Changda International 10Q 2011 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20-549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2011

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

For the transition period from ______________ to _____________

Commission file number: 0-53566

CHANGDA INTERNATIONAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

	Nevada		98-0521484
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	10 th Floor Chenhong Building No. 301 East Dong Feng Street Weifang, Shandong, People’s Republic of China		261041
			(Zip Code)

86-536 8513228

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	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 o No x

As of November 12, 2011, there are 20,509,123 shares of our common stock, par value $0.001 per share common stock issued and outstanding.

FORM 10-Q

CHANGDA INTERNATIONAL HOLDINGS, INC.

INDEX

		Page
	PART I

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4	Controls and Procedures	36

	PART II

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	37

Item 4.	Removed and Reserved	37

Item 5.	Other Information	37

Item 6.	Exhibits	37

SIGNATURES		38

Changda International Holdings, Inc.

Condensed Consolidated Balance Sheets

			As of September 30, 2011		As of December 31, 2010
	Note		US$’000		US$’000
ASSETS			(unaudited)

Current assets
Cash and cash equivalents				13,346		9,364
Restricted cash	12			4,686		-
Trade and other receivables, net				16,669		19,034
Amount due from related parties	6			94		10
Inventories				9,526		3,143
Prepaid lease payments, net				65		63
Government grant receivables in respect of tax				2,905		2,822

Total current assets				47,291		34,436

Intangible assets				3		3
Property, plant and equipment, net				21,454		17,057
Prepaid lease payments, net				2,953		2,915

Total assets				71,701		54,411

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Trade and other payables				6,082		5,006
Amount due to related parties	6			780		569
Promissory notes		10		-		534
Notes payable		12		7,029		-
Shareholders’ loans		6		1,140		1,107
Short-term interest-bearing borrowings				9,919		7,358
Income tax payables				3,439		3,574

Total current liabilities				28,389		18,148

Deferred government grants				815		805
Long-term portion of shareholders’ loans		6		-		523

Total liabilities				29,204		19,476

Commitments and contingencies		7

Stockholders’ equity
Common stock, par value $0.001 per share, 100,000,000 shares authorized, 20,509,123 shares issued and outstanding as of September 30, 2011 and 19,729,902 shares issued and outstanding as of December 31, 2010		4		21		20
Additional paid-in capital				7,249		6,499
Statutory reserves				2,852		2,822
Accumulated other comprehensive income				3,744		2,572
Retained earnings				28,631		23,022

Total stockholders’ equity				42,497		34,935

Total liabilities and stockholders’ equity				71,701		54,411

The financial statements should be read in conjunction with the accompanying notes.

Changda International Holdings, Inc.

Condensed Consolidated Statements of Operations and

Other Comprehensive Income

			Nine months ended September 30,						Three months ended September 30,
	Note		2011			2010			2011			2010
			US$’000			US$’000			US$’000			US$’000
			(unaudited)			(unaudited)			(unaudited)			(unaudited)

Operating revenues				74,511			61,117			17,547			17,322

Cost of sales				(61,974	)		(51,090	)		(14,435	)		(14,337	)

Gross profit				12,537			10,027			3,112			2,985

Operating expenses
Loss on write off of property, plant and equipment				(150	)		-			(150	)		-
Depreciation of property, plant and equipment				(277	)		(217	)		(77	)		(80	)
Amortization of intangible assets				(1	)		(1	)		-			-
Amortization of prepaid lease expenses				(48	)		(27	)		(16	)		(9	)
Selling, general and administrative expenses				(3,974	)		(3,834	)		(1,070	)		(1,051	)

Operating income				8,087			5,948			1,799			1,845

Other income				27			29			5			7
Other expenses				(28	)		-			(26	)		-
Interest income				70			6			38			4
Interest expenses				(633	)		(425	)		(220	)		(187	)
Other finance cost				(142	)		(460	)		-			(16	)

Income before income taxes				7,381			5,098			1,596			1,653

Income taxes		5		(1,742	)		(1,298	)		(442	)		(369	)

Net income				5,639			3,800			1, 154			1,284

Other comprehensive income
Foreign currency translation adjustment				1,172			768			356			646

Comprehensive income				6,811			4,568			1,510			1,930


Earnings per common share($)		3
Basic				0.28			0.20			0.06			0.07
Diluted				0.28			0.20			0.06			0.07


Weighted average number of common shares outstanding		3
Basic				20,343,574			18,964,025			20,509,123			18,964,025
Diluted				20,343,574			18,964,025			20,509,123			18,964,025

The financial statements should be read in conjunction with the accompanying notes.

Changda International Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

	Nine months ended September 30, 2011			Nine months ended September 30, 2010
	US$’000			US$’000
	(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		5,639			3,800
Adjustment to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment		1,576			1,332
Amortization of intangibles assets		1			1
Amortization of prepaid lease payments		48			27
Exchange differences		110			143
Government grants recognized		(14	)		(13	)
Cost of warrants issued		142			460
Loss on disposal of property, plant and equipment		12			5
Loss on write off of property, plant and equipment		150			-
Changes in operating assets and liabilities:
Inventories		(6,290	)		(2,801	)
Trade and other receivable, net (including amount due from related parties)		2,861			3,303
Trade and other payables (including amount due to related parties)		1,194			874
Income tax payables		(241	)		(132	)
Net cash provided by operating activities		5,188			6,999

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment		17			1
Purchase of property, plant and equipment		(5,678	)		(2,450	)
New restricted cash		(4,686	)		-
Net cash used in investing activities		(10,347	)		(2,449	)

CASH FLOWS FROM FINANCING ACTIVITIES
New bank and other loans raised		18,235			9,186
Repayment of bank and other loans		(9,368	)		(6,297	)
Net cash provided by financing activities		8,867			2,889

Net increase in cash and cash equivalents		3,708			7,439

Cash and cash equivalents at beginning of period		9,364			2,275

Effect on exchange rate changes		274			54

Cash and cash equivalents at end of period		13,346			9,768

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

During the year, cash was paid for the following:
Income taxes	1,979		1,457

Interest		633		294

The financial statements should be read in conjunction with the accompanying notes.

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

1.	ORGANIZATION AND PRINCIPAL ACTIVITIES

	The accompanying unaudited condensed consolidated financial statements present the consolidated financial position of Changda International Holdings, Inc. (“CIHI”) and its subsidiaries (together “the Company”) as of September 30, 2011 and December 31, 2010, and its results of operations for the three months and nine months ended September, 2011 and 2010 and cash flows for the nine months ended September 30, 2011 and 2010.

	Changda International Holdings, Inc. (“CIHI”) was incorporated on January 24, 2007 under the laws of the State of Nevada. On January 15, 2009, Memorandum of Understanding (“Agreement”) was entered by and among CIHI and Changda International Limited (“Changda International”), a company organized under the laws of Marshall Islands. Changda International, being the legal acquiree (accounting acquirer), delivered to CIHI, being the legal acquirer (accounting acquiree), stock certificates representing 100% of the shares in Changda International (the “Share Exchange Transaction”).

	The principal subsidiaries of CIHI after the Share Exchange Transaction are Weifang Changda Chemical Co., Ltd. (“Changda Chemical”), Weifang Changda Fertilizer Co., Ltd. (“Changda Fertilizer”) and Fengtai Changda Fertilizer Co., Ltd. (“Fengtai Changda”). Changda Chemical is a limited liability company incorporated in the People’s Republic of China (the “PRC”). Changda Chemical’s registered office is located at Weifang Ocean Chemical Industry Developing Zone Industry Area, Shandong, PRC. The principal activity of Changda Chemical is manufacturing of snow melting agent, drugs intermediate and flame retardants. Changda Fertilizer and Fengtai Changda are limited liability companies incorporated in the PRC. The registered office of both Changda Fertilizer and Fengtai Changda are located at Weifang Binhai Development Zone, Shandong, PRC. The principal activity of Changda Fertilizer and Fengtai Changda are manufacturing and trading of fertilizers.

	Reverse Stock Split

	On September 30, 2009, it was approved by the Board of Directors and ratified by the majority shareholders to effect one-for-three reverse split of the issued and outstanding shares without changing its par value of $0.001. The actions contemplated herein became effective on October 14, 2009 according to the Company Information Statement while the reverse split completed at the close of business on November 6, 2009. As a result of this reverse stock split, every three shares of the Company's common stock were combined into one share of common stock. All the relevant information relating to number of stock and per stock information contained in these consolidated financial statements has been retrospectively adjusted to reflect the reverse stock split for all periods presented.

	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.	Basis of presentations

	The accompanying unaudited condensed consolidated financial statements as of September 30, 2011 have been prepared based upon Securities and Exchange Commission rules that permit reduced disclosure for interim periods and include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the financial position, results of operations and cash flows as of September 30, 2011 and for all periods presented.

	Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“USGAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K filed on March 31, 2011 for the year ended December 31, 2010. The results of operations for the nine months ended September 30, 2011 and 2010 are not necessarily indicative of the operating results to be expected for the full year.

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

	The condensed consolidated financial statements and accompanying notes are presented in United States dollars and prepared in conformity with USGAAP which requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

	Basis of consolidation

	The consolidated financial statements include the financial information of CIHI and its subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation.

