating expenses consist primarily of transportation expenses, commission, promotion and advertising expenses, freight charges and general and administrative expenses. Operating expenses amounted to approximately $2,932,000, or 6.7% of operating revenues for the six months ended June 30, 2010 as compared to approximately $2,717,000 or 6.5 % of operating revenues for the six ended June 30, 2009.   The increase was primarily due to the costs incurred in 2010 pertinent to the S-1 registration for the proposed public offering.

Income Taxes

We are subject to effective tax rates of 22.4% and 18.5%  for the three months ended June 30, 2010 and 2009, respectively. The income tax expense was approximately $617,000 for the quarter ended June 30, 2010 and approximately $398,000 for same period in 2009.

We are subject to effective tax rates of 27% and 20%  for the six months ended June 30, 2010 and 2009, respectively. The income tax expense was approximately $927,000 for the six months ended June 30, 2010 and approximately $770,000 for same period in 2009.

27

Net Income

Our net income was approximately $2,132,000 for the quarter ended June 30, 2010 and approximately $1,753,000 for the quarter ended June 30, 2009. The increase in net income was largely due to the increase in operating revenues resulting from the increase in demand for our fertilizer products and our new flame retardant chemical product.  Net income as a percentage of total operating revenues approximated 8.1% and 8.1% for the quarters ended June 30, 2010 and 2009, respectively.

Our net income was approximately $2,506,000 for the six months ended June 30, 2010 and approximately $3,153,000 for the six months ended June 30, 2009. The decrease in net income was mainly due to the increase in interest expense and finance cost pertinent to the $900,000 bridge financing that occurred in February 2010.  Net income as a percentage of total operating revenues approximated 5.7% and 7.5% for the six ended June 30, 2010 and 2009, respectively.

Fiscal year ended December 31, 2009 as compared to the fiscal year ended December 31, 2008

The following tables set forth our summary statement of operations data for the fiscal years ended December 31, 2009 and 2008, and our summary balance sheet as of December 31, 2009 and 2008. Our statement of operations and balance sheet data for the fiscal years ended December 31, 2009 and 2008 were derived from our audited consolidated financial statements included elsewhere in this prospectus. The results indicated below and elsewhere in this prospectus are not necessarily indicative of our future performance. You should read this information together with our consolidated financial statements and related notes and our unaudited condensed consolidated financial statements and related notes included elsewhere in this prospectus.

The consolidated financial statements and accompanying notes are prepared in accordance with US GAAP.

Selected Balance Sheet Data:		Fiscal Year Ended December 31,
		2009		2008
Balance Sheet Information:		US$’000
Working capital	$	10,032	$	6,890
Total assets		42,180		35,114
Total liabilities		15,878		13,912
Additional Paid-In Capital		5,478		5,049
Accumulated Profit		16,857		12,573
Stockholders’ equity		26,302		21,202

Selected Statement of Operations Data:	Fiscal Year ended  December 31,
	US$’000
	2009			2008
INCOME
Operating revenues
Chemical		9,955			8,101
Fertilizer		63,118			72,857
Total	$	73,073		$	80,958
COST OF SALES
Cost of sales
Chemical		7,165			5,538
Fertilizer		53,072			62,369
Total	$	60,237		$	67,907
GROSS PROFIT
Chemical		2,790			2,563
Fertilizer		10,046			10,488
Total	$	12,836		$	13,051
OPERATING EXPENSES
Administrative expenses		6,543			6,122
Financial costs		327			433
Other expenses (income)		(164	)		(80	)
Taxation		1,473			931
Total Operating Expenses	$	8,179		$	7,406
NET INCOME	$	4,657		$	5,645

Operating Revenues

Revenues for the year ended December 31, 2009 of approximately $73,073,000, decreased approximately $7,885,000 or 9.74% from $80,958,000 for the year ended December 31, 2008. Chemical sales volume for the year ended December 31, 2009 totalled approximately 92,683 tonnes, representing an increase of approximately 27,533 tonnes from sales volume of approximately 65,150 tonnes for the year ended December 31, 2008.  The increase in the volume of sales of chemical products resulted in an increase of sales revenue, net of the effect of reduced sales price of certain products, of approximately $1,854,000 or 22.89%.  The demand for the de-icing salt increased in 2009 due to the harsh winter season China experienced during the year. Fertilizer sales volume for the year ended December 31, 2009 of approximately 198,719 tonnes increased approximately 9,305 tonnes compared to the sales volume of approximately 189,414 tonnes for the year ended December 31, 2008.  Despite the increase in sales volume between the corresponding periods, our fertilizer sales revenue decreased between the corresponding periods primarily due to the decrease in the sales price of our fertilizer products by 13%.  We decreased the sales price of our fertilizer products in order to pass our savings in raw material cost to the customers. We consider this an important step towards maintaining a stronger market presence and preventing competitors in other regions from encroaching onto our sales territories.

28

Cost of Sales

Total cost of sales for the year ended December 31, 2009 was approximately $60,237,000 or 82.4% of operating revenues compared to approximately $67,907,000 or 83.9% of operating revenues for the year ended December 31, 2008.  Chemical products cost of sales for the year ended December 31, 2009 was approximately $7,165,000 or 72% of chemical operating revenues.  Chemical products cost of sales for the year ended December 31, 2008 was approximately $5,538,000 or 68% of chemical operating revenues. The increase in the cost of sales of chemical products of approximately $1,627,000 resulted from the increase in sales volume, net of the effect of reduced sales price of certain products.  Fertilizer products cost of sales for the year ended December 31, 2009 was approximately $53,072,000 or 84.1% of fertilizer operating revenues. Fertilizer products cost of sales for the year ended December 31, 2008 was approximately $62,369,000 or 85.6% of fertilizer operating revenues.  The decrease in cost of sales of fertilizer products of approximately $9,297,000 resulted from the decrease in the cost of the major raw materials used in production.

The overall decrease in cost of sales resulted mainly from the decreased production cost caused by lower raw material price for fertilizer products.

Gross Profit

Total gross profit for the year ended December 31, 2009 was approximately $12,836,000 or 17.6% of operating revenues compared to approximately $13,051,000 or 16.1% of operating revenues for the year ended December 31, 2008. Chemical products gross profit for the year ended December 31, 2009 was approximately $2,790,000 or 28% of chemical operating revenues.  Chemical products gross profit for the year ended December 31, 2008 was approximately $2,563,000 or 31.6% of chemical operating revenues.  The increase in the gross profit from the sales of chemical products of approximately $227,000 resulted from the increase in sales volume offset by reduction in sales price of certain products.  Fertilizer products gross profit for the year ended December 31, 2009 was approximately $10,046,000 or 15.9% of fertilizer operating revenue.  Fertilizer products gross profit for the year ended December 31, 2008 was approximately $10,488,000 or 14.4% of fertilizer operating revenue.  The increase in the gross profit percentage of sales of fertilizer products resulted mainly from the decrease in the cost of sales.

The overall increase in gross profit percentage was mostly due to the decrease of production cost stemming from lower raw material price for fertilizer products.

Operating Expenses

Operating expenses consist primarily of transportation expenses, commission, promotion and advertising expenses, freight charges and general and administrative expenses. Operating expenses amounted to approximately $6,543,000, or 8.95% of operating revenues for the year ended December 31, 2009 as compared to approximately $6,122,000 or 7.56 % of net sales for the year ended December 31, 2008.   The increase was primarily due to the write off in 2009 of the expenditures amounting to approximately $459,000  related to the initial plan of the Company to list on the AIM Market, which was subsequently abandoned and replaced  by the reverse acquisition of the Company into an over the counter (OTC) Bulletin Board listed company.  The increase between the corresponding periods resulted also from the augmented cost of becoming a publicly listed company, such as consulting fees, directors’ fees, legal fees, audit fees and related issuance of stocks and warrants as fees and compensation.

Income Taxes

Changda Chemical, Changda Fertilizer, Changda Heze and Shangdong Fengtai as wholly owned foreign subsidiaries, are subject to effective tax rates of 24% for the years ended December 31, 2009 and 2008 as a result of tax grants by the PRC local government for economic development. The income tax paid was approximately $1,473,000 for the year ended December 31, 2009 and approximately $931,000 for same period in 2008.

Net Income

Our net income of approximately $4,657,000 for the year ended December 31, 2009 decreased from approximately $5,645,000 for the year ended December 31, 2008. The decrease in net income was largely due to the increase in operating expenses and income taxes. Net income as a percentage of total net sales approximated 6.37% and 6.97% for the years ended December 31, 2009 and 2008, respectively.

