UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      10-QSB





(MARK
      ONE)





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


ACT
      OF
      1934





FOR
      THE
      QUARTERLY PERIOD ENDED September 30, 2006





o
      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: 000-51364





Dolce
      Ventures, Inc.


(EXACT
      NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)


Utah
              32-0028823(STATE
                  OR OTHER JURISDICTION OF
              (I.R.S.
                  EMPLOYER IDENFIFICATIONINCORPORATION
                  OR ORGANIZATION
              NO.)





The
      Farmhouse


558
      Lime
      Rock Road


Lime
      Rock, Connecticut 06039


(ADDRESS
      OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)





ISSUER
      'S
      TELEPHONE NUMBER, INCLUDING AREA CODE: (860) 435-7000





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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No
x.





The
      number of shares of Common Stock of the Registrant, par value $0.001 per share,
      outstanding at November 13, 2006 was 100,770,140.





Transitional
      Small business Disclosure Format (Check one): Yes o; No x.










PART
      I.
      FINANCIAL INFORMATION





**Item
      1.**  **FINANCIAL
      STATEMENTS**





**Dolce
      Ventures, Inc.**


**Consolidated
      Financial Statements**


**Unaudited**


**September
      30, 2006**


**(Stated
      in US dollars)**








**Dolce
                Ventures, Inc.****Consolidated
                Balance Sheet****Unaudited****At
                September 30, 2006****(Stated
                in US Dollars)**





Sep
                30, 2006
            
            Dec
                31, 2005**Assets***Current
                Assets*Cash
                and Cash Equivalents
            
            $
            5,328,306
            
            $
            571,194Accounts
                Receivable
            
            
            6,887,070
            
            
            7,770,168Notes
                Receivables
            
            
            225,213
            
            
            -Advances
                to Suppliers
            
            
            250,406
            
            
            372,442Prepaid
                Expenses
            
            
            93,433
            
            
            12,097Other
                Receivables
            
            
            905,327
            
            
            437,922Total
                Current Assets
            
            $
            13,689,755
            
            $
            9,163,823*Long
                Term Assets*Investments
                in Equity Securities
            
            $
            2,697,852
            
            $
            2,443,378Plant
                and Equipment, Net
            
            
            3,443,273
            
            
            3,200,682Construction
                in Progress
            
            
            5,798,781
            
            
            3,071,497Intangible
                Assets
            
            
            448,406
            
            
            437,265Total
                Long Term Assets
            
            $
            12,388,312
            
            $
            9,152,822**Total
                Assets**
            
            $
            **26,078,067**
            
            **$**
            **18,316,645****Liabilities***Current
                Liabilities*Accounts
                Payable
            
            $
            457,120
            
            $
            3,090,870Other
                Payables
            
            
            5,509,741
            
            
            2,264,965Unearned
                Revenue
            
            
            103,616
            
            
            133,035Accrued
                Liabilities
            
            
            146,184
            
            
            201,384Total
                Current Liabilities
            
            $
            6,216,661
            
            $
            5,690,254**Total
                Liabilities**
            
            $
            **6,216,661**
            
            **$**
            **5,690,254**




See
      Accompanying Notes to the Consolidated
      Financial Statements




2




**Dolce
                Ventures, Inc.****Consolidated
                Balance Sheet****Unaudited****At
                September 30, 2006****(Stated
                in US Dollars)**





**Members’
                Equity**
            
            
            -
            
            $
            12,626,391**Stockholders’
                Equity**Series
                A Convertible Preferred Stock, Par value $0.001, Issued 14,361,647
                shares
                at Sep 7, 2006;Series
                B Convertible Preferred Stock, Par value $0.001, Issued 2,509,782
                shares
                at Sep 7, 2006.[SERIES
                A AND B PREFERRED WERE ISSUED AND OUTSTANDING AT 9/30]
            
            
            -
            
            
            -Common
                Stock, Par value $0.001, Authorized250,000,000
                shares, Issued 100,770,140 atSeptember
                30, 2006
            
            $
            100,700
            
            
            -Additional
                Paid-In Capital
            
            
            11,262,749
            
            
            -Retained
                Earnings
            
            
            8,497,957
            
            
            -$
            19,861,406
            
            
            -**Total
                Liabilities & Stockholders’ Equity**
            
            $
            **26,078,067**
            
            **$**
            **18,316,645**





See
      Accompanying Notes to the Consolidated
      Financial Statements




3




**Dolce
                Ventures, Inc.****Consolidated
                Statement of Income****Unaudited****September
                30, 2006****(Stated
                in US Dollars)**




Nine
                    monthsended
                
                Three
                    monthsendedSeptember
                    30, 2006
                
                September
                    30, 20062006
                
                2005
                
                2006
                
                2005Net
                    Sales
                
                $
                4,971,156
                
                $
                3,319,668
                
                $
                3,471,616
                
                $
                851,442Cost
                    of Sales
                
                
                (1,849,128
                )
                
                (1,485,603
                )
                
                (865,641
                )
                
                (308,709
                )Gross
                    Profit
                
                $
                3,122,028
                
                $
                1,834,065
                
                $
                2,605,975
                
                $
                542,733Selling
                    and Distributing Costs
                
                
                (66,497
                )
                
                (66,668
                )
                
                (39,673
                )
                
                (24,805
                )Administrative
                    and OtherOperating
                    Expenses
                
                
                (693,973
                )
                
                (386,973
                )
                
                (440,154
                )
                
                (158,568
                )Income
                    from Operations
                
                $
                2,361,558
                
                $
                1,380,424
                
                $
                2,126,148
                
                $
                359,360Interest
                    (Expenses)/Income, net
                
                
                (2,169
                )
                
                1,182
                
                
                973
                
                
                37Other
                    Expenses, net
                
                
                (159
                )
                
                (41,835
                )
                
                (30,417
                )
                
                (40,384
                )Other
                    Income
                
                
                13,205
                
                
                11,838
                
                
                -
                
                
                51,928Income
                    before Taxes
                
                $
                2,372,435
                
                $
                1,351,609
                
                $
                2,096,704
                
                $
                370,941Income
                    Tax
                
                
                (183,755
                )
                
                (106,943
                )
                
                (166,168
                )
                
                (32,242
                )**Net
                    Income**
                
                $
                **2,188,680**
                
                $
                **1,244,666**
                
                $
                **1,930,536**
                
                $
                **338,699**Net
                    Income per Share, Basic & Diluted
                
                
                0.02
                
                
                0.01
                
                
                0.02
                
                
                0.00Weighted
                    Average Shares Outstanding
                
                
                100,770,140
                
                
                100,770,140*
                
                
                100,770,140*
                
                
                100,770,140*




*
      Number
      of shares outstanding the day of the merger for comparison only




**See
      Accompanying Notes to the Consolidated
      Financial Statements**




4





**Dolce
                Ventures, Inc.****Consolidated
                Statement of Cash Flows****For
                the Nine Months Ended September 30, 2006****(Stated
                in US Dollars)**





Nine
                monthsendedSeptember
                30, 2006
            
            September
                30, 2005**Cash
                Flows from Operating Activities**Net
                Income
            
            $
            2,188,680
            
            $
            1,244,666Decrease/
                (Increase) in Accounts Receivable
            
            
            617,274
            
            
            (3,047,138
            )Increase
                in Notes Receivable
            
            
            (225,213
            )
            
            -(Increase)/
                Decrease in Prepayments andOther
                Receivables
            
            
            (426,705
            )
            
            838,013(Decrease)/
                Increase in Accounts Payable
            
            
            (2,633,750
            )
            
            1,294,941Increase
                in Other payables and Accruals
            
            
            3,160,157
            
            
            329,185Equity
                in an Investment
            
            
            (254,474
            )
            
            (43,279
            )Depreciation
                and Amortization
            
            
            799,780
            
            
            702,641Net
                Cash Provided by Operating Activities
            
            $
            3,225,749
            
            $
            1,319,029**Cash
                Flows from Investing Activities**Purchases
                of Intangible Assets
            
            $
            (11,141
            )
            $
            (374,588
            )Payment
                of Construction in Progress
            
            
            (2,727,284
            )
            
            (385,427
            )Purchase
                of Fixed Assets
            
            
            (1,042,371
            )
            
