UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q




x
              QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
quarterly period ended September 30, 2010
 
  ̈
              TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
transition period from 
to


Commission
File Number:  000-53658





China
Transportation International Holdings Group Limited





(Exact
name of registrant as specified in its charter)





Nevada
              
              26-4694804(State
      or other jurisdiction of
              
              (I.R.S.
      Employer Identification No.)incorporation
      or organization)





c/o
      Yiyang Xiangyun Group Co., Ltd.No.
      823 Taohualun West RoadYiyang
      City, Hunan Province, China
              
              413000(Address
      of principal executive offices)
              
              (Zip
      Code)





Registrant’s
telephone number (including area code): +86(737)-421-3711





n/a


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





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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer or a smaller reporting
company.  See definition of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):





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





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).      ̈





As of
November 22, 2010, there were 20,000,000 shares of company common stock issued
and outstanding.








TABLE
OF CONTENTS





PART
      I – FINANCIAL INFORMATIONCautionary
      Note on Forward Looking Statement
                
                (i)Item
      1.
                Financial
      Statements
                
                1-20Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                
                21Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                
                29Item
      4(T).
                Controls
      and Procedures
                
                29PART
      II – OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                
                30Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                
                30Item
      3.
                Defaults
      Upon Senior Securities
                
                30Item
      4.
                Removed
      and Reserved
                
                30Item
      5.
                Other
      Information
                
                30Item
      6.
                Exhibits
                
                31SIGNATURES
                
                32





CAUTIONARY
NOTE ON FORWARD LOOKING STATEMENTS




In
addition to historical information, this Quarterly Report on Form 10-Q contains
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The forward looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in such forward looking statements. In some
cases, you can identify forward looking statements by terminology such as “may,”
“will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “projects,” “potential,” “proposed,” “intended,” or “continue” or
the negative of these terms or other comparable terminology. Readers are
cautioned not to place undue reliance on these forward looking statements, which
reflect management’s opinions only as of the date thereof. In evaluating such
forward looking statements, readers should carefully review the discussion of
risks and uncertainties in this Quarterly Report on Form 10-Q and the Current
Report on Form 8-K filed on April 1, 2010, as well as in other filings with the
Securities and Exchange Commission (“SEC”) including, without
limitation:





●
            our
      financial position, business strategy and other plans and objectives for
      future operations;





●
            the
      ability of our management team to execute its plans to meet its
      goals;





●
            our
      ability to attract and retain
management;





●
            our
      growth strategies;





●
            anticipated
      trends in our business;





●
            our
      ability to consummate or integrate
acquisitions;





●
            our
      liquidity and ability to finance our operations and acquisition and
      development activities;





●
            the
      timing, cost and procedure for proposed
  acquisitions;





●
            the
      impact of government regulation in China and
  elsewhere;





●
            estimates
      regarding future net revenues or
profits;





●
            planned
      capital expenditures (including the amount and nature
      thereof);





●
            estimates,
      plans and projections relating to construction of facilities and the
      acquisition of facilities or
businesses;





●
            the
      possibility that our acquisitions may involve unexpected
      costs;





●
            the
      impact of competition;





●
            general
      economic conditions, whether internationally, nationally or in the
      regional and local market areas in which we are doing business, that may
      be less favorable than expected;
and


(i)





●
            other
      economic, competitive, governmental, legislative, regulatory, geopolitical
      and technological factors that may negatively impact our businesses,
      operations and pricing.





The
discussion of risks and uncertainties set forth in this Quarterly Report on Form
10-Q and the Current Report on Form 8-K filed on April 1, 2010, as well as in
other filings with the SEC, is not necessarily a complete or exhaustive list of
all risks facing the Company at any particular point in time. We operate in the
People’s Republic of China (“China” or “PRC”) in a highly competitive and
rapidly changing environment. Therefore, it is likely that new risks will
emerge, and that the nature and elements of existing risks will change, over
time. It is not possible for management to predict all such risk factors or
changes therein, or to assess either the impact of all such risk factors on our
business or the extent to which any individual risk factor, combination of
factors, or new or altered factors, may cause results to differ materially from
those contained in any forward looking statement. Although we believe that the
expectations reflected in the forward looking statements are reasonable, we
cannot guarantee future results, growth rates, and levels of activity,
performance or achievements. Given the uncertainties that surround such
statements, you are cautioned not to place undue reliance on such forward
looking statements. Except as expressly required by the federal securities laws,
there is no undertaking to publicly update or revise any forward looking
statements, whether as a result of new information, future events, changed
circumstances or any other reason.





In this
report, the terms “Company,” “we,” “us” or “our” mean China Transportation
International Holdings Group Limited and all subsidiaries and variable interest
entities (“VIEs”) included in our consolidated financial
statements.


(ii)


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED




INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS




CONTENTS
                            
                            PagesConsolidated
      Balance Sheets at September 30, 2010 (Unaudited) and December 31,
      2009
                            
                            1Consolidated
      Statements of Income for the Three Months and Nine Months
      EndedSeptember
      30, 2010 and 2009 (Unaudited)
                            
                            2Consolidated
      Statement of Changes in Stockholders’ Equity for the Nine Months
      EndedSeptember
      30, 2010 (Unaudited)
                            
                            3Consolidated
      Statements of Cash Flows for the Nine months Ended September 30, 2010
      and2009
      (Unaudited)
                            
                            4Notes
      to the Consolidated Financial Statements (Unaudited)
                            
                            5 -
      20





CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


CONSOLIDATED
BALANCE SHEETS


(IN
US DOLLARS)





September 30,
                                  
                                  
                                  December 31,2010
                                  
                                  
                                  
                                  2009(A)(Unaudited)ASSETSCurrent
      assetsCash
                                  
                                  $
                                  1,062,570
                                  
                                  
                                  $
                                  1,084,066Accounts
      receivable
                                  
                                  
                                  1,564,622
                                  
                                  
                                  
                                  782,258Other
      receivables
                                  
                                  
                                  666,607
                                  
                                  
                                  
                                  463,246Prepaid
      expenses
                                  
                                  
                                  535,757
                                  
                                  
                                  
                                  181,864Due
      from a stockholder
                                  
                                  
                                  -
                                  
                                  
                                  
                                  40,000Due
      from related parties
                                  
                                  
                                  15,628,533
                                  
                                  
                                  
                                  17,191,539Total
      Current Assets
                                  
                                  
                                  19,458,089
                                  
                                  
                                  
                                  19,742,973Non-current
      assetsProperty,
      plant and equipment, net
                                  
                                  
                                  14,787,303
                                  
                                  
                                  
                                  12,530,798Intangible
      assets, net
                                  
                                  
                                  287,546
                                  
                                  
                                  
                                  287,605Utility
      deposits
                                  
                                  
                                  5,862
                                  
                                  
                                  
                                  3,168Deposits
      for motor vehicles and software
                                  
                                  
                                  176,169
                                  
                                  
                                  
                                  110,128Total
      Non-current assets
                                  
                                  
                                  15,256,880
                                  
                                  
                                  
                                  12,931,699Total
      Assets
                                  
                                  $
                                  34,714,969
                                  
                                  
                                  $
                                  32,674,672LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent
      liabilitiesAccounts
      payable
                                  
                                  $
                                  1,920,682
                                  
                                  
                                  $
                                  1,077,254Accrued
      expenses and other payables
                                  
                                  
                                  1,025,822
                                  
                                  
                                  
                                  1,280,444Other
      loan payable
                                  
                                  
                                  343,204
                                  
                                  
                                  
                                  318,901Bank
      loans
                                  
                                  
                                  3,020,259
                                  
                                  
                                  
                                  8,224,127Deposits
      and advances received from subcontractors
                                  
                                  
                                  1,640,634
                                  
                                  
                                  
                                  1,520,082Deferred
      revenue
                                  
                                  
                                  759,112
                                  
                                  
                                  
                                  2,161,697Income
      tax payable
                                  
                                  
                                  531,282
                                  
                                  
                                  
                                  695,295Due
      to a stockholder
                                  
                                  
                                  960,000
                                  
                                  
                                  
                                  -Total
      Current Liabilities
                                  
                                  
                                  10,200,995
                                  
                                  
                                  
                                  15,277,800Non-current
      liabilitiesDeferred
      revenue, net of current portion
                                  
                                  
                                  11,905,821
                                  
                                  
                                  
                                  8,646,790Bank
      loans, net of current portion
                                  
                                  
                                  8,585
                                  
                                  
                                  
                                  33,640Total
      non-current liabilities
                                  
                                  
                                  11,914,406
                                  
                                  
                                  
                                  8,680,430Total
      Liabilities
                                  
                                  
                                  22,115,401
                                  
                                  
                                  
                                  23,958,230Commitments
      and Contingent Liabilities (see Note 2)Stockholders’
      equityPreferred
      stock: par value $0.001; 30,000,000 shares authorized; no shares issued
      & outstanding
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Common
      stock: par value $0.001; 300,000,000 shares authorized; 20,000,000 shares
      issued and outstanding (2009: 14,700,000)
                                  
                                  
                                  20,000
                                  
                                  
                                  
                                  14,700Additional
      paid-in capital
                                  
                                  
                                  2,433,564
                                  
                                  
                                  
                                  2,438,864Statutory
      reserve
                                  
                                  
                                  1,573,267
                                  
                                  
                                  
                                  1,573,267Retained
      earnings
                                  
                                  
                                  7,533,599
                                  
                                  
                                  
                                  3,888,097Accumulated
      other comprehensive income-
      Foreign currency translation gain
                                  
                                  
                                  1,067,525
                                  
                                  
                                  
                                  816,560Total
      Company’s Stockholders’ Equity
                                  
                                  
                                  12,627,955
                                  
                                  
                                  
                                  8,731,488Non-controlling
      interests
                                  
                                  
                                  (28,387
                                  )
                                  
                                  
                                  (15,046
                                  )Total
      Equity
                                  
                                  
                                  12,599,568
                                  
                                  
                                  
                                  8,716,442Total
      Liabilities and Stockholders’ Equity
                                  
                                  $
                                  34,714,969
                                  
                                  
                                  $
                                  32,674,672





(A)
            Represents
      the consolidated financial statements of Eminent Promise
      Limited




The
accompanying notes are an integral part of these consolidated financial
statements.


