China Industrial Waste Management (CIWT) 10-Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

(Mark One)

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 March 31, 2009

or

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

For The Transition Period From __________________ to __________________________

Commission File Number: 2-95836-NY

China Industrial Waste Management, Inc.

(Name of registrant as specified in its charter)

Nevada	13-3250816
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

c/o Dalian Dongtai Industrial Waste Treatment Co. No. 1 Huaihe West Road, E-T-D Zone, Dalian, China	116600
(Address of principal executive offices)	(Zip Code)

011-86-411-85811229

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No 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.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer (Do not check if smaller reporting company)	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

Indicated the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date,15,271,035 shares of common stock are issued and outstanding as of May 15, 2009.

TABLE OF CONTENTS

		Page No.
PART I. - FINANCIAL INFORMATION
Item 1.	Financial Statements.	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	2
Item 3.	Quantative and Qualitative Disclosures About Market Risk.	8
Item 4T	Controls and Procedures.	8
Item 1.	Legal Proceedings.	9
Item 1A.	Risk Factors.	9
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	9
Item 3.	Defaults Upon Senior Securities.	9
Item 4.	Submission of Matters to a Vote of Security Holders.	9
Item 5.	Other Information.	9
Item 6.	Exhibits.	10

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report includes "forward-looking statements." You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain such words as "may," "project," "might," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," "continue," or "pursue," or the negative or other variations thereof or comparable terminology. In particular, they include statements relating to, among other things, future actions, new projects, strategies, future performance, the outcomes of contingencies and our future financial results. These forward-looking statements are based on current expectations and projections about future events.

Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified and, consequently, our actual performance may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in our reports filed with the Securities and Exchange Commission (including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein): the timing and magnitude of technological advances; the prospects for future acquisitions; the effects of political, economic and social uncertainties regarding the governmental, economic and political circumstances in the People’s Republic of China; the possibility that a current customer could be acquired or otherwise be affected by a future event that would diminish their waste management requirements; the competition in the waste management industry and the impact of such competition on pricing, revenues and margins; uncertainties surrounding budget reductions or changes in funding priorities of existing government programs; the cost of attracting and retaining highly skilled personnel; our projected sales, profitability, and cash flows; our growth strategies; anticipated trends in our industries; our future financing plans; and our anticipated needs for working capital.

Forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

CONVENTIONS AND GENERAL MATTERS

The official currency of the People’s Republic of China is the Chinese “Yuan” or “Renminbi” (“yuan,” “Renminbi” or “RMB”). For the convenience of the reader, amounts expressed in this report as RMB have been translated into United States dollars (“US$” or “$”) at the rate of USD$1.00 = RMB 6.8225 as of December 31, 2008; and at the rate of USD$1.00 = RMB6.8329 as of March 31, 2009 quoted by the Federal Reserve System. The Renminbi is not freely convertible into foreign currencies and the quotation of exchange rates does not imply convertibility of Renminbi into U.S. Dollars or other currencies. All foreign exchange transactions take place through the Federal Reserve System. No representation is made that the Renminbi or U.S. Dollar amounts referred to herein could have been or could be converted into U.S. Dollars or Renminbi, as the case may be, at the PBOC Rate or at all.

The "Company," "we," "us," "our" and similar words refer to China Industrial Waste Management, Inc, its direct wholly-owned subsidiaries DonTech Waste Services, Inc. (“DonTech”) and Favour Group Ltd. (“Favour”), along with its indirect wholly-owned subsidiary, Full Treasure Investments Ltd. (“Full Treasure”), and its indirect majority owned subsidiaries: Dalian Dongtai Industrial Waste Treatment Co. Ltd. (“Dongtai”); Dongtai Water Recycling Co. Ltd. (“Dongtai Water”); Dalian Zhuorui Resource Recycling Co., Ltd. (“Zhuorui”); and Dalian Lipp Environmental Energy Engineering & Technology Co., Ltd.(“Dalian Lipp”). In March 2009 DonTech merged with and into China Industrial Waste Management, Inc.

All share and per share information contained herein has been adjusted to reflect a 1 for 100 share reverse stock split which occurred on May 12, 2006.

PART 1 - FINANCIAL INFORMATION

Item 1.                                 Financial Statements. 

CHINA INDUSTRIAL WASTE MANAGEMENT, INC.

CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
	2009		2008
	(Unaudited)		(Audited)
ASSETS
Current assets
Cash and cash equivalents	$	2,741,411	$	5,714,001
Trade accounts receivable, net		2,840,584		2,414,257
Other receivables		81,169		105,329
Inventory		2,539,388		2,372,214
Advances to suppliers		695,861		550,931
Prepaid expense		16,830		17,589
Total current assets		8,915,242		11,174,321
Investment		2,749,026		2,794,248
Property, plant and equipment, net		15,700,320		15,474,915
Construction in progress		5,579,412		5,738,271
Land usage right, net of accumulated amortization		1,800,388		1,817,427
Deposits		11,848		14,798
Related party receivable		42,285		1,256,599
Escrow account		750,000		750,000
Certificate of deposit		658,578		73,287
Other asset		345,526		348,545
TOTAL ASSETS	$	36,552,626	$	39,442,411
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	728,140	$	780,458
Short-term loan		1,463,507		3,371,198
Tax payable		92,995		215,240
Advance from customers		548,301		539,013
Deferred sales		1,072,024		972,143
Accrued expenses		16,576		361,111
Construction projects payable		3,690,930		4,742,164
Related party payable		380,512		278,490
Other payable		212,820		211,362
Total current liabilities		8,205,805		11,471,179
Asset retirement obligation		510,541		502,278
Government subsidy		1,026,691		1,028,257
TOTAL LIABILITIES		9,743,037		13,001,714
Minority interest in subsidiary		3,103,708		2,823,126
Commitments and contingencies
Stockholders' equity
Preferred stock: par value $.001; 5,000,000
shares authorized; none issued and outstanding		-		-
Common stock: par value $.001; 95,000,000 shares authorized;
15,262,035 and 13,220,843 shares issued and outstanding at March 31, 2009
and December 31, 2008 respectively		15,262		15,262
Additional paid-in capital		5,644,750		5,644,750
Other comprehensive income		2,402,960		2,422,167
Retained earnings		15,642,909		15,535,392
Total stockholders' equity		23,705,881		23,617,571
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	36,552,626	$	39,442,411

See Notes to Consolidated Financial Statements.