29

Liquidity and Capital Resources

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2010 amounted to approximately $5,354,000.  Net cash provided by operating activities for the six months ended June 30, 2009 amounted to approximately $116,000.  The increase in net cash provided by operating activities of approximately $5,238,000 was primarily due to the increase in government grants and collection of accounts receivable, net of the effect of increased purchases of raw materials and other inventory items.  The price of the key raw materials in the manufacture of fertilizers, namely urea and potassium, had started to recover in 2009 but the markets have since become more volatile.  Management decided that, in order to limit the risks of exposure to market volatility and sudden price increases, it was beneficial to take advantage of the reduced price offered by raw material suppliers and entered into agreements with said suppliers at contracted prices.  This will enable us to maintain its gross profit ratio despite the likelihood of an increase in the price of raw materials.   Furthermore, the purchase of the inventory items were made in anticipation of increased sales of fertilizer for the second quarter, which is considered a planting season.  

Net cash provided by operating activities for the years ended December 31, 2009 and 2008 amounted to approximately $914,000 and $1,889,000, respectively.  The decrease of approximately $975,000 was primarily due to the increase in prepayments pertinent to the purchase of  raw materials.  The price of the key raw materials necessary for the manufacturing of our fertilizers, namely urea and potassium,  had started to recover in 2009 but the markets have since become more volatile.  Management decided that in order to limit the risks of exposure to market volatility and sudden price increases, it was beneficial to take advantage of the reduced price offered by raw material suppliers in December 2009 and entered into agreements with said suppliers at contracted  prices with prepayment deposit for substantial delivery of the materials during the first quarter of 2010.  This will enable us to maintain our gross profit ratio despite the likelihood of an increase in the price of raw materials.  Furthermore, the purchase of the inventory items were made in anticipation of increased sales of fertilizer for the second quarter of 2010, which is considered a planting season.  

Investment Activities

Net cash used for investment activities for the six months ended June 30, 2010 amounted to approximately $423,000.  Net cash used for investment activities for the six months ended June 30, 2009 amounted to approximately $91,000.  The increase in cash used for investments activities of approximately $332,000 was mainly due to the increase in acquisition of fixed and intangible assets.

Net cash used for investment activities for the years ended December 31, 2009 and 2008 amounted to approximately $223,000 and $3,236,000, respectively.  This decrease of approximately $3,013,000  was mainly due to the decrease in acquisition of fixed and intangible assets in 2009.

Financing Activities

Net cash provided by and used for financing activities for the six months ended June 30, 2010 and 2009 amounted to approximately $1,669,000 and $400,000, respectively.  This represents an increase of approximately $2,069,000 which was primarily due to the net increase in new borrowings.

Net cash provided by financing activities for the years ended December 31, 2009 and 2008 amounted to approximately $1,007,000 and $544,000, respectively.  This represents an increase of approximately $463,000  which was primarily due to the net increase in new borrowings.

Future cash commitments

In order to improve our performance and competitiveness, we are constructing our Heze fertilizer plant and are preparing to expand our Thiophene product line. We have already invested a total of $4,000,000 into our Heze plant through March 31, 2010. However, an additional $19,700,000 is needed to complete the construction and an additional $11,500,000 will be needed for the normal operation of the plant for the first 12 months after completion of the plant.  Upon completion of the offering, we anticipate that we will have sufficient capital to meet our cash requirements for the completion of our Heze fertilizer plant and the expansion of our thiophene product line.

On February 3, 2010, we issued promissory notes in the aggregate principal amount of $900,000 to certain accredited investors (the “February 2010 Notes”).  The notes bear interest at 20% and matured on August 3, 2010 (the “Maturity Date”).  As of the date of this Prospectus, we have not repaid any principal or accrued but unpaid interest that has become due and payable under the February 2010 Notes.

On August 3, 2010, holders of an aggregate of $200,000 of February 2010 Notes entered into an agreement with us pursuant to which the maturity date of the February 2010 Notes held by such persons have been extended until the earlier of (i) December 1, 2010 or (ii) 5 business days after the closing of a public offering of our equity and/or debt securities (the “New Maturity Date”).  In consideration for the extension of the maturity date to the New Maturity Date, we agreed to provide these holders of February 2010 Notes with the following consideration:

(i)	the payment of an additional 5% interest on the February 2010 Notes commencing from August 3, 2010 until the New Maturity Date;
(ii)	a downward adjustment of the exercise price of the warrants issued in connection with the February 2010 Notes from $2.25 to $0.75, the closing price of our common stock as quoted on the Over-the-Counter Bulletin Board on August 2, 2010, the last trading day prior to the date of the agreement;

(iii)	an amendment to the cashless feature of the warrants issued in connection with the February 2010 Notes to make the warrants exercisable on a cashless basis immediately as of the date of the agreement; and
(iv)	the payment of a pro-rata portion of a $25,000 payment of interest on the aggregate principal amount of $900,000 of February 2010 Notes outstanding as of the date of the Letter Agreement.

On August 6, 2010, holders of an aggregate of $500,000 principal amount of February 2010 Notes informed us that we were in default and demanded repayment under the February 2010 Notes.  Pursuant to the terms of the February 2010 Notes, we have five (5) business days to cure an event of default under the February 2010 Notes.  As of the date of this Prospectus, we have not cured the event of default within the applicable cure period under the February 2010 Notes.  Therefore, the holders of the February 2010 Notes are entitled to, among other things (i) the principal amount of the February 2010 Notes along with any interest accrued but unpaid thereon (ii) an additional interest at a rate of 5% per annum upon and during the occurrence of an event of default and (iii) costs and expenses in connection with the collection and enforcement under the February 2010 Notes, including reasonable attorneys’ fees.  While we had cash and cash equivalents of approximately $8.9 mil as of June 30, 2010, we have encountered difficulties in remitting funds out of the PRC.  We are currently working on making arrangements to honor our obligations under the February 2010 Notes, either from our PRC operating subsidiaries or otherwise, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the February 2010 Notes.

On February 2, 2010, Changda Chemical entered into a loan agreement with Huaran Zhu, our director, for an unsecured interest free loan in the amount of $293,000 . The loan is not subject to any interest. The loan is due and payable on February 1, 2013.

On March 9, 2010, Weifang Changda Fertilizer Co., Ltd. entered into a loan contract with Bank of Weifang, New Worker Village Branch, for a loan in the amount of $2,937,466 . The loan is due and payable on March 8, 2011. The interest rate is 40% more than the Benchmark Lending Rate issued by the China Central Bank and should be adjusted monthly, with the executed interest rate as 7.434% per annum. Interest is payable on a monthly basis. The loan is secured by land use right and factory building of Weifang Changda Fertilizer Co., Ltd., our subsidiary.

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On March 17, 2010, Weifang Changda Chemicals Co., Ltd. entered into a loan contract with Bank of Weifang, New worker village Branch, for a loan in the amount of $660,930. The loan is due and payable on June 16, 2010. The interest rate is of 6.903% per annum. Interest is payable on a monthly basis. The loan is secured by the revenue from our sales agreement with Only Chemical (Asia-Pacific) Co., Limited, one of our customers. On June 25, 2010, Changda Chemical entered into a loan contract with Bank of Weifang, New Worker Village Branch, to extend the loan until September 24, 2010. The interest rate is 6.92% per annum. Interest shall be payable on a monthly basis. The loan is secured by revenue from our sales agreement with Only Chemical (Asia-Pacific) Co. Limited, one of our customers.

On March 25, 2010, Weifang Changda Chemicals Co., Ltd. entered into a loan contract with Bank of Weifang, New worker village Branch, for a loan in the amount of $587,494 . The loan is due and payable on March 24, 2011. The interest rate should be 40% more than the Benchmark Lending Rate issued by the China Central Bank and should be adjusted every month, with the executed interest rate as 7.434% per annum. Interest shall be payable on a monthly basis. The loan is guaranteed by Weifang Sanyou Package Products Co., Ltd., a supplier of Changda Chemical.

On June 4, 2010, Weifang Changda Fertilizer Co., Ltd. entered into a loan agreement with Qingran Zhu, our CEO, for an unsecured loan in the amount of $1,011,000. The loan is not subject to any interest. The loan is due and payable on June 3, 2012.

While we have interest bearing loans in the aggregate principal amount of $4,029,000 which are due on or before December 31, 2010, we believe that we have sufficient cash on our balance sheet and will have sufficient cash from operations to repay all indebtedness when it becomes due during the fiscal year ended December 31, 2010.  Furthermore, it is standard practice in China for financial institutions loans to rollover loans on the same terms as opposed to entering into long-term credit arrangements. In the past we have not experienced any problems in rolling over any of our short term loans. However, if the banks we currently dealing should decide not to roll over our loans and we do not have sufficient cash from operations or on our balance sheet to repay such indebtedness, we may need to seek funding for our capital needs through the issuance of debt, preferred stock, equity, loan guarantees, or a combination of these types of instruments.  While we do not anticipate the need to raise any additional capital at this time, to the extent we do need to raise capital in the future, we cannot be certain that we will be able to obtain financing on terms acceptable to us or at all.  In such case, we may be required to curtail or cease operations, liquidate or sell assets, modify our current plans for product development, and other research and development activities, or extend the time frame over which these activities will take place, or pursue other actions that would adversely affect future operations.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows.

