Green Solutions China 10Q 2010 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________

FORM 10-Q

_____________________

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

For the quarterly period ended December 31, 2009

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

For the transition period from ______to______.

China Green, Inc.

(Exact name of registrant as specified in the Charter)

DELAWARE		000-53415		75-3269053
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(IRS Employee Identification No.)

Room 3601, the Centre, Queen’s Road no.99

Central, Hong Kong

(Address of Principal Executive Offices) (Zip Code)

(852) 3691-8831

(Registrants Telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer 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 o 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 filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

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

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of February 16, 2010: 12,499,500 shares of common stock.

CHINA GREEN, INC.

FORM 10-Q

December 31, 2009

TABLE OF CONTENTS

PART I— FINANCIAL INFORMATION

Item 1.	Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4T.	Controls and Procedures

PART II— OTHER INFORMATION

Item 1.	Legal Proceedings
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits

SIGNATURES

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

CHINA GREEN, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

CHINA GREEN, INC.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

	Page(s)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME	3

CONDENSED CONSOLIDATED BALANCE SHEETS	4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6-25

CHINA GREEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

			Three months			Three months			Six months			Six months
			ended			ended			ended			ended
			December 31,			December 31,			December 31,			December 31,
			2009			2008			2009			2008
			(unaudited)			(unaudited)			(unaudited)			(unaudited)
	Notes		$			$			$				$

Service income		11		3,952,395			1,927,282			7,449,119			5,550,037

Cost of services		12		(1,591,337	)		(1,164,139	)		(3,175,379	)		(2,390,205	)

Gross profit				2,361,058			763,143			4,273,740			3,159,832

General and administrative expenses		13		(28,384	)		(20,872	)		(51,316	)		(55,283	)

Income before taxation				2,332,674			742,271			4,222,424			3,104,549

Income tax		14		(10,243	)		-			(48,666	)		-

Net income				2,322,431			742,271			4,173,758			3,104,549

Other comprehensive income - Foreign currency translation adjustments				(19,883	)		793,872			(14,980	)		793,872

Total comprehensive income				2,302,548			1,536,143			4,158,778			3,898,421

Net income per share – basic and diluted				0.37			0.14			0.66			0.59

Weighted average number of shares outstanding during the period – basic and diluted				6,299,750			5,277,500			6,299,750			5,277,500

The annexed notes form an integral part of these financial statements.

CHINA GREEN, INC.

CONDENSED CONSOLIATED BALANCE SHEETS

AS OF DECEMBER 30, 2009 AND JUNE 30, 2009

(UNAUDITED)

(Stated in US dollars)

			As of			As of
			December 31,			June 30,
	Notes		2009			2009
			(unaudited)			(audited)
ASSETS			$				$
Current assets
Cash and cash equivalents		4		1,099,637			849,457
Accounts receivables		5		7,797,797			5,036,977
Deposit paid for labour services				902,238			903,882
Deposit for contract procurements		6		2,534,093			2,538,710
Deposit paid for hotel investment negotiation		7		2,922,016			1,025,677

Total current assets				15,255,781			10,354,703

Plant and equipment, net		8		833,133			1,083,011

TOTAL ASSETS				16,088,914			11,437,714

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Amount due to a director		9		-			64,499
Amount due to a shareholder		9		-			23,899
Accrued expenses				49,561			10,411
Tax payable		14		120,859			72,303

TOTAL LIABILITIES				170,420			171,112

STOCKHOLDERS’ EQUITY
Authorized : 500,000,000 shares;		10		125			105
Issued : 12,499,500 shares
Additional paid-in capital		10		497,997			-
Accumulated other comprehensive income				(14,980	)		836,560
Retained earnings				15,435,352			10,429,937

				15,918,494			11,266,602

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				16,088,914			11,437,714

The annexed notes form an integral part of these financial statements.

CHINA GREEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED DECEMBER 30, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)


	Three months			Three months			Six months			Six months
	ended			ended			ended			ended
	December 31,			December 31,			December 31,			December 31,
	2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
	$			$			$				$
Cash flows from operating activities
Net income before taxation		2,332,674			742,271			4,222,424			3,104,549
Depreciation		133,079			131,883			265,193			263,769
Decrease in accounts receivables		(552,566	)		(160,563	)		(2,760,820	)		1,879,773
Increase in deposit for contract procurements		-			(2,527,806	)		-			(2,527,806	)
Increase in deposit paid for hotel investment		(1,898,265	)		(729,684	)		(1,896,339	)		(729,684	)
Negotiation
Increase in accrued expenses		34,266			-			49,561			-
(Decrease) / increase in amount due to a		(24,638	)		3,625			(23,899	)		19,987
shareholder
Decrease in amount due to a director		(64,376	)		-			(64,499	)		-

Net cash (used in) / from operating activities		(39,826	)		(2,540,274	)		(208,379	)		2,010,588

Cash flows from investment activities
Investment in a subsidiary		-			-			-			(100	)
Purchases of plant and equipment		(17,339	)		(11,088	)		(17,339	)		(11,088	)

Net cash used in investment activities		(17,339	)		(11,088	)		(17,339	)		(11,188	)


Cash flows from financing activities
Issue of share		-			-			20			105
Additional paid-in capital		-			-			497,997			-
Dividend paid		-			(729,480	)		-			(729,480	)

Net cash (used in) / generated in financing activities		-			(729,480	)		498,017			(729,375	)


Net (decrease) / increase in		(57,165	)		(3,280,842	)		272,299			1,270,025
cash and cash equivalents
Effect of foreign currency translation on cash and		94			(809,994	)		(22,119	)		(755,030	)
cash equivalents
Cash and cash equivalents - beginning of period		1,156,708			4,970,316			849,457			364,485

Cash and cash equivalents - end of period		1,099,637			879,480			1,099,637			879,480

The annexed notes form an integral part of these financial statements.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America for interim consolidated financial information. Accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements.