            (1,072,002
            )Net
                Cash Used in Investing Activities
            
            $
            (3,780,796
            )
            $
            (1,832,017
            )**Cash
                Flows from Financing Activities**Issuance
                of Common Stock
            
            $
            5,246,891
            
            
            -Net
                Cash Provided by Financing Activities
            
            $
            5,246,891
            
            
            -**Net
                in Cash and Cash Equivalents(Used)/Sourced**
            
            $
            **4,691,844**
            
            $
            **(512,988**
            **)****Effect
                of Foreign Currency Translation on Cash and****Cash
                Equivalents**
            
            
            65,268
            
            
            1,973**Cash
                and Cash Equivalents - Beginning of Year**
            
            
            571,194
            
            
            668,346**Cash
                and Cash Equivalents - End of Year**
            
            $
            **5,328,306**
            
            $
            **157,331**




See
      Accompanying Notes to the Consolidated
      Financial Statements




5




**Dolce
                  Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**





1. Basis
      of Presentation




The
      unaudited consolidated financial statements of Dolce
      Ventures, Inc. have
      been prepared in accordance with generally accepted accounting principles for
      interim financial information and pursuant to the requirements for reporting
      on
      Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include
      all the information and footnotes required by generally accepted accounting
      principles for complete financial statements. However, such information reflects
      all adjustments (consisting solely of normal recurring adjustments), which
      are,
      in the opinion of management, necessary for a fair statement of results for
      the
      interim periods. Results shown for interim periods are not necessarily
      indicative of the results to be obtained for a full fiscal
      year.





2. Organization
      and Principal
      Activities





The
      Company is a natural gas services operator, principally engaging in the
      investment, operation and management of city gas pipeline infrastructure, in
      the
      distribution of natural gas to residential and industrial users, in the
      construction and operation of natural gas stations, and in the development
      and
      application of natural gas related technologies.




6




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**





3.  Summary
      of Significant Accounting Policies





*(A)*  *Consolidation*





The
      consolidated financial statements include the accounts of the Company and its
      subsidiaries (“the Group”). Significant intercompany transactions have been
      eliminated in consolidation. Investments in which the company has a 20 percent
      to 50 percent voting interest and where the company exercises significant
      influence over the investee are accounted for using the equity
      method.





As
      of
      September 30, 2006, the particulars of the subsidiaries are as
      follows:




Name
                of Company
            
            Place
                of Incorporation
            
            Date
                of Incorporation
            
            Attributable
                Equity
              Interest
                %
            
            Registered
              CapitalPegasus
                Tel, Inc.
            
            USA
            
            2/19/2002
            
            100GAS
                Investment China Co., Ltd.
            
            BVI
            
            6/19/2003
            
            100Beijing
                Zhong Ran Wei Ye Gas Co.,Ltd
            
            PRC
            
            8/29/2001
            
            100
            
            RMB
                77,454,532Ningjin
                Weiye Gas Co., Ltd
            
            PRC
            
            12/3/2003
            
            100
            
            RMB
                3,000,000Jinzhou
                Weiye Gas Co., Ltd
            
            PRC
            
            7/19/2005
            
            100
            
            RMB
                3,000,000Xingtang
                Weiye Gas Co., Ltd
            
            PRC
            
            2/18/2005
            
            100
            
            RMB
                3,000,000Linzhang
                Weiye Gas Co., Ltd
            
            PRC
            
            7/6/2006
            
            100
            
            RMB
                1,000,000Anping
                Weiye Gas Co., Ltd
            
            PRC
            
            8/4/2006
            
            100
            
            RMB
                5,000,000Wuqiao
                Gas Co., Ltd
            
            PRC
            
            6/30/2005
            
            100
            
            RMB
                2,000,000Yutian
                Zhongran Weiye Gas Co.,Ltd
            
            PRC
            
            12/19/2003
            
            100
            
            RMB
                3,000,000Langfang
                DevelopmentRegion
                Weiye DangerousGoods
                Transportation Co., Ltd
            
            PRC
            
            3/22/2006
            
            100
            
            RMB
                1,000,000Sihong
                Weiye Gas Co., Ltd
            
            PRC
            
            12/3/2005
            
            100
            
            RMB10,000,000Peixian
                Weiye Gas Co., Ltd
            
            PRC
            
            8/22/2006
            
            100
            
            RMB
                5,000,000Sishui
                Weiye Gas Co., Ltd
            
            PRC
            
            12/22/2005
            
            100
            
            RMB
                3,000,000LongyaoZhongran
WeiyeGasCo.,Ltd
            
            PRC
            
            10/13/2006
            
            100
            
            RMB
                3,000,000Shenzhou
                Weiye Gas Co., Ltd
            
            PRC
            
            12/23/2006
            
            100
            
            RMB
                3,000,000




7




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**


*(B)*  *Economic
      and Political Risks*





The
      Company’s operations are conducted in the PRC. Accordingly, the Company’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.





The
      Company’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. The
      Company’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 abroad, and rates and methods of taxation, among other
      things.





*(C)*  *Use
      of Estimates*





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





*(D)*  *Cash
      and Cash Equivalents*





The
      Company considers all cash and other highly liquid investments with initial
      maturities of three months or less to be cash equivalents.





*(E)*  *Accounts
      and Other Receivable*





Accounts
      and other receivable are recorded at net realizable value consisting of the
      carrying amount less an allowance for uncollectible accounts, as needed. The
      Company extends unsecured credit to customers in the normal course of business
      and does not accrue interest on trade accounts receivable. Allowance for
      uncollectible accounts as of September 30, 2006 is not significant.




8




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**





*(F)*  *Advances
      to Suppliers*





Advances
      to suppliers represent the cash paid in advance for purchasing raw materials.
      The advances to suppliers are interest free and unsecured.





*(G)*  *Investments
      in Equity Securities*





The
      consolidated statement of income includes the Group's share of the
      post-acquisition results of its associate for the year. In the consolidated
      balance sheet, investments in equity securities are stated at the Group's share
      of the net assets of the associates plus the premium paid less any discount
      on
      acquisition in so far as it has not already been amortized to the statement
      of
      income, less any identified impairment loss.





*Portion
                of**Nominal**Name
                of*
            
            *Place*
            
            *Form
                of*
            
            
            
            *Value
                of**Associate*
            
            *of*
            
            *Business*
            
            *Registered*
            
            *Registered*
            
            *Principal**Company*
            
            *Registration*
            
            *Structure*
            
            *Capital*
            
            *Capital*
            
            *Activities*Beijing
                Zhongran Xiangke Oil Gas Technology Co. Ltd
            
            PRC
            
            Sino-foreign
                equity joint venture
            
            Registered
                RMB
              20,000,000
            
            40
            
            Trading
                of natural gas and gas pipeline
                construction





Beijing
      Zhongran Xiangke Oil Gas Technology Co. Ltd is the Group's 40% owned joint
      venture company and is principally engaged in sale of compressed natural gas
      to
      domestic households and industrial around sub-urban areas of Beijing and part
      of
      sub-urban areas in Hebei Province and Tianjin.




9




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**





*(H)*  *Long-Lived
      Assets*





The
      Group
      adopted Statement of Financial Accounting Standards No. 144, “Accounting for the
      Impairment or Disposal of Long-Live Assets” (“SFAS 144”), which addresses
      financial accounting and reporting for the impairment or disposal of long-lived
      assets. The Group periodically evaluates the carrying value of long-lived assets
      to be held and used in accordance with SFAS 144. SFAS 144 requires impairment
      losses to be recorded on long-lived assets used in operations when indicators
      of
      impairment are present and the undiscounted cash flows estimated to be generated
      by those assets are less than the assets’ carrying amounts. In that event, a
      loss is recognized based on the amount by which the carrying amount exceeds
      the
      fair market value of the long-lived assets. Loss on long-lived assets to be
      disposed of is determined in a similar manner, except that fair market values
      are reduced for the cost of disposal. Based on its review, the Company believes
      that, as of September, 2006, there were no significant impairments of its
      long-lived assets.





