China Green Material (CAGM) 10-Q 2008 Q3 Quarterly report

United States
Securities and Exchange Commission
Washington, D. C. 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 September 30, 2008

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

For the transition period from _____ to _____

Commission File No. 0-26799

China Green Material Technologies, Inc.

(Name of Small Business Issuer in its Charter)

Nevada	88-0381646
(State of Other Jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

27F(Changqing Building), 172 Zhongshan Road,
Harbin City, China 150040     11355

(Address of principal executive offices) (Zip Code)

00-86-451-82695957

(Registrant's telephone number including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  [X]   No  [_]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-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 [_]
(Do not check if a smaller
reporting company) Smaller reporting company [X]

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

The number of shares of common stock, par value $.001 per share, outstanding as of November 12, 2008 was 18,710,987.

CHINA GREEN MATERIAL TECHNOLOGIES, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

INDEX
TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1: Financial Statements	3
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3: Quantitative and Qualitative Disclosures about Market Risk	21
Item 4T: Controls and Procedures	21
PART II - OTHER INFORMATION
Item 1: Legal Proceedings	22
Item 1A: Risk Factors	22
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3: Defaults Upon Senior Securities	25
Item 4: Submission of Matters to a Vote of Security Holders	25
Item 5: Other Information	25
Item 6: Exhibits	25

Item 1. Financial Statements

CHINA GREEN MATERIAL TECHNOLOGIES, INC. (F/K/A UBRANDIT.COM) AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

	September 30, 2008		December 31, 2007
	(Unaudited)		(Audited)
Assets
Current Assets:
Cash and equivalents - non restricted	$	3,743,601	$	101,336
Cash - restricted		1,138		—
Accounts receivable, net of allowance for doubtful
accounts of $21,643 and $261,887, respectively		4,306,964		4,975,857
Inventories		1,056,402		143,150
Other receivable		862		5,318
Prepaid expenses		41,418		57,954
Other current assets		368,047		1,139,199
Total Current Assets		9,518,432		6,422,814
Property and Equipment, Net		12,121,553		9,856,707
Intangible Assets, Net		5,646,012		5,349,252
Investment - At Cost		313,622		272,862
Total Assets		27,599,619		21,901,635
Liabilities and Stockholders' Equity
Current Liabilities:
Account payable and accrued expenses		93,543		148,161
Customers deposits		25,723		—
Payroll payable		54,134		35,810
Due to stockholders/officers		1,293,616		1,206,871
Tax payable		210,405		117,093
Other current liabilities		49,886		14,312
Total Current Liabilities		1,727,307		1,522,247
Total Liabilities		1,727,307		1,522,247
Stockholders' Equity
Series A convertible preferred stock, $0.001 par value, 20,000,000 shares
authorized, zero and 272,250 shares issued and outstanding, respectively		—		272
Common stock, $0.001 par value, 100,000,000 shares authorized,
18,710,987 and 46,592,790 shares issued and outstanding, respectively		18,711		46,593
Additional paid-in capital		17,895,324		17,867,170
Reserve funds		647,323		67,701
Retained earnings		3,525,182		253,464
Accumulated other comprehensive income		3,785,772		2,144,188
Total Shareholders' Equity		25,872,312		20,379,388
Total Liabilities and Stockholders' Equity	$	27,599,619	$	21,901,635

See notes to consolidated financial statements.

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CHINA GREEN MATERIAL TECHNOLOGIES, INC. (F/K/A UBRANDIT.COM) AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	For Three Months Ended September 30,						For Nine Months Ended September 30,
	2008			2007			2008			2007
	Unaudited			Unaudited			Unaudited			Unaudited
Revenues	$	3,545,984		$	2,802,585		$	9,015,328		$	6,716,131
Cost of Goods Sold		1,814,724			1,833,083			4,573,734			4,253,714
Gross Profit		1,731,260			969,502			4,441,594			2,462,417
Operating Expenses
Selling expenses		73,702			20,030			200,436			138,015
Bad debt (recoveries) expenses		(179,355	)		12,123			(252,486	)		3,250
General and administrative expenses		231,434			211,122			659,585			587,764
Total Operating Expenses		125,781			243,275			607,535			729,029
Income From Operations		1,605,479			726,227			3,834,059			1,733,388
Other Income (Expense)
Related parties rental income		4,874			5,089			14,316			14,841
Interest income		2,379			239			3,133			547
Other income (expense), net		143			264			(168	)		272
Loss on disposition of fix assets		—			(18,282	)		—			(18,282	)
Total Other Income (Expense)		7,396			(12,690	)		17,281			(2,622	)
Income Before Income Taxes		1,612,875			713,537			3,851,340			1,730,766
Provision for Income Taxes		—			—			—			—
Income Before Minority Interest		1,612,875			713,537			3,851,340			1,730,766
Minority Interest		—			(11,148	)		—			(16,492	)
Net Income	$	1,612,875		$	724,685		$	3,851,340		$	1,747,258
Foreign Currency Translation Adjustment		269,386			314,348			1,641,584			754,000
Comprehensive Income	$	1,882,261		$	1,039,033		$	5,492,924		$	2,501,258
Net Income Per Common Share
-Basic	$	0.09		$	1.29		$	0.26		$	3.11
-Diluted	$	0.09		$	0.04		$	0.26		$	0.09
Weight Common Shares Outstanding*
-Basic		18,710,987			560,987			14,677,654			560,987
-Diluted		18,710,987			18,710,987			14,677,654			18,710,987

* As restated to reflect recapitalization and the subsequent reverse stock split.

See notes to consolidated financial statements.