CHINA INDUSTRIAL WASTE MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

	For the Three Months Ended March 31,
	2009			2008
Revenue
Service fees	$	1,197,699		$	1,819,552
Sales of cupric sulfate		91,131			708,843
Sales of recycled commodities		323,120			601,885
Operating revenue		1,611,950			3,130,280
Costs of revenues
Cost of service fees		470,163			371,035
Cost of cupric sulfate		87,976			286,526
Cost of recycled commodities		169,711			270,532
Costs of revenue		727,850			928,093
Gross profit		884,100			2,202,187
Operating expenses
Selling expenses		177,315			228,081
General and administrative expenses		446,722			353,846
Total operating expenses		624,036			581,927
Income from operations		260,064			1,620,260
Other income (expense)
Investment loss		(40,951	)		(9,039	)
Interest income		1,271			6,298
Other income		47			5,880
Other expense		(63,560	)		(2	)
Total other income		(103,192	)		3,137
Net income from continuing operations before minority
interest, income tax provision		156,871			1,623,397
Income tax provision		45,029			107,230
Net income before minority interest		111,842			1,516,167
Minority interest		4,324			140,550
Net income		107,518			1,375,617
Foreign currency translation adjustment		(19,207	)		589,954
Comprehensive income (loss)	$	88,311		$	1,965,571
Basic and diluted weighted average shares outstanding		15,262,035			13,755,274
Basic and diluted net earnings per share	$	0.01		$	0.10

See Notes to Consolidated Financial Statements.

CHINA INDUSTRIAL WASTE MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months ended March 31,
	2009			2008
Cash flows from operating activities:
Net income	$	107,518		$	1,375,617
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest		4,324			140,550
Depreciation		258,611			114,404
Amortization		17,039			4,148
Bad debt allowance		-			(3,534	)
Accretion expenses		8,263			9,311
Loss on equity investment		45,222			-
Subsidy received from government		-			348,326
Changes in operating assets and liabilities:
Accounts receivable		(426,327	)		(949,529	)
Inventory		(167,174	)		(160,551	)
Other receivables		24,160			(314,010	)
Advance to suppliers		(144,930	)		1,884
Prepaid expense		759			24,734
Deposits		2,950			(481,423	)
Other assets		3,019			-
Accrued expense and deferred sales		(244,654	)		33,961
Accounts payable		(50,860	)		637,869
Advance from customers		9,288			-
Tax payable		(122,245	)		40,196
Net cash provided by (used in) operating activities		(675,037	)		821,953
Cash flows from investing activities:
Investment in subsidiary		-			9,039
Purchase of property and equipment		(32,456	)		(59,015	)
Certificate of deposit		(585,291	)		-
Construction contracts		-			(1,121,648	)
Due from related party		-			11,751
Related party loan		1,214,314			-
Due to related party		102,022			41,799
Net cash provided by (used in) investing activities		698,589			(1,118,074	)
Cash flows from financing activities:
Repayment of construction projects payable		(1,051,234	)		-
Proceeds from short term loans		-			1,114,462
Repayment of short term  loans		(1,907,691	)		-
Net cash provided by (used in) financing activities		(2,958,925	)		1,114,462
Effect of exchange rate on cash		(37,217	)		146,633
Net increase (decrease) in cash and cash equivalents		(2,972,590	)		964,974
Cash and cash equivalents, beginning of period	$	5,714,001		$	3,260,307
Cash and cash equivalents, end of period	$	2,741,411		$	4,225,281
Supplemental cash flow information:
Cash paid during the year for:
Interest	$	32,078		$	-
Income taxes	$	143,518		$	-
Non-cash investing and  financing activities:
Contributed anaerobic fermentation  equipment	$	(292,701	)	$	-
Transfer out of construction  in progress	$	158,859		$	-
Transfer of construction in progress to property, plant and equipment	$	(158,859	)	$	-
Change in reporting entity	$	276,253		$	-

See Notes to Consolidated Financial Statements.

CHINA INDUSTRIAL WASTE MANAGEMENT, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and the new scaled disclosure requirements in Article 8 of Regulation S-K of the SEC. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accounts of the Company and all of its subsidiaries are included in the consolidated financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2008.

1. Nature of operations

The accompanying unaudited consolidated financial statements are those of China Industrial Waste Management, Inc., a Nevada corporation (the “Company”) incorporated on November 12, 2003, its wholly owned subsidiaries, DonTech Waste Services Inc., a Delaware corporation (“DonTech”), and Favour Group Ltd., a British Virgin Islands corporation (“Favour”), along with its indirectly majority owned subsidiaries:

• Full Treasure Investments Ltd. (“Full Treasure”)

• Dalian Dongtai Industrial Waste Treatment Co. Ltd. (“Dongtai”)

• Dalian Dongtai Water Recycling Co. Ltd. (“Dongtai Water”)

• Dalian Zhuorui Resource Recycling Co., Ltd. (“Zhuorui”)

• Dalian Lipp Environmental Energy Engineering & Technology Co., Ltd. (“Dalian Lipp”)

In March 2009, DonTech was merged with and into the Company.