*(I)*  *Plant
      and Equipment*





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





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





Gas
                Pipelines
            25
                yearsMotor
                Vehicles
            10
                yearsMachinery
                & Equipment
            20
                yearsBuildings
            25
                yearsLeasehold
                Improvements
            25
                yearsOffice
                Equipment
            8
                years





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




10


**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**




*(J)*  *Intangible
      assets*





Intangible
      assets, are stated at cost less amortization and accumulated impairment loss.
      Amortization is provided over their estimated useful lives, using the
      straight-line method. Estimated useful lives of the intangibles are as follows:





Land
                use rights
            40
                - 50 yearsFranchises
            30
                yearsOther
                intangibles
            3
                years





*(K)*  *Construction
      in Progress*





Construction
      in progress represents the cost of constructing pipelines and is stated at
      cost.
      Costs comprise direct and indirect incremental costs of acquisition or
      construction. Completed items are transferred from construction in progress
      to
      the gas pipelines of fixed assets when they are ready for their intended use.
      The major cost of construction relates to construction materials, direct labor
      wages and other overhead.  Construction of pipeline, through which to
      distribute natural gas, is one of the Group’s principal businesses.  The
      Group builds city main pipeline network and branch pipeline network to make
      gas
      connection to resident users, industrial, and commercial users, with the
      objective of generating revenue on gas connection and gas usage fees collected
      from these customers.  As at September 30, 2006, the pipelines under
      construction include mainly the projects in several cities of Hebei and Jiangsu
      province, and in Beijing.  These projects, once completed, will
      significantly increase the gas supply capacity.





*(L)*  *Unearned
      revenue*





Unearned
      revenue represents prepayments by customers for gas purchases and advance
      payments on construction and installation of pipeline contracts. The Company
      records such prepayment as unearned revenue when the payments are
      received.





*(M)*  *Financial
      Instruments*





The
      carrying amounts of all financial instruments approximate fair value. The
      carrying amounts of cash, accounts receivable, accounts payable and accrued
      liabilities approximate fair value due to the short-term nature of these items.
      The carrying amounts of borrowings approximate the fair value based on the
      Company’s expected borrowing rate for debt with similar remaining maturities and
      comparable risk.




11




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**


*(N)*  *Foreign
      Currency Translation*





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





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




**September
                30, 2006**
            
            **September
                30, 2005**Nine
                months end RMB : US$ exchange rate
            
            
            7.8989
            
            
            8.0775Average
                nine months end RMB : US$ exchange rate
            
            
            8.0013
            
            
            8.2183Average
                three months end RMB : US$ exchange rate
            
            
            7.9771
            
            
            8.1520





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 US$
      at
      the rates used in translation.




12




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**





*(O)*  *Revenue
      Recognition*





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





Net
      sales, which consist of gas and connection fee revenue. And the cost of sales
      consists of gas cost and connection cost.





Gas
      connection revenue is recognized when the outcome of a contract can be estimated
      reliably and the stage of completion at the balance sheet date can be measured
      reliably.





Sales
      of
      natural gas are recognized when goods are delivered and title has
      passed.





*(P)*  *Other
      Income*





Other
      income represents the Group’s share of post- acquisition results of its
      investment in equity securities for the year.





*(Q)*  *Income
      Taxes*





Deferred
      income taxes are recognized for the tax consequences in future years of
      differences between the tax bases of assets and liabilities and their financial
      reporting amounts at each period end based on enacted tax laws and statutory
      tax
      rates applicable to the periods in which the differences are expected to affect
      taxable income. Valuation allowances are established when necessary to reduce
      deferred tax assets to the amount expected to be realized. At September 30,
      2006, there was no significant book to tax differences.





Pursuant
      to the tax laws of PRC, general enterprises are subject to income tax at an
      effective rate of 33%. The Group is in the natural gas industry whose
      development is encouraged by the government. According to the income tax
      regulation, any company engaged in the natural gas industry enjoys a favorable
      tax rate. Also, the Company is exempt from corporate income tax for its first
      two years and is then entitled to a 50% tax reduction for the succeeding three
      years. The Company’s first profitable tax year was 2003. Accordingly, the
      Company’s income is subject to a reduced tax rate of 9%. Subsidiaries are
      subject to the effective rate of 33%.




13




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**




*(R)*  *Advertising*





The
      Group
      expensed all advertising costs as incurred. Advertising costs for the years
      ended September 30, 2006 and 2005 were insignificant.





*(S)*  *Concentration
      of Credit Risk*





Concentration
      of credit risk is limited to accounts receivable and is subject to the financial
      conditions of major customers. The Group does not require collateral or other
      security to support accounts receivable. The Group conducts periodic reviews
      of
      its clients’ financial condition and customers’ payment practices to minimize
      collection risk on accounts receivable.


*(T)*  *Statement
      of Cash Flows*





In
      accordance with Statement of SFAS 95, “Statement of Cash Flows”, cash flows from
      the Company’s operations is calculated based upon the local currencies. As a
      result, amounts related to assets and liabilities reported on the statement
      of
      cash flows will not necessarily agree with changes in the corresponding balances
      on the balance sheet.





*(U)*  *Recent
      Accounting Pronouncements*





In
      May
      2006, the FASB issued a SFAS 154, “Accounting Changes and Error Corrections” to
      replace APB Opinion No. 20, “Accounting Changes” and SFAS 3, “Reporting
      Accounting Changes in Interim Financial Statements” requiring retrospective
      application to prior periods consolidated financial statements of changes in
      accounting principle, unless it is impracticable to determine either the
      period-specific effects or the cumulative effect of the change.  When it is
      impracticable to determine the period-specific effects of an accounting change
      on one or more individual prior periods presented, SFAS 154 requires the new
      accounting principle be applied to the balances of assets and liabilities as
      of
      the beginning of the earliest period for which retrospective application is
      practicable and that a corresponding adjustment be made to the opening balance
      of retained earnings (or other appropriate components of equity or net assets
      in
      the statement of financial position) for that period rather than being reported
      in an income statement.  When it is impracticable to determine the
      cumulative effect of applying a change in accounting principle to all prior
      periods, SFAS 154 requires that the new accounting principle be applied as
      if it
      were adopted prospectively from the earliest date practicable.  The
      effective date for this statement is for accounting changes and corrections
      of
      errors made in fiscal year beginning after September 15,
      2006.




14


**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**


*(U)*  *Recent
      Accounting Pronouncements (Cont’d)*





In
      February 2006, the FASB issued a SFAS 155, “Accounting for Certain Hybrid
      Financial Instruments” to amend FASB Statements No. 133, Accounting for
      Derivative Instruments and Hedging Activities, and No. 140, Accounting for
      Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
      This statement permits fair value remeasurement for any hybrid financial
      instrument that contains an embedded derivative that otherwise would require
      bifurcation and eliminate the prohibition on a qualifying special-purpose entity
      from holding a derivative financial instrument that pertains to a beneficial
      interest other than another derivative financial instrument.  This
      statement is effective for all financial instruments acquired or issued after
      the beginning of an entity’s first fiscal year that begins after September 15,
      2006.





The
      Group
      does not anticipate that the adoption of these two standards will have a
      material impact on these consolidated financial statements.




15




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**





4.  Plant
      and Equipment





Plant
      and
      Equipment consist of the following as of September 30:





2006*At
                Cost*Gas
                Pipelines
            
            $
            2,936,293Motor
                Vehicles
            
            
            299,945Machinery
                & Equipment
            
            
            258,650Buildings
            
            
            88,873Leasehold
                Improvements
            
            
            47,053Office
                Equipment
            
            
            46,463$
            3,677,277*Less**:
                Accumulated depreciation*Gas
                Pipelines
            
            $
            138,746Motor
                Vehicles
            
            
            38,076Machinery
                & Equipment
            
            
            23,082Buildings
            
            
            5,910Leasehold
                Improvements
            
            
            17,075Office
                Equipment
            
            
            11,115$
            234,004$
            3,443,273




16




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**


5.  Intangible
      Assets





Intangible
      assets consist of the following as of September 30:





2006Land
                use rights
            
            $
            112,652Franchises
            
            
            335,754**$**
            **448,406**





The
      Group
      operates as a local natural gas distributor in a city or county, known as an
      operational location, under an exclusive franchise agreement between the Group
      and the local government or entities in charge of gas utility. Franchises are
      the rights to develop sites in Anping and Jinzhou in China. They are stated
      at
      cost less accumulated depreciation.