1


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED)


(IN
US DOLLARS)


For the Three Months Ended
                      September 30,
                    
                    
                    For the Nine Months Ended
                      September 30,2010
                    
                    
                    
                    2009(A)
                    
                    
                    2010
                    
                    
                    
                    2009(A)Revenue
                    
                    $
                    4,883,197
                    
                    
                    $
                    4,100,154
                    
                    
                    $
                    16,722,611
                    
                    
                    $
                    15,051,131Cost
      of sales
                      (including
      depreciation of motor vehicles of $2,843,306 and $2,244,873 (for the nine
      months ended September 30, 2010 and 2009, respectively); and $1,091,121
      and $846,564 (for the three months ended September 30, 2010 and 2009,
      respectively)
                    
                    
                    2,982,971
                    
                    
                    
                    2,614,754
                    
                    
                    
                    10,606,601
                    
                    
                    
                    8,824,957Gross
      profit
                    
                    
                    1,900,226
                    
                    
                    
                    1,485,400
                    
                    
                    
                    6,116,010
                    
                    
                    
                    6,226,174Operating
      expensesSelling
      and marketing expenses
                    
                    
                    5,719
                    
                    
                    
                    1,425
                    
                    
                    
                    40,596
                    
                    
                    
                    67,813General
      and administrative expenses
                    
                    
                    739,650
                    
                    
                    
                    516,588
                    
                    
                    
                    2,269,284
                    
                    
                    
                    1,987,875Loss
      on write off of property, plant and equipment
                    
                    
                    48,443
                    
                    
                    
                    61,606
                    
                    
                    
                    76,440
                    
                    
                    
                    837,041Total
      operating expenses
                    
                    
                    793,812
                    
                    
                    
                    579,619
                    
                    
                    
                    2,386,320
                    
                    
                    
                    2,892,729Operating
      Income
                    
                    
                    1,106,414
                    
                    
                    
                    905,781
                    
                    
                    
                    3,729,690
                    
                    
                    
                    3,333,445Other
      income (expense):Interest
      income
                    
                    
                    221,929
                    
                    
                    
                    244,032
                    
                    
                    
                    601,587
                    
                    
                    
                    379,971Interest
      expense
                    
                    
                    (149,536
                    )
                    
                    
                    (113,372
                    )
                    
                    
                    (383,518
                    )
                    
                    
                    (228,476
                    )Other
      (expense) income, net
                    
                    
                    746,941
                    
                    
                    
                    70,903
                    
                    
                    
                    637,306
                    
                    
                    
                    184,230Total
      other income
                    
                    
                    819,334
                    
                    
                    
                    201,563
                    
                    
                    
                    855,375
                    
                    
                    
                    335,725Income
      before taxes
                    
                    
                    1,925,748
                    
                    
                    
                    1,107,344
                    
                    
                    
                    4,585,065
                    
                    
                    
                    3,669,170Income
      taxes
                    
                    
                    384,338
                    
                    
                    
                    293,426
                    
                    
                    
                    945,710
                    
                    
                    
                    427,114Net
      income before attribution of non-controlling interests
                    
                    
                    1,541,410
                    
                    
                    
                    813,918
                    
                    
                    
                    3,639,355
                    
                    
                    
                    3,242,056Less:
      Net (loss) income attributable to non-controlling
interests
                    
                    
                    (4,057
                    )
                    
                    
                    587
                    
                    
                    
                    (6,147
                    )
                    
                    
                    1,244Net
      income attributable to the Company
                    
                    $
                    1,545,467
                    
                    
                    $
                    813,331
                    
                    
                    $
                    3,645,502
                    
                    
                    $
                    3,240,812Earnings
      per shareBasic
      and Diluted
                    
                    $
                    0.08
                    
                    
                    $
                    0.06
                    
                    
                    $
                    0.20
                    
                    
                    $
                    0.22Weighted
      common shares outstandingBasic
      and Diluted
                    
                    
                    20,000,000
                    
                    
                    
                    14,700,000
                    
                    
                    
                    18,252,747
                    
                    
                    
                    14,700,000





(A)
            Represents
      the consolidated financial statements of Eminent Promise
      Limited




The
accompanying notes are an integral part of these consolidated financial
statements.


2


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY




FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2010 (UNAUDITED)


(IN
US DOLLARS)





Common stock
                        
                        
                        Additional paid-
                        
                        
                        Statutory
                        
                        
                        Retained
                        
                        
                        Accumulated
                          other
                          comprehensive
                        
                        
                        Total
                          Company’s
                          stockholders’
                        
                        
                        Non-
                          controlling
                        
                        
                        TotalNumber
                        
                        
                        Amount
                        
                        
                        in capital
                        
                        
                        reserve
                        
                        
                        earnings
                        
                        
                        income
                        
                        
                        equity
                        
                        
                        interests
                        
                        
                        equityBalance
      at December 31, 2009(A)
                        
                        
                        14,700,000
                        
                        
                        $
                        14,700
                        
                        
                        $
                        2,438,864
                        
                        
                        $
                        1,573,267
                        
                        
                        $
                        3,888,097
                        
                        
                        $
                        816,560
                        
                        
                        $
                        8,731,488
                        
                        
                        $
                        (15,046
                        )
                        
                        $
                        8,716,442Net
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        3,645,502
                        
                        
                        
                        -
                        
                        
                        
                        3,645,502
                        
                        
                        
                        (6,147
                        )
                        
                        
                        3,639,355Share
      effectively issued toformer
      shareholder as part of therecapitalization
                        
                        
                        5,300,000
                        
                        
                        
                        5,300
                        
                        
                        
                        (5,300
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Acquisition
      of additional  interests in a subsidiary
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (7,194
                        )
                        
                        
                        (7,194
                        )Foreign
      currency translation
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        250,965
                        
                        
                        
                        250,965
                        
                        
                        
                        -
                        
                        
                        
                        250,965Balance
      at September 30, 2010 (Unaudited)
                        
                        
                        20,000,000
                        
                        
                        $
                        20,000
                        
                        
                        $
                        2,433,564
                        
                        
                        $
                        1,573,267
                        
                        
                        $
                        7,533,599
                        
                        
                        $
                        1,067,525
                        
                        
                        $
                        12,627,955
                        
                        
                        $
                        (28,387
                        )
                        
                        $
                        12,599,568





(A)
            Represents
      the consolidated financial statements of Eminent Promise
      Limited





The
accompanying notes are an integral part of these consolidated financial
statements.


3


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)


(IN
US DOLLARS)





Nine months ended September 30,2010
                    
                    
                    
                    2009(A)Cash
      flows from operating activities:Net
      income before attribution of non-controlling interests
                    
                    $
                    3,639,355
                    
                    
                    $
                    3,242,056Net
      (loss) income attributable to non-controlling interests
                    
                    
                    (6,147
                    )
                    
                    
                    1,244Company’s
      net income
                    
                    
                    3,645,502
                    
                    
                    
                    3,240,812Adjustments
      to reconcile net income to net
                      cash
      provided by operating activities:Depreciation
                    
                    
                    2,937,748
                    
                    
                    
                    2,646,469Amortization of intangible assets
                    
                    
                    5,928
                    
                    
                    
                    5,905Loss on write off of property, plant and equipment
                    
                    
                    76,440
                    
                    
                    
                    837,041Changes
      in assets and liabilities:Accounts receivable
                    
                    
                    (782,364
                    )
                    
                    
                    (773,996
                    )Other receivables
                    
                    
                    (203,361
                    )
                    
                    
                    647,060Prepaid expenses
                    
                    
                    (353,893
                    )
                    
                    
                    387,843Utility deposits
                    
                    
                    (2,694
                    )
                    
                    
                    -Accounts payable
                    
                    
                    843,428
                    
                    
                    
                    588,359Accrued expenses and other payables
                    
                    
                    (254,622
                    )
                    
                    
                    283,500Deposits and advances received from subcontractors
                    
                    
                    120,552
                    
                    
                    
                    80,243Deferred revenue
                    
                    
                    1,856,446
                    
                    
                    
                    134,311Income tax payable
                    
                    
                    (164,013
                    )
                    
                    
                    427,114Net cash provided by operating activities
                    
                    
                    7,718,950
                    
                    
                    
                    8,505,905Cash
      flows from investing activities:Advances to related parties
                    
                    
                    (5,562,567
                    )
                    
                    
                    (9,222,821
                    )Repayment from related parties
                    
                    
                    7,125,573
                    
                    
                    
                    3,406,669Deferred costs
                    
                    
                    -
                    
                    
                    
                    (203,195
                    )Acquisition of intangible assets
                    
                    
                    (67,074
                    )
                    
                    
                    -Acquisition of property, plant and equipment
                    
                    
                    (4,908,837
                    )
                    
                    
                    (5,076,018
                    )Deposits for motor vehicles and software
                    
                    
                    (66,041
                    )
                    
                    
                    -Acquisition of additional interests in a subsidiary
                    
                    
                    (7,194
                    )
                    
                    
                    -Net cash (used in) investing activities
                    
                    
                    (3,486,140
                    )
                    
                    
                    (11,095,365
                    )Cash
      flows from financing activities:Repayment from a stockholder
                    
                    
                    40,000
                    
                    
                    
                    -Advance from a stockholder
                    
                    
                    960,000
                    
                    
                    
                    -Proceeds from bank loans
                    
                    
                    2,928,858
                    
                    
                    
                    8,190,487Repayment of bank loans
                    
                    
                    (8,214,245
                    )
                    
                    
                    (3,059,395
                    )Dividends paid
                    
                    
                    -
                    
                    
                    
                    (2,746,234
                    )Net cash (used in) provided by financing activities
                    
                    
                    (4,285,387
                    )
                    
                    
                    2,384,858Net
      decrease in cash
                    
                    
                    (52,577
                    )
                    
                    
                    (204,602
                    )Effect
      of foreign currency conversion on cash
                    
                    
                    31,081
                    
                    
                    
                    (10,094
                    )Cash
      at beginning of period
                    
                    
                    1,084,066
                    
                    
                    
                    533,565Cash
      at ending of period
                    
                    $
                    1,062,570
                    
                    
                    $
                    318,869Supplemental
      cash flow information:Interest
      paid
                    
                    $
                    383,518
                    
                    
                    $
                    228,476Income
      tax paid
                    
                    $
                    1,121,441
                    
                    
                    $
                    -





(A)
            Represents
      the consolidated financial statements of Eminent Promise
      Limited





The
accompanying notes are an integral part of these consolidated financial
statements.


4


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)





1.
            DESCRIPTION
      OF ORGANIZATION AND BUSINESS





China
Transportation International Holdings Group Limited (the “Company”, f/k/a China
Ding Cheng Science Holdings Co., Ltd.), was incorporated under the laws of the
State of Nevada on March 12, 2004 under the name Beautiful Life Foods, Inc. On
December 22, 2004, the Company amended its Articles of Incorporation to change
its name to Diamond Bay Holdings, Inc. On December 1, 2006, the Company amended
its Articles of Incorporation to change its name to Shaan’xi Ding Cheng Science
Holding Co., Ltd. On February 5, 2007, the Company amended its Articles of
Incorporation to change its name to China Ding Cheng Science Holdings Co., Ltd.
The Company’s only activities had been organizational ones, directed at
developing its business plan and raising its initial capital. Prior to the
completion of the Share Exchange discussed below, the Company was a shell
company as defined in Rule 12b-2 under the Securities Act of 1933, having no or
nominal business operations, employees, or assets.