Dongtai was incorporated on January 9, 1991 in Dalian, PRC, and now is engaged in the collection, treatment, disposal, and recycling of industrial wastes, and sales of recycled products, principally in Dalian and surrounding areas in Liaoning Province, the People’s Republic of China (“PRC”). The Company provides waste disposal solutions to its more than 650 customers from facilities located in the Economic and Technological Development Zone, Dalian, China. In addition, the Company provides the following services to its clients:

• Environmental protection services

• Technology consultation

• Pollution treatment services

• Waste management design processing services

• Waste disposal solutions

• Waste transportation services

• Onsite waste management services

• Environmental pollution remediation services.

Dongtai Water, which was incorporated in July 2006, is a build-operate-transfer project established to process municipal waste water generated by Dalian City.

Zhuorui was incorporated in April 2006 and is engaged in plasma arc melting, separation and purification of waste catalysts, treatment of industrial wastes and comprehensive utilization of waste catalysts or similar material. This subsidiary is now in the stage of trial production.

Dalian Lipp is a PRC joint venture established on December 22, 2007. Dalian Lipp designs, manufactures and installs environmental protection equipment and renewable energy equipment and provides related technical services. The project is based on the Lipp GmbH tank building technique, and is dedicated to generating energy by organic waste anaerobic fermentation, industrial effluent treatment and municipal sewage plant.

2. Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of the parent entity, its directly wholly owned subsidiaries, DonTech and Favour, along with its indirectly wholly owned subsidiary, Full Treasure, its 90% indirectly owned subsidiary Dongtai, its 80% indirectly owned subsidiary Dongtai Water, its 70% indirectly owned subsidiary Zhuorui, and its 75% indirectly owned subsidiary Dalian Lipp. All material inter-company accounts and transactions have been eliminated in the consolidation.

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). This basis differs from that used in the statutory accounts of the Company, which were prepared in accordance with the accounting principles and relevant financial regulations applicable to enterprises in PRC. All necessary adjustments have been made to present the financial statements in accordance with US GAAP.

3. Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign currency translation

As of March 31, 2009 and 2008, the accounts of the Company were maintained, and the unaudited consolidated financial statements were expressed in Chinese Yuan Renminbi (“RMB”). Such consolidated financial statements were translated into U.S. dollars (“USD”) in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 52, “Foreign Currency Translation” with RMB as the functional currency. According to the Statement, all assets and liabilities were translated at the exchange rate as of the balance sheet date; stockholders’ equity was translated at the exchange rates prevailing at the time of the transactions; revenues, costs, and expenses were translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive Income”.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and cash on deposit, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Restricted cash

In accordance with Accounting Review Board (ARB) No. 43, Chapter 3A “Current Assets and Current Liabilities”, cash which is restricted as to withdrawal is considered a non-current asset. Restricted cash consists of $750,000, which is held in a separate escrow account as required by a group of investors, and $658,578, which is comprised of time deposits as below table shows:

Effective Date		Mature Date		Depository Bank	Interest Rate			Principal
	01-20-2009		01-20-2010	Shanghai Pudong Development Bank, Dalian ETD Zone Sub-branch.		2.25	%	$	292,702
	01-19-2009		01-19-2010	Dalian ETD Zone Rural Credit Cooperative Union		2.25	%		219,526
	01-19-2009		07-19-2009	Dalian ETD Zone Rural Credit Cooperative Union		1.98	%		73,175
	01-19-2009		07-19-2009	Guangdong Development Bank, Dalian ETD Zone Branch		1.98	%		73,175
								$	658,578

Accounts and other receivables

Accounts and other receivables are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as needed. Allowance for uncollectible accounts as of March 31, 2009 and December 31, 2008 is $12,113 and $12,132, respectively.

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Payment terms of sales vary from cash on delivery through a credit term of up to nine to twelve months.

Concentration of credit risks

The Company is subject to concentrations of credit risk primarily from cash and cash equivalents. The Company maintains accounts with financial institutions, which at times exceeds the insured Federal Deposit Insurance Corporation limit of $250,000. The Company minimizes its credit risks associated with cash by periodically evaluating the credit quality of its primary financial institutions.

Advances to suppliers

The Company makes advances to certain vendors for purchase of its material or equipment. The advances to suppliers are interest free and unsecured.

Inventory

Inventories are stated at the lower of cost, as determined on a first-in, first-out basis for raw materials and auxiliary materials, and weighted average basis for other categories, or market. Management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to their market value, if lower.

Property, plant and equipment

Property, plant and equipment (“PP&E”) are stated at cost, less accumulated depreciation and impairment. Expenditures for maintenance and repairs, which are not considered improvements and do not extend the useful life of PP&E, are expensed as incurred; additions, renewals and betterments are capitalized. When PP&E are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in the statement of operations.

Depreciation is provided to recognize the cost of PP&E in the results of operations. The Company calculates depreciation using the straight-line method with estimated useful life as follows:

	Useful Life
Buildings	20 Years
Machinery	10 Years
Vehicles	5 Years
Office equipment	5 Years

Construction in progress consists of construction expenditure, equipment procurement, capitalized interest expense, relevant miscellaneous expenditures, and other costs.

As of March 31, 2009, construction in progress contains two principal components; one is the costs incurred by Dongtai for the newly built incineration system that is located in Dagu Hill, ETD Zone, Dalian, including designing and building of the incinerator, construction of its supporting facilities, and miscellaneous fees. The other component is production equipment, which is still in testing phase, for Zhuorui, including plasma furnace, flue gas cleansing system, dust trapper, and other corollary equipment.

Landfills

Various costs that we incur to make a landfill ready to accept waste are capitalized. These costs generally include expenditures for land, permitting, excavation, liner material and installation and other capital infrastructure costs. The cost basis of our landfill assets also includes estimates of future costs associated with landfill final capping, closure and post-closure activities in accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations and its Interpretations”.