6.  Income
      Taxes





In
      accordance with the relevant tax laws and regulations of PRC, the corporation
      income tax rate is 33%. However, in accordance with the relevant taxation laws
      in the PRC, the Group is eligible for tax concessions and was exempted from
      part
      of the PRC income taxes for the year.





The
      following table accounts for the differences between the actual tax provision
      and the amounts obtained by applying the applicable PRC corporation income
      tax
      rate of 33% to income before taxes for the years ended September
      30,.




2006
            
            2005Income
                before Taxes
            
            $
            2,372,435
            
            $
            1,351,609Provision
                for income taxes at PRC income tax rate
            
            
            782,904
            
            
            446,031Effect
                of tax exemption granted to the Group
            
            
            (599,149
            )
            
            (339,088
            )Income
                Tax
            
            **$**
            **183,755**
            
            **$**
            **106,943**





17




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**





7.  Business
      and Geographical Segments





The
      Company has contracted with customers usually in two business segments: one
      is
      for the construction and installation of gas facilities and another one is
      the
      subsequent sales of gas to those customers through the gas facilities the
      Company constructs. However, the respective gas facilities contracts and gas
      supply contracts have separate bases for revenue recognition.





For
      management purposes, the Group is currently organized into two major operating
      divisions - gas pipeline construction (installation of gas facilities) and
      sales
      of piped gas. These principal operating activities are the basis on which the
      Group reports its primary segment information.





*Nine
                months ended*
            
            *Gas
                pipeline*
            
            *Sales
                of**September
                30, 2006*
            
            *construction*
            
            *piped
                gas*
            
            *Consolidated*Net
                Sales
            
            $
            3,104,605
            
            $
            1,866,551
            
            $
            4,971,156Cost
                of sales
            
            
            (469,824
            )
            
            (1,379,304
            )
            
            (1,849,128
            )Segment
                result
            
            **$**
            **2,634,781**
            
            **$**
            **487,247**
            
            **$**
            **3,122,028**




*Nine
                months ended*
            
            *Gas
                pipeline*
            
            *Sales
                of**September
                30, 2005*
            
            *construction*
            
            *piped
                gas*
            
            *Consolidated*Net
                Sales
            
            $
            1,959,227
            
            $
            1,360,441
            
            $
            3,319,668Cost
                of sales
            
            
            (260,322
            )
            
            (1,225,281
            )
            
            (1,485,603
            )Segment
                result
            
            **$**
            **1,698,905**
            
            **$**
            **135,160**
            
            **$**
            **1,834,065**




18




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**





*Three
                  months ended*
            
            *Gas
                pipeline*
            
            *Sales
                of**September
                30, 2006*
            
            *construction*
            
            *piped
                gas*
            
            *Consolidated*Turnover
            
            $
            2,745,948
            
            $
            725,668
            
            $
            3,471,616Cost
                of sales
            
            
            (405,609
            )
            
            (460,032
            )
            
            (865,641
            )Segment
                result
            
            $
            **2,340,339**
            
            $
            **265,636**
            
            **$**
            **2,605,975**





*Three
                  months ended*
            
            *Gas
                pipeline*
            
            *Sales
                of**September
                30, 2005*
            
            *construction*
            
            *piped
                gas*
            
            *Consolidated*Turnover
            
            $
            653,076
            
            $
            198,366
            
            $
            851,442Cost
                of sales
            
            
            (130,050
            )
            
            (178,659
            )
            
            (308,709
            )Segment
                result
            
            **$**
            **523,026**
            
            **$**
            **19,707**
            
            **$**
            **542,733**





The
      Group's operations are located in the PRC. All revenue is from customers in
      the
      PRC. All of the Group’s assets are located in the PRC. Sales of piped gas and
      gas pipeline construction are carried out in the PRC. Accordingly, no analysis
      of the Group's sales and assets by geographical market is
      presented.




19




**Dolce
                    Ventures, Inc.****Notes
                  to the Consolidated Financial Statements****For
                  the Nine Months Ended September 30, 2006 and,
                  2005****(Stated
                  in US Dollars)**





8.  *Related
      Party Transactions*





The
      following material transactions with related parties were carried out in the
      ordinary course of business and on normal commercial terms:





Sales
      to
      Beijing Zhongran Xiangke Oil Gas Technology Co. Ltd (Zhongran Xiangke), an
      investee for which the equity method is used, for
      the
      nine month ended 2006
      and
      2005 were $107,551 and $869,809 respectively. The amounts receivable from
      Zhongran Xiangke for September 2006 and 2005 were $57,561 and $162,823
      respectively.





Sales
      to
      Beijing Zhongyou Xiangke Oil Gas Technology Co. Ltd (Zhongyou Xiangke), an
      investee of Zhongran Xiangke, for the nine month ended 2006 and 2005 were nil
      and $ 52,495 respectively. The amounts receivable from Zhongyou Xiangke for
      the
      September 2006 and 2005 were $13,688 and $19,620 respectively.





20




**Item
          2.** **** **MANAGEMENT'S
          DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
 
 **DISCLAIMER
          REGARDING FORWARD-LOOKING STATEMENTS**
  Our
          disclosure and analysis in this Quarterly Report contains some forward-looking
          statements. Certain of the matters discussed concerning our operations,
          cash
          flows, financial position, economic performance and financial condition,
          including, in particular, future sales, product demand, the market for
          our
          products in the People’s Republic of China, competition, exchange rate
          fluctuations and the effect of economic conditions include forward-looking
          statements within the meaning of section 27A of the Securities Act and
          Section
          21E of the Exchange Act.
  Statements
          that are predictive in nature, that depend upon or refer to future events
          or
          conditions or that include words such as "expects," "anticipates," "intends,"
          "plans," "believes," "estimates" and similar expressions are forward-looking
          statements. Although we believe that these statements are based upon reasonable
          assumptions, including projections of orders, sales, operating margins,
          earnings, cash flow, research and development costs, working capital, capital
          expenditures and other projections, they are subject to several risks and
          uncertainties, and therefore, we can give no assurance that these statements
          will be achieved.
  Investors
          are cautioned that our forward-looking statements are not guarantees of
          future
          performance and the actual results or developments may differ materially
          from
          the expectations expressed in the forward-looking statements.
  As
          for
          the forward-looking statements that relate to future financial results
          and other
          projections, actual results will be different due to the inherent uncertainty
          of
          estimates, forecasts and projections may be better or worse than projected.
          Given these uncertainties, you should not place any reliance on these
          forward-looking statements. These forward-looking statements also represent
          our
          estimates and assumptions only as of the date that they were made. We expressly
          disclaim a duty to provide updates to these forward-looking statements,
          and the
          estimates and assumptions associated with them, after the date of this
          filing to
          reflect events or changes in circumstances or changes in expectations or
          the
          occurrence of anticipated events.
  We
          undertake no obligation to publicly update any forward-looking statement,
          whether as a result of new information, future events or otherwise. You
          are
          advised, however, to consult any additional disclosures we make in our
          reports
          on Form 10-KSB, Form 10-QSB, Form 8-K, or their successors. We also note
          that we
          have provided a cautionary discussion of risks and uncertainties under
          the
          caption "Risk Factors" in this Current Report. These are factors that we
          think
          could cause our actual results to differ materially from expected results.
          Other
          factors besides those listed here could also adversely affect
          us.
  21
  The
          following discussion and analysis of our financial condition and results
          of
          operations should be read in conjunction with the financial statements
          and
          accompanying notes and the other financial information appearing in Part I,
          Item 1 and elsewhere in this Quarterly Report.
 
 **Overview**
 
 Dolce
          Ventures, Inc. (“we”, “us” or the “Company”) is engaged in the development of
          natural gas distribution systems in small- and medium-sized cities in the
          People’s Republic of China (“PRC”), as well as the distribution of natural gas
          to residential, commercial and industrial customers in the PRC, through
          our
          indirectly-owned subsidiaries in the PRC, Beijing
          ZhongRan Weiye Gas Company and
          its
          subsidiaries (“Beijing Gas”). We also have a subsidiary, Pegasus Tel, Inc.,
          which owns and operates payphones. We plan to spin off our payphone operation
          by
          making a dividend of the Pegasus Tel, Inc. shares to our shareholders of
          record
          as of August 30, 2006. The discussion and analysis in this Section is focused
          on
          our natural gas business operated by Beijing
          Gas and its
          subsidiaries in the PRC as the operations of Pegasus Tel., Inc. are negligible.
 