The following tables summarize our contractual obligations as of June 30, 2010 and the effect these obligations is expected to have on our liquidity and cash flows in future periods.

		Payments Due by Period
		Total		Less than 1 year		1-3 Years		3-5 Years		5 Years +
				(in thousands)
Contractual Obligations :
Operating Lease	$	299	$	68	$	10	$	10	$	211
Loans, Notes and Other Borrowings
Shareholders’ loans	$	779	$	779	$	-	$	-	$	-
Short-term interest-bearing borrowings	$	6,653	$	6,653	$	-	$	-	$	-
Accrued interest on short-term interest-bearing borrowings (included in trade and other payables)	$	13	$	13
Promissory notes	$	972	$	972	$	-	$	-	$	-
Long-term portion of  Shareholders’ loans	$	1,304	$		$	1,304
Total Loans, Notes and Other Borrowings	$	9,721	$	8,417	$	1,304	$	-	$	-
Total Contractual Obligations:	$	10,020	$	8,485	$	1,314	$	10	$	211

 Off-balance Sheet Arrangements

     We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’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. 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.

Foreign Currency Exchange Rate Risk

We produce and sell almost all of our products in China. Thus, most of our revenues and operating results may be impacted by exchange rate fluctuations between RMB and US dollars.  

Critical Accounting Policies and Estimates

     Management's discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with US GAAP. Our financial statements reflect the selection application of accounting policies which require management to make significant estimates and judgments.

     We have disclosed in the notes to our financial statements those accounting policies that we consider to be significant in determining our results of operations and our financial position which we are incorporating by reference herein. We believe that the following reflect the more critical accounting policies that currently affect our financial condition and results of operations.

Critical accounting estimates and judgments

Estimates and judgments are currently evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.  Apart from information disclosed elsewhere in these financial statements, the following summarize the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

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Impairment test of assets

We determine whether an asset is impaired at least on annual basis or where an indication of impairment exists.  Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. This requires an estimation of the expected future cash flows from the assets.

Allowance of bad and doubtful debts .

     The provisioning policy for bad and doubtful debts of the Company is based on the evaluation of collectability and aging analysis of the accounts receivables.  A considerable amount of judgment is required in assessing the ultimate realization of these receivables, including the current creditworthiness and the past collection history of each debtor.  If the financial conditions of these customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowance will be required.

Allowance for inventories.

     Management reviews an aging analysis of inventories at each balance sheet date, and make allowance for obsolete and slow-moving inventory items identified that are no longer recoverable or suitable for use in production. The management estimates the net realizable value for finished goods and work-in-progress based primarily on the latest invoice prices and current market conditions. The Company carries out an inventory review on a product-by-product basis at each balance sheet date and makes allowances for obsolete items.

RECENT ACCOUNTING PRONOUNCEMENTS

Effective July 1, 2009, the Company adopted FASB Accounting Standards Codification (“ASC”) Topic 105, “the FASB Accounting Standards Codification” (“Codification”) (formerly Statement of Financial Accounting Standards (“SFAS”) No. 168). Codification will become the source of authoritative US GAAP recognized by the FASB to be applied by nongovernmental entities. Once the Codification is in effect, all of its content will carry the same level of authority. The adoption of this Statement does not have a material effect on the Company's financial statements. However, because the Codification completely replaces existing standards, it will affect the way US GAAP is referenced within the consolidated financial statements and accounting policies.

In June 2009, the FASB issued the following new accounting standards:

·   ASC Topic 860 (previously SFAS No. 166), “Accounting for Transfers of Financial Assets - an amendment of FASB Statement No. 140” (“ASC Topic 860”). ASC Topic 860 amends the de-recognition accounting and disclosure guidance relating to SFAS 140. ASC Topic 860 eliminates the exemption from consolidation for qualifying special-purpose entity “(QSPE”), it also requires a transferor to evaluate all existing QSPE to determine whether it must be consolidated in accordance with ASC Topic 810.

·   ASC Topic 810 (previously SFAS No. 167), “Amendments to FASB Interpretation No. 46(R)” (“ASC Topic 810”), which amends FASB Interpretation No. 46 (revised December 2003) to address the elimination of the concept of a qualifying special purpose entity. ASC Topic 810 also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, ASC Topic 810 provides more timely and useful information about an enterprise’s involvement with a variable interest entity.

In August 2009, the FASB issued ASC Topic 820, “Measuring Liabilities at Fair Value,” with respect to the fair value measurement of liabilities. ASC Topic 820 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: (1) the quoted price of the identical liability when traded as an asset, (2) the quoted prices for similar liabilities or similar liabilities when traded as assets, and (3) another valuation technique (e.g., a market approach or income approach) including a technique based on the amount an entity would pay to transfer the identical liability, or a technique based on the amount an entity would receive to enter into an identical liability.

ASC Topic 860 and ASC Topic 810 will be effective for periods beginning after November 15, 2009 and ASC Topic 820 will be effective for periods beginning after October 1, 2009 with early adoption permitted. We have not elected to early adopt these standards and is evaluating the impact that these standards will have on the consolidated financial statements .

On January 21, 2010, the FASB issued Accounting Standards Updates (“ASU”) No. 2010-06, amending Accounting Standards Codification (“ASC”) Topic 820, “Measuring Liabilities at Fair Value”, to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It amends ASC Topic 820 that a reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers and should present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs. It also clarifies the requirements that for purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities and should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements.

On February 24, 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. The amendments in the ASU remove the requirement for a SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements.

ASU 2010-06 is effective for the first reporting period (including interim periods) beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. All of the amendments in ASU No. 2010-09 were effective upon issuance except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. We do not expect the adoption of ASU No. 2010-06 and No. 2010-09 will have a material impact on our financial statements.

  In April 2010, the FASB issued ASU No. 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. This update provides clarification that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trade should not be considered to contain a condition that is not a market, performance or service condition. Therefore, the award would be classified as an equity award if it otherwise qualifies as equity.

ASU No. 2010-06, the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. ASU No. 2010-13 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The management are in the process of assessing the possible impact on the future adoption of these ASU, but are not yet in a position to reasonably estimate their impact on our financial statements.

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

On February 17, 2009, we dismissed Moore & Associates, Chartered, or Moore & Associates, as our independent registered public accounting firm, effective immediately.  The decision to change accountants was recommended and approved by the Board of Directors on February 17, 2009.

The report of Moore & Associates on the financial statements for the two fiscal years ended June 30, 2008 and 2007 did not contain an adverse opinion or disclaimer of opinion, or was modified as to uncertainty, audit scope, or accounting principal.  There were no disagreements with Moore & Associates during the two most recent fiscal years and subsequent interim period through February 17, 2009.

On January 22, 2009, we engaged Mazars LLP, Certified Public Accountants, as our independent registered public accounting firm.

On December 3, 2009, our Board of Directors approved the dismissal of Mazars LLP, or Mazars UK, as our independent auditors.

Since Mazars UK did not issue a report on our financial statements for the fiscal years ended December 31, 2008 and 2007 or any other relevant period, no report of Mazars UK on our financial statements contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles.

From the date of Mazars UK’s engagement, January 22, 2009,  through December 3, 2009: (i) there have been no disagreements with Mazars UK on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Mazars UK, would have caused it to make reference to the subject matter of the disagreement in connection with its reports and (ii) Mazars UK did not advise us of any of the events requiring reporting in this Current Report on Form 8-K under Item 304(a)(1) of Regulation S-K.

 On December 3, 2009, our Board of Directors ratified and approved our engagement of Mazars CPA Limited, or Mazars HK, as our independent auditors.

During the years ended December 31, 2008 and 2007 and through December 3, 2009, neither we nor anyone on our behalf consulted Mazars HK regarding (i) the application of accounting principles to a specific completed or contemplated transaction, (ii) the type of audit opinion that might be rendered on our financial statements, or (iii) any matter that was the subject of a disagreement or event identified in response to Item 304(a)(1) of Regulation S-K (there being none).

