**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
        D.C. 20549**


**FORM
        10-Q**




(MARK
      ONE)




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





For
                The Quarterly Period Ended June 30,
                2008





or





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





For
                The Transition Period From __________________ to __________________Commission
                File Number: 2-95836-NY





**CHINA
                  INDUSTRIAL WASTE MANAGEMENT, INC.**(Name
                of registrant as specified in its charter)





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





**C/O
                  DALIAN DONGTAI INDUSTRIAL WASTE TREATMENT CO.**
                **NO.
                  1 HUAIHE WEST ROAD, E-T-D ZONE, DALIAN,
                  CHINA**
            **116600**(Address
                of principal executive offices)
            (Zip
                Code)





**011-86-411-82595339**(Registrant's
                telephone number, including area
                code)





**N/A**(Former
                name, former address and former fiscal year, if changed since last
                report)





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





Yes
xNo
o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of "large accelerated filer," "accelerated filer" and "smaller
      reporting company" in Rule 12b-2 of the Exchange Act.





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





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





Yes
oNo
x





Indicated
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable date: 13,270,843 shares of common stock
      are
      issued and outstanding as of August 14, 2008.







**TABLE
      OF CONTENTS**





PageNo.**PART
                I. - FINANCIAL INFORMATION**Item
                1.
            
            Financial
                Statements.
            
            1Item
                2.
            
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations.
            
            11Item
                3.
            
            Quantative
                and Qualitative Disclosures About Market Risk.
            
            16Item
                4T
            
            Controls
                and Procedures.
            
            16**PART
                II - OTHER INFORMATION**Item
                1.
            
            Legal
                Proceedings.
            
            18Item
                1A.
            
            Risk
                Factors.
            
            18Item
                2.
            
            Unregistered
                Sales of Equity Securities and Use of Proceeds.
            
            18Item
                3.
            
            Defaults
                Upon Senior Securities.
            
            18Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders.
            
            18Item
                5.
            
            Other
                Information.
            
            18Item
                6.
            
            Exhibits.
            
            18





ii




**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING INFORMATION**





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





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





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





**CONVENTIONS
      AND GENERAL MATTERS**





The
      official currency of the People’s Republic of China is the Chinese “Yuan” or
“Renminbi” (“yuan,” “Renminbi” or “RMB”). For the convenience of the reader,
      amounts expressed in this report as RMB have been translated into United States
      dollars (“USD$” or “$”) at the rate of USD$1.00 = RMB7.3046 quoted by The
      People’s Bank of China (“POBC”) as of December 31, 2007; and at the rate of
      USD$1.00 = RMB6.871 quoted by OANDA as of June 30, 2008. OANDA is a Delaware
      corporation providing internet foreign exchange rate at www.oanda.com .
      OANDA
      is also a foreign exchange market maker. Its internet foreign exchange rate
      is
      widely used by public which is including but not limited to major international
      audit firms. The
      Renminbi is not freely convertible into foreign currencies and the quotation
      of
      exchange rates does not imply convertibility of Renminbi into U.S. Dollars
      or
      other currencies. All foreign exchange transactions take place either through
      PBOC or other banks or other market makers authorized to buy and sell foreign
      currencies at the exchange rates quoted by the People's Bank of China. No
      representation is made that the Renminbi or U.S. Dollar amounts referred to
      herein could have been or could be converted into U.S. Dollars or Renminbi,
      as
      the case may be, at the PBOC Rate, OANDA rate or at all.





The
      "Company," "we," "us," "our" and similar words refer to China Industrial Waste
      Management, Inc, its direct, wholly-owned subsidiary DonTech Waste Services,
      Inc. (“DonTech”) and
      DonTech’s majority owned subsidiaries, Dalian Dongtai Industrial Waste Treatment
      Co. Ltd. (“Dongtai”), Dongtai Water Recycling Co. Ltd. (“Dongtai Water”), Dalian
      Zhuorui Resource Recycling Co., Ltd. (“Zhuorui”), Dalian Lipp Environmental
      Energy Engineering & Technology Co., Ltd.(“Dalian Lipp”) and ,
      prior
      to its dissolution in July 2007, Liaoyang
      Dongtai Industrial Waste Treatment Co., Ltd. (“Liaoyang Dongtai”). The
      Company is in the process of dissolving DonTech, which serves as a holding
      company for the shares of the Company’s operating subsidiaries.





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




iii




**PART
      1 - FINANCIAL INFORMATION**





**Item
      1.** **Financial
      Statements.**





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




June
                30,
            
            December
                31,2008
            
            2007(Unaudited)
            
            (Audited)**ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            5,184,325
            
            $
            3,260,307Trade
                accounts receivable, net
            
            
            2,083,087
            
            
            594,322Other
                receivables
            
            
            117,942
            
            
            22,453Inventory
            
            
            1,768,914
            
            
            1,332,349Advances
                to suppliers
            
            
            1,397,475
            
            
            390,159Deferred
                expense
            
            
            18,918
            
            
            42,784Total
                current assets
            
            
            10,570,661
            
            
            5,642,374Investment
            
            
            2,744,794
            
            
            2,633,354Property,
                plant & equipment
            
            
            5,220,570
            
            
            4,697,305Less:
                accumulated depreciation
            
            
            (2,412,110
            )
            
            (2,055,268
            )Net
                property, plant and equipment
            
            
            2,808,460
            
            
            2,642,037Construction
                in progress
            
            
            10,567,080
            
            
            7,410,255Land
                usage right, net of accumulated amortization
            
            
            1,713,210
            
            
            1,732,074Deposits
            
            
            572,786
            
            
            80,925Related
                party receivable
            
            
            698,131
            
            
            388,796**TOTAL
                ASSETS**
            
            $
            29,675,122
            
            $
            20,529,815**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilitiesAccounts
                payable
            
