**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549










FORM
      10-KSB/A


(Amendment
      No. 1)





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




For
      the
      Fiscal Year Ended December 31, 2006





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





For
      the
      transition period from ________________ to ________________





Commission
      File Number 002-95836-NY





**CHINA
      INDUSTRIAL WASTE MANAGEMENT, INC.**


(Name
      of
      small business issuer in its charter)





Nevada
            13-3250816(State
                or other jurisdiction of
            (IRS.
                Employerincorporation
                or organization)
            Identification
                No.)




c/o
      Dalian Dongtai Industrial Waste Treatment Co., Ltd


No.
      1
      Huaihe West Road E-T-D-Zone, Dalian, China 116600


(Address
      of Principal Executive
      Offices)              (Zip
      Code)





Issuer’s
      telephone number, including area code 011-86-411-9770-3333




Darren
      Ofsink, Esq.


Guzov
      Ofsink, LLC


600
      Madison Avenue, 14 th Floor


New
      York,
      New York 10022


(212)
      371-8008


(Name,
      address and telephone number of agent for service)




Securities
      registered pursuant to Section 12(b) of the Act: None





Securities
      registered pursuant to Section 12(g) of the Act: None




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





Check
      if
      there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
      S-B is not contained in this form, and no disclosure will be contained, to
      the
      best of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes
oNo
x





State
      issuer’s revenues for its most recent fiscal year: US$6,383,233 for the fiscal
      year ended December 31, 2006.





The
      aggregate market value of the voting stock held by non-affiliates of the
      Company, computed by reference to the closing bid price of such stock as of
      April 5, 2007 on the OTC Bulletin Board ($1.55) was $5,570,612. For purposes
      of
      the computation we consider all directors and holders of 10% or more of our
      common stock to be affiliates. Therefore, the number of shares of our common
      stock held by non-affiliates as of April 5, 2007 was 3,593,943.





On
      April
      5, 2007, the Company had 13,220,843 shares of common stock
      outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes
oNo:
x










**EXPLANATORY
      NOTE**





China
      Industrial Waste Management, Inc. (the “Company”) is filing this Amendment No. 1
      on Form 10-KSB/A to its Annual Report on Form 10-KSB for the fiscal year ended
      December 31, 2006, as filed with the Securities and Exchange Commission on
      April
      24, 2007, solely to (a) amend and restate in its entirety Item 6. Management’s
      Discussion and Analysis or Plan of Operation and restate the financial
      statements of the Company as of December 31, 2006 and the fiscal year then
      ended
      and (b) file as exhibits hereto currently dated certifications from our
      Principal Executive and Principal Financial Officer. Only the amended Item,
      financial statements and updated exhibits are being filed herewith. The
      restatement of the financial statements includes adjustments to the Company’s
      landfill related asset retirement obligations (“ARO”) and the consolidation of
      the Company’s subsidiary, Liaoyang Dongtai Industrial Waste Treatment Co. Ltd.,
      which was not consolidated in the financial statements of the Company and its
      subsidiaries filed with the original Annual Report on Form 10-KSB for the fiscal
      year ended December 31, 2006 filed on April 24, 2007. These changes impacted
      previously reported net income, net income per share, total assets, total
      liabilities, shareholders' equity, and cash flows for the fiscal years as of
      December 31, 2006 as well as 2005. No other changes are being effected by this
      filing. Therefore, information not affected by this amendment is unchanged
      and
      reflects the disclosures made at the time of the original filing.





2


ITEM
      6.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





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 has no
      longer been in the mining business due to its loss of all its contractual rights
      in certain mining properties in Spain.





In
      November 2005, the Company, through its wholly-owned subsidiary, DonTech Waste
      Services, Inc. (formerly, Dalian Acquisition Corp.), a Delaware corporation
      (“DonTech”), acquired 90% of the capital stock of Dalian Dongtai Industrial
      Waste Treatment Co., Ltd., a corporation located in Dalian, the People’s
      Republic of China, or PRC (“Dongtai”). As a result of the acquisition, the
      Company is now engaged in the waste management business, and Dongtai currently
      represents the primary operations and business of the Company.





Dongtai
      was one of the first companies specializing in the centralized treatment of
      industrial waste in the PRC. Dongtai is engaged in the collection, treatment,
      disposal and recycle of all types of industrial wastes. It provides a wide
      range
      of waste treatment services to diversified customers. Dongtai uses industrial
      waste as a raw material to produce chemical and metallurgy products or
      incinerates, buries, or treats the waste.





Dongtai
      also provides waste disposal solutions, waste transportation services, realty
      management services and environmental pollution remediation services to its
      clients.





On
      March
      22, 2006, Dongtai and two other shareholders formed a subsidiary, Liaoyang
      Dongtai Industrial Waste Treatment Co., Ltd. (“Liaoyang Dongtai”) in the PRC, in
      which Dongtai holds a 60% ownership interest. Liaoyang Dongtai is also engaged
      in the collection, treatment, disposal and recycling of industrial waste. It
      is
      located in Liaoyang, where there is a concentration of large-scale chemical
      industrial enterprises. Industrial wastes generated by these enterprises are
      on
      the increase and have not, in our opinion, been properly disposed. We believe
      that this presents a good business opportunity for the Company to meet this
      need.




3





On
      March
      31, 2006, the Company filed with the Securities and Exchange Commission a
      definitive information statement on Schedule 14C in which it notified
      stockholders of its intention to make the following changes:




·
            to
                change the name of the Company to China Industrial Waste Management
                Inc.
                and apply for a new trading symbol of CIWT.OB.  ·
            to authorize the Board of Directors
              to effect
              a one-for-one hundred (1:100) reverse stock split of the outstanding
              shares of Common Stock.  ·
            to approve the Company's 2006 Equity
              Incentive
              Plan.




The
      name
      change and the reverse stock split became effective on May 12,
      2006.




Results
      of Operations





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





Revenue




Years
                Ended December 31,2006
            
            2005Service
                fees
            
            
            3,252,725
            
            
            2,345,136Sales
                of cupric sulfate
            
            
            1,193,369
            
            
            490,564Sales
                of other recycled commodities
            
            
            1,937,139
            
            
            2,033,485Total
            
            
            6,383,233
            
            
            4,869,185





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





Total
      revenue for the year ended December 31, 2006, was $6,383,233, an increase of
      $1,514,048 or 31.09% from $4,869,185 for the same period in 2005. The increase
      in revenue is attributable to a broadened customer base and increased demand
      from existing customers. For example, we received revenue from 496 different
      customers in the year ended December 31, 2006 as compared to 389 different
      customers in the year ended December 31, 2005.





Service
      fee revenue for the year ended December 31, 2006 was $3,252,725 which was 50.96%
      of total revenue for such year and an increase of $907,589 or 38.7% over the
      $2,345,136 in service fee revenue we generated in the year ended December 31,
      2005. Service fee revenue accounted for 48.16% of our total revenue for the
      year
      ended December 31, 2005. The relative percentages of service fee revenue and
      revenue from sales of recycled products vary based on the types of waste our
      customers generate. For example, if a customer has waste which can be recycled,
      we may charge less for our disposal fees for unrecyclable waste to the same
      customer.





Sales
      of
      recycled products (including cupric sulfate and other recycled commodities)
      were
      $3,130,508 or 49.04% of total revenue for the year ended December 31, 2006.
      Sales of recycled products in 2006 increased by $606,459 over the year ended
      December 31, 2005 when such sales were $2,524,049 or 51.84% of our total revenue
      for such year. In 2006 we determined to hold all of our production of alloys
      in
      inventory in anticipation of receiving higher selling prices for such alloys
      in
      the future and therefore generated no sales. Sales of cupric sulfate increased
      by approximately 143.26%, from $490,564 in the year ended December 31, 2005
      to
      $1,193,369 in the year ended December 31, 2006, while sales of other recycled
      products, such as organic solvents, plastic, aluminum and motor oil decreased
      by
      $96,346 or approximately 4.74% in the year ended December 31, 2006 as compared
      to the year ended December 31, 2005.




4





Costs
      of
      revenue




Years
                Ended December 31,2006
            
            2005Cost
                of service fees
            
            
            763,940
            
            
            664,392Cost
                of cupric sulfate
            
            
            310,585
            
            
            171,107Cost
                of other recycled commodities
            
            
            748,132
            
            
            753,433Total
            
            
            1,822,657
            
            
            1,588,932





Costs
      of
      revenues primarily includes labor expenses (salaries, benefits , insurance
      and
      other benefits), depreciation, materials, transportation costs, rent, repair
      costs and other sundry expenses. Costs of revenue increased $233,725 or 14.71%
      from $1,588,932 for the year ended December 31, 2005 to $1,822,657 for the
      year
      ended December 31, 2006. The increase in costs of revenue is attributable to
      the
      increase in the number of customers which retained our company for providing
      professional services and an increase in the volume of the waste we treat.