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 BUSINESS

Overview

We are engaged in developing, manufacturing and the selling of (i) microbial organic and inorganic compound fertilizers and (ii) chemical products, primarily consisting of snow melting products. We have more than 10 fertilizer product lines which are sold under the “CHANGDA” and “FENGTAI WOSIDA” brands.  Our proprietary product lines are marketed and sold to distributors which in turn sell our products to farmers. For the fiscal year ended December 31, 2009, 86% of our revenues ($63 million) were derived from our fertilizer products and 14% of our revenues ($10 million) were derived from our chemical products.

Fertilizer Products

Our organic and inorganic fertilizer products are classified into the following categories:

· Complex Fertilizers . These fertilizers contain two or three of the primary nutrients of nitrogen, phosphorus and potassium and are made by a process involving only chemical reactions between raw materials and intermediates.

· Compound Fertilizers. Such fertilizers are produced by initiating chemical reactions between the three primary nutrients of nitrogen, phosphorous and potassium during the production process. We have expanded our product offerings to include a microbial organic-inorganic compound fertilizer which (i) helps plants secure nitrogen from the air, (ii) facilitates plants’ absorption of useful minerals such as phosphorus and potassium from the soil and (iii) enhances stress resistance by the plants. The combination of the organic and inorganic elements enhances soil fertility and crop yield respectively.

· Slow-Release Compound Fertilizer. This group of fertilizers allows fertilizer nutrients to be released over a period of time, enabling plants to absorb most of the nutrients and enhance yield rate.  We have also developed controlled-release fertilizers.

Our products sold through our distributor, China Post Logistics (Shandong) Limited, a subsidiary of the China Postal Service, or China Post, under the “FENGTAI WOSIDA” brand.  We have entered into a distribution agreement with China Post whereby China Post has the exclusive right to sell our products under the “FENGTAI WOSIDA” brand in the Shandong Province.  In order to distribute our products throughout the Shandong Province, we have to enter into a sales agency agreement with a local branch of China Post that covers a particular region within the Shandong province.  Currently we have entered into sales agency agreements with 10 local branches of China Post, all of which are on the same terms and expire on December 31, 2010.  While we are not dependent on any one local branch of China Post for the distrubution of our products, any inability to renew any sales agency agreement or if such agreements are, they are renewed on terms less favorable to us, with any local branch of China Post will limit our ability to distribute our product within the Shandong Province and could result have an adverse effect on our financial condition.  We sell our products under two different brand names, including the “CHANGDA” brand, to maximize the sale of our fertilizer products in the same market through a variety of different distribution channels.

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The names and types of fertilizers that are sold under our two brand names are as follows:

	Changda Brand	Fengtai Wosida Brand
Special Fertilizer Exports
	14-17-12
	14-14-14
	17-17-17
	10-25-5-15
	18-10-14
	Silicon 40
	Inorganic 888
	10-25-12
Chong fertilization	Chong fertilization	Chong fertilization
Soil conditioner fertilizer	Silicon calcium and magnesium soil conditioner 8-6-10-5-15	Silicon calcium and magnesium soil conditioner 8-6-10-5-15
	Silicon calcium and magnesium soil conditioner 10-5-20	Silicon calcium and magnesium soil conditioner 10-5-20
Slow compound fertilizer	New type of compound fertilizer (slow release) 18-9-18	New type of compound fertilizer (slow release) 18-9-18
	New Compound chat (release) 24-8-8	New Compound chat (release) 24-8-8
	New type of compound fertilizer (slow release) 16-8-16	New type of compound fertilizer (slow release) 16-8-16
M-O-compound fertilizer	Organic and inorganic fertilizer (bio) 15-7-8	Organic and inorganic fertilizer (bio) 15-7-8
	Compound Fertilizer (biological) 12-5-8	Compound Fertilizer (biological) 12-5-8
CL-compound fertilizer	CL24-8-8	CL24-8-8
	CL15-6-9	CL 15-6-9
	CL18-12-10	CL18-12-10
Ammoniated-compound fertilizer	S15-15-15
S-compound fertilizer	Specialty Fertilizer	Specialty Fertilizer
	S 15-5-12	S 15-5-12
	S16-8-16	S16-8-16
	S15-15-15	S15-15-15

Our fertilizers sold under the “CHANGDA” and “FENGTAI WOSIDA” brands had sales volumes for the fiscal year ended December 31, 2009 of $14,436,530 and $48,681,230, respectively or 23% and 77% of our revenues for our fertilizer products, respectively.

The pricing of our fertilizer products is market-oriented based on the underlying commodity prices of raw materials.

Customers, sales and distribution

We distribute our fertilizer products to farmers through various distribution centers of China Post Logistics (Shandong) Limited, a subsidiary of the China Postal Service, or China Post, which provides postal services in the PRC. Our other distribution channels include agricultural goods wholesalers and other countryside goods suppliers such as Shandong RuiFuYuan Agricultural Materials Chains Co., Ltd.  We also supply geographically limited franchise–type distributors in four different cities located in the PRC. In Japan, our wholesale distribution partner is Seiwa Fertilizer Ind. Co. Ltd. A small portion of our sales are direct sales to end users. We believe these distribution channels minimize our promotion costs by taking advantage of China Post and Seiwa’s sales channels and goodwill to penetrate target markets, and also minimize transportation costs as products are distributed primarily to China Post and Seiwa rather than directly to end-users.

Distribution Agreement with China Post

On December 28, 2007, our wholly owned subsidiary Changda Fertilizer entered into a distribution agreement with China Post which authorized China Post to be the exclusive distributor of “FENGTAI WOSIDA” series of fertilizer in the area of Shangdong Province. The distribution price may be determined by the parties in a supplemental agreement. The distribution agreement expires on December 27, 2012.

On December 25, 2008, Changda Fertilizer entered into a sales agency agreement with China Post (Shandong), Dongying Branch, or China Post-Dongying Branch. Pursuant to such agreement, Changda Fertilizer authorized China Post-Dongying Branch to be the sales agent for its “FENGTAI WOSIDA” brand fertilizers in the Dongying region. Each order made by China Post-Dongying Branch shall be within 30,000 tons, with the actual quality allowed to fluctuate up or down by 5%. The authorization was valid through December 31, 2009. China Post-Dongying Branch sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that China Post-Dongying Branch fails to sell 70% of target sales for two consecutive quarters.  On December 21, 2009, the sales agency agreement was renewed through December 31, 2010.

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On December 25, 2008, Changda Fertilizer entered into a sales agency agreement with China Post (Shandong), Weifang Branch, or China Post-Weifang Branch. Pursuant to this agreement, Changda Fertilizer authorized China Post-Weifang Branch to be the sales agent for its “FENGTAI WOSIDA” series of fertilizers in the Weifang region. Each order made by China Post-Weifang Branch shall be within 40,000 tons, with the actual quality allowed to fluctuate up or down by 5%. The authorization was valid through December 31, 2009. China Post-Weifang Branch sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that China Post-Weifang Branch fails to sell 70% of target sales for two consecutive quarters.  On December 21, 2009, the sales agency agreement was renewed through December 31, 2010.

On December 20, 2008, Changda Fertilizer entered into a sales agency agreement with China Post (Shandong), Binzhou Branch, or China Post-Binzhou Branch. Pursuant to this agreement, Changda Fertilizer authorized China Post-Binzhou Branch to be the sales agent for its “FENGTAI WOSIDA” series of fertilizers in the Binzhou region. Each order made by China Post-Binzhou Branch shall be within 10,000 tons, with the actual quality allowed to fluctuate up or down by 5%. China Post-Binzhou Branch sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that China Post-Binzhou Branch fails to sell 70% of target sales for two consecutive quarters.  The authorization was valid through December 31, 2009. On December 21, 2009, the sales agency agreement was renewed through December 31, 2010.

On December 25, 2008, Changda Fertilizer entered into a sales agency agreement with China Post (Shandong), Dezhou Branch, or China Post- Dezhou Branch. Pursuant to this agreement, Changda Fertilizer authorized China Post-Dezhou Branch to be the sales agent for its “FENGTAI WOSIDA” series of fertilizers in the Dezhou region. Each order made by China Post-Dezhou Branch shall be within 20,000 tons, with the actual quality allowed to fluctuate up or down by 5%. China Post-Dezhou Branch sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that China Post-Dezhou Branch fails to sell 70% of target sales for two consecutive quarters.  The authorization was valid through December 31, 2009.  On December 21, 2009, the sales agency agreement was renewed through December 31, 2010.

On December 25, 2008, Changda Fertilizer entered into a sales agency agreement with China Post (Shandong), Laiwu Branch, or China Post- Laiwu Branch. Pursuant to this agreement, Changda Fertilizer authorized China Post-Laiwu Branch to be the sales agent for its “FENGTAI WOSIDA” series of fertilizers in the Laiwu region. Each order made by China Post-Laiwu Branch shall be within 30,000 tons, with the actual quality allowed to fluctuate up or down by 5%. China Post-Laiwu Branch sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that China Post- Laiwu Branch fails to sell 70% of target sales for two consecutive quarters.  The authorization was valid through December 31, 2009.  On December 21, 2009, the sales agency agreement was renewed through December 31, 2010.

