U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q


Mark One

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

               For the three-month period ended September 30, 2007

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

                For the transition period from ______ to _______


                        COMMISSION FILE NUMBER: 000-33195


                                XINHUA CHINA LTD.
                 ______________________________________________
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)


             NEVADA                                              88-0437644
_________________________________                            ___________________
  (STATE OR OTHER JURISDICTION                                (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)


                         7A-11CHANWAI MEN PROPERTY TRADE
                             CENTER OFFICE BUILDING
                          NO. 26 CHAOYANMEN WEI STREET
                           CHAOYANG DISTRICT, BEIJING
                           PEOPLE'S REPUBLIC OF CHINA
                    ________________________________________
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                                 86-10-85656588
                           ___________________________
                           (ISSUER'S TELEPHONE NUMBER)


SECURITIES REGISTERED PURSUANT TO SECTION         NAME OF EACH EXCHANGE ON WHICH
            12(b) OF THE ACT:                              REGISTERED:

                  NONE


          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                        COMMON STOCK, $0.000025 PAR VALUE
                                (TITLE OF CLASS)


<PAGE>


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

Indicate by checkmark  whether the  registrant  is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.

Large accelerated filer [ ]   Accelerated filer [ ]    Non-accelerated filer [X]

Indicate by checkmark  whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act). [ ] Yes [X] No

          APPLICABLE ONLY TO ISSUER INVOLVED IN BANKRUPTCY PROCEEDINGS
                        DURING THE PRECEDING FIVE YEARS.

                                       N/A

Indicate by  checkmark  whether the issuer has filed all  documents  and reports
required to be filed by Section 12, 13 and 15(d) of the Securities  Exchange Act
of 1934 after the distribution of securities under a plan confirmed by a court.
Yes [ ]  No [ ]

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding             Outstanding as of November
of each of the issuer's classes of common             12, 2007
stock, as of the most practicable date:

Class
Common Stock, $0.00025 par value                        54,638,890







                                      -2-


<PAGE>


                                XINHUA CHINA LTD.

                                    FORM 10-Q

          PART I - FINANCIAL INFORMATION                                      5

Item 1.   Financial Statements                                                5

Item 2    Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                               7

Item 3.   Quantitative and Qualitative Discloses About Market Risk           13

Item 4.   Controls and Procedures                                            14

Item 4T.  Controls and Procedures                                            14

          PART II - OTHER INFORMATION                                        14

Item 1.   Legal Proceedings                                                  14

Item 1A.  Risk Factors                                                       14

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds        23

Item 3.   Defaults Upon Senior Securities                                    23

Item 4.   Submission of Matters to a Vote of Security Holders                23

Item 5.   Other Information                                                  23

Item 6.   Exhibits                                                           23







                                      -3-


<PAGE>


                           FORWARD LOOKING STATEMENTS

Statements  made in this Form 10-Q that are not  historical or current facts are
"forward-looking  statements"  made  pursuant to the safe harbor  provisions  of
Section  27A of the  Securities  Act of 1933 (the  "Act") and Section 21E of the
Securities Exchange Act of 1934. These statements often can be identified by the
use  of  terms  such  as  "may,"  "will,"  "expect,"  "believe,"   "anticipate,"
"estimate," "approximate" or "continue," or the negative thereof. We intend that
such  forward-looking  statements  be  subject  to the  safe  harbors  for  such
statements.  We wish to caution  readers not to place undue reliance on any such
forward-looking  statements,   which  speak  only  as  of  the  date  made.  Any
forward-looking  statements represent  management's best judgment as to what may
occur in the future. However,  forward-looking  statements are subject to risks,
uncertainties  and important  factors beyond our control that could cause actual
results and events to differ  materially from  historical  results of operations
and events  and those  presently  anticipated  or  projected.  We  disclaim  any
obligation  subsequently  to revise any  forward-looking  statements  to reflect
events or  circumstances  after the date of such  statement  or to  reflect  the
occurrence of anticipated or unanticipated events.

AVAILABLE INFORMATION

Xinhua China Ltd. files annual,  quarterly,  current reports,  proxy statements,
and  other  information  with  the  Securities  and  Exchange   Commission  (the
"Commission").  You may read and copy  documents  referred to in this  Quarterly
Report on Form 10-Q that have been filed with the Commission at the Commission's
Public Reference Room, 450 Fifth Street, N.W.,  Washington,  D.C. You may obtain
information  on the  operation  of the  Public  Reference  Room by  calling  the
Commission  at  1-800-SEC-0330.  You can also  obtain  copies of our  Commission
filings by going to the Commission's website at http://www.sec.gov.


                                      -4-


<PAGE>




                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS















                                XINHUA CHINA LTD.

                   UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2007

                             (STATED IN US DOLLARS)














                                      -5-


<PAGE>


                                XINHUA CHINA LTD.



CONTENTS                                                                   PAGES

Report of Registered Independent Public Accounting Firm                      F-1

Consolidated Balance Sheet                                                 F-2-3

Consolidated Statement of Income                                             F-4

Consolidated Statement of Stockholders' Equity                               F-5

Consolidated Statement of Cash Flows                                         F-6

Notes to the Financial Statements                                         F-7-20























                                      -6-


<PAGE>


Board of Directors and Stockholders
Xinhua China Ltd.


             REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM

We have reviewed the accompanying  interim consolidated Balance Sheets of Xinhua
China Ltd.  ("the  Company") as of September 30, 2007 and June 30, 2007, and the
related  statements  of  income,  stockholders'  equity,  and cash flows for the
three-months  ended  September  30, 2007 and 2006.  These  interim  consolidated
financial statements are the responsibility of the Company's management.

We conducted our review in accordance  with the standards of the Public  Company
Accounting  Oversight  Board  (United  States).  A review of  interim  financial
information  consists  principally of applying analytical  procedures and making
inquiries of persons  responsible  for financial and accounting  matters.  It is
substantially  less in scope  than an audit  conducted  in  accordance  with the
standards of the Public Company  Accounting  Oversight  Board,  the objective of
which is the expression of an opinion  regarding the financial  statements taken
as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the accompanying interim  consolidated  financial statements for them
to be in conformity with U.S. generally accepted accounting principles.







South San Francisco, California                     Samuel H. Wong & Co., LLP
November 3, 2007                                    Certified Public Accountants







                                      F-1


<PAGE>

<TABLE>
<CAPTION>


                                XINHUA CHINA LTD.
                           CONSOLIDATED BALANCE SHEETS
                   AS OF SEPTEMBER 30, 2007 AND JUNE 30, 2007
                             (STATED IN US DOLLARS)

                                                         NOTES        9/30/2007        6/30/2007
                                                                     __________       __________
<S>                                                        <C>       <C>                   <C>

ASSETS
        CURRENT ASSETS
          Cash and Cash Equivalents                        4         $    3,262            2,733
          Accounts Receivable, NET                                      210,709          185,246
          Receivable from trustee                          5                  -                -
          Note receivable                                  6          1,000,000        1,000,000
          Other receivables and prepayments                7            204,054          201,186
                                                                     __________       __________
             Total Current Assets                                    $1,418,025        1,389,165


        LONG-TERM ASSETS
          Property, Plant & Equipment, NET                 8             11,133           14,094
          Note receivable, long-term portion               6            625,000          625,000
          Distribution network right, NET                                     -                -
          Goodwill, NET                                                       -                -
                                                                     __________       __________
             Total Long-term Assets                                     636,133          639,094
                                                                     __________       __________
             Total Assets                                            $2,054,158       $2,028,259
                                                                     ==========       ==========

LIABILITIES & STOCKHOLDERS' EQUITY

        LIABILITIES
          CURRENT LIABILITIES
          Accounts Payable and Accrued Liabilities         9            732,602          693,207
          Deferred revenue                                               59,659           73,427
          Current portion of loans payable                10          1,787,643        1,787,643
          Due to related parties                                              -                -
                                                                     __________       __________
             Total Current Liabilities                                2,579,904        2,554,277

          LONG-TERM LIABILITIES
          Loans Payable                                   10          1,058,261        1,058,261
          Loans from shareholders                         11          5,144,231        5,080,430
                                                                     __________       __________
             Total Long-term Liabilities                              6,202,492        6,138,691

             Total Liabilities                                        8,782,396        8,692,968
                                                                     __________       __________


               SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.

</TABLE>


                                      F-2


<PAGE>

<TABLE>
<CAPTION>


                                XINHUA CHINA LTD.
                           CONSOLIDATED BALANCE SHEET
                   AS OF SEPTEMBER 30, 2007 AND JUNE 30, 2007
                             (STATED IN US DOLLARS)



                                                 NOTES           2007               2006
                                                             ____________       ____________
<S>                                                          <C>                <C>

Minority Interest                                                       -                  -

STOCKHOLDERS' EQUITY

  Common Stock $0.0001 Par Value
  500,000,000 Shares Authorized;
  54,638,890 issued and outstanding at
  September 30, 2007 and June 30, 2007                                546                546
  Additional Paid in Capital                                   10,520,506         10,423,526
  Accumulated Other Comprehensive
  Income                                                            9,774              8,749
  Accumulated Deficit                                         (17,259,064)       (17,097,530)
                                                             ____________       ____________
      Total Stockholders' (Deficit)/Equity                     (6,728,238)        (6,664,709)
                                                             ____________       ____________

                                                             ____________       ____________
  Total Liabilities & Stockholders' Equity                   $  2,054,158       $  2,028,259
                                                             ============       ============


       SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.

</TABLE>


                                      F-3


<PAGE>

<TABLE>
<CAPTION>


                                XINHUA CHINA LTD.
                        CONSOLIDATED STATEMENTS OF INCOME
                FOR THE QUARTER ENDED SEPTEMBER 30, 2007 AND 2006
                             (STATED IN US DOLLARS)


                                                        NOTE            2007              2006
                                                                     __________       ____________
<S>                                                                  <C>              <C>

REVENUE
      Revenue, NET                                                   $        -       $     50,220
      Revenue, NET - related parties                                          -                  -

COST OF SALES
      Cost of Sales, NET                                                      -             45,449
      Cost of Sales, NET - related parties                                    -                  -
                                                                     __________       ____________
         Gross Profit                                                         -              4,771

OPERATING EXPENSES
      Selling, General, and Administrative
      Expenses                                                           78,301            461,431
      Stock-based Compensation                                                -             68,665
                                                                     __________       ____________
         Total Operating Expense                                         78,301            530,096

                                                                     __________       ____________
      Loss from Operations                                              (78,301)          (525,325)
                                                                     __________       ____________

OTHER INCOME
      Interest Income                                                        11                476

OTHER EXPENSES
      Interest Expense                                                   83,243            771,076
                                                                     __________       ____________
         Loss before minority interest and income                      (161,534)        (1,295,925)

      Minority interest in net loss of
      consolidated subsidiaries                                               -                  -
                                                                     __________       ____________

Loss before Income Tax                                                 (161,534)        (1,295,925)

Income Tax                                                                    -                  -

                                                                     __________       ____________
Net Loss                                                             $ (161,534)      $ (1,295,925)
                                                                     ==========       ============

                                                                     __________       ____________
Net Loss per common share-                                           $    -0.01       $      -0.03
Basic & Diluted Earnings Per Share
                                                                     __________       ____________

Weighted Average Shares Outstanding                                  57,723,668         52,779,765
                                                                     __________       ____________


               SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.

</TABLE>


                                      F-4


<PAGE>

<TABLE>
<CAPTION>


                                XINHUA CHINA LTD.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   AS OF SEPTEMBER 30, 2007 AND JUNE 30, 2007
                             (STATED IN US DOLLARS)


                                      NO.                 ADDITIONAL                         OTHER
                                      OF        COMMON     PAID IN      COMPREHENSIVE    COMPREHENSIVE    ACCUMULATED
                                    SHARES      STOCK      CAPITAL      INCOME(LOSS)     INCOME(LOSS)       DEFICIT          TOTAL
                                  ___________   _____     __________     ___________        _______       ___________    __________
<S>                                <C>            <C>      <C>           <C>                 <C>          <C>            <C>

Balance, July 1, 2006              61,779,765     618      9,684,907     (16,470,021)        19,478       (16,489,500)   (6,784,497)
Additional Paid-in Capital                                   738,619                                                        738,619
Cancellation of outstanding
shares                            (10,000,000)   (100)                                                                         (100)
Issuance of shares to Highgate      2,859,125      28                                                                            28
Foreign Currency translation                                                 (10,729)       (10,729)                        (10,729)
Net Loss for year                                                           (608,030)                        (608,030)     (608,030)
                                  ___________   _____     __________     ___________        _______       ___________    __________
Balance, June 30, 2007             54,638,890     546     10,423,526     (17,088,780)         8,749       (17,097,530)   (6,664,709)
                                  ===========   =====     ==========     ===========        =======       ===========    ==========

Balance, July 1, 2007              54,638,890     546     10,423,526     (17,088,780)         8,749       (17,097,530)   (6,664,709)
Additional Paid-in Capital:
o        Imputed interest from
     Shareholder                                              83,281                                                         83,281
o        Deferred Revenue
     amortized as interest                                    13,699                                                         13,699
                                                          __________                                                     ___________
                                                              96,980                                                         96,980
Foreign Currency translation                                                   1,025          1,025                           1,025
Net Loss for year                                                           (161,534)                                      (161,534)
                                  ___________   _____     __________     ___________        _______       ___________    __________
Balance, September 30, 2007        54,638,890     546     10,520,506     (17,249,289)         9,774       (17,259,064)   (6,728,238)
                                  ===========   =====     ==========     ===========        =======       ===========    ==========


               SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.

