**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**




**FORM
      10-Q**




(Mark
      One)





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




**For
      the quarterly period ended March 31, 2008**





or




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




**For
      the transition period from _______ to _________**




**Commission
      file number: 000-30311**




**GOLD
      HORSE INTERNATIONAL, INC.**


(Exact
      name of registrant as specified in its charter)




**Florida**
            **22-3719165**(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)





**No.
                31 Tongdao South Road, Hohhot, Inner Mongolia,
                China**(Address
                of principal executive offices)
            (Zip
                Code)




**86
      (471) 339 7999**


(Registrant's
      telephone number, including area code)





**N/A.**


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





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




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company:





Large
                accelerated filer
             ̈
            Accelerated
                filer
             ̈Non-accelerated
                filer
             ̈
            Smaller
                reporting company
            þ





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





Indicated
      the number of shares outstanding of each of the issuer's classes of common
      equity, as of the latest practicable date: 52,544,603 shares at April 30,
      2008.





GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


FORM
      10-Q


QUARTERLY
      PERIOD ENDED MARCH 31, 2008





INDEX




PagePART
                I - FINANCIAL INFORMATIONItem
                1.
            Financial
                Statements.Consolidated
                Balance Sheet - As of March 31, 2008 (Unaudited) and June 30,
                2007
            4Consolidated
                Statements of Income (Unaudited)For
                the Three and Nine Months Ended March 31, 2008 and 2007
            5Consolidated
                Statements of Cash Flows (Unaudited)For
                the Nine Months Ended March 31, 2008 and 2007
            6Notes
                to Unaudited Consolidated Financial Statements
            7Item
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            29Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk.
            39Item
                4T.
            Controls
                and Procedures
            39PART
                II - OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            39Item
                1A.
            Risk
                Factors.
            39Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            40Item
                3.
            Defaults
                Upon Senior Securities
            40Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            40Item
                5.
            Other
                Information
            40Item
                6.
            Exhibits
            40





**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING INFORMATION**





Certain
      statements in this quarterly report contain or may contain forward-looking
      statements that are subject to known and unknown risks, uncertainties and other
      factors which may cause actual results, performance or achievements to be
      materially different from any future results, performance or achievements
      expressed or implied by such forward-looking statements. These forward-looking
      statements were based on various factors and were derived utilizing numerous
      assumptions and other factors that could cause our actual results to differ
      materially from those in the forward-looking statements. These factors include,
      but are not limited to, our ability to increase our revenues, develop our
      brands, implement our strategic initiatives, economic, political and market
      conditions and fluctuations, government and industry regulation, Chinese, U.S.
      and global competition, and other factors. Most of these factors are difficult
      to predict accurately and are generally beyond our control.





You
      should consider the areas of risk described in connection with any
      forward-looking statements that may be made in our annual report as filed with
      the SEC. Readers are cautioned not to place undue reliance on these
      forward-looking statements and readers should carefully review this quarterly
      report in its entirety, Except for our ongoing obligations to disclose material
      information under the Federal securities laws, we undertake no obligation to
      release publicly any revisions to any forward-looking statements, to report
      events or to report the occurrence of unanticipated events. These
      forward-looking statements speak only as of the date of this quarterly report,
      and you should not rely on these statements without also considering the risks
      and uncertainties associated with these statements and our business.





Unless
      specifically set forth to the contrary, when used in this prospectus the
      terms:





•
            "Gold
                Horse International," the "Company, "we," "us," "ours," and similar
                terms
                refers to Gold Horse International, Inc., a Florida
                corporation,


•
            "Gold
                Horse Nevada" refers to Gold Horse International, Inc., a Nevada
                corporation and wholly-owned subsidiary of Gold Horse
                International,


•
            "Global
                Rise" refers to Global Rise International, Limited, a Cayman Islands
                corporation and wholly-owned subsidiary of Gold Horse
                Nevada,


•
            "IMTD"
                refers to Inner Mongolia (Cayman) Technology & Development Ltd., a
                Chinese company and wholly-owned subsidiary of Global
                Rise,


2





•
            "Jin
                Ma Real Estate" refers to Inner Mongolia Jin Ma Real Estate Development
                Co., Ltd., a Chinese company,


•
            "Jin
                Ma Construction” refers to Inner Mongolia Jin Ma Construction Co., Ltd., a
                Chinese company,


•
            “Jin
                Ma Hotel” refers to Inner Mongolia Jin Ma Hotel Co., Ltd., a Chinese
                company,


•
            “Jin
                Ma Companies” collectively refers to Jin Ma Real Estate, Jin Ma
                Construction and Jin Ma Hotel, and


•
            "PRC"
                or "China" refers to the People's Republic of
                China.





The
      information which appears on our web site at www.goldhorseinternational.com
      is
      not part of this report.


3


**GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**





**March 31,**
            
            **June 30****2008**
            
            **2007****(Unaudited)****ASSETS**Cash
                and cash equivalents
            
            $
            2,029,847
            
            $
            251,044Accounts
                receivable, net
            
            
            5,443,228
            
            
            5,246,986Inventories,
                net
            
            
            67,194
            
            
            20,477Advances
                to suppliers, net
            
            
            293,688
            
            
            198,113Other
                receivable, net
            
            
            264,647
            
            
            193,815Deferred
                debt costs
            
            
            153,480
            
            
            -Real
                estate held for sale
            
            
            389,795
            
            
            1,149,906Construction
                in process
            
            
            2,864,300
            
            
            -Cost
                and estimated earnings in excess of billings
            
            
            -
            
            
            15,237Deposit
            
            
            142,406
            
            
            131,151**Total
                Current Assets**
            
            
            11,648,585
            
            
            7,206,729Deposit
                on land use rights
            
            
            3,837,894
            
            
            2,223,069Due
                from related parties, net
            
            
            871,602
            
            
            1,047,832Property
                and equipment, net
            
            
            6,750,091
            
            
            4,731,168Intangible
                asset
            
            
            174,259
            
            
            160,487**Total
                Assets**
            
            $
            23,282,431
            
            $
            15,369,285**LIABILITIES
                AND STOCKHOLDERS' EQUITY****Liabilities:**Accounts
                payable
            
            $
            3,311,856
            
            $
            611,215Accrued
                expenses
            
            
            319,718
            
            
            1,091,154Taxes
                payable
            
            
            213,298
            
            
            532,257Advances
                from customers
            
            
            205,325
            
            
            609,574Loans
                payable, current portion
            
            
            142,406
            
            
            -Convertible
                debt, net
            
            
            545,750
            
            
            -Billings
                in excess of costs and estimated earnings
            
            
            5,124
            
            
            124,021**Total
                Current Liabilities**
            
            
            4,743,477
            
            
            2,968,221Loans
                payable, net of current portion
            
            
            1,545,954
            
            
            1,686,077**Total
                Liabilities**
            
            
            6,289,431
            
            
            4,654,298**Commitments****Stockholders'
                equity:**Preferred
                stock ($.0001 par value; 20,000,000 shares authorized; none issued
                and
                outstanding)
            
            
            -
            
            
            -Common
                stock ($.0001 par value; 300,000,000 shares authorized; 52,544,603
                and
                50,000,002 shares issued and outstanding at March 31, 2008 and June
                30,
                2007, respectively)
            
            
            5,254
            
            
            5,000Non-controlling interest
                in variable interest entities
            
            
            6,097,853
            
            
            5,954,807Additional
                paid-in capital
            
            
            4,568,639
            
            
            -Statutory
                reserve
            
            
            737,052
            
            
            594,006Retained
                earnings
            
            
            3,865,519
            
            
            3,616,296Other
                comprehensive gain - foreign currency
            
            
            1,718,683
            
            
            544,878**Total
                Stockholders' Equity**
            
            
            16,993,000
            
            
            10,714,987**Total
                Liabilities and Stockholders' Equity**
            
            $
            23,282,431
            
            $
            15,369,285





**See
      accompanying notes to unaudited consolidated financial
      statements**




4





**GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





**For the Three Months Ended**
            
            **For the Nine Months Ended****March 31,**
            
            **March 31,****2008**
            
            **2007**
            
            **2008**
            
            **2007**(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)**NET
                REVENUES**Construction
            
            $
            3,524,291
            
            $
            6,459,404
            
            $
            17,585,684
            
            $
            18,052,407Hotel
            
            
            766,158
            
            
            679,493
            
            
            2,339,870
            
            
            1,910,049Real
                estate
            
            
            304,755
            
            
            2,606
            
            
            1,560,283
            
            
            407,946**Total
                Revenues**
            
            
            4,595,204
            
            
            7,141,503
            
            
            21,485,837
            
            
            20,370,402**COST
                OF SALES**Construction
            
            
            3,027,432
            
            
            5,369,856
            
            
            14,895,208
            
            
            15,084,056Hotel
            
            
            456,677
            
            
            364,390
            
            
            1,318,281
            
            
            1,001,087Real
                estate
            
            
            196,377
            
            
            1,843
            
            
            938,406
            
            
            288,644**Total
                Cost of Sales**
            
            
            3,680,486
            
            
            5,736,089
            
            
            17,151,895
            
            
            16,373,787**GROSS
                PROFIT**
            
            
            914,718
            
            
            1,405,414
            
            
            4,333,942
            
            
            3,996,615**OPERATING
                EXPENSES:**Hotel
                operating expenses
            
            
            19,347
            
            
            78,077
            
            
            75,661
            
            
            222,655Bad
                debt expense
            
            
            489,184
            
            
            -
            
            
            796,875
            
            
            481,763Salaries
                and employee benefits
            
            
            231,764
            
            
            34,272
            
            
            550,262
            
            
            129,840Depreciation
                and amortization
            
            
            135,010
            
            
            83,357
            
            
            361,126
            
            
            216,063General
                and administrative
            
            
            85,344
            
            
            18,407
            
            
            369,071
            
            
            81,823**Total
                Operating Expenses**
            
            
            960,649
            
            
            214,113
            
            
            2,152,995
            
            
            1,132,144**INCOME
                (LOSS) FROM OPERATIONS**
            
            
            (45,931
            )
            
            1,191,301
            
            
            2,180,947
            
            
            2,864,471**OTHER
                INCOME (EXPENSE):**Other
                expense
            
            
            (26
            )
            
            2,426
            
            
            (1,698
            )
            
            339Registration
                rights penalty
            
            
            (55,000
            )
            
            -
            
            
            (55,000
            )
            
            -Interest
                income
            
            
            4,992
            
            
            -
            
            
            7,106
            
            
            553Interest
                expense
            
            
            (565,973
            )
            
            (67,823
            )
            
            (858,378
            )
            
            (186,600
            )**Total
                Other Expense**
            
            
            (616,007
            )
            
            (65,397
            )
            
            (907,970
            )
            
            (185,708
            )**INCOME
                (LOSS) BEFORE INCOME TAX**
            
            
            (661,938
            )
            
            1,125,904
            
            
            1,272,977
            
            
            2,678,763**INCOME
                TAX**
            
            
            149,851
            
            
            704,945
            
            
            880,708
            
            
            1,041,857**NET
                INCOME (LOSS)**
            
            
            (811,789
            )
            
            420,959
            
            
            392,269
            
            
            1,636,906**COMPREHENSIVE
                INCOME (LOSS):**Unrealized
                foreign currency translation gain
            
            
            615,780
            
            
            98,779
            
            
            1,173,805
            
            
            291,400COMPREHENSIVE
                INCOME (LOSS)
            
            $
            (196,009
            )
            $
            519,738
            
            $
            1,566,074
            
            $
            1,928,306**NET
                INCOME (LOSS) PER COMMON SHARE:**Basic
            
            $
            (0.02
            )
            $
            0.01
            
            $
            0.01
            
            $
            0.03Diluted
            
            $
            (0.02
            )
            $
            0.01
            
            $
            0.01
            
            $
            0.03**WEIGHTED
                AVERAGE COMMON SHARES OUTSTANDING:**Basic
            
            
            52,483,824
            
            
            48,500,000
            
            
            51,210,607
            
            
            48,500,000Diluted
            
            
            52,483,824
            
            
            48,500,000
            
            
            55,970,580
            
            
            48,500,000





**See
      accompanying notes to unaudited consolidated financial
      statements**


5




**GOLD
        HORSE INTERNATIONAL, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**





**For
                the Nine Months Ended****March
                31,****2008**
            
            **2007****(Unaudited)**
            
            **(Unaudited)****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                income
            
            $
            392,269
            
            $
            1,636,906Adjustments
                to reconcile net income to net cash provided
                by operating activities:Depreciation
            
            
            361,126
            
            
            216,063Bad
                debt expense
            
            
            796,875
            
            
            481,763Common
                stock issed for services
            
            
            156,680
            
            
            -Interest
                expense from amortization of debt discount
            
            
            545,750
            
            
            -Amortization
                of debt issuance costs
            
            
            51,160
            
            
            -Changes
                in assets and liabilities:Accounts
                receivable
            
            
            (647,734
            )
            
            6,247,764Inventories
            
            
            (42,682
            )
            
            236,239Other
                receivables
            
            
            163,366
            
            
            10,499Advance
                to suppliers
            
            
            (62,728
            )
            
            1,122,711Prepaid
                expenses
            
            
            -
            
            
            -Costs
                and estimated earnings in excess of billings
            
            
            15,707
            
            
            -Real
                estate held for sale
            
            
            815,288
            
            
            -Construction
                in process
            
            
            (2,719,216
            )
            
            -Other
                assets
            
            
            -
            
            
            (126,987
            )Accounts
                payable and accrued expenses
            
            
            1,698,293
            
            
            (8,668,466
            )Income
                tax payable
            
            
            (346,164
            )
            
            3,661Advances
                from customers
            
            
            (433,432
            )
            
            222,448Billings
                in excess of costs and estimated earnings
            
            
            (122,978
            )
            
            -NET
                CASH PROVIDED BY OPERATING ACTIVITIES
            
            
            621,580
            
            
            1,382,601**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Increase
                in due from related party
            
            
            83,424
            
            
            -Proceeds
                from sale of property and equipment
            
            
            7,993
            
            
            -Payment
                of deposits for land use rights
            
            
            (1,351,923
            )
            
            (660,998
            )Purchase
                of property and equipment
            
            
            (1,900,345
            )
            
            (281,677
            )NET
                CASH USED IN INVESTING ACTIVITIES
            
            
            (3,160,851
            )
            
            (942,675
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from convertible debt
            
            
            2,183,000
            
            
            -Payment
                of placement fees
            
            
            (204,640
            )
            
            -Repayment
                of loans payable
            
            
            (135,192
            )
            
            -Repayments
                on related party advances
            
            
            -
            
            
            (221,753
            )Capital
                contributions
            
            
            140,507
            
            
            -Proceeds
                from sale of common stock
            
            
            2,219,252
            
            
            -NET
                CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
            
            
            4,202,927
            
            
            (221,753
            )EFFECT
                OF EXCHANGE RATE ON CASH
            
            
            115,147
            
            
            9,980NET
                INCREASE IN CASH & CASH EQUIVALENTS
            
            
            1,778,803
            
            
            228,153**CASH
                & CASH EQUIVALENTS - beginning of year**
            
            
            251,044
            
            
            180,924**CASH
                & CASH EQUIVALENTS - end of the period**
            
            $
            2,029,847
            
            $
            409,077**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                paid for:Interest
            
            $
            855,027
            
            $
            186,600Incometaxes
            
            $
            1,188,993
            
            $
            1,041,857





**See
      accompanying notes to unaudited consolidated financial
      statements.**


6


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





NOTE
      1 – ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Organization





The
      Company was incorporated on March 21, 2000 under the laws of the State of New
      Jersey under its former name “Segway III”. Prior to June 29, 2007, the Company
      was a development stage company attempting to implement our business plan to
      become a fully integrated online provider that links the supply and demand
      sides
      of the ground trucking industry. In November 2007, the Company filed a
      Certificate of Domestication in the State of Florida whereby the Company
      domesticated as a Florida corporation under the name Gold Horse International,
      Inc.





