UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2009

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

For the transition period from ______________________To ______________________

Commission file number 000-52749

CHANG-ON INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Utah	87-0302579
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
514 No. 18 Building High New Technology Development Harbin, Heilongjiang Province, China	N/A
(Address of principal executive offices)	(Zip Code)

+86 451 82695010

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x   No o

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

Large accelerated filer o       Accelerated filer o     Non-accelerated filer o    Smaller reporting company þ

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. oYes o No

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of August 14, 2009, the registrant’s outstanding common stock consisted of 67,307,366 shares.

Table of Contents

PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS	3
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4
ITEM 4. CONTROLS AND PROCEDURES	7
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	8
ITEM 1A. RISK FACTORS	8
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	8
ITEM 5. OTHER INFORMATION	8
ITEM 6. EXHIBITS	8

2

PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

The unaudited financial statements of Chang-On International, Inc., and subsidiaries (the “Company”, “Chang-On”, “we”, “our”, “us”) follow.  All currency references in this report are in US dollars unless otherwise noted.

The consolidated financial statements of the Company, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission.  Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company as included in the Company's Form 10-K for the year ended December 31, 2008.

CHANG-ON INTERNATIONAL, INC. AND SUBSIDIARIES

(A Development Stage Company)

INDEX

	PAGE
CONSOLIDATED BALANCE SHEETS (UNAUDITED	F-1
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)	F-2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)	F-3
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(DEFICIT) (UNAUDITED)	F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)	F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	F-6

3

CHANG-ON INTERNATIONAL, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

	June 30, 2009			December 31, 2008
	(Unaudited)
ASSETS
Current Assets
Cash	$	56,664		$	3,798
Prepaid and other receivables		293			293
Inventories (Note 4)		108,362			108,493
Total Current Assets		165,319			112,584
Property, plant and equipment, net (Note 5)		378,299			396,056
Total Assets	$	543,618		$	508,640
LIABILITIES
Current Liabilities
Trade accounts payable	$	696		$	696
Accrued expenses		25,146			25,211
Government subsidy (Note 6)		56,088			56,155
Due to shareholders (Note 7)		296,205			215,943
Total Current Liabilities		378,135			298,005
Total Liabilities		378,135			298,005
EQUITY
Chang-On International, Inc Stockholders' Equity:
Common stock, par value $0.001, authorized
100,000,000 shares, issue and outstanding
67,307,366 shares (Note 8)		67,307			67,307
Additional paid in capital		3,067,959			3,067,959
Deficit		(2,884,491	)		(2,689,591	)
Deferred Compensation (Note 9)		(150,000	)		(317,500	)
Accumulated comprehensive income		(15,639	)		(15,457	)
Total Chang-On International, Inc Stockholders' equity		85,136			112,718
Noncontrolling interest		80,347			97,917
Total Equity		165,483			210,635
Total Liabilities and Equity	$	543,618		$	508,640

See Notes to Financial Statements

F-1

CHANG-ON INTERNATIONAL, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Period November 26, 2004 (inception) to March 31,
	2009			2008			2009			2008			2009
Net sales	$	-		$	32,742		$	-		$	32,742		$	91,786
Cost of sales		-			(16,433	)		-			(16,433	)		(59,096	)
Gross profit		-			16,309			-			16,309			32,690
Expenses
Salaries		3,514			6,176			7,025			13,113			115,311
Transportation		-			1,881			-			3,202			13,354
Office equipment		13			54			28			390			6,879
Water, electricity and gas		3,310			5,704			20,316			6,961			111,950
Other expenses		123			887			209			3,363			35,056
Advertisement		-			-			-			-			556
Rent expense		-			-			-			-			3,811
Depreciation		8,641			7,033			17,276			11,159			148,608
R & D expense		-			-			-			-			22,578
Repairs and maintenance		-			-			-			-			1,025
Gain on disposal of fixed assets		-			-			-			-			(7,730	)
Stock compensation		50,000			221,667			167,500			536,667			2,250,000
Professional fees		-			-			-			-			25,000
Fixed assets impairment		-			-			-			-			345,962
Intangibles writedown		-			-			-			-			241,639
Total Expenses		65,601			243,402			212,354			574,855			3,313,999
Total expenses and loss from operations		(65,601	)		(227,093	)		(212,354	)		(558,546	)		(3,281,309	)
Other income		-			102			-			7,083			7,195
Loss before provision for income tax		(65,601	)		(226,991	)		(212,354	)		(551,463	)		(3,274,114	)
Income tax provision		-			-			-			-			-
Net loss		(65,601	)		(226,991	)		(212,354	)		(551,463	)		(3,274,114	)
Less: Net loss attributable to the noncontrolling interest		6,058			-			17,454			-			283,257
Net loss attributable to Chang-On International, Inc
common stockholders	$	(59,543	)	$	(226,991	)	$	(194,900	)		(551,463	)	$	(2,990,857	)
Basic and Fully Diluted Earnings per Share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Weighted average shares outstanding		67,307,366			67,307,366			67,307,366			67,307,366