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CHINA GREEN MATERIAL TECHNOLOGIES, INC. (F/K/A UBRANDIT.COM) AND SUBSIDIARY
CONSOLIDATED CASH FLOW STATEMENTS

	2008			2007
	Unaudited			Unaudited
Cash flows From Operation Activities:
Net Income	$	3,851,340		$	1,747,258
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation and amortization		930,953			716,771
Loss on disposal of fixed assets		—			18,282
Bad debt (recoveries) expenses		(252,486	)		3,250
Minority interest's share of net income		—			(17,372	)
Changes in operating assets and liabilities
Accounts receivable		1,208,625			(638,146	)
Inventories		(840,162	)		(36,694	)
Other receivable		4,516			562,939
Prepaid expenses		19,401			7,160
Other current assets		796,617			115,282
Accounts payable and accrued expenses		(61,090	)		(2,191,726	)
Customers deposits		25,723			—
Payroll payable		14,578			6,890
Welfare payable		—			(14,779	)
Tax payable		78,755			413,334
Other current liabilities		32,123			6,821
Net Cash Provided by Operating Activities		5,808,893			699,270
Cash Flows From Investing Activities
Purchase of property and equipment		(2,388,922	)		(128,139	)
Sold of property		—			82,121
Net Cash Used in Investing Activities		(2,388,922	)		(46,018	)
Cash Flows From Financing Activities
Payment to officers/shareholders loans		(20,505	)		(634,755	)
Proceeds from officers/shareholders loans		17,356			597,504
Net Cash Used in Financing Activities		(3,149	)		(37,251	)
Net Increase in Cash and Cash Equivalents		3,416,822			616,001
Effect of Exchange Rate Changes on Cash and Equivalent		226,581			(99,127	)
Cash and Equivalents at Beginning of Period		101,336			274,589
Cash and Equivalents at End of Period	$	3,744,739		$	791,463

See notes to consolidated financial statements.

5

CHINA GREEN MATERIAL TECHNOLOGIES, INC. (F/K/A UBRANDIT.COM) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   Organization and Principal Activities

On January 14, 2008 China Green Material Technologies, Inc. (“the Company”), officially changed its name from Ubrandit.com and began to quote under the new symbol of CAGM.OB. Ubrandit.com used to be quoted on the Over-the-Counter Bulletin Board of the National Association of Securities Dealers, Inc., under the symbol UBDT.OB.

Concurrent with the name and symbol change, the 1 for 150 reverse split had also taken effectiveness on January 14, 2008. For the shareholders who had shares less than 100 after the reverse split obtained 100 shares.

On February 29, 2008, the Company announced that the shareholders of its Series A Convertible Preferred Stock had chosen to convert their preferred shares into Company’s common stock (“Common Stock”). As a result, a total of 18,150,000 shares of Common Stock had been issued in connection with the conversion, and all Series A Convertible Preferred Stocks had been cancelled.

On February 9, 2007, the Company acquired all of the outstanding capital stock of Advanced Green Materials, Inc. (“AGM”) by merging AGM into a wholly-owned subsidiary of the Company. AGM is a holding Company that owns 100% of the registered capital of ChangFangYuan Hi-Tech Environment-Friendly Industry Co., Ltd. (“CHFY “), a corporation organized under the laws of The People’s Republic of China. CHFY is engaged in the business of manufacturing and marketing of starch-based biodegradable tableware and packing materials. All of CHFY’s business is currently in China.

AGM was organized under the laws of Nevada on June 8, 2006. It never initiated any business activity. Most of the Company’s activities were conducted through its 100% owned equity ownership in CHFY established in Heilongjiang Province of People’s Republic of China. On August 18, 2006, AGM acquired all the outstanding 128,274,900 shares capital stock of CHFY.

CHFY was incorporated in Heilongjiang Province of PRC on May 12, 1999. It was formally known as Harbin TianHao Technology Co., Ltd., later, the Company changed its name to Harbin ChangFangYuan Hi-Tech Industrial Co., Ltd. on September 28, 2004, and then changed its name to Harbin ChangFangYuan Hi-Tech Environment-Friendly Industry Co., Ltd. on September 1, 2006.

From June 1, 2006 (date of inception of Longjun) to March 19, 2007, CHFY owns 95.23% equity ownership of Harbin Longjun Trade Co., Ltd. (“Longjun”), a corporation organized in Heilongjiang Province of People Republic of China (“PRC”) on June 1, 2006. On March 20, 2007, the minority shareholders of Longjun invested additional capital of RMB 800,000 into Longjun, On May 22,2007, Longjun changed its name to Harbin Longjun Industry Development Co.,Ltd, and its individual shareholders invested additional capital of RMB15,000,000 into Longjun, including cash of RMB9,200,000 and intangible assets of RMB5,800,000. Simultaneously, CHFY transferred its equity ownership of Longjun in the value of RMB 800,000 to Longjun’s original minority shareholders. Accordingly, CHFY became 16% equity owner of Longjun, and lost its control of Longjun. Longjun engaged in the wholesale distribution and R&D of bio-degradable products and environmental project materials. All businesses of Longjun are currently in China and Longjun hasn’t generated any products revenue as of May 22, 2007.

2.   Basis of Presentation – interim financial statements

The unaudited consolidated financial statements of the Company and its subsidiaries (“the Company”) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments), which is, in the opinion of the management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The consolidated balance sheet information as of December 31, 2007 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-KSB. These interim financial statements should be read in conjunction with that report.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All material inter-Company balances and transactions have been eliminated.

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3.   Summary of Significant Accounting Policies

a.   Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenues and expenses during the reported period. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates.

b.   Foreign Currency Translation

The reporting currency of the Company is the U.S. dollar. The functional currencies of its subsidiaries are local currencies, primarily the Chinese currency Yuan (“P.R.C” Renminbi). The financial statements are translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average rates of exchange for the conversion of revenues and expenses. Translation adjustments resulting from the process of translating the local currency of the financial statements into U.S. dollars are included in other comprehensive income or loss.

c.   Revenue Recognition

Revenue includes sales of products and services. Product revenue represents the invoiced value of goods sold recognized upon the delivery of goods to customers, net of allowance for estimated returns, when both title and risk of loss transfer to the customer, provided that no significant obligations remain. Deferred revenue represents the undelivered portion of invoiced value of goods sold to customers. Service income is recognized when services are provided. Revenue from service contracts, for which the Company is obligated to perform, is recorded as deferred revenue and subsequently recognized over the term of the contract or when the service is completed. Sales transactions not meeting all the conditions of the full accrual method are accounted for using the deposit method of accounting. Under the deposit method, all costs are capitalized as incurred, and payments received from the buyer are recorded as customer deposits. Revenue represents net of value added taxes (“VAT”) for the sales revenue from PRC subsidiaries. There were no sales incurred for the period from May 12, 1999 (date of inception) to April 30, 2006.