Costs
      related to providing services increased by $99,548 or 14.98% from $664,392
      for
      the year ended December 31, 2005 to $763,940 for the year ended December 31,
      2006. Costs related to producing recycled waste products (including cupric
      sulfate and other recycled commodities) increased by $134,177 or 14.51% from
      $924,540 for the year ended December 31, 2005 to $1,058,717 for the year ended
      December 31, 2006.





Operating
      expenses





Total
      operating expenses for the fiscal year ended December 31, 2006 was $2,069,279
      which represents an increase of $176,239 or 9.31% from $1,893,040 for the same
      period ended December 31, 2005. Labor costs typically account for approximately
      50% of operating expenses while transportation expenses, taxes, depreciation
      expense and other expenses typically account for approximately 15%, 10%, 5%
      and
      20%, respectively, of total operating expenses. In the year ended December
      31,
      2006 as compared to the year ended December 31, 2005 labor costs increased
      approximately 96%, transportation expenses increased approximately 41%, taxes
      increased by 40% and depreciation expense increased by approximately 51%. We
      incurred approximately $650,000 in expenses in the year ended December 31,
      2005
      relating to the reverse merger in which we acquired Dongtai No such expenses
      were incurred in the year ended December 31, 2006.





Other
      income





Other
      income for the fiscal year ended December 31, 2006 was $206,030, a decrease
      of
      $358,263 or 63.49% from $564,293 for the same period in 2005. The decrease
      was
      primarily attributable to a $167,410 decrease from 2005 to 2006 in financial
      subsidies paid to the Company by certain government agencies and the fact that
      in 2005 we received dividends of $192,674 from a prior subsidiary and we
      received no dividends in 2006.




5





Foreign
      Currency Translation





The
      foreign currency translation adjustment for the year ended December 31, 2006
      was
      $269,296 compared to an adjustment of $157,196 for the year ended December
      31,
      2005. Such a fluctuation was the result of volatility in foreign exchange rates
      between the U.S. dollar and the Chinese renminbi during the two fiscal years
      ended December 31, 2006 and 2005.





Income
      tax





The
      Company is not liable for income tax for 2006 as a consequence of a tax
      exemption granted to it when Dongtai became a Sino-American joint venture in
      2005 in connection with the reverse merger transaction it consummated. The
      Company has accrued income tax expenses of $385,382 for 2005. The Company’s
      tax-exempt status will continue through the end of 2007. Thereafter, the Company
      will only be liable to pay 50% of its income taxes for the next three years
      (the
      applicable tax rate will be 7.5% in the years 2008-2010 rather than 15% in
      such
      years). According to the newly adopted Enterprise Income Tax Law of the PRC,
      commencing in 2011 the Company will be subject to an enterprise income tax
      rate
      of 25%.





Net
      Income (Loss)





Net
      income for the fiscal year ended December 31, 2006 was $2,441,428, an increase
      of $947,888 or 63.47% from $1,493,540 for the same period in 2005. Net income
      was 38.25% and 30.67% of revenues for the years ended December 31, 2005 and
      December 31, 2006, respectively. This increase is primarily attributable to
      the
      $1,514,048 increase in the Company’s revenues during the fiscal year ended
      December 31, 2006 which was partially offset by increases of $233,725 in costs
      of revenues and $176,239 in total operating expenses in the year ended December
      31, 2006.





Liquidity
      and Capital Resources




We
      believe that our primary sources of liquidity are cash flows from operations
      and
      existing cash. We intend to use our available funds as working capital and
      to
      develop our current lines of business. We anticipate that cash flow provided
      by
      operating activities will provide the necessary funds on a short - and long-term
      basis to meet our operating cash requirements.





Cash
      and
      cash equivalents





The
      Company had cash and cash equivalents of $2.94 million at the beginning of
      2006
      and at December 31 2006, we had approximately $5.7 million cash and cash
      equivalents. The Company had cash and cash equivalents of approximately $2.37
      million at the beginning of 2005.





Working
      Capital





As
      of
      December 31, 2006, the Company had working capital of $6,044,650 as compared
      to
      $ 3,498,100 as of December 31, 2005. The increase is attributable to cash
      generated from operations.




6





Cash
      flow
      from operating activities





Net
      cash
      provided by operating activities in the year ended December 31, 2006 was
      $3,646,546, an increase of $2,135,755 or 141.37% over the $1,510,791 of net
      cash
      provided by operating activities in the year ended December 31, 2005. The
      increase was primarily attributable to a $947,888 increase in net income as
      well
      the Company obtaining prepayments of fees from certain customers, the effects
      of
      which were partially offset by the Company making prepayments to certain of
      its
      suppliers of raw materials.





Cash
      flow
      from investing activities





Net
      cash
      used in investing activities was $1,052,042 in the year ended December 31,
      2006
      as compared to net cash provided by investing activities of $54,841 in the
      year
      ended December 31, 2005. In 2006 the Company made an equity investment of
      $317,400 in BOT projects (no such amounts were invested in 2005) and increased
      its purchases of property and equipment by $346,965 over the amount of purchases
      made in 2005.





Capital
      resources





We
      believe that our available funds will provide us with sufficient capital for
      our
      operations during at least the next twelve months; however, to the extent that
      we make acquisitions, we may require additional capital for the acquisition
      or
      for the operation of the combined companies. We believe that capital will be
      available to us through loans from financial institutions or equity or debt
      financings. However, we cannot give any assurance that such funding will be
      available on terms acceptable to us or at all.





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. These policies 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 collectibles is reasonably
      assured. Payments received before all of the relevant criteria for revenue
      recognition are satisfied are recorded as deferred sales.




7





Property,
      Plant and Equipment





Property
      and equipment are stated at cost. Expenditures for maintenance and repairs
      are
      charged to earnings as incurred; additions, renewals and betterments are
      capitalized. When property and equipment are sold or otherwise disposed of,
      the
      related cost and accumulated depreciation are removed from the respective
      accounts, and any gain or loss is included in 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. Reserves are recorded
      primarily on a specific identification basis.




Off
      Balance Sheet Arrangements




Neither
      the Company nor any of its subsidiaries have engaged in any off-balance sheet
      transactions since its inception.




8


**ITEM
      7.**  **FINANCIAL
      STATEMENTS**





**CHINA
      INDUSTRIAL WASTE MANAGENT, INC.**





**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**As
                  of December 31, 2006 and 2005, and for the years then
                  ended**Report
                of Independent Registered Public Accounting Firm
            
            
            F-2Consolidated
                Balance Sheets
            
            
            F-3Consolidated
                Statements of Operations and Comprehensive Income
            
            
            F-4Consolidated
                Statements of Stockholders’ Equity
            
            
            F-5Consolidated
                Statements of Cash Flows
            
            
            F-6Notes
                to Consolidated Financial Statements
            
            
            F-7




F-1







F-2




**CHINA
                INDUSTRIAL WASTE MANAGEMENT, INC.****CONSOLIDATED
                BALANCE SHEETS**(In
                U.S. dollars)




December
                31,
            
            December
                31,2006
            
            2005Restated
            
            Restated**ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            5,713,925
            
            $
            2,944,179Trade
                accounts receivable, net
            
            
            151,144
            
            
            281,761Other
                receivables
            
            
            35,999
            
            
            115,417Inventory
            
            
            602,944
            
            
            410,084Advances
                to suppliers
            
            
            374,046
            
            
            16,502Deferred
                expense
            
            
            20,490
            
            
            22,304Total
                current assets
            
            
            6,898,548
            
            
            3,790,247Investment
            
            
            322,717
            
            
            -Property,
                plant & equipment
            
            
            4,189,517
            
            
            3,584,232Less:
                accumulated depreciation
            
            
            (1,502,899
            )
            
            (1,162,326
            )Net
                property, plant and equipment
            
            
            2,686,618
            
            
            2,421,906Construction
                in progress
            
            
            202,974
            
            
            220,474Land
                usage right, net of accumulated amortization
            
            
            1,524,319
            
            
            1,509,159Related
                party receivable
            
            
            231,793
            
            
            281,851**Total
                assets**
            
            $
            11,866,969
            
            $
            8,223,637**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilitiesAccounts
                payable
            
            $
            92,255
            
            $
            108,213Tax
                payable
            
            
            6,346
            
            
            -Deferred
                sales
            
            
            455,548
            
            
            -Accrued
                expenses
            
            
            15,768
            
            
            -Other
                payable
            
            
            283,981
            
            
            183,934Total
                current liabilities
            
            
            853,898
            
            
            292,147Asset
                retirement obligation liability for landfills
            
            
            381,873
            
            
            344,691Total
                liabilities
            
            
            1,235,771
            
            
            636,838Minority
                interest in subsidiary
            
            
            1,083,022
            
            
            758,680Stockholders'
                equityPreferred
                stock: par value $.001; 5,000,000 shares authorized; 0 and 64,000
                shares
                issued and outstanding
            
            
            -
            
            
            64Common
                stock: par value $.001; 95,000,000 shares authorized; 13,220,843
                and
                6,740,843 shares, respectively, issued and outstanding
            
            
            13,221
            
            
            6,741Additional
                paid-in capital
            
            
            1,952,634
            
            
            1,949,717Other
                comprehensive income
            
            
            381,579
            
            
            112,283Retained
                earnings
            
            
            7,200,742
            
            
            4,759,314Total
                stockholders' equity
            
            
            9,548,176
            
            
            6,828,119**Total
                liabilities and stockholders' equity**
            
            $
            11,866,969
            
            $
            8,223,637




See
                notes to Consolidated Financial
                Statements.