See Notes to Financial Statements

F-2

CHANG-ON INTERNATIONAL, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Period November 26, 2004 (inception) to June 30,
	2009			2008			2009			2008			2009
Net loss	$	(65,601	)	$	(226,991	)	$	(212,354	)	$	(551,463	)	$	(3,274,114	)
Other comprehensive income(loss), net of tax:
Foreign currency translation gain(loss)		96			(6,388	)		(298	)		(17,301	)		(15,755	)
Comprehensive loss		(65,505	)		(233,379	)		(212,652	)		(568,764	)		(3,289,869	)
Comprehensive loss attributable to the noncontrolling interest		6,020			-			17,570			-			283,373
Comprehensive loss attributable to Chang-On International, Inc.	$	(59,485	)	$	(233,379	)	$	(195,082	)	$	(568,764	)	$	(3,006,496	)

See Notes to Financial Statements

F-3

CHANG-ON INTERNATIONAL, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) FOR THE THREE MONTHS ENDED JUNE 30, 2009

(UNAUDITED)

							Chang-On International, Inc. Stockholders
							Common Stock				Additional								Accumulated
				Comprehensive			$0.001 Par Value				Paid-in		Accumulated			Deferred			Comprehensive			Noncontrolling
	Total			Income			Shares		Amount		Capital		Deficit			Compensation			Income (loss)			Interest
Balance December 31, 2008	$	210,635		$	-			67,307,366	$	67,307	$	3,067,959	$	(2,689,591	)	$	(317,500	)	$	(15,457	)	$	97,917
Amortization of deferred compensation		167,500															167,500
Comprehensive loss:
Net loss		(212,354	)		(212,354	)								(194,900	)								(17,454	)
Other comprehensive loss, net of tax:
Foreign currency translation loss		(298	)		(298	)														(182	)		(116	)
Comprehensive loss		(212,652	)	$	(212,652	)
Balance June 30, 2009	$	165,483						67,307,366	$	67,307	$	3,067,959	$	(2,884,491	)	$	(150,000	)	$	(15,639	)	$	80,347

See Notes to Financial Statements

F-4

CHANG-ON INTERNATIONAL, INC. AND SUBSIDIARIES

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,						For the Period November 26, 2004 (inception) to June 30,
	2009			2008			2009
Operating Activities:
Net loss	$	(212,354	)	$	(551,463	)	$	(3,274,114	)
Adjustments to reconcile net loss to net cash used by operations
Depreciation (cost and expense)		17,276			16,670			158,070
Impairment loss on intangible assets		-			-			241,639
Impairment loss on fixed assets		-			-			345,962
Gain on disposal of fixed assets		-			-			(7,730	)
Stock compensation		167,500			536,667			2,248,000
Changes in operating assets and liabilities:
(Increase)/decrease in account receivable		-			-			-
(Increase)/decrease in prepaid and other receivables		-			668			(293	)
(Increase)/decrease in inventory		-			(57,826	)		(108,493	)
Increase/(decrease) in accounts payable		-			(14,366	)		695
Increase/(decrease) in accrued expenses		(65	)		1,058			25,146
Decrease in government subsidy		-			-			(50,038	)
Net cash used by operating activities		(27,643	)		(68,592	)		(421,156	)
Investing Activities
Purchase of fixed assets		-			(1,832	)		(710,118	)
Loan to shareholders		-			-			(24,659	)
Repay of loan from shareholders		-			-			24,659
Net cash (used) by investing activities		-			(1,832	)		(710,118	)
Financing Activities
Distribution to shareholders		-			-			(24,994	)
Capital contribution		-			-			274,103
Proceeds from government subsidy		-			-			99,130
Proceeds from shareholder loans		80,262			126,080			820,964
Repay of loan to shareholders		-			-			(12,299	)
Net cash provided by financing activities		80,262			126,080			1,156,904
Effect of exchange rate changes on cash		247			(38,994	)		31,034
Increase(decrease)  in cash		52,866			16,662			56,664
Cash at beginning of period		3,798			7,380			-
Cash at end of period	$	56,664		$	24,042		$	56,664
Supplemental Cash Flow Information:
Interest received (paid) during the year	$	-		$	7		$	260
Non-cash financing activities:
Contribution of patent for equity	$	-		$	-		$	241,639
Contribution of fixed assets for equity	$	-		$	-		$	125,497
Stock issued in exchange for consulting services	$	-		$	-		$	2,400,000
Conversion of shareholder's loan to paid in capital	$	-		$	-		$	589,100