On
      June
      29, 2007, the Company executed a Share Exchange Agreement (“Share Exchange
      Agreement”) with Gold Horse International, Inc. (“Gold Horse Nevada”), a Nevada
      corporation, whereby the Company acquired all of the outstanding common stock
      of
      Gold Horse Nevada in exchange for newly-issued stock of the Company to Gold
      Horse Nevada shareholders.  Gold Horse Nevada was incorporated on August
      14, 2006 in the State of Nevada.





Under
      the
      Share Exchange Agreement, on June 29, 2007, the Company issued 48,500,000
      shares of its common stock to the Gold Horse Nevada Stockholders and their
      assignees in exchange for 100% of the common stock of Gold Horse International.
      Additionally, the Company’s prior President, CEO and sole
      director, cancelled 9,655,050 of the Company’s common stock he owned
      immediately prior to the closing. After giving effect to the cancellation of
      shares, the Company had a total of 1,500,002 shares of common stock outstanding
      immediately prior to Closing. After the Closing, the Company had a total of
      50,000,002 shares of common stock outstanding, with the Gold Horse Nevada
      Stockholders and their assignees owning 97% of the total issued and outstanding
      shares of the Company's common stock.





Gold
      Horse Nevada became a wholly-owned subsidiary of the Company and Gold Horse
      Nevada’s former shareholders own the majority of the Company’s voting stock.





Gold
      Horse Nevada owns 100% of Global Rise International, Limited (“Global Rise”), a
      Cayman Islands corporation incorporated on May 9, 2007. Through Global Rise,
      Gold Horse Nevada  operates, controls and beneficially owns the
      construction, hotel and real estate development businesses in China under a
      series of contractual arrangements (the “Contractual Arrangements”) with Inner
      Mongolia Jin Ma Real Estate Development Co., Ltd. (“Jin Ma Real Estate”), Inner
      Mongolia Jin Ma Construction Co., Ltd. (“Jin Ma Construction”) and Inner
      Mongolia Jin Ma Hotel Co., Ltd. (“Jin Ma Hotel”), (collectively referred to as
      the “Jin Ma Companies”). Other than the Contractual Arrangements with the Jin Ma
      Companies, the Company, Gold Horse Nevada or Global Rise has no business or
      operations. The Contractual Arrangements are discussed below.





On
      October 10, 2007, the Company established Inner Mongolia (Cayman) Technology
      & Development Ltd. ("IMTD"), a wholly-foreign owned enterprise incorporated
      in the PRC and wholly-owned subsidiary of Global Rise,


7


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





The
      relationship among the above companies as follows:





Gold Horse





As
      a
      result of these Contractual Agreements, the acquisition of Gold Horse Nevada
      and
      the Jin Ma Companies by the Company was accounted for as a reverse merger
      because on a post-merger basis, the former shareholders of Gold Horse Nevada
      held a majority of the outstanding common stock of the Company on a voting
      and
      fully-diluted basis. As a result, Gold Horse Nevada is deemed to be the acquirer
      for accounting purposes. Accordingly, the consolidated financial statement
      data
      presented are those of the Jin Ma Companies for all periods prior to the
      Company's acquisition of Gold Horse Nevada on June 29, 2007, and the financial
      statements of the consolidated companies from the acquisition date
      forward.





PRC
      law
      currently places certain limitations on foreign ownership of Chinese companies.
      To comply with these foreign ownership restrictions, the Company operates its
      business in China through the Jin Ma Companies, each of which is a limited
      liability company headquartered in Hohhot, the capital city of the Autonomous
      Region of Inner Mongolia in China, and organized under PRC laws. Each of the
      Jin
      Ma Companies has the relevant licenses and approvals necessary to operate the
      Company’s businesses in China. The Company has Contractual Arrangements with
      each of the Jin Ma Companies and their shareholders (collectively the Jin Ma
      Companies Shareholders”) pursuant to which the Company provides business
      consulting and other general business operation services to the Jin Ma
      Companies. Through these Contractual Arrangements, the Company also has the
      ability to control the daily operations and financial affairs of the Jin Ma
      Companies, appoint each of their senior executives and approve all matters
      requiring shareholder approval. As a result of these Contractual Arrangements,
      which enable the Company to control the Jin Ma Companies, the Company is
      considered the primary beneficiary of the Jin Ma Companies. Accordingly, the
      Company consolidates the Jin Ma Companies' results, assets and liabilities
      in
      its financial statements





The
      Contractual Arrangements are comprised of a series of agreements, including
      a
      Consulting Services Agreement and an Operating Agreement, through which the
      Company has the right to advise, consult, manage and operate each of the Jin
      Ma
      Companies, and collect and own all of their respective net profits.
      Additionally, under a Shareholders' Voting Rights Proxy Agreement, the Jin
      Ma
      Companies Shareholders have vested their voting control over the Jin Ma
      Companies to the Company. In order to further reinforce the Company’s rights to
      control and operate the Jin Ma Companies, these companies and their shareholders
      have granted the Company, under an Option Agreement, the exclusive right and
      option to acquire all of their equity interests in the Jin Ma Companies or,
      alternatively, all of the assets of the Jin Ma Companies. Further the Jin Ma
      Companies Shareholders have pledged all of their rights, titles and interests
      in
      the Jin Ma Companies to the Company under an Equity Pledge
      Agreement.


8


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





Gold
      Horse Nevada entered into the Contractual Arrangements with each of the Jin
      Ma
      Companies and their respective shareholders on August 31, 2006. On June 29,
      2007, concurrently with the closing of the Share Exchange Transaction, the
      Contractual Arrangements were amended and restated by and among Gold Horse
      Nevada, Global Rise, the Company’s wholly-owned subsidiary, and the Company on
      the one hand, and each of the Jin Ma Companies and their respective shareholders
      on the other hand, under which the Company was made a party to the
      Contractual Arrangements.





The
      Company’s relationships with the Jin Ma Companies and their respective
      shareholders are governed by the Contractual Arrangements. Under PRC laws,
      each
      of Gold Horse International, Gold Horse Nevada, Global Rise, Jin Ma Real Estate,
      Jin Ma Construction and Jin Ma Hotel is an independent legal person and none
      of
      them is exposed to liabilities incurred by the other party. Other than pursuant
      to the Contractual Arrangements, the Jin Ma Companies do not transfer any other
      funds generated from their respective operations to the Company. The Company
      has
      entered into the following Contractual Arrangements with each of the Jin Ma
      Companies:




***Consulting
      Services Agreements.*** Pursuant
      to the exclusive Consulting Services Agreements with each of the Jin Ma
      Companies, the Company exclusively provide to the Jin Ma Companies general
      business operations services and consulting services as well as general business
      operation advice and strategic planning (the “Services”). Each of the Jin Ma
      Companies shall pay a quarterly consulting service fees in Renminbi (“RMB”) to
      us that is equal to all of its net profit for such quarter.





***Operating
      Agreements.*** Pursuant
      to the Operating Agreements with the Jin Ma Companies and their respective
      shareholders, the Company provides guidance and instructions on the Jin Ma
      Companies' daily operations, financial management and employment issues. The
      Jin
      Ma Companies Shareholders must designate the candidates recommended by the
      Company as their representatives on each of the Jin Ma Companies' board of
      directors. The Company has the right to appoint senior executives of the Jin
      Ma
      Companies. In addition, the Company agreed to guarantee the Jin Ma Companies'
      performance under any agreements or arrangements relating to the Jin Ma
      Companies' business arrangements with any third party. Each of the Jin Ma
      Companies, in return, agrees to pledge its accounts receivable and all of its
      assets to the Company. Moreover, each of the Jin Ma Companies agrees that
      without the Company’s prior consent, it will not engage in any transactions that
      could materially affect its assets, liabilities, rights or operations,
      including, without limitation, incurrence or assumption of any indebtedness,
      sale or purchase of any assets or rights, incurrence of any encumbrance on
      any
      of its assets or intellectual property rights in favor of a third party or
      transfer of any agreements relating to its business operation to any third
      party. The term of this agreement is ten (10) years and may be extended only
      upon our written confirmation prior to the expiration of this agreement, with
      the extended term to be mutually agreed upon by the parties.




***Equity
      Pledge Agreements.*** ** Under
      the
      Equity Pledge Agreements, the shareholders of the Jin Ma Companies pledged
      all
      of their equity interests in the Jin Ma Companies to the Company to guarantee
      the Jin Ma Companies' performance of their obligations under the exclusive
      consulting services agreements. If the Jin Ma Companies or its shareholders
      breach their respective contractual obligations, the Company, as pledgee, will
      be entitled to certain rights, including the right to sell the pledged equity
      interests. The shareholders of the Jin Ma Companies also agreed that upon
      occurrence of any event of default, we shall be granted an exclusive,
      irrevocable power of attorney to take actions in the place and stead of the
      shareholders of the Jin Ma Companies to carry out the security
      provisions of the equity pledge agreement and take any action and execute any
      instrument that we may deem necessary or advisable to accomplish the purposes
      of
      the equity pledge agreement. The shareholders of the Jin Ma Companies agreed
      not
      to dispose of the pledged equity interests or take any actions that would
      prejudice our interest. The equity pledge agreement will expire two (2) years
      after the Jin Ma Companies' obligations under the exclusive consulting services
      agreements have been fulfilled.


9


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





***Option
      Agreements.*** ** Under
      the
      Option Agreements, the shareholders of the Jin Ma Companies irrevocably granted
      us or our designee an exclusive option to purchase, to the extent permitted
      under PRC law, all or part of the equity interests in the Jin Ma Companies
      for
      the cost of the initial contributions to the registered capital or the minimum
      amount of consideration permitted by applicable PRC law. We, or our designee,
      have sole discretion to decide when to exercise the option, whether in part
      or
      in full. The term of this agreement is ten (10) years and may be extended prior
      to its expiration by written agreement of the parties.




***Proxy
      Agreements.*** Pursuant
      to the Proxy Agreements, the shareholders of the Jin Ma Companies agreed to
      irrevocably grant a person to be designated by us with the right to exercise
      their voting rights and their other rights, in accordance with applicable laws
      and their respective Article of Association, including but not limited to the
      rights to sell or transfer all or any of their equity interests of the Jin
      Ma
      Companies, and appoint and vote for the directors and chairman as the authorized
      representative of the shareholders of the Jin Ma Companies.





*Inner
      Mongolia Jin Ma Construction Company Ltd.*





Jin
      Ma
      Construction is an engineering and construction company that offers general
      contracting, construction management and building design services primarily
      in
      Hohhot City, in the Autonomous Region of Inner Mongolia in China. In
      operation since 1980, Jin Ma Construction was formally registered as a limited
      liability company in Hohhot City in March 2002.





*Inner
      Mongolia Jin Ma Hotel Co. Ltd.*





Jin
      Ma
      Hotel was founded in 1999 and formally registered in April 2004 as a limited
      liability company in Hohhot City.  Jin Ma Hotel presently owns,
      operates and manages the Inner Mongolia Jin Ma Hotel (the “Hotel”), a 22-room
      full service hotel situated in Hohhot City approximately 15 kilometers from
      the
      Hohhot Baita Airport.





*Inner
      Mongolia Jin Ma Real Estate Development Co. Ltd.*





Jin
      Ma
      Real Estate, established in 1999, was formally registered as a limited liability
      company in Hohhot City in February 2004.





Basis
      of presentation





The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of America.
      The Company’s functional currency is the Chinese Renminbi; however the
      accompanying consolidated financial statements have been translated and
      presented in United States Dollars ($). In the opinion of management, the
      accompanying unaudited financial statements of the Company include all
      adjustments (consisting only of normal recurring adjustments) considered
      necessary to present fairly its financial position as of March 31, 2008, and
      the
      results of operations and cash flows for the three and nine months ended March
      31, 2008 and 2007. The operating results for the nine month period ended March
      31, 2008 are not necessarily indicative of the results that may be expected
      for
      the year ending June 30, 2008. The audited financial statements for the year
      ended June 30, 2007 filed with the Securities and Exchange Commission are hereby
      referenced. The information included in this Form 10-Q should be read in
      conjunction with Management's Discussion and Analysis and financial statements
      and notes thereto included in the Company's 2007 Form 10-KSB.


10


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





Principles
      of consolidation







The
      consolidated financial statements are prepared in accordance with generally
      accepted accounting principles in the United States of America and present
      the
      financial statements of the Company and its wholly owned and majority-owned
      subsidiaries including variable interest entities ("VIEs") for which the Company
      is the primary beneficiary.





The
      accompanying consolidated financial statements include the accounts of Gold
      Horse International, Inc. and its wholly owned subsidiaries, Gold Horse Nevada,
      Global Rise and Inner Mongolia (Cayman) Technology and Development, Ltd., and
      its
      variable interest entities Jin Ma
      Construction, Jin Ma Hotel and Jin Ma Real Estate. All significant inter-company
      accounts and transactions have been eliminated in consolidation.





The
      Company has adopted FASB Interpretation No. 46R "Consolidation of Variable
      Interest Entities" ("FIN 46R"), an Interpretation of Accounting Research
      Bulletin No. 51. FIN 46R requires a Variable Interest Entity (VIE) to be
      consolidated by a company if that company is subject to a majority of the risk
      of loss for the VIE or is entitled to receive a majority of the VIE's residual
      returns. VIEs are those entities in which the Company, through contractual
      arrangements, bears the risks of, and enjoys the rewards normally associated
      with ownership of the entities, and therefore the Company is the primary
      beneficiary of these entities.





Use
      of
      estimates





The
      preparation of financial statements in conformity with US GAAP requires
      management to make estimates and assumptions that affect certain reported
      amounts and disclosures. Accordingly, actual results could differ from those
      estimates. Significant estimates for the nine months ended March 31, 2008 and
      2007 include the allowance for doubtful accounts, the useful life of property
      and equipment, costs and estimated earnings in excess of billings, and billings
      in excess of costs and estimated earnings, and the valuation of warrants and
      beneficial conversions.





Accounts
      and other receivables





The
      Company has a policy of reserving for uncollectible accounts based on its best
      estimate of the amount of probable credit losses in its existing accounts
      receivable. The Company periodically reviews its accounts receivable and other
      receivables to determine whether an allowance is necessary based on an analysis
      of past due accounts and other factors that may indicate that the realization
      of
      an account may be in doubt. Account balances deemed to be uncollectible are
      charged to the allowance after all means of collection have been exhausted
      and
      the potential for recovery is considered remote. At March 31, 2008 and June
      30,
      2007, the Company has established, based on a review of its outstanding accounts
      receivable balances, an allowance for doubtful accounts in the amount of
      $1,580,211 and $740,338, respectively, on its total accounts receivable.
      Additionally, at March 31, 2008 and June 30, 2007, the Company has established,
      based on a review of its outstanding other receivable balances, an allowance
      for
      doubtful accounts in the amount of $776,795 and $923,803, respectively.





Inventories





Inventories,
      consisting of construction materials and consumable goods related to the
      Company’s hotel operations are stated at the lower of cost or market utilizing
      the first-in, first-out method.





Advances
      to suppliers





The
      Company advances to certain vendors for purchase of construction materials
      and
      services. The advances to suppliers are interest free and unsecured. The
      advances to suppliers amounted to $293,688 and $198,113, respectively, as at
      March 31, 2008 and June 30, 2007.


11


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





Property
      and equipment





Property
      and equipment are carried at cost. The cost of repairs and maintenance is
      expensed as incurred; major replacements and improvements are capitalized.
      When
      assets are retired or disposed of, the cost and accumulated depreciation are
      removed from the accounts, and any resulting gains or losses are included in
      income in the year of disposition. Depreciation is computed using straight
      line
      method over the estimated useful lives of the assets, ranging from five to
      forty
      years.





Real
      estate held for sale





The
      Company capitalizes as real estate held for sale the direct construction and
      development costs, property taxes, interest incurred on costs related to land
      under development and other related costs (i.e. engineering, surveying,
      landscaping, etc.) until the property reaches its intended use. At March 31,
      2008 and June 30, 2007, real estate held for sale amounted to $389,795 and
      $1,149,906, respectively.