In connection with the reverse acquisition and recapitalization, all share and per share amounts will be retroactively restated.

The consolidated financial statements are prepared on the basis with assumption the reverse merger was undergone at the beginning of July 1, 2008. The historical consolidated financial statements of the Company will be those of China Green, Inc. and of the consolidated entities from the July 1, 2008, the date of merger, and subsequent. The consolidated financial statements for the company for the six months ended December 30, 2009 and 2008, include the financial statements of China Green, Inc., its 100% owned subsidiary, Glorious Pie Limited, and its wholly owned subsidiary, Earn Bright Development Limited. Intercompany transactions and balances are eliminated in consolidation.

In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three-month periods have been made. Results for the periods presented are not necessarily indicative of the results that might be expected for the entire fiscal period. These condensed financial statements should be read in conjunction with the consolidated financial statements and the notes included in the 2008 and 2009 annual report filed with the Securities and Exchange Commission.

2. DESCRIPTION OF BUSINESS

China Green Group (the “Group”) consists of China Green, Inc. (the “China Green”), Glorious Pie Limited (the “Glorious Pie”) and Earn Bright Development Limited (the “Earn Bright”). China Green, Inc. was incorporated in the State of Delaware on July 11, 2008. Glorious Pie Limited was incorporated in the British Virgin Islands on 12 September, 2006, under the International Business Companies Act, British Virgin Islands. Earn Bright Development Limited was incorporated in Hong Kong on December 17, 2008.

On August 12, 2009, China Green, Inc. acquired all of the issued and outstanding common stock of Glorious Pie Limited by issuing 10,355,000 common shares to the Glorious Pie Limited Shareholder under a Share Exchange and Stock Purchase Agreement with Glorious Pie Limited.

The Group is engaged in developing its model in the areas of hospitality facilities and large scale landscape architecture and engineering. The group is specialized on providing greenery services to greenery construction projects in China, including, but not limited to, design advice, trading and quality control service of seed, provision of seedling and performance arrangement of greenery engineering and plantation.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

a) Basis of presentation and consolidation (continued)

The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.

The consolidated financial statements include the accounts of China Green, Inc. and its subsidiaries. Significant intercompany transactions have been elimination in consolidation.

The consolidated financial statements are prepared on the basis with assumption the reverse merger was undergone at the beginning of July 1, 2008.

As of December 31, 2009, the particulars of the subsidiaries are as follows:

Name of company	Place of incorporation	Date of incorporation	Attributable equity interest	Issued capital

Glorious Pie Limited	British Virgin Islands	September 12, 2006	100%	US$100

Earn Bright Development Limited	Hong Kong	December 17, 2008	100%	US$0.128 (HK$1)

b) Use of estimates

In preparing of the financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year. These accounts and estimates include, but are not limited to, the valuation of accounts receivable, inventories, deferred income taxes and the estimation on useful lives of plant and machinery. Actual results could differ from those estimates.

c) Cash and Cash Equivalents

The Group considers all cash and other highly liquid investments with initial maturities of year or less to be cash equivalents. As of December 31 and June 30, 2009, there were cash and cash equivalents of $1,099,637 and $849,457.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

d) Accounts Receivable

Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts. The Group recognizes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectibility. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. An additional reserve for individual accounts is recorded when the Group becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted.

e) Accounting for the Impairment of Long-Lived Assets

The Group adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Live Assets” (“SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Group periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Group believes that, as of December 31 and June 30, 2009, there were no significant impairments of its long-lived assets.

f) Plant and Equipment

Plant and equipment, other than construction in progress, are stated at cost less depreciation and amortization and accumulated impairment loss.

Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the plant and equipment are as follows:

Equipment and machinery	5 years
Furniture & fixtures	5 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.

Management considers that we have no residual value for plant and equipment.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

g) Fair value of Financial Instruments

SFAS No. 107, “Disclosures about Fair Values of Financial Instruments”, requires disclosing fair value to the extent practicable for financial instruments that are recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

The carrying values of the financial instruments, including cash and cash equivalents, accounts and other receivables, approximate their fair values due to the short-term maturity of such instruments. The carrying amounts of borrowings approximate their fair values because the applicable interest rates approximate current market rates.

h) Foreign Currency Translation

The Group maintains its financial statements in the functional currency. The functional currency of the Group is the Renminbi (RMB). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

For financial reporting purposes, the financial statements of the Group which are prepared using the functional currency have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.

	2009	2008
Three Months end RMB : US$ exchange rate as of December 31	6.837	6.854
Three Months Average RMB : US$ exchange rate	6.836	6.853
Six Months end RMB : US$ exchange rate as of December 31	6.837	6.854
Six Months Average RMB : US$ exchange rate	6.839	6.853

RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Revenue Recognition

The Group revenue is generated from providing services in two aspects as follows:

i) Designing and consultancy services in hotel facilities; and

ii) Resource-efficient engineering business in greenery projects.

The revenue recognized by the Group is based on the Design and Consultancy agreement between the Group and the hotel where the Group has provided the design, consultancy to the hotel and even with certain fixtures and assets provided to that hotel and hence share a certain percentage of gross revenue generated by the hotel facilities for certain years as the consideration.