See Notes to Financial Statements

F-5

Note 1- ORGANIZATION AND BUSINESS BACKGROUND

Chang-On International, Inc., (the “Company”) was incorporated under the law of the State of Utah as Gold Standard, Inc. (“Gold Standard”) on November 28, 1972 and changed its name to Chang-On International, Inc. on April 18, 2007. The Company is principally engaged in the business of waste recycling and reutilization in the People’s Republic of China (“PRC”) through its majority-owned subsidiary, Chang-On International Limited (“Chang-On”).

Chang-On International Limited (“Chang-On”) was incorporated as a Hong Kong limited liability company on September 8, 2006. Chang-On was formed to facilitate a merger between a US company and a PRC business entity. On December 29, 2006, under the terms of the Agreement for the Share Exchange, the Company has agreed to acquire all the outstanding capital stock of Chang-On in return for the issuance of 60,000,000 shares of common stock.

Chang-On is a holding company that owns 61% of the registered capital of Harbin Hongbo Environment Protection Material, Inc. (“Hongbo”) a corporation formed under the laws of the PRC on November 26, 2004. Hongbo is engaged in the business of manufacturing construction materials from waste products. All Hongbo’s business is currently in the PRC.

The Company is considered to be a development stage company, as it has not generated substantial revenues from operations.

Note 2- GOING CONCERN

As of June 30, 2009, the Company had incurred accumulated losses of $2,884,491 from operations since inception and has limited operations. The Company is actively pursuing additional funding and a potential merger or acquisition candidate and strategic partners, which would enhance owners’ investment.

Note 3- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

These accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in U.S. dollars.

The consolidated financial statements have been prepared in accordance with US GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation SX. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. These consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2008 and notes thereto contained in the Report on Form 10-K of the Company as filed with the United States Securities and Exchange Commission (the “SEC”) on June 30, 2009. Interim results are not necessarily indicative of the results for the full year.

F-6

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all its majority-owned subsidiaries which require consolidation.  Inter-company transactions have been eliminated in consolidation. The functional currency of the Company’s operation is Reminbi (“RMB”)

Use of estimates

In preparing these financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the year reported. Actual results may differ from these estimates.

Revenue recognition

Revenues are recognized when finished products are shipped to unaffiliated customers, both title and the risks and rewards of ownership are transferred or services have been rendered and accepted, and collectibility is reasonably assured.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the average cost method. Costs include direct material, direct labor and applicable manufacturing overhead.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method. Additions and improvement that substantially extend the useful life of the properties, plan and equipment are capitalized. Property, plant and equipment are depreciated to their estimated residual values over their estimated useful lives, and reviewed for impairment in accordance with Statement of Financial Accounting Standard No.144 “Accounting for the Impairment or Disposal of Long-Lived Assets.”

Intangible Assets

The Company periodically analyzes its intangible assets for potential impairment, assessing the appropriateness of lives and recoverability of unamortized balances through measurement of undiscounted operating cash flows on a basis consistent with US GAAP.

Related Parties

The caption "Due from shareholders" represents loans receivable that are unsecured, non-interest bearing and have no fixed terms of repayment, and therefore are not considered current assets.

The caption "Due to shareholders" represents loans payable that are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. Refer to Note 7.

Income Tax

Income tax expense is based on reported income before income taxes. Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. In accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," these deferred taxes are measured by applying currently enacted tax laws.

The Company did not provide any current or deferred income tax provision or benefit for any period presented to date because there is no income from operations, with only minor timing differences with regard to the depreciation of fixed assets. Management has determined that any deferred tax asset or liability is inconsequential, and not material to the financial statements.