F-3


**CHINA
                  INDUSTRIAL WASTE MANAGEMENT, INC.****CONSOLIDATED
                  STATEMENTS OF OPERATIONS AND COMPREHENSIVE
                  INCOME**(In
                  U.S. dollars)
  Years
                  ended December 31,2006
              
              2005(Restated)
              
              (Restated)Service
                  fees
              
              $
              3,252,725
              
              $
              2,345,136Sales
                  of recycled commodities
              
              
              3,130,508
              
              
              2,524,049Operating
                  revenue
              
              
              6,383,233
              
              
              4,869,185Cost
                  of service fees
              
              
              763,940
              
              
              664,392Cost
                  of recycled commodities
              
              
              1,058,717
              
              
              924,540Costs
                  of revenue (including depreciation)
              
              
              1,822,657
              
              
              1,588,932Gross
                  profit
              
              
              4,560,576
              
              
              3,280,253Operating
                  expensesSelling
                  expenses
              
              
              599,691
              
              
              197,355General
                  and administrative expenses
              
              
              1,469,588
              
              
              1,695,685Total
                  operating expenses
              
              
              2,069,279
              
              
              1,893,040Income
                  from operations
              
              
              2,491,297
              
              
              1,387,213Other
                  income(expense)Interest
                  income
              
              
              25,397
              
              
              26,728Other
                  income
              
              
              206,030
              
              
              564,293Other
                  expense
              
              
              (11,803
              )
              
              (14,764
              )Total
                  other income (expense)
              
              
              219,624
              
              
              576,257Net
                  income from continuing operations before minority interest and
                  income
                  tax
              
              
              2,710,921
              
              
              1,963,470Income
                  tax (benefit)
              
              
              626
              
              
              385,382Net
                  income before minority interest
              
              
              2,710,295
              
              
              1,578,088Minority
                  interest
              
              
              268,867
              
              
              84,548Net
                  income
              
              $
              2,441,428
              
              $
              1,493,540Foreign
                  currency translation adjustment
              
              
              269,296
              
              
              157,196Comprehensive
                  income
              
              $
              2,710,724
              
              $
              1,650,736Weighted
                  average shares outstanding
              
              
              13,181,391
              
              
              12,949,660Basic
                  and diluted net earnings per share
              
              $
              0.19
              
              $
              0.12
  See
                  notes to Consolidated Financial
                  Statements.




F-4


**CHINA
                  INDUSTRIAL WASTE MANAGEMENT, INC.****CONSOLIDATED
                  STATEMENTS OF STOCKHOLDERS' EQUITY****FOR
                  YEARS ENDED DECEMBER 31, 2006 AND 2005
                  (Restated)**
 AccumulatedAdditional
                
                Other
                
                
                
                TotalPreferred
                    Series A
                
                Common
                    Stock
                
                Paid
                    in
                
                Comprehensive
                
                Retained
                
                Stockholders'Shares
                
                Amount
                
                Shares
                
                Amount
                
                Capital
                
                Income
                
                Earnings
                
                EquityBalance
                    January 1, 2005
                
                
                64,000
                
                $
                64
                
                
                6,400,000
                
                $
                6,400
                
                $
                1,950,058
                
                $
                (44,913
                )
                $
                3,990,412
                
                $
                5,902,021Shares
                    held by Goldtech owners at time of acquisition by Dontech
                
                
                
                
                
                
                
                
                147,711
                
                
                148
                
                
                (148
                )
                
                
                
                
                
                
                
                -Shares
                    issued to consultants to effect reverse acquisition
                
                
                
                
                
                
                
                
                193,132
                
                
                193
                
                
                (193
                )
                
                
                
                
                
                
                
                -Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,493,540
                
                
                1,493,540Foreign
                    currency translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                157,196
                
                
                
                
                
                157,196Dividend
                    paid to Dalian Dongtai owners prior to reverse merger
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (724,638
                )
                
                (724,638
                )Balance
                    December 31, 2005
                
                
                64,000
                
                
                64
                
                
                6,740,843
                
                
                6,741
                
                
                1,949,717
                
                
                112,283
                
                
                4,759,314
                
                
                6,828,119Conversion
                    of preferred shares to common
                
                
                (64,000
                )
                
                (64
                )
                
                6,400,000
                
                
                6,400
                
                
                (6,336
                )
                
                
                
                
                
                
                
                -S8
                    shares issued for services
                
                
                
                
                
                
                
                
                80,000
                
                
                80
                
                
                9,253
                
                
                
                
                
                
                
                
                9,333Foreign
                    currency translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                269,296
                
                
                
                
                
                269,296Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                2,441,428
                
                
                2,441,428Balance
                    December 31, 2006
                
                
                -
                
                $
                -
                
                
                13,220,843
                
                $
                13,221
                
                $
                1,952,634
                
                $
                381,579
                
                $
                7,200,742
                
                $
                9,548,176


F-5


**CHINA
                  INDUSTRIAL WASTE MANAGEMENT, INC.****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS**(In
                  U.S. dollars)
  Years
                  Ended December 31,2006
              
              2005Restated
              
              RestatedCash
                  flows from operating activities:Net
                  income
              
              $
              2,441,428
              
              $
              1,493,540Adjustments
                  to reconcile net income to net cashprovided
                  by operating activities:Minority
                  interest
              
              
              268,867
              
              
              84,548Depreciation
                  and Amortization
              
              
              331,539
              
              
              297,262Bad
                  debt allowance
              
              
              5,146
              
              
              503Accretion
                  expenses
              
              
              25,226
              
              
              19,779Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              132,087
              
              
              (167,788
              )Inventory
              
              
              (176,167
              )
              
              (400,678
              )Other
                  receivables
              
              
              81,908
              
              
              22,120Advance
                  to suppliers
              
              
              (8,883
              )
              
              115,872Prepaid
                  expense
              
              
              2,519
              
              
              (21,978
              )Accounts
                  payable and other payables
              
              
              73,083
              
              
              212,668Accrued
                  expense and deferred sales
              
              
              463,551
              
              
              -Tax
                  payable
              
              
              6,242
              
              
              (145,057
              )Net
                  cash provided by operating activities
              
              
              3,646,546
              
              
              1,510,791Cash
                  flows from investing activiiesInvestment
                  in subsidiary
              
              
              (317,400
              )
              
              -Purchase
                  of property and equipment
              
              
              (477,351
              )
              
              (130,386
              )Construction
                  contracts
              
              
              (317,749
              )
              
              (54,335
              )Due
                  from related party
              
              
              35,267
              
              
              71,674Investment
                  in subsidiary by minority holder
              
              
              25,191
              
              
              -Proceeds
                  on sale of equity investments
              
              
              -
              
              
              167,888Net
                  cash provided by investing activities
              
              
              (1,052,042
              )
              
              54,841Cash
                  flows from financing activitiesDividends
                  distributed to shareholders
              
              
              -
              
              
              (724,638
              )Net
                  cash used in financing activities
              
              
              -
              
              
              (724,638
              )Effect
                  of exchange rate on cash
              
              
              175,242
              
              
              38,620Net
                  increase in cash and cash equivalents
              
              
              2,769,746
              
              
              879,614Cash
                  and cash equivalents, beginning of period
              
              
              2,944,179
              
              
              2,064,565Cash
                  and cash equivalents, end of period
              
              $
              5,713,925
              
              $
              2,944,179Supplemental
                  cash flow information:Cash
                  paid during the year for:Interest
              
              $
              -
              
              $
              -Income
                  taxes
              
              
              626
              
              
              283,651Non-cash
                  investing and financing activities:Stock
                  issued for services
              
              
              80,000
              
              
              -See
                  notes to Consolidated Financial
                  Statements.




F-6


**CHINA
        INDUSTRIAL WASTE MANAGEMENT, INC.**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **1.  Nature
        of operations**
  The
        audited consolidated financial statements are those of China Industrial Waste
        Management, Inc., a Nevada corporation formerly known as Goldtech Mining
        Corporation (the “Company”), and its majority owned subsidiaries. When the terms
“the Company,” “we,” “us” or “our” are used in this document, those terms refer
        to China Industrial Waste Management, Inc., and its consolidated subsidiaries.
        When we use the term “CIWM,” we are referring only to the parent holding
        company.
 
 CIWM
        is a
        holding company which conducts its business through its only wholly-owned
        subsidiary, DonTech Waste Services, Inc. (“DonTech”), formerly known as Dalian
        Acquisition Corp. DonTech owns 90% of the stock of Dalian Dongtai Industrial
        Waste Treatment Co. Ltd. (“Dongtai”), an entity organized under the laws of the
        People’s Republic of China (“ PRC”). As of December 31, 2006 Dongtai owned 60%
        of the equity in Liaoyang Dongtai Industrial Waste Treatment Co. Ltd. (“Liaoyang
        Dongtai”).
 