</TABLE>


                                      F-5


<PAGE>

<TABLE>
<CAPTION>



                                XINHUA CHINA LTD.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                FOR THE QUARTER ENDED SEPTEMBER 30, 2007 AND 2006
                             (STATED IN US DOLLARS)

                                                                                9/30/2007          6/30/2007
                                                                               ____________       ____________
<S>                                                                            <C>                <C>

CASH FLOW FROM OPERATING ACTIVITIES:
       Net Loss                                                                $   (161,534)      $ (1,295,925)
       Adjustments to reconcile net earnings to net cash provided by
       operating activities:
            Depreciation                                                                 822            12,182
            Stock-based compensation                                                       -            68,665
            Net gain on deconsolidation of a subsidiary                                    -                 -
            Amortization of deferred imputed interest                                 13,768           677,898
            Imputed interest expense                                                  83,213            93,178
            Allowance for doubtful accounts                                                -                 -
            Loss on Vancouver office discontinuation                                       -                  -

       Changes in assets and liabilities:
            Decrease/(Increase) Accounts receivable                                 (25,463)                 -
            Decrease/(Increase) Note Receivable                                            -                 -
            Decrease/(Increase) Other receivables and prepayments                    (2,868)         (232,870)
            Decrease/(Increase) Accounts Payable and accrued liabilities              39,395            19,183
            Decrease/(Increase) in Deferred Revenue Inventory                       (13,768)                 -
                                                                               ____________       ____________
       Net Cash Used in Operating Activities                                     (2,908,974)         (657,689)
                                                                               ____________       ____________

CASH FLOWS FROM INVESTING ACTIVITIES:
       Cash acquired in connection with acquisition of Xinhua C&D                          -                 -
       Deposits received from disposal of a subsidiary                                     -           252,982
       Advances to trustee                                                                 -                 -
       Purchase of plant and equipment                                                     -           (9,681)
                                                                               ____________       ____________
       Net Cash Used in Investing Activities                                               -           243,301
                                                                               ____________       ____________

CASH FLOWS FROM FINANCING ACTIVITIES:
       Contribution from minority interests of Xinhua C&D                                  -                 -
       Common Stocks issued for cash                                                       -                 -
       Proceeds from convertible debenture                                                 -                 -
       Repayment of Loan Payable                                                           -                 -
       Loans from shareholders                                                        63,801           498,665
                                                                               ____________       ____________
       Net Cash Provided by Financing Activities                                      63,801           498,665
                                                                               ____________       ____________


NET INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS FOR THE YEAR                          529            82,562

EFFECT OF CURRENCY TRANSLATION                                                       (3,163)           (1,715)

CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR                                           2,733           224,192

                                                                               ____________       ____________
CASH & CASH EQUIVALENTS AT END OF YEAR                                             $  3,262        $  306,754
                                                                               ============       ============

Cash paid for interest expenses                                                          30                  -
                                                                               ============       ============


               SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.

</TABLE>


                                      F-6


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


1.   ORGANIZATION AND BUSINESS BACKGROUND

     Xinhua  China Ltd.  (the  "Company",  formerly  Camden  Mines  Limited) was
     incorporated in the State of Nevada, United States of America, on September
     14, 1999.  Until  September  2004,  the Company was a  non-operating  shell
     company  and  considered  as  a  development  stage  enterprise  since  its
     inception.  Effective  from  October 12, 2004,  the Company  changed to its
     current  name.  The Company  established  an office in  Vancouver,  Canada;
     however,  this  office  was  closed  down in  December  2006.  The  Company
     established  its  principal  executive  office at A-11 Chaowai Men Property
     Trade Center  Office  Building,  No. 26  Chaoyangmen  Wai Street,  Chaoyang
     District, Beijing, 100020, People's Republic of China.

     On September 22, 2004, the Company's subsidiaries, Pac-Poly Investment Ltd.
     ("Pac-Poly")  and Beijing  Boheng  Investments  and  Management  Co.,  Ltd.
     ("Boheng")  jointly  entered  into  an  Investment  Agreement  ("Investment
     Agreement")  with Xinhua  Bookstore  (Main Store)  ("Xinhua  Bookstore") to
     acquire a 57.67%  interest  in  publication  distribution  business  in the
     People's Republic of China ("PRC").  Pursuant to the Investment  Agreement,
     Xinhua Bookstore  transferred the publication  distribution business into a
     newly formed Chinese company, called Xinhua C&D. Pac-Poly and Boheng agreed
     to contribute $20.9 million (RMB173 million) in cash in exchange for 57.67%
     interest in Xinhua C&D. 20% of $20.9  million is payable  within two months
     of closing the  transaction  and the remaining is payable within six months
     of closing.  The eight other founding member corporations ("Other Investors
     Group")  agreed to contribute  $800,000 (RMB 7 million) in cash in exchange
     for 2.33%  interest  in Xinhua C&D.  20% of $800,000 is payable  within two
     months of closing the  transaction  and the remaining is payable within six
     months of closing.  As of June 30, 2005, a total of $4.34  million was paid
     by Pac-Poly,  Boheng and the other  investors  group in accordance with the
     payment  schedule.  The due date for the remaining cash contribution of 80%
     amounting to $17.36 million  originally  expired on August 1, 2005 has been
     extended  to July 31,  2006.  Pursuant  to a letter of  confirmation  dated
     October 7, 2005,  Xinhua  Bookstore has agreed to reduce the long-term loan
     it  extended  to Xinhua C&D should any  receivables  acquired by Xinhua C&D
     become uncollectible. The acquisition was completed on February 1, 2005.

     As of May 31, 2006, the Company  reduced its equity  interest in Xinhua C&D
     from 56.14% to 7.98% (note 4). Subsequent to the  deconsolidation of Xinhua
     C&D, the Company commenced the internet book distribution  business through
     Beijing Joannes Information  Technology Co., Ltd.  ("Joannes").  Details of
     the Company's subsidiaries as of September 30, 2007 are described below: -

<TABLE>
<CAPTION>

                                            PLACE OF
                                          INCORPORATION                                       PARTICULARS OF        EFFECTIVE
                                           AND KIND OF            PRINCIPAL ACTIVITIES       ISSUED/REGISTERED      INTEREST
                NAME                      LEGAL ENTITY           AND PLACE OF OPERATION        SHARE CAPITAL          HELD
     ___________________________     _______________________     ______________________     _________________       _________
<S>                                  <C>                         <C>                        <C>                       <C>

     Pac-Poly Investment Ltd.        British Virgin Islands,     Investment holding,PRC     10,000,000 ordinary       100%
                                     a company with limited                                 shares of US$1 par
                                     liability                                              value

     Beijing Joannes Information     PRC, a company with         Sales and distribution     Registered capital        100%
     Technology Co., Ltd.            limited liability           of books, PRC              US$1,250,000


</TABLE>


                                      F-7


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


2.   GOING CONCERN UNCERTAINTIES

     These  consolidated  financial  statements have been prepared assuming that
     Company  will  continue  as  a  going  concern,   which   contemplates  the
     realization of assets and the discharge of liabilities in the normal course
     of business for the foreseeable future.

     As of September  30, 2007,  the Company had no working  capital but current
     liabilities  exceeding current assets by $1,161,879,  a negative  operating
     cash flow of $66,435 and an accumulated  deficit of $17,259,064  due to the
     fact that the  Company  continued  to incur  losses  over the past  several
     years.  Management  has taken  certain  action and  continues  to implement
     changes designed to improve the Company's  financial  results and operating
     cash flows. The actions involve certain cost-saving initiatives and growing
     strategies,  including (a)  reductions in headcount and corporate  overhead
     expenses;  and (b) development of e-commerce business.  Management believes
     that these actions will enable the Company to improve future  profitability
     and cash flow in its  continuing  operations  through June 30,  2008.  As a
     result, the financial  statements do not include any adjustments to reflect
     the possible future effects on the  recoverability  and  classification  of
     assets or the amounts and  classification  of  liabilities  that may result
     from the outcome of the Company's ability to continue as a going concern.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (A.) BASIS OF PRESENTATION

          These  accompanying   consolidated   financial  statements  have  been
          prepared in accordance with generally accepted  accounting  principles
          in the United States of America ("US GAAP").

     (B.) USE OF ESTIMATES

          In preparing these consolidated financial statements, management makes
          estimates and assumptions  that affect the reported  amounts of assets
          and liabilities in the balance sheets and revenues and expenses during
          the year reported. Actual results may differ from these Estimates.

     (C.) BASIS OF CONSOLIDATION

          The interest of the Company in the  subsidiaries was acquired by means
          of  exchange of shares in the  Company  pursuant  to a share  exchange
          agreement  on September  14, 2004.  The  transaction  is  considered a
          transfer between entities under common control,  within the meaning of
          US GAAP. Accordingly, the assets and liabilities transferred have been
          accounted for at historical  cost or at their "fair value" at the date
          of their original  acquisition and have been included in the foregoing
          financial statements as of the beginning of the periods presented.

          The consolidated financial statements include the financial statements
          of the Company and its  subsidiaries.  Subsidiaries are those entities
          in which the Company,  directly or indirectly,  controls more than one
          half of the voting  power;  has the power to govern the  financial and


                                      F-8


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


          operating  policies;  to appoint or remove the majority of the members
          of the board of directors; or to cast majority of votes at the meeting
          of directors. All significant  inter-company balances and transactions
          within the Company have been eliminated on consolidation.

     (D.) INVESTMENTS IN UNCONSOLIDATED ENTITIES

          The  investments  in and the  operating  results of  50%-or-less-owned
          entities  not  required  to  be  consolidated   are  included  in  the
          consolidated financial statements on the basis of the equity method of
          accounting  or the cost method of  accounting,  depending  on specific
          facts and circumstances.

          The Company has an investment  in a privately  held entity in the form
          of equity  instruments that are not publicly traded and for which fair
          values  are  not  readily   determinable.   The  Company  records  its
          investment in a private entity under the cost method of accounting and
          assesses the net realizable  value of this entity on a quarterly basis
          to determine if there has been a decline (other than temporary) in the
          fair value of the entity,  under  Statement  of  Financial  Accounting
          Standards  ("SFAS") No. 115,  "ACCOUNTING  FOR CERTAIN  INVESTMENTS IN
          DEBT AND EQUITY SECURITIES".

     (E.) CASH AND CASH EQUIVALENTS

          Cash and cash  equivalents  are carried at cost and represent  cash on
          hand,   demand   deposits   placed  with  banks  or  other   financial
          institutions  and all  highly  liquid  investments  with  an  original
          maturity  of  three  months  or less as of the  purchase  date of such
          investments.

     (F.) ACCOUNTS RECEIVABLE, NET

          Accounts  receivable  are recorded at the  invoiced  amount and do not
          bear interest.  The Company extends  unsecured credit to its customers
          in the ordinary course of business but mitigates the associated  risks
          by performing  credit checks and actively  pursuing past due accounts.
          An allowance for doubtful accounts is established and determined based
          on   managements'   assessment   of  known   requirements,   aging  of
          receivables,   payment   history,   the   customer's   current  credit
          worthiness, and the economic environment.

     (G.) INVENTORIES, NET

          Inventories  consist primarily of books and are stated at the lower of
          cost or net realizable value, with cost being determined on a weighted
          average basis. A majority of the inventories carry the right of return
          to  publishers.   An  allowance  for   slow-moving   inventories   and
          obsolescence  is an  estimate  amount  based on an analysis of current
          business and economic  risks,  the duration of the  inventories  held,
          whether the  inventories  carry the right of return to publishers  and
          other specific  identifiable risks that may indicate a potential loss.
          The  allowance  is reviewed  regularly  to ensure  that it  adequately
          provides for all reasonable expected losses.