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d.   Recent Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No.162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 indicates the entity (not its auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. Accordingly, the GAAP hierarchy should reside in the accounting literature established by the FASB and is issuing SFAS 162 to achieve that result. SFAS 162 also identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy).SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411,The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company is in the process of evaluating the new disclosure requirements under SFAS 162.

In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No.161,“Disclosures about Derivative Instruments and Hedging Activities — An Amendment of SFAS No. 133” (“SFAS 161”). SFAS 161 seeks to improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. To achieve this increased transparency, SFAS 161 requires (1) the disclosure of the fair value of derivative instruments and gains and losses in a tabular format;(2) the disclosure of derivative features that are credit risk-related; and (3)cross-referencing within the footnotes. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends)., with early application encouraged. The Company is in the process of evaluating the new disclosure requirements under SFAS 161.

In December 2007, the Financial Accounting Standard Board (“FASB”) issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements-an amendment of ARB No. 51” which clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement also changes the way the consolidated income statement is presented. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. In addition, it requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The Company is currently in the process of evaluating the effect, if any, the adoption of SFAS No. 160 will have on its consolidated results of operations, financial position, and financial disclosure.

In December 2007, Statement of Financial Accounting Standards No. 141(R), Business Combinations, was issued. SFAS No. 141R replaces SFAS No. 141, Business Combinations. SFAS 141R retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquire at the acquisition date, measured at their fair values as of that date, with limited exceptions. This replaces SFAS 141‘s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS 141R also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquire, at the full amounts of their fair values (or other amounts determined in accordance with SFAS 141R). SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). An entity may not apply it before that date. The Company is currently evaluating the impact that adopting SFAS 141R will have on its financial statements.

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4.    Cash — restricted

Commencing from 2008, in accordance with the relevant Harbin local tax regulations, the Company is subjected to the labor union fees at 2% of total payroll. The General Union of the City Government will return 40% back to the Company, and the returned amount should be deposited into a special bank account that is restricted to be used only for employees welfare purpose by the labor union department of the Company. As of September 30, 2008, cash — restricted were $1,138.

5.    Inventories

Inventories on September 30, 2008 and December 31, 2007 consisted of the following:

	September 30, 2008		December 31, 2007
	Unaudited		Audited
Raw materials	$	955,052	$	96,689
Work in process		7,789		8,266
Finished goods		93,561		25,112
Packaging and other		—		13,083
Total	$	1,056,402	$	143,150

6.    Other Receivable

As of September 30, 2008 and December 31, 2007, other receivable consisted of the following:

	September 30, 2008		December 31, 2007
	Unaudited		Audited
Advance to unrelated parties	$	862	$	5,318
Total	$	862	$	5,318

7.    Other Current Assets

As of September 30, 2008 and December 31, 2007, other current assets consist of following:

	September 30, 2008		December 31, 2007
	Unaudited		Audited
Rent receivable	$	220,916	$	71,292
Employee travel and operation fee advance		125,768		1,050,670
Security deposit		15,867		13,946
Others		5,496		3,291
Total	$	368,047	$	1,139,199

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8.    Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation. Depreciation is determined using the straight-line method over the estimated useful lives listed below:

	Estimated Life
Building	20 years
Equipment and machinery	5 to 10 years
Vehicle	5 years
Office equipment	5 years
Leasehold improvements	lower of term of lease or 5 years

As of September 30, 2008 and December 31, 2007, property and equipment, at cost less accumulated depreciation, consisted of the following:

	September 30, 2008		December 31, 2007
	Unaudited		Audited
Building	$	5,608,442	$	5,220,404
Equipment and machinery		8,748,817		5,934,307
Vehicle		59,699		55,569
Office equipment		113,339		92,951
Leasehold improvement		174,532		160,561
Subtotal		14,704,829		11,463,792
Less: Accumulated depreciation		2,583,276		1,607,085
Total	$	12,121,553	$	9,856,707

For the nine months ended September 30, 2008 and 2007, depreciation expenses amounted to $832,902 and $627,401, respectively.

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9.    Intangible Assets, Net

Intangible assets is recorded at its cash equivalent cost in accordance with the cost principle. Cost is defined as the sum of all expenditures made to acquire the rights and privileges. Intangible assets have a limited life because the rights or privileges that give them value terminate or simply disappear. Therefore, the acquisition cost of an intangible asset must be written off over its estimated economic life.

The Company acquired the land use right and patent right at September 9, 2005. All intangible assets were contributed by unrelated parties in exchange of its common stocks. The Company kept inactive on land use right and patent right until January 1, 2006 and May 19, 2006, respectively. Accordingly, the Company starts to amortize these rights from date it used them. The patent right is no longer used since September 2007. The owner did not provide the specific using method of the patent and the Company later developed new technology.

The intangible assets at cost less amortization consist of the following as of September 30, 2008 and December 31, 2007:

	September 30, 2008		December 31, 2007
	Unaudited		Audited
Land use right	$	5,530,680	$	5,148,022
Patent		477,179		444,164
Subtotal		6,007,859		5,592,186
Less: Accumulated amortization		361,847		242,934
Total	$	5,646,012	$	5,349,252

For the nine months ended September 30, 2008 and 2007 amortization expense amounted to $98,051 and $89,370, respectively.

The amortization expense for the next five years is as follows:

Quarter Ended September 30
2009	130,732
2010	130,732
2011	130,732
2012	130,732
2013	130,732

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10.    Investment – At Cost

On March 20, 2007, Longjun’s minority shareholders invested additional capital of RMB 0.8 million into Longjun. On May 22, 2007, Longjun’s individual shareholders invested additional capital of RMB15 million into Longjun. Simultaneously, CHFY transferred its equity ownership of Longjun in the value of RMB0.8 million to Longjun’s original minority shareholders. Accordingly, CHFY became 16% equity owner of Longjun, and lost its control of Longjun on May 22, 2007. CHFY began to record this investment at cost on May 22, 2007.