On December 25, 2008, Changda Fertilizer entered into a sales agency agreement with China Post (Shandong), Laiyang Branch, or China Post- Laiyang Branch. Pursuant to this agreement, Changda Fertilizer authorized China Post-Laiyang Branch to be the sales agent for its “FENGTAI WOSIDA” series of fertilizers in the Laiyang region. Each order made by China Post-Laiyang Branch shall be within 10,000 tons, with the actual quality allowed to fluctuate up or down by 5%. China Post-Laiyang Branch sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that China Post-Laiyang Branch fails to sell 70% of target sales for two consecutive quarters.  The authorization was valid through December 31, 2009.  On December 21, 2009, the sales agency agreement was renewed through December 31, 2010.

On December 25, 2008, Changda Fertilizer entered into a sales agency agreement with China Post (Shandong), Laizhou Branch, or China Post- Laizhou Branch. Pursuant to this agreement, Changda Fertilizer authorized China Post-Laizhou Branch to be the sales agent for its “FENGTAI WOSIDA” series of fertilizers in the Laizhou region. Each order made by China Post- Laizhou Branch shall be within 10,000 tons, with the actual quality allowed to fluctuate up or down by 5%. China Post-Laizhou Branch sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that China Post-Laizhou Branch fails to sell 70% of target sales for two consecutive quarters.  The authorization was valid through December 31, 2009. On December 21, 2009, the sales agency agreement was renewed through December 31, 2010.

On December 25, 2008, Changda Fertilizer entered into a sales agency agreement with China Post (Shandong), Rongcheng Branch, or China Post-Rongcheng Branch. Pursuant to this agreement, Changda Fertilizer authorized China Post-Rongcheng Branch to be the sales agent for its “FENGTAI WOSIDA” series of fertilizers in the Rongcheng region. Each order made by China Post-Rongcheng Branch shall be within 10,000 tons, with the actual quality allowed to fluctuate up or down by 5%. China Post-Rongcheng Branch sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that China Post-Rongcheng Branch fails to sell 70% of target sales for two consecutive quarters.  The authorization was valid through December 31, 2009.  On December 21, 2009, the sales agency agreement was renewed through December 31, 2010.

On December 25, 2008, Changda Fertilizer entered into a sales agency agreement with China Post (Shandong), Tai’an Branch, or China Post- Tai’an Branch. Pursuant to this agreement, Changda Fertilizer authorized China Post-Tai’an Branch to be the sales agent for its “FENGTAI WOSIDA” series of fertilizers in the Tai’an region. Each order made by China Post-Tai’an Branch shall be within 10,000 tons, with the actual quality allowed to fluctuate up or down by 5%. China Post-Tai-an Branch sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that China Post-Tai’an Branch fails to sell 70% of target sales for two consecutive quarters.  The authorization was valid through December 31, 2009. On December 21, 2009, the sales agency agreement was renewed through December 31, 2010.

On December 25, 2008, Changda Fertilizer entered into a sales agency agreement with China Post (Shandong), Laixi Branch, or China Post- Laixi Branch. Pursuant to this agreement, Changda Fertilizer authorized China Post-Laixi Branch to be the sales agent for its “FENGTAI WOSIDA” series of fertilizers in the Laixi region. Each order made by China Post-Laixi Branch shall be within 10,000 tons, with the actual quality allowed to fluctuate up or down by 5%. China Post-Laiwu Branch sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that China Post-Laixi Branch fails to sell 70% of target sales for two consecutive quarters.  The authorization was valid through December 31, 2009. On December 21, 2009, the sales agency agreement was renewed through December 31, 2010.

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Distribution Agreement with Shandong RuiFuYuan Agricultural Materials Chains Co, Ltd.

On December 22, 2008, Changda Fertilizer entered into a distributor agreement with Shandong RuiFuYuan Agricultural Materials Chains Co., Ltd., or RuiFuYuan. Pursuant to this agreement, Changda Fertilizer authorized RuiFuYuan to be the distributor for its fertilizer products in the Shandong province. Each order made by RuiFuYuan shall be within 30,000 tons, with the actual quality allowed to fluctuate up or down by 5%. RuiFuYuan sells the products in the market at a price decided by Changda Fertilizer. Changda Fertilizer may terminate the agreement in the event that RuiFuYuan fails to sell 70% of target sales for two consecutive quarters.  The authorization was valid through December 31, 2009. On December 18, 2009, the sales agency agreement was renewed through December 31, 2010.

For the fiscal year ended December 31, 2009, the following distributors each accounted for over 10% of our total revenues related to our fertilizer products.

Ranking		Distributor Name	Amount (USD)		Percentage  of  sales
	1	China Post (Shandong), Weifang Branch	$	9,950,982		16%
	2	China Post (Shandong), Laiwu Branch	$	7,821,916		12%
	3	China Post (Shandong), Dongying Branch	$	7,608,941		12%
	4	Shandong RuiFuYuan Agricultural Materials Chains Co., Ltd.	$	6,909,358		11%

Seasonality of Sales

We experience seasonal variations in our revenues and our operating costs based on the farming season. The peak selling seasons for our fertilizer products are the first, second and fourth quarters of the year. These periods are the planting and crop-growing months, which boost fertilizer sales. The third quarter of the year is harvest season, hence the low demand for fertilizer.  During the fiscal year ended December 31, 2009, approximately 85% of our annual fertilizer sales volume occurred in the first, second and fourth fiscal quarters.

Materials

The key raw materials we use in the production of our fertilizers are urea, potassium sulphate, potassium chloride, ammonium sulphate, ammonium phosphate and potash. Our chemical fertilizer products are manufactured through chemical reactions occurring between different inorganic fertilizer materials so as to provide a balanced proportion of all nutrients. Our microbial organic-inorganic compound fertilizer products are manufactured from bacteria combined with inorganic and organic elements. Approximately 94% of the raw materials we use for our products are found domestically in the PRC with the remaining approximately 6% of our raw materials come from Canada and Russia. The raw materials sourced outside China are predominantly potassium chloride materials. Our payment terms with our suppliers vary from a credit period of up to 60 days to cash payments in advance.

Since the end of 2008, when almost all prices for raw materials collapsed in the wake of the international financial crisis, raw materials markets have become increasingly volatile and less predictable. Despite overcapacities for certain raw materials, the overall supply situation has not changed substantially but prices are now significantly lower. As a result, in 2009 management decided to enter into advance contracts guaranteeing the lowest price for our key raw materials, specifically potassium, urea, magneisum ammonium phosphate and potassium chloride. Management decided to undertake this step despite the fact such contracts had a negative effect on our cash flow situation for the fiscal year ended December 31, 2009 since they believed that sudden price hikes in raw materials would have a worse effect on our earnings. The PRC government continues to promulgate a number of supportive policies for the development of the countryside, the ensuring of food supply and the improvement of food safety, including the China Food Safety Regulation promulgated by Eleventh National People’s Congress Standing Committee of the seventh meeting in February 2009 and the PRC’s Central Committee of the Communist Party and the State Council annual "Document No. 1," which outlines the PRC government’s plans to address a wide range of rural issues, including the development of modern agriculture in the upcoming year, for 2010. Management believes that these policies will further strengthen the demand for fertilizer, which will ultimately lead to rising prices for raw materials.

Suppliers

For the fiscal year ended December 31, 2009, the following suppliers each accounted for over 10% of our total raw materials purchased related to our fertilizer products.

Ranking		Fertilizer Supplier Name	Amount (USD)		Percentage  of Purchases
	1	Haihua of potassium sulfate plant	$	7,756,832		15%
	2	Weifang Yinfeng Chemical Industry	$	6,745,875		13%
	3	Qingzhou Zhongde Agricultural Means Production Co., Ltd.	$	6,156,404		12%

 We purchase products from our suppliers on an “as needed” basis and we presently do not believe the loss of any one supplier will have an adverse effect on our business.

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Facilities

Our fertilizer production facilities are located in Weifang and Heze, Shandong Province in the PRC, consisting of land parcels with a total site area of approximately 151,164 square meters. There are two production lines for the manufacture of chemical fertilizers, and two production lines for the manufacture of the microbial organic-inorganic compound fertilizers and slow-release compound fertilizers, with an aggregate annual capacity of 300,000 tonnes in 2009 (tonnes is a metric measure of weight equivalent to 1,000 kilograms).