                                      F-9


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


     (H.) PROPERTY, PLANT, AND EQUIPMENT, NET

          Property,  plant,  and equipment  are stated at cost less  accumulated
          depreciation and accumulated  impairment losses, if any.  Depreciation
          is calculated on the straight-line  basis over the following  expected
          useful lives from the date on which they become fully operational.

               ASSET CLASSIFICATION                   DEPRECIABLE LIFE
               ____________________                   ________________

               Land use right                         50 years

               Buildings                              50 years

               Equipment and machinery                5 - 8 years

               Motor vehicles                         8 - 10 years

               Leasehold improvement                  2 years

          Expenditure for  maintenance and repairs is expensed as incurred.  The
          gain or loss on the disposal of property,  plant, and equipment is the
          difference  between the net sales proceeds and the carrying  amount of
          the relevant assets and is recognized in the consolidated statement of
          operations.

     (I.) NATIONAL DISTRIBUTION RIGHT

          The  national  distribution  right  enables the  Company,  through its
          former subsidiary, Xinhua C&D, to distribute books and publications in
          all  provinces  in The  PRC  without  the  need to  obtain  individual
          provincial  approval.  The intangible asset is acquired as part of the
          acquisition of Xinhua C&D at fair value.  Management expects the right
          will be renewed  indefinitely  for  nominal  periodic  renewal  costs.
          Hence,  the  fair  value  of the  national  distribution  right is not
          amortized but will be evaluated  annually in accordance  with SFAS No.
          142 "GOODWILL AND OTHER INTANGIBLE ASSETS",  ("SFAS 142"). If facts or
          circumstances suggest that the Company's intangible asset is impaired,
          an  impairment  loss  would  be  recognized  in  that  period  for the
          difference  between the carrying value of the intangible asset and its
          estimated  fair value  based on  discounted  net future  cash flows or
          quoted market prices.  There have been no impairment losses recognized
          to date.

     (J.) GOODWILL

          The Company's  goodwill is deemed to have an indefinite life and is no
          longer  amortized  under  SFAS  No.142,   but  is  subject  to  annual
          impairment tests. If facts or circumstances suggest that the Company's
          goodwill  is  impaired,  the  Company  assesses  the fair value of the
          goodwill  and  reduces  it to an amount  that  results  in book  value
          approximating  fair  value.  Under SFAS 142,  goodwill  impairment  is
          deemed to exist if the net book value of a reporting  unit exceeds its
          estimated fair value.


                                      F-10


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


     (K.) IMPAIRMENT OF LONG-LIFE ASSETS

          In accordance  with SFAS No. 121,  "ACCOUNTING  FOR THE  IMPAIRMENT OF
          LONG-LIVED  ASSETS AND FOR  LONG-LIVED  ASSETS TO BE  DISPOSED  OF', a
          long-lived assets and certain identifiable  intangible assets held and
          used by the Company are reviewed  for  impairment  whenever  events or
          changes in circumstances indicate that the carrying amount of an asset
          may  not  be   recoverable.   For  the  purposes  of  evaluating   the
          recoverability  of  long-lived  assets,  the  recoverability  test  is
          performed using  undiscounted net cash flows related to the long-lived
          assets.  The Company reviews  long-lived  assets, if any, to determine
          the carrying values are not impaired.

     (L.) REVENUE RECOGNITION

          Sales revenue is recognized when persuasive evidence of an arrangement
          exists, the price is fixed and final,  delivery has occurred and there
          is  reasonable  assurance of  collection  of the sales  proceeds.  The
          Company generally obtains purchase  authorizations  from its customers
          for a specified  amount of products at a specified price and considers
          delivery to have  occurred when the customer  takes  possession of the
          products.  The net sales  incorporate  offsets for discounts and sales
          returns.  Revenue is recognized  upon delivery,  risk and ownership of
          the title is  transferred  and a reserve for sales returns is recorded
          even  though   invoicing  may  not  be  completed.   The  Company  has
          demonstrated the ability to make reasonable and reliable  estimates of
          products returns in accordance with SFAS No. 48, "REVENUE  RECOGNITION
          WHEN RIGHT OF RETURN EXISTS".

          Shipping and handling  fees billed to customers are included in sales.
          Costs  related to shipping and handling are part of selling,  general,
          and  administrative   expenses  in  the  consolidated   statements  of
          operations. EITF No. 00-10, "ACCOUNTING FOR SHIPPING AND HANDLING FEES
          AND COSTS"  allows  for the  presentation  of  shipping  and  handling
          expenses in line items other than cost of sales. For the quarter ended
          September 30, 2007, there were no shipping and handling costs included
          in selling,  general and  administrative  expenses in the accompanying
          consolidated statements of operations.

     (M.) COST OF SALES

          Cost of sales includes depreciation of property,  plant, and equipment
          and purchase costs to publishers.

     (N.) VALUE-ADDED TAX

          The Company is subject to value  added tax ("VAT")  imposed by the PRC
          on sales.  The output VAT is charged to customers  who purchase  books
          from the Company and the input VAT is paid when the Company  purchases
          books  from  publishers.  The VAT rate is 13%.  The  input  VAT can be
          offset against the output VAT.


                                      F-11


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


     (O.) ADVERTISING EXPENSES

          The Company expenses  advertising costs as incurred in accordance with
          the  American  Institute  of Certified  Public  Accountants  ("AICPA")
          Statement of Position 93-7, "REPORTING FOR ADVERTISING COSTS". For the
          year ended September 30, 2007, advertising expenses amount to zero.

     (P.) COMPREHENSIVE INCOME

          SFAS No. 130, "REPORTING COMPREHENSIVE INCOME",  establishes standards
          for reporting and display of comprehensive income, its components, and
          accumulated  balances.  Comprehensive  income as defined  includes all
          changes in equity during a period from non-owner sources.  Accumulated
          comprehensive  income,  as presented in the accompanying  statement of
          changes in owners' equity consists of changes in unrealized  gains and
          losses on foreign currency  translation.  This comprehensive income is
          not included in the computation of income tax expense or benefit.

     (Q.) INCOME TAXES

          The Company accounts for income tax using SFAS No. 109 "ACCOUNTING FOR
          INCOME  TAXES",  which  requires the asset and liability  approach for
          financial  accounting  and  reporting  for  income  taxes.  Under this
          approach,  deferred income taxes are provided for the estimated future
          tax effects  attributable to temporary  differences  between financial
          statement  carrying  amounts  of  assets  and  liabilities  and  their
          respective  tax bases,  and for the expected  future tax benefits from
          loss  carry-forwards  and provisions,  if any. Deferred tax assets and
          liabilities  are measured  using the enacted tax rates expected in the
          years of  recovery  or  reversal  and the effect  from a change in tax
          rates is recognized in the statement of operations  and  comprehensive
          (loss)  income in the period of  enactment.  A valuation  allowance is
          provided  to  reduce  the  amount  of  deferred  tax  assets  if it is
          considered  more likely  than not that some  portion of, or all of the
          deferred tax assets will not be realized.

     (R.) LOSS PER SHARE

          The Company calculates loss per share in accordance with SFAS No. 128,
          "EARNINGS PER SHARE". Basic loss per share is computed by dividing the
          net loss by the weighted-average  number of common shares outstanding.
          Diluted  loss per share is  computed  similar  to basic loss per share
          except  that the  denominator  is  increased  to include the number of
          additional  common  shares  that  would have been  outstanding  if the
          potential  common  stock  equivalents  had  been  issued  and  if  the
          additional  common  shares were  dilutive.  The effect of  outstanding
          stock options,  stock  purchase  warrants and  convertible  debenture,
          which  could  result in the  issuance of  54,638,890  shares of common
          stock at September  30, 2007 is  anti-dilutive.  As a result,  diluted
          loss  per  share  data  does  not  include  the  assumed  exercise  7f
          outstanding stock options,  stock purchase warrants,  or conversion of
          convertible  debenture and has been presented  jointly with basic loss
          per share.


                                      F-12


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


     (S.) FOREIGN CURRENCIES TRANSLATION

          The  functional  and  reporting  currency of the Company is the United
          States  dollars  ("U.S.  dollars").   The  accompanying   consolidated
          financial   statements  have  been  expressed  in  U.S.  dollars.

          The functional  currency of the Company's foreign  subsidiaries is the
          Renminbi  Yuan ("RMB").  The balance  sheet is translated  into United
          States  dollars  based on the rates of exchange  ruling at the balance
          sheet date. The statement of operations is translated using a weighted
          average rate for the year.  Translation  adjustments  are reflected as
          cumulative translation adjustments in stockholders' equity.

          EXCHANGE RATES                             9/30/2007     9/30/2006
                                                     _________     _________

          Period end RMB : US$ exchange rate           7.5176       7.9168
          Average period RMB : US$ exchange rate       7.6757       7.9771

     (T.) SEGMENT REPORTING

          SFAS No. 131 "DISCLOSURES  ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
          INFORMATION"  establishes  standards for reporting  information  about
          operating  segments on a basis consistent with the Company's  internal
          organization  structure  as well  as  information  about  geographical
          areas,  business segments and major customers in financial statements.
          The Company operates in one principal reportable segment.

     (U.) FAIR VALUE OF FINANCIAL INSTRUMENTS

          The  carrying  value of the  Company's  financial  instruments,  which
          include cash and cash equivalents, accounts receivables, other payable
          and  accrued  liabilities,  approximate  their fair  values due to the
          short-term maturity of these instruments.

     (V.) RELATED PARTIES

          For the purposes of these financial statements, parties are considered
          to be related if one party has the ability, directly or indirectly, to
          control the party or exercise significant  influence over the party in
          making financial and operating decisions,  or vice versa, or where the
          Company  and the  party  are  subject  to  common  control  or  common
          significant  influence.  Related  parties may be  individuals or other
          entities.

     (W.) EQUITY-BASED COMPENSATION

          The  Company  adopts  SFAS  No.  123,   "ACCOUNTING   FOR  STOCK-BASED
          COMPENSATION"  using  the fair  value  method.

          The Company uses the  Black-Scholes  Option  Pricing Model to estimate
          the fair value of options.


                                      F-13


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


          The  Company  has  issued  stock  options  to   directors,   officers,
          employees, and consultants.  As such, the Company records compensation
          expense for stock  options and awards  only if the  exercise  price is
          less than the fair market value of the stock on the measurement date.

          Detailed  movement of stock-based  compensation  has been disclosed in
          the note 14 to  consolidated  financial  statements.  No options  were
          granted during the three months ended September 30, 2007.

     (X.) CONVERTIBLE DEBENTURE ISSUED WITH STOCK PURCHASE WARRANTS

          The Company  accounts  for the  issuance of and  modifications  to the
          convertible  debt issued with stock  purchase  warrants in  accordance
          with APB No. 14,  ACCOUNTING FOR CONVERTIBLE DEBT AND DEBT ISSUED WITH
          STOCK PURCHASE  WARRANTS , EITF No. 98-5,  ACCOUNTING FOR  CONVERTIBLE
          SECURITIES  WITH  BENEFICIAL   CONVERSION   FEATURES  OR  CONTINGENTLY
          ADJUSTABLE CONVERSION RATIOS, and EITF No. 00-27, APPLICATION OF ISSUE
          NO.  98-5  TO  CERTAIN  CONVERTIBLE   INSTRUMENTS  and  SFAS  No.  15,
          ACCOUNTING BY DEBTORS AND CREDITORS FOR TROUBLED DEBT RESTRUCTURINGS.

          Due to the indeterminate number of shares, which might be issued under
          the  embedded  convertible  host  debt  conversion  feature  of  these
          debentures,  the Company is required to record a liability relating to
          both the detachable  warrants and embedded  convertible feature of the
          notes  payable   (included  in  the   liabilities   as  a  "derivative
          liability").

          The accompanying consolidated financial statements comply with current
          requirements   relating  to  warrants  and  embedded   derivatives  as
          described in SFAS 133 as follows: -

               o    The  Company  treats  the  full  fair  market  value  of the
                    derivative and warrant liability on the convertible  secured
                    debentures as a discount on the debentures (limited to their
                    face value).  The excess, if any, is recorded as an increase
                    in the  derivative  liability and warrant  liability  with a
                    corresponding   increase  in  loss  on   adjustment  of  the
                    derivative and warrant liability to fair value.

               o    Subsequent to the initial recording,  the change in the fair
                    value  of the  detachable  warrants,  determined  under  the
                    Black-Scholes  option pricing  formula and the change in the
                    fair  value  of  the  embedded  derivative   (utilizing  the
                    Black-Scholes  option  pricing  formula)  in the  conversion
                    feature  of  the  convertible  debentures  are  recorded  as
                    adjustments to the liabilities as of September 30, 2006.

               o    The expense  relating to the change in the fair value of the
                    Company's stock reflected in the change in the fair value of
                    the warrants and derivatives is included in interest expense
                    in the accompanying consolidated statements of operations.