Construction
      in process





Properties
      currently under development are accounted for as construction-in-process.
      Construction-in-process is recorded at acquisition cost, including land rights
      cost, development expenditure, professional fees and the interest expenses
      capitalized during the course of construction for the purpose of financing
      the
      project. Upon completion and readiness for use of the project, the cost of
      construction-in-progress is to be transferred to real estate held for sale.
      Construction in progress is valued at the lower of cost or market. Management
      evaluates the market value of its properties on a periodic basis for impairment.
      As of March 31, 2008, construction in process was $2,864,300.





Costs
      in excess of billings





Costs
      in
      excess of billings are stated at cost, unless events or circumstances indicate
      that cost cannot be recovered, in which case the carrying value is reduced
      to
      estimated fair value. Estimated fair value: (i) is based on the Company’s
      plans for the development of each property; and (ii) considers the cost to
      complete and the estimated fair value of the completed projects.




Direct
      construction, development costs, property taxes and other related costs to
      the
      construction projects are capitalized during periods those activities which
      are
      necessary to get the projects ready for its intended use. The capitalization
      ends when the construction is substantially completed and the projects are
      ready
      for its intended use.





Advances
      from customers





Advances
      from customers at March 31, 2008 and June 30, 2007 of $205,325 and
      $609,574, respectively, consist of prepayments from third party customers to
      the
      Company for construction and real estate transactions to ensure sufficient
      funds are available to complete the real estate and construction projects.
      The
      Company will recognize the deposits as revenue upon transfer of title to the
      buyer, in compliance with its revenue recognition policy.





I mpairment
      of long-lived assets





In
      accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
      "Accounting for the Impairment or Disposal of Long-Lived Assets," The Company
      periodically reviews its long-lived assets for impairment whenever events or
      changes in circumstances indicate that the carrying amount of the assets may
      not
      be fully recoverable. The Company recognizes an impairment loss when the sum
      of
      expected undiscounted future cash flows is less than the carrying amount of
      the
      asset. The amount of impairment is measured as the difference between the
      asset’s estimated fair value and its book value. The Company did not consider it
      necessary to record any impairment charges during the nine months ended March
      31, 2008 and during the year ended June 30, 2007.


12


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





Income
      taxes





The
      Company is governed by the Income Tax Law of the People’s Republic of China and
      the United States. 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. At March 31, 2008
      and
      June 30, 2007, there were no significant book and tax basis
      differences.





Pursuant
      to the PRC Income Tax Laws, prior to January 1, 2008, the Company is subject
      to
      Enterprise Income Taxes (“EIT”) at a statutory rate of 33%, which comprises 30%
      national income tax and 3% local income tax. Beginning January 1, 2008, the
      new
      Enterprise Income Tax ("EIT") law replaced the existing laws for Domestic
      Enterprises ("DES") and Foreign Invested Enterprises ("FIEs").




The
      key
      changes are:




a.
            The
                new standard EIT rate of 25% replaced the 33% rate currently applicable
                to
                both DES and FIEs, except for High Tech companies who pays a reduced
                rate
                of 15%; andb.
            Companies
                established before March 16, 2007 will continue to enjoy tax holiday
                treatment approved by local government for a grace period of the
                next 5
                years or until the tax holiday term is completed, whichever is sooner.





Earnings
      and diluted earnings per common share





Earnings
      per share is calculated in accordance with the Statement of financial accounting
      standards No. 128 (SFAS No. 128), “Earnings per share”. Net loss per share for
      all periods presented has been restated to reflect the adoption of SFAS No.
      128.
      Basic earnings per share is computed by dividing net income by the weighted
      average number of shares of common stock outstanding during the period. Diluted
      income per share is computed by dividing net income by the weighted average
      number of shares of common stock, common stock equivalents and potentially
      dilutive securities outstanding during each period. Potentially dilutive common
      shares consist of the common shares issuable upon the conversion of convertible
      debt (using the if-converted method) and warrants. Dilutive securities were
      not
      include for the three months ended March 31, 2008 since they were anti-dilutive.
      The following table presents a reconciliation of basic and diluted earnings
      per
      share:





Three Months Ended March 31,
            
            Nine Months Ended March 31,2008
            
            2007
            
            2008
            
            2007Net
                income (loss) used for basic and diluted earnings (loss) per
                share
            
            $
            (811,789
            )
            $
            420,959
            
            $
            392,269
            
            $
            1,636,906Weighted
                average shares outstanding – basic
            
            
            52,483,824
            
            
            48,500,000
            
            
            51,210,607
            
            
            48,500,000Effect
                of dilutive securities:Unexercised
                warrants
            
            
            —
            
            
            —
            
            
            1,921,612
            
            
            —Convertible
                debentures
            
            
            —
            
            
            —
            
            
            2,838,361
            
            
            —Weighted
                average shares outstanding– diluted
            
            
            52,483,824
            
            
            48,500,000
            
            
            55,970,580
            
            
            48,500,000Earnings
                (loss) per share – basic
            
            $
            (0.02
            )
            $
            0.01
            
            $
            0.01
            
            $
            0.03Earnings
                (loss) per share – diluted
            
            $
            (0.02
            )
            $
            0.01
            
            $
            0.01
            
            $
            0.03





13


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





Revenue
      recognition





The
      Company follows the guidance of the Securities and Exchange Commission’s Staff
      Accounting Bulletin 104 for revenue recognition.  In general, the Company
      records revenue when persuasive evidence of an arrangement exists, services
      have
      been rendered or product delivery has occurred, the sales price to the customer
      is fixed or determinable, and collectability is reasonably assured.  The
      following policies reflect specific criteria for the various revenues streams
      of
      the Company:





Real
      estate sales which primarily involve the sale of multi-family homes and
      community environments are reported in accordance with the provisions of
      Statement of Financial Accounting Standard No. 66, "Accounting for Sales of
      Real
      Estate". Profit from the sales of development properties, less 5% business
      tax,
      is recognized by the full accrual method when the sale is consummated. A sale
      is
      not considered consummated until (1) the parties are bound by the terms of
      a
      contract, (2) all consideration has been exchanged, (3) any permanent financing
      of which the seller is responsible has been arranged, (4) all conditions
      precedent to closing have been performed, (5) the seller does not have
      substantial continuing involvement with the property, and (6) the usual risks
      and rewards of ownership have been transferred to the buyer. Sales transactions
      not meeting all the conditions of the full accrual method are accounted for
      using the deposit method of accounting. Under the deposit method, all costs
      are
      capitalized as incurred, and payments received from the buyer are recorded
      as a
      deposit liability (reflected as advances from customers in the Company’s
      consolidated balance sheets).





Revenue
      from the performance of general
      contracting, construction management and design-building services
      is recognized upon completion of the service.





Revenue
      primarily derived from hotel operations, including the rental of rooms and
      food
      and beverage sales, is recognized when rooms are occupied and services have
      been
      rendered.





In
      accounting for long-term engineering and construction-type contracts, the
      Company follows the provisions of the AICPA’s Statement of Position
      81-1 *—Accounting
      for Performance of Construction-Type and Certain Production-Type
      Contracts* .
      The
      Company recognizes revenues using the percentage of completion method of
      accounting by relating contract costs incurred to date to the total estimated
      costs at completion. Contract price and cost estimates are reviewed periodically
      as work progresses and adjustments proportionate to the percentage of completion
      are reflected in contract revenues and gross profit in the reporting period
      when
      such estimates are revised. This method of revenue recognition requires the
      Company to prepare estimates of costs to complete contracts in progress. In
      making such estimates, judgments are required to evaluate contingencies such
      as
      potential variances in schedule, the cost of materials and labor, and
      productivity; and the impact of change orders, liability claims, contract
      disputes, and achievement of contractual performance standards which may result
      in revisions to costs and income and are recognized in the period in which
      the
      revisions are determined. Provisions for estimated losses on uncompleted
      contracts are made in the period in which such losses are determined.





The
      asset, "costs and estimated earnings
      in excess of billings," represents revenues recognized in excess of amounts
      billed.  The liability, "billings in excess of costs and estimated earnings,"
      represents billings in excess of revenues recognized.


14


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





Concentrations
      of credit risk




Financial
      instruments which potentially subject the Company to concentrations of credit
      risk consist principally of cash and trade accounts receivable. The Company
      places its cash with high credit quality financial institutions in China. Total
      cash in state-owned banks at March 31, 2008 amounted to $2,011,656, of which
      no
      deposits are covered by insurance. The Company has not experienced any losses
      in
      such accounts and believes it is not exposed to any risks on its cash in bank
      accounts. A portion of the Company's sales are credit sales which are primarily
      to customers whose ability to pay is dependent upon the industry economics
      prevailing in these areas; however, concentrations of credit risk with respect
      to trade accounts receivables is limited due to generally short payment terms.
      The Company also performs ongoing credit evaluations of its customers to help
      further reduce credit risk.





Stock-based
      compensation





The
      Company adopted SFAS 123(R) using the modified prospective transition method.
      In
      accordance with the modified prospective transition method, the Company’s
      financial statements for prior periods have not been restated to reflect, and
      do
      not include, the impact of SFAS 123(R). There were no options outstanding as
      of
      March 31, 2008 and 2007.





Foreign
      currency translation and comprehensive income





The
      reporting currency of the Company is the U.S. dollar. The functional currency
      of
      the Company is the local currency, the Chinese Renminbi (“RMB”). The financial
      statements of the Company are translated into United States dollars in
      accordance with Statement of Financial Accounts Standards (“SFAS”) No. 52,
“Foreign Currency Translation”. Results of operations and cash flows are
      translated at average exchange rates during the period, assets and liabilities
      are translated at the unified exchange rate at the end of the period, and equity
      is translated at historical exchange rates. Translation adjustments resulting
      from the process of translating the local currency financial statements into
      U.S. dollars are included in determining comprehensive income. The cumulative
      translation adjustment and effect of exchange rate changes on cash for the
      nine
      months ended March 31, 2008 and 2007 was $68,712 and $9,980, respectively.
      Transaction gains and losses that arise from exchange rate fluctuations on
      transactions denominated in a currency other than the functional currency are
      included in the results of operations as incurred.





Asset
      and
      liability accounts at March 31, 2008 and June 30, 2007 were translated at 7.0222
      RMB to $1.00 USD and at 7.6248 RMB to $1.00 USD, respectively. Equity accounts
      were stated at their historical rate. The average translation rates applied
      to
      income statements for the nine months ended March 31, 2008 and 2007 were 7.39687
      RMB and 7.82854 RMB to $1.00 USD, respectively. In accordance with Statement
      of
      Financial Accounting Standards No. 95, "Statement of Cash Flows," cash flows
      from the Company's operations is calculated based upon the local currencies
      using the average translation rate. 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.





At
      March
      31, 2008 and December 31, 2007, the cumulative translation adjustment of
      $1,718,683 and $544,878, respectively, was classified as an item of other
      comprehensive income in the stockholders’ equity section of the consolidated
      balance sheets. For the nine months ended March 31, 2008 and 2007, accumulated
      other comprehensive income was $1,566,074 and $1,928,306,
      respectively.


15


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





Segment
      reporting





Statement
      of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About
      Segments of an Enterprise and Related Information” requires use of the
“management approach” model for segment reporting. The management approach model
      is based on the way a company’s management organizes segments within the company
      for making operating decisions and assessing performance. Reportable segments
      are based on products and services, geography, legal structure, management
      structure, or any other manner in which management disaggregates a company.
      During the nine months ended March 31, 2008 and 2007, the Company operated
      in
      three reportable business segments - (1) the Construction segment (2) Hotel
      segment and (3) Real estate development segment (Refer to Note 12).





Recent
      accounting pronouncements




In
      September 2006, the FASB issued SFAS 158 (“SFAS 158”), *“Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans, an
      amendment of FASB Statements No. 87, 88, 106, and 132(R)”.* This
      statement requires an employer to recognize the over funded or under funded
      status of a defined benefit postretirement plan as an asset or liability in
      its
      statement of financial position and to recognize changes in that funded status
      in the year in which the changes occur through comprehensive income of a
      business entity. This statement also requires an employer to measure the funded
      status of a plan as of the date of its year end statement of financial position,
      with limited exceptions. The Company will be required to initially recognize
      the
      funded status of a defined benefit postretirement plan and to provide the
      required disclosures as of the end of the fiscal year ending after
      December 15, 2006. The requirement to measure plan assets and benefit
      obligations as of the date of the employer’s fiscal year end statement of
      financial position is effective for fiscal years ending after December 15,
      2008, or fiscal 2009 for the Company. Since we do not contribute toward any
      pension plan for our employees, the initial recognition and required disclosures
      required by SFAS 158 are not applicable at this time.





In
      February 2007, the FASB issued SFAS No. 159, *“The
      Fair Value Option for Financial Assets and Financial Liabilities, Including
      an
      Amendment of FASB Statement No. 115”* , under
      which entities will now be permitted to measure many financial instruments
      and
      certain other assets and liabilities at fair value on an
      instrument-by-instrument basis. This Statement is effective as of the beginning
      of an entity's first fiscal year that begins after November 15, 2007. Early
      adoption is permitted as of the beginning of a fiscal year that begins on or
      before November 15, 2007, provided the entity also elects to apply the
      provisions of SFAS 157. The Company is currently assessing the impact, if
      any, the adoption of SFAS 159 will have on its financial
      statements.





In
      December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
      Consolidated Financial Statements”. This Statement amends ARB 51 to establish
      accounting and reporting standards for the non-controlling (minority) interest
      in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that
      a
      non-controlling interest in a subsidiary is an ownership interest in the
      consolidated entity that should be reported as equity in the consolidated
      financial statements. SFAS No. 160 is effective for the Company’s fiscal year
      beginning October 1, 2009. Management is currently evaluating the effect of
      this
      pronouncement on its consolidated financial statements.




In
      March
      2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative
      Instruments and Hedging Activities. The new standard is intended to improve
      financial reporting about derivative instruments and hedging activities by
      requiring enhanced disclosures to enable investors to better understand their
      effects on an entity’s financial position, financial performance, and cash
      flows. It is effective for financial statements issued for fiscal years and
      interim periods beginning after November 15, 2008, with early application
      encouraged. The new standard also improves transparency about the location
      and
      amounts of derivative instruments in an entity’s financial statements; how
      derivative instruments and related hedged items are accounted for under
      Statement 133; and how derivative instruments and related hedged items affect
      its financial position, financial performance, and cash flows. Management is
      currently evaluating the effect of this pronouncement on financial
      statements.


16


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      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





In
      December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This
      Statement replaces SFAS No. 141, Business Combinations. This Statement retains
      the fundamental requirements in Statement 141 that the acquisition method of
      accounting (which Statement 141 called the purchase method) be used for all
      business combinations and for an acquirer to be identified for each business
      combination. This Statement also establishes principles and requirements for
      how
      the acquirer: a) recognizes and measures in its financial statements the
      identifiable assets acquired, the liabilities assumed, and any non-controlling
      interest in the acquiree; b) recognizes and measures the goodwill acquired
      in
      the business combination or a gain from a bargain purchase; and c) determines
      what information to disclose to enable users of the financial statements to
      evaluate the nature and financial effects of the business combination. SFAS
      No.
      141(R) will apply prospectively to business combinations for which the
      acquisition date is on or after Company’s fiscal year beginning October 1, 2009.
      While the Company has not yet evaluated this statement for the impact, if any,
      that SFAS No. 141(R) will have on its consolidated financial statements, the
      Company will be required to expense costs related to any acquisitions after
      September 30, 2009.