The Company adopted FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes,” which prescribes a comprehensive model for how a company should reorganize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return (including a decision whether to file or not to file a return in s particular jurisdiction).

F-7

Fair Value of Financial Instruments

The carrying value of financial instruments, including cash and cash equivalents, receivables, accounts payable and accrued expenses, approximates their fair value at June 30, 2009, due to the relatively short-term nature of these instruments.  Unless otherwise noted, it is management opinion that the Company is not exposed to significant interest, currency or credit risk arising from those financial instruments.

Foreign currencies translation

The functional currency of the Company is the Reminbi (“RMB”). The accompanying financial statements have been expressed in United States dollars, the reporting currency of the Company.  The balance sheet is translated into United States dollars based on the rates of exchange ruling at the balance sheet date.  The statement of operations is translated using a weighted average rate for the period.  Translation adjustments are reflected as accumulated comprehensive income in shareholders’ equity.

New Accounting Pronouncements

In December 2008, the FASB issued FSP 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (FSP 132(R)-1).  FSP 132(R)-1 requires additional disclosures for plan assets of defined benefit pension or other postretirement plans.  The required disclosures include a description of our investment policies and strategies, the fair value of each major category of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets, the effect of fair value measurements using significant unobservable inputs on changes in plan assets, and the significant concentrations of risk within plan assets.  FSP 132 (R)-1 does not change the accounting treatment for postretirement benefits plans.  FSP 132(R)-1 is effective for us for fiscal year 2009.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairment” (FSP 115-2/124-2).  FSP 115-2/124-2 amends the requirements for the recognition and measurement of other-than-temporary impairments for debt securities by modifying the pre-existing “intent and ability” indicator.  Under FSP 115-2/124-2, another-than-temporary impairment is triggered when there is intent to sell the security, it is more likely than not that the security will be required to be sold before recovery, or the security is not expected to recover the entire amortized cost basis of the security.  Additionally, FSP 115-2/124-2 changes the presentation of another-than-temporary impairment in the income statement for those impairments.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”.  This standard incorporates into authoritative accounting literature certain guidance that already existed within generally accepted auditing standards, with the requirements concerning recognition and disclosure of subsequent events remaining essentially unchanged.  This guidance addresses events which occur after the balance sheet date but before the issuance of financial statements.  Under SFAS No.165, as under previous practice, an entity must record the effects of subsequent events that provide evidence about conditions that existed at the balance sheet date and must disclose but not record the effects of subsequent events which provide evidence about conditions that did not exist at the balance sheet date.  This standard added an additional required disclosure relative to the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued.  For the Company, this standard was effective beginning April 1, 2009.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162” and approved the FASB Accounting Standards Codification TM (Codification) as the single source of authoritative nongovernmental US GAAP.  The Codification does not change current US GAAP, but is intended to simplify user access to all authoritative US GAAP by providing all the authoritative literature related to a particular topic in one place.  All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative.  For the Company, the Codification is effective July 1, 2009 and will require future references to authoritative US GAAP to coincide with the appropriate section of the Codification.  Accordingly, this standard will not have an impact on the Company’s consolidated results of operations or financial condition.

F-8

Note 4- INVENTORIES

Inventories consist of the following:

	June 30, 2009		December 31, 2008
Raw Material	$	38,284	$	38,330
Finished Goods		70,078		70,163
	$	108,362	$	108,493

Note 5- PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment consist of the following:

	June 30, 2009			December 31, 2008
Machinery and Equipment	$	335,460		$	335,863
Office Equipment		7,667			7,676
Vehicle		6,881			6,889
Construction in Progress		136,720			136,884
		486,728			487,312
Less: Accumulated Depreciation		(108,429	)		(91,256	)
	$	378,299		$	396,056

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. The annual percentages applied are:

Machinery and Equipment	10%
Office Equipment	20%
Vehicle	10%

The depreciation was $17,276 and $16,670, including cost and operating expense, for the six months ended June 30, 2009 and 2008, respectively.

Note 6- GOVERNMENT SUBSIDY

During 2005, the Company received approximately $100,000 in a government subsidy from the Finance Department of Heilongjiang Province to be used for research and development activities. This subsidy reduces the cost of the Company’s research and development activities. Any unused portion of the subsidy has to be returned to the province. At June 30, 2009, the Company had not used $56,088 of the subsidy.