Interest accretion on final capping, closure and post-closure liabilities is recorded using the effective interest method and is recorded as accretion expense, which is included our Consolidated Statements of Operations.

The amortizable basis of a landfill includes (i) amounts previously expended and capitalized; (ii) capitalized landfill final capping, closure and post-closure costs; (iii) projections of future purchase and development costs required to develop the landfill site to its remaining permitted and expansion capacity; and (iv) projected asset retirement costs related to landfill final capping, closure and post-closure activities.

Amortization is recorded on a units-of-consumption basis, applying cost as a rate per ton. The rate per ton is calculated by dividing each component of the amortizable basis of a landfill by the number of tons needed to fill the corresponding asset’s airspace.

Liabilities for landfill and environmental remediation costs are presented in the table below:

	March 31,2009		December 31,2008
Long-term Liability	$	510,541		$	502,278

Long-term investment

Long-term investments are recorded under the equity method. Dongtai Organic is constructing and was organized to operate a municipal sludge treatment and disposal facility in Dalian, PRC. The Company currently owns 49% of Dongtai Organic.

Impairment of long-lived assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144), such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Intangible assets are tested for impairment annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no events or changes in circumstances that necessitated a review of impairment of long lived assets as of March 31, 2009 and December 31, 2008, respectively.

Intangible assets

Intangible assets consist of “Rights to use land and build a plant” for 50 years and intellectual property. The intangible assets are amortized using straight – line method. The Company also evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and, goodwill is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors, including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss.

As of March 31, 2009 and December 31, 2008, net land usage right was $1,800,388 and $1,817,427 respectively.

Non-controlling interest in consolidated financial statements

In December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements,” (“SFAS 160”). This Statement amends Accounting Research Bulletin 51 (“ARB 51”) to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 is effective for the Company beginning January 1, 2009.

Non-controlling interest represents the minority owners’10% equity interest in Dongtai, 20% equity interest in Dongtai Water, 30% equity interest in Zhuorui and 25% equity interest in Dalian Lipp.

Fair value of financial instruments

SFAS No.107, “Disclosures About Fair Value of Financial Instruments”, requires that the Company discloses estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

Revenue recognition

The Company’s revenue recognition policies are in compliance with Staff Accounting Bulletin (“SAB”) 104. Our revenues are generated from the fees we charge for waste collection, transfer, treatment, disposal and recycling services and the sale of recycled commodities. The fees charged for services are generally defined in service agreements and vary based on contract specific terms such as frequency of service, weight, volume and the general market factors influencing industry’s rates. Revenue is generally recognized as services are rendered or products are delivered.

Deferred sales consist of contracts for which the fees have been collected but revenue has not yet been recognized in accordance with the revenue recognition policy. As of March 31, 2009 and December 31, 2008, deferred sales amounted to $1,072,024 and $972,143, respectively.

Advertising costs

The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the period ended March 31, 2009 and 2008 were immaterial.

Stock-based compensation 

In December 2004, the Financial Accounting Standard Board (“FASB”) issued SFAS No.123(R), “Share-Based Payment”, which prescribes accounting and reporting standards for all stock based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123(R) requires compensation expense to be recorded using the fair value method.

Income taxes

The Company utilizes SFAS No.109, “Accounting for Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Local PRC income tax

The Company is subject to the PRC Enterprise Income Tax (“EIT”) at a rate of 25% on its net income. According to PRC EIT Law, any joint venture with foreign investment will get EIT exemption treatment for the first two years and reduced tax rates of 9%, 10% and 11% for the third, fourth and fifth years, respectively. As a foreign investment enterprise, Dongtai is subject to EIT at 10% for the period ended March 31, 2009. Furthermore, the Law stipulates that enterprises that engage in municipal waste water treatment business are eligible for special EIT treatment. According to such rules, Dongtai Water is entitled to a three-year EIT exemption treatment starting whenever it receives the first operation revenue, and another 50% off of the normal rate for the next three years.

Statement of cash flows

In accordance with SFAS No. 95, “Statement of Cash Flows” cash flows from the Company’s operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Basic and diluted net earnings per share

Earnings per share is calculated in accordance with SFAS No. 128, “Earnings Per Share”. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Reclassifications

Certain reclassifications have been made in the 2008 financial statements to conform to the 2009 presentation.

Recent accounting pronouncements

On January 12, 2009, the FASB issued FASB Staff Position EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20 (FSP). FASB FSP 99-20-1 amends the impairment guidance in FASB EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests that Continue to be held by a Transferor in Securitized Financial Assets. The intent of the FSP is to reduce complexity and achieve more consistent determinations as to whether other-than-temporary impairments of available for sale or held to maturity debt securities have occurred. The FSP is effective for interim and annual reporting periods ending after December 15, 2008. The adoption of this FSP did not have an impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued three Final Staff Positions (“FSPs”) to provide additional guidance and disclosures regarding fair value measurements and impairments of securities:

FSP FAS 157-4. “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, provides guidance for estimating fair value  when the volume and level of activity for an asset or liability have significantly decreased. The Company does not expect that FSP FAS 157-4 will have a material impact on the Company’s consolidated financial statements.

FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in financial statements. The Company does not expect that FSP FAS 115-2 and FAS 124-2 will have a material impact on the Company’s consolidated financial statements.

FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, requires disclosure about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The Company will review the requirements of FSP FAS 107-1 and comply with its requirements.

These three FSPs are effective for interim and annual periods ending after June 15, 2009.