NOTE
      2 - INVENTORIES





At
      March
      31, 2008 and June 30, 2007, inventories consisted of the following:





March
                31,
            
            June
                30,2008
            
            2007Construction
                materials
            
            $
            2,239
            
            $
            1,746Consumable
                goods
            
            
            64,955
            
            
            18,731$
            67,194
            
            $
            20,477





NOTE
      3 – COSTS
      AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS





Costs
      in
      excess of billings at March 31, 2008 and June 30, 2007 consisted
      of:





March
                31,
            
            June
                30,2008
            
            2007Costs
                incurred on uncompleted contracts
            
            $
            5,784,879
            
            $
            8,980,006Estimated
                earnings
            
            
            1,277,851
            
            
            2,072,1597,062,730
            
            
            11,052,165Less
                billings to date
            
            
            (7,067,854
            )
            
            (11,160,949
            )$
            (5,124
            )
            $
            (108,784
            )





Amounts
      are included in the accompanying balance sheets under the following
      captions:





March
                31,
            
            June
                30,2008
            
            2007Costs
                and estimated earnings in excess of billings
            
            $
            -
            
            $
            15,237Billings
                in excess of costs and estimated earnings
            
            
            (5,124
            )
            
            (124,021
            )$
            (5,124
            )
            $
            (108,784
            )




17


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





NOTE
      4 – DEPOSITS
      ON LAND USE RIGHTS




For
      the
      development of a new commercial real estate
      projects, the Company must first obtain granted land use rights. Land use rights
      can be granted through bidding, auction and listing. The Company then will
      enter
      into a land use right grant contract with the relevant government authority.
      At
      March 31, 2008 and June 30, 2007, the Company made deposits with various
      governmental agencies to acquire a long-term interest’s to utilize certain land
      to construct real property for sale or development. In order to obtain the
      provincial government’s permission to build on top on the land, the Company will
      need to make additional payments to the respective governmental agency. Since
      the Company has not received the final land use rights contract or the license
      to build on these lands, the Company has reflected these deposits as “deposits
      on land use rights” on the accompanying balance sheets. Upon obtaining the land
      use contracts, the deposit on land use rights is to be transferred to
      construction in process. At March 31, 2008 and June 30, 2007, deposits on land
      use rights were as follows:





March
                31,
            
            June
                30,2008
            
            2007Nan
                Yuan Estates (residence buildings)
            
            $
            2,413,839
            
            $
            2,223,069Inner
                Mongolia Electrical VocationalTechnical
                School (old location)
            
            
            640,825Procuratorate
                (Yu Quan) Housing Estates
            
            
            783,230
            
            
            -$
            3,837,894
            
            $
            2,223,069





(a)
            As
                approved by the Hohhot municipal government, the Inner Mongolia Vocational
                School is being relocated. This amount represents a deposit on the
                right
                to acquire the land use right s at this location.





NOTE
      5 - PROPERTY
      AND EQUIPMENT





At
      March
      31, 2008 and June 30, 2007, property and equipment consist of the
      following:





March
                31,
            
            June
                30,2008
            
            2007Useful
                LifeOffice
                equipment
            
            5
                Years
            
            $
            63,237
            
            $
            49,230Machinery
                equipment
            
            5-15
                Years
            
            
            4,261,115
            
            
            2,467,724Vehicles
            
            10
                Years
            
            
            461,338
            
            
            61,390Building
                and building improvements
            
            20
                – 40 Years
            
            
            4,080,943
            
            
            3,758,4198,866,633
            
            
            6,336,763Less:
                accumulated depreciation
            
            
            
            
            
            (2,116,542
            )
            
            (1,605,595
            )$
            6,750,091
            
            $
            4,731,168





Depreciation
      of property and equipment is provided using the straight-line method .
      For the
      nine months ended March 31, 2008 and 2007, depreciation expense amounted to
      $361,126 and $216,063, respectively.


18


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





NOTE
      6 – INTANGIBLE
      ASSET





All
      land
      in the People’s Republic of China is owned by the government and cannot be sold
      to any individual or company. The Company has recorded the costs paid to a local
      government agency to acquire a long-term interest to utilize certain land to
      construct real property for sale.  This
      type
      of arrangement is common for the use of land in the PRC. The land use rights
      are
      valued at a fixed amount RMB 1,223,679, fluctuated by the exchange rate. At
      March 31, 2008 and June 30, 2007, the land use rights are valued at $174,259
      and
      $160,487, respectively. Under the terms of the agreement, the Company has rights
      to use certain land for a period to be specified when the land is put into
      use.
      As of March 31, 2008, this land has not been entered into service. The Company
      will amortize these land use rights over the contract period when determined.





NOTE
      7 – ACCRUED
      EXPENSES





At
      March
      31, 2008 and June 30, 2007, accrued expenses consist of the
      following:





March
                31,
            
            June
                30,2008
            
            2007Construction
                payable
            
            $
            -
            
            $
            223,309Accrued
                interest payable
            
            
            109,419
            
            
            676,587Employees
                benefit
            
            
            152,432
            
            
            148,791Accrued
                payroll
            
            
            2,867
            
            
            28,638Accrued
                registration rights penalty
            
            
            55,000
            
            
            -Other
                accounts payable
            
            
            -
            
            
            13,829$
            319,718
            
            $
            1,091,154





NOTE
      8 – RELATED
      PARTY TRANSACTIONS





**Due
      from related parties**





From
      time
      to time, the Company advanced funds to companies related through common
      ownership for working capital purposes. These advances are non interest bearing,
      unsecured and payable on demand. There
      is
      no indication that the related party receivable balances would be repaid within
      one year. Due
      from
      related parties was due from the following;





March
                31,
            
            June
                30,Name
            
            Relationship
            
            2008
            
            2007Inner
                Mongolia Jin Ma Group Ltd and its subsidiaries
            
            Owned by Yang Liankuan
            
            $
            871,602
            
            $
            999,984Yang
                Liankuan
            
            Officer
                and director
            
            
            -
            
            
            47,848$
            871,602
            
            $
            1,047,832




19


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





NOTE
      9 – LOANS
      PAYABLE





Loans
      payable consisted of the following at March 31, 2008 and June 30,
      2007:





March
                31,
            
            June
                30,2008
            
            2007Loans
                to various unrelated parties, due in January 2010 with annual interest
                of
                14.4% and unsecured.
            
            $
            1,007,661
            
            $
            993,600Loans
                to various unrelated parties, due in December 2009 with annual interest
                of
                14.4% and unsecured.
            
            
            111,076
            
            
            167,873Loans
                to various unrelated parties, due in August 2008 with annual interest
                of
                14.4% and unsecured
            
            
            140,406
            
            
            131,151Loans
                to various unrelated parties, due in January 2010 with annual interest
                of
                18% and unsecured.
            
            
            92,564
            
            
            85,248Loans
                to various unrelated parties, due in April 2012 with annual interest
                of
                18% and unsecured
            
            
            185,127
            
            
            170,496Loans
                to various unrelated parties, due in August 2011 with annual interest
                of
                18% and unsecured
            
            
            35,601
            
            
            32,788Loans
                to various unrelated parties, due in September 2012 with annual interest
                of 18% and unsecured
            
            
            113,925
            
            
            104,921Total
                loans payable
            
            
            1,688,360
            
            
            1,686,077Less
                : Current portion
            
            
            (142,406
            )
            
            -Long
                term liability
            
            $
            1,545,954
            
            $
            1,686,077





For
      the
      nine months ended March 31, 2008 and 2007, interest expense related to these
      loans amounted to $192,169 and $186,600, respectively. Future maturities of
      long-term debt are as follows:





Period
                ended March 31:2009
                (current liability)
            
            $
            142,4062010
            
            $
            1,211,3012011
            
            $
            35,6012012
            
            $
            299,052





NOTE
      10 – CONVERTIBLE
      DEBT





On
      November 30, 2007, the Company entered into a Securities Purchase Agreement
      pursuant to which the Company agreed to sell an aggregate of $3,275,000
      principal amount 10% Secured Convertible Debentures to six accredited investors
      and to issue those investors common stock purchase warrants to purchase an
      aggregate of 9,520,352 shares of the Company’s common stock in a private
      transaction exempt from registration under the Securities Act of 1933 in
      reliance on the exemptions provided by Section 4(2) and Rule 506 of Regulation
      D
      of that act.


20


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





Under
      the
      terms of the Securities Purchase Agreement, on the first closing which occurred
      on November 30, 2007, the Company issued $2,183,000 principal amount 10% Secured
      Convertible Debentures to the purchasers together with the common stock purchase
      warrants to purchase an aggregate of 6,345,930 shares of the Company’s common
      stock. The Company paid Next Generation Equity Research, LLC (“Next”), a broker
      dealer and member of FINRA, a commission of $174,640 and issued Next common
      stock purchase warrants to purchase an aggregate of 507,674 shares of the
      Company’s common stock at $.50 per share. Additionally, the Company reimbursed
      one of the investors $30,000 to defer its legal fees in connection with the
      financing. The Company intends to use the balance of the proceeds for general
      working capital.




Within
      five days following the effectiveness of the registration statement described
      below, a second closing will occur and the Company will issue the remaining
      $1,092,000 principal amount 10% Secured Convertible Debentures to the purchasers
      together with the common stock purchase warrants to purchase an aggregate of
      3,174,419 shares of the Company’s common stock. The Company will pay an
      additional commission of $87,360 and will grant an additional common stock
      purchase warrants to purchase an aggregate of 253,953 shares of the Company’s
      common stock. The issuance is not subject to any other condition other than
      the
      registration of the securities.





The
      debentures, which bear interest at 10% per annum, are due 16 months from the
      issuance date. Interest is payable in cash quarterly on January 1, April 1,
      July
      1 and October 1 beginning on the first date after the issuance. At the Company’s
      option, and providing certain conditions precedent have been met, interest
      can
      be paid in shares of our common stock valued at the lesser of (i) the conversion
      rate, or (ii) 90% of the lesser of (a) the average VWAP (as defined in the
      debenture) for the 20 consecutive trading days prior to the interest payment
      date or (b) the average VWAP for the 20 consecutive trading days ending on
      the
      trading day immediately prior to the delivery of the interest conversion shares.
      The Company is not permitted to prepay the debentures without the prior written
      consent of the holders. The debentures are convertible at any time at the option
      of the holder into shares of the Company’s common stock based upon a conversion
      rate of $0.344 per share, subject to adjustment as hereinafter set
      forth.





The
      Company agreed that so long as the debentures remain outstanding, unless the
      Company receives the prior written consent of the holders of at least 85% of
      the
      outstanding principal amount of the debentures, the Company agreed that it
      will
      not:





•
            incur
                additional indebtedness, subject to certain exceptions,•
            incur
                any liens on any of our property or assets,•
            repurchase
                any of its common stock, subject to certain exceptions,•
            amend
                its charter documents in a manner that would be adverse to the debenture
                holders,•
            pay
                any cash dividends or distributions on any equity securities,
                or•
            enter
                into any transaction with an affiliate unless it is made on an
                arm’s-length basis and approved by a majority of the disinterred
                directors.




If
      the
      Company should default on the debentures, the holders have the right to
      immediately accelerate the maturity date of the principal amount of the
      debentures as well as any accrued but unpaid interest and it such amount is
      not
      satisfied within five days the interest rate on the debentures increases to
      18%.
      Events of default include customary clauses such as failure to make payments
      when required, failure to observe any covenant contained in the debentures,
      a
      default under any other document executed in connection with the transaction,
      bankruptcy or default under any other obligation greater than $150,000. In
      addition, an event of default would occur if the Company’s common stock should
      no longer be quoted on the OTC Bulletin Board, if the Company were a party
      to a
      change of control transaction involving in excess of 33% of its assets or if
      the
      registration statement described below is not declared effective within 180
      days
      after the first closing date, among other provisions.


21


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





The
      warrants are exercisable for five years from the date of issuance at an initial
      exercise price of $0.50 per share, subject to adjustment as hereinafter set
      forth. The warrants are exercisable on a cashless basis at any time when there
      is not an effective registration statement covering the underlying shares.
      The
      Company is permitted to call the warrants on 30 trading days’ prior notice at
      $0.001 per warrant at any time after the effective date of the registration
      statement covering the shares underlying the warrants when, (i) the VWAP (as
      defined in the warrant) for each of 20 consecutive trading days beginning with
      the effective date of the registration statement exceeds $1.50, (ii) the average
      daily volume for during this period exceeds 500,000 shares of common stock
      per
      trading day and (iii) the holder is not in possession of any information that
      constitutes, or might constitute, material non-public information which was
      provided by the Company to the holder.




The
      conversion price of the debentures and the exercise price of the warrants are
      subject to the proportional adjustment in the event of a stock splits, stock
      dividends, recapitalizations or similar corporate events. Both the conversion
      price of the debentures and the number of shares issuable upon conversion of
      the
      debentures as well as the exercise price of the warrants and the number of
      shares issuable upon the exercise of the warrants is subject to adjustment
      if
      the Company should issue shares of common stock or other securities convertible
      or exercisable into shares of common stock or otherwise reprice any existing
      conversion or exercise prices to a price less than the then current conversion
      and/or exercise prices.





The
      debentures are not convertible and the warrants are not exercisable to the
      extent that (i) the number of shares of our common stock beneficially owned
      by
      the holder and (ii) the number of shares of our common stock issuable upon
      the
      conversion of the debentures and/or the exercise of the warrants would result
      in
      the beneficial ownership by holder of more than 4.99% of our then outstanding
      common stock. This ownership limitation can be increased to 9.99% by the holder
      upon 61 days notice to the Company.




In
      conjunction with the transaction, Mr. Liankuan Yang and Yang Yang and
      Ms. Runlan Ma, officers and directors of the Company, pledged an aggregate
      of 19,000,000 shares of the Company’s common stock owned by them as additional
      security for the Company’s obligations under the transaction. Mr. Liankuan
      Yang, Ms. Yang Yang and Ms. Runlan Ma have also entered into lock-up
      agreements whereby they are agreed not to offer or sell any shares of the
      Company’s common stock owned by them until the 180th trading day after the
      effective date of the registration statement described elsewhere
      herein.




So
      long
      as the debentures are outstanding, should the Company issue any common stock
      or
      common stock equivalent, the Company granted the purchasers a right of first
      refusal whereby each purchaser in this offering has the right to participate
      in
      such subsequent financing up to an amount equal to 100% of such subsequent
      financing upon the same terms and conditions of that financing. If the Company
      undertakes such a financing while the debentures remain outstanding, other
      than
      an underwritten offering, the holders are entitled to exchange the debentures
      on
      a dollar for dollar basis for any securities which the Company may issue in
      the
      subsequent financing.





In
      addition, during the period from the execution of the Securities Purchase
      Agreement until 90 days following the effective date of the registration
      statement described below, the Company agreed not to issue any shares of common
      stock or securities convertible or exercisable into shares of common stock
      subject to certain exceptions with includes the offer and sale of up to
      $3,000,000 of equity securities limited solely to offshore purchasers. The
      Company also agreed that so long as the purchasers own any of the securities
      sold or to be issued in the transaction, the Company will not enter into any
      agreement which would involve a variable rate transaction, which includes
      floating conversion prices, conversion prices with reset mechanisms or equity
      lines of credit among others.


22


GOLD
      HORSE INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


March
      31,
      2008





The
      Company granted the purchasers certain piggy-back registration rights. In
      addition, the Company agreed to file a registration statement with the
      Securities and Exchange Commission registering the shares of common stock
      underlying the $3,275,000 principal amount debentures and the warrants so as
      to
      permit the public resale thereof within 45 days from the first closing date.
      The
      Company is subject to the payment to the holders liquidated damages if it fails
      to file the registration statement within 45 days from the date of the
      Securities Purchase Agreement, or if the registration statement is not declared
      effective within 120 days from the date of the Securities Purchase Agreement
      (or
      150 days if the staff of the SEC reviews the filing), or if all the securities
      are not registered by April 30, 2008 as well as certain other events. The
      liquidated damages, which are payable in cash, will be calculated at 1.5% of
      the
      aggregate purchase price paid by each holder for every 30 day period, with
      a
      maximum of 18% of the aggregate purchase price. If the Company fails to pay
      all
      or any portion of these liquidated damages, they accrue interest at 18% per
      annum. The Company is obligated to pay all expenses associated with the
      registration statement, other than fees and expenses of the holders counsel,
      if
      any, any commissions payable by the holders on the sale of the underlying
      securities. The Company filed its registration on January 23, 2008 and has
      received a full review. As of the date of this report, the registration
      statement has not been declared effective. Accordingly, pursuant to FASB Staff
      Position, or FSP, EITF 00-19-2, *Accounting
      for Registration Payment Arrangements,* the
      Company has recorded a registration rights penalty of $55,000. The Company
      believes the registration statement will be declared effective by June 10,
      2008.