 Dongtai
        was incorporated on January 9, 1991. Dongtai is located in the Economic and
        Technology Development Zone, Dalian, PRC. Dongtai is engaged in the collection,
        treatment, disposal and recycling of industrial waste in China. Dongtai recovers
        all types of industrial wastes which can be used as raw material to produce
        chemical and metallurgy products. Dongtai also provides incineration, burial,
        and water treatment services. Dongtai also provides service for environment
        protection, technology consultation, pollution treatment, and waste managing
        process design.
 
 Liaoyang
        Dongtai was incorporated on March 22, 2006. Dongtai has a 60% interest in
        this
        subsidiary. Liaoyang Dongtai is located in Liaoyang, PRC and is engaged in
        the
        business of the collection, treatment, disposal and recycling of industrial
        wastes.
 
 Another
        corporation with the name China Industrial Waste Management, Inc. was
        incorporated in the State of Delaware on August 16, 2005. On September 22,
        2005,
        that corporation acquired 90% of the outstanding shares of Dongtai from its
        shareholders in exchange for 1,280,000 shares of the corporation’s common stock,
        representing 100% of the issued and outstanding shares of its common stock
        at
        the date of the acquisition. The
        exchange of shares with Dongtai was accounted for as a reorganization between
        entities under common control with China Industrial Waste Management, Inc.
        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. Since China Industrial Waste Management Inc. had
        minimal assets and liabilities, the combination was essentially a
        recapitalization of Dongtai.




F-7





On
      November 11, 2005, CIWM entered into an Agreement and Plan of Merger (the
“Merger Agreement”) with the Delaware corporation also called China Industrial
      Waste Management, Inc. and the shareholders of that company. Pursuant to the
      Merger Agreement, which closed on November 11, 2005, China Industrial Waste
      Management, Inc. (the Delaware corporation) merged with and into CIWM’s wholly
      owned subsidiary, DonTech, and CIWM issued 64,000 shares of its Series A
      Convertible Preferred Stock to the former shareholders of the Delaware
      corporation. Each share of Series A Convertible Preferred Stock was convertible
      into 10,000 shares of common stock and was entitled to 10,000 votes on each
      matter submitted to the stockholders. The holders of the Series A Convertible
      Preferred Stock contractually agreed not to convert such shares until CIWM
      increased its authorized number of shares of common stock.





Pursuant
      to the Merger Agreement, after the merger, the Delaware corporation ceased
      to
      exist and DonTech was the surviving company. The merger of the Delaware
      corporation into DonTech was accounted for as a reverse acquisition under the
      purchase method of accounting since the shareholders of the Delaware corporation
      obtained control of the Company by virtue of the merger. Accordingly, the merger
      was recorded as a recapitalization of the Delaware corporation, with the
      Delaware corporation being treated as the continuing entity. The financial
      statements of the accounting acquiree (CIWM) are not significant.
      Therefore, no pro forma financial information is submitted.





On
      May
      12, 2006, the Company changed its name to “China Industrial Waste Management,
      Inc.” and began trading under a new trading symbol (CIWT). In addition, the
      Company effected a 1:100 reverse split of its outstanding common shares.





On
      May
      15, 2006, the Company issued to 10 stockholders an aggregate of 6,400,000
      additional shares of the Company's Common Stock as an equitable adjustment
      of
      the number of shares which the Company had agreed to issue to such persons
      pursuant to the Merger Agreement entered into and consummated on November 11,
      2005. Since the issuance of additional 6,400,000 shares was caused by the merger
      consummated on November 11, 2005, such shares have been assumed to be
      outstanding in 2005 in the calculation of EPS.





**2.
      Basis of Presentation**





The
      accompanying consolidated financial statements include the accounts of China
      Industrial Waste Management, Inc., a Nevada corporation, its 100% owned
      subsidiary, DonTech Waste Services Inc. (formerly, Dalian Acquisition Corp.),
      a
      Delaware corporation, its 90% indirectly owned subsidiary, Dalian Dongtai
      Industrial Waste Treatment Co., Ltd., a PRC company, and its 60% indirectly
      owned subsidiary, Liaoyang Dongtai Industrial Waste Treatment Co. Ltd., a PRC
      company. All material inter-company accounts and transactions have been
      eliminated in the consolidation.





The
      accompanying financial statements have been 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 the PRC. All
      necessary adjustments have been made to present the financial statements in
      accordance with US GAAP.




F-8





**3.
      Summary of Significant Accounting Policies**





Economic
      and Political Risks




The
      Company faces a number of risks and challenges as a result of having primary
      operations and markets in the PRC. Changing political climates in the PRC could
      have a significant effect on the Company’s business.





Foreign
      currency translation




As
      of
      December 31, 2006 and 2005, the accounts of the Company were maintained, and
      the
      consolidated financial statements were expressed, in the 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 the RMB as the functional
      currency. According to the Statement, all assets and liabilities were translated
      at the exchange rate on the balance sheet date, stockholders’ equity was
      translated at the historical rates and the statement of operations items 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.”





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.





Cash
      and cash equivalents




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





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 December 31, 2006 is
      $20,550.





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. Reserves are recorded
      primarily on a specific identification basis.





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.





The
      Company is in the process of expanding and advancing its facilities, creating
      a
      need to increase the advanced payment for the purchase of machinery and the
      building of a new plant, resulting in an advance to suppliers balance of
      $374,046 at December 31, 2006.




F-9





Inventory




Inventories
      are stated at the lower of cost, as determined on a first-in, first-out basis,
      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,
      equipment and construction in progress




Property
      and equipment are stated at cost. Expenditures for maintenance and repairs
      are
      charged to earnings as incurred; additions, renewals and betterments are
      capitalized. When property and equipment 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 operations. Depreciation of
      property and equipment is provided using the straight-line method for
      substantially all assets with estimated lives as follows:





Buildings
            
            30
                YearsMachinery
            
            10YearsVehicles
            
            8YearsOffice
                equipment
            
            5Years





Construction
      in progress consists of the design expenses, architect fee and cost of the
      equipment to treat waste.




Landfills





Cost
      Basis of Landfill Assets — We capitalize various costs that we incur to make a
      landfill ready to accept waste. 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 (“SFAS No. 143”) 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 added to the cost of revenues in our Consolidated Statements of
      Operations.





Amortization
      of Landfill Assets — 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:





As
                of  December 312006
            
            2005Asset
                retirement obligation liability for landfills
            
            $
            381,873
            
            
            344,691


F-10


Long-term
      investment




Long-term
      investments are recorded under equity method.





As
      of
      December 31, 2006, Dongtai has made investment in a company engaged in the
      same
      industry as Dongtai - Dongtai Water Recycling. The $322,717 equity investment
      in
      Dongtai Water Recycling has been recorded under equity method.





Dongtai
      Water Recycling Company was incorporated on July, 2006. Dongtai acquired 18%
      of
      the equity in such company. Dongtai Water Recycling is a Build-Operate-Transfer
      (BOT) project, designed to process polluted water generated by the city of
      Dalian. Though the Company acquired less than 20% equity interest of Dongtai
      Water Recycling Company as of December 31, 2006, the other 82% equity interest
      of the invested company was held as of December 31, 2006 by Lida Environment
      Engineering Company, which is controlled by Mr. Dong Jinqing, CEO and CFO of
      the
      Company. In accordance with US GAAP, the equity method of accounting for the
      acquisition has been applied.





Asset
      impairments





We
      monitor the carrying value of our long-lived assets for potential impairment
      and
      test the recoverability of such assets whenever events or changes in
      circumstances indicate that their carrying amounts may not be recoverable.
      Typical indicators that an asset may be impaired include:





·
            A
                significant decrease in the market price of an asset or asset group;


·
            A
                significant adverse change in the extent or manner in which an asset
                or
                asset group is being used or in its physical condition;


·
            A
                significant adverse change in legal factors or in the business climate
                that could affect the value of an asset or asset group, including
                an
                adverse action or assessment by a regulator;


·
            An
                accumulation of costs significantly in excess of the amount originally
                expected for the acquisition or construction of a long-lived asset;





·
            Current
                period operating or cash flow losses combined with a history of operating
                or cash flow losses or a projection or forecast that demonstrates
                continuing losses associated with the use of a long-lived asset or
                asset
                group; or




·
            A
                current expectation that, more likely than not, a long-lived asset
                or
                asset group will be sold or otherwise disposed of significantly before
                the
                end of its previously estimated useful life.