                                      F-14


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


     (Y.) RECENTLY ISSUED ACCOUNTING STANDARD

          In May 2005,  the FASB issued SFAS No.  154,  "ACCOUNTING  CHANGES AND
          ERROR  CORRECTIONS  - A  REPLACEMENT  OF APB  OPINION  NO. 20 AND FASB
          STATEMENT NO. 3" ("SFAS 154").  SFAS 154 changes the  requirements for
          the accounting for and reporting of a change in accounting  principle.
          These requirements apply to all voluntary changes and changes required
          by an  accounting  pronouncement  in the  unusual  instance  that  the
          pronouncement does not include specific  transition  provisions.  SFAS
          154 is effective for fiscal years  beginning  after December 15, 2005.
          As such,  the  Company has adopted  these  provisions,  if any, at the
          beginning  of the fiscal year ended  December  31,  2006.

          In February 2006, the FASB issued SFAS Statement No. 155,  "ACCOUNTING
          FOR  CERTAIN  HYBRID  FINANCIAL   INSTRUMENTS--AN  AMENDMENT  OF  FASB
          STATEMENTS NO. 133 AND 140" ("SFAS 155").  This Statement  amends FASB
          Statements No. 133, Accounting for Derivative  Instruments and Hedging
          Activities,  and No. 140,  Accounting  for  Transfers and Servicing of
          Financial Assets and  Extinguishments  of Liabilities.  This Statement
          resolves issues  addressed in Statement 133  Implementation  Issue No.
          D1,   "Application  of  Statement  133  to  Beneficial   Interests  in
          Securitized  Financial  Assets."  This  Statement  permits  fair value
          re-measurement  for any hybrid  financial  instrument that contains an
          embedded   derivative  that  otherwise   would  require   bifurcation,
          clarifies which interest-only strips and principal-only strips are not
          subject  to  the   requirements   of  Statement  133,   establishes  a
          requirement to evaluate  interests in securitized  financial assets to
          identify  interests  that  are  freestanding  derivatives  or that are
          hybrid  financial  instruments  that  contain an  embedded  derivative
          requiring bifurcation, clarifies that concentrations of credit risk in
          the form of  subordination  are not  embedded  derivatives  and amends
          Statement   140  to  eliminate   the   prohibition   on  a  qualifying
          special-purpose  entity from holding a derivative financial instrument
          that pertains to a beneficial  interest other than another  derivative
          financial  instrument.   SFAS  155  is  effective  for  all  financial
          instruments  acquired or issued for the Company for fiscal year begins
          after  September  15,  2006.  The  adoption  of this  standard  is not
          expected  to  have a  material  effect  on the  Company's  results  of
          operations or financial  position.

          In July 2006, the FASB issued FIN 48,  Accounting  for  Uncertainty in
          Income  Taxes--an  Interpretation  of FASB  Statement  No. 109,  which
          clarifies  the  accounting  for  uncertainty  in tax  positions.  This
          Interpretation   requires   that  the   Company   recognizes   in  its
          consolidated financial statements the impact of a tax position if that
          position is more likely than not of being sustained on audit, based on
          the  technical  merits of the position.  The  provisions of FIN 48 are
          effective  for the  Company on January  1, 2007,  with the  cumulative
          effect of the change in accounting  principle,  if any, recorded as an
          adjustment to opening retained  earnings.

          In September 2006, the FASB issued SFAS 157, Fair Value  Measurements,
          which defines fair value,  establishes a framework for measuring  fair
          value  in  generally  accepted  accounting  principles,   and  expands
          disclosures  about fair value  measurements.  SFAS 157  applies  under
          other  accounting  pronouncements  that  require or permit  fair value
          measurements,  where fair value is the relevant measurement attribute.
          The standard  does not require any new fair value  measurements.  SFAS
          157 is  effective  for  financial  statements  issued for fiscal  year
          beginning  after November 15, 2007,  and interim  periods within those
          fiscal years.


                                      F-15


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


          In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
          for  Financial  Assets  and  Financial   Liabilities  -  Including  an
          Amendment of SFAS 115" (SFAS No. 159),  which allows for the option to
          measure  financial  instruments and certain other items at fair value.
          Unrealized  gains and losses on items for which the fair value  option
          has been elected are reported in earnings.  The  objective of SFAS 159
          is  to  provide  opportunities  to  mitigate  volatility  in  reported
          earnings   caused  by  measuring   related   assets  and   liabilities
          differently without having to apply hedge accounting provisions.  SFAS
          159 also establishes presentation and disclosure requirements designed
          to facilitate  comparisons  between  companies  that choose  different
          measurement  attributes  for similar types of assets and  liabilities.
          This statement is effective for financial statements issued for fiscal
          years  beginning  after  November 15,  2007.  The Company is currently
          evaluating  the impact of SFAS No. 159 on our  consolidated  financial
          statements.

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

4.   CASH AND CASH EQUIVALENTS

     Cash and cash  equivalents  include the  following  for the purposes of the
     cash flow statement:

                              9/30/2007       9/30/2006
                              _________       _________

          Cash at banks       $   3,262       $   2,733
                              =========       =========

5.   RECEIVABLE FROM A TRUSTEE

     On February 28, 2006,  the Company  entered an  entrustment  agreement (the
     "Agreement")   with   Asia-Durable    Investments    (Beijing)   Co.   Ltd.
     ("Asia-Durable"), a company incorporated in the PRC. In accordance with the
     Agreement,  the  Company  agreed to entrust  Asia-Durable  on its behalf to
     invest,  set up, hold, and administer its interest of a company  registered
     in the PRC (the "Project Company"). The Company also provided a sum of $1.5
     million (RMB 12 million) to  Asia-Durable  being the investment  capital of
     the Project Company in April 2006. The sum of $1.5 million is refundable at
     the Company's option within one year from the date of the Agreement.  As of
     September 30, 2006, the  effectiveness of the Project Company is subject to
     the approval of Chinese government to enter into co-publishing arrangements
     with foreign publishers.

     The  balance is  unsecured,  interest-free,  and  repayable  within  twelve
     months.  Eventually this account proves to be irrecoverable  after pursuing
     collection.  An  allowance  for  loss of  $1,500,000  was  provided  in the
     financial statements of September 30, 2007.


                                      F-16


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


6.   NOTE RECEIVABLE

     The amount  represents the sales proceeds  receivable  from the disposal of
     Boheng.   Pursuant  to  the  Disposal  Agreement  the  sales  proceeds  are
     receivable  in 5  installments  and are due in full, no later than July 31,
     2008.

     SCHEDULED RECEIPT DATE                 APPROXIMATELY       EQUAL TO RMB
     ______________________                 _____________       ____________

     March 10, 2007                          $   250,000          2,000,000
     September 30, 2007                          375,000          3,000,000
     October 31, 2007                            375,000          3,000,000
     January 31, 2008                            250,000          2,000,000
     July 31, 2008                               625,000          5,000,000
                                             ___________         __________

     Total                                   $ 1,875,000         15,000,000
     Less: Paid                                 (250,000)        (2,000,000)
                                             ___________         __________

     Balance at September 30, 2007           $ 1,625,000         13,000,000
                                             ___________         __________

     The schedule  payment of $375,000 on June 30, 2007 was still unpaid through
     September 30, 2007. The balance is unsecured and interest-free. The Company
     calculated the imputed interest income of $87,195 at the current  effective
     rate of  4.82%  per  annum  and  reduced  from the  gain on  disposal  of a
     subsidiary.  The  amount is  recognized  as  deferred  revenue  and will be
     amortized as interest income over the terms of repayment period.

7.   OTHER RECEIVABLES AND PREPAYMENT

                                              9/30/2007          6/30/2007
                                             ___________         __________

     Advances to employee                     $       -          $       -
     Goods and service tax receivable                 -                  -
     Other receivables                                -                  -
     Prepayments                                204,054            201,186
                                              _________          _________
                                              $ 204,054          $ 201,186
                                              =========          =========

     The carrying amounts of other receivables approximate their fair value.


                                      F-17


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


8.   PROPERTY, PLANT, AND EQUIPMENT, NET

     Property, plant, and equipment consist of the following:

                                              9/30/2007          6/30/2007
                                              _________          _________

     Land Use Right                           $       -          $       -
     Buildings                                        -                  -
     Equipment and machinery                     36,789             38,928
     Motor vehicles                                   -                  -
     Leasehold Improvement                            -                  -
                                              _________          _________
                                                 36,789             38,928
     Less: Accumulated Depreciation              25,656             24,834
                                              _________          _________
                                              $  11,133          $  14,094
                                              =========          =========

     Depreciation expense for the quarter ended September 30, 2007, was $822.

9.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

     Accounts  payable and accrued  liabilities as of September 30, 2007 consist
     of the following:

                                              9/30/2007          6/30/2007
                                              _________          _________

     Accounts payable                         $ 732,602          $ 693,207
                                              _________          _________

                                              $ 732,602          $ 693,207
                                              =========          =========


10.  LOANS PAYABLE/CONVERTIBLE DEBENTURE

     On November 23, 2005, the Company  entered into a debt financing  agreement
     (the  "Agreement") with an institutional  investor,  and on March 23, 2006,
     the Agreement was modified to include an additional institutional investor,
     who  is  an  affiliate  of  the  original   institutional   investor  (both
     institutional  investors collectively referred to as "the Investors").  The
     Investors  committed to purchase up to $4,000,000 of a secured  convertible
     debenture ("the  debenture")  that shall be convertible  into shares of the
     Company's common stock.

     After two  closings on December  13, 2005 and March 23,  2006,  the Company
     received gross  proceeds of $3,250,000  (net proceeds  $2,989,460)  for the
     secured convertible  debenture.  The Company and debenture-holders  entered
     into a Forbearance and Settlement Agreement on December 29, 2006 because of
     default in debt  service,  whereby the Company  agreed to make cash payment
     and to grant  rights to the  creditors to cashless  purchase the  Company's
     common  stock by  exercising  the warrant at 200,000  shares in every three
     month  period  beginning on December  29, 2006  according to the  following
     payment plan:


                                      F-18


<PAGE>


                                                 CONVERSION OF
     PAYMENT DATE             CASH PAYMENT         DEBENTURE
     __________________       ____________       _____________

     March 10, 2007           $    250,000           250,000
     September 30, 2007            375,000           375,000
     October 31, 2007              375,000           375,000
     January 31, 2008              250,000           250,000
     July 31, 2008                 625,000           625,000
                              ____________         _________
                              $  1,875,000         1,875,000
                              ============         =========

     As of  September  30, 2007,  the Company paid  $250,000 for the payment due
     March 10,  2007 and the  creditors  exercised  100,000  shares and  125,000
     shares  on March 1,  2007 and April 18,  2007  respectively  Loans  Payable
     outstanding  as of  September  30,  2007  amount  to  $2,845,904  of  which
     $1,787,643  and  $1,058,261  attributed  to current  portion and  long-term
     respectively.

11.  LOANS FROM SHAREHOLDERS

     The outstanding  amounts  represent cash advanced from  shareholders of the
     Company.

     These  shareholders'  loans are unsecured and not repayable within the next
     twelve months.  For the quarter ended September 30, 2007, there was $83,213
     imputed interest recorded.

12.  INCOME TAX

     The Company is subject to US taxes at 35%. Pac-Poly is a BVI company and is
     not  subject to income  taxes.  Xinhua C&D and Boheng are subject to income
     taxes in The PRC. Pursuant to the PRC Income Tax Laws, the subsidiaries are
     generally  subject to enterprise  income tax ("EIT") at a statutory rate of
     33% (30% national income tax plus 3% local income tax).

     Neither the Company nor its subsidiaries had any assessable  income for the
     period and so neither  provision  nor benefit for EIT was  recorded for the
     quarter ended September 30, 2007.

     Subject to the approval of the relevant  tax  authorities,  the Company had
     tax losses carry-forward against future years' taxable income.

     As of September 30, 2007,  valuation  allowance of $873,110 was provided to
     the  deferred  tax  assets  due  to  the  uncertainty   surrounding   their
     realization.