	Recently issued accounting pronouncements
	In May 2011, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRSs”) (“ASU 2011-05”)”. ASU 2011-04 amends certain accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S. GAAP and in IFRSs and that their respective fair value measurement and disclosure requirements are the same. ASU 2011-04 is effective for public entities during interim and annual periods beginning after December 15, 2011. Early adoption by public entities is not permitted. The Company believes that the adoption of ASU 2011-04 will not have a material impact on the Company’s consolidated results of operation and financial condition. In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income,” (“ASU 2011-05”) which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, the reporting entity must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011 with early adoption permitted. The Company believes that the adoption of ASU 2011-05 will not have a material impact on the Company’s consolidated results of operation and financial condition. In September 2011, the FASB issued ASU No. 2011-08, “Intangibles—Goodwill and Other (ASC Topic 350): Testing Goodwill for Impairment,” (“ASU 2011-08”) which simplifies how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The Company believes that the adoption of ASU 2011-08 will not have a material impact on the Company’s consolidated results of operation and financial condition.

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

3.	EARNINGS PER COMMON SHARE
	Basic earnings per common share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed similar to basic earnings per common share except that the denominator is increased to include the number of dilutive common stock equivalents.

	Earnings per common shares was computed as follows:

Nine months ended September 30, 2011

Three months ended September 30, 2011

Income

Weighted average

number of common

shares outstanding

Per

common

amount

Income

Weighted

average

number of

common

shares outstanding

Per

common

amount

US$’000

US$

US$’000

US$

Basic earnings per common share

Net income attributable to common stockholders

5,639

20,343,574

0.28

1,154

20,509,123

0.06

For the three months and nine months ended September 30, 2011, all potentially dilutive instruments have an anti-dilutive effect. Accordingly, the basic and diluted earnings per common stock are the same.

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

Nine months ended September 30, 2010

Three months ended September 30, 2010

Income

Weighted average

number of common

shares outstanding

Per

common

amount

Income

Weighted

average

number of

common

shares outstanding

Per

common

amount

US$’000

US$

US$’000

US$

Basic earnings per common stock

Net income attributable to common stockholders

3,800

18,964,025

0.20

1,284

18,964,025

0.07

For the three months and nine months ended September 30, 2010, all potentially dilutive instruments have an anti-dilutive effect. Accordingly, the basic and diluted earnings per common stock are the same.


4 .	STOCKHOLDERS’ EQUITY

	Common stock

	As of September 30, 2011, the Company has 100,000,000 shares of common stock with a par value of $0.001 per share authorized and 20,509,123 shares issued and outstanding.

	During the nine months ended September 30, 2011, 779,221 shares valued at US$0.77 per share were issued to a principal shareholder (see note 10).

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

5.	INCOME TAXES

	The Company’s principal subsidiaries in the PRC are subject to income taxes on an entity basis on income arising in or derived from the tax jurisdictions in which each entity domiciles and operates.

	In 2006, the local government of economic development area has granted a special tax exemption to both Changda Fertilizer and Changda Chemical. In this connection, both Changda Fertilizer and Changda Chemical are entitled to receive the whole amount of Enterprise Income Tax (“EIT”) payable for its first two profitable years of operation starting from 2006 and followed by an entitlement to receive 50% of EIT payable for the following three years. The exemption is not applicable upon the successful listing of any holding company vehicle in overseas stock market.

	On December 29, 2008, Changda Chemical was approved as a high-tech enterprise and ceased to enjoy the special tax exemption. Tax rate for an approved high-tech enterprise is 15%. Taxation has been estimated based on the assessable profit for the each of years at a rate of 15%.

	Starting from January 1, 2009, the special tax exemption previously granted to Changda Fertilizer ceased to be effective since it became a subsidiary of CIHI which is listed in the US stock market. Changda Fertilizer is subject to EIT at a rate of 25% thereafter.

	For accounting purpose, taxation has been estimated based on the assessable profit for the period at a rate of 33% in 2007 for both Changda Fertilizer and Changda Chemical and at a rate of 25% according to the EIT Law effective in 2008 of the PRC for Changda Fertilizer. The respective tax liability has been recognized as tax liability and the related receivable from the local government of economic development area has been recognized as government grant receivable in respect of taxation, as reported in the balance sheet.

	Fengtai Changda is subject to EIT at a rate of 25%. However, a special tax exemption has been granted by the local government and Fengtai Changda is entitled to full exemption of EIT payable for its two years of operation starting from 2008 and followed by a 50% exemption of EIT payable for the following three years.

	Dividends payable by a foreign invested enterprise to its foreign investors are subject to a 10% withholding tax, unless any foreign investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a different withholding arrangement. Since the Company intends to reinvest its earnings to further expand its businesses in the PRC, its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. Accordingly, as of September 30, 2011, the Company has not recorded any withholding tax on the retained earnings of its foreign invested enterprises in the PRC.

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

5.	INCOME TAXES (CONTINUED)
	(a) Income tax expenses comprised the following:
		Income tax expenses comprised the following:

	Nine months ended September 30,				Three months ended September 30,
	2011		2010		2011		2010
	US$’000		US$’000		US$’000		US$’000
Current taxes arising in the PRC:
- For the period		1,742		1,298		442		369

The Company has adopted the FASB Accounting Standards Codification Topic 740, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (ASC Topic 740”) issued by the FASB which clarifies the accounting and disclosure for uncertainty in tax positions, as defined, and prescribes the measurement process and a minimum recognition threshold for a tax position, taken or expected to be taken in a tax return, that is required to be met before being recognized in the financial statements. Under ASC Topic 740, the Company must recognize the tax benefit from an uncertain position only if it is more-likely-than-not the tax position will be sustained on examination by the taxing authority, based on the technical merits of the position. The tax benefits recognized in the financial statements attributable to such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate resolution of the position.

Subject to the provision of ASC Topic 740, the Company has analyzed its filing positions in all of the domestic and foreign jurisdictions where it is required to file income tax returns. As of September 30, 2011 and 2010, the Company has identified the jurisdictions at PRC as “major” tax jurisdictions, as defined, in which it is required to file income tax returns. Based on the evaluations noted above, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its consolidated financial statements.

As of September 30, 2011and 2010, the Company had no unrecognized tax benefits or accruals for the potential payment or interest and penalties. The Company’s policy is to record interest and penalties related to unrecognized tax benefits as a component of the provision for income tax expense. For the nine months ended September 30, 2011 and 2010, no interest or penalties were recorded.

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

5.	INCOME TAXES (CONTINUED)

	(b) Reconciliation from the expected income taxes expenses calculated with reference to the statutory tax rates in the PRC:

	Nine months ended September 30,						Three months ended September 30,
	2011			2010			2011			2010
	US$’000			US$’000			US$’000			US$’000

Expected income tax expenses		1,845			1,275			399			413
Effect on tax incentives / holiday		(427	)		(320	)		(77	)		(98	)
Non-deductible items		369			363			149			76
Others		(45	)		(20	)		(29	)		(22)

Income tax expenses		1,742			1,298			442			369

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

6.	RELATED PARTY TRANSACTIONS

In addition to the transactions / information disclosed elsewhere in these condensed consolidated financial statements, during the periods and at balance sheet date, the Company had the following transactions and balances with related parties.

(a) Relationship of related parties

Party	Existing relationship with the Company
Mr. Zhu Qing Ran	Chairman and Chief Executive Officer (“CEO”)
Mr. Zhu Xin Ran	Family member of the directors of the Company
Geo Genesis Group Inc.	Stockholder of the Company
Allhomely International Limited	Stockholder of the Company
Mr. Zhu Hua Ran	Director of the Company
Mr. Charles Brock	Director of the Company
Mr. Carsten Aschoff	Director of the Company
Mr. Craji Marshak	Director of the Company
Mr. Jan Panneman	Key management of the Company
Mr. David Cohen	Director of the Company

(b) Summary of related party transactions

	Nine months ended September 30,				Three months ended September 30,

	2011		2010		2011		2010
	US$’000		US$’000		US$’000		US$’000
Key management personnel, including directors:
Short-term employee benefits		373		262		116		67

	As of September 30, 2011		As of December 31, 2010
	US$’000 (unaudited)		US$’000
Loans from Mr. Zhu Qing Ran and his family member		1,140		1,630

Current portion (included in shareholders’ loans)		1,140		1,107
Non-current portion (included in Long-term portion of shareholders’ loans)		-		523

		1,140		1,630

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

6.	RELATED PARTY TRANSACTIONS (CONTINUED)

	As of September 30, 2011		As of December 31, 2010
	US$’000		US$’000
	(unaudited)
Due from
Mr. Zhu Qing Ran		94		9
Mr. Zhu Xin Ran		-		1
		94		10

Due to
Allhomely International Limited		1		1
Geo Genesis Group Inc.		17		17
Mr. Zhu Qing Ran		361		269
Mr. Zhu Hua Ran		275		200
Mr. Charles Brock		7		7
Mr. Carsten Aschoff		23		17
Mr. Craig Marshak		17		11
Mr. Jan Panneman		62		36
Mr. David Cohen		17		11
		780		569

The loan from Mr. Zhu Qing Ran of US$523,000 as of December 31, 2010 was unsecured, interest-free and had a fixed repayment term of 2 years, however, the loan was repaid during the first quarter, 2011. All other amounts due from/to related parties and directors are unsecured, interest-free and have no fixed repayment term.