            $
            1,121,256
            
            $
            279,600Short-term
                loan
            
            
            4,802,235
            
            
            1,369,000Tax
                payable
            
            
            54,508
            
            
            93,954Deferred
                sales
            
            
            728,610
            
            
            667,389Accrued
                expenses
            
            
            15,342
            
            
            7,236Accrued
                employees benefits
            
            
            16,543
            
            
            -Related
                party payable
            
            
            334,701
            
            
            536,362Other
                payable
            
            
            215,594
            
            
            343,207Total
                current liabilities
            
            
            7,288,789
            
            
            3,296,748Asset
                retirement obligation liability
            
            
            477,341
            
            
            437,619Other
                long-term liabilities
            
            
            1,023,895
            
            
            620,979**TOTAL
                LIABILITIES**
            
            
            8,790,025
            
            
            4,355,346Minority
                interest in subsidiary
            
            
            3,478,694
            
            
            2,259,595Stockholders'
                equityPreferred
                  stock: par value $.001; 5,000,000 shares authorized; none issued
                  and
                  outstanding
            
            
            -
            
            
            -Common
                  stock: par value $.001; 95,000,000 shares authorized; 13,270,843
                  shares
                  issued and outstanding
            
            
            13,271
            
            
            13,221Additional
                paid-in capital
            
            
            2,085,684
            
            
            1,968,634Other
                comprehensive income
            
            
            1,782,748
            
            
            1,153,728Retained
                earnings
            
            
            13,524,700
            
            
            10,779,291Total
                stockholders' equity
            
            
            17,406,403
            
            
            13,914,874**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            29,675,122
            
            $
            20,529,815





See
      notes
      to Consolidated Financial Statements




1





**CHINA
                INDUSTRIAL WASTE MANAGEMENT, INC.****CONSOLIDATED
                STATEMENTS OF OPERATIONS AND COMPREHENSIVE
                INCOME****(Stated
                in U.S. dollars)****(Unaudited)**




Three
                Months Ended
            
            Six
                Months EndedJune
                30,
            
            June
                30,2008
            
            2007
            
            2008
            
            2007Service
                fees
            
            $
            1,954,513
            
            $
            1,031,021
            
            $
            3,774,065
            
            $
            1,868,084Sales
                of cupric sulfate
            
            
            671,747
            
            
            561,859
            
            
            1,380,590
            
            
            950,192Sales
                of recycled commodities
            
            
            964,599
            
            
            871,383
            
            
            1,566,484
            
            
            1,328,959Operating
                revenue
            
            
            3,590,859
            
            
            2,464,263
            
            
            6,721,139
            
            
            4,147,235Cost
                of service fees
            
            
            315,881
            
            
            354,530
            
            
            686,916
            
            
            583,148Cost
                of cupric sulfate
            
            
            238,577
            
            
            168,454
            
            
            525,103
            
            
            265,751Cost
                of recycled commodities
            
            
            536,944
            
            
            330,693
            
            
            807,476
            
            
            514,546Costs
                of revenue (including depreciation)
            
            
            1,091,402
            
            
            853,677
            
            
            2,019,495
            
            
            1,363,445Gross
                profit
            
            
            2,499,457
            
            
            1,610,586
            
            
            4,701,644
            
            
            2,783,790Operating
                expensesSelling
                expenses
            
            
            187,022
            
            
            277,783
            
            
            415,103
            
            
            482,024General
                and administrative expenses
            
            
            563,930
            
            
            579,847
            
            
            917,776
            
            
            797,007Total
                operating expenses
            
            
            750,952
            
            
            857,630
            
            
            1,332,879
            
            
            1,279,031Income
                from operations
            
            
            1,748,505
            
            
            752,956
            
            
            3,368,765
            
            
            1,504,759Other
                income(expense)Investment
                income (loss)
            
            
            (1,413
            )
            
            -
            
            
            (10,452
            )
            
            -Interest
                income
            
            
            (112
            )
            
            9,085
            
            
            6,186
            
            
            11,889Other
                income
            
            
            574
            
            
            1,118
            
            
            6,454
            
            
            1,486Other
                expense
            
            
            (1,659
            )
            
            (26
            )
            
            (1,661
            )
            
            (53
            )Total
                other income (expense)
            
            
            (2,610
            )
            
            10,177
            
            
            527
            
            
            13,322Net
                income from continuing operations before minority interest and income
                tax
            
            
            1,745,895
            
            
            763,133
            
            
            3,369,292
            
            
            1,518,081Income
                tax expense
            
            
            (227,216
            )
            
            -
            
            
            (334,446
            )
            
            -Income
                from continuing operations
            
            
            1,518,679
            
            
            763,133
            
            
            3,034,846
            
            
            1,518,081Minority
                interest
            
            
            148,887
            
            
            76,141
            
            
            289,437
            
            
            151,177Net
                income
            
            $
            1,
                369,792
            
            $
            686,992
            
            $
            2,745,409
            
            $
            1,366,904Foreign
                currency translation adjustment
            
            
            155,554
            
            
            165,373
            
            
            745,508
            
            
            224,141Comprehensive
                income
            
            $
            1,525,346
            
            $
            852,365
            
            $
            3,490,917
            
            $
            1,591,045Basic
                weighted average shares outstanding
            
            
            13,234,434
            
            
            13,220,843
            
            
            13,234,434
            
            
            13,220,843Diluted
                weighted average shares outstanding
            
            
            13,234,434
            
            
            13,220,843
            
            
            13,234,434
            
            
            13,220,843Basic
                and diluted net earnings per share
            
            $
            0.10
            
            $
            0.05
            
            $
            0.21
            
            $
            0.10




See
                notes to Consolidated Financial
                Statements.