If
      any of
      these or other indicators occurs, the asset is reviewed to determine whether
      there has been an impairment. An impairment loss is recorded as the difference
      between the carrying amount and fair value of the asset. If significant events
      or changes in circumstances indicate that the carrying value of an asset or
      asset group may not be recoverable, we perform a test of recoverability by
      comparing the carrying value of the asset or asset group to its undiscounted
      expected future cash flows. If cash flows cannot be separately and independently
      identified for a single asset, we will determine whether an impairment has
      occurred for the group of assets for which we can identify the projected cash
      flow. If the carrying values are in excess of undiscounted expected future
      cash
      flows, we measure any impairment by comparing the fair value of the asset or
      asset group to its carrying value. Fair value is determined by either an
      internally developed discounted projected cash flow analysis of the asset or
      asset group or an actual third-party valuation. If the fair value of an asset
      or
      asset group is determined to be less than the carrying amount of the asset
      or
      asset group, an impairment in the amount of the difference is recorded in the
      period that the impairment indicator occurs and is included in the “(Income)
      expense from divestitures, asset impairments and unusual items” line item in our
      Consolidated Statement of Operations.




F-11





Intangible
      assets





Intangible
      assets consist of “Rights to use land and build a plant” for fifty years. The
      intangible assets are amortized straight-line over fifty years. 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.





Net
      intangible assets on December 31, 2006 were $1,524,319. Such assets consist
      entirely of a right to use land of $1,570,621 less accumulated amortization
      of
      $46,302.





Amortization
      expense for the Company’s intangible assets for the year ended December 31, 2006
      and 2005 totaled $ 28,383 and $ 29,220, respectively.





Minority
      interest




Minority
      interest represents the minority owners’ 10% equity interest in Dalian Dongtai
      and 40% equity interest in Liaoyang Dongtai.





Fair
      value of financial instruments




Statements
      of Financial Accounting Standards No. 107, “Disclosures About Fair Value of
      Financial Instruments, requires that the Company disclose 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 two sources, namely, service fees we charge for
      waste collection, transfer, disposal and recycling services and our sale of
      recycled commodities.





1.
      Recognition of service fees as revenue




Before
      waste treatment services are rendered, the Company will enter into agreements
      with its customers which explicitly express the scope of the Company’s services,
      the types of wastes to be treated, the method of treatment to be applied, the
      Company’s fees rates and form of settlement and other rights and obligations of
      the parties.




F-12





Once
      an
      agreement with a customer takes effect, the Company conducts the treatment
      activities described in the agreement, such as collection and transfer, which
      activities are observed and confirmed by the Company’s client. Both parties will
      sign a note, acknowledging that the wastes have been delivered to the Company’s
      working site for further treatment.





The
      fees
      charged by the Company for its services are then determined by multiplying
      the
      fee rate defined in the agreement by the customer confirmed waste amount
      delivered to the Company’s plant for treatment. The bill for the services will
      be sent to the client, indicating the fees due. After sending out the invoice,
      the company will recognize the fees as revenue.





Deferred
      sales refer to those for which fees have been collected, but for which the
      related treatment and disposal services have not been completely performed.
      The
      Company uses the fee rate and the amount of waste not treated to calculate
      the
      deferred sales. At December 31, 2006 deferred sales amounted to
      $455,548.





2.
      Recognition of revenues from reclaimed products




The
      Company also enters into agreements with customers who need reclaimed products
      that the Company generates from the waste treatment process. The parties usually
      settle the price in the agreement and make adjustments in case the market price
      of the reclaimed product fluctuates significantly between contract signing
      and
      delivery. After the products are delivered to customers, the Company issues
      an
      invoice to purchasers and identifies all contents and details concerning sales.
      The buyer then either can pay the full invoiced amount or promise to make
      payment over time. In the latter case, the Company also recognizes upon
      invoicing the amount due as revenues of reclaimed product.





Costs
      of revenue





The
      costs
      of revenue fall into two categories -costs of service fees charged for services
      and costs of revenue from reclaimed products.





The
      costs
      of service fees refer to the production expenses incurred by the Company’s
      departments providing waste disposal services, which include the waste
      disassembly department, waste solvent recovery department, industrial waste
      water treatment department, waste storage, sorting and burning department,
      dangerous waste filling and burying department and common industrial waste
      filling and burying department. The costs include the direct labor cost, direct
      material and depreciation expenses and other miscellaneous expenses incurred
      by
      the foregoing departments.





The
      Company’s reclaimed products can be divided into main two categories - products
      reclaimed by sophisticated production means and at great expense in terms of
      labor, energy , depreciation; and products reclaimed by simpler means such
      as
      manual sorting. For the former, the costs of revenue from reclaimed products
      includes the copper sulfate and alloy cost sold, which consist of the purchase
      cost of wastes as raw materials, as well as the direct labor cost, depreciation
      expenses, and other expenses incurred by the Company. For the latter, the costs
      of revenue includes the cost of units recycled and sold, consisting of the
      purchase cost of wastes used for recycling.




F-13





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 year ended
      December 31, 2006 and 2005 were immaterial.





Stock-based
      compensation




In
      December 2004, the FASB issued SFAS No.123(R) 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 realized.





Local
      PRC income tax




The
      Company is subject to the PRC Enterprise Income Tax at a rate of 30% percent
      on
      its net income. According to a PRC ruling, any joint venture with foreign
      investment will get special tax exempt treatment for the first two years.





Statement
      of cash flows




In
      accordance with Statement of Financial Accounting Standards No. 95, “Statement
      of Cash Flows,” cash flows from the Company’s operations are 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 Statement of Financial Accounting
      Standards No. 128 (“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.





F-14




**4.
      Inventory**





Our
      inventory at December 31 consists of raw materials and recycled commodities
      as
      follows:





2006
            
            2005Raw
                materials
            
            
            221,225
            
            
            261,092Recycled
                commodities
            
            
            381,719
            
            
            148,992602,944
            
            
            410,084





5.
      Property and equipment




Property
      and equipment at December 31 consisted of the following:





2006
            
            2005Land
                and building
            
            $
            2,157,521
            
            
            2,087,122Machinery
                equipment
            
            
            1,129,566
            
            
            824,153Office
                equipment
            
            
            352,346
            
            
            354,179Vehicles
            
            
            550,084
            
            
            318,7784,189,517
            
            
            3,584,232Less:
                Accumulated depreciation
            
            
            (1,502,899
            )
            
            (1,162,326
            )$
            2,686,618
            
            
            2,421,906




**6.
      Accumulated Other Comprehensive Income**




The
      components of accumulated other comprehensive income were as follows:




December
                31,2006
            
            2005Cumulative
                translation adjustment of foreign currency statements
            
            $
            269,296
            
            $
            157,196




**7.
      Shareholders’ equity**


On
        November 11, 2005, the Company entered into and consummated an Agreement
        and
        Plan of Merger (the “Merger Agreement”) with China Industrial Waste Management
        Ltd., a Delaware corporation (“Delaware”), the stockholders of Delaware, and
        Dalian Acquisition Corp., a Delaware corporation wholly-owned by the Company.
        In
        the merger, the stockholders of Delaware received 64,000 shares of the Company’s
        newly-designated Series A Convertible Preferred Stock (the “Series A Stock”) in
        exchange for the outstanding shares of Delaware. Each share of Series A Stock
        was convertible into 10,000 shares of Common Stock. Since the Company did
        not
        have sufficient authorized but unissued shares of Common Stock to effect
        a full
        conversion of the Series A Stock at the effective time of the merger, the
        holders of the Series A Stock have agreed that they would not convert their
        shares of Series A Stock until the Company had sufficient available shares
        for a
        full conversion.




F-15




On
      March
      9, 2006, the Board of Directors of the Company determined that it had made
      an
      error at a previous meeting held on June 13, 2005 in cancelling certain
      outstanding shares of common stock. To correct such error a total 6,983,400
      pre-split shares of common stock were reinstated, as a result of which the
      total common shares outstanding increased from 7,773,841 pre-split to 14,757,241
      pre-split.





On
      May
      12, 2006, two amendments to the Company's Articles of Incorporation became
      effective. The amendments changed the name of the Company to China Industrial
      Waste Management, Inc. and effected a 1 for 100 reverse split of the Company's
      Common Stock. In the statement of shareholders’ equity, the reverse split has
      been treated as it happened at the beginning of 2005.





On
      May
      15, 2006, the Company issued to 10 stockholders an aggregate of 6,400,000
      additional shares of the Company's Common Stock as an equitable adjustment
      of
      the number of shares which the Company had agreed to issue to such persons
      pursuant to the Merger Agreement entered into on November 11, 2005. As this
      issuance is part of the 2005 recapitalization transaction, such shares are
      deemed to be outstanding from the beginning of 2005.





On
      June
      8, 2006, we issued an aggregate of 80,000 shares of our Common Stock to two
      consultants pursuant to a Consulting Agreement. Management valued the stock
      issued at $1.00 per share based on the value of the services to be performed
      by
      the consultants under consulting agreement rather than the quoted price of
      our
      common stock during a period with little or no trading activity. The Company
      recorded a contra equity for the value of the consulting services to be received
      and is amortizing that value as an expense over the five year requisite service
      period.