On April
1, 2010, the Company entered into a Share Exchange Agreement (the “Exchange
Agreement”) with Eminent Promise Limited (“Eminent Promise”), a corporation
incorporated under the laws of the British Virgin Islands, and the shareholders
of Eminent Promise (the “Eminent Shareholders”). Pursuant to the terms of the
Exchange Agreement, the Eminent Shareholders agreed and transferred all of the
issued and outstanding shares of common stock in Eminent Promise to the Company
in exchange for the issuance of an aggregate of 14,700,000 shares of the
Company’s common stock, par value $0.001 (“Common Stock”), to the Eminent
Shareholders (“Share Exchange”).





Prior to
the Share Exchange, Mr. Yueming Guo returned 14,700,000 previously issued shares
of common stock to the Company for cancellation and such shares were returned to
the Company’s authorized but unissued shares of common stock. Following the
Share Exchange, the Company has a total of 20,000,000 shares of common stock
issued and outstanding.





Eminent
Promise owns 100% of the issued and outstanding capital stock of Tone Express
(HK) Limited (“Tone Express"), a corporation incorporated under the laws of Hong
Kong. Tone Express owns 100% of the issued and outstanding capital stock of the
Yiyang Tone Express (HK) Limited (“Yiyang Tone Express”), a corporation
incorporated under the laws of the PRC. On December 24, 2009, Yiyang Tone
Express entered into a series of variable interest entity contractual agreements
(the “VIE Agreements”) with Yiyang Xiangyun Group Company Limited (the “Yiyang
Group”) and its shareholders, pursuant to which Yiyang Tone Express effectively
assumed management of the business activities of Yiyang Group and has the right
to appoint all executives and senior management and the members of the board of
directors of Yiyang Group.





The VIE
Agreements comprised of a series of agreements, including a Management and
Consulting Services Agreement, Operating Agreement and Proxy Agreement, through
which Yiyang Tone Express has the right to advise, consult, manage and operate
Yiyang Group for an annual fee in the amount of Yiyang Group’s yearly net
profits after tax. Additionally, Yiyang Group’s shareholders pledged their
rights, titles and equity interest in Yiyang Group as security for Yiyang Tone
Express to collect consulting and services fees provided to Yiyang Group through
an Equity Pledge Agreement. In order to further reinforce Yiyang Tone Express’s
rights to control and to operate Yiyang Group, Yiyang Group’s shareholders
granted Yiyang Tone Express an exclusive right and option to acquire all of
their equity interests in Yiyang Group through an Option
Agreement.


5


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)





1.
            DESCRIPTION
      OF ORGANIZATION AND BUSINESS
(CONTINUED)





As a
result of the Share Exchange, the Company, through its subsidiaries and VIE, is
now engaged in the business of providing public transportation services in the
PRC. All business operations are conducted through the Company’s wholly-owned
subsidiary, Yiyang Tone Express, and its VIE, Yiyang Group.


Yiyang
Group includes the following subsidiaries along with its respective ownership
interests:





Ownership %Yiyang
      Xiang Highway Transportation Company Limited
                    
                    
                    80
                    %Yiyang
      Shi Dong Fang Travelling Bus Company Limited
                    
                    
                    100
                    %
      (1)An
      Hua Xian An Shun Local Transportation Company Limited
                    
                    
                    100
                    %Tao
      Jiang Xiang Hui Shan Gang Xiangyun Rural Transportation Company
      Limited
                    
                    
                    100
                    %





(1) On
April 13, 2010, Yiyang Group acquired the remaining interest of 12% of Yiyang
Shi Dong Fang Travelling Bus Company Limited, which then become a wholly-owned
subsidiary of Yiyang Group.





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





Basis
of Presentation and Consolidation





The
accompanying unaudited consolidated financial statements and related notes have
been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) for interim financial information and
with the rules and regulations of the Securities and Exchange Commission (“SEC”)
for Form 10-Q. Accordingly, they do not include all of the information and
footnotes required by U.S. GAAP for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods have been included. Interim
results are not necessarily indicative of the results for the full year. These
unaudited consolidated financial statements should be read in conjunction with
the financial statements of the Company on Form 8-K on April 1,
2010.




The Share
Exchange transaction has been accounted for as a recapitalization of the Company
whereby the Company is considered the legal acquiror and Eminent Promise is
considered the accounting acquiror. As a result of this transaction, the Company
is deemed to be a continuation of the business of Eminent Promise.  The
historical stockholders’ equity of the accounting acquiror prior to the share
exchange has been retroactively restated as if the Share Exchange transaction
occurred as of the beginning of the first period presented.





The
Company has adopted Financial Accounting Standard Board (“FASB”) Accounting
Standards Codification (“ASC”) 810, which requires that a VIE to be consolidated
by a company if that company is entitled to receive a majority of the VIE’s
residual returns and has direct ability to make decision on all operational
activities of the VIE.





The
Operating Agreement indicated that Yiyang Group, is the operating entity which
is under control of Yiyang Tone Express. It empowers Yiyang Tone Express the
direct ability to make decisions on all activities of Yiyang Group.





Under the
Management and Consulting Service Agreement entered between Yiyang Tone Express
and Yiyang Group on December 24, 2009, Yiyang Group agreed to pay all of its net
profits to Yiyang Tone Express as consultancy fee annually. Accordingly, Yiyang
Tone Express has the right to receive the expected residual returns of Yiyang
Group.


6





CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





Basis
of Presentation and Consolidation (Continued)





Under the
aforementioned contractual arrangement, the Company, “China Transportation
International Holdings Group Limited” qualifies as the primary beneficiaries for
the controlling interest of Yiyang Group under ASC230-10-45 and ASC810-10-15-14.
The result of subsidiaries or variable interest entities acquired prior to April
1, 2010when the Share Exchange Agreement was entered into are included in the
consolidated financial statements.





As of
September 30, 2010, the unaudited consolidated financial statements include the
accounts of the Company and the following entities (together referred to as the
“CTHG Group”). All intercompany transactions and accounts have been eliminated
in consolidation.





Name of Company
                        
                        Place of
                          incorporation
                        
                        Date of
                          incorporation
                        
                        Attributable
                          equity interest
                        
                        Direct/ Indirect
                          Controlling
                          interestEminent
      Promise Limited
                        
                        British
      Virgin Islands
                        
                        August
      11, 2009
                        
                        
                        100
                        %
                        DirectTone
      Express (HK) Limited
                        
                        Hong
      Kong
                        
                        August
      13, 2009
                        
                        
                        100
                        %
                        IndirectYiyang
      Tone Express (HK) Limited
                        
                        PRC
                        
                        January
      11, 2010
                        
                        
                        100
                        %
                        IndirectYiyang
      Xiangyun Group Co., Ltd.
                        
                        PRC
                        
                        December
      26, 1987
                        
                        
                        *
                        
                        Indirect





*
            The
      Company has indirect controlling interest of Yiyang Group under the VIE
      Agreements entered into on December 24, 2009, which are described in Note
      1 above.





Initial
measurement of VIE - The Company initially measures the assets, liabilities, and
non-controlling interests of the VIEs at their fair values at the date of the
acquisitions. At the date of acquisition, the fair value of VIE was equal to
book value of the VIE.





Accounting
after initial measurement of VIE - Subsequent accounting for the assets,
liabilities, and non-controlling interest of a consolidated variable interest
entity are accounted for as if the entity were consolidated based on voting
interests and the usual accounting rules for which the VIE operates are applied
as they would to a consolidated subsidiary as follows:





-
            Carrying
      amounts of the VIE are consolidated into the financial statements of the
      Company as the primary beneficiary (referred as “Primary Beneficiary” or
      “PB”); and





-
            Inter-company
      transactions and balances, such as revenues and costs, receivables and
      payables between or among the Primary Beneficiary and the VIE(s) are
      eliminated in their entirety.





Use
of Estimates





The
preparation of the consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions relating to the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.





Significant
items subject to such estimates and assumptions include the valuation allowances
for receivables, the recoverability of the carrying amount, the estimated useful
lives of long-lived assets, and the contingencies. Actual results could differ
from those estimates.


7


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





Economic
and Political Risks





CTHG
Group’s operations are conducted in the PRC. Accordingly, CTHG Group’s business,
financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.




CTHG
Group’s operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. CTHG
Group’s results may be adversely affected by changes in the political and social
conditions in the PRC, and by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion,
remittances aboard, and rates and methods of taxation, among other
things.





Cash





Cash
include cash on hand and at banks. Substantially all of CTHG Group’s cash
deposits are held with financial institutions located in the PRC. Management
believes that these major financial institutions are of high credit quality.
Restricted cash is excluded from cash.





Accounts
Receivable





Accounts
receivable represents outstanding service fees to be collected from customers
and subcontractors. The allowance for doubtful accounts is CTHG Group’s best
estimate of the amount of probable credit losses in the existing accounts
receivable. Management determines the allowance based on historical experience,
customer specific facts and economic conditions.





Outstanding
account balances are reviewed individually for collectability. Account balances
are charged off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. Management
believes CTHG Group is not exposed to any off-balance-sheet credit exposure from
its customers





Management
performs ongoing credit evaluation of its customers’ financial conditions and
believes that all outstanding balance is collectible. Therefore, management has
determined that no allowance for doubtful accounts was deemed necessary as of
September 30, 2010 and December 31, 2009.





Related
Parties





Related
parties, which can be a corporation, individual, investor or another entity are
considered to be related if the party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the Company in
making financial and operating decisions. Companies are also considered to be
related if they are subject to common control or common significant
influence.





Property,
Plant, and Equipment





Property,
plant, and equipment are recorded at cost less accumulated depreciation.
Expenditures for major additions and betterments are capitalized. Maintenance
and repairs are charged to general and administrative expenses as incurred.
Depreciation of property, plant and equipment is computed by the straight-line
method over the assets estimated useful lives ranging from two to nineteen
years.





Upon sale
or retirement of property, plant and equipment, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
operations.


8


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





The
estimated useful lives of the assets as follows:


YearsBuildings
                            
                            19Office
      equipment and furniture
                            
                            2-8Motor
      vehicles
                            
                            5-8Computer
      software
                            
                            5





Intangible
Assets





Intangible
assets acquired separately, including land use right, is measured on
initial recognition on cost.





The
useful lives of intangible assets are assessed to be either finite or
indefinite. Intangible assets with finite lives are subsequently amortized over
the useful economic life and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The amortization period
and the amortization method for an intangible asset with a finite useful life
are reviewed at least at each financial year end.





Land use
right represents the prepayments for the use of the parcels of land in the PRC
where CTHG Group’s headquarter is located through a deed of trust with Yiyang
Xiangyun Investment Company Limited, one of CTHG Group’s related parties, and
are charged to expense over their respective lease periods of 39 years expiring
on June 28, 2046. According to the laws of the PRC, the state owns all the land
in the PRC.  Companies or individuals are authorized to use the land only
through land use rights granted by the PRC government for a certain period
(usually 50 years).  The land use right can be sold, purchased, and
exchanged in the market. The term of such rights for successive owner shall be
reduced by the amount of time utilized by the preceding owner. CTHG Group has
obtained a land use right from the PRC government for commercial purpose through
a deed of trust with Yiyang Xiangyun Investment Company Limited.





Impairment
of Long-Lived Assets





Long-lived
assets, including intangible assets and property, plant, and equipment, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.