2





**CHINA
                INDUSTRIAL WASTE MANAGEMENT, INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(Stated
                in U.S. dollars)****(Unaudited)**




For
                the Six Months Ended
              June
                30,2008
            
            2007Cash
                flows from operating activities:Net
                income
            
            $
            2,745,409
            
            $
            1,366,904Adjustments
                  to reconcile net income to net cash provided by operating activities:Minority
                interest
            
            
            1,219,099
            
            
            151,177Depreciation
            
            
            356,842
            
            
            218,250Amortization
            
            
            18,864
            
            
            17,915Bad
                debt allowance
            
            
            6,701
            
            
            -Stock
                issued for services
            
            
            117,100
            
            
            8,000Accretion
                expenses
            
            
            39,722
            
            
            13,910Loss
                on equity investment
            
            
            (111,440
            )
            
            -Subsidy
                received from government
            
            
            402,916
            
            
            -Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (1,495,466
            )
            
            (36,476
            )Inventory
            
            
            (436,565
            )
            
            (272,455
            )Other
                receivables
            
            
            (95,489
            )
            
            (148,646
            )Advance
                to suppliers
            
            
            (1,007,316
            )
            
            (9,138
            )Prepaid
                expense
            
            
            -
            
            
            (22,349
            )Deposits
            
            
            (491,861
            )
            
            -Accrued
                expense and deferred sales
            
            
            109,736
            
            
            471,927Accounts
                payable
            
            
            714,043
            
            
            111,217Tax
                payable
            
            
            (39,446
            )
            
            (1,354
            )Net
                cash provided by operating activities
            
            
            2,052,849
            
            
            1,868,882Cash
                flows from investing activitiesInvestment
                in subsidiary
            
            
            -
            
            
            (1,269,825
            )Purchase
                of property and equipment
            
            
            (523,265
            )
            
            (74,472
            )Construction
                contracts
            
            
            (3,156,825
            )
            
            (1,297,834
            )Due
                from related party
            
            
            (309,335
            )
            
            (239,625
            )Due
                to related party
            
            
            (201,661
            )
            
            -Net
                cash used in investing activities
            
            
            (4,191,086
            )
            
            (2,881,756
            )Cash
                flows from financing activitiesProceeds
                from loans
            
            
            3,433,235
            
            
            -Net
                cash provided by financing activities
            
            
            3,433,235
            
            
            -Effect
                of exchange rate on cash
            
            
            629,020
            
            
            132,640Net
                increase in cash and cash equivalents
            
            
            1,924,018
            
            
            (880,234
            )Cash
                and cash equivalents, beginning of period
            
            
            3,260,307
            
            
            5,713,925Cash
                and cash equivalents, end of period
            
            $
            5,184,325
            
            $
            4,833,691Supplemental
                cash flow information:Cash
                paid during the year for:Interest
            
            $
            89,107
            
            $
            -Income
                taxes
            
            $
            -
            
            $
            -




See
                notes to Consolidated Financial
                Statements.





3





CHINA
      INDUSTRIAL WASTE MANAGEMENT, INC.


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
      30,
      2008


The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America for interim financial information and with the instructions to Form
      10-Q
      and the new scaled disclosure requirements in Article 8 of Regulation S-K.
      Accordingly, they do not include all of the information and footnotes required
      by accounting principles generally accepted in the United States of America
      for
      annual financial statements. In the opinion of management, all adjustments
      (consisting of normal recurring accruals) considered necessary for a fair
      presentation have been included. The accounts of the Company and all of its
      subsidiaries are included in the consolidated financial statements. All
      significant intercompany accounts and transactions have been eliminated in
      consolidation. The consolidated operating results for the three and six months
      ended June 30, 2008 are not necessarily indicative of the results that may
      be
      expected for the year ending December 31, 2008. For further information, refer
      to the consolidated financial statements and footnotes thereto included in
      the
      Company's Form 10-K for the year ended December 31, 2007.





**1.
      Nature of operations**





The
      accompanying unaudited consolidated financial statements include China
      Industrial Waste Management, Inc., a Nevada corporation (the “Company”)
      incorporated on November 12, 2003, its wholly owned subsidiary, DonTech Waste
      Services, a Delaware corporation (“DonTech”), and its indirect majority owned
      subsidiaries:


·
              Dongtai
                    Industrial Waste Treatment Co. Ltd. (“Dongtai”)  ·
              Dongtai Water Recycling Co. Ltd.
                (“Dongtai
                Water”)  ·
              Dalian Zhuorui Resource Recycling
                Co., Ltd.
                (“Zhuorui”)  ·
              Dalian Lipp Environmental Energy
                Engineering
                & Technology Co., Ltd. (“Dalian
                Lipp”)


The
      Company is engaged in the collection, treatment, disposal, and recycling of
      industrial wastes principally in Dalian and surrounding areas in Liaoning
      Province, the People’s Republic of China (“PRC). The Company provides waste
      disposal solutions to its more than 400 customers from facilities located in
      the
      Economic and Technology Development Zone, Dalian, China. In addition, the
      Company provides the following services to its clients:




·
            Environmental
                  protection services,  ·
            Technology
              consultation,  ·
            Pollution treatment
              services,  ·
            Waste management design processing
              services,  ·
            Waste disposal
              solutions,  ·
            Waste transportation
              services,  ·
            Onsite waste management services,
              and  ·
            Environmental pollution remediation
              services.




The
      Company is currently participating in the operation of the following waste
      disposal and environmental protection projects:





·
      Dongtai Water, a build-operate-transfer
      project established to process polluted water generated by the city of Dalian.
      Construction of the sewage plant has been completed, and the project is
      currently in the stage of commissioning.




·
      Zhuorui engages in the project of plasma
      arc melting, separation and purification of waste catalysts, treatment of
      industrial wastes and comprehensive utilization of waste catalysts or similar
      material. The project is now in the facility installation stage.




·
      Dalian Lipp is currently conducting a
      project based on the Lipp tank building technique to generate energy by organic
      waste anaerobic fermentation, and industrial effluent treatment and municipal
      sewage plant.




·
      Dongtai Organic Waste Treatment project,
      engaged in municipal sludge treatment in Dalian. The project is now in the
      installation stage.





**2.
      Basis of Presentation**




The
      accompanying consolidated financial statements include the accounts of the
      parent entity, its wholly owned subsidiary, DonTech Waste Services Inc, its
      90%
      owned subsidiary, Dalian Dongtai Industrial Waste Treatment Co., Ltd, its 80%
      owned subsidiary, Dongtai Water Recycling Co. Ltd, its 70% owned subsidiary,
      Dalian Zhuorui Resource Recycling Co., Ltd, and its 75% owned subsidiary, Dalian
      Lipp Enviromental Energy Engineering & Technology Co., Ltd.. All material
      inter-company accounts and transactions have been eliminated in the
      consolidation.