4. Inventory

	March 31, 2009		December 31, 2008
Raw materials	$	1,107,853	$	1,130,109
Recycled commodities		1,431,535		1,242,105
	$	2,539,388	$	2,372,214

5. Property, plant and equipment

	March 31,2009			December 31,2008
Land and building	$	10,023,789		$	9,978,971
Machinery and equipment		7,328,398			6,898,868
Office equipment		553,228			542,174
Vehicles		910,154			911,540
		18,815,569			18,331,553
Less accumulated depreciation		(3,115,249	)		(2,856,638	)
Total property and equipment, net		15,700,320			15,474,915
Construction in progress		5,579,412			5,738,271
Total	$	21,279,732		$	21,213,186

Depreciation expenses amounted to $258,611 and $114,404 for the period ended March 31, 2009 and 2008, respectively.

6. Short-term loan

As of March 31, 2009, the remaining short-term loan balance represents the loan borrowed from Shanghai Pudong Development Bank, Dalian ETD Zone Sub-branch, with the amount of approximately $1,463,507 (RMB10, 000,000), interest rate of 8.217% per annum, and maturity date of April 25th, 2009.

7. Government subsidies

Government subsidies, with the amount of $1,026,691 as of March 31, 2009, represents subsidies that Zhuorui received from local government, as Zhuorui’s business falls into the industry classifications encouraged by the local government’s development strategy. The subsidy is to be used exclusively for facility construction and equipment procurement to fulfill its business operations. The subsidy is initially recorded as deferred revenue. Upon the completion and acceptance of the government subsidized project, subsidies are recognized over the useful lives of the related asset.

8. Accumulated other comprehensive income

	March 31, 2009			December 31, 2008
Cumulative translation adjustment of foreign currency statements	$	(19,207	)	$	1,268,439

9. Related parties

Related Parties	March 31, 2009
	Receivable		Payable
Dongtai Investment	$	-	$	380,512
Dongtai Organic		27,731		-
Dalian Lida		14,554		-
Total	$	42,285	$	380,512

10. Statutory common welfare fund

As stipulated by the Company Law of the PRC as applicable to Chinese companies with foreign ownership, net income after taxation can only be distributed as dividends after appropriation has been made for the following:

a.  Making up cumulative prior years’ losses, if any

b. Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined    under PRC accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital;

c. Allocations of 5 -10% of income after tax, as determined under PRC accounting rules and regulations to the Company’s “Statutory common welfare fund”, which is established for the purpose of providing employee facilities and other collective benefits to the Company’s employees; and

d.  Allocations to the discretionary surplus reserve, if approved in the shareholders’ general meeting.

11. Current vulnerability due to certain concentrations

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC and by the general state of the PRC economy. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversions and remittance abroad, and rates and methods of taxation, among other things.

12. Change in reporting entity

In February 2009, Mr. Roland Lipp, Mrs. Karin Lipp-Mayer, and Mr. Shan Minghuan (minority shareholders) delivered an anaerobic fermentation equipment installation machine to Dalian Lipp. The fair value of the equipment was approximately $292,701 and has been classified as property, plant and equipment on the balance sheet. The capital contribution was recorded to Dalian Lipp as additional paid-in capital. Prior to the contribution of property, plant and equipment by the minority shareholders, Dongtai also contributed cash of approximately $702,484 to Dalian Lipp, which increased Dongtai investment in Dalian Lipp.

Subsequent to the additional paid-in capital contributions by the minority shareholders, Dongtai experienced a change in its reporting entity and now owns 75% of Dalian Lipp as of March 31, 2009. Prior to the change in its reporting entity, Dongtai owned 100% of Dalian Lipp.

The change in a parent’s ownership interest is accounted for as equity transactions in accordance with SFAS160. Therefore, no gain or loss has been recognized in consolidated net income or comprehensive income. The carrying amount of the noncontrolling interest has been adjusted to reflect the change in its ownership interest in the subsidiary. The difference between the fair values of the consideration received and the amount by which the noncontrolling interest is adjusted has been recognized in equity attributable to the parent.

13. Subsequent events

On April 22, 2009, the Company issued 9,000 shares of common stock under an agreement with a consultant to provide the Company with investor relations services.

On April 25, 2009, Dongtai repaid a loan to Shanghai Pudong Development Bank Dalian Branch (“SPDB”), with an amount of approximately $1,465,738 (RMB 10, 000,000).

On April 29, 2009, Dongtai entered into a short-term loan program with SPDB. The principal amount was approximately $3,805,119 (RMB 26,000,000) which matures on April 27, 2010. A fixed interest rate of 5.841% per annum is applied. The loan is secured with Dongtai’s buildings and land use rights.

On May 8, 2009, the board of directors established an audit committee consisting of three directors. Each member of the audit committee is independent within the meaning of Nasdaq Marketplace Rule 4200(a) (15). The board of directors also adopted an audit committee charter to govern the activities of the audit committee.

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

FORWARD-LOOKING INFORMATION - Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") includes forward-looking statements. All statements, other than statements of historical facts, included in this MD&A regarding the Company's financial position, business strategy and plans and objectives of management of the Company for future operations are forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside of the Company's control that could cause actual results to materially differ from such statements. While the Company believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors, especially the timing and magnitude of technological advances; the prospects for future acquisitions; the possibility that a current customer could be acquired or otherwise be affected by a future event that would diminish their waste management requirements; the competition in the waste management industry and the impact of such competition on pricing, revenues and margins; uncertainties surrounding budget reductions or changes in funding priorities of existing government programs and the cost of attracting and retaining highly skilled personnel.