 Beijing
          Gas is
          organized as a operating and holding company with 13 subsidiaries, known
          as
          project companies, in three provinces, and four branches offices in Beijing,
          as
          shown on the corporate structure chart provided below. The project companies
          are
          the operating subsidiaries of Beijing
          Gas .
          Each
          project company operates as a local natural gas distributor in a city or
          county,
          known as an operational location, under an exclusive franchise agreement
          between Beijing
          Gas and the
          local government or entities in charge of gas utility, pursuant to which Beijing
          Gas formed
          the project company to operate the natural gas distribution project in
          the
          operational location.
  In
          addition, Beijing
          Gas holds a
          40% equity interest in Beijing Zhong Ran Xiang Ke Oil and Gas Technology
          Co.
          Ltd. (“Beijing Zhong Ran Xiang Ke”), a PRC joint venture entity engaged in the
          business of development, licensing and sale of oil and gas technologies
          and
          equipment, and sale of self-produced products.
 
 Beijing
          Gas owns and
          operates natural gas distribution systems primarily in Hebei, Jiangsu,
          and
          Shandong provinces in the PRC.
 
 **Recent
          Developments**
 
 On
          September 7, 2006, in connection with a reverse merger transaction in which
          the
          Company (i) consummated a share exchange transaction with the shareholders
          of
          GAS Investment China Co., Ltd. (“Gas (BVI)”), whereby the Company exchanged
          14,361,647 shares of our Series A Convertible Preferred Stock, par value
          $0.001
          per share (the “Series A Stock”) for all of the issued and outstanding stock of
          Gas (BVI) held by the shareholders of Gas (BVI) (the “Share Exchange
          Transaction”), and (ii) consummated the initial closing of a private placement
          offering, whereby the Company, issued to the investors of the initial funding
          2,509,782 shares of the Series B Stock, and Series A, B, J, C and D warrants
          in
          exchange for $6,876,800 (the “Private Financing”, together with “Share Exchange
          Transaction”, and, collectively, the “Reverse Merger Transaction”).
  22
 
 As
          a
          result of the Share Exchange Transaction, Gas (BVI) became a wholly-owned
          subsidiary of the Company, and Beijing Gas became an indirectly wholly
          owned
          subsidiary of the Company.
 
 On
          October 20, 2006, we entered into and closed a stock purchase transaction
          (the
“October Financing”) pursuant to which we issued for an aggregate of $2,404,800
          in gross cash proceeds, 877,664 shares of our Series B Convertible Preferred
          Stock, par value $0.001 per share (the “Series B Stock”), at $2.74 per share and
          Series A, B, J, C and D warrants. As a result of the consummation of the
          Private
          Financing and October Financing, we raised an aggregate of $9,281,600 gross
          cash
          proceeds.
 
 **Corporate
          Structure**
  
  23
  **R** **ESULTS
            OF** **O** **PERATIONS**
 
 **Nine
          month ended Sep 30, 2006 and nine months ended Sep 30, 2005** ****
 
 For
          the
          nine months ended September 30, 2006, we believe that the Company made
          notable
          progress as shown in the table below. We have been able to increase net
          sales,
          gross profits, operating income and net income by at least 50% compared
          with the
          same period last year.
 
 Net
          Sales
          reached $4,971,156, an increase of 50% from $3,319,668 last year, driven
          by our
          successful expansion in both the residential markets and industrial markets.
          While we believe that our business is growing at a significant rate, our
          gross
          profit margin has also improved, reaching 63%, an increase over last year’s 55%,
          due primarily to our strengthened efforts to expand our connection business
          which has significantly higher margins than natural gas sales. As a result,
          gross profit increased 70% to $3,122,028, a significantly higher rate than
          the
          50% increase in net sales. Net income reached $2,188,680 for the nine months
          ended September 30, 2006 compared to $1,244,666 for the same period last
          year,
          an increase of 76%.
 
 Nine
                    months ended September 30, 20062006
                
                2005
                
                ChangeUS$
                
                US$
                
                %Net
                    sales
                
                
                4,971,156
                
                
                3,319,668
                
                
                50
                %Gross
                    profit
                
                
                3,122,028
                
                
                1,834,065
                
                
                70
                %Income
                    from operations
                
                
                2,361,558
                
                
                1,380,424
                
                
                71
                %Net
                    income
                
                
                2,188,680
                
                
                1,244,666
                
                
                76
                %Gross
                    profit margin (%)
                
                
                63
                %
                
                55
                %
                
                6
                %
 
 **Net
          Sales**
 
 Net
          sales
          for the nine months ended September 30, 2006 was $4,971,156, an increase
          of
          $1,651,488, or 50%, compared with net sales of $3,319,668 for the nine
          months
          ended September 30, 2005. Revenue from new connections grew at a faster
          pace
          than revenue from supplying gas and accounted for a larger percentage of
          our
          total revenue. We believe this change is a positive development for the
          Company,
          as connections bring a higher profit margin than supplying gas.
  24
 
 For
          the
          first nine months this year we have signed with 27,247 residential households
          for connections of natural gas in the cities we had entered by the end
          of last
          year. Among them are approximately 10,000 households from a single project,
          Da
          Tun Mei Dian project in Peixian County, JiangSu province. Those connection
          contracts have resulted in $3,104,605 in revenues.
 
 In
          January, 2006, Hebei Zhong Steel, our largest industrial customer, started
          to
          use our natural gas supply. With a designed gas supply capacity of 30,000
          cubic
          meters per day, the actual usage of natural gas by Hebei Zhong Steel is
          in
          excess of 10,000 cubic meters per day, on average. Gas usage by Hebei Zhong
          Steel has enabled us to increase gas revenues despite our strategic reduction
          of
          gas suppkies to certain lower-margin customers such as Zhong Ran Xiang
          Ke and
          Zhong You Xiang Ke.
 
 Nine
                    months ended September 30, 20062006
                
                2005
                
                ChangeUS$
                
                %
                
                US$
                
                %
                
                %Net
                    sales
                
                
                4,971,156
                
                
                100
                %
                
                3,319,668
                
                
                100
                %
                
                50
                %Gas
                
                
                1,866,551
                
                
                38
                %
                
                1,360,441
                
                
                41
                %
                
                37
                %Connection
                    Fees
                
                
                3,104,605
                
                
                62
                %
                
                1,959,227
                
                
                59
                %
                
                58
                %
 
 **Gross
          profit**
 
 Gross
          profit for the nine months ended September 30, 2006 was $3,122,028, an
          increase
          of 70% from $1,834,065 for the nine months ended September 30, 2005. 80%
          of our
          gross profits resulted from connection fees.
 
 Our
          gross
          profit margin reached 63% for the nine months ended September 30, 2006.
          A
          significant increase over the 55% gross profit margin for the nine months
          ended
          September 30, 2005. The increase reflects the improvements in our profit
          margins
          for the supply of natural gas due to our focus on natural gas supply to
          higher
          margin customers.
 
 With
          the
          beginning of gas supply to Hebei Zhong Steel and new residential users,
          we have
          substantially reduced gas supply to Zhong Ran Xiang Ke and Zhong You Xiang
          Ke,
          two affiliates of the company with low profit margins. The total gas supplied
          to
          these two customers have decreased to around 574,000 cubic meters for the
          first
          nine months this year, compared with 5,277,000 cubic meters the same period
          last
          year.
  25
 Nine
                      months ended September 302006
                  
                  2005US$
                  
                  %
                  
                  Gross
                      margin
                  
                  US$
                  
                  %
                  
                  Gross
                      marginGross
                      profit
                  
                  
                  3,122,028
                  
                  
                  100
                  %
                  
                  63
                  %
                  
                  1,834,065
                  
                  
                  100
                  %
                  
                  55
                  %Gas
                  
                  
                  487,247
                  
                  
                  16
                  %
                  
                  26
                  %
                  
                  135,160
                  
                  
                  7
                  %
                  
                  10
                  %Connection
                  
                  
                  2,634,781
                  
                  
                  84
                  %
                  
                  85
                  %
                  
                  1,698,905
                  
                  
                  93
                  %
                  
                  87
                  %
  **Income
          from operations**
 
 For
          the
          reasons set forth above, income from operations was $2,361,558 for the
          nine
          months ended September 30, 2006, a 71% increase from $1,380,424 for the
          same
          period last year.
  **Cost
          of sales**
 
 As
          shown
          in the table below, cost of sales for the nine months ended September 30,
          2006
          was $1,849,128, an increase of 24% from $1,485,603 in 2005. The cost of
          gas
          still constituted the majority of cost of sales, but the percentage fell
          to 75%
          from 82% one year ago. The connection cost increased 80% to $469,824 from
          $260,322 last year, but still account for only approximately 25% of total
          costs.
 