4


CHINA
        INDUSTRIAL WASTE MANAGEMENT, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2008




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





**3.
      Summary of Significant Accounting Policies**





**Use
      of estimates**




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





**Foreign
      currency translation**




As
      of
      June 30, 2008 and 2007, the accounts of the Company were maintained, and the
      consolidated financial statements were expressed in the Chinese Yuan Renminbi
      (“RMB”). Such consolidated financial statements were translated into U.S.
      dollars (“USD”) in accordance with Statement of Financial Accounting Standards
      (“SFAS”) No. 52, “Foreign Currency Translation,” with the RMB as the functional
      currency. According to the Statement, all assets and liabilities were translated
      at the exchange rate on the balance sheet date; stockholders’ equity was
      translated at the historical rates and the statement of operations items were
      translated at the weighted average exchange rate for the period. The resulting
      translation adjustments are reported under other comprehensive income in
      accordance with SFAS No. 130, “Reporting Comprehensive Income.”





**Cash
      and cash equivalents**




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





**Accounts
      and other receivables**




Accounts
      and other receivables are recorded at net realizable value consisting of the
      carrying amount less an allowance for uncollectible accounts, as needed.
      Allowance for uncollectible accounts as of June 30, 2008 and December 31, 2007
      is $6,701 and $9,776, respectively. The Company maintains reserves for potential
      credit losses on accounts receivable. Management reviews the composition of
      accounts receivable and analyzes historical bad debts, customer concentrations,
      customer credit worthiness, current economic trends and changes in customer
      payment patterns to evaluate the adequacy of these reserves. Terms of the sales
      vary from COD through a credit term of up to nine to twelve months. Reserves
      are
      recorded primarily on a specific identification basis.





**Advances
      to suppliers**




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





**Inventory**




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





**Property,
      equipment and construction in progress**




Property
      and equipment are stated at cost. Expenditures for maintenance and repairs
      are
      charged to earnings as incurred; additions, renewals and betterments are
      capitalized. When property and equipment are retired or otherwise disposed
      of,
      the related cost and accumulated depreciation are removed from the respective
      accounts, and any gain or loss is included in operations. Depreciation of
      property and equipment is provided using the straight-line method for
      substantially all assets with estimated lives as follows:





Buildings
            30
                YearsMachinery
            10
                YearsVehicles
            8
                YearsOffice
                equipment
            5
                Years




5


CHINA
        INDUSTRIAL WASTE MANAGEMENT, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2008




Construction
      in progress consists of the design expenses, architect fee and cost of the
      equipment to treat waste. Construction
      in progress includes capitalized interest of $116,029  and
      $77,353 as of June 30, 2008 and December 31, 2007 respectively.





**Landfills**




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





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





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





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





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





June
                30,
              2008
            
            December
                 31,
              2007Long-term
            
            $
            477,341
            
            
            437,619





**Long-term
      investment**





Invested
                company
            
            Equity
                acquired
            
            Balance
                as of
              June
                30,
              2008
            
            Balance
                as of
              December
                31,
              2007Dongtai
                Organic
            
            
            49
            %
            
            2,744,794
            
            
            2,633,354Total
            
            
            
            
            
            2,744,794
            
            
            2,633,354





Long-term
      investments are recorded under the equity method. Dongtai Organic is
      constructing and will operate a sludge treatment and disposal facility in
      Dalian, PRC, of which the investment is recorded under the equity
      method.





**Impairment
      of long-lived assets**




In
      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets” (SFAS 144), such as property, plant, and equipment, and
      purchased intangibles, are reviewed for impairment whenever events or changes
      in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. Intangible assets are tested for impairment annually.
      Recoverability of assets to be held and used is measured by a comparison of
      the
      carrying amount of an asset to estimated undiscounted future cash flows expected
      to be generated by the asset. If the carrying amount of an asset exceeds its
      estimated future cash flows, an impairment charge is recognized by the amount
      by
      which the carrying amount of the asset exceeds the fair value of the asset.
      There were no events or changes in circumstances that necessitated a review
      of
      impairment of long lived assets as of June 30, 2008 and 2007,
      respectively.




6


CHINA
        INDUSTRIAL WASTE MANAGEMENT, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2008




**Intangible
      assets**




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





Net
      intangible assets at June 30, 2008 and December 31, 2007 were $1,713,210 and
      $1,732,074 respectively. Such assets consist entirely of a right to use land
      of
      $1,921,474, less accumulated amortization of $208,246 and $189,400.




**Minority
      interest**




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




**Fair
      value of financial instruments**




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





**Revenue
      recognition**




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





Deferred
      sales consist of contracts for which the fees have been collected but revenue
      has not yet been recognized in accordance with the revenue recognition policy.
      As of June 30, 2008 and December 31, 2007 deferred sales amounted to $728,610
      and $667,389, respectively.





**Advertising
      costs**




The
      Company expenses the cost of advertising as incurred or, as appropriate, the
      first time the advertising takes place. Advertising costs for the three and
      six
      months ended June 30, 2008 and 2007 were immaterial.





**Stock-based
      compensation**




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




**Income
      taxes**




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




7


CHINA
        INDUSTRIAL WASTE MANAGEMENT, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2008




**Local
      PRC income tax**




The
      Company is subject to the PRC Enterprise Income Tax at a rate of 30% on its
      net
      income. According to a PRC ruling, any joint venture with foreign investment
      will get special tax exempt treatment for the first two years, reduced tax
      rate
      for three years at 9%, 10% and 11% for the third, fourth and fifth
      year..