                                      F-19


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2007
                             (STATED IN US DOLLARS)


13.  CHINA CONTRIBUTION PLAN

     Full-time  employees of the Company are entitled to staff welfare  benefits
     including  medical  care,  welfare  subsidies,  unemployment  insurance and
     pension benefits through a China government-mandated multi-employer defined
     contribution  plan. The Company is required to pay for these benefits based
     on certain percentages of the employees' salaries.  The total contributions
     made  for  such  employee  benefits  were $  6,483  for the  quarter  ended
     September 30, 2007.

14.  STATUTORY RESERVES

     The  Company  is  required  to  make   appropriations  to  reserves  funds,
     comprising the statutory surplus reserve, statutory public welfare fund and
     discretionary surplus reserve,  based on after-tax net income determined in
     accordance with generally  accepted  accounting  principles of the People's
     Republic of China (the "PRC GAAP").  Appropriation to the statutory surplus
     reserve  should be at least 10% of the after-tax  net income  determined in
     accordance  with  the PRC GAAP  until  the  reserve  is equal to 50% of the
     Company's registered capital. Appropriation to the statutory public welfare
     fund is 10% of the after-tax net income  determined in accordance  with the
     PRC GAAP.  Appropriations to the discretionary  surplus reserve are made at
     the discretion of the Board of Directors. The statutory public welfare fund
     is  established  for providing  employee  facilities  and other  collective
     benefits  to  the  employees  and  is   non-distributable   other  than  in
     liquidation.  The Company made no appropriations to the statutory  reserve,
     as it did not have a pre-tax profit.

15.  CONCENTRATION OF RISK

     (A.) Major Customers and Vendors

          100% of the Company's  revenues were derived from customers located in
          the PRC, and there are no customers and vendors who account for 10% or
          more of revenues and purchases.  The Company's  assets are all located
          in the PRC.

     (B.) Credit Risk

          There are no concentrations of credit risk because the Company,  while
          in  operation,  entered  into large  number of cash sale  transactions
          without deploying financial  instruments,  which may potentially drive
          to significant concentrations.

16.  COMMITMENT AND CONTINGENCIES

     The  Company  leases an office  premise  under a  non-cancelable  operating
     lease.  The cost incurred under this operating  lease is recorded as rental
     expense and  totaled  $18,084 for the quarter  ended  September  30,  2007.
     Future minimum rental payments due under a  non-cancelable  operating lease
     until termination at November 30, 2007 are $12,052.


                                      F-20


<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

BUSINESS DEVELOPMENT

Xinhua  China Ltd.  was  incorporated  September  14, 1999 under the laws of the
State of Nevada as Camden Mines Limited ("Camden").  On October 12, 2004, Camden
changed its name from  "Camden  Mines  Limited" to its  current  corporate  name
"Xinhua China Ltd." The change in corporate name reflected our  anticipation  of
acquiring an interest in the Chinese book distribution giant" Xinhua Circulation
& Distribution ("Xinhua C&D").

As of the date of this Quarterly Report, we are a company establishing ourselves
as a leader in the digital media industry. As discussed below, we have refocused
our strategic business operation plans to maximize our strategic position in the
publishing  industry.  Please note that  throughout this Quarterly  Report,  and
unless  otherwise  noted, the words "we," "our," "us," or the "Company" refer to
Xinhua China Ltd.

SUBSIDIARIES

         PAC-POLY INVESTMENTS LIMITED

As of the date of this  Quarterly  Report,  we hold of record  100% of the total
issued and  outstanding  shares of Pac-Poly  Investments  Limited  ("Pac-Poly"),
which is our wholly-owned subsidiary. Pac-Poly is an investment holding company.
We maintain a 7.98% effective interest in Xinhua C&D through Pac-Poly.

         BEIJING JOANNES INFORMATION TECHNOLOGY CO. LT.

On May 9,  2006,  we formed  Beijing  Joannes  Information  Technology  Co.  Lt.
("Beijing Joannes"), as our Chinese wholly owned subsidiary, to launch a digital
media  content  initiative.  We held of  record  100% of the  total  issued  and
outstanding  shares of  Beijing  Joannes.  Beijing  Joannes  was  formed for the
purpose  of  launching  a digital  media  content  initiative  with the web site
branded  www.geepip.com.  The business focus is building online communities with
connectivity  to an ecommerce  engine,  which allows for the online  purchase of
e-books,  e-audio, and computer games. Hard copies of books can also be purchase
through the portal. A unique customer loyalty program and digital  redemption or
trade-in strategy will be a market differentiator.

RECENT BUSINESS OPERATIONS

DIVESTURE OF  INTEREST IN XINHUA CIRCULATION & DISTIRBUTION

Pursuant to the terms and provisions of an investment agreement (the "Investment
Agreement")  among our two  subsidiaries  Pac-Poly and Beijing Boheng and Xinhua
Bookstore  (Main Store) ("Xinhua  Bookstore"),  we acquired a 57.67% interest in
the publication  distribution business in the People's Republic of China. Xinhua
Bookstore transferred the publication  distribution business into a newly formed


                                      -7-


<PAGE>


Chinese company called Xinhua Circulation & Distribution  ("Xinhua C&D"). Xinhua
C&D is presently primarily a book distribution  enterprise.  As of May 31, 2006,
we reduced  our  ownership  interest in Xinhua C&D to 7.98%.  We had  originally
intended to help guide  Xinhua C&D through the  modernization  and growth of its
systems and  distribution  strategies.  Realizing  the large  investment in real
estate,  equipment,  fixed  assets  requirements  to achieve  modernization  and
growth,  as well as the  shifting  of reading  habits to a digital  format and a
dynamic  and  growing  digital  youth  (age  12-25)  comprising  over 50% of the
population, our management, after very careful consideration,  effective May 31,
2006,  revised  our  business  focus  to  instead  concentrate  on  the  growing
opportunity in online content  distribution,  co-publishing,  and digital rights
management.  While  executing  this  strategy,  we will continue to maximize our
strategic  position in the publishing  industry by utilizing the connections and
channels  we have  established  as a result of our  interest in Xinhua C&D. As a
result of the decision to focus on digital media and co-publishing, we were able
to  renegotiate  our  financial  commitment  to  Xinhua  C&D and  eliminate  the
requirement to invest a further  $16,700,000  into Xinhua C&D to build their new
distribution warehouse along with all other obligations related to the long term
leasing  of  approximately  128 acres of land on which the  warehouse  was to be
built. This change reduced our equity interest in Xinhua C&D to 7.98%.

RESULTS OF OPERATION

The  summarized  consolidated  financial  data set forth in the tables below and
discussed in this section  should be read in conjunction  with our  consolidated
financial  statements  and  related  notes  for  the  three-month  period  ended
September 30, 2007 and 2006, which financial  statements are included  elsewhere
in this Quarterly Report.

                                     FOR QUARTER ENDED        FOR QUARTER ENDED
                                     SEPTEMBER 30, 2007       SEPTEMBER 30, 2006
                                        (UNAUDITED)              (UNAUDITED)

Net Sales                               $        0               $    50,220
Loss from Operations                       (78,301)                 (525,325)
Loss from Operations per Share               -0.01                     -0.03
Total Assets                             2,054,158                 2,227,860
Total Liabilities                        8,782,396                10,148,253

RESULTS OF OPERATION

FOR QUARTER ENDED  SEPTEMBER  30, 2007  COMPARED TO QUARTER ENDED  SEPTEMBER 30,
2006.

         REVENUES AND GROSS MARGIN

We had net sales of $-0- for the quarter  ended  September  30, 2007 compared to
net sales of $4,771 for the quarter ended September 30, 2006,  after taking into
account cost of sales. Net sales decreased substantially due to the divesture of
our interest in Xinhua C& D.


                                      -8-


<PAGE>


         COST OF SALES

Our cost of sales for the quarter ended  September 30, 2007 was $-0- compared to
cost of sales of $45,449 for the quarter ended September 30, 2006. Cost of sales
consisted of purchased costs to publishers and  depreciation of property,  plant
and  equipment.  Cost of sales  decreased  proportionately  with the decrease in
revenues to $-0- during the quarter  ended  September 30, 2007 compared with the
quarter ended  September 30, 2006 due to the divesture of our interest in Xinhua
C&D.

         OPERATING EXPENSES

Our total  operating  expenses were $78,301 for the quarter ended  September 30,
2007 as compared to total  operating  expenses of $530,096 for the quarter ended
September 30, 2006. The decrease in operating  expenses during the quarter ended
September 30, 2007 as compared  September 30, 2006 was due to the  corresponding
decrease in net revenues. Selling, general and administrative expenses decreased
based  on  a  substantial  decrease  in  stock-based  compensation.  Stock-based
compensation  decreased from $68,665 during the quarter ended September 30, 2006
to $-0- during the quarter ended  September 30, 2007.  Stock-based  compensation
expense is attributable to the valuation of our Stock Option Plan under the fair
value  method  in   accordance   with  SFAS  No.  123.   Selling,   general  and
administrative  expenses  decreased  from  $461,431  during  the  quarter  ended
September 30, 2006 to $78,301 during the quarter ended  September 30, 2007. This
primarily   resulted  from  the  decrease  of  fees  to  our   consultants   and
professionals  in relation  to our fund  raising  and  issuance  of  convertible
debentures  primarily  to  Cornell  Capital  LLC and other  legal and  financial
matters.

         INTEREST

We incurred  $83,243 in interest  expense during the quarter ended September 30,
2007 as  compared to $771,076  incurred as interest  expense  during the quarter
ended  September 30, 2006.  Interest  expense  incurred  consisted  primarily of
interest charged on loans from related parties.

We incurred a net loss of ($161,534)  for the quarter  ended  September 30, 2007
compared  to a net  loss of  ($1,295,925)  incurred  during  the  quarter  ended
September 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES

QUARTER ENDED SEPTEMBER 30, 2007

Our financial  statements have been prepared assuming that we will continue as a
going  concern  and,  accordingly,  do not include  adjustments  relating to the
recoverability  and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation.

As at the quarter ended  September 30, 2007, our current assets were  $1,418,025
and our current  liabilities  were  $2,579,904,  resulting in a working  capital
deficit of  $1,161,879.  As at the quarter  ended  September  30, 2007,  current
assets were comprised of: (i) $3,262 in cash and cash equivalents; (ii) $210,709


                                      -9-


<PAGE>


in net  accounts  receivable;  (iii)  $1,000,000  in note  receivable;  and (iv)
$204,054 in other  receivables and prepayments.  The note receivable  represents
the sales  proceeds of  $1,875,000,  of which  $250,000 has been paid,  from the
disposal of Beijing  Boheng in accordance  with the terms and  provisions of the
disposal  agreement.  The sales proceeds are receivable in five installments and
are due in full no later than July 31, 2008. As at the quarter  ended  September
30, 2007,  our current  liabilities  were comprised of: (i) $732,602 in accounts
payable and accrued  liabilities;  (ii)  $1,787,643 in current  portion of loans
payable; and (iii) $59,659 in deferred revenue. See " - Material Commitments."

As at the quarter  ended  September 30, 2007,  our total assets were  $2,054,158
comprised  of: (i)  $1,418,025  in current  assets;  (ii)  $625,000 in long-term
portion  of note  receivable;  and  (iii)  $11,133  in net  property,  plant and
equipment.  The  slight  increase  in total  assets  during  the  quarter  ended
September 30, 2007 from fiscal year ended June 30, 2007 was primarily due to the
note receivable.

As at  the  quarter  ended  September  30,  2007,  our  total  liabilities  were
$8,782,396 comprised of: (i) $2,579,904 in current liabilities;  (ii) $1,058,261
in loans payable;  and (iii) $5,144,231 in loans from  shareholders.  The slight
increase in total  liabilities  during the quarter ended September 30, 2007 from
fiscal year ended June 30, 2007 was  primarily due to the increase in loans from
shareholders and in accounts payable and accrued liabilities.

Stockholders'   deficit  increased  from  ($6,664,709)  for  June  30,  2007  to
($6,728,238) for September 30, 2007.

         OPERATING ACTIVITIES

We have not generated  positive cash flows from  operating  activities.  For the
quarter ended September 30, 2007, net cash flow used in operating activities was
($2,908,974).  Net cash flow used in  operating  activities  during the  quarter
ended  September  30,  2007  consisted  primarily  of a net  loss of  ($161,534)
adjusted by $83,213 in imputed  interest  expense and $13,768 in amortization of
deferred  imputed  expense.  Changes in assets and  liabilities  consisted of an
increase of $25,463 in account  receivable,  $139,395  in  accounts  payable and
accrued  liabilities,  $13,768 in deferred revenue inventory and $2,868 in other
receivables and prepayments.