On
      August
      22, 2006, the Company issued 96,566 shares to Jie Sun and Yunzhong Wu,
      respectively, as compensation for their services pursuant to the Merger
      Agreement consummated on November 11, 2005. This was accounted for as a cost
      of
      issuance. Since the issuance was connected with the reverse merger, the
      financial effect of the issuance had been reflected in the financial statements
      for the fiscal year ended December 31, 2005.





**8.
      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 anyb.
            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; andd.
            Allocations
                to the discretionary surplus reserve, if approved in the shareholders’
                general meeting.




F-16




**9.
      Earnings Per Share**




Basic
      earnings per common share (“EPS”) are calculated by dividing net income by the
      weighted average number of common shares outstanding during the year. Diluted
      EPS is calculated by adjusting the weighted average outstanding shares, assuming
      conversion of all potentially dilutive securities, such as stock options and
      warrants, using the treasury stock method. The numerators and denominators
      used
      in the computations of basic and diluted EPS are presented in the following
      table:




Years
                Ended December 31,2006
            
            2005Income
                available to common stockholders
            
            $
            2,441,428
            
            $
            1,493,540Diluted
                net income
            
            $
            2,441,428
            
            $
            1,493,540Weighted
                average basic common shares outstanding
            
            
            13,181,391
            
            
            12,949,660Basic
                net earnings per share
            
            $
            0.19
            
            $
            0.12Diluted
                net earnings per share
            
            $
            0.19
            
            $
            0.12





As
      stated
      above, on May 15, 2006, the Company issued to 10 stockholders an aggregate
      of
      6,400,000 additional shares of the Company's Common Stock as an equitable
      adjustment of the number of shares which the Company had agreed to issue to
      such
      persons pursuant to an Agreement and Plan of Merger entered into on November
      11,
      2005.





Since
      the
      issuance of additional 6,400,000 shares was caused by the Merger consummated
      on
      November 11, 2005, the issuance had been assumed outstanding in 2005 in the
      calculation of EPS.





**10.
      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.





**11.
      Recently issued accounting pronouncements**





In
      February 2007, the FASB issued FASB No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities ("FASB 159"), which requires companies to
      provide additional information that will help investors and other users of
      financial statements to more easily understand the effect of the company's
      choice to use fair value on its earnings. FASB 159 also requires entities to
      display the fair value of those assets and liabilities for which they have
      chosen to use fair value on the face of the balance sheet. FASB 159 is effective
      for us beginning January 1, 2008. We do not expect FASB 159 to have a material
      impact on our future results of operations or financial position.




F-17





In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (“SFAS No. 157”), which defines fair value, establishes a framework
      for measuring fair value, and expands disclosures about fair value measurements.
      SFAS No. 157 will be effective for the Company beginning
      January 1, 2008. We are currently in the process of assessing the
      provisions of SFAS No. 157 and determining how this framework for
      measuring fair value will affect our current accounting policies and procedures
      and our financial statements. We have not determined whether the adoption of
      SFAS No. 157 will have a material impact on our consolidated financial
      statements.





In
      February, 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No. 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAS No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”. SFAS No. 155, permits fair value re-measurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No. 133, establishes a
      requirement to evaluate interest in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of the Company’s first fiscal year that begins
      after September 15, 2006. The Company expects that the Statement will have
      no
      material impact on its consolidated financial statements.





**12.
      Restatements**





During
      the preparation of the financial statements for three and six months ended
      June
      30, 2007, the Company received a comment letter from the Office of the Chief
      Accountant of the Division of Corporation Finance of Securities and Exchange
      Commission regarding certain disclosures in the Company’s previously filed
      periodic reports. The Company determined that its asset retirement obligations
      (“ARO”) for landfills had not been properly accounted for and also that
      its  subsidiary, Liaoyang Dongtai, had not been consolidated while
      preparing the Company’s consolidated financial statements in accordance with
      GAAP contained in such reports.





The
      Company has therefore restated its consolidated balance sheet as of December
      31,
      2006 and 2005, its consolidated statements of income for years ended December
      31, 2006 as well as 2005 and its consolidated statement of cash flows for years
      ended December 31, 2006 as well as 2005. The effects of the restatements are
      shown in the following tables.


F-18





**Balance
      Sheet**





Original
            
            RestatedDecember
                31,**ITEMS**
            
            2006
            
            2006Current
                assetsCash
                and cash equivalents
            
            $
            5,660,698
            
            $
            5,713,925Trade
                accounts receivable
            
            
            151,144
            
            
            151,144Other
                receivables
            
            
            50,789
            
            
            35,999Inventory
            
            
            602,582
            
            
            602,944Advances
                to suppliers
            
            
            374,046
            
            
            374,046Deferred
                expense
            
            
            20,490
            
            
            20,490Total
                current assets
            
            
            6,859,749
            
            
            6,898,548Investment
            
            
            361,136
            
            
            322,717Property,
                plant & equipment
            
            
            3,927,234
            
            
            4,189,517Less:
                Accumulated depreciation
            
            
            (1,487,340
            )
            
            (1,502,899
            )Net
                property, plant and equipment
            
            
            2,439,894
            
            
            2,686,618Construction
                in progress
            
            
            202,974
            
            
            202,974Land
                usage right, net of accumulated amortization
            
            
            1,524,319
            
            
            1,524,319Related
                party Receivable
            
            
            231,793
            
            
            231,793**Total
                assets**
            
            $
            11,619,865
            
            $
            11,866,969**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilitiesAccounts
                payable
            
            $
            92,255
            
            $
            92,255Tax
                payable
            
            
            6,346
            
            
            6,346Deferred
                Sales
            
            
            455,548
            
            
            455,548Accrued
                expenses
            
            
            15,410
            
            
            15,768Other
                payable
            
            
            181,136
            
            
            283,981Total
                current liabilities
            
            
            750,695
            
            
            853,898Long-term
                debtAsset
                retirement obligation liability for landfills
            
            
            -
            
            
            381,873Total
                liabilities
            
            
            750,695
            
            
            1,235,771Minority
                interest in subsidiary
            
            
            1,086,917
            
            
            1,083,022Stockholders'
                equityCommon
                stock
            
            
            13,221
            
            
            13,221Additional
                paid-in capital
            
            
            1,952,634
            
            
            1,952,634Other
                comprehensive income
            
            
            478,500
            
            
            381,579Retained
                earnings
            
            
            7,337,898
            
            
            7,200,742Total
                stockholders' equity
            
            
            9,782,253
            
            
            9,548,176**Total
                liabilities and stockholders' equity**
            
            $
            11,619,865
            
            $
            11,866,969




As
      a
      result of the restatement of the consolidated balance sheet as of December
      31,
      2006, total assets as of December 31, 2006 increased from $11,619,865, as
      originally reported, to $11,866,969, an increase of $247,104. The increase
      in
      total assets was mostly a result of a $246,724 increase in net property, plant
      and equipment resulting from the change in accounting for ARO liabilities
      pertaining to the Company’s landfill. Stockholders' equity as of December 31,
      2006 decreased from $9,782,253, as originally reported, to $9,548,176, a
      decrease of $234,077. Minority interest in subsidiary decreased by $3,895,
      from
      $1,086,917 to $1,083,022.




F-19





**Balance
      Sheet**




Original
            
            RestatedDecember
                31,**ITEMS**
            
            2005
            
            2005Current
                assetsCash
                and cash equivalents
            
            $
            2,944,179
            
            $
            2,944,179Trade
                accounts receivable
            
            
            281,761
            
            
            281,761Other
                receivables
            
            
            115,417
            
            
            115,417Inventory
            
            
            410,084
            
            
            410,084Advances
                to suppliers
            
            
            16,502
            
            
            16,502Prepaid
                expenses and other assets
            
            
            22,304
            
            
            22,304Total
                current assets
            
            
            3,790,247
            
            
            3,790,247Net
                property, plant and equipment
            
            
            2,168,678
            
            
            2,421,906Construction
                in progress
            
            
            220,474
            
            
            220,474Land
                usage right, net of accumulated amortization
            
            
            1,509,159
            
            
            1,509,159Related
                party Receivable
            
            
            281,851
            
            
            281,851**Total
                assets**
            
            $
            7,970,409
            
            $
            8,223,637**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilitiesAccounts
                payable
            
            $
            108,213
            
            $
            108,213Other
                payable
            
            
            183,934
            
            
            183,934Total
                current liabilities
            
            
            292,147
            
            
            292,147




Long-term
                debtAsset
                retirement obligation liability for landfills
            
            
            -
            
            
            344,691




Minority
                interest in subsidiary
            
            
            767,826
            
            
            758,680Stockholders'
                equitySeries
                A preferred stock $.001 par value; 5,000,000 shares authorized, 64,000
                shares issued and outstanding
            
            
            64
            
            
            64Common
                stock: par value $.001; 90,000,000 shares authorized; 340,843 shares
                issued and outstanding
            
            
            341
            
            
            6,741Additional
                paid-in capital
            
            
            1,956,117
            
            
            1,949,717Other
                comprehensive income
            
            
            158,953
            
            
            112,283Retained
                earnings
            
            
            4,794,961
            
            
            4,759,314Total
                stockholders' equity
            
            
            6,910,436
            
            
            6,828,119**Total
                liabilities and stockholders' equity**
            
            $
            7,970,409
            
            $
            8,223,637




As
      a
      result of the restatement on the balance sheet, total assets as of December
      31,
      2005 increased from $7,970,409, as originally reported, to $8,223,637, an
      increase of $253,228, the increase in total assets was mostly a result of a
      $253,228 increase in net property, plant and equipment resulting from the change
      in accounting for ARO liabilities pertaining to the Company’s landfill; total
      liabilities as of December 31, 2005 increased from $292,147, as originally
      reported, to $636,838, an increase of $344,691, arising from the change in
      accounting for ARO liabilities pertaining to the Company’s landfill;
      stockholders' equity as of December 31, 2005 decreased from $6,910,436, as
      originally reported, to $6,828,119, a decrease of $82,317; and minority interest
      in subsidiary decreased by $9,146, from $767,826 to $758,680.