Recoverability
of assets to be held and used is measured by a comparison of the carrying amount
of an asset to estimated undiscounted future net cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated
undiscounted future cash flows, an impairment charge is recognized by the amount
by which the carrying amount of the assets exceeds the fair value of the
asset.





Assets to
be disposed of, if any, are separately presented in the balance sheet and
reported at the lower of the carrying amount or fair value less costs to sell,
and are no longer depreciated.





At
September 30, 2010 and September 30, 2009, CTHG Group determined that there was
no impairment in value.


9


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





Fair
Value of Financial Instruments





In August
2009, the FASB issued Accounting Standards Update “ASU” 2009-5 “Measuring
Liabilities at Fair Value”. This ASU provides amendments to ASC 820-10 “Fair
Value Measurements and Disclosures” to address concerns regarding the
determination of the fair value of liabilities. Because liabilities are often
not “traded”, due to restrictions placed on their transferability, there is
typically a very limited amount of trades (if any) from which to draw market
participant data. As such, many entities have had to determine the fair value of
a liability through the use of a hypothetical transaction. This ASU clarifies
the valuation techniques that must be used when the liability subject to the
fair value determination is not traded as an asset in an active market. The
management does not expect the adoption of this ASU to have a material effect on
the consolidated financial statements.





Deposits
and Advances Received From Subcontractors





CTHG
Group enters into agreements with various subcontractors to grant them the
rights to operate a designated bus route. Such agreement requires a deposit and
an advance received from subcontractors for obtaining the rights to operate the
bus line and is renewed on an annual basis. These deposits and advances received
are non-interest bearing.





Deferred
Revenue





Along
with the agreement to operate the bus routes, CTHG Group also contracts with
subcontractors to grant them the rights to use the motor vehicles during the
operation of designated bus routes. Each agreement has a fixed term of five
years and is renewable upon expiration. Upon signing of the agreements,
subcontractors are required to pay a lump sum subcontracting fee calculated
based on an annual estimated usage of the contracted motor vehicle for the right
to use. These fees will be amortized over the term of the agreement, usually
five years. Deferred revenue that will be recognized in next year is being
classified as short term liabilities with the balance classified as a long term
liability.





Revenue
Recognition





CTHG
Group generates revenue primarily from public transportation services provided
through direct bus ticket sales and subcontractors.





CTHG
Group recognizes revenue over the applicable contract periods with its
subcontractors or as services are rendered. Amounts contracted and collected
before the services being rendered are included in deferred revenue





Income
Taxes





CTHG
Group accounts for income taxes under ASC 740 “Income Taxes”. Deferred income
tax assets and liabilities are determined based upon differences between the
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be effective when the differences
are expected to reverse.





Deferred
tax assets are reduced by a valuation allowance to the extent that management
concludes it is more likely than not that the assets will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the
consolidated statements of income in the period that includes the enactment
date.


10


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





Income
Taxes (Continued)





ASC 740
prescribes a more-likely-than-not threshold for financial statement recognition
and measurement of a tax position taken in the tax return. This interpretation
also provides guidance on de-recognition of income tax assets and liabilities,
classification of current and deferred income tax assets and liabilities,
accounting for interest and penalties associated with tax positions, accounting
for income taxes in interim periods and income tax disclosures. As of September
30, 2010 and December 31, 2009, there were no amounts that had been accrued with
respect to uncertain tax positions.





Statutory
Reserves





Pursuant
to the PRC Company Law, Yiyang Group are required to make appropriations to the
statutory reserve at a rate of at least 10% of the after-tax net earnings for
each year as determined in accordance with the PRC GAAP. The after-tax net
earnings must be set off against any accumulated losses sustained by Yiyang
Group in prior years, before allocation is made to the statutory reserve.
Appropriation to the statutory reserve must be made before distribution of
dividends to owners. The appropriation is required until the reserve accumulated
is equal to 50% of Yiyang Group’ registered capital. This statutory reserve is
not distributable in the form of cash dividends. For the nine months ended
September 30, 2010 and year ended December 31, 2009, Yiyang Group has made
appropriations of $nil and $905,304, respectively, into the statutory
reserve.





Stock-Based
Compensation




CTHG
Group adopted ASC Topic 718. This Statement requires a public entity to measure
the cost of services received in exchange for an award of equity instruments
based on the grant-date fair value of the award. That cost will be recognized
over the period during which services are received. Stock compensation for stock
granted to non-employees has been determined in accordance with ASC Topic 718
and ASC Topic 505-50, as the fair value of the consideration received or the
fair value of equity instruments issued, whichever is more reliably
measured.





Other
Comprehensive Income





CTHG
Group adopted ASC 220 “Comprehensive Income”, which establishes standards for
the reporting and display of comprehensive income and its components in the
financial statements. Other comprehensive income is defined as the change in
equity of a company during the period from transactions and other events and
circumstances excluding transactions resulting from investments from owners and
distributions to owners. Accumulated other comprehensive income, as presented on
the accompanying consolidated statements of changes in equity and comprehensive
income, was cumulative foreign currency translation adjustment in each of the
quarters ended September 30, 2010 and 2009.





Pension
and Employee Benefits





Full time
employees of CTHG Group’s PRC subsidiaries are required to participate in a
government mandated multi-employer defined contribution plan pursuant to which
certain pension benefits, medical care, unemployment insurance, employee housing
fund and other welfare benefits are provided to employees. PRC labor regulations
require CTHG Group to accrue for these benefits based on certain percentages of
the employees’ salaries. Costs for pension and employee benefits for the nine
months ended September 30, 2010 and 2009 were $371,873 and $229,153,
respectively.


11


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





Commitments
and Contingencies





Certain
conditions may exist as of the date the financial statements are issued, which
may result in a loss to CTHG Group, but which will only be resolved when one or
more future events occur or fail to occur. CTHG Group’s management and its legal
counsel assess such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to
legal proceedings that are pending against CTHG Group, or unasserted claims that
may result in such proceedings, CTHG Group’s legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be sought
therein.





If the
assessment of a contingency indicates that it is probable that a material loss
has been incurred and the amount of the liability can be estimated, the
estimated liability would be accrued in CTHG Group’s consolidated financial
statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, the nature of the contingent liability, together with an
estimate of the range of possible loss if determinable and material, would be
disclosed.





As of
September 30, 2010 and December 31, 2009, the management has evaluated all such
proceedings and claims. In the opinion of management, provision of legal claim
was made and the ultimate disposition of these matters will not have a material
adverse effect on CTHG Group's financial position, liquidity or results of
operations.





Foreign
Currency Translation





CTHG
Group uses United States dollars (“U.S. Dollar” or “US$” or “$”) for financial
reporting purposes. The subsidiaries with the company maintain their books and
records in their respective functional currency, Chinese Renminbi (“RMB”) and
Hong Kong Dollars (“HK$”), being the lawful currency in the PRC and Hong Kong,
respectively. Assets and liabilities of the subsidiaries are translated from RMB
or HK$ into U.S. Dollars using the applicable exchange rates prevailing at the
balance sheet date. Items on the statements of income, comprehensive income and
cash flows are translated at average exchange rates during the reporting period.
Equity accounts are translated at historical rates. Adjustments resulting from
the translation of the CTHG Group’s financial statements are recorded as
accumulated other comprehensive income.





The
exchange rates used to translate amounts in RMB and HK$ into U.S. Dollars for
the purposes of preparing the consolidated financial statements are as
follows:





September30,
                                            2010
                                          
                                          September 30,
                                            2009
                                          
                                          December 31,
                                            2009Period
      end exchange rate
                                          
                                          RMB6.69810=$1
                                          
                                          RMB6.83760=$1
                                          
                                          RMB6.83720=$1HK$7.75000=$1
                                          
                                          HK$7.75000=$1
                                          
                                          HK$7.75000=$1Average
      exchange rate
                                          
                                          RMB6.81640=$1
                                          
                                          RMB6.84251=$1
                                          
                                          RMB6.84658=$1HK$7.75000=$1
                                          
                                          HK$7.75000=$1
                                          
                                          HK$7.75000=$1





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





Earnings
Per Share





CTHG
Group reports earnings per share in accordance with the ASC 260 “Earnings Per
Share” This statement requires dual presentation of basic and diluted earnings
(loss) with a reconciliation of the numerator and denominator of the loss per
share computations. Basic earnings per share amounts are based on the weighted
average shares of common outstanding. If applicable, diluted earnings per share
would assume the conversion, exercise or issuance of all potential common stock
instruments such as options, warrants and convertible securities, unless the
effect is to reduce a loss or increase earnings per share. There were no
adjustments required to net profit for the period presented in the computation
of diluted earnings per share. There were no common stock equivalents necessary
for the computation of diluted earnings per share.





Segment
Information





ASC 280
“Segment reporting” establishes standards for reporting information on operating
segments in interim and annual financial statements.  CTHG Group has one
segment, all of the CTHG Group’s operations and customers are in the PRC and all
income is derived from the providing services of public transportation. The
information presented in the consolidated statement of operations reflects the
revenues and costs associated with this business segment that management uses to
make operating decisions and assess performance.


12


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





Recently
Issued Accounting Pronouncements





In
January 2010, FASB issued authoritative guidance intended to improve disclosures
about fair value measurements. The guidance requires entities to disclose
significant transfers in and out of fair value hierarchy levels and the reasons
for the transfers and to present information about purchases, sales, issuances
and settlements separately in the reconciliation of fair value measurements
using significant unobservable inputs (Level 3). Additionally, the guidance
clarifies that a reporting entity should provide fair value measurements for
each class of assets and liabilities and disclose the inputs and valuation
techniques used for fair value measurements using significant other observable
inputs (Level 2) and significant unobservable inputs (Level 3). This guidance is
effective for interim and annual periods beginning after December 15, 2009
except for the disclosures about purchases, sales, issuances and settlements in
the Level 3 reconciliation, which will be effective for interim and annual
periods beginning after December 15, 2010. As this guidance provides only
disclosure requirements, the adoption of this guidance will not impact CTHG
Group’s financial condition or results of operations.





In
February 2010, the FASB issued Accounting Standards Update 2010-09 “Subsequent
Events (Topic 855)” allowing SEC filers to remove the date through which
subsequent events have been reviewed. ASU 2010-09 became effective upon
issuance, and the adoption of this guidance did not have a material impact on
CTHG Group’s financial statements.





In April
2010, the EITF issued “Revenue Recognition – Milestone Method.” This issue
provides guidance on defining a milestone and determining when it may be
appropriate to apply the milestone method of revenue recognition for research or
development transactions. This issue is effective on a prospective basis for
milestones achieved in fiscal years beginning after June 15, 2010. Early
adoption is permitted. CTHG Group is currently evaluating the potential impact
of this issue.





3.
            CASH





Cash
represents cash at banks and cash in hand. CTHG Group does not believe it is
exposed to any significant credit risk on cash. As of September 30, 2010 and
December 31, 2009, there were cash of $1,062,570 and $1,084,066
respectively.