         INVESTING ACTIVITIES

During the quarter  ended  September  30, 2007,  net cash flow used in investing
activities  was  $-0-compared  to net cash flow used in investing  activities of
($243,301)  for the quarter  ended  September  30,  2006.  Net cash flow used in
investing  activities  during the quarter ended September 30, 2006 was primarily
the result of $252,982 in deposits received from disposal of the subsidiary.

         FINANCING ACTIVITIES

During the  quarter  ended  September  30,  2007,  net cash flow from  financing
activities was $63,801  compared to net cash flow from  financing  activities of
$498,665 for the quarter ended  September 30, 2006. Net cash flow from financing
activities  during the quarter ended  September 30, 2007 pertained  primarily to
$63,801 received as proceeds from loan from shareholders.


                                      -10-


<PAGE>


PLAN OF OPERATION

The local and  regional  distribution  business  for  books is  competitive  and
fragmented in the People's  Republic of China.  Estimates  range up to 500 as to
the number of  entrants  in this  field.  It is our plan that  economy of scale,
relationships  with  Chinese  publishers  and  also  with  sub-distributors  and
retailers and our nationwide scope which allows us the flexibility to distribute
books in any region will assist us in maintaining  and enhancing our competitive
position.

Our goal is to expand our  business to include  electronic  sales,  delivery and
distribution of media contents.  We also plan to partner with foreign publishers
to provide  foreign  media  contents in China.  We seek to achieve our goal on a
national  scale to  maximize  opportunities  in one of the  largest  and fastest
growing economies in the world.

To execute on our strategy to become a digital  media  company we formed our new
subsidiary, Beijing Joannes. Beijing Joannes is intended to be our digital media
company and it is expected to distribute all digital  content for Xinhua C&D and
others.  Beijing  Joannes has  anticipated in operating its business to consumer
(B2C)  e-commerce  portal as  www.geezip.com,  and expects to allow customers to
purchase electronic and hard copies of books on-line.

We expect  to also  establish  a  co-publishing  company  which  anticipates  on
co-publishing  agreements with both domestic and foreign publishers,  publishing
both hard copy and digital works.

Existing  working  capital,  further  advances  and possible  debt  instruments,
warrant exercises, further private placements,  monetization of existing assets,
and  anticipated  cash flow are  expected to be adequate to fund our  operations
over the next two  months.  We have no lines of credit or other  bank  financing
arrangements.  Generally,  we  have  financed  operations  to date  through  the
proceeds of the private  placement of equity and debt  securities and loans from
our  shareholders.  In connection with our business plan,  management will delay
additional increases in operating expenses and capital  expenditures.  We intend
to utilize our best  efforts to settle  current  finance  accounts  payables and
liabilities  with  further  issuances  of  securities,  debt  and  or  advances,
monetization of existing assets,  and revenues from operations.  We will need to
raise  additional  capital  and  increase  revenues  to meet both short term and
long-term  operating  requirements.

We have undertaken certain actions and continue to implement changes designed to
improve our financial  results and  operating  cash flows.  The actions  involve
certain  cost-saving   initiatives  and  growing  strategies,   including:   (i)
reductions in headcounts and corporate overhead  expenses;  and (ii) continue to
develop  e-commerce  business  through  Beijing  Joannes.  We believe that these
actions  will  enable us to improve  future  profitability  and cash flow in our
continuing  operations  through June 30, 2008.  Furthermore,  the  commitment to
contribute  further  capital of $16,700,000 to Xinhua C&D and the restructure of
debt  pertaining  to Cornell  and  Highgate  has been  advantageous  to our over
financial  outlook.  Ultimately,  we have  released  the burden on cash flow for
further  contribution  and  intend to put our  resources  in  co-publishing  and
e-commerce business opportunities.


                                      -11-


<PAGE>


The report of the independent registered public accounting firm that accompanies
our June 30, 2007 and June 30, 2006 consolidated  financial  statements contains
an  explanatory  paragraph  expressing  substantial  doubt  about our ability to
continue as a going concern.  The  consolidated  financial  statements have been
prepared "assuming that we will continue as a going concern," which contemplates
that we will realize our assets and satisfy our  liabilities  and commitments in
the ordinary course of business.

MATERIAL COMMITMENTS

LOANS PAYABLE/CONVERTIBLE DEBENTURE

During  2007/8,  a material  commitment  for us relates to the  Forbearance  and
Settlement  Agreement  with  Cornell and  Highgate.  On December  29,  2006,  we
completed the debt restructuring with Cornell and Highgate under the Forbearance
and Settlement Agreement.  Pursuant to the Forbearance and Settlement Agreement,
we agreed to make certain  payments to Cornell and Highgate  with respect to the
Securities  Purchase  Agreement  previously  entered into by us with Cornell and
Highgate  dated  November  23, 2005 and amended on March 23,  2006,  and the two
convertible  debentures in the amounts of $1,250,000 to Highgate  dated November
23, 2005 and  $2,000,000  to Cornell  dated March 23,  2006  (collectively,  the
"Convertible  Debentures") in accordance with the terms and conditions set forth
in the Forbearance and Settlement Agreement.

In further accordance with the Forbearance and Settlement  Agreement,  we agreed
to use the proceeds  from the disposal of Beijing  Boheng to repay the principal
and interest due to Cornell and Highgate  under the  Convertible  Debentures  in
exchange  for the  agreement of Cornell and Highgate to: (i) waive on a one-time
basis only any accrued liquidated damages owing to Cornell and Highgate; (ii) no
application  of the  redemption  premium  on  the  scheduled  repayments;  (iii)
conversion  of the  Convertible  Debentures  in an amount  equal to at least the
amount  of  a  scheduled  repayment  subject  to  certain  conditions;  (iv)  no
additional  liquidated  damages  accruing during the term of the Forbearance and
Settlement Agreement;  (v) permitting us to withdraw the registration  statement
filed on  March  28,  2006  with  the  Securities  and  Exchange  Commission  in
connection  with  the  Convertible  Debentures;  (vi)  during  the  term  of the
Forbearance and Settlement Agreement,  waiving the requirement for us to receive
written  consent of  Cornell  and  Highgate  for any  organizational  change (as
defined in the  Securities  Purchase  Agreement)  to be directly  or  indirectly
consummated by us, and that we will not effectuate any stock splits for at least
nine months without the consent of Cornell and Highgate;  and (vii)  terminating
the provisions  for security  shares as set forth in Section 9 of the Securities
Purchase  Agreement  and in Section 2 of the transfer  agent  instructions  upon
receipt by Cornell and Highgate of the first scheduled repayment amount.

The payment plan under the Forbearance and Settlement Agreement is as follows:

                                               Conversion of
     Payment Date           Cash Payment         Debenture
     ________________       ____________       _____________

     March 10, 2007         $    250,000           250,000
     June 30, 2007               375,000           375,000
     October 31, 2007            375,000           375,000
     January 31, 2008            250,000           250,000
     July 31, 2008               625,000           625,000
                            ____________         _________
                            $  1,875,000         1,875,000
                            ============         =========


                                      -12-


<PAGE>


As of September  30, 2007,  we paid  $250,000 for the payment due March 10, 2007
and  issued  100,000  shares of our  common  stock on March 1, 2007 and  125,000
shares on April 18, 2007, respectively, pursuant to exercise rights.

LOANS FROM SHAREHOLDERS

During  fiscal year 2007/8,  a material  commitment  for us relates to the loans
from shareholders. The outstanding amount of $5,144,231 represents cash advanced
to  us  from  our   shareholders.   These   shareholder   loans  are  unsecured,
interest-free  and not repayable within the next twelve months.  For the quarter
ended September 30, 2007, we calculated  imputed  interest expense of $83,213 in
relation to interest-free  shareholders loans at its effective interest rate and
accounted for it in the consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk represents the risk of loss that may impact our financial  position,
results of  operations or cash flows due to adverse  change in foreign  currency
and  interest  rates.

EXCHANGE  RATE

Our reporting  currency is United States Dollars  ("USD").  The Chinese Renminbi
("RMB")  has  been  informally  pegged  to the  USD.  However,  China  is  under
international pressure to adopt a more flexible exchange rate system. If the RMB
were no longer pegged to the USD, rate  fluctuations  may have a material impact
on the Company's  consolidated  financial  reporting and make realistic  revenue
projections difficult. Recently (July 2005) the Renminbi was allowed to rise 2%.
This has not had an  appreciable  effect on our operations and seems unlikely to
do so.

As Renminbi is the functional  currency of Xinha C&D and Boheng, the fluctuation
of exchange  rates of  Renminbi  may have  positive  or negative  impacts on the
results of  operations  of the  Company.  However,  since all sales  revenue and
expenses of these two subsidiary companies are denominated in Renminbi,  the net
income effect of  appreciation  and  devaluation of the currency  against the US
Dollar will be limited to the net operating results of the subsidiary  companies
attributable to us.

INTEREST RATE

Interest rates in China are low and stable and inflation is well controlled, due
to the habit of the  population  to deposit  and save money in the banks  (among
with other reasons,  such as the People's  Republic of China's perennial balance
of trade  surplus).  Our loans  relate  mainly to trade  payables and are mainly
short-term. However our debt is likely to rise with physical plant in connection
with  expansion  and, were interest  rates to rise at the same time,  this could
become a significant impact on our operating and financing activities.


                                      -13-


<PAGE>


We have not entered into derivative  contracts either to hedge existing risks or
for  speculative  purposes.

ITEM 4. CONTROLS AND  PROCEDURES

An evaluation was conducted under the supervision and with the  participation of
our management, including our Chief Executive Officer/Chief Financial Officer of
the  effectiveness  of the design and operation of our  disclosure  controls and
procedures  as of  September  30,  2007.  Based on that  evaluation,  our  Chief
Executive Officer/Chief Financial Officer concluded that our disclosure controls
and  procedures  were  effective  as of such  date to  ensure  that  information
required  to be  disclosed  in the  reports  that we file or  submit  under  the
Exchange Act, is recorded,  processed,  summarized and reported  within the time
periods  specified in SEC rules and forms.  Such  officers also  confirmed  that
there was no change in our internal control over financial  reporting during the
quarter ended September 30, 2007 that has materially affected,  or is reasonably
likely to materially affect, our internal control over financial reporting.

ITEM 4T. CONTROLS AND PROCEDURES

Not applicable.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDING

Management  is  not  aware  of  any  legal   proceedings   contemplated  by  any
governmental  authority or any other party involving us or our properties.  None
of our  directors,  officers or affiliates  are (i) a party adverse to us in any
legal  proceedings,  or  (ii)  has  an  adverse  interest  to  us in  any  legal
proceedings.  Management is not aware of any other legal proceedings  pending or
that have been threatened against us or our properties.

ITEM 1A. RISK FACTORS

An investment in our common stock involves a number of very  significant  risks.
You should carefully  consider the following risks and uncertainties in addition
to other  information  in this  prospectus  in  evaluating  our  company and its
business before purchasing  shares of our common stock. Our business,  operating
results and  financial  condition  could be  seriously  harmed due to any of the
following risks. The risks described below are all of the material risks that we
are  currently  aware of that are  facing  our  company.  Additional  risks  not
presently  known to us may also impair our business  operations.  You could lose
all or part of your investment due to any of these risks.

WE HAVE  INCURRED  LOSSES AND  SUBSTANTIAL  DOUBT  EXISTS  ABOUT OUR  ABILITY TO
CONTINUE AS A GOING CONCERN.

We have a history of operating losses,  expect to continue to incur losses,  and
may never be  profitable.  We have  incurred  a net loss of  ($161,534)  for the
quarter ended September 30, 2007. We had a working capital deficit of $1,161,879
and shareholders'  deficit of $6,728,238 as of September 30, 2007. These factors


                                      -14-


<PAGE>


raise  substantial  doubt about our ability to continue as a going concern.  The
auditors'  report in our  financial  statements as at fiscal year ended June 30,
2007 includes an  explanatory  paragraph  that states that we have generated net
losses and have a shareholders'  deficit factors which raise  substantial  doubt
about our ability to  continue as a going  concern.  We have been  dependent  on
sales of our equity securities and debt financing to meet our cash requirements.
Further,  we do not expect  positive cash flow from operations in the near term.
There  is no  assurance  that  actual  cash  requirements  will not  exceed  our
estimates. In particular,  additional capital may be required in the event that:
(i)  operating  costs  may be more  than  we  currently  anticipate;  or (ii) we
encounter greater costs associated with general and  administrative  expenses or
offering costs.

WE ARE OPERATING IN A DEVELOPING  MARKET AND THERE IS  UNCERTAINTY  AS TO MARKET
ACCEPTANCE OUR TECHNOLOGY AND PRODUCTS.