Revenue from fixed-price and modified fixed-price construction contracts are recognized on the percentage-of-completion method, measured by the percentage of actual cost incurred to date to estimated total cost for each contract. The Group would regularly and frequently reviews the estimated contract cost on each project being accepted and not yet finished to ensure the contract cost estimate is measured with the best knowledge of the personnel involved.

j) Cost of revenue

Regarding the design and consultancy services to the hotel facilities, the respective cost of revenue includes the consultancy expenses in professional staff involved and the design and consultancy fee with other third-party experts, and also the depreciation expenses on those fixtures and movable assets being placed with the hotel by the Group.

Regarding the trading of seeding and provision of greenery engineering projects, the respective cost of revenue consists primarily of material costs, labour cost, subcontracting expenses, and related expenses, which are directly attributable to the greenery construction projects.

k) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of income and comprehensive income in the period that includes the enactment date.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

k) Income Taxes (Continued)

The China Green accounts for income taxes under the liability method in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" under this method, deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The China Green adopted the provisions of FASB Interpretation No. 48; “Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The China Green consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments. At December 30, 2009, the China Green did not record any liabilities for uncertain tax position.

l) Comprehensive Income

SFAS No. 130, "Reporting Comprehensive Income", requires companies to classify items of other comprehensive income in a financial statement. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Group's comprehensive net income is equal to its net income for all periods presented. The Group’s current component of other comprehensive income is the foreign currency translation adjustment.

m) Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

n) Share-based compensation

All share-based payments to employees is recorded and expensed in the statement of operations as applicable under SFAS No. 123R, “Share-Based Payment”. The Company has issued 254,166 shares of share-based compensation at par value USD0.00001 to its director on August 12, 2009 as compensation for services that he rendered.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o) Non-employee stock based compensation

Stock-based compensation awards issued to non-employees for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Emerging Issues Task Force Issue EITF No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”). The Company has issued 1,458,334 shares of non-employee stock based compensation at par value USD0.0001 to third parties on August 12, 2009 as compensation for their consulting services rendered.

p) Segment reporting

The Group uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Group’s chief operating decision maker for making operating decisionsand assessing performance as the source for determining the Group’s reportable segments. Management, including the chief operating decision maker, reviews monthly operating results derived from two types of services and therefore the Group has determined that the Group has two operating segments as defined by SFAS 131, “Disclosures about Segments of an Enterprise and Related Information”.

q) Earnings per share

The Group reports basic earnings per share in accordance with SFAS 128, “Earnings Per Share”. Basic earnings/(loss) per share is computed by dividing net income/(loss) by weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. At December 31, 2009, the Group had no common stock equivalents that could potentially dilute future earnings per share.

r) Additional paid-in captial

In connection with the China Green’s private placement completed in July 2009, the Company issued 332,000 shares of its common stock to 296 investors at USD$1.50 per share for an aggregate purchase price of USD$498,000. The Company issued these shares in reliance on the safe harbor provided by Regulation S promulgated under the Securities Act. These investors who received the securities represented and warranted that they are not “U.S. Person” as defined in Regulation D.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

4. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of the following:

	As of		As of
	December 31,		June 30,
	2009		2009
	(unaudited)		(audited)
	$			$

Cash at bank		108,427		458,729
Cash on hand		991,210		390,728
		1,099,637		849,457

5. ACCOUNTS RECEIVABLES

Accounts receivables consist of the following:

	As of		As of
	December 31,		June 30,
	2009		2009
	(unaudited)		(audited)
	$			$
Accounts receivables related to:

Hotel facilities		218,850		522,113
Greenery construction projects		5,501,755		3,909,385
Greenery maintenance projects		2,077,192		605,479
		7,797,797		5,036,977

At the balance sheet date, most of the accounts receivables were related to greeneryconstruction projects and their credit period is usually ranged from 90 days to 180 days.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

6. DEPOSIT PAID FOR CONTRACT PROCUREMENTS

Main contractors require the company to put escort money during negotiation of contract. Once the contract is successfully made, the escort money will be kept by the contractors until the contract has been completed. If the bid is fail, the escort money will be refunded immediately.

7. DEPOSIT PAID FOR HOTEL INVESTMENT NEGOTIATION

The Group has placed the following amount of deposit being held in escrow by the counter-party for the negotiation for acquiring certain equity interest of the hotel facilities located hereunder which gives comfort to the negotiating party that the Group shows its financial strength and capability to get the acquisition closed if the acquisition deal is reached:

	As of		As of
	December 31,		June 30,
Deposit for hotel investment negotiation	2009		2009
	(unaudited)		(audited)
	$			$
Location:
(1) Dongguan City, Changan Town,
Xin Min Administration Region,		292,517		293,051
Jianan Road Section

(2) Chang An Di Ying Hotel
Dongguan City, Changan Town,
Zhenan Road and Xiabian Road Section		292,517		293,051

(3) Jin Ye Hotel
Guangzhou City, Huan Shi Dong Road,
Section No. 422		438,777		439,575

(4) Sha Tou Hotel
Dongguan City, Changan Town,
Sha Tou Administration Region Section		1,000,000		-

(5) Kang Zu Yuan Hotel
Dongguan City, Changan Town,
Zhen An Zhong Road, Section No. 269		898,205		-

		2,922,016		1,025,677

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

8. PLANT AND EQUIPMENT, NET

Plant and equipment and being part of hotel facilities and consist of the following:

	2009			2009
	(unaudited)			(audited)
At cost	$				$
Balance at beginning of period		2,648,609			2,624,306
Acquisition during the period		17,339			11,136
Exchange difference		(4,819	)		13,167

Balance at end of period		2,661,129			2,648,609

Less: Accumulated depreciation
Aggregated depreciation
Balance at beginning of period		1,565,598			1,030,705
Charge for the period		265,193			527,909
Exchange difference		(2,795	)		6,984

Balance at end of period		1,827,996			1,565,598

Net book value
As of December 31 and June 30		833,133			1,083,011

Management considers that there are no residual value for plant and equipment.