Renminbi
is not a freely convertible currency and the remittance of funds out of the PRC
is subject to the exchange restrictions imposed by the PRC
government.





4.
            OTHER
      RECEIVABLES


As of September 30,
                  
                  
                  As of December 31,2010
                  
                  
                  2009Advances
      to bus suppliers
                  
                  $
                  -
                  
                  
                  $
                  35,746Advances
      to employees
                  
                  
                  138,993
                  
                  
                  
                  140,799Advances
      to third parties
                  
                  
                  19,703
                  
                  
                  
                  35,024Advances
      to subcontractors
                  
                  
                  495,234
                  
                  
                  
                  240,382Others
                  
                  
                  12,677
                  
                  
                  
                  11,295$
                  666,607
                  
                  
                  $
                  463,246





These
advances are interest free and without fixed repayment terms.


13


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)





5.
            PREPAID
      EXPENSES


As of September 30,
                  
                  
                  As of December 31,2010
                  
                  
                  2009Prepaid
      fuel
                  
                  $
                  448,715
                  
                  
                  $
                  77,509Prepaid
      insurance
                  
                  
                  81,365
                  
                  
                  
                  49,846Prepaid
      repairs and maintenance
                  
                  
                  -
                  
                  
                  
                  13,238Others
                  
                  
                  5,677
                  
                  
                  
                  41,271$
                  535,757
                  
                  
                  $
                  181,864





6.
            DUE
      FROM RELATED PARTIES





Related
parties, which can be a corporation, individual, investor or another entity are
considered to be related if the party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the Company in
making financial and operating decisions. Companies are also considered to be
related if they are subject to common control or common significant influence.
CTHG Group has the following due from related parties as outlined
below:





As of September 30,
                  
                  
                  As of December 31,2010
                  
                  
                  2009Yiyang
      Xiangyun Station Services Company Limited (a)
                  
                  $
                  6,476,459
                  
                  
                  $
                  8,971,918Yiyang
      Xiangyun Investment Company Limited (a)
                  
                  
                  1,668,399
                  
                  
                  
                  6,298,512Yiyang
      Xiangyun Holding Company Limited (a)
                  
                  
                  7,483,675
                  
                  
                  
                  1,921,109$
                  15,628,533
                  
                  
                  $
                  17,191,539





(a)
            On
      June 1, 2010, CTHG Group renewed the loan agreement with above related
      parties. Under the new agreement, the loan advances were secured by the
      assets of these related parties, interest was computed at a rate based on
      10% increment of the PRC’s banks’ current borrowing rate, and was
      repayable on demand.





Interest
income was $601,587 and $379,971 for the nine months ended September 30, 2010
and 2009, respectively.


14


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(IN
US DOLLARS)


7.
            PROPERTY,
      PLANT AND EQUIPMENT





Property,
plant and equipment consist of the following:





As of September
                    30,
                  
                  
                  As of December
                    31,2010
                  
                  
                  2009Buildings
                  
                  $
                  140,084
                  
                  
                  $
                  134,308Office
      equipment and furniture
                  
                  
                  276,735
                  
                  
                  
                  248,624Motor
      vehicles
                  
                  
                  31,491,613
                  
                  
                  
                  27,250,495Computer
      software
                  
                  
                  68,165
                  
                  
                  
                  -31,976,597
                  
                  
                  
                  27,633,427Less:Accumulated
      depreciation
                  
                  
                  (17,189,294
                  )
                  
                  
                  (15,102,629
                  )Net
      book value
                  
                  $
                  14,787,303
                  
                  
                  $
                  12,530,798





Depreciation
charged to costs of sales was $2,843,306 and $2,244,873 for the nine months
ended September 30, 2010 and 2009, respectively. The expense charged to costs of
sales was $1,091,121 and $846,564 for the three months ended September 30, 2010
and 2009, respectively.





Depreciation
charged to general and administrative expenses was $94,442 and $401,596 for the
nine months ended September 30, 2010 and 2009, respectively. The expense charged
to general and administrative expenses was $37,908 and $58,367 for the three
months ended September 30, 2010 and 2009, respectively.





Buildings
with an aggregate net book value of $103,626 and $102,450 at September 30, 2010
and December 31, 2009, respectively, were pledged as collateral for various bank
loans.





CTHG
Group inspects the motor vehicles periodically to check if any of them are old
and need to be retired or write off due to the operation inefficiencies. As of
September 30, 2010 and 2009, CTHG Group recognized a loss on write off of motor
vehicles amounting to $76,440 and $837,041,
respectively.





8.
            INTANGIBLE
      ASSETS





Intangible
assets consist of the following:





As of September 30,
                  
                  
                  As of December 31,2010
                  
                  
                  2009Land
      use right, net
                  
                  $
                  287,546
                  
                  
                  $
                  287,605





In July
2007, CTHG Group obtained the land use right of a piece of land, on which CTHG
Group’s headquarter is located, through a deed of trust with Yiyang Xiangyun
Investment Company Limited, one of CTHG Group’s related parties, for $275,836
(approximately RMB2,101,100) as of July 2007. This land is located in Yiyang,
Hunan Province, with an area of approximately 2,200 square meters. Under the
deed of trust, the land use right has a term of 39 years expiring on June 28,
2046. Land use right is amortized using straight-line method over its
prospective beneficial period. Land use right was pledged as collateral for
various bank loans.


15


CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (IN
US DOLLARS)
 
 8.
              INTANGIBLE
      ASSETS (CONTINUED)
 
 The
amortization expense was $5,928 and $5,905 for the nine months ended September
30, 2010 and 2009, respectively, whereas the amortization expense was $1,987 and
$1,969 for the three months ended September 30, 2010 and 2009,
respectively.
 
 Estimated
aggregate amortization expense for the next five years and thereafter is as
follows:
 
 For the year ending December
      31,
                    
                    Amount2010
                    
                    $
                    1,9872011
                    
                    
                    7,9482012
                    
                    
                    7,9482013
                    
                    
                    7,9482014
      and thereafter
                    
                    
                    261,715$
                    287,546
 
 9.
              BANK
      LOANS
 As of September 30,
                    
                    
                    As of December 31,2010
                    
                    
                    2009Current
                    
                    $
                    3,020,259
                    
                    
                    $
                    8,224,127Non-current
                    
                    
                    8,585
                    
                    
                    
                    33,640$
                    3,028,844
                    
                    
                    $
                    8,257,767
 
 Bank
loans were secured by land use right and the buildings held by CTHG Group and
its related parties, namely Yiyang Xiangyun Investment Company Limited and
Yiyang Xiangyun Station Services Company Limited. These loans were used to
finance daily operations, fuel purchasing and accessories of motor vehicles.
Interest rate ranges from 6.372% to 6.48%.
 
 Bank
loans consist of the following as of September 30, 2010:
 
 Financial Institutions
                                  
                                  Original Loan
                                    Amount
                                    USD
                                  
                                  
                                  Loan Balance
                                    as of
                                    September 30,
                                    2010
                                    USD
                                  
                                  Term of Loan
                                  
                                  Annual
                                    Interest Rate
                                  
                                  
                                  CollateralIndustrial
      and Commercial Bank of China Limited
                                  
                                  
                                  2,985,921
                                  
                                  
                                  
                                  2,985,921
                                  
                                  8/2/2010-
      7/2/2011
                                  
                                  
                                  6.372
                                  %
                                  
                                  Related
      parties’ and the Group’s
                                    buildingsRural
      Credit Cooperatives
                                  
                                  
                                  103,014
                                  
                                  
                                  
                                  42,923
                                  
                                  12/29/2008-
      12/29/2011
                                  
                                  
                                  6.48
                                  %
                                  
                                  N/ATotal
                                  
                                  
                                  3,088,935
                                  
                                  
                                  
                                  3,028,844
 
 The
interest expenses incurred and paid for the nine months ended September 30, 2010
were $383,518 and for the three months ended September 30, 2010 were $149,536.
The weighted average interest rate was 6.37%.
  The
interest expenses incurred and paid for the nine months ended September 30, 2009
were $228,476 and for the three months ended September 30, 2009 were $113,372.
The weighted average interest rate was 5.51%.
  16
 
 CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (IN
US DOLLARS)
 
 9.
              BANK
      LOANS (CONTINUED)
 
 Bank
loans consist of the following as of December 31, 2009:
  Financial Institutions
                
                Original Loan
                  Amount
                  USD
                
                
                Loan Balance
                  as of
                  September 30,
                  2009
                  USD
                
                Term of Loan
                
                Annual
                  Interest Rate
                
                
                CollateralIndustrial
      and Commercial Bank of China Limited
                
                
                877,552
                
                
                
                877,552
                
                1/16/2009-
      1/15/2010
                
                
                6.372
                %
                
                Related
      parties’ and the CTHG Group’s buildingsChina
      Construction Bank
                
                
                7,312,935
                
                
                
                7,312,935
                
                6/22/2009-
      6/21/2010
                
                
                5.31
                %
                
                Related
      parties’ buildings and the land use rightRural
      Credit Cooperatives
                
                
                103,014
                
                
                
                67,280
                
                12/29/2008-
      12/29/2011
                
                
                6.48
                %
                
                N/ATotal
                
                
                8,293,501
                
                
                
                8,257,767
 
 The loan
from Industrial and Commercial Bank of China Limited of $877,552 was repaid on
January 15, 2010 and the loan from China Construction Banks of $7,312,935 was
repaid on June 21, 2010.
 
 10.
              ACCRUED
      EXPENSES AND OTHER PAYABLES
 
 As of September 30,
                    
                    
                    As of December 31,2010
                    
                    
                    2009Accrued
      utility expenses and others
                    
                    $
                    20,662
                    
                    
                    $
                    148Accrued
      insurance expenses
                    
                    
                    215,701
                    
                    
                    
                    167,148Accrued
      salaries and welfare
                    
                    
                    190,417
                    
                    
                    
                    121,689Value
      added tax and other taxes payable
                    
                    
                    120,246
                    
                    
                    
                    89,209Other
      payablesDue
      to staffs
                    
                    
                    178,104
                    
                    
                    
                    81,872Provision
      for litigation claims (Note a)
                    
                    
                    59,151
                    
                    
                    
                    709,906Due
      to bus suppliers
                    
                    
                    168,331
                    
                    
                    
                    41,853Others
                    
                    
                    73,210
                    
                    
                    
                    68,619$
                    1,025,822
                    
                    
                    $
                    1,280,444
 
 (a)
              In
      2008, CTHG Group was involved in a severe traffic accident which resulted
      in death and injuries to several victims. Before Hunan Court final
      determination, the Company made payments as compensation to victims
      amounting to US$535,000 (RMB3.65 million).  Such compensation was
      expensed as incurred during the period from March 2008 to September
      2008.  As of September 30, 2010, the Court issued the judgment and
      determined the compensation obligation of each party involved in the case.
      Pursuant to the court's judgment, the Company had an obligation to
      compensate the victims up to US$535,000(RMB3.65 million). Management
      reviewed the judgment and the opinion from its PRC legal counsel which
      reached a conclusion that no additional compensation will be incurred and
      determined to reverse the provision previously made for the accident as
      other income during the quarter ended September 30, 2010. Such provision
      reversal amounted to $650,000 (RMB 4.3 million). The Company’s actual loss
      after the reimbursement from the insurance company and other responsible
      parties for the traffic accident was approximately $24,226 (RMB
      162,269).
  