F-20





**Income
      Statements**




Original
            
            RestatedFor Year
                Ended December 31,**ITEMS**
            
            2006
            
            2006Revenue
            
            $
            6,383,233
            
            $
            6,383,233Costs
                of revenue (including depreciation)
            
            
            1,782,397
            
            
            1,822,657Gross
                profit
            
            
            4,600,836
            
            
            4,560,576Operating
                expensesSelling
                expenses
            
            
            599,691
            
            
            599,691General
                and administrative expenses
            
            
            1,358,038
            
            
            1,469,588Total
                operating expenses
            
            
            1,957,729
            
            
            2,069,279Income
                from operations
            
            
            2,643,107
            
            
            2,491,297Other
                income (expense)




Interest
                income
            
            
            25,319
            
            
            25,397


Other
                income
            
            
            206,031
            
            
            206,030Other
                expense
            
            
            (11,803
            )
            
            (11,803
            )Total
                other income (expense)
            
            
            219,547
            
            
            219,624Net
                income before minority interest and income tax
            
            
            2,862,654
            
            
            2,710,921Income
                tax (benefit)
            
            
            626
            
            
            626Net
                income after income tax
            
            
            2,862,028
            
            
            2,710,295Minority
                interest
            
            
            319,091
            
            
            268,867Net
                income
            
            $
            2,542,937
            
            $
            2,441,428Foreign
                currency translation adjustment
            
            
            319,547
            
            
            269,296Comprehensive
                income
            
            $
            2,862,484
            
            $
            2,710,724Basic
                and diluted weighted average
                shares   outstanding
            
            
            13,181,391
            
            
            13,181,391Basic
                and diluted net earnings per share
            
            
            0.19
            
            $
            0.19





As
      a
      result of the restatement, net income for years ended December 31, 2006
      decreased from $2,542,937, as originally reported, to $2,441,428, a decrease
      of
      $101,509, comprised of a $40,260 increase in cost of goods, a $111,550 increase
      in general and administrative expenses, and a $50,224 decrease in minority
      interest.




F-21





**Income
      Statement**




Original
            
            RestatedFor Year
                Ended December 31,**ITEMS**
            
            2005
            
            2005Revenue
            
            $
            4,869,185
            
            $
            4,869,185Costs
                of revenue(including depreciation)
            
            
            1,557,106
            
            
            1,588,932Gross
                profit
            
            
            3,312,079
            
            
            3,280,253Operating
                expensesSelling
                expenses
            
            
            197,355
            
            
            197,355General
                and administrative expenses
            
            
            1,695,685
            
            
            1,695,685Total
                operating expenses
            
            
            1,893,040
            
            
            1,893,040Income
                from operations
            
            
            1,419,039
            
            
            1,387,213Other
                income (expense)Investment
                income
            
            
            -
            
            
            -Interest
                income
            
            
            26,728
            
            
            26,728Other
                income
            
            
            564,293
            
            
            564,293Other
                expense
            
            
            (14,764
            )
            
            (14,764
            )Total
                other income (expense)
            
            
            576,257
            
            
            576,257Net
                income before minority interest and income tax
            
            
            1,995,296
            
            
            1,963,470Income
                tax (benefit)
            
            
            385,382
            
            
            385,382Net
                income after income tax
            
            
            1,609,914
            
            
            1,578,088Minority
                interest
            
            
            87,731
            
            
            84,548Net
                income
            
            $
            1,522,183
            
            $
            1,493,540Foreign
                currency translation adjustment
            
            
            158,953
            
            
            157,196Comprehensive
                income
            
            $
            1,681,136
            
            $
            1,650,736Basic
                and diluted weighted average shares outstanding
            
            
            12,949,660
            
            
            12,949,660Basic
                and diluted net earnings per share
            
            $
            0.12
            
            $
            0.12




As
      a
      result of the restatement, net income for the year ended December 31, 2005
      decreased from $1,522,183, as originally reported, to $1,493,540, a decrease
      of
      $28,643, comprised of a $31,826 increase in cost of goods and a $3,183 decrease
      in minority interest.




F-22





**Statement
      of Cash Flows**




Original
            
            RestatedFor Year
                Ended
              December
                31,**ITEMS**
            
            2006
            
            2006Cash
                flows from operating activities:Net
                income
            
            $
            2,542,937
            
            $
            2,441,428Adjustments
                to reconcile net income to net cashprovided
                by operating activities:Minority
                interest
            
            
            319,091
            
            
            268,867Depreciation
                and amortization
            
            
            281,474
            
            
            331,539


Bad
                debt allowance
            
            
            -
            
            
            5,146Accretion
                expenses
            
            
            -
            
            
            25,226


Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (104,070
            )
            
            132,087Inventory
            
            
            (175,811
            )
            
            (176,167
            )Other
                receivables
            
            
            (145,270
            )
            
            81,908Advance
                to suppliers
            
            
            (125,575
            )
            
            (8,883
            )Prepaid
                expense
            
            
            48,006
            
            
            2,519Accounts
                payable and other payables
            
            
            -
            
            
            73,083


Deferred
                sales
            
            
            448,043
            
            
            463,551


Tax
                payable
            
            
            (19,691
            )
            
            6,242Net
                cash provided by operating activities
            
            
            3,446,657
            
            
            3,646,546Cash
                flows from investing activitiesInvestment
                in subsidiary
            
            
            (302,836
            )
            
            (317,400
            )Purchase
                of property and equipment
            
            
            (580,224
            )
            
            (477,351
            )Construction
                contracts
            
            
            -
            
            
            (317,749
            )Due
                from related party
            
            
            -
            
            
            35,267Investment
                in subsidiary by minority holder
            
            
            -
            
            
            25,191Net
                cash used in investing activities
            
            
            (883,060
            )
            
            (1,052,042
            )Cash
                flows from financing activitiesNet
                cash provided by financing activities
            
            
            -
            
            
            -Effect
                of exchange rate on cash
            
            
            152,922
            
            
            175,242Net
                increase in cash and cash equivalents
            
            
            2,716,519
            
            
            2,769,746Cash
                and cash equivalents, beginning of period
            
            
            2,944,179
            
            
            2,944,179Cash
                and cash equivalents, end of period
            
            $
            5,660,698
            
            $
            5,713,925





As
      a
      result of the restatement, net cash provided by operating activities for the
      year ended December 31, 2006 decreased by $199,889 from $3,446,657 as originally
      reported, to $3,646,546; and net cash used in investing activities decreased
      by
      $168,982 from $883,060, as originally reported, to $1,052,042.




F-23





**Statement
      of Cash Flows**




Original
            
            RestatedFor Year
                Ended
              December
                31,**ITEMS**
            
            2005
            
            2005Cash
                flows from operating activities:Net
                income
            
            $
            1,522,183
            
            $
            1,493,540Adjustments
                to reconcile net income to net cashprovided
                by operating activities:Minority
                interest
            
            
            87,731
            
            
            84,548Depreciation
                and amortization
            
            
            214,200
            
            
            297,262


Bad
                debt allowance
            
            
            -
            
            
            503Accretion
                expenses
            
            
            -
            
            
            19,779


Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (219,655
            )
            
            (167,788
            )Inventory
            
            
            (524,537
            )
            
            (400,678
            )Other
                receivables
            
            
            (269,175
            )
            
            22,120Advance
                to suppliers
            
            
            152,699
            
            
            115,872Prepaid
                expense
            
            
            (11,509
            )
            
            (21,978
            )Accounts
                payable and other payables
            
            
            (277,122
            )
            
            212,668Tax
                payable
            
            
            11,923
            
            
            (145,057
            )Net
                cash provided by operating activities
            
            
            968,589
            
            
            1,510,791Cash
                flows from investing activitiesDecrease
                in long-term investment
            
            
            12,391
            
            
            -Purchase
                of property and equipment
            
            
            (146,833
            )
            
            (130,386
            )Construction
                contracts
            
            
            -
            
            
            (54,335
            )Due
                from related party
            
            
            -
            
            
            71,674Proceeds
                on sale of equity investments
            
            
            -
            
            
            167,888Net
                cash (used in) provided by investing activities
            
            
            (134,442
            )
            
            54,841Cash
                flows from financing activitiesDividends
                distributed to shareholders
            
            
            (205,300
            )
            
            (724,638
            )Net
                cash used in financing activities
            
            
            (205,300
            )
            
            (724,638
            )Effect
                of exchange rate on cash
            
            
            (57,053
            )
            
            38,620Net
                increase in cash and cash equivalents
            
            
            571,794
            
            
            879,614Cash
                and cash equivalents, beginning of period
            
            
            2,372,385
            
            
            2,064,565Cash
                and cash equivalents, end of period
            
            $
            2,944,179
            
            $
            2,944,179





As
      a
      result of the restatement, net cash provided by operating activities for the
      year ended December 31, 2005 increased by $542,202 from $968,589 as originally
      reported, to $1,510,791; and net cash used in investing activities decreased
      by
      $189,283 from $134,442, as originally reported, to a net cash provided by
      investing activities $54,841; and net cash used in financing activities
      increased by $519,338 from $205,300, as originally reported, to
      $724,638.