11.    Due to Shareholders/Officers

Commencing from year 2005, the major shareholders/officers began to advance necessary working capital to the Company to support its research, development, and operations. These amounts are unsecured, non-interest bearing and due on demand. As of September 30, 2008 and December 31, 2007, the net amounts due to the shareholders/officers were $1,293,616 and 1,206,871, respectively.

12.    Income and Other Taxes

a.   Corporation Income Taxes (“CIT”)

The Company will file federal consolidated income tax return with its US subsidiary and state annual tax individually. The Company’s PRC subsidiary will file income tax returns under the Income Tax Law of the People’s Republic of China concerning Foreign Investment Enterprises and Foreign Enterprises and local income tax laws.

In accordance with the relevant PRC tax laws and regulations, the Company’s PRC subsidiary, CHFY, is subject to CIT at a 33% and 30% tax rate before and after September 1, 2006. Since CHFY merged with AGM and became a foreign wholly-own Company on August 18, 2006, CHFY had been authorized to reduce its income tax rate by 3% to 30% from the regular 33% tax rate starting from the following month of acquisition date. Commencing from January 2008, PRC government had reduced the regular CIT tax rate from 33% to 25%

In accordance with the relevant tax laws and regulations of the PRC, CHFY is entitled to full exemption from CIT for the first two years and a 50% reduction in CIT for the next three years, commencing from the first profitable year after offsetting all tax losses carried forward from the previous five years. As 2007 was the Company’s first profitable year, CHFY was entitled to a full exemption from CIT for the year 2007 and 2008.

There were no tax effects of temporary differences that give rise to significant portions of deferred tax assets as of September 30, 2008 and 2007, and furthermore, there were no valuation allowance as of September 30, 2008 and 2007.

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b.   Value Added Tax (“VAT”)

The Company’s PRC subsidiary, CHFY, is subjected to VAT on merchandises sales in PRC. For the years ended December 31, 2006, a small scale tax rate of 6% was applicable. Commencing from March 1, 2007, general VAT tax rate of 17% was applicable. Since the CHFY is located in HeilongJiang District and belongs to Hi-Tech manufacturing Company, China National Tax Authority had authorized CHFY to offset the VAT tax for purchasing equipment and machinery with the regular VAT tax collected from sales products of CHFY. This authorization has begun in December 2007.

c.   Taxes Payable

As of September 30, 2008 and December 31, 2007, tax payable consists of the following:

	September 30, 2008			December 31, 2007
	Unaudited			Audited
Value-added taxes	$	210,535		$	117,047
Individual income tax withholdings		(130	)		46
Total	$	210,405		$	117,093

13.     Stockholders’ Equity

The Company was authorized to issue 100,000,000 shares of Common Stock, $0.001 par value per share, of which 18,710,987 and 46,592,790 shares are issued and outstanding as of September 30, 2008 and December 31, 2007, respectively.

Holders of the Common Stock are entitled to one vote for each share in the election of directors and in all other matters to be voted on by the stockholders. There is no cumulative voting in the election of directors. Holders of Common Stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors with respect to the Common Stock out of funds legally available therefore and, in the event of liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities. The holders of Common Stock have no preemptive or conversions rights and are not subject to further calls or assessments. There are no redemption or sinking fund provisions applicable to the Common Stock. The Common Stock currently outstanding is validly issued, fully paid and non-assessable.

On January 14, 2008, the 1 for 150 reverse split had also taken effectiveness, for the shareholders who had shares less than 100 after reverse split obtained 100 shares.

On February 29, 2008, the Company announced that the shareholders of its Series A Convertible Preferred Stock had chosen to convert their preferred shares into shares of the Company’s common stock (“Common Stock”). As a result, a total of 18,150,000 shares of Common Stock had been issued in connection with the conversion, and all Series A Convertible Preferred Stock had been cancelled.

14.    Reserve Funds

The Company’s subsidiary in PRC is required to maintain certain statutory reserves by appropriating from the profit after taxation in accordance with the relevant laws and regulations in the PRC and articles of association of the subsidiary before declaration or payment of dividends. The reserves form part of the equity of the Company.

The appropriation to the statutory surplus reserve and statutory common welfare fund reserve represent 10 percent and 5 percent of the profits after taxation, respectively. In accordance with the laws and regulations in the PRC, the appropriation to statutory reserve ceased when the balances of the reserve reach 50 percent of the registered capital of the Company.

13

The reserve funds consisted of the following as of September 30, 2008 and December 31, 2007.

	September 30, 2008		December 31, 2007
	Unaudited		Audited
Statutory surplus reserve	$	431,549	$	45,134
Statutory common welfare fund reserve		215,774		22,567
Total	$	647,323	$	67,701

15.    Lease Commitments

The Company leases certain sales representation offices, general and administrative office, employee living space, and factory space under operating leases.

The following is a schedule of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms as of September 30, 2008.

Quarter Ended September 30,
2009	$	61,789
2010		306
Total minimum payments required	$	62,095

The total rent expenses for the nine months ended September 30, 2008 and 2007 were $167,997 and $100,117, respectively.

16.    Related Parties Rental Income

The Company lease out certain unused building with land use right, and equipment and machinery to its related party under operating leases agreements, and the lease terms all had been extended to December 31, 2008. The rental revenue and cost information for nine months ended September 30, 2008 and 2007 consisted of the following:

	September 30, 2008		September 30, 2007
	Unaudited		Unaudited
Rental income	$	322,157	$	293,641
Less: Depreciation and amortization		307,841		278,800
Total Rental Income	$	14,316	$	14,841

14

17.    Basic and Diluted Income per Common Share

The Company account for net income per common share in accordance with SFAS 128, Earnings per Share (“EPS”). SFAS 128 requires the disclosure of the potential dilution effect of exercising or converting securities or other contracts involving the issuance of common stock. Basic net income (loss) per share is determined based on the weighted average number of common shares outstanding. Diluted net income (loss) per share is determined based on the assumption that all dilutive convertible shares were converted or exercised.