F-9

Note 7- DUE TO SHAREHOLDERS

Due to Shareholders consists of the following:

	June 30, 2009		December 31, 2008
Li, Yukun	$	22,296	$	22,323
Li, Guomin		271,986		191,697
Zhou, Qingwei		1,923		1,923
	$	296,205	$	215,943

Li Guomin had been a shareholder of Hongbo since November 2006. Zhou, Qingwei has been a shareholder of Chang-On since September 2006.  Under the Agreement for the Share Exchange on December 29, 2006, Li, Guomin and Zhou, Qingwei acquired 17,400,000 and 36,600,000 shares of Gold Standard, Inc. respectively.

Note 8- COMMON STOCK

Under the Agreement for the Share Exchange, Gold Standard, Inc. issued to the shareholders of Chang-On 60,000,000 shares of common stock. With 1,307, 366 shares issued and outstanding before the shares exchange. On March 23, 2007, the Company filed S-8 to register 6,000,000 common shares for stock based compensation (Note 9). There are a total of 67,307,366 shares issued and outstanding for the Company as of June 30, 2009.

Note 9-STOCK BASED COMPENSATION

On January 19, 2007, the Company entered into an agreement with Li, Yaru for legal services in PRC for a term of two years, pursuant to which the Company issued 900,000 shares of common stock in April 2007. The fair market value amounted to $360,000, which is being amortized over the term of the agreement.

On January 31, 2007, the Company entered into an agreement with Canyon Red Group Limited,  a British Virgin Island corporation, for advisory services on the marketing strategy and implementation of corporate identity for a term of twelve months, pursuant to which the Company issued 700,000 shares of common stock in April 2007. The fair market value amounted to $280,000, which is being amortized over the term of the agreement.

On March 30, 2007, the Company entered into an agreement with Mu, Shiwei for internal audit services for a term of three years, pursuant to which the Company issued 1,500,000 shares of common stock in April 2007. The fair market value amounted to $600,000, which is being amortized over the term of the agreement.

On March 30, 2007, the Company entered into an agreement with I &V Limited,  a British Virgin Island corporation, for advisory services on the sales and distribution channels of certain environmental friendly construction materials in Northern China for a term of eighteen months, pursuant to which the Company issued 1,000,000 shares of common stock in April 2007. The fair market value amounted to $400,000, which is being amortized over the term of the agreement.

On March 30, 2007, the Company entered into an agreement with Billion Profit International Holdings Limited,  a British Virgin Island corporation,  for advisory services on the sales and distribution channels of certain environmental friendly construction materials in Hainan Province of China for a term of twelve months, pursuant to which the Company issued 700,000 shares of common stock in April 2007. The fair market value amounted to $280,000, which is being amortized over the term of the agreement.

On March 30, 2007, the Company entered into an agreement with Prospect Bright Holdings Limited, a British Virgin Island corporation for advisory services on the sales and distribution channels of certain environmental friendly construction materials in Northeast China for a term of twenty-four months, pursuant to which the Company issued 1,200,000 shares of common stock in April 2007. The fair market value amounted to $480,000, which is being amortized over the term of the agreement.

For the six months ended June 30, 2009, $167,500 of the above stock compensation was charged to operating expenses and $150,000 was recorded as deferred compensation.

F-10

Note 10- GEOGRAPHIC INFORMATION

All of the Company's sales and all of the Company's long-lived assets are located in the PRC.

Note 11- OPERATING RISK

Concentrations of credit risk

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents with high-quality institutions to mitigate the fact there is no deposit insurance.

Country risk

The Company has significant investments in the PRC. The operating results of the Company may be adversely affected by changes in the political and social conditions in the PRC and by changes in Chinese government policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. There can be no assurance; however, those changes in political and other conditions will not result in any adverse impact.

NOTE 12- EMPLOYEE BENEFIT PLAN

Full time employees of the Company participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to accrue for these benefits based on certain percentages of the employees' salaries. The total provisions for such employee benefits were $0 for the nine months ended June 30, 2009 and 2008. 

NOTE 13- RESTRICTED RETAINED EARNINGS

Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC ("PRC GAAP") at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations should be made to the “reserve fund”. For foreign invested enterprises, the annual appropriation for the “reserve fund” cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under PRC GAAP at each year-end). The Company did not make any appropriations to the reserve funds mentioned above due to lack of profit after tax since commencement of operations.

F-11

ITEM 2.  MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This report on Form 10-Q contains certain forward-looking statements.  All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.