OVERVIEW

Historically, the Company engaged in two lines of business: (a) the exploration and development of potential mining properties, and (b) the development, marketing and support of computer software products and services. In September 2004, the Company sold its computer business. Since September 2005, the Company ceased mining activities due to its loss of all its contractual rights in certain mining properties in Spain. In November 2005, a Delaware corporation known as China Industrial Waste Management, Inc. (“CIWM Delaware”) acquired 90% of the issued and outstanding capital stock of Dalian Dongtai Industrial Waste Treatment Co., Ltd. (“Dongtai”) from the shareholders of Dongtai in a reverse merger transaction in which the Dongtai shareholders became the owner of all of the issued and outstanding shares of CIWM Delaware. As a result of the reverse merger, Dongtai became a joint venture with foreign investment under the laws of the PRC, with a total registered and paid-in capital of $2.3 million. The exchange of shares with the Dongtai shareholders was accounted for as a reorganization between entities under common control with CIWM Delaware as the receiving entity, as prescribed by Appendix D of SFAS 141. The accounts of both entities were combined at their historical cost basis, resulting in no gain, loss, or goodwill. The combination was essentially a recapitalization of Dongtai.

On November 11, 2005, China Industrial Waste Management, Inc., a Nevada corporation (f/k/a Goldtech Mining Corporation) (“CIWM Nevada”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CIWM Delaware and the shareholders of CIWM Delaware. Pursuant to the Merger Agreement, which closed on November 11, 2005, CIWM Delaware merged with and into CIWM Nevada’s wholly-owned Delaware subsidiary, DonTech. Pursuant to the Merger Agreement, after the merger, CIWM Delaware ceased to exist and DonTech was the surviving company (and the owner of 90% of the issued and outstanding capital stock of Dongtai). The merger of CIWM Delaware into DonTech was accounted for as a reverse acquisition under the purchase method of accounting since the shareholders of CIWM Delaware obtained control of CIWM Nevada (the Company) by virtue of the merger. Accordingly, the merger was recorded as a recapitalization of CIWM Delaware, with DonTech being treated as the continuing entity. CIWM Nevada (the Company) currently owns all of the issued and outstanding capital stock of DonTech, which in turn, owns 90% of the issued and outstanding capital stock of Dongtai. In March 2009, DonTech merged with and into the Company.

Dongtai is engaged in the collection, treatment, disposal and recycling of industrial wastes, principally in Dalian, China and surrounding areas in Liaoning Province, China. Dongtai provides waste disposal solutions to its more than 650 customers, including large multinational corporations, from facilities located in the Economic and Technological Development Zone, Dalian, PRC. Dongtai treats, disposes of and/or recycles many types of industrial wastes, and recycled waste products are sold to customers as raw materials to produce chemical and metallurgy products. In addition, Dongtai treats or disposes of industrial waste through incineration, burial or water treatment; as well as provides a range of environmental protection services to its clients. Dongtai generates revenues from waste collection and disposal services, as well as from sales of valuable products and recycled commodities.

Dongtai Water Recycling Co. Ltd (“Dongtai Water”), a Build-Operate-Transfer (BOT) project established to process municipal sewage generated by Dalian City. Phase One of the project, which is designed with a capacity of 30,000 tons per day, commenced commercial operationa on June 21, 2008. Dongtai owns 80% of the equity of this project.

Dalian Zhuorui Resource Recycling Co., Ltd. (“Zhuorui”), which is 70% owned by Dongtai, engages in plasma arc melting, separation and purification of waste catalysts, treatment of industrial wastes and comprehensive utilization of waste catalysts or similar material. The designed production capacity of the project is 5,000 tons/year. As of March 31, 2009, the project was in the trial production stage.

Dalian Lipp Environmental Energy Engineering & Technology Co., Ltd. (“Dalian Lipp”) is a Sino-German joint venture, of which Dongtai owns a 75% equity interest. Dalian Lipp designs, manufactures and installs environmental protection equipment and renewable energy equipment and provides related technical services. The project is based on the Lipp GmbH tank building technique, and is dedicated to generating energy by organic waste anaerobic fermentation, and industrial effluent and municipal sewage treatment.

In order to provide sufficient infrastructure to meet the increasing demand for waste treatment and disposal, an expansion project is now underway to significantly increase Dongtai’s capacity for waste treatment and disposal. The expansion project, which is one of the fifty-five hazardous waste treatment centers sponsored by the National Development and Reform Commission and one of the two centers in Liaoning Province, commenced construction at the end of July, 2008. As of the date of this Report, Phase One of the project, which includes construction of the incineration plant and boiler, has been completed. Phase 2, which includes construction of an office building and a waste solvent recycling plant, is in process. The Company expects the project to be operational by September 2009.

 Further information about the expansion of the facility is as follows: 

		Capacity
Facility	Description	Existing		After expansion
Incinerator	Incineration System for Solid Waste		3,300 t/y		9,000 t/y
Hazardous Waste Landfill	Hazardous Waste Safe Landfill		13,000t		40,000t
Industrial Effluent Treatment System	Industrial Sewage Treatment		18,000 t/y		25,000 t/y
Organic Solvent Recycling System	Industrial Organic Solvent Product		1,000 t/y		3,000 t/y

Our business strategy is aimed at increasing revenue and earnings through profitable growth and improving returns on invested capital. The components of our strategy include: (1) placing emphasis on the commercialization of solid waste treatment; (2) our expansion into municipal sewage and sludge treatment BOT projects; (3) managing our businesses locally with a strong operations focus on customer service; (4) entering into new geographic markets in China; and (5) maintaining our financial capacity and effective administrative systems and controls to support on-going operations and future growth. We are evaluating growth in our solid waste treatment operations through opportunities to cooperate with prominent domestic or overseas partners and attempt to integrate customer groups (for example, the refinery industry), to realize resource optimization.

We also plan to seek new BOT projects and acquire interests in existing projects, as we believe they can provide us with stable revenues and cash inflows. Furthermore, we believe that a well-operated BOT project will gain attention and social recognition from the local government and business community, which may, in turn, provide additional business opportunities in the Dalian metropolitan area.