(d) Guarantee

Included in short-term interest bearing borrowings, there is bank loan of US$2,499,297 which is guaranteed by the Chairman and CEO of the Company.

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

7.	COMMITMENTS AND CONTINGENCIES

(a) Operating lease commitments

The following table summarizes the approximate future minimum rental payments under non-cancelable operating leases in effect as of September 30, 2011 and December 31, 2010:

	As of September 30, 2011 US$'000		As of December 31, 2010 US$'000

Within one year		5		5
One to three years		10		10
Three to five years		10		10
Move than five years		181		183

Total		206		208

(b) Capital commitments

As of September 30, 2011, the Company had capital commitments for construction projects amounting to US$54,000.

8.	PLEDGE OF ASSETS

The Company has pledged prepaid lease payments with a net book value of approximately US$1,065,000 and buildings under property, plant and equipment with a net book value of approximately US$2,626,000 and restricted cash of US$4,686,000 to secure general banking facilities granted to Changda Chemical and Changda Fertilizer.

9.	SEGMENT REPORTING

In accordance with ASC Topic 280, Segment Reporting (“ASC 280”) and based on the nature of revenue, the Company is organized into two business segments, consisting of (i) Fertilizer, and (ii) Chemical, which includes mainly snow melting agent, thiophene, flame retardant, calcium chloride and magnesium chloride.

The following table summarizes financial information for each of the business segments for the nine months ended September 30, 2011 and 2010.

	Nine months ended September 30, 2011 (unaudited)												Nine months ended September 30, 2010 (unaudited)
	Fertilizer			Chemical			All other			Consolidated			Fertilizer			Chemical			All other			Consolidated
	US$’000			US$’000			US$’000			US$’000			US$’000			US$’000			US$’000			US$’000

Operating revenue		59,389			15,122			-			74,511			52,361			8,756			-			61,117
Cost of sales		(50,306	)		(11,668	)		-			(61,974	)		(44,308	)		(6,782	)		-			(51,090	)
Loss on write off of property, plant and equipment		(150	)		-			-			(150	)		-			-			-			-
Depreciation of property, plant and equipment		(92	)		(185	)		-			(277	)		(89	)		(128	)		-			(217	)
Amortization of intangible assets		(1	)		-			-			(1	)		(1	)		-			-			(1	)
Amortization of prepaid lease expenses		(36	)		(12	)		-			(48	)		(16	)		(11	)		-			(27	)
Interest income		66			4			-			70			5			1			-			6
Interest expense		(402	)		(207	)		(24	)		(633	)		(194	)		(100	)		(131	)		(425	)
Other segment income		14			13			-			27			13			16			-			29
Other segment expenses		(2,570	)		(794	)		(638	)		(4,002	)		(2,221	)		(787	)		(826	)		(3,834	)
Other finance cost		-			-			(142	)		(142	)		-			-			(460	)		(460	)
Income taxes		(1,367	)		(375	)		-			(1,742	)		(1,153	)		(145	)		-			(1,298	)
Segment profit		4,545			1,898			(804	)		5,639			4,397			820			(1,417	)		3,800

Segment assets		51,258			20,764			573			72,595			33,720			12,499			210			46,429

Capital expenditures		1,762			3,916			-			5,678			1,438			1,012			-			2,450

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

9.	SEGMENT REPORTING (CONTINUED)

The following table summarizes financial information for each of the business segments for the three months ended September 30, 2011 and 2010.

	Three months ended September 30, 2011 (unaudited)												Three months ended September 30, 2010 (unaudited)
	Fertilizer			Chemical			All other			Consolidated			Fertilizer			Chemical			All other			Consolidated
	US$’000			US$’000			US$’000			US$’000			US$’000			US$’000			US$’000			US$’000

Operating revenue		12,014			5,533			-			17,547			13,953			3,369			-			17,322
Cost of sales		(10,192	)		(4,243	)		-			(14,435	)		(11,726	)		(2,611	)		-			(14,337	)
Loss on write off of property, plant and equipment		(150	)		-			-			(150	)		-			-			-			-
Depreciation of property, plant and equipment		(32	)		(45	)		-			(77	)		(29	)		(51	)		-			(80	)
Amortization of intangible assets		-			-			-			-			-			-			-			-
Amortization of prepaid lease expenses		(12)			(4	)		-			(16	)		(6	)		(3	)		-			(9	)
Interest income		36			2			-			38			4			-			-			4
Interest expense		(157	)		(63	)		-			(220	)		(83	)		(46	)		(58	)		(187	)
Other segment income		5			-			-			5			4			3			-			7
Other segment expenses		(735	)		(172	)		(189	)		(1,096	)		(601	)		(236	)		(214	)		(1,051	)
Other finance cost		-			-			-			-			-			-			(16	)		(16	)
Income taxes		(279	)		(163	)		-			(442	)		(321	)		(48	)		-			(369	)
Segment profit		498			845			(189	)		1,154			1,195			377			(288	)		1,284

Segment assets		51,258			20,764			573			72,595			33,720			12,499			210			46,429

Capital expenditures		246			1,050			-			1,296			727			963			-			1,690

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

10.	PROMISSORY NOTES

On February 3, 2010, the Company entered into a Securities Purchase Agreement with six purchasers pursuant to which the purchasers purchased promissory notes in the aggregate amount of US$900,000 (“February 2010 Notes”). The February 2010 Notes were due and payable on August 3, 2010 (the “Maturity Date”) together with accrued interest at the rate of 20% per annum. The remaining outstanding balance of the February 2010 Notes together with the corresponding accrued interest of US$9,057, were classified as current liabilities as of December 31, 2010.

In conjunction with the February 2010 Notes, the Company issued warrants to purchasers of the February 2010 Notes to purchase an aggregate of 495,000 shares of the Company’s common stock (“PN Warrants”). The exercise price per share is US$2.25, subject to customary adjustments as set forth in the PN Warrants for stock splits, stock dividends, etc. The PN Warrants expire three years from and fully vested at the date of issuance. The fair value of the PN Warrants was estimated as US $0.90 per warrant at the date of issuance using the Black-Scholes model.

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

10.	PROMISSORY NOTES (CONTINUED)

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

(i)	the payment of an additional 5% interest on the February 2010 Notes commencing from August 3, 2010 until the New Maturity Date;
(ii)	a downward adjustment of the exercise price of the 110,000 PN warrants issued in connection with the February 2010 Notes from US$2.25 to US$0.75, the closing price of our common stock as quoted on the Over-the-Counter Bulletin Board on August 2, 2010, the last trading day prior to the date of the agreement;
(iii)	an amendment to the cashless feature of the warrants issued in connection with the February 2010 Notes to make the warrants exercisable on a cashless basis immediately as of the date of the agreement; and
(iv)	the payment of a pro-rata portion of a US$25,000 payment of interest on the aggregate principal amount of US$900,000 of February 2010 Notes outstanding as of the date of the Agreement.

On August 6, 2010, holders of an aggregate of US$500,000 principal amount of February 2010 Notes informed the Company that they are in default and demanded repayment under the February 2010 Notes. Therefore, the holders of the February 2010 Notes are entitled to, among other things (i) the principal amount of the February 2010 Notes along with any interest accrued but unpaid thereon, (ii) an additional interest at a rate of 5% per annum upon an during the occurrence of an event of default and (iii) costs and expenses in connection with the collection and enforcement under the February 2010 Notes, including reasonable attorneys’ fees.

On October 1, 2010, the Company received notice that on September 27, 2010, holders of an aggregate of US$250,000 principal amount of February 2010 Notes filed a complaint (the "Complaint") in the Supreme Court of the State of New York, County of New York (the "Court"), Index No. 261595/10, against the Company seeking repayment of their respective February 2010 Notes.

On November 16, 2010, holder of an original aggregate of US$200,000 of February 2010 Notes informed the Company that they are in default and demanded repayment under the February 2010 Notes.

As of December 6, 2010, the Company has made payments to the holders of the February 2010 Notes totaling an aggregate of US$500,000 (the “Partial Payment”). This Partial Payment covered all accrued but unpaid interest due and payable under the February 2010 Notes through December 6, 2010 with the remainder as a partial payment of the principal amount due and payable under the February 2010 Notes. Accordingly, as of December 6, 2010, the principal amount remaining under the February 2010 Notes was US$567,252.

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

10.	PROMISSORY NOTES (CONTINUED)

On December 7, 2010, holders of an aggregate of US$200,000 principal amount of February 2010 Notes entered into a subsequent agreement with the Company pursuant to which the December 2010 Maturity Date of the February 2010 Notes held by such persons has been further extended until January 21, 2011 (the “New Maturity Date”), provided , however , that if the Company does not repay all amounts due and payable under the February 2010 Notes on or before December 21, 2010, then beginning on December 21, 2010 and ending on the New Maturity Date, the Holder shall have right to convert their respective principal amount of February 2010 Notes then outstanding, plus accrued but unpaid interest thereon (which is currently equal to a rate of 25% per annum) (the “Owed Amount”), at their sole option, into such number of shares of the Company’s common stock which is equal to the Owed Amount divided by 0.75. No fractional shares of the Company’s common stock will be issued upon such conversion and all fractional shares shall be rounded up to the nearest whole share.

On December 21, 2010, the holder of an original aggregate US$50,000 of February 2010 Notes exercised the right to convert the Owed Amount into 51,591 shares of the Company’s common stock.