9. AMOUNT DUE TO A DIRECTOR / SHAREHOLDER

The amounts represent unsecured, interest free and have no fixed repayment terms.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

10. STOCKHOLDERS’ EQUITY

On July 17, 2008, the China Green, Inc. issued it’s President and Director 100,000 shares of common stock at par value USD0.00001 as the founder shares as compensation for the services that he rendered in connection with the Company’s incorporation.

In connection with the Company’s private placement completed in July 2009, the Company issued 332,000 shares of its common stock to 296 investors at USD$1.50 per share for an aggregate purchase price of USD$498,000.

On August 12, 2009, the Company has issued 254,166 shares of share-based compensation at par value USD0.00001 to its director as compensation for services that he rendered.

On August 12, 2009, the Company has issued 1,458,334 shares of non-employee stock based compensation at par value USD0.00001 to third parties as compensation for their consulting services rendered.

Stockholders’ equity is as follows:

	Common Stock				Additional paid-in
	Number		Amount($)		capital($)		Total($)
As of date of Inception		100,000		1		-	��	1
Share issued on July 2009		332,000		3		497,997		498,000
Share issued on August 2009		1,712,500		17		-		17
Share issued for takeover a subsidiary		10,355,000		104		-		104
As of December 31, 2009		12,499,500		125		497,997		498,122

As of December 31, 2009, the Company has 500,000,000 shares of common stock authorized and 12,499,500 shares of common stock issued and outstanding.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

11. BUSINESS SEGMENT

The Group is engaged in provision of designing and consultancy services in hotel facilities and also involved in provision of engineering services to greenery construction projects, which include, but is not limited to, provision of seedling and skillful workers to those construction projects.

Segment information is disclosed in accordance to FAS 131, “Disclosures about Segments of an Enterprise and Related Information” as below:

	Greenery					Greenery				Hotel
	Construction					Maintenance				Consultancy &
	Consultancy					Consultancy				Facilities				Total
	3 months ended					3 months ended				3 months ended				3 months ended
	Dec 31,		Dec 31,			Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,
	2009		2008			2009		2008		2009		2008		2009		2008
	(unaudited)		(unaudited)			(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
		$	$				$	$			$	$			$		$
Revenue from
external customers		2,633,107		507,927			604,481		602,977		714,807		816,378		3,952,395		1,927,282

Gross profit		1,466,760		(195,225	)		330,124		288,436		564,174		669,932		2,361,058		763,143

	Greenery				Greenery				Hotel
	Construction				Maintenance				Consultancy &
	Consultancy				Consultancy				Facilities				Total
	6 months ended				6 months ended				6 months ended				6 months ended
	Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,
		2009		2008		2009		2008		2009		2008		2009		2008
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
		$		$		$		$		$		$		$		$
Revenue from
external customers		4,841,085		2,729,315		1,208,514		1,205,968		1,399,520		1,614,754		7,449,119		5,550,037

Gross profit		2,511,582		1,174,749		660,003		663,283		1,102,155		1,321,800		4,273,740		3,159,832

	Dec 31,		Jun 30,		Dec 31,		Jun 30,		Dec 31,		Jun 30,		Dec 31,		Jun 30,
		2009		2009		2009		2009		2009		2009		2009		2009
	(unaudited)		(audited)		(unaudited)		(audited)		(unaudited)		(audited)		(unaudited)		(audited)
		$		$		$		$		$		$		$		$
Segment non-
current assets		-		-		-		-		833,133		1,083,011		833,133		1,083,011

Segment current assets
(excluding cash and
cash equivalents)		8,938,086		6,825,404		2,077,192		1,132,052		3,140,866		1,547,790		14,156,144		9,505,246

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

12. COST OF SERVICES

Details of cost of services are summarized as follows:

	Three months		Three months		Six months		Six months
	ended		ended		ended		ended
	December 31,		December 31,		December 31,		December 31,
	2009		2008		2009		2008
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
	$		$		$			$

Depreciation		133,079		131,883		265,193		263,769
Repair and maintenance		17,554		14,562		32,172		29,184
Sub-contracting charges		513,052		388,297		1,025,724		761,326
Material cost		766,072		532,895		1,531,577		1,122,072
Professionals and related costs		16,823		10,944		31,306		21,888
Other construction costs		144,757		85,558		289,407		191,966

		1,591,337		1,164,139		3,175,379		2,390,205

13. GENERAL AND ADMINISTRATIVE EXPENSES

Details of general and administrative expenses are summarized as follows:

	Three months		Three months		Six months		Six months
	ended		ended		ended		ended
	December 31,		December 31,		December 31,		December 31,
	2009		2008		2009		2008
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
	$		$		$			$

Audit fee		4,872		2,500		9,775		4,500
Computer expenses		995		918		1,960		1,875
Electricity and water		336		267		686		627
Legal and professional fee		14,486		8,830		23,893		17,742
Preliminary expenses		-		-		-		13,801
Sundry expenses		1,301		1,984		2,529		3,648
Travelling		951		1,439		1,843		2,919
Telephone		1,055		557		1,857		1,416
Wages and salaries		4,388		4,377		8,773		8,755

		28,384		20,872		51,316		55,283

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

14. INCOME TAXES

The enterprise income tax is reported on a separate entity basis.