The
      Company concluded that since the series A convertible redeemable preferred
      stock
      had a fixed redemption price of $0.374, the convertible redeemable preferred
      stock was not a derivative instrument. The Company analyzed this provision
      under
      EITF 05-04 and therefore it qualified as equity under EITF 00-19.





In
      accordance with Emerging Issues Task Force (‘‘EITF’’) 98-5 and EITF 00-27, the
      convertible notes were considered to have an embedded beneficial conversion
      feature (BCF) because the effective conversion price was less than the fair
      value of the Company’s common stock. This convertible notes were fully
      convertible at the issuance date, therefore the portion of proceeds allocated
      to
      the convertible notes of $1,295,233 was determined to be the value of the
      beneficial conversion feature and was recorded as a debt discount and is being
      amortized over the 16-months note term. Additionally, the Company evaluated
      whether or not the convertible debt contains embedded conversion options, which
      meet the definition of derivatives under SFAS 133 “Accounting for Derivative
      Instruments and Hedging Activities” and related interpretations. The Company
      concluded that since the convertible debt a fixed conversion price of $0.374,
      the convertible debt.





Pursuant
      to the terms of the Warrants, the Purchasers are entitled to purchase up to
      6,345,930 shares of common stock of the Company at an exercise price of $0.50
      per share. The Warrants have a term of 5 years after the issue date of November
      30, 2007. These warrants were treated as a discount on the secured notes and
      were valued at $887,768 to be amortized over the 16-month note term. The fair
      market value of each stock warrant was estimated on the date of grant using
      the
      Black-Scholes option-pricing model in accordance with SFAS No. 123R using the
      following weighted-average assumptions: expected dividend yield 0%; risk-free
      interest rate of 3.41%; volatility of 25% and an expected term of five
      year.





During
      the nine months ended March 31, 2008, amortization of debt issue costs was
      $51,160 and has been included in interest expense on the accompanying
      consolidated statement of operations.. The remaining balance of debt issue
      costs
      at March 31, 2008 was $153,480 which will be amortized over the remaining term
      of the debenture. The amortization of debt discounts for the nine months ended
      March 31, 2008 was $545,750, which has been included in interest expense on
      the
      accompanying consolidated statement of operations. The balance of the debt
      discount is $1,637,250 at March 31, 2008 which will be amortized over the
      remaining term of the debenture.


23




GOLD
        HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March
        31,
        2008
 
 The
        Company evaluated whether or not the secured convertible debentures contain
        embedded conversion options, which meet the definition of derivatives under
        SFAS
        133 “Accounting for Derivative Instruments and Hedging Activities” and related
        interpretations. The Company concluded that since the secured convertible
        debentures had a fixed conversion rate of $0.344, the secured convertible
        debt
        was not a derivative instrument. The Company analyzed this provision under
        EITF
        05-04 and, although the debt is unconventional, the reset provision is deemed
        within the Company’s control and therefore it qualified as equity under EITF
        00-19
 
 The
        convertible debenture liability is as follows at March 31, 2008:
  Convertible
                  debentures payable
              
              $
              2,183,000Less:
                  unamortized discount on debentures
              
              
              (1,637,250
              )Convertible
                  debentures, net
              
              $
              545,750
 
 NOTE
        11
– STOCKHOLDERS’
        EQUITY
 
 Common
        stock
 
 During
        the six months ended December 31, 2007, the Company sold 2,219,252 shares
        of
        common stock to 36 individuals residing in China for net proceeds of $2,219,252.
 
 On
        January 17, 2008, the Company issued 145,349 shares of common stock to its
        chief
        financial officer or his assignee for services rendered. The shares were
        fair
        value on the date of grant based on recent trading price. In connection with
        the
        issuance of these shares, the Company recorded compensation of $63,080 and
        prepaid expenses of $12,500, which will be amortized over the service
        period...
 
 On
        January 17, 2008, the Company issued 180,000 shares of common stock to its
        directors for services rendered. The shares were fair value on the date of
        grant
        based on recent trading price of $0.52. In connection with the issuance of
        these
        shares, the Company recorded compensation of $93,600.
 
 2007
        Equity Compensation Plan
 
 On
        October 25, 2007 the Company’s board of directors adopted its 2007 Equity
        Compensation Plan. The purpose of the 2007 Equity Compensation Plan is to
        offer
        to the Company’s employees, officers, directors and consultants whose past,
        present and/or potential contributions to the Company have been or are or
        will
        be important to our success, an opportunity to acquire a proprietary interest
        in
        the Company. The issuance of grants under the 2007 Equity Compensation Plan
        will
        be made to persons who are closely related to the Company and who provide
        bona
        fide services to the Company in connection with its business. Under Federal
        securities laws, these services cannot be in connection with the offer of
        sale
        of the Company’s securities in a capital raising transaction nor directly or
        indirectly promote or maintain a market for the Company’s securities. The
        Company has currently reserved 3,000,000 of its authorized but unissued shares
        of common stock for issuance under the 2007 Equity Compensation Plan.
  24
  GOLD
        HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March
        31,
        2008
 
 Plan
        options may either be options qualifying as incentive stock options under
        Section 422 of the Internal Revenue Code of 1986, as amended, or non-qualified
        options. In addition, the 2007 Equity Compensation Plan allows for the inclusion
        of a reload option provision, which permits an eligible person to pay the
        exercise price of the option with shares of common stock owned by the eligible
        person and receive a new option to purchase shares of common stock equal
        in
        number to the tendered shares. Any incentive option granted under the 2007
        Equity Compensation Plan must provide for an exercise price of not less than
        100% of the fair market value of the underlying shares on the date of grant,
        but
        the exercise price of any incentive option granted to an eligible employee
        owning more than 10% of our outstanding common stock must not be less than
        110%
        of fair market value on the date of the grant. Any non-qualified option granted
        under the 2007 Equity Compensation Plan must provide for an exercise price
        of
        not less than the par value of our common stock. The term of each plan option
        and the manner in which it may be exercised is determined by the Board of
        Directors or the compensation committee, provided that no option may be
        exercisable more than 10 years after the date of its grant and, in the case
        of
        an incentive option granted to an eligible employee owning more than 10%
        of the
        common stock, no more than five years after the date of the grant. Unless
        the
        2007 Equity Compensation Plan is approved by our stockholders by October
        25,
        2008, no incentive stock options may be granted and all incentive stock options
        that may have been previously granted shall automatically be converted into
        non-qualified stock options.
 
 Subject
        to the limitation on the aggregate number of shares issuable under the 2007
        Equity Compensation Plan, there is no maximum or minimum number of shares
        as to
        which a stock grant or plan option may be granted to any person. Shares used
        for
        stock grants and plan options may be authorized and unissued shares or shares
        reacquired by us, including shares purchased in the open market. Shares covered
        by plan options which terminate unexercised will again become available for
        grant as additional options, without decreasing the maximum number of shares
        issuable under the 2007 Equity Compensation Plan, although such shares may
        also
        be used by us for other purposes. As of December 31, 2007, the Company has
        not
        made any grants under the 2007 Equity Compensation Plan.
 
 Warrants
 
 Stock
        warrant activity for the nine months ended March 31, 2008 is summarized as
        follows:
 
 Number of
              
              Weighted average
              
              Aggregateshares
              
              exercise price
              
              Intrinsic valueOutstanding
                  at June 30, 2007
              
              
              -
              
              $
              -
              
              $
              -Granted
              
              
              6,853,604
              
              
              0.50
              
              
              -Exercised
              
              
              -
              
              
              -
              
              
              -Cancelled
              
              
              -
              
              
              -
              
              
              -Outstanding
                  at March 31, 2008
              
              
              6,853,604
              
              $
              0.50
              
              $
              -
 
 The
        following table summarizes the Company's stock warrants outstanding at March
        31,
        2008:
 Warrants Outstanding
                
                Warrants ExercisableRange of
                  Exercise
                  Price
                
                Number
                  Outstanding at
                  March 31, 2008
                
                Weighted
                  Average
                  Remaining
                  Contractual
                  Life
                
                Weighted
                  Average
                  Exercise
                  Price
                
                Number
                  Exercisable at
                  March 31, 2008
                
                Weighted
                  Average
                  Exercise
                  Price$
                0.50
                
                
                6,853,604
                
                
                4.92
                    Years
                
                $
                0.50
                
                
                6,853,604
                
                $
                0.50
  25
  GOLD
        HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March
        31,
        2008
 
 NOTE
        12
– SEGMENT
        INFORMATION
 
 Statement
        of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About
        Segments of an Enterprise and Related Information” requires use of the
“management approach” model for segment reporting. The management approach model
        is based on the way a company’s management organizes segments within the company
        for making operating decisions and assessing performance. Reportable segments
        are based on products and services, geography, legal structure, management
        structure, or any other manner in which management disaggregates a company.
 
 During
        the nine months ended March 31, 2008 and 2007, the Company operated in three
        reportable business segments - (1) the Construction segment (2) Hotel segment
        and (3) Real estate development segment. The Company's reportable segments
        are
        strategic business units that offer different products.  The
        Company's reportable segments, although integral to the success of the others,
        offer distinctly different products and services and require different types
        of
        management focus. As such, these segments are managed separately. Condensed
        information with respect to these reportable business segments for the three
        and
        nine months ended March 31, 2008 and 2007 is as follows:
 
 For
                  the Three Months Ended
                March
                  31,
              
              For
                  the Nine Months Ended
                March
                  31,2008
              
              2007
              
              2008
              
              2007Revenues:Construction
              
              $
              3,524,291
              
              $
              6,459,404
              
              $
              17,585,684
              
              $
              18,052,407Real
                  Estate
              
              
              304,755
              
              
              2,606
              
              
              1,560,283
              
              
              407,946Hotel
              
              
              766,158
              
              
              679,493
              
              
              2,339,870
              
              
              1,910,0494,595,204
              
              
              7,141,503
              
              
              21,485,837
              
              
              20,370,402Depreciation:Construction
              
              
              58,798
              
              
              36,715
              
              
              148,991
              
              
              100,236Real
                  Estate
              
              
              11,738
              
              
              4,354
              
              
              20,393
              
              
              7,094Hotel
              
              
              64,474
              
              
              44,288
              
              
              191,742
              
              
              108,733135,010
              
              
              83,357
              
              
              361,126
              
              
              216,063Interest
                  expense:Construction
              
              
              63,259
              
              
              67,823
              
              
              192,169
              
              
              186,600Other
              
              
              502,714
              
              
              -
              
              
              666,209
              
              
              -565,973
              
              
              67,823
              
              
              858,378
              
              
              186,600Net
                  income (loss):Construction
              
              
              (234,463
              )
              
              335,523
              
              
              774,955
              
              
              1,319,858Real
                  Estate
              
              
              41,772
              
              
              (10,591
              )
              
              318,998
              
              
              46,295Hotel
              
              
              138,787
              
              
              96,027
              
              
              336,003
              
              
              270,753Other
              
              
              (757,885
              )
              
              -
              
              
              (1,037,687
              )
              
              -(811,789
              )
              
              420,959
              
              
              392,269
              
              
              1,636,906Identifiable
                  assets at March 31, 2008 andJune
                  30, 2007:Construction
              
              $
              10,010,027
              
              $
              9,049,034Real
                  Estate
              
              
              9,015,568
              
              
              2,757,842Hotel
              
              
              3,880,202
              
              
              3,562,409Other
              
              
              376,634
              
              
              -$
              23,282,431
              
              $
              15,369,285
 
 NOTE
        13 - STATUTORY
        RESERVES
 
 As
        stipulated by the Company Law of the People's Republic of China (PRC), net
        income after taxation can only be distributed as dividends after appropriation
        has been made for the following:
  1.
              Making
                  up cumulative prior years' losses, if any;
  26
  GOLD
        HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March
        31,
        2008
  2.
              Allocations
                  to the "Statutory surplus reserve" of at least 10% of income after
                  tax, as
                  determined under PRC accounting rules and regulations, until the
                  fund
                  amounts to 50% of the Company's registered capital;
  3.
              Through
                  December 31, 2005, allocations of 5-10% of income after tax, as
                  determined
                  under PRC accounting rules and regulations, to the Company's "Statutory
                  common welfare fund", which is established for the purpose of providing
                  employee facilities and other collective benefits to the Company's
                  employees; and
  4.
              Allocations
                  to the discretionary surplus reserve, if approved in the shareholders'
                  general meeting.
  In
        accordance with the Chinese Company Law, the Company allocated 10% of income
        after taxes to the statutory surplus reserve for the nine months ended March
        31,
        2008 and 2007. The amount included in the statutory reserves as of March
        31,
        2008 amounted to $737,052.
 
 NOTE
        14 – OPERATING
        RISK
 
 The
        Company's operations are subject to a number of risks and uncertainties,
        including the risk of doing business in the PRC, our ability to implement
        our
        strategic initiatives, our access to sufficient capital, the effective
        integration of our subsidiaries in the PRC into a U.S. public company structure,
        economic, political and market conditions and fluctuations, government and
        industry regulation, Chinese and global competition, and other factors. Most
        of
        these factors are difficult to predict accurately and are generally beyond
        our
        control. You should consider the areas of risk described below as well as
        the
        risks described in "Item 1A. - Risk Factors" in our Form 10-K for the year
        ended
        December 31, 2007 as filed with the SEC. Readers should carefully review
        this
        report in its entirety.
 
 (a)
        Country risk
 
 Currently,
        the Company’s revenues are primarily derived from construction projects, real
        estate and hotel revenues to customers in the Peoples Republic of China (PRC).
        The Company hopes to expand its operations to countries outside the PRC,
        however, such expansion has not been commenced and there are no assurances
        that
        the Company will be able to achieve such an expansion successfully. Therefore,
        a
        downturn or stagnation in the economic environment of the PRC could have
        a
        material adverse effect on the Company’s financial condition.
 
 (b)
        Products risk
 
 In
        addition to competing with other construction companies, real estate companies,
        and hotel operations, the Company competes with larger Chinese and international
        companies who may have greater funds available for expansion, marketing,
        buying
        power, resources, and the ability to attract more qualified personnel. These
        Chinese companies may be able to offer products at a lower price. There can
        be
        no assurance that the Company will remain competitive should this
        occur.
 
 (c)
        Political risk
 
 Currently,
        PRC is in a period of growth and is openly promoting business development
        in
        order to bring more business into PRC. Additionally PRC allows a Chinese
        corporation to be owned by a United States corporation. If the laws or
        regulations are changed by the PRC government, the Company's ability to operate
        the PRC subsidiaries could be affected.
 
 (d)
        Exchange risk
 
 The
        Company can not guarantee that the current exchange rate will remain steady,
        therefore there is a possibility that the Company could post the same amount
        of
        profit for two comparable periods and because of a fluctuating exchange rate
        actually post higher or lower profit depending on exchange rate of Chinese
        Renminbi (RMB) converted to U.S. dollars on that date. The exchange rate
        could
        fluctuate depending on changes in the political and economic environments
        without notice.
  27
  GOLD
        HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March
        31,
        2008
 
 NOTE
        15 – MAJOR
        CUSTOMERS & VENDORS
 
 The
        nature of the Company’s construction segment is that at any given time, the
        Company will have a concentration of significant customer depending upon
        the
        number and scope of construction projects. These significant customers may
        not
        be the same from period to period depending upon the percentage of completion
        of
        the specific projects. Two construction projects, the Xiao Kang Xin Cun
        Residential Apartments (Phase I and II) (also known as Ta Bu Ban) and the
        Riverbank Garden Community provided approximately $9,309,000 or 43.3% and
        $6,839,000 or 31.8% of the Company’s revenue for the nine months ended March 31,
        2008, respectively. At March 31, 2008, the Company had $1,432,241 and $3,713,936
        of accounts receivable due from these customers, respectively.
 
 The
        Company uses five to seven subcontractors to perform its construction services
        and to develop its real estate projects. Management is aware of similar
        subcontractors that are available to perform construction services if required
        and management has plans to engage their services if necessary.
  28
  ITEM
        2.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS.
 