**Statement
      of cash flows**




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




**Basic
      and diluted net earnings per share**




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





**Contingent
      liabilities**




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





**Recent
      accounting pronouncements**





*Determining
      Whether Instruments Granted in Share-Based Payment Transactions Are
      Participating Securities*





In
      June 2008, the Financial Accounting Standards Board (“FASB”) issued FSP
      Emerging Issues Task Force (“EITF”) Issue No. 03-6-1, “Determining Whether
      Instruments Granted in Share-Based Payment Transactions Are Participating
      Securities.” The FSP addresses whether instruments granted in share-based
      payment transactions are participating securities prior to vesting and,
      therefore, need to be included in the earnings allocation in computing earnings
      per share under the two-class method. The FSP affects entities that accrue
      dividends on share-based payment awards during the awards’ service period when
      the dividends do not need to be returned if the employees forfeit the award.
      This FSP is effective for fiscal years beginning after December 15, 2008.
      The Company is currently assessing the impact of FSP EITF 03-6-1 on its
      consolidated financial position and results of operations.





*Determining
      Whether an Instrument (or an Embedded Feature) Is Indexed to an entity's Own
      Stock*





In
      June
      2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument
      (or an Embedded Feature) Is Indexed to an Entity's Own Stock" (EITF 07-5).
      EITF
      07-5 provides that an entity should use a two step approach to evaluate whether
      an equity-linked financial instrument (or embedded feature) is indexed to its
      own stock, including evaluating the instrument's contingent exercise and
      settlement provisions. It also clarifies on the impact of foreign currency
      denominated strike prices and market-based employee stock option valuation
      instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning
      after December 15, 2008. The Company is currently assessing the impact of EITF
      07-5 on its consolidated financial position and results of
      operations.




8


CHINA
        INDUSTRIAL WASTE MANAGEMENT, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2008




*Accounting
      for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
      (
      Including Partial Cash Settlement)*





In
      May 2008, the FASB issued FSP Accounting Principles Board (“APB”) Opinion
      No. 14-1, “Accounting for Convertible Debt Instruments That May Be
      Settled in Cash upon Conversion (Including Partial Cash Settlement).” The FSP
      clarifies the accounting for convertible debt instruments that may be settled
      in
      cash (including partial cash settlement) upon conversion. The FSP requires
      issuers to account seperately for the liability and equity components of certain
      convertible debt instruments in a manner that reflects the issuer's
      nonconvertible debt (unsecured debt) borrowing rate when interest cost is
      recognized. The FSP requires bifurcation of a component of the debt,
      classification of that component in equity and the accretion of the resulting
      discount on the debt to be recognized as part of interest expense in our
      consolidated statement of operations. The FSP requires retrospective application
      to the terms of instruments as they existed for all periods presented. The
      FSP
      is effective for us as of January 1, 2009 and early adoption is not permitted.
      The Company is currently evaluating the potential impact of FSP APB 14-1 upon
      its consolidated financial statements.




*The
      Hierarchy of Generally Accepted Accounting Principles*




In
      May
      2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
      Accounting Principles" (FAS No.162). SFAS No. 162 identifies the sources of
      accounting principles and the framework for selecting the principles used in
      the
      preparation of financial statements. SFAS No. 162 is effective 60 days following
      the SEC's approval of the Public Company Accounting Oversight Board amendments
      to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally
      Accepted Accounting Principles". The implementation of this standard will not
      have a material impact on the Company's consolidated financial position and
      results of operations.




*Determination
      of the Useful Life of Intangible Assets*




In
      April
      2008, FASB issued FASB Staff Position on Financial Accounting Standard (“FSP
      FAS”) No. 142-3, “Determination of the Useful Life of Intangible Assets”, which
      amends the factors that should be considered in developing renewal or extension
      assumptions used to determine the useful life of intangible assets under
      SFAS No. 142 “Goodwill and Other Intangible Assets”.  The intent of this
      FSP is to improve the consistency between the useful life of a recognized
      intangible asset under SFAS No. 142 and the period of the expected cash flows
      used to measure the fair value of the asset under SFAS No. 141 (revised 2007)
      “Business Combinations” and other U.S. generally accepted accounting
      principles.    The Company is currently evaluating the potential
      impact of FSP FAS No. 142-3 on its consolidated financial
      statements.




*Disclosure
      about Derivative Instruments and Hedging Activities*




In
      March
      2008, the FASB issued SFAS No. 161, *“* Disclosure
      about Derivative Instruments and Hedging Activities *,* an
      amendment of SFAS No. 133”, (SFAS 161). This statement requires that objectives
      for using derivative instruments be disclosed in terms of underlying risk and
      accounting designation. The Company is required to adopt SFAS No. 161 on January
      1, 2009. The Company is currently evaluating the potential impact of SFAS No.
      161 on the Company’s consolidated financial statements.




*Delay
      in Effective Date*




In
      February 2008, the FASB issued FSP FAS No. 157-2, “Effective Date of FASB
      Statement No. 157”. This FSP delays the effective date of SFAS No. 157 for
      all nonfinancial assets and nonfinancial liabilities, except those that are
      recognized or disclosed at fair value on a recurring basis (at least annually)
      to fiscal years beginning after November 15, 2008, and interim periods
      within those fiscal years. The impact of adoption was not material to the
      Company’s consolidated financial condition or results of
      operations.




**3.
      Inventory**





Inventory
      at June 30, 2008 and December, 31, 2007 consists of raw materials and recycled
      commodities as Follow:





June
                30,
              2008
            
            December
                31,
              2007Raw
                materials
            
            $
            391,796
            
            $
            786,427Recycled
                commodities
            
            
            1,377,118
            
            
            545,922Total
            
            $
            1,768,914
            
            $
            1,332,349





9


CHINA
        INDUSTRIAL WASTE MANAGEMENT, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2008




**4.
      Property and equipment**




June
                30,
              2008
            
            December
                31,
              2007Land
                and building
            
            $
            2,536,429
            
            $
            2,305,868Machinery
                and equipment
            
            
            1,284,611
            
            
            1,242,966Office
                equipment
            
            
            562,575
            
            
            375,433Vehicles
            
            
            836,955
            
            
            773,0385,220,570
            
            
            4,697,305Less
                accumulated depreciation
            
            
            (2,412,110
            )
            
            (2,055,268
            )Total
                property and equipment, net
            
            $
            2,808,460
            
            $
            2,642,037Construction
                in progress
            
            
            10,567,080
            
            
            7,410,255Total
            
            $
            13,375,540
            
            $
            10,052,292




**5.
      Short-term loan**





The
      Company entered into multiple one-year loans with accredited lenders. The
      interest rate varies from 8.748 % to 9.720%. As of June 30, 2008, the remaining
      balance was $4,802,235.