F-24





**13.
      Related parties**





Dalian
      Bofa Chemical Material Company (“Bofa”), a company controlled by the Company’s
      majority shareholder, sells part of the products recycled by Dongtai, the
      subsidiary of the Company. Our total sales to Bofa were $1,235,825 and $668,728
      respectively, for the years ended December 31, 2006 and 2005.





**14.
      Contingent liabilities**





From
      time
      to time, we may become involved in various lawsuits and legal proceedings which
      arise in the ordinary course of business. However, litigation is subject to
      inherent uncertainties, and an adverse result in these or other matters may
      arise from time to time that may harm our business. Except as described below,
      we are currently not aware of any such legal proceedings or claims that we
      believe will have, individually or in the aggregate, a material adverse affect
      on our business, financial condition or operating results.





On
      September 14, 2006, the Alberta Securities Commission, Canada, citing Goldtech
      Mining Corporation, 2006 ABASC 1690, under Securities Act, R. S. A. 2000, c.
      S-4
      (the "Alberta Act"), provided notice to the Company, Glen Lochton Management
      Inc., and certain other individuals (collectively, "Respondents") that a hearing
      will be held on certain allegations that Respondents breached subsection 75(1)
      and 110(1) of the Alberta Act by trading and distributing securities of the
      Company in Alberta without registration or a prospectus or had appropriate
      exemption from the prospectus requirement, wherein such failure was contrary
      to
      the public interest. On October 27, 2006, the hearing was scheduled for March,
      2007. On February 6, 2007 the ASC discontinued without prejudice the action
      against the Company and will proceed against the other Respondents.




On
      August
      9, 2006, the Company was served with a Summons and Complaint, in an action
      filed
      in the Superior Court of Washington, Kings County, entitled Don Moroz and Glen
      Lochton Management Inc., V. Tolan Furusho, Columbia State Bank, Goldtech Mining
      Corporation, a Nevada Corporation, Goldtech Mining Corporation, a Washington
      corporation, Tracy Kroeker, Ralph Jordan, Jack Laskin, Nancy Egan, Richard
      Smith, and Beverlee Claydon AKA Beverlee Kamerling. The plaintiffs claim to
      be
      victims of a failed "pump and dump" penny stock scheme. The Company believes
      that the complaint against the Company is without merit and filed an answer,
      affirmative defenses and cross-claims on October 31, 2006. The case is
      continuing with discovery. The Company is contesting this case
      vigorously.





On
      March
      6, 2006, a lawsuit was filed against the Company entitled Tolan S. Furusho
      V.
      Goldtech Mining Corp., Case No.:  06-A-518343-B, in the District Court,
      Clark County, Nevada. The plaintiff claims that he is the sole director of
      the
      Company, alleging that he was improperly removed as a director. The Company
      filed an answer and affirmative defenses and believes that the complaint is
      without merit. The case is continuing with discovery. The Company is contesting
      this case vigorously.





On
      October 14, 2004, a small group of shareholders commenced a derivative action
      on
      behalf of the Company, entitled Steward, Pearce, Vizzard, Furusho and Robertson
      v. Kroeker, Jordan, Laskin, Egan, Smith, Bourgoin, Civil Action No. CV04-2130L,
      in the United States  District  Court for the Western  District
      of Washington alleging  conversion  and  breach of specific
      duties against former directors. The Court dismissed the case with prejudice
      against all defendants, except defendant Tracy Kroeker and without prejudice
      against Ms. Kroeker.





We
      estimate the amount of potential exposure we may have with respect to claims,
      assessments and litigation in accordance with SFAS No. 5. We are party
      to pending or threatened legal proceedings covering a wide range of matters
      in
      various jurisdictions. It is not always possible to predict the outcome of
      litigation, as it is subject to many uncertainties. Additionally, it is not
      always possible for management to make a meaningful estimate of the potential
      loss or range of loss associated with such litigation.




F-25





**15.
      Subsequent events**





On
      March
      2, 2007, the Company purchased for $1,271,077, 49% of the equity of a newly
      formed company named Dongtai Organic Waste Treatment Company (“Dongtai
      Organic”). Dongtai Organic is a Build-Operate-Transfer (“BOT”) project, engaged
      in municipal sludge treatment. Dongtai Organic will operate for the next 20
      years. The fees for treating sludge will be paid by the local government at
      a
      predetermined price on a periodic basis. The investment in Dongtai Organic
      will be accounted for using the equity method.





On
      July
      14, 2007, Liaoyang Dongtai was dissolved and liquidated. Liaoyang Dongtai was
      incorporated on March 22, 2006. Dongtai had a 60% interest in this subsidiary.
      Liaoyang Dongtai was located in Liaoyang, PRC and was engaged in the business
      of
      the collection, treatment, disposal and recycling of industrial
      wastes.





On
      July
      16, 2007 Dongtai acquired an additional 62% of the equity of Dongtai
      Water, which was accounted for reorganization of entities under common control.
      Dongtai Water was incorporated in July 2006 and Dongtai acquired 18% of the
      equity of such company in such month. Dongtai Water is a BOTproject,
      designed to process polluted water generated by the city of Dalian.





In
      August
      2007, Dongtai acquired 70% of the equity of Zhuorui from a related company,
      controlled by Mr. Dong Jinqing, the Chief Executive Officer and Chief Financial
      Officer of the Company, at the price of RMB7 million. The acquisition was
      accounted for as a reorganization of entities under common control. 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.




F-26


**ITEM
      13.**  **EXHIBITS**




**Number**
            
            **Description**3.1
            
            Articles
              of
              Incorporation of the Company (f/k/a Goldtech Mining Corporation) filed
              November 12, 2003. Incorporated by reference to Exhibit 3.1 to the
              Company’s Quarterly Report on Form 10-QSB for the quarter ended September
              30, 2003 (the “9/30/03 10-QSB”).3.2
            
            Articles
                of Merger of Egan Systems, Inc. with and into the Company filed with
                the
                Secretary of State of Nevada. Incorporated by reference to Exhibit
                2.2 to
                the 9/30/03 10-QSB.3.3
            
            Certificate
                of Amendment to Articles of Incorporation filed with the Nevada Secretary
                of State on April 27, 2006. Incorporated by reference to Exhibit
                3.2 to
                the Company’s Quarterly report on Form 10-QSB for the quarter ended March
                31, 2006.3.4
            
            By-laws
                of the Company. Incorporated by reference to Exhibit 3.2 to the 9/30/03
                10-QSB.10.1
            
            Agreement
                and Plan of Merger, dated November 11, 2005, by and among the Company,
                Dalian Acquisition Corp., China Industrial Waste Management Inc.,
                and each
                of the CIWM Shareholders. Incorporated by reference to Exhibit 10.1
                to the
                Current Report on Form 8-K filed by the Company on November 17,
                2005.21.1
            
            List
                of Subsidiaries. Incorporated by reference to Exhibit 21.1 to the
                Annual
                Report on Form 10-KSB for the fiscal year ended December 31, 2006
                filed by
                the Company on April 24, 2007.31.1
            
            Certification
                of Jinqing Dong in his capacity as the CEO of the Company pursuant
                to
                Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
                Section
                302 of the Sarbanes-Oxley Act of 2002*31.2
            
            Certification
                of Jinqing Dong in his capacity as the CFO of the Company pursuant
                to
                Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
                Section
                302 of the Sarbanes-Oxley Act of 2002*32.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002*





*
      Filed
      herewith.




9




**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) 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.Date:
              January 30, 2008
            By:
            /s/
              Dong
              JinqingJinqing Dong,
              Chief Executive Officer


Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, this Report has been signed below by the following persons on behalf
      of
      the Registrant and in the capacities and on the dates indicated.





/s/
                Dong Jinqing
            
            Chief
                Executive Officer,
            
            January
                30, 2008Jinqing
                Dong
            
            Chief
                Financial Officer and Director/s/
                Jun Li
            
            Director
            
            January
                30, 2008Jun
                Li/s/
                Tong Wen
            
            Director
            
            January
                30, 2008Tong
                Wen





10