Government Stimulus

The $586 billion government stimulus announced in November 2008 has sustained the development of rural infrastructure and water supply projects in rural areas, among other projects.  Infrastructure construction, an important pillar of China’s economic progress, will contribute to the growth of the agriculture industry and the demand for our products.  Two other major factors that we envisage will promote the essential need for our fertilizers are: (i) the increasing domestic consumption and export demand for China’s agricultural products, and (ii) the decreasing availability of arable farm lands.

The rapid economic growth in China over the past two decades has led to income growth that elevated millions of consumers from poverty, resulting in dramatic improvements of standards of living and diet diversification to more protein based. As the world’s largest agricultural economy, China produces and consumes a wide range of agricultural products, from traditional staple grains such as wheat and rice, to more varieties of fruits, vegetables, livestock, poultry and fish, as the demand by a wealthier domestic consumer base and export market dictates. We believe the use of microbial organic and slow-release fertilizers which are essential to augment agricultural production to meet the food needs of a large population with demand for high quality produce, vegetables and fruits that are organic and pollution-free, even the production of grain for feed given to livestock utilizes fertilizers.

China’s agricultural production comes almost entirely from small-scale operations. According to China’s 2007 agricultural census, the country has 200 million farm households and an estimated 122 million hectares (494 million acres) of cultivated land—an average of 0.6 hectare (1.5 acres) per household. These small land holdings are typically divided into several parcels that are not adjacent to each other.  Industrial and urban growth further decreased the agricultural land base.  To coax production out of such small plots, farm households engage in intensive agricultural practices, including high levels of fertilizer application and raising two or three crops per year on a single plot.

Chemical Products

Products

Our principal chemical products are snow melting agents and various other industrial chemicals.  Snow melting agents are de-icing salt, consisting of a combination of sodium chloride, calcium chloride, magnesium chloride and additives in varying levels for different customer segments and uses. The snow melting agents are a white, odorless and soluble solid compound and are used primarily to de-ice airports, roads and golf courses in the winter seasons, spread by winter service vehicles.

Our industrial chemical products range includes thiophene, calcium chloride and magnesium chloride. Thiophene is a colorless and transparent liquid which is primarily used in the pharmaceutical raw materials industry as a medicine chemical auxiliary, and for the synthesisation of anti-bacterial fungus. Calcium chloride and magnesium chloride are used for dust control on roads and also as essential product ingredients for a wide range of industrial usage such as in cement production.

Our principal chemical products for the fiscal year ended December 31, 2009 were as follows: thiophene; snow-melting agents; calcium chloride; magnesium chloride; ordinary coke; flame retardant; leather curing agent; salt; whisker; and seratrodast.  For the fiscal year ended December 31, 2009, de-icing salt and calcium chloride represented 48% and 28%, respectively, of our total chemical revenues of our chemical products.  The pricing of our chemical products is market-oriented based on the underlying commodity prices of raw materials.

Customers, sales and distribution

We mainly sell and distribute our snow melting agents and thiophene to industrial end-users through our sales team. Most of our snow melting agent products are sold to Japanese customers and in total made up 14%, and 23% of our sales in for the years ended December 31, 2009 and 2008, respectively. We believe our wholly owned subsidiary Changda Chemical supplied approximately 6% of the snow melting agents demanded in Japan in each of the fiscal years ended December 31, 2009 and 2008.

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Thiophene was commercialized in the first half of 2008 and sales were not material. Domestic sales are settled in RMB while sales to Japan are settled in USD. Payment terms are usually by cash payment for sales to Japan. Payment terms for domestic sales are usually cash in advance of delivery, although a credit period of up to 90 days may be granted to repeat customers.

For the fiscal year ended December 31, 2009, the following customers each accounted for over 10% of our total revenues related to our chemical products.

Ranking		Chemical Product Customer Name	Amount (USD)		Percentage  of  sales
	1	Weifang Economic and Trade Co., Ltd.	$	1,723,776		17	%
	2	Weifang Strong Source Chemical Co., Ltd.	$	1,447,027		15	%
	3	Sun Duqian	$	1,082,357		11	%
	4	Li Kun	$	1,077,158		11	%

We do not currently have any long-term contractual arrangements with our customers for our chemical products.

Materials

The principal raw materials in the chemical products include sodium chloride, calcium chloride, magnesium chloride and additives. For the fiscal years ended December 31, 2009 and 2008, use of sodium chloride, calcium chloride and magnesium chloride accounted for approximately 48% and 64%,  respectively, of our total chemical product cost of sales. De-icing agents are manufactured by granulisation and drying of various chlorides and additives. Thiophenes are manufactured from the catalisation and distillation of butadiene and sulphur.

Suppliers

For the fiscal year ended December 31, 2009, the following suppliers each accounted for over 10% of our total raw materials purchased related to our chemical products.

Ranking		Supplier Name	Amount (USD)		Percentage  of  Purchases
	1	Wang Sheng Hu	$	1,495,291		21	%
	2	Coastal Salt Company	$	1,025,859		14	%
	3	Wang Pei Jia	$	745,501		10	%

We purchase products from our suppliers on an as needed basis and we presently do not believe the loss of any one supplier will have an adverse effect on our business. At present, we purchase most of our principal raw materials locally. All of our suppliers are paid in RMB. Most of our suppliers do not allow a credit period.

Facilities

Our chemical production facilities are located in Shandong Province in the PRC and occupy a total site area of 69,278 square meters. Three production lines are utilized for the manufacture of snow melting agent products, while one production line is operated to produce thiophene and one production line is operated to produce our fire retardant agent. Total annual production capacity in 2009 was 301,500 tonnes.

Seasonality of Sales

We experience seasonal variations in our revenues and our operating costs for our chemical products depending on the winter season. During the fiscal year ended December 31, 2009, approximately 85% of our annual fertilizer sales volume occurred in the first, second and fourth fiscal quarters.  The peak selling seasons for our chemical products are the first and fourth quarters of the year.  During the fiscal year ended December 31, 2009, approximately 76% of our annual chemical sales volume occurred in the first and fourth fiscal quarters.  This was primarily a result of the extreme winter months of 2009 which saw some of the coldest temperatures and volume of snow in the last decade and which resulted in the increase in the use of three of our products: calcium chloride, deicing salt and salt which are all used for snow-melting purposes.

Classification and Function of Fertilizers

Fertilizers are used to provide, maintain and improve plant nutrition and enhance the performance of the soil in which plants grow, with the aim of increasing agricultural output, improving the quality of agricultural products and increasing plants’ resistance to disease. In accordance with their mineral nutrient content, chemical fertilizers can be divided into four types, namely nitrogen, phosphate, potassium and compound fertilizers.

As set out below, fertilizers come in both organic and inorganic forms.

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Chemical Fertilizers (Inorganic Fertilizers)

Chemical fertilizers are manufactured using inorganic material of wholly or partially synthetic origin, and are added to the soil to sustain plant growth. These nutrients are essential to plant growth:

• Nitrogen

Nitrogen plays an important role during plant growth. It is a component of amino acids in plants, which are the building blocks of protein. Nitrogen also helps the crop yield. It not only increases the output of agricultural products, but also improves their quality.

• Potassium

Potassium is essential in its ionic form for metabolism. Potassium encourages crops to use nitrogen more efficiently, increases production, improves crop quality and increases crop resistance.

• Phosphorous

Phosphorus is the component of cell protoplasm in the plant. It plays an important role in cell growth and proliferation. It also assists in photosynthesis, and accelerates root growth of seedlings and the growth of plump-eared grain.

• Compound Fertilizers

Compound Fertilizers contain several elements as well as trace elements and/or other nutrients and are useful ingredients.

Organic Fertilizers

Organic fertilizers are made up of materials of natural origin (primarily derived from plants and/or animals) that release nutrients into the soil as its constituent parts are broken down by micro-organisms.

Organic fertilizers promote the growth and reproduction of micro-organisms in the soil, improve the physical, chemical and biological characteristics of the soil, and increase the soil’s capacity to hold water and nutrients, thus creating a favorable environment for plant growth.

Global Demand and Supply of Fertilizer

We believe the steady growth of the global population and of the world economy has contributed to increased demand for agricultural products. Other factors, including the development of bio-energy (partly in response to rising oil prices) and the implementation of favorable agricultural policies in certain countries, have also promoted agricultural growth, which in turn has led to growth in demand for fertilizers.

According to a June 2009 industry presentation made by the International Fertilizer Association, or IFA, on Fertilizer Outlook 2009 – 2013 at the 77th IFA Annual Conference held in Shanghai, PRC in May 2009(the “June 2009 IFA Presentation”), like other commodities, fertilizers have been affected by the economic downturn in 2008. Aggregate world fertilizer demand in 2008/09 is down 5.1% compared with the previous year, from 168.1 to 159.6 million tonnes (Mt) nutrients. Drops in consumption are registered in all the regions except South Asia and Eastern Europe and Central Asia.