18.    Foreign Subsidiary Operations

Substantially all of the Company’s operations are carried out through its subsidiary located in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.

19.    Concentration of Business

The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information.

a.   Major Customers

The following summarizes sales to major customers (each 10% of more of sales):

Nine Months Ended September 30,	Sales to Major Customers	Number of Customers	Percentage of Total
2008	$7,749,604	5	85.96%
2007	$6,592,918	1	98.17%

b.   Major Suppliers

The following summarizes purchases from major suppliers (each 10% of more of purchases):

Nine Months Ended September 30,	Purchase from Major Suppliers	Number of Suppliers	Percentage of Total
2008	$4,611,688	2	99.45%
2007	$3,591,998	2	97.75%

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Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations

We are engaged in the development, manufacture, export and distribution of biodegradable consumer packaging materials in the People’s Republic of China (the “PRC”). The basic material we use is a starch-based compound that is non-toxic, microwaveable, fire retardant, odor-free, and durable under temperatures ranging from 40°C below zero up to 150°C above zero. In addition, our products have conformed to the world industrial 4R and 1D Standard (i.e. Reduced consumption, Recyclable, Refillable, Reusable and Degradable). We currently offer over 100 product specifications, which mainly include tableware and various other consumer packaging materials.

Up until October 2006, the Company was engaged entirely in the product development, the establishment of the manufacturing facilities and the marketing relationships. Thus we recorded no revenue during 2004, 2005, and the first four months of 2006. The losses that the Company incurred in the aforesaid periods were mainly attributable to the administrative expenses of carrying out the new business plan.

We realized our first revenue in May of 2006, during which the Company completed $4,120,716 in sales. However, that revenue was derived primarily from our primary independent distributor, Weihai Qiancheng Import & Export Co. Ltd. (“Weihai Qiancheng”). Our revenue continued to increase and customer base continued to be diversified as we entered into 2008. As of November 10, 2008, we have four branch sales offices in cities of Weihai, Dalian, Qingdao, and Jinan in Northeastern China and expect new customers to be developed in the regions to increase sales.

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008
COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2007

	For Three Months Ended September 30, 2008				For Three Months Ended September 30, 2007				2008 Vs 2007 Increase/ (decrease)
	Unaudited				Unaudited
Revenues	$	3,545,984			$	2,802,585			$	743,399		27%
Cost of Goods Sold		1,814,724		51%		1,833,083		65%		(18,359	)	-1%
Gross Profit		1,731,260		49%		969,502		35%		761,758		79%
Operating Expenses
Selling expenses		73,702				20,030				53,672		268%
Bad debt (recoveries) expenses		(179,355	)			12,123				(191,478	)	-1579%
General and administrative expenses		231,434				211,122				20,312		10%
Total Operating Expenses		125,781		4%		243,275		9%		(117,494	)	-48%
Income From Operations		1,605,479		45%		726,227		26%		879,252		121%
Other Income (Expense)
Related parties rental income		4,874				5,089				(215	)	-4%
Interest income		2,379				239				2,140		896%
Other income (expense), net		143				264				(121	)	-46%
Loss on disposition of fix assets		—				(18,282	)			18,282		-100%
Total Other Income (Expense)		7,396				(12,690	)			20,086		-158%
Income Before Income Taxes		1,612,875		45%		713,537		25%		899,338		126%
Provision for Income Taxes		—				—				—
Income Before Minority Interest		1,612,875		45%		713,537		25%		899,338		126%
Minority Interest		—				(11,148	)			11,148		-100%
Net Income	$	1,612,875		45%	$	724,685		26%	$	888,190		123%

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Revenue  Total revenues were approximately $3.5 million for the three months ended September 30, 2008 as compared to approximately $2.8 million for the three months ended September 30, 2007, an increase of approximately $0.7 million or 27 percent as we continued to expand our sales efforts and customer base. Revenues generated from Weihai Qiancheng were reduced to 3.16% of the total revenue for the three months ended September 30, 2008 as compared to that of 98.32% for the three months ended September 30, 2007.

Cost of Goods Sold   Cost of goods sold for the three months ended September 30, 2008 was approximately $1.8 million or 51 percent of revenues, as compared to approximately $1.8 million or 65 percent of revenues for the three months ended September 30, 2007. Gross margin for the three months ended September 30, 2008 was 49 percent, which is higher than the gross margin of 35 percent for the same period of 2007. The primary reason for the increased gross margin was that the Company had increased its unit-sales price for most of the sales to middle wholesalers in current quarter compared to the same period of last year, since the Company had changed its target sales entities from agents to middle wholesalers in year 2008. In addition, since the Company produces more quantities of finish goods to sell in current year, it reduced the standard unit cost of indirect manufacture costs in current year. This decrease of indirect costs had offset the slightly increased direct costs in year 2008.

Selling Expenses   Selling expenses were $73,702 for the three months ended September 30, 2008, as compared to $20,030 in the same period last year. It was mainly due to increased employees salaries and related insurance fees, advertising fees, and the expenses from four branch sales offices in the current quarter.

Bad Debt (Recoveries) Expenses   Bad debt recoveries were $(179,355) for the three months ended September 30, 2008, as compared to the expenses of $12,123 for the three months ended September 30, 2007. It was primarily due to the reverse of allowance of bad debt in current quarter. The Company usually used allowance of bad debt on 0.5% of the accounts receivable balance. Commencing from fourth quarter of 2007, the Company changed its bad debt allowance estimates to be 5% of accounts receivable, since it had faced a concentrated and high amount of overdue accounts receivable from WeiHai Qiancheng. After half a year in supervising and improving the accounts receivable collection effort, the Company had collected most of WeiHai Qiancheng accounts receivable. Accordingly, the Company had dropped down its allowance rate from 5% back to 0.5% starting from the third quarter of 2008.