United States Tax

SFAS 109 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. SFAS 109 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

The China Green has a net operating loss carry forward at December 31, 2009 for tax purposes totaling $34,665, expiring through the year 2028. Internal Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carry forwards after a change in control (generally greater than a 50% change in ownership). Temporary differences, which give rise to a net deferred tax asset, are as follows:

	As of
	December 31,
	2009
	(unaudited)
	$
Gross deferred tax assets:
Net operating loss carry forwards		11,786

Total deferred tax assets		11,786
Less: valuation allowance		(11,786	)

Net deferred tax asset recorded		-

The valuation allowance at September 30, 2009 was $8,512. The net change in valuation allowance during the period ended December 31, 2009, was an increase of $3,274. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2009.

The actual tax benefit differs from the expected tax benefit for the period ended December 31, 2009 (computed by applying the U.S. Federal Corporate tax rate of 34% to income before taxes) as follows:

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

14. INCOME TAXES (CONTINUED)

	As of
	December 31,
	2009
	(unaudited)
	$
Expected tax expense (benefit) – Federal		(11,786	)
Change in valuation allowance		11,786
Actual tax expense (benefit)		-

BVI Tax

Glorious Pie Limited is subjected to British Virgin Island (BVI) tax law. The Management of Glorious Pie Limited determined that the company did not operate in BVI and therefore is not subject to BVI tax. Therefore, Glorious Pie Limited did not incur any BVI tax during the year/period presented.

Hong Kong Tax

Earn Bright Development Limited has not been carrying out any business activity in Hong Kong and Earn Bright Development Limited is not subjected to Hong Kong profit tax as there is no assessable profit for the year ended December 31, 2009.

PRC Tax

PRC’s legislative body, the National People’s Congress, adopted the unified Enterprise Income Tax (“EIT”) Law on March 16, 2007. This new tax law replaces the existing separate income tax laws for domestic enterprises and foreign-invested enterprises and became effective on January 1, 2008. Under the new tax law, a unified income tax rate is set at 25% for both domestic enterprises and foreign-invested enterprises. However, there will be a transition period for enterprises, whether foreign-invested or domestic, that are currently receiving preferential tax treatments granted by relevant tax authorities. Enterprises that are subject to an enterprise income tax rate lower than 25% may continue to enjoy the lower rate and will transit into the new rate over a five year period beginning on the effective date of the EIT Law. Enterprises that are currently entitled to exemptions for a fixed term may continue to enjoy such treatment until the exemption term expires. Preferential tax treatments may continue to be granted to industries and projects that qualify for such preferential treatments under the new law.

The Earn Bright Development Limited is subjected to PRC tax law. The Management of Earn Bright Limited considered that the Company did operate in PRC and is subject to PRC tax since 2 January 2009. As all the business are operated through Earn Bright Development Limited, under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), the Company is entitled to 5% of business tax and 7% of profit tax.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

14. INCOME TAXES (CONTINUED)

Income tax at applicable tax rates of 5% of business tax and 7% of profit tax:

	Three months		Three months
	ended		ended
	December 31,		December 31,
	2009		2008
	(unaudited)		(unaudited)
	$		$

Tax for the period at the statutory tax rate of applicable in jurisdictions:
- Business tax at 5% of turnover		8,935		-
- Profit tax at 7% of profit		1,308		-

Income tax		10,243		-

	Six months		Six months
	Ended		ended
	December 31,		December 31,
	2009		2008
	(unaudited)		(unaudited)
	$		$

Tax for the period at the statutory tax rate of applicable in jurisdictions:
- Business tax at 5% of turnover		29,476		-
- Profit tax at 7% of profit		19,190		-

Income tax		48,666		-

Tax payable in the balance sheet represents:

	As of			As of
	December 31,			June 30,
	2009			2009
	(unaudited)			(audited)
	$			$

Tax at the statutory tax rate of applicable in jurisdictions:
jurisdictions:
- Business tax at 5% of turnover		29,476			38,737
- Profit tax at 7% of profit		19,190			33,319

		48,666			72,056
Balance brought forward		72,303			-
Foreign exchange translation		(110	)		247

Tax payable		120,859			72,303

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

14. INCOME TAXES (CONTINUED)

The deferred tax asset and liability has not been recognized because no valuation allowance to be established for the period ended December 31, 2009 and December 31, 2008.

15. COMMITMENTS AND CONTINGENCIES

There is no foreseeable commitments or contingencies for the period ended December 31, 2009.

16. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In October 2009, the FASB issued EITF 08-1, “Revenue Arrangements with Multiple Deliverables”, which is also known as Accounting Standards Update (ASU) No. 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (ASU 2009-13). ASU 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services separately rather than as a combined unit and modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. ASU 2009-13 significantly expands the disclosure requirements for multiple-deliverable revenue arrangements. ASU 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted, provided that the guidance is retroactively applied to the beginning of the year of adoption. The Company is currently evaluating the impact this update will have on our consolidated financial statements.

In September 2009, the EITF reached final consensus on a new revenue recognition standard, Issue No. 09-3, “Applicability of AICPA Statement of Position 97-2 to Certain Arrangements That Contain Software Elements”, as codified in FASB Accounting Standards Update (ASU) 985. ASU 985 amends the scope of AICPA Statement of Position 97-2, Software Revenue Recognition to exclude tangible products that include software and non-software components that function together to deliver the product’s essential functionality. This Issue shall be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted, provided that the guidance is retroactively applied at the beginning of the year of adoption. The Company is currently evaluating the potential impact of ASU 985 on the Company’s results of operations or financial condition.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

16. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles – a Replacement of FASB Statement No. 162. The Codification will become the source of authoritative U.S. generally accounting principles (GAAP) recognized by the FASB to be applied to nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009 (our quarter ended September 30, 2009). We are currently unable to determine what impact the future application of this pronouncement may have on our financial statements.