On January 21, 2011, the holder of an original aggregate of US$150,000 of February 2010 Notes entered into an agreement with the Company pursuant to which the January 2011 Maturity Date of the February 2010 Notes held by such person has been further extended until March 31, 2011 (the “New Maturity Date”), provided , however , the holder shall have right to convert its principal amount of February 2010 Notes then outstanding, plus accrued but unpaid interest thereon (which is currently equal to a rate of 25% per annum) (the “Owed Amount”), at its sole option, into such number of shares of the Company’s common stock which is equal to the Owed Amount divided by 0.75. No fractional shares of the Company’s common stock will be issued upon such conversion and all fractional shares shall be rounded up to the nearest whole share. The additional cost arisen from the conversion feature granted was expensed with corresponding credit to the additional paid-in capital.

As of December 31, 2010, the total amount due on the February 2010 notes was US$533,843. Therefore, the holders of the February 2010 Notes continued to be entitled to, among other things (i) the remaining outstanding portion of the principal amount due and payable under the February 2010 Notes along with any interest accrued but unpaid thereon (ii) an additional interest at a rate of 5% per annum upon and during the occurrence of an event of default and (iii) costs and expenses in connection with the collection and enforcement under the February 2010 Notes, including reasonable attorneys’ fees.

On February 18, 2011 and February 25, 2011, the Company made payments to the holders of the February 2010 Notes totaling an aggregate of US$600,000 (the “Note Repayment”). This Note Repayment covered all remaining principal and accrued but unpaid interest due and payable under the February 2010 Notes, as a result of which the February 2010 Notes have been repaid in full.

The funds for the repayments made on February 18, 2011 and February 25, 2011 were provided to the Company by Allhomely International Limited (“Allhomely”), an entity controlled by Jan Pannemann, the Company’s Executive VicePresident and QingRan Zhu, the Company’s Chairman and Chief Executive Officer. On February 28, 2011, the Company and Allhomely entered into a subscription agreement pursuant to which Allhomely agreed to purchase 779,221 shares of the Company’s common stock for the $600,000 of funds provided, which is per share purchase price of $0.77 per share, which was the closing price of the Company’s common stock as quoted on the Over-the-Counter Bulletin Board on February 28, 2011. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933, as amended.

The Company has repaid all principal and interest due and payable under the February 2010 Notes. All remaining amounts owed with respect to the February 2010 Notes were settled in April 2011, including all amounts for attorneys fees incurred in connection with the prior collection efforts by certain noteholders.

On June 13, 2011, the date of modification, the Company reduced the exercise price of all PN Warrants to US$0.70 per warrant and increased the total number of PN Warrants from 495,000 to 1,355,357.

Changda International Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended September 30, 2011 and 2010

10.	PROMISSORY NOTES (CONTINUED)

The fair value of the modified PN Warrants was estimated as US$0.11 per warrant and the weighted average fair value of the original PN Warrants was estimated as US$0.02 per warrant at the date of modification using the Black-Scholes model together with the following assumptions:

Expected volatility	26%
Expected dividend	Nil
Expected life	1.5 years
Risk-free interest rate	1.59%

Expected volatility is based on historical volatility of the Company's stock price over a period commensurates with the expected life of the warrants as well as other factors. The expected dividend which is assumed to be zero, as the Company has not paid cash dividends to date and does not currently expect to pay cash dividends. The expected life of warrants represents the estimated period of time from the date of modification that the warrant is expected to remain outstanding. The risk-free interest rate is derived from the zero-coupon U.S. government issues with a remaining term equal to the expected life at the time of grant.

The excess of the fair value of the modified PN Warrants over the original PN Warrants of US$142,304 was recorded as other finance costs.

During the three months and nine months periods ended September 30, 2011, no PN Warrant has been exercised. There are 1,355,357 PN Warrants with weighted average exercise price of US$0.70 and remaining life of 1.25 years outstanding and exercisable as of September 30, 2011. While as of December 31, 2010, there were 495,000 PN Warrants with weighted average exercise price of US$1.92 and remaining life of 2 years outstanding.

11.

STOCK BASED COMPENSATION

	Number of warrants		Weighted- average exercise price

Warrants outstanding and exercisable as of September 30, 2011 and January 1, 2011		359,934	$	US3.60

There is no movement during the nine months ended September 30, 2011.

The aggregate intrinsic value, which represents the difference between the price of the Company's common stock at September 30, 2011 and the related exercise price of the underlying warrants, was US$0 for outstanding and exercisable warrants as of September 30, 2011 and December 31, 2010.

12.	NOTES PAYABLE AND RESTRICTED CASH

The notes payable is secured by bank deposit of US$4,686,000 which is classified as restricted cash in the condensed consolidated balance sheet, bears interest ranging from 0.1% to 1% per annum and matures on various dates ranging from February 2, 2012 through March 27, 2012.

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

The following is a discussion and analysis of the results of operations of Changda International Holdings Inc. and its subsidiaries (collectively,”we.” “us,” “our,” or the "Company") and should be read in conjunction with our financial statements and related notes contained in this Form 10-Q. This Form 10-Q contains forward looking statements that involve risks and uncertainties. You can identify these statements by the use of forward-looking words such as "may", "will", "expect", "anticipate", "estimate", "believe", "continue", or other similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operation or financial condition or state other "forward-looking" information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are unable to accurately predict or control. Those events as well as any cautionary language in this Form 10-Q provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You should be aware that the occurrence of the events described in this Form 10-Q could have a material adverse effect on our business, operating results and financial condition. Actual results may differ materially from current expectations and the Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law. The following discussion should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”) filed with the U.S. Securities and Exchange Commission (“SEC”) and the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. Additional information relating to the Company can be found on the SEC’s website at www.sec.gov/edgar.shtml.

Historical Overview

On February 13, 2009, we completed a “reverse acquisition” transaction pursuant to which the stockholders of Changda International Ltd. (“Changda International”) transferred all of the issued and outstanding shares of common stock of Changda International to us in exchange for 15,909,988 newly issued shares and 1,956,667 shares transferred from our stockholders. Upon closing of the reverse acquisition, Changda International became our wholly owned subsidiary, with Changda International’s former stockholders acquiring a majority of the outstanding shares of our common stock. The acquisition of Changda International was accounted for as a “reverse acquisition”, since the stockholders of Changda International acquired a majority of the outstanding shares of our common stock immediately following the closing of the transaction. Changda International was deemed to be the accounting acquirer upon such closing of the transaction and, accordingly, the assets and liabilities and the historical operations that is reflected in the financial statements are those of Changda International.

Overview of the Business

We are engaged in developing, manufacturing and the selling of (i) microbial organic and inorganic compound fertilizers and (ii) chemical products, primarily consisting of snow melting products. We have more than 10 fertilizer product lines which are sold under the “CHANGDA” and “FENGTAI WOSIDA” brands. Our proprietary product lines are marketed and sold to distributors which in turn sell our products to farmers. For the quarter ended September 30, 2011, 68.5% of our revenues ($12.0 million) were derived from our fertilizer products and 31.5% of our revenues ($5.6 million) were derived from our chemical products.

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

Product Pricing

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

From the end of 2009 through the first quarter of 2010, prices of fertilizer raw materials dropped at a rate lower than what occurred from 2008 to 2009. While prices of raw materials continued to drop during the first quarter of 2010, based upon presentation made at the 78th Fertilizer Industry Association Annual Conference on Fertilizer Outlook 2010 - 2014 made in Paris, France in June 2010, as management believed, the trend stopped and prices began to increase in 2010 as the demand for fertilizer products increased. Average sales prices of fertilizers increased during the second quarter of 2011 compared to those during the second quarter of 2010.

Seasonality of Sales

We experience seasonal variations in our revenues and our operating costs due to the farming season. The peak selling seasons for our fertilizer products are the first, second and fourth quarters of the year. These periods are the planting and crop-growing months, which boost fertilizer sales. The third quarter of the year is harvest season, hence the low demand for our fertilizer products. The peak selling seasons for our chemical products have been typically the first and fourth quarters of the year, which are the winter season in China when there is strong demand for deicing salt, calcium chloride and salt. The third quarter of the year is typically our slowest due to the low demand for our chemical products.

Fertilizer Products

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

●	Complex Fertilizers. These fertilizers contain two or three of the primary nutrients of nitrogen, phosphorus and potassium and are made by a process involving only chemical reactions between raw materials and intermediates.
●	Compound Fertilizers. Such fertilizers are produced by initiating chemical reactions between the three primary nutrients of nitrogen, phosphorous and potassium during the production process. We have expanded our product offerings to include a microbial organic-inorganic compound fertilizer which (i) helps plants secure nitrogen from the air, (ii) facilitates plants’ absorption of useful minerals such as phosphorus and potassium from the soil and (iii) enhances stress resistance by the plants. The combination of the organic and inorganic elements enhances soil fertility and crop yield respectively.
●	Slow-Release Compound Fertilizer . This group of fertilizers allows fertilizer nutrients to be released over a period of time, enabling plants to absorb most of the nutrients and enhance yield rate. We have also developed controlled-release fertilizers.