General and Administrative Expenses   General and administrative expenses increased by 10 percent from $211,122 for the three months ended September 30, 2007 to $231,434 for the three months ended September 30, 2008. The increase was mainly due to fact that Harbin union welfare fees were started to impose in year 2008, and the higher office fees for the three months ended September 30, 2008 compared to the same period last year.

Operating Expenses   Operating expenses were $125,781 for the three months ended September 30, 2008 as compared to $243,275 for the three months ended September 30, 2007, an decrease of $117,494 or 48 percent mainly as a result of recoveries of bad debts in the current quarter.

Income from Operations   Income from operations was approximately $1.6 million for the three months ended September 30, 2008 as compared to approximately $0.7 million for the three months ended September 30, 2007, an increase of approximately $0.88 million or 121 percent. The increase was mainly due to the increase in our revenues for sale of higher gross margin products in the current quarter.

Other Income(Expense)   Total other income was $7,396 for the three months ended September 30, 2008 as compared to other expenses $(12,690) for the three months ended September 30, 2007. The other income increased slightly as we generated more interest income from our bank for more money deposited in the current quarter. In addition, we disposed disabled fixed asset, and generated a loss on disposition for the three months ended September 30, 2007.

17

Income Tax   Under the laws of the PRC, Chang Fang Yuan, as a wholly foreign owned enterprise, is subject to the corporate income tax exemption during its first and second profitable years and a 50% reduction in income tax in the subsequent three years. Year 2007 and 2008 were Chang Fang Yuan’s first and second profitable years and therefore, we were entitled to the income tax exemption during these years.

Net Income   Our net income was approximately $1.6 million for the three months ended September 30, 2008 as compared to approximately $0.7 million for the three months ended September 30, 2007, an increase of $0.89 million or 123 percent. The fully diluted EPS was $0.09 for the three months ended September 30 2008 compared to that of $0.04 in the same period 2007.

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008
COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2007

	For Nine Months Ended September 30, 2008				For Nine Months Ended September 30, 2007				2008 Vs 2007 Increase/ (decrease)
	Unaudited				Unaudited
Revenues	$	9,015,328			$	6,716,131			$	2,299,197		34%
Cost of Goods Sold		4,573,734		51%		4,253,714		63%		320,020		8%
Gross Profit		4,441,594		49%		2,462,417		37%		1,979,177		80%
Operating Expenses
Selling expenses		200,436				138,015				62,421		45%
Bad debt (recoveries) expenses		(252,486	)			3,250				(255,736	)	-7869%
General and administrative expenses		659,585				587,764				71,822		12%
Total Operating Expenses		607,535		7%		729,029		11%		(121,494	)	-17%
Income From Operations		3,834,059		43%		1,733,388		26%		2,100,671		121%
Other Income (Expense)
Related parties rental income		14,316				14,841				(525	)	-4%
Interest income		3,133				547				2,586		473%
Other income (expense), net		(168	)			272				(440	)	-162%
Loss on disposition of fix assets		0				(18,282	)			18,282		-100%
Total Other Income (Expense)		17,281				(2,622	)			19,903		-759%
Income Before Income Taxes		3,851,340		43%		1,730,766		26%		2,120,574		123%
Provision for Income Taxes		—				—				—
Income Before Minority Interest		3,851,340		43%		1,730,766		26%		2,120,574		123%
Minority Interest		—				(16,492	)			16,492		-100%
Net Income	$	3,851,340		43%	$	1,747,258		26%	$	2,104,082		120%

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Revenue  Total revenues were approximately $9.02 million for the nine months ended September 30, 2008 as compared to approximately $6.72 million for the nine months ended September 30, 2007, an increase of approximately $2.3 million or 34 percent as we continued to expand our sales efforts and customer base. Revenues generated from Weihai Qiancheng were reduced to approximately12% of the total revenue for the nine months ended September 30 2008 as compared to that of approximately 98% for the nine months ended September 30 2007.

Cost of Goods Sold   Cost of goods sold for the nine months ended September 30, 2008 was approximately $4.57 million or 51 percent of revenues, as compared to approximately $4.25 million or 63 percent of revenues for the nine months ended September 30, 2007. Gross margin for the nine months ended September 30, 2008 was 49 percent, which was higher than the gross margin of 37 percent for the same period of 2007. The gross margin increased mainly as a result of increased unit-sales price for most of the sales to middle wholesalers in current year compared to last year, since the Company had changed its target sales entities from agents to middle wholesalers in year 2008. In addition, since the Company produces more quantities of finish goods to sell in current year, it reduced the standard unit cost of indirect manufacture costs in current year. This decrease of indirect costs had offset the slightly increased direct costs in year 2008.

Selling Expenses   Selling expenses were $200,436 for the nine months ended September 30, 2008, as compared to $138,015 for the same period last year. It was mainly due to raised employees salaries and related insurance fees, advertising fees, and expenses from four branch sales offices during the current year.

Bad Debt (Recoveries) Expenses    Bad debts were recoveries $(252,486) for the nine months ended September 30, 2008, as compared to the expenses amount of $3,250 for the nine months ended September 30, 2007. It was primarily due to the reverse of allowance of bad debt in current year. The Company usually used allowance of bad debt on 0.5% of the accounts receivable balance, since it had faced a high amount and concentrated accounts receivable from WeiHai Qiancheng in fourth quarter of 2007. After half a year in supervising and improving accounts receivable collection effort, the Company had collected most of WeiHai Qiancheng accounts receivable. Accordingly, the Company had dropped down its allowance rate from 5% back to 0.5% starting from third quarter of 2008.

General and Administrative Expenses   General and administrative expenses increased by 12 percent from $587,764 for the nine months ended September 30, 2007 to $659,585 for the nine months ended September 30, 2008. The increase was mainly due to the fact that we had incurred higher professional fees and entertainment fees for the nine months ended September 30, 2008 as compared to the same period last year.