 The
          changes of our cost structure reflect our strong growth in the connection
          business during the first nine months of this year, which is critical to
          sustainable growth in the future. As set forth above, we have signed with
          27,247
          new residential households to connect to our natural gas network which
          resulted
          in an 80% increase in connection costs. With respect to gas usage, we have
          substantially reduced gas supply to customers that lower our overall profit
          margin, a move offset by increased gas supply to industrial and residential
          users. The net result is that the cost of gas increased by approximately
          13% for
          the nine months ended September 30, 2006 when compared to the same period
          last
          year.
 
 Nine
                    months ended September 302006
                
                2005
                
                ChangeUS$
                
                %
                
                US$
                
                %
                
                %Cost
                    of sales
                
                
                1,849,128
                
                
                100
                %
                
                1,485,603
                
                
                100
                %
                
                24
                %Gas
                
                
                1,379,304
                
                
                75
                %
                
                1,225,281
                
                
                82
                %
                
                13
                %Connection
                
                
                469,824
                
                
                25
                %
                
                260,322
                
                
                18
                %
                
                80
                %
  26
 
 **Operating
          expenses**
 
 Nine
                    months ended Sep 302006
                
                2005US$
                
                US$
                
                %Selling
                    Expenses
                
                
                66,497
                
                
                66,668
                
                
                -General
                    & Administrative Expenses
                
                
                693,973
                
                
                386,973
                
                
                79
                %Total
                    Operating Expenses
                
                
                760,470
                
                
                453,641
                
                
                68
                %
 
 Total
          operating expenses were $760,470 for the nine months ended September 30,
          2006,
          an increase of 68% from $453,641 for the same period last year. The increase
          was
          principally the result of an increase in general and administrative expenses
          relating to our equity financing and reverse merger in September, 2006,
          including auditing fees, placement agent fees and legal fees. In addition,
          the
          amortization of intangible assets and leasing expense increased to approximately
          $35,000 due to business expansion.
 
 Selling
          expenses remained flat for the nine months ended September 30, 2006, compared
          with the same period last year.
 
 **Net
          Income**
 
 Net
          income was $2,188,680 for the nine months ended September 30, 2006, an
          increase
          of 76% from $1,244,666 for the same period in 2005.
 
 For
          the
          first half of this year, we principally focused on completion of construction
          commenced in 2005, maintenance of existing gas stations and recovery of
          accounts
          receivable. As a result, we reported a decrease of net income for that
          period
          compared with one year ago.
  27
 
 The
          September 30 quarter is typically strong for the natural gas distribution
          industry as the weather is starting to become cold leading to demand for
          natural
          gas for heating and many connections are completed during this time at
          the end
          of construction projects which are finishing before the winter. In addition,
          most natural gas distribution networks are constructed during the second
          and
          third calendar quarters. The construction time of each period is ranging
          from
          four months to six months, depending on the size of the projects. Therefore,
          network construction projects are usually completed and revenue recognized
          during the third quarter.
  Nine
                    months ended Sep 302006
                
                2005
                
                ChangeUS$
                
                US$
                
                %Net
                    Income
                
                
                2,188,680
                
                
                1,244,666
                
                
                76
                %
 
 **Liquidity
          and capital resources**
 
 We
          have
          typically financed our operations and expansion from our cash flow generated
          from operations and capital contributed by our shareholders. We consummated
          the
          Reverse Merger Transaction and raised approximately $6,876,800 in gross
          proceeds
          in the Private Financing on September 7, 2006. After the deduction of financing
          fees, the net proceeds from the Private Financing was $ 5,246,891.
 
 **Cash
          and cash equivalents**
  Cash
          and
          cash equivalents was $5,328,306 for the nine months ended September 30,
          2006, an
          increase of $4,757,112 from $571,194 for the same period last year. The
          large
          increase was primarily due to the cash inflow from the Private Financing.
          In
          addition, we collected approximately $3,282,575 in accounts receivable.
  **Cash
          flows from operating activities**
  Cash
          flows from operating activities were $3,225,749 for the nine months ended
          September 30, 2006, an increase of $1,906,720, or 145%, from $1,319,029
          for same
          period last year. This significant increase was principally due to our
          collection of $3,282,575 in accounts receivable.
  28
  **Cash
          flows from investing activities**
 
 We
          had a
          net cash outflow from investing activities for the nine months ended September
          30, 2006. Net cash used in investing activities was $3,780,796, an increase
          of
          $1,948,779, or 106%, from $1,832,017 for the same period last year. The
          increase
          was principally due to increased payments for our projects under development,
          such as Da Tun Mei Dian or old projects, such as those in Mi Yun, Jin Zhou,
          Si
          Hong and Pei Xian. Each of the projects required a large amount of investment
          for building the network connections.
 
 **Cash
          flows from financing activities**
 
 We
          raised
          approximately $6,876,800 in gross proceeds in the Private Financing. After
          the
          deduction of financing fees, the net proceeds from the initial closing
          of the
          Private Financing is $5,246,891.
 
 **Accounts
          Receivable**
 Accounts
          receivable were $6,887,070 as of September 2006, a decrease of $883,098,
          or 11%,
          from December 31, 2005. The decrease is primarily due to the collection
          of
          $3,282,575 in accounts receivable, partially offset by approximately $2,390,000
          in accounts receivable from the Da Tun Mei Dian project in Pei Xian County,
          Jiangsu Province.
 
 **Construction
          In Progress**
 
 Construction
          in progress was $5,798,781 for the nine months ended September 2006, an
          increase
          of $2,727,284, or 89%, from $3,071,497 for the same period last year.
          Construction in progress principally comprises this year’s new project, Da Tun
          Mei Dian, as well the already existing projects, such as project in Beijing’s Mi
          Yun and Jiangsu’s Si Hong and Pei Xian.
  **Prepaid
          Expenses and other current assets**
 
 Prepaid
          expenses and advances to suppliers totaled $343,839 for the nine months
          ended
          September 30, 2006, a slight decrease of 11% from $384,539 for the same
          period
          last year. Other receivables increased 107% to $905,327, compared with
          $437,922
          last year.
  29
 
 **Loans**
 
 The
          company had no bank or other loans for the nine months ended September
          30, 2006.
  **Three
          months ended September 30, 2006 and three months ended September 30, 2005.**
 
 Three
                    months ended Sep 302006
                
                2005
                
                ChangeUS$
                
                US$
                
                %Net
                    Sales
                
                $
                3,471,616
                
                $
                851,442
                
                
                308
                %Gross
                    Profit
                
                $
                2,605,975
                
                $
                542,733
                
                
                380
                %Income
                    from operations
                
                $
                2,126,148
                
                $
                359,360
                
                
                492
                %Net
                    Income
                
                $
                1,930,536
                
                $
                338,699
                
                
                470
                %Gross
                    profit margin
                
                
                75
                %
                
                64
                %
                
                11
                %
 
 As
          shown
          in the table above, we achieved significant growth during the aurter ended
          September 30, 2006.
 
 Net
          sales
          increased more than 300% to $3,471,616 during the three-month period, as
          compared with $851,442 for the same period last year. Gross profit reached
          $2,605,975, an increase of 380% from the third quarter last year. Both
          income
          from operations and net income grew at a rate of nearly 500%, with net
          income
          reaching $1,930,536 and income from operations reaching $2,126,148. Gross
          profit
          margins also improved by 11% from last year’s 64%.
 