In June, 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R). This statement is a revision to FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The statement is effective at the start of a company’s first fiscal year beginning after November 15, 2009 (our fiscal year beginning July 1, 2010), or January 1, 2010 for companies reporting on a calendar year basis. We currently are unable to determine what impact the future application of this pronouncement may have on our financial statements.

In June, 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets – an Amendment of FASB Statement No. 140. This statement is a revision to Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. The statement is effective at the start of a company’s first fiscal year beginning after November 15, 2009 (our fiscal year beginning July 1, 2010), or January 1, 2010 for companies reporting on a calendar year basis. We currently are unable to determine what impact the future application of this pronouncement may have on our financial statements.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

16. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events.” This Statement sets forth: 1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and 3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This Statement is effective for interim and annual periods ending after September 15, 2009. The Group adopted this Statement in the quarter ended September 30, 2009. This Statement did not impact the consolidated financial results.

In May 2008, the FASB issued SFAS No 163, “Accounting for Financial Guarantee Insurance Contracts” (“SFAS 163”), SFAS 163 is intended to correct the inconsistencies in the recognition and measurement of claim liabilities by insurance enterprises. This SFAS 163 statement requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. This will result in increasing comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. The provisions of SFAS 163 are effective for fiscal years beginning after December 15, 2008. The Group does not expect that the adoption will have a material impact on the Group’s consolidated financial position or results of operations.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS 162 will become effective 60 days following the SEC’s approval of the Public Group Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” We do not currently expect the adoption of SFAS 162 to have a material effect on our consolidated results of operations and financial condition.

In May 2008, the FASB issued FSP Accounting Principles Board (‘APB”) 14-1 “Accounting for Convertible Debt instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis. As we do not have convertible debt at this time, we currently believe the adoption of FSP APB 14-1 will have no effect on our consolidated results of operations and financial condition.

CHINA GREEN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008

(UNAUDITED)

(Stated in US dollars)

17. COMPARATIVE FIGURES

Certain comparative figures of last year have been reclassified to confirm with current’s year presentation.

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

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

OVERVIEW

Corporate History and Structure

We were incorporated in the State of Delaware on July 11, 2008, formed as a vehicle to pursue a business combination. On August 13, 2009, pursuant to a share exchange and stock purchase agreement (the “Agreement”), we closed a share exchange and stock purchase transaction (the “Share Exchange and Stock Purchase”) with Glorious Pie Limited, a British Virgin Islands corporation (“Glorious Pie”), the shareholder of Glorious Pie (the “Shareholders”) and the representative of the investors in our private placement in reliance upon the exemption provided by Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”). As a result of the closing of the Share Exchange and Stock Purchase, we became the 100% holding company of Glorious Pie which in turn is the 100% holding company of Earn Bright Development Limited, a Hong Kong corporation. Effective September 24, 2009, we changed our company name from “China Eco-Hospitality Operations, Inc.” to “China Green, Inc.” The chart below depicts our current corporate structure.

Business Overview

We operate our eco-hospitality business through our Hong Kong subsidiary which developed our business model – ECHOO (an acronym of Eco-Hospitality Operations) in the areas of hospitality investment projects and large-scale landscape architecture and engineering projects in China. We are specialized on providing greenery services to landscaping construction projects in China, including, but not limited to, design advice, trading and quality control of seeds, provision of seedling and performance management of landscaping engineering and plantation.

ECHOO is a business model developed on the basis of Green Theory created by us. The Green Theory is developed on the ground of two green philosophies, namely the Neo Tai Chi Concept and Magic of Duality, and is applied in the form of our innovative approaches, Connected Environmental Betterment Approach (CEBA) and Hospitality Investment and Management Approach (HIMA). The two approaches represent two different ways to market our business vision of building harmonious living environment with greenery services, reflected by providing resource-efficient engineering design, and green hotel investment and consultancy, respectively.

Business Model

▪	HIMA Approach

Our HIMA approach focuses on cooperation with property owners, including hotel, housing estate and commercial building, to construct green accommodation, such as indoor eco-friendly living environment.

Facing strong competition in the hospitality industry in China, hotel owners are actively seeking partnership in green accommodation construction or refurbishment to improve the quality of their services and the image of their facilities, and to reduce pollution.

We have adopted flexible fee payment method. Instead of charging hotel owners a lump sum upon engagement of our services, we charge monthly installment in an amount equal to certain percentage of the hotel owner’s monthly revenue.

▪	CEBA Approach

Our CEBA approach is related to outdoor eco-friendly landscaping projects financed by various levels of Chinese governments. Since the central Chinese government advocates (1) the importance of environmental protection and (2) CO2 emission reduction after Kyoto Protocol, hence local municipal governments have taken the initiative to improve landscaping in public infrastructure, such as highways. For these government-funded outdoor landscaping projects, we provide professional landscaping knowledge, international benchmarking and initial investment on the resources and labor. The government is only required to pay the full amount after the project is completed.

Landscaping plantation absorbs CO2 and improves environmental condition, which enhances the images of the districts where the local governments are based. Better natural environment can attract the flow-ins of investors and people with skills and talents, which are the driving force of regional development.