We researched the markets for our products involving the digital media industry.
We have  conducted  limited  test  marketing  and thus  have  relatively  little
information on which to estimate our levels of sales,  the amount of revenue our
planned operations will generate and our operating and other expenses. There can
be no assurance that we will be successful in our efforts to market our products
or to develop our markets in the manner we contemplate  within the digital media
industry.

The markets for our products and technology are developing and rapidly  evolving
and are  characterized  by an  increasing  number  of market  entrants  who have
developed  or are  developing a wide  variety of products  and  technologies,  a
number of which offer certain of the features that our products  offer.  Because
of these factors, demand and market acceptance for new products are subject to a
high level of  uncertainty.  There can be no assurance  that our  technology and
products will become widely  accepted.  It is also difficult to predict with any
assurance  the  future  growth  rate,  if  any,  and  size of the  market.  If a
substantial  market  fails to develop,  develops  more  slowly than  expected or
becomes  saturated  with  competitors  or if our products do not achieve  market
acceptance,  our business,  operating  results and financial  condition  will be
materially and adversely affected.

OUR DIGITAL MEDIA INDUSTRY AND MARKET IS CHARACTERISED BY NEW ENTRANTS AND RAPID
TECHNOLOGICAL CHANGE.

The digital  media  industry  and market for our  products is  characterized  by
rapidly changing technology and frequent new product introductions.  Our success
will depend in part on our ability to enhance our  technologies and products and
to  introduce  new  products  and   technologies   to  meet  changing   customer
requirements.  We are  currently  devoting,  and intend to  continue  to devote,
significant  resources  toward the  development of digital media  technology and
products.  There can be no  assurance  that we will  successfully  complete  the
development of these  technologies  and related  products in a timely fashion or
that our current or future  products will satisfy the needs of the digital media
industry.  There  can also be no  assurance  that  digital  media  products  and
technologies  developed  by others  will not  adversely  affect our  competitive
position or render our products or technologies non-competitive or obsolete.


                                      -15-


<PAGE>


IF WE ARE UNABLE TO COMPETE IN THE  DIGITAL  MEDIA  MARKET,  YOU MAY LOSE ALL OR
PART OF YOUR INVESTMENT.

The  digital  media  market is highly  competitive  and highly  fragmented.  Our
competitors may have substantially greater financial, technological,  marketing,
personnel and research and development  resources than we currently have.  There
are direct  competitors who have  competitive  technology and products.  Many of
these  competitors may have significant  advantages over us,  including  greater
financial,  technical,  marketing and  manufacturing  resources,  more extensive
distribution channels,  larger customer bases and faster response times to adapt
new or emerging technologies and changes in customer requirements.  As a result,
our competitors may develop superior products or beat us to market with products
similar to ours. Further,  there can be no assurance that new companies will not
enter our markets in the future.  Although we believe that our products  will be
distinguishable   from  those  of  our   competitors   on  the  basis  of  their
technological  features and  functionality at an attractive  value  proposition,
there  can be no  assurance  that  we  will  be  able  to  penetrate  any of our
anticipated  competitors' portions of the market. There can be no assurance that
we will be able to compete successfully against currently  anticipated or future
competitors  or that  competitive  pressures  will not have a  material  adverse
effect on our business, operating results and financial condition. If we are not
successful in competing  against our current and future  competitors,  you could
lose your entire investment.

Moreover,  foreign direct  investment in China has increased rapidly in the last
twenty years and the investment  environment  has further  improved to encourage
foreign and local  investors to invest in fields other than those  considered by
the government of the Peoples'  Republic of China to be sensitive.  Distribution
channels  have been  opened up to new  foreign  investment  subject to  Peoples'
Republic of China  government  guidelines.  Many  companies  are involved in the
electronic  and  traditional   publishing  and   distribution  of  literary  and
entertainment  material.  There is no guarantee that other  competitors will not
become  involved  in  business  similar to ours.  If this  occurs,  there may be
competitors  with  greater  financial  resources  and to the  extent  that  such
competitors  compete  on the basis of price,  this could  affect our  results of
operations and our ability to continue operations.

WE HAVE LIMITED MARKETING CAPABILITY.

We have limited marketing capabilities and resources. In order to achieve market
penetration we will have to undertake  significant  efforts and  expenditures to
create awareness of, and demand for, our technology and products. Our ability to
penetrate the market and build our customer base will be substantially dependent
on our marketing efforts, including our ability to establish strategic marketing
arrangements.  No assurance  can be given that we will be able to enter into any
such  arrangements or if entered into that they will be successful.  Our failure
to successfully develop our marketing capabilities,  both internally and through
third-party  alliances,  would have a material  adverse  effect on our business,
operating results and financial  condition.  Further,  there can be no assurance
that, if developed, such marketing capabilities will lead to sales.


                                      -16-


<PAGE>


WE WILL NEED TO RESTRUCTURE OUR BUSINESS TO MAXIMIZE OUR  PROFITABILITY AND CASH
FLOW.

We may experience significant  fluctuations in our operating results and rate of
growth.  Due to our limited  operating  history and our evolving business model,
and the  unpredictability  of the future of our industry,  we may not be able to
accurately  forecast our rate of growth.  We base our current and future expense
levels and our investment  plans on estimates of future net sales.  Our expenses
and  investments  are to a large extent fixed,  and we may not be able to adjust
our spending quickly enough if our net sales fall short of our expectations.

Our revenue and  operating  profit  growth  depends on the  continued  growth of
demand for books  offered by our  customers  and  partners,  and our business is
affected by business  conditions in China and,  indirectly,  worldwide.  Revenue
growth may not be sustainable and our  company-wide  percentage  growth rate may
decrease in the future.

OUR BUSINESS IS EXPOSED TO RISKS  ASSOCIATED WITH ONLINE  COMMERCE  SECURITY AND
CREDIT CARD FRAUD WHICH COULD REDUCE OUR REVENUES.

A fundamental  requirement for online commerce and  communications is the secure
transmission of confidential  information,  such as credit card numbers or other
personal  information,  over  public  networks.  Our  security  measures  may be
inadequate  and, if any  compromise of security  were to occur,  it could have a
detrimental  effect on our  reputation  and  adversely  affect  our  ability  to
maintain our existing travelers and/or attract new travelers.

Consumer concerns over the security of transactions conducted on the Internet or
the privacy of users may inhibit the growth of the Internet and online commerce.
To  transmit  confidential  information  such as customer  credit  card  numbers
securely,  we rely on encryption and  authentication  technology.  Unanticipated
events or developments  could result in a compromise or breach of the systems we
use to protect customer  transaction  data. Our servers and those of our service
providers  may be  vulnerable  to  viruses  or other  harmful  code or  activity
transmitted  over the Internet.  A virus or other harmful activity could cause a
service disruption.

In addition,  we bear  financial  risk from products or services  purchased with
fraudulent credit card data. Although we have implemented anti-fraud measures, a
failure  to  control  fraudulent  credit  card  transactions   adequately  could
adversely  affect our business.  Because of our limited  operating  history,  we
cannot  assure  you that our  anti-fraud  measures  are  sufficient  to  prevent
material  financial  loss.  Since we cannot exert the same level of influence or
control over our sales agents as we could were they our own employees, our sales
agents could fail to comply with our policies and procedures, which could result
in claims  against us that  could harm our  financial  condition  and  operating
results.  We are not in a  position  to  directly  provide  the same  direction,
motivation  and  oversight for our sales agents as we would if such sales agents
were our own  employees.  As a result,  there can be no assurance that our sales
agents  will  participate  in our  marketing  strategies  or plans,  accept  our
introduction  of new  products  and  services,  or comply with our  policies and
procedures.

Moreover,  our  processing,  storage,  use and disclosure of personal data could
give rise to liabilities as a result of government regulation, conflicting legal
requirements or differing views of personal privacy rights. In the processing of
our traveler  transactions,  we receive and store a large  volume of  personally
identifiable  information.  This  information  is also  increasingly  subject to
legislation and  regulations in numerous  jurisdictions  around the world.  This
government  action is  typically  intended  to protect  the  privacy of personal


                                      -17-


<PAGE>


information  that  is  collected,  processed  and  transmitted  in or  from  the
governing  jurisdiction.  We could  be  adversely  affected  if  legislation  or
regulations  are  expanded to require  changes in our  business  practices or if
governing  jurisdictions interpret or implement their legislation or regulations
in ways that negatively affect our business,  financial condition and results of
operations. As privacy and data protection have become more sensitive issues, we
may also become exposed to potential  liabilities as a result of differing views
on the privacy of travel data.  These and other  privacy  developments  that are
difficult to anticipate could adversely affect our business, financial condition
and results of operation.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY,  PARTICULARLY IN LIGHT OF
CHINESE INTELLECTUAL PROPERTY LAWS.

Intellectual   property   rights  are  evolving  in  China,   trending   towards
international  norms,  but are by no  means  fully  developed.  We have  not had
significant  involvement in  intellectual  property to date. The  application of
intellectual property rights to protect our foreign clients' and partners' media
will  likely  be  necessary  in the  future.  Protection  is needed at a minimum
against  piracy;  legal action may be needed and all legal action  involves risk
and  expenses.

WE MAY NOT BE ABLE TO HIRE AND  RETAIN  THE  PERSONNEL  WE NEED TO  SUSTAIN  OUR
BUSINESS.

We depend on the  continued  services of our  executive  officers  and other key
personnel.  The loss of or failure to attract key personnel could  significantly
impede our financial plans,  growth,  and other objectives.  We believe that our
future  success  will  depend in large part on our ability to attract and retain
additional  highly  skilled and  qualified  personnel  and to expand,  train and
manage our  employee  base.  We may not continue to be  successful  in doing so,
because the competition for qualified  personnel in China is intense.  If we are
unable  to  attract  and  retain  qualified  personnel,  we  may  never  achieve
profitability.

WE MAY NOT BE ABLE TO ENTER NEW MARKETS, WHICH MAY IMPAIR OUR ABILITY TO GROW.

Our  ability to enter into new markets is  dependent  upon the  availability  of
quality  products and demand of these  products in China.  Thus, it is important
for us to develop  relationships  with  publishers and  distributors  of foreign
(mainly  English-language)  books and media  contents to expedite  their import,
translation  and  distribution   through  electronic  and  traditional  channels
nationwide  in China.  There is no guarantee  that we can develop  relationships
with foreign  publishers and  distributors.  Currently,  foreign books and media
contents are not  commonly  available  in China,  therefore,  we are not able to
quantify  the demand of foreign  books and media  contents in China.  As such we
cannot predict our probability of success in this new market.

THE SUCCESS OF OUR BUSINESS  DEPENDS ON CONTINUED GROWTH OF ONLINE DIGITAL MEDIA
PRODUCTS AND ATTRACTING CUSTOMERS IN A COST-EFFECTIVE MANNER.

Our sales and  revenues  will not grow as we plan if  consumers  do not purchase
significantly  more digital media products  online than they currently do and if
the use of the  Internet  as a medium of  commerce  for such  products  does not


                                      -18-


<PAGE>


continue to grow or grows more slowly than expected. The success of our business
is dependent  on  significant  increase in the number of  consumers  who use the
Internet to purchase digital media products.

Our  business  strategy  depends on our  ability  to  broaden  the appeal of our
website to consumers and business and to increase the overall number of consumer
transactions  conducted on our website in a cost-effective  manner.  In order to
increase the number of consumer  transactions,  we must attract more visitors to
our website and convert a larger number of these visitors into paying customers.
Our ability to offer  products  and  services  that will  attract a  significant
number of consumers  to use our  services is not certain.  If it does not occur,
our growth may be limited.  It may be necessary to spend substantial  amounts on
marketing  and  advertising  to enhance  our brand  recognition  and attract new
customers to our website,  and to  successfully  convert these new visitors into
paying  customers.  We cannot  assure  you that our  marketing  and  advertising
efforts  will be  effective  to  attract  new  customers.  If we fail to attract
customers  and  increase  our  overall  number  of  consumer  transactions  in a
cost-effective  manner,  our  ability  to  grow  and  become  profitable  may be
impaired.

Moreover, we rely on the Internet  infrastructure which may be unable to support
increased  levels of demand.  The  internet  infrastructure  may not expand fast
enough to meet the  increased  levels of demand.  In  particular,  the  expected
benefits from our online  operations  may be reduced if internet  usage does not
continue to grow.  In addition,  activities  that  diminish the  experience  for
internet  users,  such as spyware,  spoof e-mails,  viruses and spam directed at
internet users, as well as viruses and "denial of service"  attacks  directed at
internet companies and service  providers,  may discourage people from using the
internet,  including  for  commerce.  If consumer use  diminishes  or grows at a
slower  rate,  then our business  and results of  operations  could be adversely
affected.