CRITICAL ACCOUNTING POLICIES

We have disclosed in Note 3 to our financial statements those accounting policies that we consider to be significant in determining our results of operations and our financial position which are incorporated by reference herein.

The preparation of financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. We evaluate our estimates, including those related to bad debts, inventories and warranty obligations, on an ongoing basis. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. The actual results may differ from these estimates under different assumptions or conditions.

The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

Revenue Recognition

Revenue is recognized when services are rendered to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as deferred sales.

Property, Plant and Equipment

Property, plant and equipment (“PP&E”) are stated at cost, less accumulated depreciation and impairment. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When PP&E are required or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in the statement of operations.

Bad Debts  

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Terms of the sales vary from cash on delivery through a credit term of up to nine to twelve months.

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this quarterly report.

Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008.

We generate revenue primarily from two sources, namely, fees charged to customers for waste collection, transfer, recycling and disposal services and proceeds from the sale of recycled materials. We consider our collection and disposal operations and reclamation of reusable substances as our core business.

Revenues

The Company’s operating revenues for the three months ended March 31, 2009 was $1,611,950, decreased by $1,518,330 or 49% compared with $3,130,280 for the three months ended March 31, 2008.

	Three Months Ended March 31,
	2009		2008
Service fees	$	1,197,699	$	1,819,552
Sales of cupric sulfate		91,131		708,843
Sales of recycled commodities		323,120		601,885
Operating revenue	$	1,611,950	$	3,130,280

The decrease is mainly attributable to the adverse consequences of the global economic recession and corresponding world financial crisis which severely impacted the Company’s primary business:

1. Service fees

Service fees decreased from $1,819,552 for the three months ended March 31, 2008 to $1,197,699 for the same period of 2009, a decrease of $621,853, or 34%.

The export business of China has been significantly affected by the global economic recession. Dongtai is located in the Dalian Economic & Technological Development Zone (“ETD Zone”), and most of its customers, which are located in the same area, pursue export-oriented manufacturing businesses. The recession has affected them so profoundly that many have been forced to cease operations or curtail production and reduced their workforce. As a result, the volume of waste collection sharply decreased in the first quarter of 2009.The daily average collection volume has decreased from 135 tons in 2008 to the current level of 79 tons, an almost 50% decrease.

Since its commencement of normal operations in June 2008, Dongtai Water continues to function stably. In the first quarter of 2009, Dongtai Water generated an aggregate of approximately $320,000 of revenue.

2. Sales of recycled products

As the market demand shrinks significantly, prices for many raw materials have dropped dramatically, including Dongtai’s main products, cupric sulfate, aluminum products and zinc slag. For example, the average price for cupric sulfate in the first quarter of 2009 was about RMB 8, 000/ton, while the average price for the most recent 5 years was approximately RMB14, 000/ton, a decrease of approximately 43%. To optimize on this situation, Dongtai has elected to suspend sales of certain products. As of the end of March 2009, Dongtai had an aggregate inventory of approximately 360 tons of cupric sulfates, 240 tons of aluminum products, and 200 tons of zinc slags. The deferral of sales due to the current economic situation resulted in a decrease of sales of recycled products from $1,310,728 for the three months ended March 31, 2008 to $ 414,251 for the same period of 2009. Dongtai intends to sell these materials with improved margins as the market for them stabilizes and demand increases.

Cost of Revenues

The Company’s cost of revenues for the three months ended March 31, 2009 was $727,850 compared with $928,093 for the three months ended March 31, 2008.

	Three Months Ended March 31,
	2009		2008
Cost of service fees	$	470,163	$	371,035
Cost of cupric sulfate		87,976		286,526
Cost of recycled commodities		169,711		270,532
Costs of revenue	$	727,850	$	928,093

Cost of revenues decreased by $200,243 or 22% for the three months ended March 31, 2009 compared to the three months ended March 31, 2008.

Cost of service fees increased by $99,128, or 27% for the three months ended March 31, 2009 compared to the three months ended March 31, 2008. The decrease primarily resulted from the cost incurred by Dongtai Water in the amount of approximately $123,000. In the three months ended March 31, 2008, Dongtai Water had not yet entered into operation.

Cost of reclaimed products, including cupric sulfate and other recycled commodities, for the three months ended March 31, 2009 decreased by $299,371 or 54%, compared with the same period of 2008. Such decrease is in line with the dramatic decrease of revenues of reclaimed products.

Foreign Currency Translation

Foreign currency translation adjustments for the three months ended March 31, 2009 is a decrease of $19,207, compared to an increase of $589,954 for the three months ended March 31, 2008. This fluctuation is attributable to the revaluation of the Chinese currency against the U.S. dollar. 

Net Income

Net income for the three months ended March 31, 2009 decreased by $1,268,099, or 92%, to $107,518 from $1,375,617 for the three months ended March 31, 2008. This decrease is primarily attributable to the significant decrease in revenue. 

Liquidity and Capital Resources

We have financed our operations and met capital expenditure requirements primarily through cash provided by operating activities, trade credit and bank loans.

Accounts receivable increased by $426,327 or 18% from $2,414,257 as of December 31, 2008 to $2,840,584 as of March 31, 2009, which is primarily contributed to an increase of approximately $328,267 due from local government for sewage treatment service rendered.

Short-term loan as of March 31 2009 was $1,463,507, whereas the amount as of December 31 2008 was $3,371,198. In the first quarter of 2009, the Company repaid loans in the amount of approximately $1,907,691(RMB 13,000,000).

As of March 31, 2009, the Company had cash and cash equivalents of $2,741,411, compared to $5,714,001 as of December 31, 2008, decreased by $2,972,590 or 52%. The decrease mainly due to: (1) Repayment of bank loans; (2) Payment for construction and procurement of equipments for Dongtai Water, Zhuorui, and Dongtai’s expansion project. (3) Investment in certificate of deposit.