**6.
      Other long-term liabilities**





Other
      long term liabilities include special fund for environmental protection in
      the
      amount of $ 873,134, and obligation to pay for land usage right in the amount
      of
      $ 150,761.





**7.
      Accumulated other comprehensive income**





The
      components of accumulated other comprehensive income was as follow:





June
                30,
              2008
            
            December
                31,
              2007Cumulative
                translation adjustment of foreign currency statements
            
            $
            745,508
            
            $
            774,007




**8.
      Equity**





During
      current period, the Company issued 50,000 shares of common stock as compensation
      for services to an investment consulting firm. The fair market value of the
      stock is approximately $117,000.




10





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




**FORWARD-LOOKING
      INFORMATION**





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




**OVERVIEW**





Historically,
      the Company engaged in two lines of business: (a) the exploration and
      development of potential mining properties, and (b) the development, marketing
      and support of computer software products and services. In September 2004,
      the
      Company sold its computer business. Since September 2005, the Company has no
      longer been in the mining business due to its loss of all its contractual rights
      in certain mining properties in Spain.





In
      November 2005, a Delaware corporation known as China Industrial Waste
      Management, Inc. (“CIWM Delaware”) acquired 90% of the issued and outstanding
      capital stock of Dalian Dongtai Industrial Waste Treatment Co., Ltd. (“Dongtai”)
      from the shareholders of Dongtai in a reverse merger transaction in which the
      Dongtai shareholders became the owner of all of the issued and outstanding
      shares of CIWM Delaware. As a result of the reverse merger, Dongtai became a
      joint venture with foreign investment under the laws of the PRC, with a total
      registered and paid-in capital of $2.3 million. The exchange of shares with
      the
      Dongtai shareholders was accounted for as a reorganization between entities
      under common control with CIWM Delaware as the receiving entity, as prescribed
      by SFAS 141. The accounts of both entities were combined at their historical
      cost basis, resulting in no gain, loss, or goodwill. The combination was
      essentially a recapitalization of Dongtai.





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




11





Dongtai
      is engaged in the collection, treatment, disposal and recycling of industrial
      wastes principally in Dalian, China and surrounding areas in Liaoning Province,
      China. Dongtai provides waste disposal solutions to its more than 400
      customers, including large multinational corporations, from facilities located
      in the Economic and Technology Development Zone, Dalian, PRC. Dongtai treats,
      disposes of and/or recycles many types of industrial wastes, and recycled waste
      products are sold to customers as raw material to produce chemical and
      metallurgy products. In addition, Dongtai treats or disposes of industrial
      waste
      through incineration, burial or water treatment; as well as provides a range
      of
      environmental protection services to its clients. Dongtai generates revenues
      from waste collection and disposal services, as well as from sales of valuable
      products and recycled commodities.





In
      addition to its waste collection and disposal operations, Dongtai participates
      in the operation of the following waste disposal and environmental protection
      projects, which are expected to contribute to revenues in future
      periods:





·
            Dongtai
                Water Recycling Co. Ltd (“Dongtai Water”), a Build-Operate-Transfer (BOT)
                project established to process polluted water generated by the City
                of
                Dalian. Dongtai owns 80% of this project. The total investment in
                this
                project is approximately RMB 44 million (approximately $6 million).
                Construction of the sewage plant has been completed, and the project
                is
                currently in the stage of
                commissioning.





·
            Dongtai
                Organic Waste Treatment Co. Ltd. (“Dongtai Organic”), which is also a BOT
                project, engaged in municipal sludge treatment in Dalian. Dongtai
                owns a
                49% interest in Dongtai Organic, which is expected to operate for
                the next
                20 years and provide a municipal sludge treatment capacity of 600
                tons per
                day. The total investment in the project, which is in the installation
                stage, is approximately RMB 130 million (approximately $17.8
                million).





·
            Dalian
                Zhuorui Resource Recycling Co., Ltd. (“Zhuorui”), which is 70% owned by
                Dongtai, engages in plasma arc melting, separation and purification
                of
                waste catalysts, treatment of industrial wastes and comprehensive
                utilization of waste catalysts or similar material. RMB 65 million
                (approximately $8.9 million). The project is now in the facility
                installation stage.





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





Our
      revenues generated in first quarter 2008 were primarily attributable to fees
      from waste treatment and disposal services. We expect to experience continued
      increases in waste treatment and disposal services in fiscal 2008 in large
      part
      due to continued growth in Dalian and Liaoyang Province and increasing
      government environmental regulation.





In
      order
      to provide sufficient infrastructure to meet the increasing demand for waste
      treatment and disposal, an expansion project is now underway to significantly
      increase Dongtai’s capacity for waste treatment and disposal. It is anticipated
      that the total investment in this expansion project will be approximately RMB
      120 million (approximately USD$16.4 million). Groundbreaking, incinerator design
      and other facilities design for the expansion project have been completed,
      and
      an environmental impact assessment report has been submitted to and approved
      by
      the Ministry of Environmental Protection of China.




12





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





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





**RESULTS
      OF OPERATIONS**





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





Three
      Months and Six Months Ended June 30, 2008 Compared to the Three Months and
      Six
      Months Ended June 30, 2007





We
      generate revenue primarily from two sources: (a) Services provided to customers
      for waste collection, transfer, recycling and disposal; and (b) Sale of recycled
      materials. We consider our collection and disposal operations, and reclamation
      of recycled materials as our core business.





*Revenues**.*





The
      Company’s operating revenues for the three and six months ended June 30,
      2008 were $3,590,859 and $6,721,139, compared with $2,464,263 and $4,147,235
      for
      the three and six months ended June 30, 2007, respectively.