 11.
              OTHER
      LOAN PAYABLE
 
 The loan
was borrowed in an amount of $343,204 (RMB2,298,818) in February 2006, from
Hunan Highway Transportation Company Limited, a minority shareholder of Yiyang
Xiang Highway Transportation Company Limited. The loan was utilized for working
capital purposes. Such loan was unsecured, interest-free and does not have a
fixed repayment date.
  17
  CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (IN
US DOLLARS)
 
 12.
              DEFERRED
      REVENUE
 
 The
deferred revenue will be amortized over the term of five years. Deferred revenue
that will be recognized in next year is being classified as current liabilities
and is being classified as non-current liabilities if it is over one
year.
 
 As of September 30,
                    
                    
                    As of December 31,2010
                    
                    
                    2009Current
      liabilities
                    
                    $
                    759,112
                    
                    
                    $
                    2,161,697Non-current
      liabilities
                    
                    
                    11,905,821
                    
                    
                    
                    8,646,790$
                    12,664,933
                    
                    
                    $
                    10,808,487
 
 A summary
of 5 years deferred revenue is summarized as below:
 
 For
      the year ending December 31,2010
                    
                    $
                    633,2472011
                    
                    
                    2,532,9862012
                    
                    
                    2,532,9862013
                    
                    
                    2,532,9862014
                    
                    
                    2,532,986Thereafter
                    
                    
                    1,899,742$
                    12,664,933
 
 13.
              DUE
      TO A STOCKHOLDER
 
 The
amount due to Mr. Yueming Guo, our Chairman and major shareholder, is interest
free, unsecured and repayable on demand.
 
 14.
              COMMON
      STOCK
 
 Common StockNumber
                    
                    
                    AmountAs
      of December 31, 2009
                    
                    
                    14,700,000
                    
                    
                    $
                    14,700Share
      effectively issued to former shareholders as part of the
      recapitalization
                    
                    
                    5,300,000
                    
                    
                    
                    5,300As
      of September 30, 2010
                    
                    
                    20,000,000
                    
                    
                    $
                    20,000
 
 As of
September 30, 2010, the company has authorized 300,000,000 of $0.001 par common
stock, of which 20,000,000 shares were issued and outstanding.
  18
  CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (IN
US DOLLARS)
 
 15.
              COMPREHENSIVE
      INCOME
 
 Comprehensive
income consists of the following:
 
 Three months ended September 30,
                    
                    
                    Nine months ended September 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Net
      income attributable to common stockholders
                    
                    $
                    1,545,467
                    
                    
                    $
                    813,331
                    
                    
                    $
                    3,645,502
                    
                    
                    $
                    3,240,812Other
      comprehensive income:Foreign
      currency translation adjustments
                    
                    
                    208,393
                    
                    
                    
                    7,351
                    
                    
                    
                    250,965
                    
                    
                    
                    16,681Comprehensive
      income
                    
                    $
                    1,753,860
                    
                    
                    $
                    820,682
                    
                    
                    $
                    3,896,467
                    
                    
                    $
                    3,257,493
 
 16.
              INCOME
      TAXES
 
 CTGH
Group is subject to income taxes on income arising in or derived from the
tax jurisdiction in which the entities are domiciled.
 
 The
income tax on the consolidated statements of income represents the provision of
income taxes for the operating VIE and Yiyang Group only. No provision for the
CTGH Group and Eminent Promise has been made as both companies have no operation
nor assessable profits for the nine months ended September 30, 2010. All the
Company’s income is generated in the PRC.
 
 All
Chinese enterprises are governed by the Enterprise Income Tax Law of the PRC and
various local income tax laws, pursuant to which a company generally is subject
to a statutory enterprise income tax rate of 25% on income as reported in its
statutory financial statements after appropriate tax adjustments and tax
preferential treatment.
 
 In
September 2010, the VIE has obtained from Yiyang City government a tax
preferential treatment  pursuant to which 28% of the total enterprise
income tax paid for the period from 2009 to 2011 will be refunded to the
VIE.
  19
  CHINA
TRANSPORTATION INTERNATIONAL HOLDINGS GROUP LIMITED
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (IN
US DOLLARS)
 
 16.
              INCOME
      TAXES (CONTINUED)
 
 A
reconciliation of the expected income tax expense to the actual income tax
expense is as follows:-
 
 Three months ended September 30,
                        
                        
                        Nine months ended September 30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Income
      beforeincome
      taxes
                        
                        $
                        1,925,748
                        
                        
                        $
                        1,107,344
                        
                        
                        $
                        4,585,065
                        
                        
                        $
                        3,669,170Expected
      tax at PRC statutory income tax rate (25%)
                        
                        
                        481,436
                        
                        
                        
                        276,836
                        
                        
                        
                        1,146,266
                        
                        
                        
                        917,292Non-deductible
      expenses
                        
                        
                        32,145
                        
                        
                        
                        16,590
                        
                        
                        
                        124,963
                        
                        
                        
                        39,678Tax
      preferential treatment provided by local district official
                        
                        
                        (143,803
                        )
                        
                        
                        -
                        
                        
                        
                        (355,944
                        )
                        
                        
                        -Non-taxable
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (529,856
                        )Effect
      on exchange rate
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Other
                        
                        
                        14,560
                        
                        
                        
                        -
                        
                        
                        
                        30,425
                        
                        
                        
                        -Income
      tax expense
                        
                        $
                        384,338
                        
                        
                        $
                        293,426
                        
                        
                        $
                        945,710
                        
                        
                        $
                        427,114
 
 CTHG
Group adopted the provisions of ASC 605, “Accounting for Uncertainty in Income
Taxes.” ASC 605 contains a two step approach to recognizing and measuring
uncertain tax positions accounted for in accordance with ASC 740, “Accounting
for Income Taxes.” The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it
is more likely than not that the position will be sustained on audit, including
50% likely of being realized upon ultimate settlement. Management does not
anticipate any potential future adjustments would result in a material change to
its tax position. As a result, there is no unrecognized tax
benefit.
  20
  Item
2. Management’s Discussion and Analysis of Financial Conditions of
Operations.
 
 You
should read this Management’s Discussion and Analysis in conjunction with the
Consolidated Financial Statements and Related Notes.
 
 Business
Overview
 
 China
Transportation International Holdings Group Limited (the “Company”, f/k/a China
Ding Cheng Science Holdings Co., Ltd.), was incorporated under the laws of the
State of Nevada on March 12, 2004 under the name Beautiful Life Foods, Inc. On
December 22, 2004, the Company amended its Articles of Incorporation to change
its name to Diamond Bay Holdings, Inc. On December 1, 2006, the Company amended
its Articles of Incorporation to change its name to Shaan’xi Ding Cheng Science
Holding Co., Ltd. On February 5, 2007, the Company amended its Articles of
Incorporation to change its name to China Ding Cheng Science Holdings Co., Ltd.
Up until the entry of the Share Exchange (as described below), the Company’s
only activities had been organizational ones, directed at developing its
business plan and raising its initial capital. Prior to the completion of the
Share Exchange with Eminent Promise discussed below, the Company was a shell
company as defined in Rule 12b-2 under the Securities Act of 1933, having no or
nominal business operations, employees, or assets.
 
 On April
1, 2010, the Company entered into a Share Exchange Agreement (the “Exchange
Agreement”) with Eminent Promise Limited (“Eminent Promise”), a corporation
incorporated under the laws of the British Virgin Islands, and the shareholders
of Eminent Promise (the “Eminent Shareholders”). Pursuant to the terms of the
Exchange Agreement, the Eminent Shareholders agreed to transfer all of the
issued and outstanding shares of common stock in Eminent Promise to the Company
in exchange for the issuance of an aggregate of 14,700,000 shares of the
Company’s common stock, par value $.001 (“Common Stock”), to the Eminent
Shareholders, thereby causing Eminent Promise and its wholly-owned subsidiaries,
Tone Express (HK) Limited (“Tone Express”), a company incorporated under the
laws of Hong Kong Special Administrative Region of PRC, and Yiyang Tone Express
(HK) Limited (“Yiyang Tone Express”), a corporation incorporated under the laws
of the Peoples Republic of China (“PRC”) to become wholly-owned subsidiaries of
the Company, and Yiyang Xiangyun Group Company Limited (the “Yiyang Group”), a
corporation organized under the PRC laws to become a variable interest entity
(“VIE”) of the Company (“Share Exchange”).
 
 As a
result of the Share Exchange the Company, through its subsidiaries and VIE, is
now engaged in the business of providing public transportation services in the
PRC. All business operations are conducted through the Company’s wholly-owned
subsidiary, Yiyang Tone Express, and through Yiyang Group, its VIE.
 
 Plan
of Operation
 
 During
the next twelve months, the Company expects to take the following steps in
connection with the development of its transportation business in PRC and the
implementation of the following operation plans:
 
 ·           The
Company intends to continue with its general strategies to build a road
transportation network throughout China and expand extensively.
 ·           The
Company intends to acquire or merge with an array of trans-provincial and
trans-regional passenger transport companies and build the company to become the
first choice for passengers.
 ·           The
Company intends to build a multilevel passenger transport network and strive for
expanding market.
  21
  ·           The
Company intends to boost urban public transportation and integrate urban and
rural passenger transport business.
 
 We are
exploring opportunities to acquire other transportation companies to increase
our bus lines. We currently have no agreements or commitments with respect to
any material acquisitions or investments in other companies.
 
 Results
of Operations
 
 Results
of Operations for the Three Months Ended September 30, 2010 and
2009
 
 Gross
revenue was $4,883,197 for the three months ended September 30, 2010, an
increased of approximately $783,043 or 19.10% as compared to the three months
ended September 30, 2009. The increase was primarily due to the increase in
passenger flows brought by the strong rebound of the Chinese economy which
requires more labor from inner main land provinces like Hu Nan where we are
located to South and East China. According to the announcement of the National
Bureau of Statistics of China on October 21, 2010, China’s GDP for the first
three quarters of 2010 increased 10.6%.
  Cost of
sales consists of depreciation of transportation vehicles, fuel cost, insurance
and subcontractors’ operating expenses, including labor and tolls. Cost of sales
was $2,982,971 or 61.09% of revenues, for the three months ended September 30,
2010, while cost of sales for the three months ended September 30, 2009 was
$2,614,754 or 63.77% of revenues. The increase of cost of sales, notwithstanding
the decrease in the overall percentage, was partly due the launch of new
high-level buses and the increase of gas prices. The increase in cost other than
those listed above was approximately in proportion to the increase in
revenue.
  Gross
profit was $1,900,226 for the three months ended September 30, 2010 compared to
$1,485,400 for the three months ended September 30, 2009. The increase of gross
profit was a result of the increase of passenger flows, and partly
attributable to the decrease of insurance by $422,878 during the three
months ended September 30, 2010.
 