 **Overview**
 
 Prior
        to
        June 29, 2007, we were a development stage company attempting to implement
        our
        business plan to become a fully integrated online provider that linked the
        supply and demand sides of the ground trucking industry. On June 29, 2007,
        we
        executed the Share Exchange Agreement with Gold Horse Nevada whereby we acquired
        all of the outstanding common stock of Gold Horse Nevada in exchange for
        newly-issued shares of our common stock to the Gold Horse Nevada shareholders.
        Gold Horse Nevada conducts its business operations through its wholly-owned
        subsidiary Global Rise and three operating companies based in
        the PRC.  The acquisition of Gold Horse Nevada was accounted for
        as a reverse merger because on a post-merger basis, the members of Gold Horse
        Nevada held a majority of our outstanding common stock on a voting and
        fully-diluted basis. As a result of the share exchanges, Gold Horse Nevada
        was
        deemed to be the acquirer for accounting purposes. Accordingly, the financial
        statement data presented are those of Gold Horse Nevada for all periods prior
        to
        our acquisition of Gold Horse Nevada on June 29, 2007, and the financial
        statements of the consolidated companies from the acquisition date
        forward.
 
 Neither
        our company nor our subsidiaries, Gold Horse Nevada, Global Rise or IMTD
        are
        engaged in any business or operations other than pursuant to the terms of
        the
        various Contractual Arrangements with the Jin Ma Companies as described
        elsewhere in this report. As such, we are completely dependent on the
        Contractual Arrangements. We do not have any assets other than limited cash
        on
        deposit in U.S. banks which we are using to fund our operating expenses.
        Pursuant to the requirements of Financial Accounting Standards Board (FASB)
        Interpretation No. 46R “Consolidation of Variable Interest Entities” (“FIN
        46R”), under generally accepted accounting principles the Jin Ma Companies which
        are deemed to be variable interest entities ("VIEs") we are required to
        consolidate the financial statements of the Jin Ma Companies with our financial
        statements. Accordingly, and as described in the consolidated financial
        statements included in this report, the assets and liabilities at March 31,
        2008
        and June 30, 2007 and the results of operations for the three and nine months
        ended March 31, 2008 and 2007 are substantially those of the Jin Ma Companies.
        All of those assets and operations are located in the PRC and the Contractual
        Arrangements are subject to enforcement under the laws of the PRC. If we
        are
        unable to enforce any legal rights we may have under these contracts or
        otherwise, our ability to continue as a going concern is in jeopardy. In
        addition, the terms of these contracts expire in August 2016 and there are
        no
        assurances these agreements will be renewed. If the Contractual Arrangements
        are
        not renewed or are significantly modified, unless we have expanded our business
        and operations, of which there are no assurances, we will in all likelihood
        be
        forced to cease our operations.
 
 **Critical
        Accounting Policies and Estimates**
 
 While
        our
        significant accounting policies are more fully described in Note 1 to our
        consolidated financial statements appearing elsewhere herein, we believe
        that
        the following accounting policies are the most critical to aid you in fully
        understanding and evaluating this management discussion and
        analysis.
 
 Principles
        of consolidation
 
 The
        consolidated financial statements are prepared in accordance with generally
        accepted accounting principles in the United States of America and present
        the
        financial statements of the Company and our wholly-owned and majority-owned
        subsidiaries including variable interest entities ("VIEs") for which we are
        the
        primary beneficiary.
 
 The
        accompanying consolidated financial statements include the accounts of Gold
        Horse International and our wholly-owned subsidiaries Gold Horse Nevada,
        Global
        Rise, and IMTD and our
        variable interest entities Jin Ma
        Construction, Jin Ma Hotel and Jin Ma Real Estate. All significant inter-company
        accounts and transactions have been eliminated in consolidation.
 
 We
        have
        adopted FASB Interpretation No. 46R "Consolidation of Variable Interest
        Entities" ("FIN 46R"), an Interpretation of Accounting Research Bulletin
        No. 51.
        FIN 46R requires a Variable Interest Entity (VIE) to be consolidated by a
        company if that company is subject to a majority of the risk of loss for
        the VIE
        or is entitled to receive a majority of the VIE's residual returns. VIEs
        are
        those entities in which we, through contractual arrangements, bear the risks
        of,
        and enjoy the rewards normally associated with ownership of the entities,
        and
        therefore we are the primary beneficiary of these entities.
  29
 
 Use
        of
        estimates
 
 The
        preparation of financial statements in conformity with US GAAP requires
        management to make estimates and assumptions that affect certain reported
        amounts and disclosures. Accordingly, actual results could differ from those
        estimates. Significant estimates in 2008 and 2007 include the allowance for
        doubtful accounts, the useful life of property and equipment, costs and
        estimated earnings in excess of billings, and billings in excess of costs
        and
        estimated earnings.
 
 Accounts
        and other receivables
 
 We
        have a
        policy of reserving for uncollectible accounts based on our best estimate
        of the
        amount of probable credit losses in our existing accounts receivable. We
        periodically review our accounts receivable and other receivables to determine
        whether an allowance is necessary based on an analysis of past due accounts
        and
        other factors that may indicate that the realization of an account may be
        in
        doubt. Account balances deemed to be uncollectible are charged to the allowance
        after all means of collection have been exhausted and the potential for recovery
        is considered remote. At March 31, 2008 and June 30, 2007, we have established,
        based on a review of our outstanding accounts receivable balances, an allowance
        for doubtful accounts in the amount of $1,062,599 and $740,338, respectively,
        on
        our total accounts receivable. Additionally, at March 31, 2008 and June 30,
        2007, we established, based on a review of our outstanding other receivable
        balances, an allowance for doubtful accounts in the amount of $887,855 and
        $923,803, respectively.
 
 Inventories
 
 Inventories,
        consisting of construction materials and consumable goods related to our
        operations are stated at the lower of cost or market utilizing the first-in,
        first-out method.
 
 Real
        estate held for sale
 
 We
        capitalize as real estate held for sale the direct construction and development
        costs, property taxes, interest incurred on costs related to land under
        development and other related costs (i.e. engineering, surveying, landscaping,
        etc.) until the property reaches its intended use.
 
 Advances
        from customers
 
 Advances
        from customers at March 31, 2008 and June 30, 2007 of $205,325 and
        $609,574, respectively, consist of prepayments from third party customers
        to the
        Company for construction and real estate transactions to ensure sufficient
        funds are available to complete the real estate and construction projects.
        The
        Company will recognize the deposits as revenue upon transfer of title to
        the
        buyer, in compliance with its revenue recognition policy.
 
 Revenue
        recognition
 
 We
        follow
        the guidance of the Securities and Exchange Commission’s Staff Accounting
        Bulletin 104 for revenue recognition. In general, we record revenue when
        persuasive evidence of an arrangement exists, services have been rendered
        or
        product delivery has occurred, the sales price to the customer is fixed or
        determinable, and collectability is reasonably assured. The following policies
        reflect specific criteria for the various revenues streams:
 
 •  Real
        estate sales which primarily involve the sale of multi-family homes and
        community environments are reported in accordance with the provisions of
        Statement of Financial Accounting Standard (SFAS) No. 66, “Accounting for Sales
        of Real Estate”. Profit from the sales of development properties, less 5%
        business tax, is recognized by the full accrual method when the sale is
        consummated. A sale is not considered consummated until:
 
 •  the
        parties are bound by the terms of a contract,
 •  all
        consideration has been exchanged,
 •  any
        permanent financing of which the seller is responsible has been arranged,
 •  all
        conditions precedent to closing have been performed,
 •  the
        seller does not have substantial continuing involvement with the property,
        and
 •  the
        usual
        risks and rewards of ownership have been transferred to the buyer.
 
 Sales
        transactions not meeting all the conditions of the full accrual method are
        accounted for using the deposit method of accounting. Under the deposit method,
        all costs are capitalized as incurred, and payments received from the buyer
        are
        recorded as a deposit liability (reflected as advances from customers in
        our
        consolidated balance sheets).
  30
 
 Revenue
        from the performance of general contracting, construction management and
        design-building services is recognized upon completion of the
        service.
 
 Revenue
        primarily derived from hotel operations, including the rental of rooms and
        food
        and beverage sales, is recognized when rooms are occupied and services have
        been
        rendered.
 
 In
        accounting for long-term engineering and construction-type contracts, we
        follow
        the provisions of the AICPA’s Statement of Position 81-1 *—Accounting
        for Performance of Construction-Type and Certain Production-Type
        Contracts* .
        We
        recognize revenues using the percentage of completion method of accounting
        by
        relating contract costs incurred to date to the total estimated costs at
        completion. Contract price and cost estimates are reviewed periodically as
        work
        progresses and adjustments proportionate to the percentage of completion
        are
        reflected in contract revenues and gross profit in the reporting period when
        such estimates are revised. This method of revenue recognition requires we
        prepare estimates of costs to complete contracts in progress. In making such
        estimates, judgments are required to evaluate contingencies such as potential
        variances in schedule, the cost of materials and labor, and productivity;
        and
        the impact of change orders, liability claims, contract disputes, and
        achievement of contractual performance standards which may result in revisions
        to costs and income and are recognized in the period in which the revisions
        are
        determined. Provisions for estimated losses on uncompleted contracts are
        made in
        the period in which such losses are determined. The asset, “costs and estimated
        earnings in excess of billings,” represents revenues recognized in excess of
        amounts billed. The liability, “billings in excess of costs and estimated
        earnings,” represents billings in excess of revenues recognized.
 
 **Recent
        Accounting Pronouncements**
 
 In
        February 2007, the FASB issued SFAS No. 159, *“The
        Fair Value Option for Financial Assets and Financial Liabilities, Including
        an
        Amendment of FASB Statement No. 115”* ,
        under
        which entities will now be permitted to measure many financial instruments
        and
        certain other assets and liabilities at fair value on an
        instrument-by-instrument basis. This Statement is effective as of the beginning
        of an entity's first fiscal year that begins after November 15, 2007. Early
        adoption is permitted as of the beginning of a fiscal year that begins on
        or
        before November 15, 2007, provided the entity also elects to apply the
        provisions of SFAS 157. The adoption of SFAS 159 did not have a material
        impact on our results of operations, financial position or
        liquidity.
 
 In
        September 2006, the EITF reached a consensus on EITF Issue No. 06-1, *Accounting
        for Consideration Given by a Service Provider to Manufacturers or Resellers
        of
        Equipment Necessary for an End-Customer to Receive Service from the Service
        Provider* (EITF 06-1).
        EITF 06-1 provides that consideration provided to the manufacturers or
        resellers of specialized equipment should be accounted for as a reduction
        of
        revenue if the consideration provided is in the form of cash and the service
        provider directs that such cash be provided directly to the customer. Otherwise,
        the consideration should be recorded as an expense. The provisions of
        EITF 06-1 are effective on January 1, 2008. The adoption of EITF 06-1
        had no effect on our financial position or results of operations.
 
 In
        June
        2007, the Emerging Issues Task Force of the FASB issued EITF Issue No. 07-3, *Accounting
        for Nonrefundable Advance Payments for Goods or Services to be Used in Future
        Research and Development Activities* ,
        (“EITF
        07-3”) which is effective for fiscal years beginning after December 15, 2007.
        EITF 07-3 requires that nonrefundable advance payments for future research
        and
        development activities be deferred and capitalized. Such amounts will be
        recognized as an expense as the goods are delivered or the related services
        are
        performed. It is expected that adoption of EITF 07-3 will not have a material
        impact on tour results of operations, financial position or
        liquidity.
  In
        December 2007, the FASB issued SFAS No. 141(R), *“Business
        Combinations”* (“SFAS
        141(R)”), which replaces SFAS No. 141. SFAS No. 141(R) establishes principles
        and requirements for how an acquirer recognizes and measures in its financial
        statements the identifiable assets acquired, the liabilities assumed, any
        non-controlling interest in the acquiree and the goodwill acquired. The
        Statement also establishes disclosure requirements which will enable users
        to
        evaluate the nature and financial effects of the business combination. SFAS
        141(R) is effective for fiscal years beginning  after
        December 15, 2008. The adoption of SFAS 141(R) may have an impact on accounting
        for future business combinations once adopted.
  In
        December 2007, the FASB issued SFAS No. 160, *“Non-controlling
        Interests in Consolidated Financial Statements – an amendment of Accounting
        Research Bulletin No. 51”* (“SFAS
        160”), which establishes accounting and reporting standards for ownership
        interests in subsidiaries held by parties other than the parent, the amount
        of
        consolidated net income attributable to the parent and to the non-controlling
        interest, changes in a parent’s ownership interest and the valuation of retained
        non-controlling equity investments when a subsidiary is deconsolidated. The
        Statement also establishes reporting requirements that provide sufficient
        disclosures that clearly identify and distinguish between the interests of
        the
        parent and the interests of the non-controlling owners. SFAS 160 is effective
        for fiscal years beginning after December 15, 2008. We have not determined
        the
        effect that the application of SFAS 160 will have on our financial
        statements.
  31
  
 In
        March 2008, the FASB issued SFAS 161, “ *Disclosures
        about Derivative Instruments and Hedging Activities* ” *.* The new
        standard is intended to improve financial reporting about derivative instruments
        and hedging activities by requiring enhanced disclosures to enable investors
        to
        better understand their effects on an entity’s financial position, financial
        performance, and cash flows. It is effective for financial statements issued
        for
        fiscal years and interim periods beginning after November 15, 2008, with
        early application encouraged. We are currently evaluating the impact of adopting
        SFAS 161 on our consolidated financial statements.
 
 **Results
        of Operations**
 
 ***Comparison
        of Three and Nine Months Ended March 31, 2008 and March 31, 2007.***
 
 The
        following table sets forth the results of our operations for the periods
        indicated:
 **For the Three months**
                
                **For the Nine months****Ended March 31,**
                
                **Ended March 31,****2008**
                
                **2007**
                
                **2008**
                
                **2007**(Unaudited)
                
                (Unaudited)
                
                (Unaudited)
                
                (Unaudited)**NET
                    REVENUES:**Construction
                
                $
                3,524,291
                
                $
                6,459,40
                
                $
                17,585,684
                
                $
                18,052,407Hotel
                
                
                766,158
                
                
                679,493
                
                
                2,339,870
                
                
                1,910,049Real
                    Estate
                
                
                304,755
                
                
                2,606
                
                
                1,560,283
                
                
                407,946**Total
                    Revenues**
                
                
                4,595,204
                
                
                7,141,503
                
                
                21,485,837
                
                
                20,370,402**COST
                    OF SALES:**Construction
                
                
                3,027,432
                
                
                5,369,856
                
                
                14,895,208
                
                
                15,084,056Hotel
                
                
                456,677
                
                
                364,390
                
                
                1,318,281
                
                
                1,001,087Real
                    Estate
                
                
                196,377
                
                
                1,843
                
                
                938,406
                
                
                288,644**Total
                    Cost of sales**
                
                
                3,680,486
                
                
                5,736,089
                
                
                17,151,895
                
                
                16,373,787**GROSS
                    PROFIT**
                
                
                914,718
                
                
                1,405,414
                
                
                4,333,942
                
                
                3,996,615**OPERATING
                    EXPENSES:**Hotel
                    operating expenses
                
                
                19,347
                
                
                78,077
                
                
                75,661
                
                
                222,655Bad
                    debt expense
                
                
                489,184
                
                
                -
                
                
                796,875
                
                
                481,763Salaries
                    and employee benefits
                
                
                231,264
                
                
                34,272
                
                
                550,262
                
                
                129,840Depreciation
                    and amortization
                
                
                135,010
                
                
                83,357
                
                
                361,126
                
                
                216,063General
                    and administrative
                
                
                85,344
                
                
                18,407
                
                
                369,071
                
                
                81,823**Total
                    Operating Expenses**
                
                
                960,649
                
                
                214,113
                
                
                2,152,995
                
                
                1,132,144**INCOME
                    (LOSS) FROM OPERATIONS**
                
                
                (45,931
                )
                
                1,191,301
                
                
                2,180,947
                
                
                2,864,471**OTHER
                    INCOME (EXPENSE):**Other
                    income (expense)
                