Global Fertilizer Consumption (million metric tonnes nutrients)

Year	Nitrogen	Phosphorous	Potassium	Total
2006-2007	97.4	38.1	26.9	162.4
2007-2008	101.0	38.8	28.3	168.1
2008-2009 (estimated)	99.4	36.0	24.3	159.7
2009-2010 (forecast)	102.0	38.1	25.3	165.4
2013-2014 (forecast)	111.1	44.3	31.4	186.8

Source: IFA, June 2009

The June 2009 IFA Presentation indicated that, in response to relatively high agricultural commodity prices in 2007, as well as to policies promoting fertilizer use in many Asian countries and favorable weather conditions in the northern hemisphere, global fertilizer demand in 2007 was at 168.7 Mt of nutrients. At the regional level, the bulk of the increase in demand is forecast to come from Asia and, to a lesser extent, from Latin America. South Asia and East Asia together are forecast to account for 62% of the total global growth. If Latin America is added, the three regions together are forecast to account for three-fourths of the increase in global demand in the next five years. The June 2009 IFA Presentation projected an average global growth of fertilizer consumption of 2.8% to the year 2013 with a then global consumption of 186.8 million tonnes.

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PRC Fertilizer Industry

Growing Agricultural Industry in the PRC

According to the 2009 CIA World Factbook, the PRC is one of the fastest growing economies in the world and primary industry (farming, forestry, animal husbandry, sideline production and fishery) accounts for over 10% of the PRC’s total gross domestic product.  The agricultural sector employs 39.5% of the country’s total labor force.

The PRC has a population of 1.3 billion. In contrast, the country’s farmland is relatively limited, with approximately 122 million hectares of arable land. Per capita arable land is less than 0.1 hectares.

Accordingly, the PRC Government attaches great importance to the PRC’s issues concerning “countryside, farmers and agriculture.” It has promulgated a series of agricultural measures in favor of farmers since 2004, such as agricultural tax relief, adopting agricultural subsidies and controlling arable area, so as to promote the continued growth of agricultural production and farmers’ income. The net income per capita of China's rural residents in the first half of 2009 year increased 8.1% year-on-year. In 2008, farmers' net income per capita was 4,761 yuan, a growth of 8% over the previous year, according to a survey released by the Chinese Academy of Social Sciences, the country's government think tank in April. According to the PRC Ministry of Agriculture, the central fiscal has so far allocated 123 billion yuan in subsidizing farmers' purchase of seed, diesel, fertilizers and other production materials in 2009, rising 19.4% over the previous year. (National Bureau of Statistics).  

Overview of the PRC Fertilizer Industry

According to the June 2009 IFA Presentation , the PRC’s chemical fertilizer industry plays an important role in the world fertilizer industry. The PRC is one of the largest fertilizer producers and it accounts for approximately 34% of global consumption (168.7 million tonnes – by effective component) in 2007.

In accordance with the 11th Five-Year plan adopted in 2006 and the building of a new socialist countryside program, in order to encourage investment in the fertilizer industry, the PRC Government has promulgated a number of preferential policies, including zero rate VAT for certain fertilizer products, preferential electricity prices and cheaper railway transportation.

The PRC’s continuous economic growth, agricultural development, growing demand for fertilizers and preferential fertilizer industry policies combine to promote the development of the fertilizer industry.  According to the National Bureau of Statistics, the PRC’s output of chemical fertilizers grew from 37.9 million tonnes (by effective component) in 2002 to 57.9 million tonnes (by effective component) in 2007, with an average annual growth rate of 8.8%. After a slowdown in 2008 in the wake of the international economic crisis, the China National Bureau of Statistics reported a 9.5% year-on-year increase in chemical fertilizer production in the first half of 2009.  

Development trend of PRC fertilizers

Continuous development of chemical fertilizers

According to the June 2009 IFA Presentation, the pressure to use a decreasing area of land to feed a growing population has resulted in a consistent upward trend in the output of chemical fertilizers in the PRC. The use of compound fertilizers in particular has grown continuously in recent years.

  Development opportunity for slow/controlled release fertilizers

The PRC Government’s 11th Five-Year Technology Development Planning and the National Mid/Long- Term Science and Technology Development Planning Framework of 2006 indicated the direction for the development of technology of PRC fertilizers, focusing on research and development of environmentally-friendly fertilizers and developing compound slow release and controlled-release fertilizers. The development and increased usage of slow release and controlled release fertilizers should serve to reduce agricultural pollution, and also to save non-renewable resources.

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Compound Fertilizers in the PRC

Compound fertilizers have become increasingly popular over the past decade and the consumption of them has been growing at the fastest rate among the categories listed. According to the National Office of Statistics, the consumption of compound fertilizers in the PRC has grown from approximately 6,708,000 tonnes in 1995 to approximately 13,032,000 tonnes in 2005 representing a compound annual growth rate, or CAGR, of approximately 7.66%.  We believe that the increasing popularity of compound fertilizers in the PRC derives from their greater nutrient content compared with that of single-fertilizer mixtures, and the fact that they can be adapted to give crops a variety of different nutrients to cater for different conditions and times of application.

Emergence of Organic Fertilizers

Chemical fertilizers provide plants with immediately available nutrients to sustain plant growth and have been widely used in traditional PRC agricultural production for decades. Prolonged usage of chemical fertilizers will reduce the soil’s beneficial organism population and harden the soil. According to a 2008 United States Drug Administration, or USDA, Foreign Agricultural Service report, with the increase in health awareness among consumers in the PRC, the organic market in China has been growing at an annual double digit rate over the past decade.

Organic fertilizer has been listed as one of the key development products in the 11th Five-Year Plan for Ecology Protection, promulgated in October 2006. The PRC Government also indicated that it would increase spending on research and development on organic fertilizer products and technologies in the next five to ten years. These new policies will help the farmers to realize the advantages of using organic fertilizers, especially for farmland with poor soil structure and fertility after prolonged inappropriate use of chemical fertilizers. Accordingly, management believes that demand for organic fertilizers will remain strong in the coming years.

PRC Government Support for the Fertilizer Industry

According to the PRC National Bureau of Statistics, the PRC is currently the largest fertilizer market in the world wand it accounts for 34% of the global market. The annual average growth rate in fertilizer application for 2002-2007 was 8.8 percent with demand growth higher than the world average level, which is approximately 1.5 -5% according to the June 2009 IFA Presentation . Management believes that the steady growth of the PRC’s population and rising income will lead to demand for a diet with higher protein such as meat, which requires grain as feedstock. The PRC’s urbanization and industrialization will result in a continued decline in available arable farm land, thus making it essential for the PRC to raise its agricultural products yield to ensure an adequate food supply. At the same time, management believes that economic reform in the PRC will lead to a growth in consumer demand for cash crops such as vegetables and fruits, which generally require the application of higher volumes of fertilizers than traditional farm crops. The PRC government has mandated that farmers increase crop yields is in order to decrease the nation’s dependence on food imports and the growing consensus on the need to use environmentally friendly fertilizers has also been a factor in the growth of our business. Management believes that as a result of these factors, the demand for and the usage of fertilizers in the PRC will increase and that, as one of the fast-growing and competitive fertilizer producers in the PRC, we will benefit from the growth of the PRC fertilizer market.

As fertilizer usage is key to increasing grain production yields, the PRC government has been encouraging fertilizer application and hence production. Fertilizer production enterprises are given a number of benefits by the PRC Government in terms of electricity supply and transportation. Since 2004, the PRC government has introduced several preferential VAT policies directly for the benefit of fertilizer production enterprises; for instance, 50 percent of the VAT collected from urea producers is refundable to these producers. To further support the industry, from July 1, 2005, urea producers were temporarily exempted from paying VAT, pursuant to a joint announcement made in May 2005 by the Ministry of Finance and State Administration of Taxation. The purpose of these preferential tax policies, and other supportive policies from the government, is to promote domestic fertilizer supply and stable fertilizer prices.

 In addition, the 11th Five-Year Plan for National Agricultural & Rural Economic Development, promulgated in August 2006, establishes a goal of an annual 0.65 percent increase in comprehensive grain productive capacity over five years, assuming an annual 0.18 percent decrease in planted grain acreage. The allowance for the agricultural industry reached RMB 63.8 billion in 2008, representing an increase of 131 percent over 2007. The PRC Government has recently declared that it will strive to double the income of Chinese farmers by 2020 from the 2008 level and elevate the nation’s agricultural productivity to a higher level. The 11th Five-Year Plan for Fertilizer Industry, issued by the PRC’s National Development and Reform Commission in October 2006, indicates that the nation’s fertilizer production should reach 60 million tonnes by 2010, which represents an approximately 25 percent growth above the production in 2004. Management believes that these policies will lead to a sustained demand for each type of fertilizer.