 Gross
margins increased to 38.91% for the three months ended September 30, 2010 from
36.23% for the three months ended September 30, 2009. The increase was mainly
attributed to a higher seat utilization rate which reduced the cost per
ticket.
 
 Operating
expenses, which consist of selling and marketing expenses, general and
administrative expenses, and loss on write off of property, plant and equipment,
was $793,812 for the three months ended September 30, 2010, as compared to
$579,619 for the three months ended September 30, 2009. The increase was
primarily due to an increase of salary by $153,019, and an increase of social
insurance payments by $136,841. Operating expenses, as a percentage of gross
revenue, increased to 16.26% for the three months ended September 30, 2010
compared to 14.14% for the three months ended September 30, 2009.
 
 Operating
income for the three months ended September 30, 2010 was $1,106,414, compared to
$905,781 for the three months ended September 30, 2009. The increase was
primarily attributable to the higher revenue as a result of higher passenger
volume and slightly higher ticket prices as well as the favorable impact
from foreign currency.
  22
  Other
income (expenses) consists primarily of interest income/expense, expenses paid
to the insurance company for services in connection with accident investigation
and compensation paid to subcontractors. Net other income was $746,941 for the
three months ended September 30, 2010, compared to net other income of $70,903
for the three months ended September 30, 2009. The significant increase of other
income was mainly due to the reverse of the excess provision previously made for
a severe traffic accident amounting to approximately $650,000 (RMB4.3 million).
As of September 30, 2010, the Hunan Court (Trial No. 371) issued a judgment and
determined the compensation obligation of each party involved in the case. The
Company had an obligation to compensate the victims up to US$535,000 (RMB3.65
million). The company had previously paid compensation to victims with an
aggregate amount of US$535,000 (RMB3.65 million). Management reviewed the
judgment and the opinion from its PRC legal counsel which reached a conclusion
that no additional compensation will be incurred and determined to reverse the
provision previously made for the accident as other income during the quarter
ended September 30, 2010. Such provision reversal amounted to $650,000 (RMB4.3
million). Net interest income was $72,393 for the three months ended September
30, 2010, compared to net interest income of $130,660 for the three months ended
September 30, 2009. More than 98% of interest income, which was $221,645 for the
three months ended September 30, 2010, came from the Company’s related parties
Yiyang Holding, Yiyang Station Co., and Yiyang Investment Co. Prior to the
carve-out on June 1, 2009, as a branch of Yiyang Xiangyun, Yiyang Group didn’t
collect interest from other entities under control of Yiyang Xiangyun. The
interest rates on two bank loans were 6.37% and 6.48%, respectively, for the
three months ended September 30, 2010. For the three months ended September 30,
2010, we paid approximately $141,592 as interests for the bank loans compared to
approximately $113,349 for the three months ended September 30,
2009.
 
 The
effective income tax rate for the three months ended September 30, 2010 was
19.96% compared to 26.50% for the three months ended September 30, 2009. We
obtained preferential tax treatment from Yiyang City in September 2010. 28% of
the enterprise income tax paid for the period from fiscal year of 2009 to
2011 will be refunded to us.
 
 As a
result of the above factors, net income from continuing operations for the three
months ended September 30, 2010 was $1,545,467, or $0.08 per share, as compared
to $813,331, or $0.06, per share for the same period of 2009.
 
 Results
of Operations for the Nine Months ended September 30, 2010 and 2009
 
 Gross
revenue for the nine months ended September 30, 2010 was $16,722,611, an
increase of approximately $1,671,480 or 11.11% from the first nine months ended
September 30, 2009. Excluding an increase of 0.38% due to the favorable impact
of foreign exchange, reflecting a weaker U.S. dollar compared to first nine
months in 2009, revenue increased 10.68%. The increase was due to the increase
in passenger flows brought by the strong rebound of the Chinese economy which
requires more labor from inner main land provinces like Hu Nan where we are
located to South and East China. According to the announcement of the National
Bureau of Statistics of China on October 21 2010, China’s GDP for the first
three quarters of 2010 increased 10.6%.
  Cost of
sales consists of depreciation of transportation vehicles, fuel cost, insurance
and subcontractors’ operating expenses, including labor and tolls.  Cost of
sales was $10,606,601 or 63.43% of revenues for the nine months ended September
30, 2010, while cost of sales for the nine months ended September 30, 2009 was
$8,824,957 or 58.63% of revenues. The increase of cost of sales was partly due
to the increase of revenue. The increase of gas prices, depreciation of motor
vehicles also contributed to the cost increase.
  Gross
profit was $6,116,010 for the nine months ended September 30, 2010 compared to
$6,226,174 for the same period in 2009. The decrease of gross profit was mainly
attributed to the increase of fuel cost, depreciation of transportation vehicles
and subcontractors’s operating expenses in the nine months ended September 30,
2010.
  Gross
margins decreased to 36.57% for the nine months ended September 30, 2010 from
41.37% for the nine months ended September 30, 2009. The decrease was primarily
due to the increase in the expenses associated the sub-contracting charges, fuel
cost, depreciation, insurance, and toll charges.
 
 Operating
expenses which consist of selling and marketing expenses, general and
administrative expenses, and loss on write-off of property, plant and equipment
were $2,386,320 for the nine months ended September 30, 2010 compared to
$2,892,729 for the nine months ended September 30, 2009. The decrease was
primarily due to loss from write off of property, plant and equipment, which was
$76,440 for the nine months ended September 30, 2010 compared to $837,041 for
the nine months ended September 30, 2009. Meanwhile, general and administrative
expenses increased by $281,409, which was particularly attributed to the
increase of salaries, social insurance payments and traveling expenses by
$1,092,146, notwithstanding the decrease of provision for litigation and
depreciation of office furniture, office equipment and building by $950,173.
Operating expenses, as a percentage of gross revenue, decreased to 14.27% from
19.22% for the nine months ended September 30, 2009.
  23
  Operating
income for the nine months ended September 30, 2010 was $3,729,690 compared to
$3,333,445 for the nine months ended September 30, 2009. This increase was
mainly attributable to the higher gross profit as a result of higher passenger
volume and slightly higher ticket prices, and the favorable impact from
foreign currency.
 
 Other
income (expenses) consists primarily of interest income/expenses, expenses paid
to the insurance company for services in connection with accident investigation,
and compensation paid to subcontractors. Net other income was $637,306 for the
nine months ended September 30, 2010, compared to net other income of $184,230
for the nine months ended September 30, 2009. The significant increase of other
income was due to the reverse of the excess provision previously made for a
severe traffic accident amounting to approximately $650,000 (RMB4.3 million). As
of September 30, 2010, the Hunan Court (Trial No. 371) issued a judgment and
determined the compensation obligation of each party involved in the case. The
Company had an obligation to compensate the victims up to US$535,000 (RMB3.65
million). The Company had previously paid compensation to victims with an
aggregate amount of US$535,000 (RMB3.65 million). Management reviewed the
judgment and the opinion from its PRC legal counsel which reached a conclusion
that no additional compensation will be incurred and determined to reverse the
provision previously made for the accident as other income during the quarter
ended September 30, 2010. Such provision reversal amounted to $650,000 (RMB4.3
million). Net interest income was $218,069 for the nine months ended September
30, 2010 compared to $151,495 for the nine months ended September 30, 2009.
During the first nine months of 2010, interest income which came from the
Company’s related parties Yiyang Holding, Yiyang Station Co., and Yiyang
Investment Co. was $600,825 for the nine months ended September 30, 2010. Prior
to the carve-out on June 1, 2009, as a branch of Yiyang Xiangyun, Yiyang Group
didn’t collect interest from other entities under control of Yiyang
Xiangyun.  The interest rates on two bank debts were 6.37% and 6.48%,
respectively, for the nine months ended September 30, 2010. For the nine months
ended September 30, 2010, we paid approximately $340,598.93 as interests for the
bank loans compared to approximately $228,476.34 for the nine months ended
September 30, 2009.
 
 The
effective tax rate for the first nine months 2010 increased to 20.63% from
11.64% for the nine months ended September 30, 2009. Prior to the carve-out on
June 1, 2009, Yiyang Group was a branch of Yiyang Xiangxun, and most of its
profits were off set by other branches’ losses, causing a lower effective income
tax rate then.
 
 As a
result of the above factors, net income from continuing operations for the nine
months ended September 30, 2010 was $3,645,502, or $0.20 per share, compared to
$3,240,812, or $0.22, per share for the same period of 2010.
 
 Liquidity
and Capital Resources
 
 The
Company has historically funded its operations primarily through bank loans and
cash flows from operations. At September 30, 2010, the Company had an
approximately $3 million secured revolving credit facility with Industrial and
Commercial Bank of China Limited, and Rural Credit Cooperatives. The bank loans
are secured by a first priority perfected security interest on land use right
and the building owned by Yiyang Group and its related parties.
 
 Over the
next twelve months, we intend to pursue organic and acquisitive growth and
increase our market share. We are also evaluating acquisition and consolidation
opportunities in China’s transportation industry. We believe that we have
sufficient funds to operate our existing business for the next twelve months.
However, in addition to funds available from our operating and short term bank
loans, we may need external sources of capital for our expansion. There can be
no assurance that we will be able to obtain such additional financing at
acceptable terms to us, or at all.
 
 The
following table summarizes the cash flows for the nine months ended September
30, 2010 and 2009.
  24
 
 Nine months Ended
                                        September 30,2010
                                      
                                      
                                      2009Cash
      provided by (used in):Operating
      Activities
                                      
                                      $
                                      7,718,950
                                      
                                      
                                      
                                      8,505,905Investing
      Activities
                                      
                                      $
                                      (3,486,140
                                      )
                                      
                                      
                                      (11,095,365
                                      )Financing
      Activities
                                      
                                      $
                                      (4,285,387
                                      )
                                      
                                      
                                      2,384,858
 
 Cash
decreased $52,577 during the nine months ended September 30, 2010 primarily due
to the repayment of $5,285,387 bank loans during the nine months ended September
30, 2010.  During the first nine months of 2010, net income was $3,639,355
compared to $3,242,056 for the same period of 2009.
  Cash
flows provided by operations were $7,718,950
for the nine months ended September 30, 2010 compared to $8,505,905
for the first nine months of 2009. The decrease was mainly attributable to the
payment of income tax accrued in fiscal year of 2009 and first two quarters of
2010 in amount of $1,121,441. The decrease was also attributable to the decrease
in deferred revenues and other receivables.
 
 Cash
flows used in investing activities for the nine months ended September 30, 2010
were $3,486,140 compared to $11,095,365 for the same period of 2009. The
major in-flow of funds was from related parties, including Yiyang Xiangyun
Investment Company Limited and Yiyang Xiangyun Station Services Company Limited,
in an aggregate amount of $1,563,006 in the first nine months of 2010 as a
result of repayment of loans by these related parties to Yiyang Group after the
carve-out in June 2009, compared to outflows of $5,816,152 in the first nine
months in 2009.
 