WE HAVE SUBSTANTIAL DEBT OBLIGATIONS, INCLUDING CERTAIN DEBT OBLIGATIONS SECURED
BY ALL OF OUR ASSETS. IF WE ARE UNABLE TO REPAY SUCH  OBLIGATIONS,  OUR BUSINESS
WILL LIKELY FAIL.

Our  current  liabilities  were  $2,579,904  as of  September  30, 2007 of which
approximately  $1,787,643  is due within  the next year  unless  extended.  Such
substantial debt obligations could affect our status as a going concern and also
represent  a  concentration  of risk  which  could pose a serious  concern.  Our
ability to repay debt will be  dependent  on cash flow from the business and our
ability  to raise  new  funds in the form of  loans,  debt or equity in the next
year.  We have  $6,202,492  in long term debt of which  $1,250,000  is due on or
before  November 23, 2010 and  $2,000,000  is due on or before March 23, 2011 in
connection  with recent  convertible  debenture  financings  with Highgate House
Funds, Ltd. and Cornell Capital Partners, LP.

CHINESE TAX AND OTHER LAWS MAY NEGATIVELY IMPACT OUR BUSINESS RESULTS.

We conduct our business in China through our subsidiaries. China currently has a
number of laws  related to various  taxes  imposed by both  federal and regional
governmental  authorities.  Applicable taxes include  value-added tax, corporate
income tax, and payroll and worker and welfare  taxes,  along with others.  Laws


                                      -19-


<PAGE>


related to some of these taxes have not been in force for a significant  period,
in  contrast  to more  developed  market  economies  and  regulations  for their
implementation  are often  unclear  or  incomplete.  Often,  differing  opinions
regarding legal interpretation exist both among and within government ministries
and  organizations;  thus  creating  uncertainties  and areas of  conflict.  Tax
declarations,  together with other legal compliance areas (as examples,  customs
and  currency  control  matters)  are subject to review and  investigation  by a
number of authorities,  who are enabled by law to impose severe fines, penalties
and interest charges.  These facts create tax risks in China  substantially more
significant than typically found in countries with more developed tax systems.

We believe that we are in substantial compliance with the tax laws affecting our
operations;  however,  the risk remains that the relevant authorities could take
differing  positions with regard to interpretive  issues and the effect could be
significant. The fact that a year has been reviewed does not close that year, or
any tax declaration applicable to that year, from further review.

Chinese  company  law  as it  applies  to  foreign  invested  corporations  (our
subsidiaries)  requires  them to maintain  dedicated  reserves  which  include a
general reserve and a reserve for enterprise  expansion.  The dedicated reserves
are  appropriated  from net income  after taxes,  determined  under the relevant
Chinese accounting  regulations,  at a rate set by the Board of Directors of the
respective  subsidiaries,  and record as a component  of  shareholders'  equity.
These  reserves  are  not  distributable,   other  than  upon  liquidation.   No
appropriation has been made for the year as our subsidiaries recorded losses.

Similar  provisions  of Chinese  company law require our Board of  Directors  at
their  discretion to transfer a certain  amount of their annual net income after
taxes, as determined under the relevant  Chinese  accounting  regulations,  to a
staff welfare and bonus fund.  No such transfer was made for the fiscal  period,
as the subsidiaries recorded losses.

EXCHANGE RATE FLACTUATIONS MAY NEGATIVELY IMPACT OUR BUSINESS.

Our reporting  currency is the United States Dollar but our functional  currency
in China is the Renminbi.  As such, rate fluctuations may have a material impact
on our consolidated  financial  reporting and make realistic revenue projections
difficult.  Additionally,  as  Renminbi  is the  functional  currency of Beijing
Joannes,  Xinhua C&D and Beijing  Boheng,  the  fluctuation of exchange rates of
Renminbi may have positive or negative impacts on our results of operations.

CHINESE   FUNDS   REMITTANCE   POLICIES   MAY  NOT  ALLOW  US  TO  MAXIMIZE  OUR
PROFITABILITY.

Pursuant to Chinese company law applicable to foreign investment companies, such
as our Chinese  subsidiaries,  as well as our minor  interest in Xinhua C&D, are
required to maintain dedicated reserves,  which include a general reserve and an
enterprise expansion reserve. The dedicated reserves are to be appropriated from
net  income  after  taxes,  determined  under the  relevant  Chinese  accounting
regulations  at a rate  determined  by the board of directors of the  respective
subsidiaries, and recorded as a component of shareholders' equity. The dedicated
reserves  are not  distributable  other than upon  liquidation.  As our  Chinese
subsidiaries  and Xinhua C&D have recorded losses for the fiscal year ended June


                                      -20-


<PAGE>


30,  2007,  no  appropriation  to the  dedicated  reserves  was made.  Moreover,
pursuant to the same Chinese company law, our Chinese  subsidiaries are required
to transfer at the discretion of their boards of directors,  a certain amount of
its annual net income  after  taxes as  determined  under the  relevant  Chinese
accounting  regulations  to a staff  welfare and bonus  fund.  Since our Chinese
subsidiaries  and Xinhua C&D have recorded losses for the fiscal year ended June
30, 2007, no transfer to the staff welfare and bonus fund was made.

AS A RESULT OF A MAJORITY OF OUR DIRECTORS AND OFFICERS BEING RESIDENTS OF OTHER
COUNTRIES  OTHER THAN THE UNITED  STATES,  INVESTORS  MAY FIND IT  DIFFICULT  TO
ENFORCE  WITHIN  THE  UNITED  STATES ANY  JUDGMENTS  OBTAINED  AGAINST US OR OUR
DIRECTORS AND OFFICERS.

We do not  currently  maintain a permanent  place of business  within the United
States.  In addition,  a majority of our  directors  and officers are  nationals
and/or  residents  of  countries  other  than the  United  States,  and all or a
substantial  portion of such  persons'  assets are  located  outside  the United
States.  As a result,  it may be difficult for  investors to enforce  within the
United  States any  judgments  obtained  against our company or our  officers or
directors, including judgments predicated upon the civil liability provisions of
the securities  laws of the United States or any state  thereof.

NEVADA LAW AND OUR  ARTICLES OF  INCORPORATION  MAY PROTECT OUR  DIRECTORS  FROM
CERTAIN TYPES OF LAWSUITS.

Nevada law provides that our officers and directors  will not be liable to us or
our  stockholders  for monetary  damages for all but certain types of conduct as
officers and directors. Our Bylaws permit us broad indemnification powers to all
persons  against all damages  incurred in  connection  with our  business to the
fullest extent provided or allowed by law. The  exculpation  provisions may have
the effect of  preventing  stockholders  from  recovering  damages  against  our
officers  and  directors  caused by their  negligence,  poor  judgment  or other
circumstances.  The indemnification provisions may require us to use our limited
assets to defend our officers and directors  against  claims,  including  claims
arising out of their negligence, poor judgment, or other circumstances.

A DECLINE IN THE PRICE OF OUR SHARES OF COMMON STOCK COULD AFFECT OUR ABILITY TO
RAISE FURTHER WORKING CAPITAL AND ADVERSELY IMPACT OUR OPERATIONS.

A prolonged decline in the price of our shares of common stock could result in a
reduction in the  liquidity of our shares of common stock and a reduction in our
ability to raise  capital.  Any reduction in our ability to raise equity capital
in the future  would force us to  reallocate  funds from other  planned uses and
would have a significant  negative  effect on our business plans and operations,
including  our  ability  to  develop  our  business  and  continue  our  current
operations.  If the stock price declines,  there can be no assurance that we can
raise  additional  capital or generate funds from operations  sufficient to meet
our obligations.


                                      -21-


<PAGE>


IF WE ISSUE ADDITIONAL SHARES OF COMMON STOCK IN THE FUTURE,  THIS MAY RESULT IN
DILUTION TO OUR EXISTING STOCKHOLDERS.

Our articles of incorporation, as amended, authorize the issuance of 500,000,000
shares of  common  stock.  Our board of  directors  has the  authority  to issue
additional  shares of common stock up to the  authorized  capital  stated in the
articles of  incorporation.  Our board of directors  may choose to issue some or
all of such shares to acquire one or more  businesses  or to provide  additional
financing  in the  future.  The  issuance  of any such  shares  may  result in a
reduction  of the book value or market  price of the  outstanding  shares of our
common stock. It will also cause a reduction in the proportionate  ownership and
voting power of all other stockholders.

BECAUSE OUR COMMON STOCK IS SUBJECT TO PENNY STOCK RULES,  THE LIQUIDITY OF YOUR
INVESTMENT MAY BE RESTRICTED.

Our common stock is now,  and may  continue to be in the future,  subject to the
penny  stock  rules  under the  Securities  Exchange  Act of 1934.  These  rules
regulate  broker/dealer  practices for  transactions  in "penny  stocks."  Penny
stocks  generally  are equity  securities  with a price of less than $5.00.  The
penny  stock  rules  require  broker/dealers  to  deliver  a  standardized  risk
disclosure document that provides  information about penny stocks and the nature
and  level of risks in the  penny  stock  market.  The  broker/dealer  must also
provide the customer with current bid and offer  quotations for the penny stock,
the  compensation of the  broker/dealer  and its salesperson and monthly account
statements  showing the market value of each penny stock held in the  customer's
account.  The bid and offer  quotations and the  broker/dealer  and  salesperson
compensation  information  must be given to the  customer  orally or in  writing
prior to completing the transaction and must be given to the customer in writing
before or with the customer's  confirmation.  In addition, the penny stock rules
require  that prior to a  transaction,  the  broker  and/or  dealer  must make a
special written  determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's  written agreement to the transaction.
These  additional  penny stock  disclosure  requirements  are burdensome and may
reduce the trading  activity in the market for our common stock.  As long as the
common  stock is subject to the penny stock  rules,  holders of our common stock
may find it more difficult to sell their securities.

NASD SALES PRACTIVE  REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S  ABILITY TO BUY
AND SELL OUR SHARES OF COMMON  STOCK.

In addition to the "penny stock" rules described above, the National Association
of Securities  Dealers Inc. has adopted rules that require that in  recommending
an investment to a customer,  a broker-dealer  must have reasonable  grounds for
believing  that  the  investment  is  suitable  for  that  customer.   Prior  to
recommending  speculative  low  priced  securities  to  their  non-institutional
customers,  broker-dealers  must make reasonable  efforts to obtain  information
about the customer's  financial status,  tax status,  investment  objectives and
other   information.   Under   interpretations  of  these  rules,  the  National
Association of Securities Dealers Inc. believes that there is a high probability
that  speculative  low priced  securities will not be suitable for at least some
customers. The National Association of Securities Dealers Inc. requirements make
it more difficult for  broker-dealers  to recommend that their customers buy our
shares of common stock,  which may limit your ability to buy and sell our shares
of common stock and have an adverse effect on the market for its shares.


                                      -22-


<PAGE>


TRADING  ON THE OTC  BULLETIN  BOARD MAY BE  SPORADIC  BECAUSE IT IS NOT A STOCK
EXCHANGE, AND STOCKHOLDERS MAY HAVE DIFFICULTY RESELLING THEIR SHARES.

Our common stock is quoted on the OTC Bulletin Board. Trading in stock quoted on
the OTC Bulletin Board is often thin and  characterized by wide  fluctuations in
trading  prices,  due to many  factors  that  may  have  little  to do with  the
Company's  operations  or business  prospects.  The OTC Bulletin  Board is not a
stock  exchange,  and trading of securities  on the OTC Bulletin  Board is often
more sporadic than the trading of securities  listed on a quotation  system like
Nasdaq or a stock  exchange  like  Amex.  Accordingly,  you may have  difficulty
reselling any of our shares you purchase.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

The following exhibits are filed as part of this Quarterly Report:

Exhibit

31.1        Certification under Rule 13a-14(a).
31.2        Certification under Rule 13a-14(a).
32.1        Certification under Section 1350.
32.2        Certification under Section 1350.


                                      -23-


<PAGE>


SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                               XINHUA CHINA LTD.


Dated: November 13, 2007                       By: /s/ XIANPING WANG
                                                   ___________________________
                                                       Xianping Wang
                                                       President
                                                       Chief Executive Officer



Dated: November 13, 2007                       By: /s/ XIANPING WANG

                                                   ___________________________
                                                       Xianping Wang
                                                       Acting as Interim
                                                       Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities.


SIGNATURES              TITLE                                  DATE


/s/ XIANPING WANG       President, Chief Executive Officer     November 13, 2007
_________________       and a Director
    Xianping Wang


                                      -24-