                
                (26
                )
                
                2,426
                
                
                (1,698
                )
                
                339Registration
                    rights penalty
                
                
                (55,000
                )
                
                -
                
                
                (55,000
                )
                
                -Interest
                    income
                
                
                4,992
                
                
                -
                
                
                7,106
                
                
                553Interest
                    expense
                
                
                (565,973
                )
                
                (67,823
                )
                
                (858,378
                )
                
                (186,600
                )**Total
                    Other Income (Expense)**
                
                
                (616,007
                )
                
                (65,397
                )
                
                (907,970
                )
                
                (185,708
                )**INCOME
                    (LOSS) BEFORE INCOME TAX**
                
                
                (661,938
                )
                
                1,125,904
                
                
                1,272,977
                
                
                2,678,763**INCOME
                    TAX**
                
                
                149,851
                
                
                704,945
                
                
                880,708
                
                
                1,041,857**NET
                    INCOME (LOSS)**
                
                $
                (811,789
                )
                $
                420,959
                
                $
                392,269
                
                $
                1,636,906
  32
 
 ***Nine
        months ended March 31, 2008 compared to nine months ended March 31,
        2007***
 
 ***Net
        Revenues*** *.* Overall,
        for the nine months ended March 31, 2008, our net revenues decreased $1,115,435
        or approximately 5.5% from the comparable period in fiscal 2007. The following
        table provides information on the percentage of our net revenues in each
        period
        which are attributable to our three reporting segments:
 **Nine Months Ended**
                
                **%****2008**
                
                **2007**
                
                **Change(+/-)****(unaudited)**Jin
                    Ma Construction
                
                
                81.8
                %
                
                88.6
                %
                
                -6.8
                %Jin
                    Ma Hotel
                
                
                10.9
                %
                
                9.4
                %
                
                +1.5
                %Jim
                    Ma Real Estate
                
                
                7.3
                %
                
                2.0
                %
                
                +5.3
                %Total
                
                
                100.0
                %
                
                100.0
                %
 
 The
          overall decrease in net revenues in the nine month period was mainly due
          to a decrease in revenues from Jin Ma Construction of approximately 2.6% in
          the 2008 period from the 2007 period resulting from the use of our construction
          resources in connection with the construction of buildings for the Inner
          Mongolia Electrical Vocational Technical School ,
          which
          we are constructing on behalf of our Jin Ma Real Estate segment which will
          be
          leased to the vocational school for a period of 26 years. The costs associated
          with this project are reflected on our balance sheet as construction in
          process
          and we will not recognize any revenues on this project until the project
          is
          complete and we begin receiving lease income. We estimate that this project
          should be completed in August 2008. Jin Ma Construction completed the Xiao
          Kang
          Xin Cun Residential apartment project
          during the nine months ended March 31, 2008 and began another new project
          during
          the period. Two construction projects, Xiao Kang Xin Cun Residential Apartments
          (Phase I and II) (also known as Ta Bu Ban) and the River Bank Garden Community
          represented approximately 43.3% and approximately 31.8%, respectively,
          of Jin Ma
          Construction’s revenues for the nine months ended March 31, 2008. The decrease
          in net revenues from Jin Ma Construction during the nine months ended March
          31,
          2008 as compared to the nine months ended March 31, 2007 were offset by
          increases in net revenues in the 2008 period as compared to the 2007 period
          by
          both Jin Ma Hotel and Jin Ma Real Estate. Net revenues for our hotel operations
          increased $429,821 or approximately 22.5% for the nine months ended March
          31,
          2008 from the comparable periods in fiscal 2007, because of an increase
          in
          tourism resulting from the completion of the Muslim Scenic Route through
          Hohhot
          City. Finally, net revenues for our real estate development operation increased
          $1,152,337 or approximately 282% in the nine months ended March 31, 2008
          from
          the comparable period in fiscal 2007 due to the sale of apartments from
          our
          inventory of completed projects.
  ***Cost
        of Sales*** *.* Overall,
        cost of sales as a percentage of net revenues remained relatively constant
        for
        the nine months ended March 31, 2008 as compared to the nine months ended
        March
        31, 2007. Cost of sales from our construction operations as a percentage
        of
        construction segment revenues increased 1% for the nine months ended March
        31,
        2008 from the comparable periods in fiscal 2007. The increase in cost of
        sales
        from our construction operation were partly attributable to increases in
        costs for building supplies, labor costs, and other costs incurred on our
        projects. Cost of sales related to our hotel operation as a percentage of
        hotel
        revenues increased approximately 4.2% for the nine months ended March 31,
        2008
        as compared to the nine months ended March 31, 2007, which was primarily
        attributable to an increase in food costs. These increases were offset by
        a
        decrease in cost of sales as a percentage of net revenues in our real estate
        segment which decreased approximately 10.7% for the nine months ended March
        31,
        2008 from the comparable fiscal 2007 periods. We started to generate revenues
        from this segment during the three month ended December 31 2006 period and
        a
        higher cost of sales as a percentage of net revenues is associated with initial
        start up costs.
 
 ***Gross
        Profit.*** Overall,
        gross profit increased $337,327 or approximately 8.4% for the nine months
        ended
        March 31, 2008 from the nine months ended March 31, 2007. For the nine months
        ended March 31, 2008 our gross profit percentage was 20.2% as compared to
        19.6%
        for the nine months ended March 31, 2007.
 
 ***Operating
        Expenses*** .
        For the
        nine months ended March 31, 2008, overall operating expenses increased
        $1,020,851 or 90.2% as compared to the nine months ended March 31, 2007.
        Our
        total operating expenses were approximately 10% of our total net revenues
        in the
        2008 period as compared to approximately 5.6% in the 2008 period. This increase
        was mainly due to increases in salaries and employee benefits, bad debt,
        depreciation expense, and other general and administrative expenses offset
        by a
        decrease in hotel operating expenses and bad debt as discussed
        below.
  33





***Hotel
      Operating Expenses*** *.* Hotel
      operating expenses decreased by $146,994 or approximately 66% for the nine
      months ended March 31, 2008 as compared to the nine months ended March 31,
      2007.
      Hotel operating expenses were approximately 3% of revenues from this segment
      for
      the nine months ended March 31, 2008 as compared to approximately 12% for the
      nine months ended March 31, 2007 due to the write off of supply inventory in
      the
      2007 period for which there was not a comparable expense in the 2008 period.





***Bad
      Debt Expense*** *.* For the
      nine months ended March 31, 2008, bad debt expense amounted to $796,875 as
      compared to $481,763 for the nine months ended March 31, 2007, an increase
      of
      $315,112 or approximately 65.4%. We have a policy of reserving for uncollectible
      accounts based on our best estimate of the amount of probable credit losses
      in
      our existing accounts and other receivables. We periodically review our accounts
      receivable and other receivables to determine whether an allowance is necessary
      based on an analysis of past due accounts and other factors that may indicate
      that the realization of an account may be in doubt. Account balances deemed
      to
      be uncollectible are charged to the allowance after all means of collection
      have
      been exhausted and the potential for recovery is considered remote. We are
      currently reviewing our credit policies and began aggressively pursuing overdue
      accounts.





***Salaries
      and Employee Benefits*** .  During
      the fiscal 2008 periods our salaries and employee benefits increased $420,422
      or
      approximately 323% as compared from the comparable period in fiscal 2007, as
      we
      increased the number of our employees. These increases included increases in
      our
      accounting staff and administrative staff to meet the needs of becoming a public
      entity as well as increases in real estate sales staff as our sales in this
      segment increased.





***Depreciation
      and Amortization*** .  For
      the nine months ended March 31, 2008, depreciation and amortization increased
      $145,063 or approximately 67%, respectively, from the comparable periods in
      fiscal 2007 relating to the acquisition of construction equipment in the current
      period.





***General
      and Administrative Expenses*** .  General
      and administrative expenses consist of office expenses and supplies, utilities,
      insurance, telephone and communications, maintenance and automobile expense
      as
      well as expenses incurred to operate our company in the US. General and
      administrative expenses increased $287,248 or 351% for the nine months ended
      March 31, 2008 as compared to the nine months ended March 31, 2007. The increase
      was attributable to a significant increase in professional fees of $189,563
      and
      an increase in other general and administrative expenses.





***Total
      Other Expense*** .
      Total
      other expense increased $722,262 or approximately 389% for the nine months
      ended
      March 31, 2008 from the comparable period in fiscal 2007. The increase is
      primarily attributable to an increase in interest expense of approximately
      $615,000 related to amortization of debt discount and deferred debt costs and
      the payment interest on our 10% Secured Convertible Debentures in November
      2007
      and the accrual of a registration rights penalty of $55,000 during the 2008
      period.





***Net
      Income*** **.** Net
      income decreased $1,244,637 or 76% from a net income of $1,636,906 for the
      nine
      months ended March 31, 2007 to net income of $392,269 for the nine months ended
      March 31, 2008. The decrease for the nine months ended March 31, 2008 as
      compared to the comparable periods in fiscal 2007 was due primarily to an
      increase in operating expenses and an increase in interest expense. This
      translates to basic per common share of $0.01 and $0.03, and diluted net income
      per common share of $0.01 and $0.03, for the nine months ended March 31, 2008
      and 2007, respectively.





***Comprehensive
      Income.*** For the
      nine months ended March 31, 2008 we reported unrealized gain on foreign currency
      translation of $1,173,805 as compared to $291,400 for the nine months ended
      March 31, 2007 which reflects the effect of the declining value of the U.S.
      dollar. These gains are non-cash items. As described elsewhere herein, our
      functional currency is the Chinese Renminbi; however the accompanying
      consolidated financial statements have been translated and presented in U.S.
      dollars using period-end rates of exchange for assets and liabilities, and
      average rates of exchange for the period for revenues, costs, and expenses.
      Net
      gains and losses resulting from foreign exchange transactions are included
      in
      the consolidated statements of operations and can have a significant effect
      on
      our financial statements. As a result of this non-cash gain, we reported
      comprehensive income of $1,566,074 for the nine months ended March 31, 2008
      as
      compared to $1,928,306 for comparable fiscal 2007 period.


34





***Three
      Months ended March 31, 2008 compared to three months ended March 31,
      2007***





***Net
      Revenues*** *.* Overall,
      for the three months ended March 31, 2008, our net revenues decreased $2,935,113
      or approximately 41% from the comparable period in fiscal 2007. The following
      table provides information on the percentage of our net revenues in each period
      which are attributable to our three reporting segments:





**Three
                Months Ended****2008**
            
            **2007**
            
            **%
                Change**
              **(+/-)****(unaudited)**Jin
                Ma Construction
            
            
            76.7
            %
            
            90.4
            %
            
            -13.7
            %Jin
                Ma Hotel
            
            
            16.7
            %
            
            9.5
            %
            
            +7.2
            %Jim
                Ma Real Estate
            
            
            6.6
            %
            
            7.1
            %
            
            -0.5
            %Total
            
            
            100.0
            %
            
            100.0
            %




For
        the
        three months ended March 31, 2008, we had a decrease in revenues in construction
        segment of $2,935,000 or approximately 44% from the comparable periods in
        fiscal
        2007. As set forth above, the decrease in net revenues in the three month
        period
        was mainly due to the use of our construction resources in connection with
        the construction of buildings for the Inner
        Mongolia Electrical Vocational Technical School. One construction
        project, River Bank Garden Community represented approximately 88% of Jin
        Ma
        Construction’s revenues for the nine months ended March 31, 2008. We
        completed our construction project, Xiao
        Kang
        Xin Cun Residential Apartments (Phase I and II) (also known as Ta Bu Ban),
        in
        December 2007. Revenues for our
        hotel operations increased $86,665 or approximately 13% in the three months
        ended March 31, 2008 because of an increase in tourism resulting from the
        completion of the Muslim Scenic Route through Hohhot City. Finally, revenues
        for
        our real estate development operation increased $302,149 for the three months
        ended March 31, 2008 from the comparable period in fiscal 2007 due to the
        sale
        of inventory of unit held for sale which we did not have in the prior
        period.


***Cost
      of Sales*** *.* Overall,
      cost of sales as a percentage of net revenues remained relatively constant
      for
      the three months ended March 31, 2008 as compared to the three months ended
      March 31, 2007. Cost of sales from our construction operation as a percentage
      of
      construction revenues increased 2.8% for the three months ended March 31, 2008
      from the comparable periods in fiscal 2007 partly attributable to increases
      in costs for building supplies, labor costs, and other costs incurred on our
      projects. Cost of sales as a percentage of revenues for our hotel operation
      increased approximately 6% for the three months ended March 31, 2008 as compared
      to the three months ended March 31, 2007, which was primarily attributable
      to an
      increase in food costs. Cost of sales for our real estate development operation
      as a percentage of real estate revenues decreased approximately 6.3% for the
      three months ended March 31, 2008. We started to generate revenues from this
      segment during the three month ended December 31 2006 period and a higher cost
      of sales as a percentage of net revenues is associated with initial start up
      costs.




***Gross
      Profit.*** Overall,
      gross profit decreased $490,696 or approximately 35% for the three months ended
      March 31, 2008 from the comparable period in fiscal 2007. For the three months
      ended March 31, 2008 our gross profit percentage was 19.9% as compared to 19.7%
      for the three months ended March 31, 2007.





***Operating
      Expenses*** .
      For the
      three months ended March 31, 2008, overall operating expenses increased $746,536
      or approximately 348.7% as compared to the three months ended March 31, 2007.
      Our total operating expenses were approximately 20.9% of our total net revenues
      in the 2008 period as compared to approximately 3.0% in the 2008 period. These
      increases these increases were mainly due to increases in salaries and employee
      benefits, depreciation expense, and bad debt expenses and other general and
      administrative expenses offset by a decrease in hotel operating expenses, bad
      debt and general and administrative expenses as discussed below.





***Hotel
      Operating Expenses*** *.* Hotel
      operating expenses decreased by $58,730 or approximately 75% for the three
      months ended March 31, 2008 from the comparable period in fiscal 2006. Hotel
      operating expenses were approximately 3% of revenues from this segment for
      the
      three months ended March 31, 2008 as compared to approximately 11.5% for the
      three months ended March 31, 2007 due to the write off of supply inventory
      in
      the 2007 period for which there was no comparable expense in the 2008 period.





***Bad
      Debt Expense*** *.* For the
      three months ended March 31, 2008, bad debt expense amounted to $489,184 as
      compared to $0 for the three months ended March 31, 2007. We have a policy
      of
      reserving for uncollectible accounts based on our best estimate of the amount
      of
      probable credit losses in our existing accounts and other receivables. We
      periodically review our accounts receivable and other receivables to determine
      whether an allowance is necessary based on an analysis of past due accounts
      and
      other factors that may indicate that the realization of an account may be in
      doubt. Account balances deemed to be uncollectible are charged to the allowance
      after all means of collection have been exhausted and the potential for recovery
      is considered remote. We are currently reviewing our credit policies and began
      aggressively pursuing overdue accounts.


35





***Salaries
      and Employee Benefits*** .  During
      the three months ended March 31, 2008, our salaries and employee benefits
      increased $197,492 or approximately 575% as compared from the comparable period
      in fiscal 2007, as we increased the number of our employees. These increases
      included increases in our accounting staff and administrative staff to meet
      the
      needs of becoming a public entity as well as increases in real estate sales
      staff as our sales in this segment increased.





***Depreciation
      and Amortization*** .  For
      the three months ended March 31, 2008, depreciation and amortization increased
      $51,653 or approximately 62% from the comparable periods in fiscal 2007 relating
      to the acquisition of construction equipment in the current period.





***General
      and Administrative Expenses*** .  General
      and administrative expenses consist of office expenses and supplies, utilities,
      telephone and communications, maintenance, insurance and automobile expense
      as
      well as expenses incurred to operate our company in the US. General and
      administrative expenses increased significantly in the three months ended March
      31, 2008 to $85,344 from $18,407 for the three months ended March 31, 2007
      as a
      result of significant increases in our offices supplies, insurance coverage,
      travel and other expenses to meet the needs of becoming a public entity.