Our products sold through our distributor, China Post under the “FENGTAI WOSIDA” brand. We have entered into a distribution agreement with China Post whereby China Post has the exclusive right to sell our products under the “FENGTAI WOSIDA” brand in the Shandong Province. In order to distribute our products throughout the Shandong Province, we have to enter into a sales agency agreement with a local branch of China Post that covers a particular region within the Shandong province. Currently we have entered into sales agency agreements with 10 local branches of China Post, all of which are substantially on the same terms and expire on December 31, 2011. While we are not dependent on any one local branch of China Post for the distribution of our products, any inability to renew any sales agency agreement or if such agreements are renewed on terms less favorable to us with any local branch of China Post will limit our ability to distribute our product within the Shandong Province and could result have an adverse effect on our financial condition. We sell our products throughout China, including the Shandong Province, under two different brand names, including the “CHANGDA” brand, to maximize the sale of our fertilizer products in the same market through a variety of different distribution channels.

For the quarter ended September 30, 2011, our top ten selling fertilizers were as follows:

Ranking		Products	Type of Fertilizer	Revenues (US$)		Percent in total Revenues of our Fertilizer Products

	1	Specialty Fertilizer	S-Compound		2,790,881		23	%
	2	Organic and inorganic fertilizer (bio) 15-7-8	M-O Compound		1,598,714		13	%
	3	Organic and inorganic fertilizer (bio) 12-5-8	M-O Compound		1,576,927		13	%
	4	Silicon calcium and magnesium soil conditioner 8-6-10-5-15	Soil Conditioner		1,446,816		12	%
	5	New fertilizer (slow release) 16-8-16	Slow Compound		1,082,153		9	%
	6	New compound fertilizer (slow release) 18-9-18	Slow Compound		1,054,371		9	%
	7	Silicon calcium and magnesium soil conditioner 10-5-20	Soil Conditioner		867,083		7	%
	8	New Compound Chat (release) 24-8-8	Slow Compound		760,566		6	%
	9	Water flush fertilizer	Complex fertilizer		197,202		2	%
	10	Granular urea	Other fertilizer		85,980		1	%

Our fertilizers sold under the “FENGTAI WOSIDA” and “CHANGDA” brands had sales volumes for the three months ended September 30, 2011 of approximately $9,259,000 and $2,755,000, respectively or 77% and 23% of our revenues.

Chemical Products

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

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

Our chemical products, which had the highest sales volumes for the three months ended September 30, 2011, are listed below:

Ranking		Product Names	Revenues (US$)		Percent in total Revenues of our Chemical Products
	1	Flame Retardant		5,265,064		95	%
	2	Thiophene		150,991		3	%
	3	Calcium Chloride		55,062		1	%
	4	Magnesium Chloride		26,997		1	%

Effective the year ended December 31, 2010, our new flame retardant product became one of our highest selling products as a result of the implementation of the "Fire Prevention Law of The People's Republic of China" and the government standards set by “Requirements and Mark on Burning Behavior of Fire Retarding Products and Subassemblies in Public Place” by various industries as well as our increased marketing efforts to promote the product. This sales trend continued during the three months ended September 30, 2011.

February 2010 Notes

On February 3, 2010, the Company entered into a Securities Purchase Agreement with six purchasers pursuant to which the purchasers purchased promissory notes in the aggregate amount of US$900,000 (“February 2010 Notes”). The February 2010 Notes were due and payable on August 3, 2010 (the “Maturity Date”) together with accrued interest at the rate of 20% per annum. The February 2010 Notes were classified as current liabilities with the corresponding accrued interest of US$9,057 as of December 31, 2010.

The Company has repaid all principal and interest due and payable under the February 2010 Notes. All remaining amounts owed with respect to the February 2010 Notes were settled in April 2011, including the claim by two investors for attorneys fees incurred in connection with the prior collection efforts related to the amounts that were previously owed under their respective February 2010 Notes.

The funds for the Partial Payment were provided to the Company by Allhomely International Limited (“Allhomely”), an entity controlled by Jan Pannemann, the Company’s Executive VicePresident and QingRan Zhu, the Company’s Chairman and Chief Executive Officer. On December 6, 2010, the Company and Allhomely entered into a subscription agreement pursuant to which Allhomely agreed to purchase 714,286 shares of the Company’s common stock for the $500,000 of funds provided (which is an effective purchase price of $0.70 per share). On February 28, 2011, the Company and Allhomely entered into a subscription agreement pursuant to which Allhomely agreed to purchase 779,221 shares of the Company’s common stock for the $600,000 of funds provided, which is per share purchase price of $0.77 per share, which was the closing price of the Company’s common stock as quoted on the Over-the-Counter Bulletin Board on February 28, 2011. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933, as amended.

As mentioned above, on December 6, 2010, the Company and Allhomely International Limited (“Allhomely”) entered into a subscription agreement pursuant to which Allhomely agreed to purchase 714,286 shares of the Company’s common stock for the $500,000 of funds provided.

On June 13, 2011, the date of modification, the Company reduced the exercise price of all PN warrants to US$0.70 per warrant and increased the total number of PN warrants from 495,000 to 1,355,357.

Results of Operations

Three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010

The following tables set forth our summary statement of operations data for the three and nine months ended September 30, 2011 and 2010, and our summary balance sheet as of September 30, 2011 and 2010.

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

									As of
Selected Balance Sheet Data									September 30,
									2011				2010
Balance Sheet Information:									US$'000
Working capital										$	18,902			$	13,704
Total assets											71,701				51,205
Total liabilities											29,204				19,875
Additional Paid-In Capital											7,249				5,925
Accumulated Profit											28,631				20,575
Stockholders’ equity											42,497				31,330

	Nine Months Ended								Three Months Ended
Selected Statement of Operations Data:	September 30,								September 30,
	2011				2010						2011				2010
	US$'000								US$'000
INCOME
Operating revenues
Chemical			15,122				8,756				5,533				3,369
Fertilizer			59,389				52,361				12,014				13,953
Total		$	74,511			$	61,117			$	17,547			$	17,322

COST OF SALES
Chemical			11,668				6,782				4,243				2,611
Fertilizer			50,306				44,308				10,192				11,726
Total		$	61,974			$	51,090			$	14,435			$	14,337

GROSS PROFIT
Chemical			3,454				1,974				1,290				758
Fertilizer			9,083				8,053				1,822				2,227
Total		$	12,537			$	10,027			$	3,112			$	2,985

OPERATING EXPENSES
Administrative expenses			4,450				4,079				1,313				1,140
Finance expense			775				885				220				203
Other expenses (income)			(69	)			(35	)			(17	)			(11	)
Total Operating Expenses		$	5,156			$	4,929			$	1,516			$	1,332


TAX			1,742				1,298				442				369

NET INCOME		$	5,639			$	3,800			$	1,154			$	1,284

Operating Revenues

Revenues for the quarter ended September 30, 2011 of approximately $17,547,000 increased approximately $225,000 or 1.3% from approximately $17,322,000 for the quarter ended September 30, 2010. Chemical sales volume for the quarter ended September 30, 2011 of approximately 1,168 tonnes represent an overall decrease of approximately 5,250 tonnes or 81.8% from sales volume of approximately 6,418 tonnes for the quarter ended September 30, 2010. The decrease is accounted for mainly by the decrease in the sales of calcium chloride, magnesium chloride, snow melting agent, and thiopene, partially offset by the 30% increase in the sales volume of flame retardant. Sales of chemical products increased by approximately $2,164,000 or 64.2% despite the decrease in the overall volume mainly due to (1) the concurrent increase in the volume of sales and average selling price of the flame retardant product as a consequence of the strong demand for the new product, which has a high sales price per tonne, and (2) the increase in the average selling price of thiophene by approximately 28.6%. The average sales price of flame retardant increased approximately 90.6%, due to increasing demand for the product, resulting from the implementation of the "Fire Prevention Law of The People's Republic of China" and the government standards set by “Requirements and Mark on Burning Behavior of Fire Retarding Products and Subassemblies in Public Place” by various industries as well as our increased marketing efforts to promote the product. Fertilizer sales volume for the quarter ended September 30, 2011 of approximately 29,055 tonnes represents a decrease of approximately 13,308 tonnes or 31.4% from sales volume of approximately 42,363 tonnes for the quarter ended September 30, 2010. Sales of fertilizer products decreased by approximately $1,939,000 or 13.9% due primarily to the decrease in sales volume typical during harvest season, inspite of the increase in average sales price of the best-selling products.

Revenues for the nine months ended September 30, 2011 of approximately $74,511,000 increased approximately $13,394,000 or 21.9% from approximately $61,117,000 for the nine months ended September 30, 2010. Chemical sales volume for the nine months ended September 30, 2011 of approximately 36,408 tonnes represent a decrease of approximately 7,024 tonnes or 16.2% from the sales volume of approximately 43,432 tonnes for the nine months ended September 30, 2010. Sales of chemical products increased by approximately $6,366,000 or 72.7% mainly due to the concurrent increase in the volume of sales and average selling price of flame retardant product as a consequence of a strong demand for the new product, which has a high sales price per tonne, offseting the effect of reduced sales volume of other major chemical products, such as calcium chloride, magnesium chloride, de-icing salt, and thiophene. Fertilizer sales volume for the nine months ended September 30, 2011 of approximately 153,102 tonnes represents a decrease of approximately 11,439 tonnes or 7% from sales volume of approximately 164,541 tonnes for the nine months ended September 30, 2010. Sales of fertilizer products increased by approximately $7,028,000 or 13.4% due primarily to increase in average sales price of the best-selling products, such as Specialty Fertilizer, Organic and inorganic fertilizer (bio) 15-7-8, Compound Fertilizer (biological) 12-5-8, Silicon calcium and magnesium soil conditioner 8-6-10-5-15, new type of compound fertilizer (slow release) 16-8-16, New compound fertilizer (slow release) 18-9-18, Silicon calcium and magnesium soil conditioner 10-5-20, and New Compound chat (release) 24-8-8, which offset the decrease in the sales volume.