 The
          strong performance for the quarter was principally the result of the development
          of the Da Tun Mei Dian project which is located in Pei Xian County, Jiangsu
          Province. Da Tun Mei Dian is a medium-size state-owned enterprise in the
          PRC. In
          July, we signed an agreement with this company to supply 17,000 households
          within its residential area with natural gas, replacing coal. By September
          30,
          2006, we completed construction of the network 10,000
          households.
  30
 
 **Net
          Sales**
 
 Three
                    months ended Sep 302006
                
                2005
                
                ChangeUS$
                
                %
                
                US$
                
                %
                
                %Net
                    Sales
                
                $
                3,471,616
                
                
                100
                %
                $
                851,442
                
                
                100
                %
                
                308
                %Connection
                
                $
                2,745,948
                
                
                79
                %
                $
                653,076
                
                
                77
                %
                
                320
                %Gas
                
                $
                725,668
                
                
                21
                %
                $
                198,366
                
                
                23
                %
                
                266
                %
 
 As
          shown
          from the table above, net sales were $3,471,616 for the three months ended
          September 30, 2006, an increase of 308% from $851,442 for the same period
          last
          year. This significant increase was principally due to the progress made
          with
          the Da Tun Mei Dian project. For this project we have signed connection
          agreements with a total of 17,000 households and completed the construction
          of
          networks to 10,000 households, bringing in nearly $2,400,000
          revenues.
 
 **Gross
          Profit**
 Three
                      months ended Sep 302006
                  
                  2005US$
                  
                  %
                  
                  Gross
                      margin
                  
                  US$
                  
                  %
                  
                  Gross
                      MarginGross
                      profit
                  
                  $
                  2,605,975
                  
                  
                  100
                  %
                  
                  75
                  %
                  $
                  542,733
                  
                  
                  100
                  %
                  
                  64
                  %Connection
                  
                  $
                  2,340,339
                  
                  
                  90
                  %
                  
                  85
                  %
                  $
                  523,026
                  
                  
                  96
                  %
                  
                  80
                  %Gas
                  
                  $
                  265,636
                  
                  
                  10
                  %
                  
                  37
                  %
                  $
                  19,707
                  
                  
                  4
                  %
                  
                  10
                  %
  As
          shown
          from the table above, gross profit grew nearly 400% to $2,605,975 from
          $542,733.
          As we discussed previously, the Da Tun Mei Dian project resulted in our
          revenue
          growth and generated nearly $2,000,000 in gross profits.
 
 **Cost
          of sales**
 
 Cost
          of
          sales was $865,641 for the three months ended September 30, 2006, increasing
          180% from $308,709 for the same period last year. The increasing rate of
          cost of
          sales is significantly lower than that of revenues, as the revenue was
          mostly
          driven by connection fees from Da Tun Mei Dian, which has the highest profit
          margin among any of our current projects.
  31
 
 Three
                    months ended Sep 302006
                
                2005
                
                ChangeUS$
                
                %
                
                US$
                
                %
                
                %Cost
                    of sales
                
                $
                865,641
                
                
                100
                %
                $
                308,709
                
                
                100
                %
                
                180
                %Connection
                
                $
                405,609
                
                
                47
                %
                $
                130,050
                
                
                42
                %
                
                212
                %Gas
                
                $
                460,032
                
                
                53
                %
                $
                178,659
                
                
                58
                %
                
                157
                %
  **Operating
          expense**
 Three
                      months ended Sep 302006
                  
                  2005
                  
                  ChangeUS$
                  
                  US$
                  
                  %Selling
                      expense
                  
                  $
                  39,673
                  
                  $
                  24,805
                  
                  
                  60
                  %Administrative
                      & Other
                  
                  $
                  440,154
                  
                  $
                  158,568
                  
                  
                  178
                  %Total
                      operating expenses
                  
                  $
                  479,827
                  
                  $
                  183,373
                  
                  
                  162
                  %
 
 With
          the
          first closing of Private Financing in early September, financing related
          fees
          accounted for most of the increase operating expenses, such as auditing
          fees,
          placement agent fees and legal fees.
 
 **Net
          Income**
 
 The
          September 30 quarter is typically strong for the natural gas distribution
          industry as the weather is starting to become cold leading to demand for
          natural
          gas for heating and many connections are completed during this time at
          the end
          of construction projects which are finishing before the winter. In
          addition, most natural gas distribution networks are constructed during
          the
          second and third calendar quarters. The construction time of each period
          is
          ranging from four months to six months, depending on the size of the projects.
          Therefore, network construction projects are usually completed and revenue
          recognized during the third quarter.
  32
 
 In
          addition, we made significant progress in market development, revenue structure
          adjustments and project management. All the factored combined together,
          the
          company’s net income rose to $1,930,536, a 470% increase from $338,699 last
          year.
 
 **Critical
          Accounting Policies**
 
 Management's
          discussion and analysis of its financial condition and results of operations
          is
          based upon Beijing
          Gas ’
          consolidated financial statements, which have been prepared in accordance
          with
          United States generally accepted accounting principles. Beijing
          Gas ’
          financial statements reflect the selection and application of accounting
          policies which require management to make significant estimates and judgments.
          Management bases its estimates on historical experience and on various
          other
          assumptions that are believed to be reasonable under the circumstances.
          Actual
          results may differ from these estimates under different assumptions or
          conditions. Beijing
          Gas believes
          that the following reflect the more critical accounting policies that currently
          affect Beijing
          Gas ’
          financial condition and results of operations.
 
 *(A)*  *Method
          of Accounting*
 
 Beijing
          Gas maintains its general ledger and journals with the accrual method accounting
          for
          financial reporting purposes. The financial statements and note are
          representations of management. Accounting policies adopted by Beijing
          Gas conform
          to generally accepted accounting principles in the United States of America
          and
          have been consistently applied in the presentation of financial statements,
          which are compiled on the accrual basis of accounting.
 
 *(B)*  *Consolidation*
  The
            consolidated financial statements include the accounts of the Company
            and its
            subsidiaries (“the Group”). Significant intercompany transactions have been
            eliminated in consolidation. Investments in which the company has a 20
            percent
            to 50 percent voting interest and where the company exercises significant
            influence over the investee are accounted for using the equity
            method.
 
 As
            of
            September 30, 2006, the particulars of the subsidiaries are as
            follows:
  Name
                      of Company
                  
                  Place
                      of Incorporation
                  
                  Date
                      of Incorporation
                  
                  Attributable
                      Equity
                    Interest
                      %
                  
                  Registered
                    CapitalPegasus
                      Tel, Inc.
                  
                  USA
                  
                  2/19/2002
                  
                  100GAS
                      Investment China Co., Ltd.
                  
                  BVI
                  
                  6/19/2003
                  
                  100Beijing
                      Zhong Ran Wei Ye Gas Co.,Ltd
                  
                  PRC
                  
                  8/29/2001
                  
                  100
                  
                  RMB
                      77,454,532Ningjin
                      Weiye Gas Co., Ltd
                  
                  PRC
                  
                  12/3/2003
                  
                  100
                  
                  RMB
                      3,000,000Jinzhou
                      Weiye Gas Co., Ltd
                  
                  PRC
                  
                  7/19/2005
                  
                  100
                  
                  RMB
                      3,000,000Xingtang
                      Weiye Gas Co., Ltd
                  
                  PRC
                  
                  2/18/2005
                  
                  100
                  
                  RMB
                      3,000,000Linzhang
                      Weiye Gas Co., Ltd
                  
                  PRC
                  
                  7/6/2006
                  
                  100
                  
                  RMB
                      1,000,000Anping
                      Weiye Gas Co., Ltd
                  
                  PRC
                  
                  8/4/2006
                  
                  100
                  
                  RMB
                      5,000,000Wuqiao
                      Gas Co., Ltd
                  
                  PRC
                  
                  6/30/2005
                  
                  100
                  
                  RMB
                      2,000,000Yutian
                      Zhongran Weiye Gas Co.,Ltd
                  
                  PRC
                  
                  12/19/2003
                  
                  100
                  
                  RMB
                      3,000,000Langfang
                      DevelopmentRegion
                      Weiye DangerousGoods
                      Transportation Co., Ltd
                  
                  PRC
                  
                  3/22/2006
                  
                  100
                  
                  RMB
                      1,000,000Sihong
                      Weiye Gas Co., Ltd
                  