Business Overview

We are principally engaged in the business of waste recycling and reutilization in the People’s Republic of China (“China”) through our majority owned subsidiary, Harbin Hongbo Environment Protection Material, Inc. (“Hongbo”), a corporation organized under the laws of China.

We own our interest in Hongbo through Chang-On International Limited, a company incorporated under the laws of Hong Kong as a limited liability company on September 8, 2006 (“Chang-On HK”).  Chang-On HK is a holding company with one asset: 61% of the equity in Harbin Hongbo Environment Protection Material, Inc. (“Hongbo”), a corporation organized under the laws of China.  The remaining 39% of the registered capital of Hongbo is owned by Guomin Li (29%) and Su Yu (10%), who are members of our Board of Directors.  We manufacture construction material out of waste plastic and waste coal ash.  From inception on November 26, 2004 to June 30, 2009 we have generated revenues of $91,786 from the sale of our products.

Liquidity and Capital Resources

As of June 30, 2009, we had cash of $56,664 and a working capital deficiency of $212,816.  As at June 30, 2009 our accumulated deficit was $2,884,491.  Our net loss for the period from our inception on November 26, 2004 until June 30, 2009 was $3,274,114.  Our loss has been primarily funded by proceeds from shareholder loans and stock-based compensation.  During the six months ended June 30, 2009, we received $80,262 as proceeds from shareholder loans compared to proceeds of $126,080 which we received during the same period in 2008.  During the six months ended June 30, 2009 our cash position increased by $52,866.

We used net cash of $27,643 in operating activities for the six months ended June 30, 2009 compared to net cash of $68,592 in operating activities for the same period in 2008.  We have used $421,156 on operating activities from our inception on November 26, 2004 until June 30, 2009.  The difference in cash used in operating activities is attributed mostly to a decrease in operating activities due to a decrease in seasonal demand for our products.

We did not use any cash in investing activities during the period ended June 30, 2009 compared to $1,832 for the purchase of fixed assets during the same period in 2008, and have used $710,118 in investing activities, for the purchase of fixed assets for our manufacturing plant from our inception on November 26, 2004 until June 30, 2009.

We received $80,262 from financing activities for the six months ended June 30, 2009 compared to net cash of $126,080 during the same period in 2008.  All cash received during the periods in 2009 and 2008 was provided by proceeds from shareholder loans.  We did not raise any funds through the sale of our securities during the six months ended June 30, 2009 or during the same period in 2008.

4

Exchange rates resulted in a gain of $247 during the six months ended June 30, 2009 compared to a loss of $38,994 during the same period in 2008.  Since our inception on November 26, 2004 until June 30, 2009, we have gained $31,034 due to the effect of exchange rates on our cash position.

During the six months ended June 30, 2009 our monthly cash requirement was approximately $4,607, compared to our cash requirements of approximately $11,432 for the same period in 2008. Given our cash usage during the six months

We expect to require a total of approximately $930,000 set out as follows to fully carry out our business plan over the next twelve months beginning September 2009.  Our expenditures for the next twelve months include:

Description	Estimated Expenses ($)
Research and development costs for further products and manufacturing processes	250,000
Consulting fees (including legal and auditing fees)	100,000
Rent expenses	20,000
Marketing expenses	400,000
Investor relations costs	80,000
Other administrative expenses	80,000
Total	930,000

We anticipate that our future revenues will be nominal and we do not anticipate enough positive internal operating cash flow until we can generate substantial revenues, which may take the next few years to fully realize. There is no assurance we will achieve profitable operations.

We have historically financed our operations primarily by cash flows generated from the sale of our equity securities and through cash infusions from officers and affiliates in exchange for debt and/or common stock. No officer or affiliate has made any commitment or is obligated to continue to provide cash through loans or purchases of equity.

We intend to meet the balance of our cash requirements for the next 12 months through external sources: a combination of debt financing and equity financing through private placements. Currently we are active in contacting broker/dealers in North America and elsewhere regarding possible financing arrangements. However, we currently do not have any arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unsuccessful in raising enough money through future capital raising efforts, we may review other financing possibilities such as bank loans. If we are unsuccessful in raising enough money, we may not fully carry out our business plan.

Results of Operations for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 and from inception to June 30, 2009.

Revenues

We generated no revenues for the three months ended June 30, 2009 compared to $32,742 in the same period in 2008.  Since inception on November 26, 2004 to June 30, 2009 we generated total revenues of $91,786.  As we are a development stage company, our revenue streams are not established and thus our product sales are unstable.