Cost of Sales

Total cost of sales for the quarter ended September 30, 2011 was approximately $14,435,000 or 82.3% of operating revenues compared to approximately $14,337,000 or 82.8% of operating revenues for the three months ended September 30, 2010. Chemical products cost of sales for the quarter ended September 30, 2011 was approximately $4,243,000 or 76.7% of chemical operating revenues. Chemical products cost of sales for the quarter ended September 30, 2010 was approximately $2,611,000 or 77.5% of chemical operating revenues. The increase in the cost of sales of chemical products of approximately $1,632,000 resulted primarily from the increase in sales volume as well as the increase in the cost of production related to the Company's new flame retardant product. Fertilizer products cost of sales for the quarter ended September 30, 2011 was approximately $10,192,000 or 84.8% of fertilizer operating revenues. Fertilizer products cost of sales for the quarter ended September 30, 2010 was approximately $11,726,000 or 84% of fertilizer operating revenues. The decrease in cost of sales for fertilizer products of approximately $1,534,000 resulted primarily from the decrease in sales volume.

Total cost of sales for the nine months ended September 30, 2011 was approximately $61,974,000 or 83.2% of operating revenues compared to approximately $51,090,000 or 83.6% of operating revenues for the nine months ended September 30, 2010. Cost of sales for our chemical products for the nine months ended September 30, 2011 was approximately $11,668,000 or 77.2% of chemical operating revenues. Cost of sales for our chemical products for the nine months ended September 30, 2010 was approximately $6,782,000 or 77.5% of chemical operating revenues. The increase in the cost of sales of chemical products of approximately $4,886,000 resulted primarily from the increase in sales volume as well as the increase in the cost of production related to the Company’s new flame retardant product. Cost of sales for our fertilizer products for the nine months ended September 30, 2011 was approximately $50,306,000 or 84.7% of fertilizer operating revenues. Cost of sales for our fertilizer products for the nine months ended September 30, 2010 was approximately $44,308,000 or 84.6% of fertilizer operating revenues. The increase in the cost of sales of fertilizer products of approximately $5,998,000 between the corresponding periods resulted primarily from the increase in the cost of the major raw materials used in production, such as phosphate, sulphur, and ammonia.

Gross Profit

Total gross profit for the quarter ended September 30, 2011 was approximately $3,112,000 or 17.7% of operating revenues compared to approximately $2,985,000 or 17.2% of operating revenues for the quarter ended September 30, 2010. Chemical products gross profit for the quarter ended September 30, 2011 was approximately $1,290,000 or 23.3% of chemical operating revenues. Chemical products gross profit for the quarter ended September 30, 2010 was approximately $758,000 or 22.5% of chemical operating revenues. The increase in the gross profit from the sales of chemical products of approximately $532,000 resulted primarily from the increase in sales volume and sales price of the new flame retardant product, offset by the increase in the cost of its production. Fertilizer products gross profit for the quarter ended September 30, 2011 was approximately $1,822,000 or 15.2% of fertilizer operating revenue. Fertilizer products gross profit for the quarter ended September 30, 2010 was approximately $2,227,000 or 16% of fertilizer operating revenue. The decrease in the gross profit of fertilizer products of approximately $405,000 resulted mainly from the decrease sales volume, offset by the increase in the average sales price of the best-selling fertilizer products, such as Specialty Fertilizer, Organic and inorganic fertilizer (bio) 15-7-8, Compound Fertilizer (biological) 12-5-8, Silicon calcium and magnesium soil conditioner 8-6-10-5-15, new type of compound fertilizer (slow release) 16-8-16, New compound fertilizer (slow release) 18-9-18, Silicon calcium and magnesium soil conditioner 10-5-20, and New Compound chat (release) 24-8-8 during the quarter ended September 30, 2011 by approximately 21.1% compared to the same period in 2010.

Total gross profit for the nine months ended September 30, 2011 was approximately $12,537,000 or 16.8% of operating revenues compared to approximately $10,027,000 or 16.4% of operating revenues for the nine months ended September 30, 2010. Gross profit for our chemical products for the nine months ended September 30, 2011 was approximately $3,454,000 or 22.8% of chemical operating revenues. Gross profit for our chemical products for the nine months ended September 30, 2010 was approximately $1,974,000 or 22.5% of chemical operating revenues. The increase in the gross profit of chemical products of approximately $1,480,000 or 75% between the corresponding periods resulted mainly from the increase in sales volume of the new product flame retardant. Another factor that increased the gross profit for our chemical products was the increase in the sales price of flame retardant, calcium chloride, and thiophene. Gross profit for our fertilizer products for the nine months ended September 30, 2011 was approximately $9,083,000 or 15.3% of fertilizer operating revenues. Gross profit for our fertilizer products for the nine months ended September 30, 2010 was approximately $8,053,000 or 15.4% of fertilizer operating revenues. The increase in the gross profit of fertilizer products of approximately $1,030,000 or 12.8% between the corresponding periods resulted mainly from the increase in the average sales price of the best-selling products, such as Specialty Fertilizer, Organic and inorganic fertilizer (bio) 15-7-8, Compound Fertilizer (biological) 12-5-8, Silicon calcium and magnesium soil conditioner 8-6-10-5-15, new type of compound fertilizer (slow release) 16-8-16, New compound fertilizer (slow release) 18-9-18, Silicon calcium and magnesium soil conditioner 10-5-20, and New Compound chat (release) 24-8-8 in 2011.

Operating Expenses

Operating expenses consist primarily of transportation expenses, commission, promotion and advertising expenses, freight charges and general and administrative expenses. Operating expenses amounted to approximately $1,313,000, or 7.5% of operating revenues for the quarter ended September 30, 2011 as compared to approximately $1,140,000 or 6.6 % of operating revenues for the quarter ended September 30, 2010. The increase in operating expenses between the two periods of approximately $23,000 is mainly due to the increase in transport, packing, and handling expenses.

Operating expenses consist primarily of transportation expenses, commission, promotion and advertising expenses, freight charges and general and administrative expenses. Operating expenses amounted to approximately $4,450,000, or 6.0% of operating revenues for the nine months ended September 30, 2011 as compared to approximately $4,079,000, or 6.7% of operating revenues for the nine months ended September 30, 2010. The increase in operating expenses between the two periods of approximately $221,000 is mainly due to the increase in transport, packing, and handling expenses.

Income Taxes

Changda Chemical, Changda Fertilizer, Changda Heze and Shangdong Fengtai as wholly owned foreign subsidiaries, are subject to effective tax rates of 28% and 22% for the quarter ended September 30, 2011 and 2010 respectively as a result of tax grants by the PRC local government for economic development. The income tax paid was approximately $442,000 for the quarter ended September 30, 2011 and approximately $369,000 for same period in 2010.

The Company is subject to effective tax rates of 24% and 25% for the nine months ended September 30, 2011 and 2010, respectively. The income tax expense was approximately $1,742,000 for the nine months ended September 30, 2010 and approximately $1,298,000 for same period in 2010.

Net Income

Our net income of approximately $1,154,000 for the quarter ended September 30, 2011 increased from approximately $1,284,000 for the quarter ended September 30, 2010. The increase in net income was largely due to the increase in operating revenues and gross profit. For the quarter ended September 30, 2011, income taxes increased consequent to the increase in net income and total finance and interest cost increased pursuant to the increase in short-term borrowings for working capital requirements. The income after the operating expenses covered the increase in income tax and interest expense and still resulted in a higher net income compared to the same period in 2010. Net income as a percentage of operating revenues approximated 6.6% and 7.4% for the three months ended September 30, 2011 and 2010, respectively.

Our net income was approximately $5,639,000 for the nine months ended September 30, 2011 and approximately $3,800,000 for the nine months ended September 30, 2010. The increase in net income was largely due to the increase in operating revenues and gross profit. For the nine months ended September 30, 2011, income taxes increased consequent to the increase in net income. Despite the increase in short-term borrowings for the nine months ended September 30, 2011 compared to the same period in 2010, the settlement of the borrowings on the February 2010 promissory notes resulted in the decrease of total finance and interest cost by $110,000 for the nine months ended September 30, 2011 compared to those for the nine months ended September 30, 2010. Net income as a percentage of total operating revenues approximated 7. 6% and 6.2% for the nine months ended September 30, 2011 and 2010, respectively.

Liquidity and Capital Resources

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2011 and 2010 amounted to approximately $5,188,000 and $6,999,000, respectively. The decrease of approximately $1,811,000 was primarily due to the increase in inventory purchases.

As in December 2009 when management decided that in order to limit the risks of exposure to market volatility and sudden price increases, it was beneficial to take advantage of the reduced price offered by raw material suppliers and entered into agreements with said suppliers at contracted prices with prepayment deposit for substantial delivery of the materials during the first quarter of 2010, management continued to make prepayment deposits for raw materials in 2011 and 2010 as the return on the investment has been beneficial to the company in terms of hedging against raw material price increases.