Operating Expenses   Operating expenses were $607,535 for the nine months ended September 30, 2008 as compared to $729,029 for the nine months ended September 30, 2007, a decrease of $121,494 or 17 percent was mainly as a result of higher bad debt recoveries in the current year as compared to last year.

Income from Operations   Income from operations was approximately $3.83 million for the nine months ended September 30, 2008 as compared to approximately $1.73 million for the nine months ended September 30, 2007, an increase of approximately $2.1 million or 121 percent. The increase was mainly due to the increase in our revenues for sale of higher gross margin products as well as the lower operating expenses in the current year.

Other Income(Expense)   Total other income was $17,281 for the nine months ended September 30, 2008 as compared to other expenses $(2,622) for the nine months ended September 30, 2007. The other income increased slightly as we disposed the disabled fixed assets in last year, those increased expenses were higher than the increased interest income received from our bank during the current year as compared to the same period in year 2007.

19

Income Tax   Under the laws of the PRC, Chang Fang Yuan, as a wholly foreign owned enterprise, is subject to the corporate income tax exemption during its first and second profitable years and a 50% reduction in income tax in the subsequent three years. Year 2007 and 2008 were Chang Fang Yuan’s first and second profitable years and therefore, we were entitled to the income tax exemption during year 2008 and 2007, respectively.

Net Income   Our net income was approximately $3.85 million for the nine months ended September 30, 2008 as compared to approximately $1.75 million for the nine months ended September 30, 2007, an increase of approximately $2.10 million or 120 percent. The fully diluted EPS was $0.26 for the nine months ended September 30 2008 compared to that of $0.09 in the same period 2007.

Foreign Currency Translation Adjustment   Our major operations are in the PRC, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between the United States dollar and the Chinese Renminbi. Sales of the Company’s products are in Renminbi. During 2003 and 2004 the exchange rate of RMB to the dollar remained constant at 8.26 RMB to the dollar. On July 21, 2005, the Chinese government adjusted the exchange rate from 8.26 to 8.09 RMB to the dollar. In 2007, the RMB kept on appreciating to the dollar. As of September 30, 2008, the market foreign exchanges rate was increased to 6.7899 RMB to one dollar. The financial statements of Chang Fang Yuan (whose functional currency is the RMB) were translated into US dollars using the closing rate method. The balance sheet items were translated into US dollars using the exchange rates at the respective balance sheet dates. The capital and various reserves were translated at historical exchange rates prevailing at the time of the transactions while income and expenses items were translated at the average exchange rate for the year. All exchange differences were recorded within equity. The foreign currency translation gain for the nine months ended September 30, 2008 and 2007 were $1,641,584 and $754,000, respectively.

Liquidity and Capital Resources

The Company’s operations were initially capitalized by the combination of cash contributed to Chang Fang Yuan with a manufacturing facility and intellectual property contributed by the Company’s shareholders. Since that time the Company had funded operations primarily by means of loans from its shareholders and management in addition to its internally generated cash flow. As a result, on September 30, 2008, the Company owed $1,293,616 to certain members of its management and shareholders. These loans do not bear interest and are due on demand, and thus they were recorded as current liabilities. It’s the intention of the relevant management members and shareholders that the Company will not repay the loans during the recent expansionary years.

On September 30, 2008 the Company had the working capital of $7,791,125, which increased in amount of $2,890,559 as compared to December 31, 2007 as its cash and equivalents balance increased significantly while accounts receivable balance decreased for the collection of receivable. For nine months ended September 30, 2008, the net result of the Company’s growth in net income, reduced accounts receivable balance, and decreased balance in other current assets collectively led to a positive cash inflow from operations in amount of $5,808,893 for the nine months ended September 30, 2008.

Net cash used in investing activities was $2,388,922 in the nine months ended September 30, 2008, compared with $46,018 in the same period 2007. The increase was primarily attributable to the purchase of new machinery and equipment as we expected business expansion.

20

Net cash outflow from financing activities was $3,149 for the nine months ended September 30, 2008, compared with net cash outflow from financing activities of $37,251 in the same period 2007. The financing cash outflow decrease was primarily due to less amount of returned to shareholders or officers during the current year as compared to year 2007.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition or results of operations.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

A smaller reporting Company is not required to provide the information required by this Item.

Item 4T.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of its disclosure controls and procedures as of September 30, 2008. Pursuant to Rule13a-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, “disclosure controls and procedures” means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time limits specified in the Commission’s rules. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information the Company is required to disclose in the reports it files with the Commission is accumulated and communicated to its Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation, its Chief Executive Officer and Chief Financial Officer concluded that the Company’s system of disclosure controls and procedures was effective as of September 30, 2008 for the purposes described in this paragraph.

Changes in Internal Control Over Financial Reporting. During the most recent quarter ended September 30, 2008, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) ) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

21

PART II — OTHER INFORMATION

Item 1.   Legal Proceedings

None

Item 1A.   Risk Factors

DEPENDENCE ON KEY PERSONNEL. The Company is dependent upon the continued services of its officers and directors. To the extent that their services become unavailable, the Company will be required to obtain other qualified personnel and there can be no assurance that it will be able to recruit and hire qualified persons upon acceptable terms.

BROAD DISCRETION OF MANAGEMENT. Any person who invests in Company securities will do so without an opportunity to evaluate the specific merits or risks of any potential new prospective business in which the Company may engage. As a result, investors will be entirely dependent on the discretion and judgment of management in connection with the selection of a prospective business. There can be no assurance that determinations made by management will guarantee that the Company will achieve its business objectives.

22

ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO PROSPECTIVE BUSINESS.As of the date of filing of this quarterly report, the Company has not yet identified any prospective business or industry in which it may seek to become involved and at present it has no substantive information concerning any prospective business. There can be no assurance that any prospective business combination will benefit shareholders or prove to be more favorable to shareholders than any other investment that may be made by shareholders and investors.