Net Loss

We incurred a net loss of $65,601 for the three months ended June 30, 2009, compared to a net loss of $226,991 for the same period in 2008. The decrease of $161,390 in net loss was a result of $171,667 less stock-based compensation issued during the three months ended June 30, 2009.  From inception on November 26, 2004 to June 30, 2009, we have incurred net loss of $3,274,114.

We did not register a net loss per share for the three months ended June 30, 2009 or for the same period in 2008.

5

Expenses

Our total operating expenses decreased from $243,402 for the three months ended June 30, 2008 to $65,601 for the three months ended June 30, 2009.  The reason for the decrease was less issuance of stock based compensation. Since our inception on November 26, 2004 to June 30, 2009, we have incurred total operating expenses of $3,313,999.

Our expenses, net of stock-based compensation, decreased $6,134 from $21,735 to $15,601 for the three months ended June 30, 2009 compared to the same period in 2008.  This decrease was mainly due to a decrease in payments for salaries and utilities compared to the same period in 2008.

Our stock compensation decreased $171,667 to $50,000 for the three months ended June 30, 2009 from $221,667 for the same period in 2008.  From inception on November 26, 2004 to June 30, 2009, we have incurred stock based compensation expenses of $2,250,000.

We did not incur research and development expenses for the three months ended June 30, 2009 or for the same period in 2008.   Since our inception on November 26, 2004 until June 30, 2009 we have spent $22,578 on research and development.  Going forward, we anticipate that we will spend approximately $250,000 on research and development during the next 12 months.

Results of Operations for the six months ended June 30, 2009 compared to the six months ended June 30, 2008 and from inception to June 30, 2009.

Revenues

We generated no revenues for the six months ended June 30, 2009 compared to $32,742 in the same period in 2008.As we are a development stage company, our revenue streams are not established and thus our product sales are unstable.

Net Loss

We incurred a net loss of $212,354 for the six months ended June 30, 2009, compared to a net loss of $551,463 for the same period in 2008. The decrease of $339,109 in net loss was a result of less stock-based compensation during the six months ended June 30, 2009.

Our net loss per share was $0.00 for the six months ended June 30, 2009 and $0.01 for the same period in 2008.

Expenses

Our total operating expenses decreased from $574,855 for the six months ended June 30, 2008 to $212,354 for the six months ended June 30, 2009.  The reason for the decrease was less issuance of stock based compensation.

Our expenses, net of stock-based compensation, increased $6,666 from $38,188 to $44,854 for the six months ended June 30, 2009 compared to the same period in 2008.  This increase was mainly due to an increase in utilities and depreciation expenses compared to the same period in 2008.

Our stock compensation decreased $369,167 to $167,500 for the six months ended June 30, 2009 from $536,667 for the same period in 2008.  We did not incur research and development expenses for the six months ended June 30, 2009 or for the same period in 2008.

6

Inflation

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Off-Balance Sheet Arrangements

As of June 30, 2009, we had no off-balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

Use of estimates

In preparing these financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the year reported. Actual results may differ from these estimates.

Revenue recognition

Revenues are recognized when finished products are shipped to unaffiliated customers, both title and the risks and rewards of ownership are transferred or services have been rendered and accepted, and collectibility is reasonably assured.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method. Additions and improvement that substantially extend the useful life of the properties, plan and equipment are capitalized. Property, plant and equipment are depreciated to their estimated residual values over their estimated useful lives, and reviewed for impairment in accordance with Statement of Financial Accounting Standard No.144 “Accounting for the Impairment or Disposal of Long-Lived Assets.”

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls

We  carried out an evaluation, under the supervision and with the participation   of  our  management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) for the period covered in this report.  Based upon that evaluation and the unresolved material weaknesses in our internal control over financial reporting identified in our Annual Report on Form 10-K for the year ended December 31, 2008, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange  Act") is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate  to allow timely decisions regarding required disclosure.

Changes in internal controls

During the period covered by this report, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

7

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party against us.  None of our directors, officers or affiliates are (i) a party adverse to us in any legal proceedings, or (ii) have an adverse interest to us in any legal proceedings.  Management is not aware of any other legal proceedings that have been threatened against us.

ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

Exhibit Number	Exhibit Description
31.1	Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

8

SIGNATURES

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

	Chang-On International, Inc.
Date: August 14, 2009	By: /s/ Guomin Li
	Guomin Li
	President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Director

9