Investment Activities

Net cash used for investment activities for the nine months ended September 30, 2011 and 2010 amounted to approximately $10,347,000 and $2,449,000, respectively. This increase of approximately $7,898,000 was mainly due to the increase in acquisition of fixed assets and in placing cash on a restricted category in 2011.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2011 and 2010 amounted to approximately $8,867,000 and $2,889,000, respectively. This represents an increase of approximately $5,978,000 which was primarily due to the net increase in new borrowings.

Future cash commitments

In order to improve our performance and competitiveness, we are constructing our Heze fertilizer plant and are preparing to expand our Thiophene product line. We have already invested a total of $7,506,000 into our Heze plant through September 30, 2011. However, an additional $13,104,000 is needed to complete the constructions and an additional $11,500,000 will be needed for the normal operation of the plant and Thiophene product line for the first 12 months after its completion.

To strengthen our financial position, we intend to seek additional funding to be used for general corporate purposes, as well as research and development activities, including advancing our current product development activities and construction of the Heze Plant. We intend to seek funding for our capital needs through the issuance of debt, preferred stock, equity, loan guarantees, or a combination of these types of instruments. We may also seek to obtain financing through private placement or a public offering, a consequence of which could include the sale or issuance of stock to third parties. We expect that we will be able to secure sufficient financing to satisfy our anticipated cash requirements for normal operations and capital expenditures through at least December 31, 2011, although current economic and market conditions will make it challenging for us to do so.

We cannot be certain that we will be able to obtain financing on terms acceptable to us or at all. If we are not able to raise additional capital, we will not have sufficient cash to fund our operations. In such case, we could be required to curtail or cease operations, liquidate or sell assets, modify our current plans for product development, and other research and development activities, or extend the time frame over which these activities will take place, or pursue other actions that would adversely affect future operations.

On February 3, 2010, the Company entered into a Securities Purchase Agreement with six purchasers pursuant to which the purchasers purchased promissory notes in the aggregate amount of US$900,000 (“February 2010 Notes”). The February 2010 Notes were due and payable on August 3, 2010 (the “Maturity Date”) together with accrued interest at the rate of 20% per annum. The February 2010 Notes were classified as current liabilities with the corresponding accrued interest of US$9,057 as of December 31, 2010.

In conjunction with the February 2010 Notes, the Company issued warrants to purchasers of the February 2010 Notes to purchase an aggregate of 495,000 shares of the Company’s common stock (“PN Warrants”). The exercise price per share is US$2.25, subject to customary adjustments as set forth in the PN Warrants for stock splits, stock dividends, etc. The PN Warrants expire three years from and fully vested at the date of issuance. The Company assessed the terms in accordance with ASC Topic 815 “Derivatives and Hedging” and determined that the PN Warrants should be accounted for as equity and are valued at fair value at the date of issuance. The fair value of the PN Warrants was estimated as $0.90 per warrant at the date of issuance using Black-Scholes model.

On February 18, 2011 and February 25, 2011, the Company made payments to the holders of the February 2010 Notes totaling an aggregate of US$600,000 (the "Note Repayment"). This Note Repayment covered all remaining principal and accrued but unpaid interest due and payable under the February 2010 Notes, as a result of which the February 2010 Notes have been repaid in full.

The funds for the repayments made on Februrary 18, 2011 and February 25, 2011 were provided to the Company by Allhomely International Limited ("Allhomely"), an entity controlled by Jan Pannermann, the Company's Executive Vice President and QingRan Zhu, The Company's Chairman and Chief Executive Officer. On February 28, 2011, the Company and Allhomely entered into a subsription agreement pursuant to which Allhomely agreed to purchase 779,221 shares of the Company's common stock for the $600,000 of funds provided, which is per share purchase price of $0.77 per share, which was the closing price of the Company's common stock as quoted on the Over-the Counter Bulletin Board on February 28, 2011. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933, as amended.

The Company has repaid all principal and interest due and payable under the February 2010 Notes. All remaining amounts owed with respect to the February 2010 Notes were settled in April 2011, including all amounts of attorneys fees incurred in connection with the prior collection efforts by certain noteholders.

On June 13, 2011, the date of modification, the Company reduced the exercise price of all the PN Warrants to US$0.70 per warrant and increased the total number of PN Warrants from 495,000 to 1,355,357.

The fair value of the modified PN Warrants was estimated as US$0.11 per warrant and weighted average fair value of the original PN Warrant was estimated as US$0.02 per warrant at the date of modification using the Black- Scholes model together with the following assumptions:

Expected volatility	26%
Expected dividends	Nil
Expected life	1.5 years
Risk-free interest rate	1.59%

During the nine-month period ended September 30, 2011, no PN Warrant has been exercised. There are 1,355,357 PN Warrants with weighted average exercise price of US$0.70 and remaining life of 1.25 years outstanding and exercisable as of September 30, 2011. While as of December 31, 2010, there were 495,000 PN Warrants with weighted average exercise price of US$1.92 and remaining life of 2 years outstanding.

On February 2, 2010, Changda Chemical entered into a loan agreement with Huaran Zhu, our director, for an unsecured interest free loan in the amount of $303,444. The loan is not subject to any interest. The loan is payable on demand.

On March 9, 2010, Weifang Changda Fertilizer Co., Ltd. entered into a loan contract with Bank of Weifang, New Worker Village Branch, for a loan in the amount of $3,053,388. The loan is due and payable on March 8, 2011. The interest rate is 40% more than the Benchmark Lending Rate issued by the China Central Bank and should be adjusted monthly, with the executed interest rate as 7.434% per annum. Interest is payable on a monthly basis. The loan is secured by land use right and factory building of Weifang Changda Fertilizer Co., Ltd., our subsidiary. On March 14, 2011, Changda Fertilizer entered into a loan contract with Bank of Weifang, New Worker Village Branch, to extend the loan until March 3, 2012. The interest rate is 8.484% per annum

On March 25, 2010, Weifang Changda Chemicals Co., Ltd. entered into a loan contract with Bank of Weifang, New worker village Branch, for a loan in the amount of $610,678. The loan is due and payable on March 24, 2011. The interest rate should be 40% more than the Benchmark Lending Rate issued by the China Central Bank and should be adjusted every month, with the executed interest rate as 7.434% per annum. Interest is payable on a monthly basis. The loan is guaranteed by Weifang Sanyou Package Products Co., Ltd., a supplier of Changda Chemical. On March 30, 2011, we entered into an agreement with Bank of Weifang New worker village Branch to extend the loan on the same terms until March 21, 2012, while the executed interest rate is 8.484% per annum.

On June 4, 2010, Weifang Changda Fertilizer Co., Ltd. entered into a loan agreement with Qingran Zhu, our CEO, for an unsecured loan in the amount of $1,044,303. The loan is not subject to any interest. The loan is due and payable on June 3, 2012. The loan was fully paid by February 2011.

On July 26, 2010, Changda Chemicals entered into a loan contract with China Minsheng Banking Corp., Ltd., for a loan in the amount of $2,290,041. The loan is due and payable on July 26, 2011. The interest rate equals 20% more than the Benchmark Lending Rate issued by the China Central Bank and is adjusted every month, with an executed interest rate of 6.372% per annum. Interest is payable on a monthly basis. The loan is secured by land use right and factory building of Weifang Changda Chemicals Co., Ltd., our subsidiary and is guaranteed by Weifang Changda Fertilizer Co., Ltd., our subsidiary. This loan was fully paid on July 26,2011.

On January 5, 2011, Changda Chemicals entered into a loan contract with Bank of Weifang, New worker village Branch, for a loan in the amount of $687,012. The loan is due and payable on April 4, 2011. The interest rate is 8.114% per annum. Interest is payable on a monthly basis. The loan is secured by the revenue from our sales agreement with Seiwa Fertilizer Ind. Co., Ltd, one of our customers. This loan was fully paid on April 4, 2011.

On September 3, 2009, Changda Fertilizer entered into a Credit Facility Agreement with the China Merchants Bank, Weifang Branch, for a credit facility in the amount of $1,517,220. The loan is due and payable on September 2, 2010. The interest rate is to be determined on application of loans under the credit facility agreement. The maximum amount under the credit facility agreement is guaranteed by Changda Chemicals and Qingran Zhu, our chief executive officer, through separate Maximum Irrevocable Guarantee Agreements, effective September 3, 2009. Pursuant to the Maximum Irrevocable Guarantee Agreements, Changda Chemicals and Qingran Zhu are jointly and severally liable for any unpaid loans, interests, or fees arising under the agreement. Pursuant to the Credit Facility Agreement, on September 3, 2009, Changda Fertilizer applied for a loan in the amount of $763,347. The loan was due and payable on the maturity date of September 2, 2010. The loan is subject to a fixed annual interest rate of 6.372% per annum. In the case of unauthorized use of the loan, the annual interest rate is 100% more than the 12-month Benchmark Lending Rate issued by China Central Bank on the date of unauthorized use. On September 2, 2010, Changda Fertilizer entered into a loan contract with China Merchants Bank, Weifang Branch, to extend the loan until March 1, 2011. The interest rate is 5.832% per annum. On March 2, 2011, Changda Fertilizer entered into a loan contract with China Merchants Bank, Weifang Branch, to extend the loan until March 2, 2012. The interest rate is 8.203% per annum.