Three
                Months Ended
            
            Six
                Months EndedJune
                30,
            
            June
                30,2008
            
            2007
            
            2008
            
            2007Service
                fees
            
            
            1,954,513
            
            
            1,031,021
            
            
            3,774,065
            
            
            1,868,084Sales
                of cupric sulfate
            
            
            671,747
            
            
            561,859
            
            
            1,380,590
            
            
            950,192Sales
                of other recycled commodities
            
            
            964,599
            
            
            871,383
            
            
            1,566,484
            
            
            1,328,959Total
            
            
            3,590,859
            
            
            2,464,263
            
            
            6,721,139
            
            
            4,147,235





Revenues
      from service fees increased by $1,905,981 or 102% for the six months ended
      June 30, 2008 as compared to the six months ended June 30,
      2007.  Revenues from service fees for the three months ended June 30,
      2008 increased by $923,492 or 89.6% over the comparable period in 2007. The
      increases in revenues  from service fees during the three and six months
      ended June 30, 2008 over the comparable periods in 2007 resulted from an
      increase in the number of our customers for waste processing services, and
      increased demand for our services from existing customers.




13





*Cost
      of Revenues* *.*





The
      Company’s cost of revenues for the three and six months ended June 30, 2008
      were $1,091,402 and $2,019,495, compared with $853,677 and $1,363,445 for the
      three and six months ended June 30, 2007, respectively.





Three
                Months Ended
            
            Six
                Months EndedJune
                30,
            
            June
                30,2008
            
            2007
            
            2008
            
            2007Cost
                of service fees
            
            
            315,881
            
            
            354,530
            
            
            686,916
            
            
            583,148Cost
                of cupric sulfate
            
            
            238,577
            
            
            168,454
            
            
            525,103
            
            
            265,751Cost
                of other recycled commodities
            
            
            536,944
            
            
            330,693
            
            
            807,476
            
            
            514,546Total
            
            
            1,091,402
            
            
            853,677
            
            
            2,019,495
            
            
            1,363,445





The
      cost
      of service fees for the six months ended June 30, 2008 increased by $103,768
      or
      17.8% compared to the six months ended June 30, 2007 due to increase in cost
      of
      raw materials.





The
      cost
      of reclaimed products (which includes cost of cupric sulfate and cost of other
      recycled commodities) for both the three and six months ended June 30, 2008
      increased by 55.4% and 70.8%, respectively, compared with the same periods
      in
      2007. Such increase is attributable to a sharp increase in the cost of raw
      materials.





*Selling
      Expenses* *.*





Total
      selling expenses for the three months ended June 30, 2008 decreased by 32.7%
      over such expenses for the three months ended June 30, 2007 and decreased by
      13.9% for the six months ended June 30, 2008 compared with the same period
      in
      2007. The decreases in selling expenses were principally attributable to
      improved control over cost and expenses.





*General
      and Administrative Expenses* *.*





In
      comparison with the same period in 2007, the general and administrative expenses
      for the six months ended June 30, 2008 increased by 15.2%, principally as a
      result of expanded business.





*Net
      Income.*





Net
      income for the three months ended June 30, 2008 increased by $682,800 or 99.4%
      to $1,369,792 from $696,992 for the three months ended June 30, 2007. Net income
      for the six months ended June 30 2008 increased by $1,378,505 or 100.8% to
      $2,745,409 from $1,366,904 for the six months ended June 30, 2007. This increase
      is primarily attributable to the increase in both service fees and sales of
      recycled commodities (including sales of cupric sulfate), which is generated
      from widened customer base of the Company and improved gross profit margin
      in
      the first quarters of 2008.





**LIQUIDITY
      AND CAPITAL RESOURCES**





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




14





Short-term
      loan for the six months ended June 30, 2008 was $4,802,235 compared to
      $1,369,000 at December 31, 2007 due to additional bank borrowings to accelerate
      business expansion.





As
      of
      June 30, 2008, cash and cash equivalents of the Company increased $1,924,018
      or
      59% from $3,260,307 to $5,184,325 compared with that of December 31, 2007.
      This
      is attributable to increase in net cash provided by operating activities, and
      proceeds from bank loans. As of June 30, 2008, the Company had working capital
      of $3,281,872, compared to $2,345,626 as of December 31, 2007.





*Cash
      Flow* *.*





June
                30,
              2008
            
            June
                30,
              2007Net
                cash provided by operating activities
            
            $
            2,052,849
            
            $
            1,868,882Net
                cash used in investing activities
            
            $
            (4,191,086
            )
            $
            (2,881,756
            )Net
                cash provided by financing activities
            
            $
            3,433,235
            
            
            -




Net
      cash
      provided by operating activities totaled $ 2,052,849 for the six months ended
      June 30, 2008, compared to cash provided by operations of $ 1,868,882 for the
      six months ended June 30, 2007; an increase of $183,967 or 9.8% over the same
      period in the previous year.





Net
      cash
      used in investing activities for the six months ended June 30, 2008 increased
      by
      $1,309,330 or 45.4% compared to the same period in 2007. This increase is
      attributable to purchasing of property and equipment, and construction in
      progress.





Net
      cash
      provided by financing activities for the six months ended June 30, 2008
      increased by $3,433,235 compared to the same period in 2007, due to short term
      borrowing.





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





**OFF-BALANCE
      SHEET ARRANGEMENTS**





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





·
            Any
                obligation under certain guarantee contracts;





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





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





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




15




As
      of
      June 30, 2008, the Company has no off-balance sheet arrangements that have
      or
      are reasonably likely to have a current or future effect on our financial
      condition, changes in financial condition, revenues or expenses, results of
      operations, liquidity, capital expenditures or capital resources that is
      material to investors.





**Item
              3.**
            **Quantitative
                and Qualitative Disclosures About Market
                Risk**





Not
      Applicable





**Item
              4T.**
            **Controls
                and Procedures.**





Evaluation
      of Disclosure Controls and Procedures





In
      connection with the preparation of this quarterly report on Form 10-Q, an
      evaluation was carried out by the Company’s management, with the participation
      of the Company’s Chief Executive Officer and Chief Financial Officer, of the
      effectiveness of our disclosure controls and procedures [as defined in Rules
      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange
      Act”)] as of June 30, 2008. Disclosure controls and procedures are designed to
      ensure that information required to be disclosed in reports filed or submitted
      under the Exchange Act is recorded, processed, summarized and reported within
      the time periods specified in SEC rules and forms and that such information
      is
      accumulated and communicated to management, including the Chief Executive
      Officer and Chief Financial Officer, to allow timely decisions regarding
      required disclosures.