The PRC Chemical Industry

The chemical industry is the third largest in the PRC and accounted for 10% of the country’s GDP in 2006 according to the PRC National Bureau of Statistics. PRC consumption constituted 35 percent to 40% of global demand growth for chemicals. The growth in domestic demand for chemicals alone in 2005 and 2006 was 7% to 8%, according to the PRC National Bureau of Statistics.

Despite this growth however, the PRC has a net chemical trade deficit and remains heavily dependent on imported raw materials, which have over recent years been affected by upward price trends in the world market caused by heavy global demand for raw materials, petroleum and other input.

Like all other sectors the chemical industry in China also has been affected by global economic crisis. Nevertheless the industry now shows signs of recovery.  According to China Chemical Industry News (CCIN) the overall production increased by 1.1% in the first 8 months of 2009 compared to the same period in the previous year.  Specialty Chemicals (+10.6%) and Rubber Related Chemicals (+10.4%) gained particularly strong.  In 2006, global sales of chemical products amounted to just under 2,180 billion Euros, reflecting a growth rate of almost 8 percent against 2005. Europe and Asia have roughly equal positions as the major chemical manufacturers, closely followed by North America. China ranks second only to the United States, its chemical industry outgrew Germany in 2005 and Japan in 2006 with 205 billion Euros worth in sales.

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Investment in the chemical sector is still growing strongly.  Investment undertaken by the PRC chemical industry (Billion RMBs compared to previous year period)

Sector	1st Half. 2008		1st Half. 2009		Change
Petrochem		77,4		83,2		7,5	%
Base Chemicals		192,8		248,9		29.1	%
Pharmacy		43,1		60,8		41.1	%
Fibres		13,0		11,5		-11.5	%
Rubber Products		21,8		28,5		30.7	%
Plastic Products		45,8		59,8		30,.6	%
Total		393,9		492,7		25.1	%

(Source: Germany Trade and Invest (GovOrg) & China Chemical Industry News (Industry Federation Publication), National Bureau of Statistics, German Chemical Industry Federation (VCI))

Competitive Strengths

We believe that, compared with other PRC fertilizer manufacturers, the following principal competitive strengths have contributed to our historical success and will contribute to our future prospects:

Experienced management team

Our management team has an average industry experience of over 10 years in production, financial and business management in the agricultural products and specialty chemicals business. We believe the management team possesses the leadership, vision and in-depth industry knowledge to anticipate and take advantage of market opportunities, to formulate sound business strategies, and to execute the strategies in an effective manner to maximize the benefit to our stockholders. Senior management has been able to achieve cost-efficient, organic and acquisitive growth of our business as well as effective integration of management and operations.

Strong distribution channel anchored by an exclusive distribution agreement with China Post

Our sales are primarily in Shandong Province, one of the major agricultural provinces in the PRC, and overseas to Japan. We believe we supplied approximately 6% of snow melting agents used in Japan in 2009.  We have established a broad distribution network, including four exclusive distribution centers in Shandong Province, and an exclusive distribution agreement with China Post, which has a broad network of 80,000 distribution centers in 18 cities in Shandong Province. We are able to obtain information on the identity of end-users, so as to establish on-going and direct business relationships with them, providing technical training and after-sales services. Training seminars are also conducted on a regular basis for end-users, to familiarize them with our products and promote brand presence and enhance market value.  

Ability to develop next generation microbial organic-inorganic compound fertilizers and slow-release compound fertilizers

Prolonged application of synthetic chemical additives to soil leads to deterioration of soil condition and water pollution. Unlike inorganic fertilizers, our microbial organic-inorganic compound fertilizer products may facilitate the preservation of soil fertility and the prevention of some plant diseases. In 1998, the State Council of the PRC launched the “Rich Soil Project” in the PRC, with the objective of improving the deteriorating arable soil condition by promoting the usage of organic fertilizers. Our microbial organic-inorganic compound fertilizer products are consistent with this government policy, and we believe they will contribute to the protection of the environment.

Full scale research and development support with patent coverage over both the fertilizer and chemical key products

Our product range of fertilizers and chemical products are covered by two patents and eight pending patents. We have a strong focus on research and development to ensure that the quality of our products are continuously improved and to accelerate the development of new products.  We believe that our capabilities in developing new products and production processes will allow our products to remain at the forefront of those available in our target markets.

Fertilizer sector receives significant support from the PRC government

In accordance with the 11th Five-Year plan and the building of a new socialist countryside program, the PRC government has expressed strong support for the agricultural industry, declaring that farmers’ incomes should double from the 2008 level by 2020 and that agricultural productivity should increase. The PRC Government has also expressed support for the fertilizer industry in particular, stating that annual fertilizer production should reach 60m tonnes by 2010, representing a 25 percent increase over the 2004 level. We believe that these policies will lead to a sustained demand for fertilizers.

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Our internal processes and environmental procedures are ISO9001/ISO 14000 certified

The internal processes and environmental procedures we adopted ensure that quality control, efficiency and environmental awareness are of the highest level. This has been recognized by the attaining of the internationally recognized ISO 9001 and ISO 14000 certifications.

Quality Control Standards and Procedures

Stringent quality control measures are implemented throughout the fertilizer and chemical products’ production process in accordance with national standards. Each of the plants has a quality control team in place to ensure product quality meets the standards set by the PRC Government.

The quality management and control system of the production facilities encompasses the following features:

• Process control – well-trained management and operating personnel to optimize operations, stabilize production and ensure product quality.

• Packaging and storage – systematic package and storage procedures are in place to ensure proper packaging and to avoid any damage to the products during storage in our warehouses.

• Testing and Inspection – testing appliances are installed. Quality inspection teams undertake random tests of both intermediate and finished products on a sample basis to ensure the products comply with the required standards. Testing processes include checking physical appearance and composition of nutrients.

• Machinery and equipment management – engineers and other personnel conduct regular checks and repairs to maintain production.  

Intellectual Property

All of our fertilizer products are sold under the “CHANGDA” trademark, which was granted by the PRC authorities on October 14, 2008 and the “WOSIDA” trademark, which was granted by the PRC authorities on October 7, 2008.  Our products sold through China Post are sold under the “FENGTAI WOSIDA” trademark. The “CHANGDA” trademark covers a wide range of fertilizer products, including agricultural fertilizers, animal fertilizers, compound fertilizers and plant fertilizers. We sell our products under two different brand names so that we can maximize the sale our fertilizer products in the same market through a variety of different distribution channels.

All of our chemical products are also sold under the “CHANGDA” trade mark. The trademark “CHANGDA” for the chemical products was applied for in June 2006 and June 2007. The registered trademark “CHANGDA” (only our name in Chinese characters) has been granted by National Bureau of Intellectual Property for our leather curing agent and snow melting agents on May 28, 2009 and September 7, 2009, respectively. On April 28, 2010 we were granted by the National Bereau of Intellectual Property a new registered trademark under the name “CHANGDA” for our chemical products, including our snow melting agents, thiophene and leather curing agents. This new trademark is with our name in English and our logo.

Trademark	Products	Date of Application	Date of Approval
“CHANGDA” in Chinese characters only	Leather curing agent	January 16, 2006	May 28, 2009
“CHANGDA” in Chinese characters only	Snow melting agent	June 12, 2006	September 7, 2009
“CHANGDA” with English name and logo	Various chemicals	June 4, 2007	April 28, 2010

A total of eight patent applications have been filed in the PRC in relation to the various production methods and technology currently employed by us for our fertilizer business. In addition, we have, together with our Chief Executive Officer Mr. Qing Ran Zhu, filed two patent applications in the PRC for the snow melting agent product and thiophene production methods and technology for the chemical business segment. A summary of our patents is set out below:

Company Business	Patent Description	Patent registration No.	Status	Date of patent filed/issued
Fertilizer	High silicon compound fertilizer product and its Production Process	200710110812.1	Filed	June 11, 2007
	Sprout and Article Formation Production Process for Compound Fertilizer	200610043439.8	Granted	December 12, 2007
	An Organic-Compound Fertilizer and its Production Process	200810007504.0	Filed	February 26, 2008
	Intelligent Sulfur Film Coating for Large Granular Urea or Granular Compound Fertilizers	200710195664.8	Filed	December 5, 2007
	A Soil Conditioner Containing Nitrogen and Phosphor	200810007850.9	Filed	February 26, 2008
	A Social Conditioner and its Production Process	200810007503.6	Filed	February 26, 2008
	Resin capsule fertilizer and technology (1)	200810126410.5	Filed