On August 24, 2010, Changda Fertilizer extended a loan contract with Bank of Weifang, New worker village Branch, for a loan in the amount of $458,008. The loan is due and payable on August 21, 2011. The interest rate equals 40% more than the Benchmark Lending Rate issued by the China Central Bank and should be adjusted every month, with an executed interest rate of 7.434% per annum. Interests should be paid monthly. The loan is guaranteed by Weifang Changda Chemicals Co., Ltd., our subsidiary. The loan was fully paid on August 23, 2011.

On October 21, 2008, Gang Zhang entered into a personal loan contract with Yingtaoyuan Rural Credit Cooperative, for a loan in the amount of $229,004. The loan is due and payable on October 20, 2010. The interest rate equals 40% more than the Benchmark Lending Rate issued by the China Central Bank and should be adjusted every month, with an executed interest rate of 7.784% per annum. Interest is payable on a monthly basis.The loan is secured by the office premises of Weifang Changda Fertilizer Co., Ltd., our subsidiary. On October 21, 2008, Gang Zhang and Changda Fertilizer entered into an entrusted loan agreement pursuant to which Gang Zhang entrusted his loan with Yingtaoyuan Rural Credit Cooperative to Changda Fertilizer.On October 28, 2010, we entered into an agreement with Weifang Weicheng district Rural Credit Cooperative (previously known as Yingtaoyuan Rural Credit Cooperative) to extend the loan the same terms until October 27, 2011. On October 27, 2011, the loan was extended until October 26, 2012.

On January 31, 2011, Weifang Changda Fertilizer Co., Ltd. entered into a loan contract with China Minsheng Banking Corp., Ltd and Shandong Liwei Touzi Youxian Gangsi, for a loan in the amount of $763,347. China Minsheng Banking Corp., Ltd is an agent, while Shandong Liwei Youxian Gongsi is the capital provider. The loan is due and payable on July 30, 2011. The executed interest rate is 19.2% per annum. Interest is payable on a monthly basis. The loan was fully paid on July 31, 2011.

On March 23, 2011, Weifang Changda Fertilizer Co., Ltd. entered into a loan contract with Shenzhen Development Bank, Qingdao Branch, for a loan in the amount of $1,526,694. The loan is due and payable on March 22, 2012. The interest rate is 10% more than the Benchmark Lending Rate issued by the China Central Bank and should be adjusted monthly, with the executed interest rate as 6.941% per annum. Interest is payable on a monthly basis. The loan is guaranteed by Weifang Dayeng Shipin Youxian Gongsi.

On March 25, 2011, Weifang Changda Fertilizer Co., Ltd. entered into a Bank’s acceptance bill contract with Shenzhen Development Bank, Qingdao Branch, for the note payable in the amount of $6,189,076. The note payable is due and payable on September 25, 2011. The note payable is secured by the bank deposit placed in Shenzhen Development Bank, Qingdao Branch, with an amount of $3,868,173. The note was paid on September 25, 2011.

On April 5, 2011, Changda Chemicals entered into a loan contract with Industrial and Commercial Bank of China Limited, Weifang Dongguan Branch, for a loan in the amount of $1,856,723. The loan is due and payable on December 15, 2011. The interest rate is 6.941% per annum. Interest is payable on a monthly basis. The loan is guaranteed by Shandong Yinlin Guarant Co., Ltd.

On July 26, 2011, Changda Fertilizer entered into a loan contract with Zheshang Bank of China, for a loan in the amount of $1,718,266. The loan is due and payable on July 25, 2012. The interest rate is 6.56% per annum. Interest is payable on a monthly basis. The loan is guaranteed by Shandong Shouguang ShenRunfa Ocean Chemical Industry Co., Ltd.

On August 2, 2011, Weifang Changda Fertilizer Co., Ltd. entered into a Bank’s acceptance bill contract with Zhejiang Bank, Jinan Branch, for the note payable in the amount of $3,124,121. The note payable is due and payable on February 2, 2012. The note payable is secured by the bank deposit placed in Zhejiang Bank, Jinan Branch, with an amount of $3,124,121.

On September 27, 2011, Weifang Changda Fertilizer Co., Ltd. entered into a Bank’s acceptance bill contract with Shenzhen Development Bank, Qingdao Branch, for the note payable in the amount of $3,905,152. The note payable is due and payable on March 27, 2012. The note payable is secured by the bank deposit placed in Shenzhen Development Bank, Qingdao Branch, with an amount of $1,562,061.

While we have interest bearing loans and notes payable in the aggregate principal amount of $16,948,000 which are due on or before March 31, 2012, we believe that we have sufficient cash on our balance sheet and will have sufficient cash from operations to repay all indebtedness when it becomes due. Furthermore, it is standard practice in China for financial institutions loans to rollover loans on the same terms as opposed to entering into long-term credit arrangements. In the past we have not experienced any problems in rolling over any of our short term loans. However, if the banks we currently dealing should decide not to roll over our loans and we do not have sufficient cash from operations or on our balance sheet to repay such indebtedness, we may need to seek funding for our capital needs through the issuance of debt, preferred stock, equity, loan guarantees, or a combination of these types of instruments. While we do not anticipate the need to raise any additional capital at this time, to the extent we do need to raise capital in the future, we cannot be certain that we will be able to obtain financing on terms acceptable to us or at all. In such case, we may be required to curtail or cease operations, liquidate or sell assets, modify our current plans for product development, and other research and development activities, or extend the time frame over which these activities will take place, or pursue other actions that would adversely affect future operations.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

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

The following tables summarize our contractual obligations as of September 30, 2011 and the effect these obligations is expected to have on our liquidity and cash flows in future periods.

	Payments Due by Period
	Total		Less than 1 year		1-3 Years		3-5 Years		5 Years +
			(in thousands)

Contractual Obligations :
Operating Lease	$	206	$	5	$	10	$	10	$	181
Loans, Notes and Other Borrowings
Notes payable	$	7,029	$	7,029	$	-	$	-	$	-
Shareholders’ loans	$	1,140	$	1,140	$	-	$	-	$	-
Short-term interest-bearing borrowings	$	9,919	$	9,919	$	-	$	-	$	-
Interest payable	$	-	$	-
Promissory notes	$	-	$	-	$	-	$	-	$	-
Total Loans, Notes and Other Borrowings	$	18,088	$	18,088	$	-	$	-	$	-

Total Contractual Obligations:	$	18,294	$	18,093	$	10	$	10	$	181

Off-balance Sheet Arrangements

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

Foreign Currency Exchange Rate Risk

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

Critical Accounting Policies and Estimates

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

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

Critical accounting estimates and judgments

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

Impairment test of assets

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

Allowance of bad and doubtful debts .

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

Allowance for inventories.

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

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRSs”) (“ASU 2011-05”)”. ASU 2011-04 amends certain accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S. GAAP and in IFRSs and that their respective fair value measurement and disclosure requirements are the same. ASU 2011-04 is effective for public entities during interim and annual periods beginning after December 15, 2011. Early adoption by public entities is not permitted. The Company believes that the adoption of ASU 2011-04 will not have a material impact on the Company’s consolidated results of operation and financial condition.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income,” (“ASU 2011-05”) which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, the reporting entity must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011 with early adoption permitted. The Company believes that the adoption of ASU 2011-05 will not have a material impact on the Company’s consolidated results of operation and financial condition.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles—Goodwill and Other (ASC Topic 350): Testing Goodwill for Impairment,” (“ASU 2011-08”) which simplifies how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The Company believes that the adoption of ASU 2011-08 will not have a material impact on the Company’s consolidated results of operation and financial condition.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures. We maintain "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information 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. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of September 30, 2011, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported, within the time periods specified for each report and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting for the quarterly period ended September 30, 2011 identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Controls

Management does not expect that the Company's disclosure controls and procedures or the Company's internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. The Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and the Company's chief executive officer and chief financial officer have concluded that the Company's disclosure controls and procedures are effective at that reasonable assurance level.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

We are not currently a party to any material legal proceedings except as described below.

On October 1, 2010, the Company received notice that on September 27, 2010, holders of an aggregate of $250,000 principal amount of promissory notes issued on February 3, 2010 (the “February 2010 Notes”) filed a complaint (the “Complaint”) in the Supreme Court of the State of New York, County of New York (the “Court”), Index No. 651595/10, against the Company seeking repayment of their respective February 2010 Notes. On May 3, 2011, these holders of February 2010 Notes filed a notice of discontinuance in the Court to voluntarily discontinue the action against the Company.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Exhibit No.		Description

31.1		Certification of Principal Executive Officer pursuant to 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2.		Certification of Principal Financial Officer pursuant to 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

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

101.INS		XBRL Instance Documentz*

101.SCH		XBRL Taxonomy Extension Schema Document*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

* The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

SIGNATURES

In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CHANGDA INTERNATIONAL HOLDINGS, INC.

Date: November 14, 2011	By:	/s/ Qingran Zhu
		Qingran Zhu
		Chief Executive Officer (Principal Executive Officer)


Date: November 14, 2011	By:	/s/ Leodegario Quinto Camacho
		Leodegario Quinto Camacho
		Chief Financial Officer (Principal Financial and Accounting Officer)

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Changda International (CIHD) Inactive 10-Q2011 Q3 Quarterly report

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