Marketing Opportunities

Current development driving forces in China are characterized by steady population growth, ongoing urbanization of the former agriculturally-based population, aggressive economic growth and rapid motorization. However, within the backdrop of impetus to fast speed urbanization, there is no comprehensive regional planning, nor national land development approach.

The consequence is a threat of a scattered low-density urbanization in the countryside and fast, uncontrolled and uncoordinated growth of the large city regions. The problem has caught the Chinese government's attention at the highest levels. In order to build a suitable environment for inhabitants, garden city construction is included in local government's agenda. It is also used as one of the measurements to evaluate the local government's performance.

We operate our business in one of the biggest contributor to global warming where has a great demand in environmental protection as the PRC government advocates the importance of environmental protection and the citizen wants more green area in their city. There is a huge market potential in China for ECHOO business model to grow because management believes we are among the few companies that are in meeting this continual demand of cost-efficient environment services through the abovementioned approaches – HIMA and CEBA approaches.

With our experience and expertise, management believes that we can satisfy the market need in green accommodation construction or refurbishment demanded from private sector and China government.

RESULTS OF OPERATIONS

Six Months ended December 31, 2009 Compared to the Six Months ended December 31, 2008

The following tables set forth key components of our results of operations for the periods indicated, in U.S. dollars, and key components of our revenue for the period indicated, in dollars.

	For the Six Months Ended
	December 31, 2009		December 31, 2008
	$		$
Service income		7,449,119		5,550,037
Cost of services		(3,175,379)		(2,390,205)
Gross profit		4,273,740		3,159,832
General and administrative expenses		(51,316)		(55,283)
Income before taxation		4,222,424		3,104,549
Income tax		(48,666)		-
Net income		4,173,758		3,104,549
Other comprehensive income		(14,980)		793,872
- Foreign currency translation adjustments
Total comprehensive income		4,158,778		3,898,421

Service Income. Our service income for the six months ended December 31, 2009 was $7,449,119 as compared to $5,550,037 for the six months ended December 31, 2008, representing an increase of $1,899,082 or approximately 34.22%. Our service income increased because the service income generated by our greenery construction consultancy business increased by approximately $2,000,000 for the six months ended December 31, 2009 compared to the same period in 2008.

Cost of Services. Our cost of services for the six months ended December 31, 2009 was $3,175,379 as compared to $2,390,205 for six months ended December 31, 2008, an increase of $785,174 or approximately 32.85%. The increase of our cost of services was mainly attributable to the increase of our service income for the six months ended December 31, 2009.

Gross Profit. For six months ended December 31, 2009 as compared to the six months ended December 31, 2008, we generated gross profit of $4,273,740 and $3,159,832, respectively, reflecting an increase of $1,113,908 or approximately 35.25%. Our gross profit margin (gross profit divided by service income) for the same period increase from approximately 56.93% for the six months ended December 31, 2008 to approximately 57.37% for the same period ended 2009, representing an increase of 0.44%.

General and Administrative Expenses. We incurred general and administrative expenses of $51,316 for the six months ended December 31, 2009, a decrease of $3,967 or 7.18%, compared to $55,283 for the six months ended December 31, 2008. Our general and administrative expenses decreased because no preliminary expense was incurred during the six months ended December 31, 2009.

Net Income. We had net income of $4,173,758 for the six months ended December 31, 2009 as compared to a net income $3,104,549 for the six months ended December 31, 2008, representing an increase of $1,069,209 or approximately 34.44%. The increase in our net income was largely due to increase of our service income driven by the general global economic recovery during the six months ended December 31, 2009. Net income as a percentage of total service income approximated 56.03% and 55.94% for the six months ended December 31, 2009 and 2008, respectively.

Three Months ended December 31, 2009 Compared to the Three Months ended December 31, 2008

	For the Three Months Ended
	For the Three Months Ended
	December 31, 2009			December 31, 2008
	(unaudited)			(unaudited)
	$			$

Service income		3,952,395			1,927,282

Cost of services		(1,591,337	)		(1,164,139	)

Gross profit		2,361,058			763,143

General and administrative expenses		(28,384	)		(20,872	)

Income before taxation		2,332,674			742,271

Income tax		(10,243	)		-

Net income		2,322,431			742,271

Other comprehensive income -Foreign currency translation adjustments		(19,883	)		793,872

Total comprehensive income		2,302,548			1,536,143

Service Income. Our service income for the three months ended December 31, 2009 was $3,952,395 as compared to $1,927,282 for the three months ended December 31, 2008, representing an increase of $2,205,113 or approximately 105.08%. Our service income substantially increased because we were engaged in a greenery construction consultancy project with higher profit margin during the three months ended December 31, 2009.

Cost of Services. Our cost of services for the three months ended December 31, 2009 was $1,591,337 as compared to $1,164,139 for three months ended December 31, 2008, an increase of $427,198 or approximately 36.70%, which was mainly attributable to the increase of our service income during the three months ended December 31, 2009.

Gross Profit. For three months ended December 31, 2009 as compared to the three months ended December 31, 2008, we generated gross profit of $2,361,058 and $763,143, respectively, reflecting an increase of $1,597,915 or approximately 209.39%. Our gross profit margin (gross profit divided by service income) for the same period increase from approximately 39.60% for the three months ended December 31, 2008 to approximately 59.74% for the same period ended 2009, representing an increase of 20.14%. The substantial increase in our gross profit margin was mainly because we received the advance payment from a greenery construction consultancy project with high profit margin prior to the completion of the project.