 Cash
flows used in financing activities for the nine months ended September 30, of
2010 were $4,285,387 compared to $2,384,858 which was generated from financing
activities for the same period of 2009. We repaid loans from China Construction
Bank in the amount of approximately $7,311,438 (RMB50, 000,000) in June
2010.
 
 The
Company’s forecasted cash flow from future operations may be adversely affected
by various factors including, but not limited to, gas prices, declines in
passenger demand, increased competition, the deterioration in general economic
and business conditions, and its ability to continue to serve public at
competitive costs as well as to obtain collections from sub-contractors, as well
as other factors. See the “Risk Factors” section of the Company’s Current Report
on Form 8-K on April 1, 2010 for further explanation of factors that may
negatively impact the Company’s cash flows. Any change in the current status of
these factors could adversely impact the Company’s ability to fund operating
cash flow requirements.
 
 The
Company was in compliance with all financial covenants at September 30,
2010.
 
 CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 Use
of Estimates
 
 The
preparation of the consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions relating to the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
  25
  Significant
items subject to such estimates and assumptions include the valuation allowances
for receivables, the recoverability of the carrying amount, the estimated useful
lives of long-lived assets, and the contingencies. Actual results could differ
from those estimates.
 
 Economic
and Political Risks
 
 CTHG
Group’s operations are conducted in the PRC. Accordingly, CTHG Group’s business,
financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.
  CTHG
Group’s operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. CTHG
Group’s results may be adversely affected by changes in the political and social
conditions in the PRC, and by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion,
remittances aboard, and rates and methods of taxation, among other
things.
 
 Accounts
Receivable
 
 Accounts
receivable represents outstanding service fees to be collected from customers
and subcontractors. The allowance for doubtful accounts is CTHG Group’s best
estimate of the amount of probable credit losses in the existing accounts
receivable. Management determines the allowance based on historical experience,
customer specific facts and economic conditions.
 
 Outstanding
account balances are reviewed individually for collectability. Account balances
are charged off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. Management
believes CTHG Group is not exposed to any off-balance-sheet credit exposure from
its customers
 
 Management
performs ongoing credit evaluation of its customers’ financial conditions and
believes that all outstanding balance is collectible. Therefore, management has
determined that no allowance for doubtful accounts was deemed necessary as of
September 30, 2010 and December 31, 2009.
 
 Related
Parties
 
 Related
parties, which can be a corporation, individual, investor or another entity are
considered to be related if the party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the Company in
making financial and operating decisions. Companies are also considered to be
related if they are subject to common control or common significant
influence.
 
 Property,
Plant, and Equipment
 
 Property,
plant, and equipment are recorded at cost less accumulated depreciation.
Expenditures for major additions and betterments are capitalized. Maintenance
and repairs are charged to general and administrative expenses as incurred.
Depreciation of property, plant and equipment is computed by the straight-line
method over the assets estimated useful lives ranging from two to nineteen
years.
 
 Upon sale
or retirement of property, plant and equipment, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
operations.
  26
  The
estimated useful lives of the assets as follows:
 YearsBuildings
                          
                          19Office
      equipment and furniture
                          
                          2-8Motor
      vehicles
                          
                          5-8Computer
      software
                          
                          5
 
 Impairment
of Long-Lived Assets
 
 Long-lived
assets, including intangible assets and property, plant, and equipment, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
 
 Recoverability
of assets to be held and used is measured by a comparison of the carrying amount
of an asset to estimated undiscounted future net cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated
undiscounted future cash flows, an impairment charge is recognized by the amount
by which the carrying amount of the assets exceeds the fair value of the
asset.
 
 Assets to
be disposed of, if any, are separately presented in the balance sheet and
reported at the lower of the carrying amount or fair value less costs to sell,
and are no longer depreciated.
 
 At
September 30, 2010 and September 30, 2009, CTHG Group determined that there was
no impairment in value.
 
 Deferred
Revenue
 
 Along
with the agreement to operate the bus routes, CTHG Group also contracts with
subcontractors to grant them the rights to use the motor vehicles during the
operation of designated bus routes. Each agreement has a fixed term of five
years and is renewable upon expiration. Upon signing of the agreements,
subcontractors are required to pay a lump sum subcontracting fee calculated
based on an annual estimated usage of the contracted motor vehicle for the right
to use. These fees will be amortized over the term of the agreement, usually
five years. Deferred revenue that will be recognized in next year is being
classified as short term liabilities with the balance classified as a long term
liability.
  Commitments
and Contingencies
        Foreign
Currency Translation
 
 CTHG
Group uses United States dollars (“U.S. Dollar” or “US$” or “$”) for financial
reporting purposes. The subsidiaries with the company maintain their books and
records in their respective functional currency, Chinese Renminbi (“RMB”) and
Hong Kong Dollars (“HK$”), being the lawful currency in the PRC and Hong Kong,
respectively. Assets and liabilities of the subsidiaries are translated from RMB
or HK$ into U.S. Dollars using the applicable exchange rates prevailing at the
balance sheet date. Items on the statements of income, comprehensive income and
cash flows are translated at average exchange rates during the reporting period.
Equity accounts are translated at historical rates. Adjustments resulting from
the translation of the CTHG Group’s financial statements are recorded as
accumulated other comprehensive income.
 
 The
exchange rates used to translate amounts in RMB and HK$ into U.S. Dollars for
the purposes of preparing the consolidated financial statements are as
follows:
  27
 
 September 30,
                            2010
                          
                          September 30,
                            2009
                          
                          December 31,
                            2009Period
      end exchange rate
                          
                          RMB6.69810=$1
                          
                          RMB6.83760=$1
                          
                          RMB6.83720=$1HK$7.75000=$1
                          
                          HK$7.75000=$1
                          
                          HK$7.75000=$1Average
      exchange rate
                          
                          RMB
      6.81640=$1
                          
                          RMB6.84251=$1
                          
                          RMB6.84658=$1HK$7.75000=$1
                          
                          HK$7.75000=$1
                          
                          HK$7.75000=$1
 
 The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into USD at
the rates used in translation.
 
 Recently
Issued Accounting Pronouncements
 
 In
January 2010, FASB issued authoritative guidance intended to improve disclosures
about fair value measurements. The guidance requires entities to disclose
significant transfers in and out of fair value hierarchy levels and the reasons
for the transfers and to present information about purchases, sales, issuances
and settlements separately in the reconciliation of fair value measurements
using significant unobservable inputs (Level 3). Additionally, the guidance
clarifies that a reporting entity should provide fair value measurements for
each class of assets and liabilities and disclose the inputs and valuation
techniques used for fair value measurements using significant other observable
inputs (Level 2) and significant unobservable inputs (Level 3). This guidance is
effective for interim and annual periods beginning after December 15, 2009
except for the disclosures about purchases, sales, issuances and settlements in
the Level 3 reconciliation, which will be effective for interim and annual
periods beginning after December 15, 2010. As this guidance provides only
disclosure requirements, the adoption of this guidance will not impact CTHG
Group’s financial condition or results of operations.
 
 In
February 2010, the FASB issued Accounting Standards Update 2010-09 “Subsequent
Events (Topic 855)” allowing SEC filers to remove the date through which
subsequent events have been reviewed. ASU 2010-09 became effective upon
issuance, and the adoption of this guidance did not have a material impact on
CTHG Group’s financial statements.
 
 In April
2010, the EITF issued “Revenue Recognition – Milestone Method.”  This
issue provides guidance on defining a milestone and determining when it may be
appropriate to apply the milestone method of revenue recognition for research or
development transactions. This issue is effective on a prospective basis for
milestones achieved in fiscal years beginning after June 15, 2010. Early
adoption is permitted. CTHG Group is currently evaluating the potential impact
of this issue.
 
 Off
Balance Sheet Arrangements
 
 As of
September 30, 2010, the Company had no off balance sheet
arrangements.
  28
  Item
3.          Quantitative and
Qualitative Disclosures about Market Risk
 
 Not
applicable
 
 Item 4T.
       Controls and Procedures
 
 Evaluation
of Disclosure Controls and Procedures
 
 As of the
end of the period covered by this Quarterly Report, the Company’s chief
executive officer and chief financial officer (the “Certifying Officers”),
conducted evaluations of the Company’s disclosure controls and procedures. As
defined under Sections 13a–15(e) and 15d–15(e) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), the term “disclosure controls and
procedures” means controls and other procedures of an issuer that are designed
to ensure that information required to be disclosed by the issuer in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules
and forms. Disclosure controls and procedures include without limitation,
controls and procedures designed to ensure that information required to be
disclosed by an issuer in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the issuer’s management,
including the Certifying Officers, to allow timely decisions regarding required
disclosures.
 
 Based on
this evaluation, the Certifying Officers have concluded that the Company’s
disclosure controls and procedures were effective to ensure that material
information is recorded, processed, summarized and reported by management of the
Company on a timely basis in order to comply with the Company’s disclosure
obligations under the Exchange Act and the rules and regulations promulgated
thereunder.
 
 Changes
in Internal Control over Financial Reporting
 
 Further,
there were no changes in the Company’s internal control over financial reporting
during the Company’s fiscal quarter September 30, 2010 that materially affected,
or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
 
 Limitations
on the Effectiveness of Internal Controls
 
 Readers
are cautioned that our management does not expect that our disclosure controls
and procedures or our internal control over financial reporting will necessarily
prevent all fraud and material error. An internal control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.  Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected.  The design of any system of
controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any control design will
succeed in achieving its stated goals under all potential future
conditions.  Over time, control may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may
deteriorate.
  29
  PART
II - OTHER INFORMATION
 
 Item
1.     Legal Proceedings
 
 From time
to time, we may become involved in various lawsuits and legal
proceedings, including the proceedings associated with traffic accidents
arising in the ordinary course of our transportation business. We are currently
not aware of any such legal proceedings or claims that will have, individually
or in the aggregate, a material adverse affect on our business, financial
condition or operating results. 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 business.
 
 Item
2.     Unregistered Sales of Equity Securities and Use
of Proceeds
 
 None.
 
 Item
3.     Defaults Upon Senior Securities
 
 None.
 
 Item
4.     Removed and Reserved
 
 Item
5.     Other Information
 
 None.
  30
  Item
6.     Exhibits
 
 (a)  Exhibits
 
 Exhibit
                Number
              Description of Exhibit31.1*
              Certification
      of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended.31.2*
              Certification
      of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended.32.1*
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Principal Executive
    Officer).32.2*
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Principal Financial
    Officer).
 
 
 * Filed
herewith
  31
  SIGNATURES
 
 In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 CHINA
      TRANSPORATION  INTERNATIONAL HOLDINGS GROUP,
    LIMITED.November
      22, 2010
                  By:
                  /s/ Yueming GuoYueming
      Guo
                    Chairman
      & PresidentNovember
      22, 2010
                  By:
                  /s/ Xin HeXin
      He
                    Chief
      Financial Officer
  32