As of March 31, 2009, the Company had working capital surplus of $709,437, compared to a deficit of $296,858 as of December 31, 2008.

Cash Flow

	Three Months Ended March 31,
	2009			2008
Net cash provided by (used in) operating activities	$	(675,037	)	$	821,953
Net cash provided by (used in) investing activities		698,589			(1,118,074	)
Net cash provided by (used in) financing activities		(2,958,925	)		1,114,462

Net cash used in operating activities was $675,037 for the three months ended March 31, 2009, compared to net cash provided by operating activities in the amount of $821,953 for the same period in 2008, which is mainly caused by the sharp decrease in net income.

The Company invested approximately $0.6 million cash in certificate of deposit in the first quarter of 2009. The Company also received a loan payment of approximately $1,214,314 (RMB 8.4 million) from Dongtai Organic. Net cash provided by investing activities for the three months ended March 31, 2009 was $698,589.

Net cash used in financing activities for the three months ended March 31, 2009 was $2,958,925 compared to net cash provided by financing activities in the amount of $1,114,462 in the same period of 2008. The net change is attributable to a repayment of short term loans in the amount of approximately $1,907,691.Furthermore, the Company paid approximately $1 million for Dongtai Water and Zhuorui’s construction projects payable.

We intend to use our available funds as working capital and to expand and develop our current lines of business. We believe that our available funds will provide us with sufficient capital for at least the next twelve months; however, to the extent that we make acquisitions, we may require additional capital for the acquisition or to support the operations of the combined companies. We cannot provide any assurance that any required funding will be available on terms acceptable to us.

OFF-BALANCE SHEET ARRANGEMENTS

Under SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which we have:

·Any obligation under certain guarantee contracts;

•  Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;

•  Any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in stockholder’s equity in our statement of financial position; and

•   Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

As of March 31, 2009, the Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ZHUORUI’S CURRENT CONDITION

As of March 31, 2009, the trial production is continuing. In total, 14 batches of waste catalyst have been put into production. The main products of the process are ammonium metavanadate and ammonium molybdate, with by-products consisting of cobalt and nickel slags. The recovery rate and quality of the main products have both met the predefined standards. Further optimization of the personnel configuration and the technical process are expected throughout trial production. It is expected that Zhuorui could enter the normal production phase of operations by the end of the second quarter of 2009, and the output of ammonium metavanadate and ammonium molybdate will be 40 tons/month and 15 tons/month, respectively. As of March 31, 2009, inventory consists of 5.7 tons of ammonium metavanadate. Ammonium molybdate, cobalt and nickel slags are combined in the semi-finished state.

As of March 31, 2009, Shanghai Pudong Development Bank Dalian Branch has completed its review process relating to Zhuorui’s credit application for RMB 20, 000,000 (US$3,131,851). The bank has approved Zhuorui’s application, and funding is expected to be available shortly.

The recent 5-year average prices of ammonium metavanadate, ammonium molybdate, and cobalt and nickel slag are RMB125,000/ton, 150,000/ton, and 15,000/ton respectively, while, in comparison, the market prices as of March 31, 2009 are RMB 85,000/ton, 90,000/ton, and 10,000/ton, almost the lowest level in recent years. The sharp decrease in the prices is primarily due to the effects of the global economic recession.

To resist the significant negative effect caused by the global crisis, and revitalize the economy, the Chinese Government carried out expansionary fiscal and monetary policies to increase domestic demand since last year. These actions have gradually taken effect. Moreover, the Government’s massive stimulus package includes Non-ferrous Metal Industry Promotion Planning as promulgated on February 25, 2009. Although the specifics of the Planning have not yet been promulgated, the industry began to revive due to the positive signal conveyed by the Government action.

In view of the pending financing to be made available to Zhuorui to satisfy its operational needs, and its optimistic outlook for the industry, Zhuorui elected to suspend purchases and inventory final products for sale as market conditions improve.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Item 4T.  Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, or the "Exchange Act") that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC 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.  Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2009.  Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to accomplish their objectives.

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or our internal controls will prevent all error and all fraud.  he design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be considered relative to their cost.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that we have detected all of our control issues and all instances of fraud, if any. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions.

There have been no changes in our internal control over financial reporting that occurred during our fiscal quarter ended March 31, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

LACK OF SEGREGATION OF DUTIES

Management is aware that there is a lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

None.

Item 1A.  Risk Factors.

None.

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

On April 30 2009, we issued 9,000 shares of our Common Stock under an agreement with a consultant to provide us with investor relations services.

Item 3.  Defaults Upon Senior Securities.

None.

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

None.

Item 5.  Other Information.

On May 8 2009, the Board of Directors established an Audit Committee consisting of three directors, Mr. Henry Wong, Mr. Francis Leong and Mr. Wu Chunyou. Each member of the Audit Committee is “independent” within the meaning of Nasdaq Marketplace Rule 4200(a) (15). Mr. Wong has been appointed to serve as Chairman of the Committee. The Board of Directors also adopted an Audit Committee Charter to govern the activities of the Audit Committee. A copy of the Audit Committee Charter is filed as an exhibit to this Report.

Item 6.  Exhibits.

No.	Description
31.1	Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/ 15d-14(a) Certification of principal financial and accounting officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer
99.1	Charter of the Audit Committee of the Board of Directors

SIGNATURES

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

CHINA INDUSTRIAL WASTE MANAGEMENT, INC.
By:	/s/ Dong Jinqing
	Dong Jinqing, Chief Executive Officer
	Date: May 15, 2009

By:	/s/ Guo Xin
	Guo Xin, Chief Financial Officer
	Date: May 15, 2009