General and Administrative Expenses. We incurred general and administrative expenses of $28,384 for the three months ended December 31, 2009, an increase of $7,512 or 35.99%, compared to $20,872 for the three months ended December 31, 2008. Our general and administrative expenses increased because we incurred more legal and other professional service fees in connection with our compliance with applicable U.S. securities laws and regulations during the three months ended December 31, 2009 compared to the same period in 2008.

Net Income. We had net income of $2,322,431for the three months ended December 31, 2009 as compared to a net income $742,271 for the three months ended December 31, 2008, representing an increase of $1,580,160 or approximately 212.88%. The substantial increase in our net income was the result of the increase of our service income driven by the general global economic recovery during the three months ended December 31, 2009. Net income as a percentage of total service income approximated 58.76% and 38.51% for the three months ended December 31, 2009 and 2008, respectively.

Critical Accounting Policies and Estimates

Use of estimates

Cash and Cash Equivalents

The Company considers all cash and other highly liquid investments with initial maturities of year or less to be cash equivalents. As of December 31 and June 30, 2009, there were cash and cash equivalents of $1,099,637 and $849,457.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts. The Company recognizes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectibility. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. An additional reserve for individual accounts is recorded when the Group becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted.

Accounting for the Impairment of Long-Lived Assets

The Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Live Assets” (“SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Group periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Group believes that, as of December 31 and June 30, 2009, there were no significant impairments of its long-lived assets.

Plant and Equipment

Plant and equipment, other than construction in progress, are stated at cost less depreciation and amortization and accumulated impairment loss.

Equipment and machinery	5 years
Furniture & fixtures	5 years

Management considers that we have no residual value for plant and equipment.

Fair value of Financial Instruments

Foreign Currency Translation

The Company maintains its financial statements in the functional currency. The functional currency of the Company is the Renminbi (RMB). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

For financial reporting purposes, the financial statements of the Company which are prepared using the functional currency have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.

	2009		2008
Three Months end RMB : US$ exchange rate as of December 31		6.837		6.854
Three Months Average RMB : US$ exchange rate		6.836		6.853
Six Months end RMB : US$ exchange rate as of December 31		6.837		6.854
Six Months Average RMB : US$ exchange rate		6.839		6.853

Revenue Recognition

The Company’s revenue is generated from providing services in two aspects as follows:

i) Designing and consultancy services in hotel facilities; and

ii) Resource-efficient engineering business in greenery projects.

he revenue recognized by the Company is based on the Design and Consultancy agreement between the Company and the hotel where the Group has provided the design, consultancy to the hotel and even with certain fixtures and assets provided to that hotel and hence share a certain percentage of gross revenue generated by the hotel facilities for certain years as the consideration.

Recently Issued Accounting Pronouncements

LIQUIDITY AND CAPITAL RESOURCES

We are a development stage company. As of December 31, 2009, we have incurred an accumulated net income of $4,173,758. At December 31, 2009, we had cash and cash equivalents of $1,099,637 as compared to cash and cash equivalents of $849,457 as of June 30, 2009. Management is trying to raise additional capital through sales of common stock, as well as seeking financing from third parties.

The following table sets forth a summary of our cash flows for the periods indicated:

	Three months			Three months
	ended			ended
	December 31,			December 31,
	2009			2008
	(unaudited)			(unaudited)
	$			$
Net cash (used in) / from operating activities		(39,826	)		(2,540,274	)
Net cash used in investment activities		(17,339	)		(11,088	)
Net cash (used in) / generated in financing activities		-			(729,480	)
Net (decrease) / increase in		(57,165	)		(3,280,842	)
cash and cash equivalents
Effect of foreign currency translation on cash and		94			(809,994	)
cash equivalents
Cash and cash equivalents - beginning of period		1,156,708			4,970,316
Cash and cash equivalents - end of period		1,099,637			879,480

Operating Activities

Net cash used in operating activities was $39,826 for the three months ended December 31, 2009, a decrease of $2,500,448 from net cash of $2,540,274 used in operating activities for the same period in 2008. The decrease was largely due to our deposit payments to Sha Tou Hotel and Kang Zu Yuan Hotel in order to initiate our preliminary negotiations in the near future with these two hotels for potential acquisitions for the purpose of expanding our hotel consultancy and facilities services.

Investing Activities

Net cash used in investing activities in the three months ended December 31, 2009 was 17,339, an increase of $6,251 from $11,088 for the same period in 2008. This increase was largely due to our purchase of plant and equipment for hotel services totaled at $17,339 during the three months ended December 31, 2009.

Financing Activities

The net cash used in financing activities for the same period in 2008 was $729,480. There was no net cash used in financing activities for the three months ended December 31, 2009, which was primarily due to that no dividend was declared and paid during the three months ended December 31, 2009.

OFF-BALANCE SHEET ARRANGEMENTS

As of the date hereof, we do not have any off-balance sheet debt, nor do we have any transactions, arrangements or relationships with any special purpose entities.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

This item does not apply to smaller reporting company such as us.

Item 4T. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. At the conclusion of the period ended December 31, 2009 we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our 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”)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms and that such information was accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, in a manner that allowed for timely decisions regarding required disclosure.

(b) Changes in internal controls. During the period covered by this report, there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors

This item does not apply to smaller reporting companies such as us.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

31.1	Certification of Tai Chip Yip pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


32.1	Certification of Tai Chip Yip pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	China Green, Inc.

Date: February 16, 2010	By:	/s/ Tai Chi Yip
		Tai Chi Yip Chief Executive Officer and Principal Accounting Officer

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Green Solutions China Inactive 10-Q2010 Q2 Quarterly report

Content analysis