In
      designing and evaluating its disclosure controls and procedures, management
      recognized that disclosure controls and procedures, no matter how well conceived
      and operated, can provide only reasonable, not absolute, assurance that the
      objectives of the disclosure controls and procedures are met. Additionally,
      in
      designing disclosure controls and procedures, management necessarily was
      required to apply its judgment in evaluating the cost-benefit relationship
      of
      possible disclosure controls and procedures. The design of any disclosure
      controls and procedures also is based in part upon certain assumptions about
      the
      likelihood of future events, and there can be no assurance that any design
      will
      succeed in achieving its stated goals under all potential future
      conditions.





During
      the evaluation of disclosure controls and procedures as of December 31, 2007
      conducted during the preparation of the Company’s financial statements included
      in its annual report on Form 10-K, a material weakness in internal controls
      was
      identified.  As a result of this material weakness the Company’s Chief
      Executive Officer and Chief Financial Officer concluded that, as of December
      31,
      2007, our disclosure controls and procedures were not completely effective.





A
      material weakness is “a deficiency, or a combination of deficiencies (within the
      meaning of PCAOB Auditing Standard No. 5), in internal control over financial
      reporting, such that there is a reasonable possibility that a material
      misstatement of the Company’s annual or interim financial statements will not be
      prevented or detected on a timely basis.” The Company’s management had concluded
      that, as of December 31, 2007, the following material weakness
      existed:





·
            We
                had an insufficient familiarity with generally accepted accounting
                principles in the United States (“US GAAP”) causing us to improperly (a)
                account for landfill-related asset retirement obligations and
                consolidation of the results of operations of a subsidiary company,
                as a
                result of which we restated ourfinancial
                statements as of December 31, 2006 and for the year then ended, and
                as of
                March 31, 2007 and for the quarter then endedand, (b)record
                and reconcile various financial statement entries including accounts
                receivable balances (including allowance for doubtful accounts),
                other
                current assets, construction in progress amounts, customer deposits,
                deferred revenues depreciation and amortization expenses, certain
                operating expenses and taxes payable, income and interest expense,
                a loss
                on investment, related party transactions; and subsidizing amounts;
                resulting in numerous audit
                adjustments.




16




Since
      January 2, 2008 we have engaged in substantial efforts to improve our internal
      control over financial reporting and disclosure controls and procedures related
      to many areas of our financial statements and disclosures. In order to remediate
      the material weakness identified as of December 31, 2007, during 2008 we
      have:





·
            Appointed
                a full-time Chief Financial Officer which will now allow the CEO
                to devote
                his full-time and attention to the Company’s operations and permit a CFO
                with experience in accounting matters to devote her full time and
                attention to the functions of chief financial
                officer.





·
            Added
                additional accounting and financial personnel with industry
                experience.





·
            Commenced
                the process by which we will become better informed about US
                GAAP.





·
            Continued
                the process of sourcing a consultant experienced in the application
                of US
                GAAP, including internal controls over financial reporting, to augment
                our
                accounting staff.





Notwithstanding
      the remedial actions we have undertaken since December 31, 2007, because of
      the
      scope of the material weakness at December 31, 2007, our management concluded
      that our disclosure controls and procedures at June 30, 2008 were not completely
      effective. Our efforts to remediate our disclosure controls and procedures
      and
      internal control over financial reporting are continuing and are expected to
      continue throughout fiscal 2008. Until such time, however, as our efforts
      remediate this weakness, there remains a risk that we will fail to identify
      weaknesses or adequately correct any identified weaknesses in our disclosure
      controls and procedures and internal control over financial reporting, both
      as
      they relate to the material weakness identified at December 31, 2007 and to
      other possible areas.





Notwithstanding
      the existence of this material weakness in disclosure controls and procedures
      and internal control over financial reporting at June 30, 2008, we believe
      that
      the consolidated financial statements included elsewhere in this report fairly
      present, in all material respects, our consolidated balance sheets as of June
      30, 2008 and 2007 and the related consolidated statements of
      operations, stockholders’ equity, and cash flows for the quarters ended
      June 30, 2008 and 2007 in conformity with US GAAP.





Changes
      in Internal Control over Financial Reporting





During
      the three months ended June 30, 2008 in connection with the remedial actions
      described earlier in this section we modified our internal control over
      financial reporting to incorporate additional internal controls required by
      US
      GAAP. Other than these changes, there have been no changes in our internal
      control over financial reporting during our last fiscal quarter that has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting .




17


**PART
      II - OTHER INFORMATION**





**Item
      1.** **Legal
      Proceedings.**





None.





**Item
      1A.**  **Risk
      Factors.**





Not
      Applicable.





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





None.





**Item
      3.** **Defaults
      Upon Senior Securities.**





None.





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





None.





**Item
      5.** **Other
      Information.**





None.





**Item
      6.** **Exhibits.**





**Exhibit
                No.**
            
            **Description**31.1
            
            Rule
                13a-14(a)/ 15d-14(a) Certificationof
                Chief Executive Officer31.2
            
            Rule
                13a-14(a)/ 15d-14(a) Certificationof
                Chief Financial Officer32.1
            
            Section
                1350 Certification of Chief Executive Officer32.2
            
            Section
                1350 Certification of Chief Financial
                Officer





18


**SIGNATURES**





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


**CHINA
                INDUSTRIAL WASTE MANAGEMENT, INC.**Date:
                August 14, 2008
            By:
            /s/
              Dong
              JinqingDong
                Jinqing, Chief Executive Officer  Date:
                August 14, 2008
            By:
            /s/
              Guo
              XinGuo
                Xin, Chief Financial Officer




19