***Total
      Other Expense*** .
      Total
      other expense increased $550,610 or 842% for the three months ended March 31,
      2008 from the three months ended March 31, 2007. The increase is primarily
      attributable to an increase in interest expense of related to amortization
      of
      debt discount and deferred debt costs and the payment interest on our 10%
      Secured Convertible Debentures in November 2007 and the accrual of a
      registration rights penalty of $55,000 during the 2008 period.





***Net
      Income*** **.** For the
      three months ended March 31, 2008, we incurred a net loss of $811,789 as
      compared to net income of $420,959 for the three months ended March 31, 2007.
      This translates to basic income (loss) per common share of $(0.02) and $0.01,
      and diluted net income (loss) per common share of $(0.01) and $0.01, for the
      three months ended March 31, 2008 and 2007, respectively.





***Comprehensive
      Income.*** For the
      three months ended March 31, 2008 we reported unrealized gain on foreign
      currency translation of $615,780 as compared to $98,779 for the three months
      ended March 31, 2007. These gains are non-cash items. As described elsewhere
      herein, our functional currency is the Chinese Renminbi; however the
      accompanying consolidated financial statements have been translated and
      presented in U.S. dollars using period-end rates of exchange for assets and
      liabilities, and average rates of exchange for the period for revenues, costs,
      and expenses. Net gains and losses resulting from foreign exchange transactions
      are included in the consolidated statements of operations and can have a
      significant effect on our financial statements. As a result of this non-cash
      gain, we reported comprehensive loss of $196,009 for the three months ended
      March 31, 2008 as compared to $519,738 for comparable fiscal 2007.





**Liquidity
      and Capital Resources**





Liquidity
      is the ability of a company to generate funds to support its current and future
      operations, satisfy its obligations and otherwise operate on an ongoing basis.





At
      March
      31, 2008, we had a cash balance of $2,029,847. Total cash of $2,011,656 is
      located in financial institutions in China under the control of the Jin Ma
      Companies, with the balance maintained in U.S. accounts which is under our
      control.





Our
      working capital position increased $2,766,237 to $6,905,108 at March 31, 2008
      from $4,238,508 at June 30, 2007. This increase in working capital is primarily
      attributable to net proceeds of approximately $4,198,000 from the sales of
      our
      securities and from net proceeds from convertible debt and an increase in
      construction in process of $2,864,300 offset by an increase in convertible
      debt
      (net of debt discount) of $545,750 and an increase in accounts payable of
      approximately $2,700,000. We have lent $1,800,000 of the net proceeds received
      from our convertible debt to the Jin Ma Companies, which they are using as
      working capital for their current operations and to fund their registered
      capital requirements under PRC wholly-owned foreign enterprise rules. These
      advances are unsecured and interest free. Upon receipt of additional funds
      from
      the second closing of the sale of our 10% Secured Convertible Debentures, we
      intend to transfer additional funds to the Jin Ma Companies. It is anticipated
      that this advance will also be unsecured and interest free. There has been
      no
      repayment schedule fixed for the funds advanced to date to the Jin Ma Companies
      and we do not anticipate that a repayment schedule will be established for
      any
      additional funds we should advance.


36





Our
      current assets increased $4,441,856 at March 31, 2008 from June 30, 2007. This
      increase includes:





·
            At
                March 31, 2008, cash balance was $2,029,847 as compared to $251,044
                at
                June 30, 2007, an increase of $1,778,803.





·
            At
                March 31, 2008 current portion of accounts receivable, net of allowance
                for doubtful accounts, was $5,443,228 as compared to $5,246,986 at
                June
                30, 2007, an increase of $196,242 and was attributable to our construction
                segment. We anticipate that the balance of these accounts receivable
                will
                be paid in accordance with each of their
                terms.





·
            Our
                inventory of real estate held for sale at March 31, 2008 was $389,705
                as
                compared to $1,149,906 at June 30, 2007, a decrease of $176,230.
                We will
                continue to sell our current inventory of real estate. If we sell
                our
                remaining inventory of real estate and have no additional units in
                our
                inventory, our cash flows from the sale of real estate inventory
                may
                decrease.





·
            During
                the nine months ended March 31, 2008, we capitalized construction
                cost in
                connection to the development of building for the Inner Mongolia
                Electrical Vocational Technical School of $2,864,300. In November
                2007,
                Jin Ma Real Estate entered into an agreement with the Vocational
                School to
                construct various student dormitory buildings at the school’s new
                location. Jin Ma Real Estate is responsible for all costs associated
                with
                the completion of the student dormitory buildings which are being
                constructed by Jin Ma Construction. Pursuant to this agreement, upon
                completion of the construction project, Jin Ma Real Estate will lease
                these buildings to the Vocational School for a period of 26 years
                at an
                annual amount of 4,800,000 RMB or approximately $685,000. During
                the lease
                term, Jin Ma Real Estate will not have any other participation or
                obligations to the school. At the end of the lease, the title to
                the
                buildings will be transferred to the Vocational
                School.




Our
        balance sheet at March 31, 2008 also reflects notes payable to third parties
        of
        approximately $1,688,360 due through September 2012 which was a working capital
        loan made to us by these third pa **rt** ies.
        These loans bear annual interest rates ranging from 14.4% to 18% and are
        unsecured. In October and November 2007, we paid these third parties accrued
        interest due of approximately $786,000.


Our
        balance sheet at March 31, 2008 reflects a due from related parties of $871,602
        which represents advances to a related party for working capital. These advances
        could also be deemed to be in violation of Section 402 of the Sarbanes Oxley
        Act
        of 2002 which prohibits a public company from extending or maintaining credit
        or
        arranging for the extension of credit in the form of a "personal loan" to
        an
        officer or director. If it is determined that these working capital advances
        violated Section 402 of the Sarbanes Oxley Act of 2002, we could become subject
        to SEC investigations and/or litigation, which may not be resolved favorably
        and
        will require significant management time and attention, and we could incur
        costs, which could negatively affect our business, results of operations
        and
        cash flows. While at June 30, 2007 it was management’s intent to collect these
        amounts prior to December 31, 2007, the balances have yet to be repaid and
        there
        is no indication that the related party receivable balances will be repaid
        within one year. Accordingly, we have reclassified these balances to a long-term
        receivable.




Net
      cash
      flow provided by operating activities was $621,580 for the nine months ended
      March 31, 2008 as compared to net cash provided $1,382,601 for the nine months
      ended March 31, 2007, a decrease of $761,021. The decrease in net cash flow
      provided by operating activities in the 2008 period as compared to the 2007
      period was primarily due to an increase in advances to suppliers of $1,108,890,
      the increase in cash used to fund construction in process of $2,719,216, the
      payment of accounts payable and accrued expenses of $642,811, including the
      payment of accrued interest of approximately $786,000 and a decrease in advances
      from customers of $459,089 offset by an increase in our net income.





Net
      cash
      flow used in investing activities was $3,160,851 for the nine months ended
      March
      31, 2008 as compared to cash used in investing activities of $942,675 for the
      nine months ended March 31, 2007. For the nine months ended March 31, 2008,
      cash
      used in investing activities consisted of cash used for the purchase of property
      and equipment of $1,900,345, $854,866 which included heavy equipment for our
      construction segment and the payments of a deposit on land use rights of
      $1,351,923, offset by an increase in due from related parties of $83,424. For
      the nine months ended March 31, 2007, cash used in investing activities
      consisted of an increase in cash used for the purchase of property and equipment
      and deposits on land use rights of $660,998.




Net
      cash
      flow provided by financing activities was $4,202,927 for the nine months ended
      March 31, 2008 which was primarily attributable to proceeds received from the
      sale of our common stock of $2,219,252 and net proceeds from convertible debt
      of
      $2,183,000 offset by a repayment of loans payable of $135,192 and a payment
      of
      placement fees of $204,640. For the nine months ended March 31, 2007, we used
      cash for the repayment of related party advances of
      $221,753.


37





We
      have
      no operations other than the Contractual Arrangements with the Jin Ma Companies
      and, accordingly, we are dependent upon the quarterly service fees due us to
      provide cash to pay our operating expenses. Such payments have not been tendered
      to us and those funds are being retained by the Jin Ma Companies to fund their
      operations. At March 31, 2008 the Jin Ma Companies owned us approximately
      $1,900,000 for such fees and we do not know when such funds will be paid to
      us.
      Our CEO is also the CEO and principal shareholder of the Jin Ma Companies.
      Accordingly, we are solely reliant upon his judgment to ensure that these funds
      advanced to the Jin Ma Companies are repaid to us. If these funds should not
      be
      repaid, or if the Jin Ma Companies should continue to withhold payment of the
      quarterly service fee due us under the Contractual Arrangement, it is possible
      that we will not have sufficient funds to pay our operating expenses in future
      periods.





Other
      than our existing cash we presently have no other alternative source of working
      capital. We currently have no material commitments for capital expenditures
      but
      believe that our working capital is sufficient to fund our current operations
      for approximately the next 12 months. The Jin Ma Companies have historically
      funded their capital expenditures and ongoing development projects from their
      working capital and have advised us that they believe this capital is sufficient
      for their current needs. Should these funds prove insufficient, the Jin Ma
      Companies believe that they could secure bank financing at competitive rates
      as
      necessary to provide funding for their committed projects. However, the ability
      of the Jin Ma Companies to raise any significant capital to expand their
      operations is very limited. We believe that it is in our best long term
      interests to assist the Jin Ma Companies in their growth plans. Accordingly,
      it
      is likely that we will seek to raise working capital to fund the further
      expansion of various construction and real estate projects by the Jin Ma
      Companies as the Jin Ma Companies may not have sufficient working capital to
      fund new construction and real estate projects as well as to provide working
      capital necessary for their current projects, ongoing operations and financial
      obligations. No assurances can be given that we will be successful in obtaining
      additional capital, or that such capital will be available in terms acceptable
      to our company.





**Contractual
      Obligations and Off-Balance Sheet Arrangements**




*Contractual
      Obligations*




We
      have
      certain fixed contractual obligations and commitments that include future
      estimated payments. Changes in our business needs, cancellation provisions,
      changing interest rates, and other factors may result in actual payments
      differing from the estimates. We cannot provide certainty regarding the timing
      and amounts of payments. We have presented below a summary of the most
      significant assumptions used in our determination of amounts presented in the
      tables, in order to assist in the review of this information within the context
      of our consolidated financial position, results of operations, and cash
      flows.





The
      following tables summarize our contractual obligations as of December 31, 2007,
      and the effect these obligations are expected to have on our liquidity and
      cash
      flows in future periods.


**Payments
                  Due by Period****Total**
              
              **Less
                  than 1**
                **year**
              
              **1-3
                  Years**
              
              **4-5
                  Years**
              
              **5
                  Years +**Contractual
                  Obligations :Other
                  Indebtedness *
              
              $
              $1,688,360
              
              $
              142,406
              
              $
              1,246,902
              
              $
              299,052
              
              
              —Convertible
                  debt
              
              $
              2,183,000
              
              
              2,183,000
              
              
              —
              
              
              —
              
              
              —Purchase
                  obligations
              
              $
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Total
                  Contractual Obligations:
              
              $
              $3,871,360
              
              $
              2,325,406
              
              $
              1,246,902
              
              $
              299,052
              
              
              -




·
            Other
                indebtedness includes long-time loans borrowed from
                individuals.





*Off-balance
      Sheet Arrangements*





We
      have
      not entered into any other financial guarantees or other commitments to
      guarantee the payment obligations of any third parties. We have not entered
      into
      any derivative contracts that are indexed to our shares and classified as
      stockholder's equity or that are not reflected in our consolidated financial
      statements. Furthermore, we do not have any retained or contingent interest
      in
      assets transferred to an unconsolidated entity that serves as credit, liquidity
      or market risk support to such entity. We do not have any variable interest
      in
      any unconsolidated entity that provides financing, liquidity, market risk or
      credit support to us or engages in leasing or hedging services with
      us.


38





ITEM
      3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





Not
      applicable to a smaller reporting company.





ITEM
      4.
      CONTROLS AND PROCEDURES





As
      required by Rule 13a-15 under the Securities Exchange Act of 1934, as of March
      31, 2008, the end of the period covered by this report, our management concluded
      its evaluation of the effectiveness of the design and operation of our
      disclosure controls and procedures. Disclosure controls and procedures are
      controls and procedures designed to reasonably assure that information required
      to be disclosed in our reports filed under the Securities Exchange Act of 1934,
      such as this report, is recorded, processed, summarized and reported within
      the
      time periods prescribed by SEC rules and regulations, and to reasonably assure
      that such information is accumulated and communicated to our management,
      including our Chief Executive Officer and Chief Financial Officer, to allow
      timely decisions regarding required disclosure.





Our
      management does not expect that our disclosure controls and procedures will
      prevent all error and all fraud. A control system, no matter how well designed
      and operated, can provide only reasonable, not absolute, assurance that the
      control system’s objectives will be met. Further, the design of a control system
      must reflect the fact that there are resource constraints, and the benefits
      of
      controls must be considered relative to their costs. Because of the inherent
      limitations in all control systems, no evaluation of controls can provide
      absolute assurance that all control issues and instances of fraud, if any,
      have
      been detected. These inherent limitations include the realities that judgments
      in decision-making can be faulty, and that breakdowns can occur because of
      simple error or mistake. The design of any system of controls 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.





As
      of the
      evaluation date, our Chief Executive Officer and Chief Financial Officer
      concluded that we do not maintain disclosure controls and procedures that are
      effective in providing reasonable assurance that information required to be
      disclosed in our reports under the Securities Exchange Act of 1934 is recorded,
      processed, summarized and reported within the time periods prescribed by SEC
      rules and regulations, and that such information is accumulated and communicated
      to our management, including our Chief Executive Officer and Chief Financial
      Officer, to allow timely decisions regarding required disclosure. In May 2008
      we
      were required to restate our financial statements at December 31, 2007 and
      for
      the three and six months then ended to correct an accounting error to properly
      reflect the accounting for the vocational school construction project that
      Jin
      Ma Construction is currently constructing. We originally recorded this project
      as a third-party construction project pursuant to our normal revenue recognition
      policies. However, because Jin Ma Real Estate is a party to an agreement to
      lease these buildings to a third party for a period of 26 years, we have
      subsequently determined that the proper accounting for this construction project
      should have been to reflect the costs incurred to date a construction ion
      process as part of our property and equipment and to eliminate any revenues,
      cost of sales and related gross profit. This control deficiency in our ability
      to properly record construction in progress is a material weakness in both
      our
      disclosure controls and procedures and our internal control over financial
      reporting. While we have taken certain remedial steps to correct these control
      deficiencies, we have an inadequate number personnel in China with the requisite
      expertise in generally accepted accounting principles to ensure the proper
      application thereof. Due to the nature of these material weaknesses in our
      internal control over financial reporting, there is more than a remote
      likelihood that misstatements which could be material to our annual or interim
      financial statements could occur that would not be prevented or
      detected.





Other
      than changes associated with our recordation of construction in progress, there
      have been no changes in our internal control over financial reporting that
      has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.





PART
      II -
      OTHER INFORMATION





Item
              1.
            Legal
                Proceedings.





None.





Item
              1A.
            Risk
                Factors.





Not
      applicable to a smaller reporting company.


39





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





None.





Item
              3.
            Defaults
                Upon Senior Securities.





None.





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





None.





Item
              5.
            Other
                Information.





None.





Item
              6.
            Exhibits





31.1  Rule
      13a-14(a)/15d-14(a) certification of Chief Executive Officer


31.2  Rule
      13a-14(a)/15d-14(a) certificate of Chief Financial Officer


32.1  Section
      1350 certification of Chief Executive Officer


32.2  Section
      1350 certification of Chief Financial Officer





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.





Gold
                Horse International, Inc.Date:
                May 20, 2008
            By:
                /s/ Liankuan YangLiankuan
                YangChief
                Executive Officer, Principal Executive OfficerDate:
                May 20, 2008
            By:
                /s/ Adam WassermanAdam
                WassermanChief
                Financial Officer, Principal Financial and Accounting
                officer


40