UNSPECIFIED INDUSTRY FOR NEW PROSPECTIVE BUSINESS OPPORTUNITIES; UNASCERTAINABLE RISKS. There is no basis for shareholders to evaluate the possible merits or risks of potential new business opportunities or the particular industry in which the Company may ultimately operate. To the extent that the Company effects a business combination with a financially unstable individual or entity or an entity that is in its early stage of development or growth, including entities without established records of revenues or income, the Company will become subject to numerous risks inherent in the business and operations of that financially unstable Company. In addition, to the extent that the Company effects a business combination with an entity in an industry characterized by a high degree of risk, the Company will become subject to the currently unascertainable risks of that industry. An extremely high level of risk frequently characterizes certain industries that experience rapid growth. Although management will endeavor to evaluate the risks inherent in a particular new prospective business or industry, there can be no assurance that the Company will properly ascertain or assess all such risks or that subsequent events may not alter the risks that Company perceives at the time of the consummation of any new business opportunity.

CONFLICTS OF INTEREST. Management is not required to commit its full time to Company affairs. There may be a conflict of interest in allocating their time in the event that management engages in similar business efforts for other entities. Management will devote such time, in its sole discretion, to conduct Company business, including the evaluation of potential new business opportunities and the negotiation and consummation of a business combination. As a result, the amount of time devoted to Company business and affairs may vary significantly depending upon whether the Company has identified a new prospective business opportunity or are engaged in active negotiations related to the consummation of a business combination.

COMPETITION.     The Company expects to encounter intense competition from other entities seeking to pursue new business opportunities or business combinations. Many of these entities are well-established and have extensive experience in connection with identifying new prospective business opportunities or in effecting business combinations. Many of these competitors possess greater financial, technical, human and other resources and there can be no assurance that the Company will have the ability to compete successfully. Based upon limited financial and personnel resources, the Company may lack the resources as compared to those of many of potential competitors.

REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is required to provide certain information about significant acquisitions and other material events. The Company will continue to be required to file quarterly reports on Form 10-Q and annual reports on Form 10-K, which annual report must contain our audited financial statements. As a reporting Company under the Exchange Act, following any business combination, the Company will be required to file a report on Form 8-K or other form appropriate under the Exchange Act, which contains audited financial statements of the acquired entity. These audited financial statements must be filed with the SEC within 4 days following the filing of Form 8-K disclosing the transaction. While obtaining audited financial statements is typically the economic responsibility of the acquired Company, it is possible that a potential target Company may be a non-reporting Company with unaudited financial statements. The additional time and costs that may be incurred by some potential target companies to prepare such audited financial statements may significantly delay or may even preclude consummation of an otherwise desirable transaction. Acquisition prospects that do not have or are unable to obtain the required audited statements may not be appropriate for acquisition because the Company is subject to the reporting requirements of the Exchange Act.

23

STATE BLUE SKY REGISTRATION; POTENTIAL LIMITATIONS ON RESALE OF THE SECURITIES. The holders of the Company’s shares of common stock registered under the Exchange Act and those persons who desire to purchase them in any trading market that might develop in the future, should be aware that there may be state blue-sky law restrictions upon the ability of investors to resell such securities. Accordingly, investors should consider the secondary market for the Company’s securities to be a limited one.

It is the intention of the Company following the consummation of a business or business combination to seek coverage and publication of information regarding the Company in an accepted publication manual which permits a manual exemption. The manual exemption permits a security to be distributed in a particular state without being registered if the Company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer’s balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. Furthermore, the manual exemption is a non-issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities.

Most of the accepted manuals are those published in Standard and Poor’s, Moody’s Investor Service, Fitch’s Investment Service, and Best’s Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals.

DIVIDENDS UNLIKELY. The Company does not expect to pay dividends for the foreseeable future. The payment of dividends will be contingent upon future revenues and earnings, if any, capital requirements and overall financial conditions. The payment of any future dividends will be within the discretion of the board of directors as then constituted. It is expected that future management following a business combination will determine to retain any earnings for use in business operations and accordingly, the Company does not anticipate declaring any dividends in the foreseeable future.

POSSIBLE ISSUANCE OF ADDITIONAL SECURITIES. The Company may issue additional shares of common stock in connection with its intention to pursue new business opportunities or enter into a business combination. To the extent that additional shares of common stock are issued, Company shareholders would experience dilution of their respective ownership interests in the Company. If the Company issues shares of common stock in connection with the intent to pursue new business opportunities, a change in control of the Company may occur. The issuance of additional shares of common stock may adversely affect the market price of the common stock, in the event that an active trading market commences, of which there can be no assurance.

COMPLIANCE WITH PENNY STOCK RULES.Company common stock will be considered a “penny stock” as defined in the Exchange Act and the rules thereunder, unless the price of shares of common stock is at least $5.00. The Company expects that its share price will be less than $5.00. The penny stock rules require a broker-dealer prior to a transaction in penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its sales person in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that the broker-dealer, not otherwise exempt from such rules, must make a special writ-ten determination that the penny stock is suitable for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure rules have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. So long as the common stock is subject to the penny stock rules, it may be-come more difficult to sell such securities. Such requirements could result in reduction in the level of trading activity for Company common stock and could make it more difficult for investors to sell our common stock.

24

RISK RELATED TO DOING BUSINESS IN CHINA. Uncertainty in the state regulatory environment such as in the field of corporate financial and investment and fund raising activities may expose the Company to unexpected liability exposure and even penalties. The Company has to finance its operations through equity and debt financings to support its operations. China has an evolving regulatory environment as to what is permitted and often new regulations are adopted to regulate certain area where there were no regulation before. As a result, the Company may be exposed to unforeseen risks of violating rules that did not exist. Such risks apply to all aspects of the operation of the Company. In case the Company is found to be in such violation, it could be subjected to monetary and other unexpected penalties. This may in turn have an impact on its operation results, operations and the value of its shares of common stock.

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

(a)         Unregistered sales of equity securities.

None for the period covered by this report.

(b)          Purchases of equity securities

None for the period covered by this report.

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 Description

31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

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

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SIGNATURES

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

	China Green Material Technologies, Inc.
Date: November 12, 2008	By:	/s/ Zhonghao Su
		Zhonghao Su, Chief Executive Officer

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