                  PRC
                  
                  12/3/2005
                  
                  100
                  
                  RMB10,000,000Peixian
                      Weiye Gas Co., Ltd
                  
                  PRC
                  
                  8/22/2006
                  
                  100
                  
                  RMB
                      5,000,000Sishui
                      Weiye Gas Co., Ltd
                  
                  PRC
                  
                  12/22/2005
                  
                  100
                  
                  RMB
                      3,000,000LongyaoZhongranWeiyeGasCo.,Ltd
                  
                  PRC
                  
                  10/13/2006
                  
                  100
                  
                  RMB
                      3,000,000Shenzhou
                      Weiye Gas Co., Ltd
                  
                  PRC
                  
                  12/23/2006
                  
                  100
                  
                  RMB
                      3,000,000
 33
  *(D)*  *Use
          of Estimates*
 
 In
          preparing of the consolidated financial statements in conformity with accounting
          principles generally accepted in the United States of America, management
          makes
          estimates and assumptions that affect the reported amounts of assets and
          liabilities and disclosures of contingent assets and liabilities at the
          dates of
          the consolidated financial statements, as well as the reported amounts
          of
          revenues and expenses during the reporting year. These accounts and estimates
          include, but are not limited to, the valuation of accounts receivable,
          inventories, deferred income taxes and the estimation on useful lives of
          plant
          and machinery. Actual results could differ from those estimates.
 
 *(E)*  *Cash
          and Cash Equivalents*
 
 The
          Company considers all cash and other highly liquid investments with initial
          maturities of three months or less to be cash equivalents.
 
 *(F)*  *Accoun* ts
          and
          Other Receivab *le*
 
 Accounts
          and other receivable are recorded at net realizable value consisting of
          the
          carrying amount less an allowance for uncollectible accounts, as needed.
          The
          Company extends unsecured credit to customers in the normal course of business
          and does not accrue interest on trade accounts receivable.
 
 *(G)*  *Advances
          to Suppliers*
 
 Advances
          to suppliers represent the cash paid in advance for purchasing raw materials.
          The advances to suppliers are interest free and unsecured.
  34
  *(H)*  *Investments
          in Equity Securities*
 
 The
          consolidated statement of income includes the Group's share of the
          post-acquisition results of its associate for the six months ended September
          30.
          In the consolidated balance sheet, investments in equity securities are
          stated
          at the Group's share of the net assets of the associates plus the premium
          paid
          less any discount on acquisition in so far as it has not already been amortized
          to the statement of income, less any identified impairment loss.
 
 *Portion
                    of**Nominal**Name
                    of*
                
                *Place*
                
                *Form
                    of*
                
                
                
                *Value
                    of**Associate*
                
                *of*
                
                *Business*
                
                *Registered*
                
                *Registered*
                
                *Principal**Company*
                
                *Registration*
                
                *Structure*
                
                *Capital*
                
                *Capital*
                
                *Activities*Beijing
                    Zhongran Xiangke Oil Gas Technology Co. Ltd
                
                PRC
                
                Sino-foreign
                    equity joint venture
                
                Registered
                    RMB
                  20,000,000
                
                40
                
                Trading
                    of natural gas and gas pipeline
                    construction
 
 Beijing
          Zhongran Xiangke Oil Gas Technology Co. Ltd is Beijing
          Gas ’
40%
          owned joint venture company and is principally engaged in sale of compressed
          natural gas to domestic households and industrial around sub-urban areas
          of
          Beijing and part of sub-urban areas in Hebei Province and Tianjin.
  *(J)*  *Plant
          and Equipment*
 
 Plant
          and
          equipment, other than construction in progress, are stated at cost less
          depreciation and amortization and accumulated impairment loss.
 
 Plant
          and
          equipment are carried at cost less accumulated depreciation. Depreciation
          is
          provided over their estimated useful lives, using the straight-line method.
          Estimated useful lives of the plant and equipment are as follows:
 
 Gas
                    Pipelines
                25
                    yearsMotor
                    Vehicles
                10
                    yearsMachinery
                    & Equipment
                20
                    yearsBuildings
                25
                    yearsLeasehold
                    Improvements
                25
                    yearsOffice
                    Equipment
                8
                    years
 
 The
          cost
          and related accumulated depreciation of assets sold or otherwise retired
          are
          eliminated from the accounts and any gain or loss is included in the statement
          of income. The cost of maintenance and repairs is charged to income as
          incurred,
          whereas significant renewals and betterments are capitalized.
 
 *(K)
          Construction in Progress*
 
 Construction
          in progress represents the cost of constructing pipelines.  The major cost
          of construction relates to material, labor and overhead.  
Construction of pipeline, through which to distribute natural gas, is one
          of the
          Group’s principal businesses.  The Group builds city main pipeline network
          and branch pipeline network to make gas connection to resident users,
          industrial, and commercial users, with the objective of generating revenue
          on
          gas connection and gas usage fees collected from these customers.
  35
 
 *(L)*  *Revenue
          Recognition*
 
 Revenue
          is recognized when services are rendered to customers when a formal arrangement
          exists, the price is fixed or determinable, the delivery is completed,
          no other
          significant obligations of the Company exist and collectibility is reasonably
          assured. Payments received before all of the relevant criteria for revenue
          recognition are satisfied are recorded as unearned revenue.
 
 Gas
          connection revenue is recognized when the outcome of a contract can be
          estimated
          reliably and the stage of completion at the balance sheet date can be measured
          reliably.
 
 Sales
          of
          natural gas are recognized when goods are delivered and title has
          passed.
 
 *(Q)*  *Income
          Taxes*
 
 Pursuant
          to the tax laws of PRC, general enterprises are subject to income tax at
          an
          effective rate of 33%. Beijing
          Gas is in
          the natural gas industry whose development is encouraged by the government.
          According to the income tax regulation, any company engaged in the natural
          gas
          industry enjoys a favorable tax rate. In addition, Beijing
          Gas has been
          approved as a hi-technology company and has been enjoying preferential
          income
          tax treatment under China’s income tax policies that provide certain
          preferential income tax treatment to entities qualified as hi-technology
          entities. Under such policies, Beijing
          Gas is
          exempt from corporate income taxes for the first two years commencing from
          its
          first profitable year and thereafter, will be entitled to a 50% tax reduction
          for the succeeding three years. The company’s first profitable tax year was
          2003. Accordingly, the company’s income would be subject to a reduced tax rate
          of 9% from 2005 to 2007. From 2008, the income tax rate will be 18%. The
          subsidiaries of Beijing
          Gas are
          subject to the effective rate of 33%.
  **Item
          3.**  **Controls
          and Procedures.**
 
 (a)
          Evaluation of disclosure controls and procedures. Our Chief Executive Officer
          and our Chief Financial Officer, after evaluating the effectiveness of
          the
          Company's "disclosure controls and procedures" (as defined in the Securities
          Exchange Act of 1934, as amended (the "Exchange Act"), Rules 13a-15e and
          15d-15e) as of the end of the period covered by this report (the "Evaluation
          Date"), have concluded that, as of the Evaluation Date, our disclosure
          controls
          and procedures were effective.
 
 (b)
          Changes in internal controls. During the fiscal quarter covered by this
          quarterly report, there was no change in our internal control over financial
          reporting that has materially affected, or is reasonably likely to materially
          affect our internal control over financial reporting.
  36
  PART
          II
 
 Item
          6.
          Exhibits
 
 (a)
          Exhibits
 
 21.1
          -
          List of Subsidiaries
 
 31.1
          -
          Certification of Chief Executive Officer pursuant to Section 302 of the
          Sarbanes-Oxley Act of 2002.
 
 31.2
          -
          Certification of Chief Financial Officer pursuant to Section 302 of the
          Sarbanes-Oxley Act of 2002.
 
 32.1
          -
          Certification of Chief Executive Officer and Chief Financial Officer pursuant
          to
          Section 906 of the Sarbanes-Oxley Act of 2002.
  37
  SIGNATURES
 
 Pursuant
          to the requirements of the Securities Act of 1934, the Registrant has duly
          caused this report to be signed on its behalf by the undersigned there
          unto duly
          authorized.
  DOLCE
                    VENTURES, INC.Date:
                  Novemebr 14, 2006
                BY:
                /s/
                  Chen
                  FangChen
                    Fang
                  Chief
                    Financial Officer
  38