UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      10-Q





(Mark
      One)





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





For
      the quarterly period ended September 30, 2008





o
            TRANSITIONAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
                ACT OF 1934




For
              the transition period from ____________________ to
              _________________________Commission
                file number:
            000-49852




DAHUA
      INC.





(Exact
      name of small business issuer as specified in its charter)





Delaware
            04-3616479State
                or other jurisdiction
            (I.R.S.
                Employer Identification No.)of
                incorporation or organization)





19 th Floor, Building C, Tianchuangshiyuan, Huizhongbeili,


Chaoyang
      District, Beijing, China, 100012


(Address
      of principal executive offices)





86-10-6480-1527


(Issuer's
      telephone number)





N/A


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





Check
      whether the issuer: (1) 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 o





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




Large
                Accelerated Filer o
            Accelerated
                Filer o
            Non-accelerated
                Filer o
            Smaller
                Reporting Company x





APPLICABLE
      ONLY TO CORPORATE ISSUERS





State
      the number of shares outstanding of each of the issuer's classes of common
      equity, as of the latest practicable date: 25,015,000 shares of common stock,
      par value $.0001, as of November 14, 2008





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          1
          -





DAHUA
      INC.





Table
      of Contents





Part
                I.
            Financial
                InformationItem
                1.
            Financial
                StatementsConsolidated
                Balance Sheet as of September 30, 2008 (unaudited) and December 31,
                2007
            
            3Consolidated
                Statements of Operations and Comprehensive Income (Loss) for the
                Three and
                Nine Months Ended September 30, 2008 and 2007 (Unaudited)
            
            4Consolidated
                Statements of Cash Flows for the Nine Months Ended September 30,
                2008 and
                2007 (Unaudited)
            
            5Notes
                to Consolidated Financial Statements
            
            6Item
                2.
            Management's
                Discussion and Analysis or Plan of Operation
            
            12Item
                3.
            Qualitative
                and Quantitative Disclosures About Market Risk
            
            15Item
                4T.
            Controls
                and Procedures
            
            16Part
                II.
            Other
                InformationItem
                1.
            Legal
                Information
            
            18Item
                1A.
            Risk
                Factors
            
            18Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            25Item
                3.
            Defaults
                Upon Senior Securities
            
            25Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            25Item
                5.
            Other
                Information
            
            25Item
                6.
            Exhibits
                and Reports on Form 8-K
            
            26Signatures
            
            
            26




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          2
          -




PART
      I. FINANCIAL INFORMATION





ITEM
      1. Financial Statements





DAHUA,
      INC.


Consolidated
      Balance Sheets as of September 30, 2008 and


December
      31, 2007




ASSETS




September
                  30, 2008
              
              December
                  31, 2007(unaudited)Current
                assets:Cash
                  and cash equivalents
              
              $
              2,026,226
              
              $
              1,893,626Inventory
                  (note 4)
              
              
              7,153,319
              
              
              6,501,143Prepaid
                  expenses
              
              
              171,939
              
              
              148,171Total
                  Current Assets
              
              
              9,351,484
              
              
              8,542,940Equipment:Computer
                  equipment
              
              
              56,583
              
              
              52,816Office
                  equipment
              
              
              102,592
              
              
              93,983Telephones
              
              
              3,286
              
              
              3,067Vehicles
              
              
              560,433
              
              
              508,748Total
                  Equipment
              
              
              722,894
              
              
              658,614Less:
                  Accumulated depreciation
              
              
              (228,766
              )
              
              (135,119
              )Net
                  equipment
              
              
              494,128
              
              
              523,495Construction
                  in progress (note 5)
              
              
              1,696,698
              
              
              788,896Prepaid
                  construction in progress
              
              
              119,174
              
              
              -Other
                  receivables (note 12)
              
              
              173,537
              
              
              300,054Prepaid
                  tax (note 9)
              
              
              435,983
              
              
              234,608Restricted
                  cash (note 8)
              
              
              730,748
              
              
              679,872Total
                  Assets
              
              $
              13,001,752
              
              $
              11,069,865LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  Liabilities:Accounts
                  payable
              
              $
              253,218
              
              $
              236,360Customer
                  deposits (note 7)
              
              
              6,283,089
              
              
              4,994,842Short-term
                  loans - related parties (note 6)
              
              
              858,825
              
              
              309,975Accrued
                  interest - short-term loans, related parties (note 6)...
              
              
              179,844
              
              
              151,446Other
                  accruals
              
              
              139,243
              
              
              179,470Total
                  Current Liabilities
              
              
              7,714,219
              
              
              5,872,093Minority
                  interest in subsidiary
              
              
              918,164
              
              
              972,996Stockholders’
                  Equity:Preferred
                  stock: par value $.0001, 20,000,000 shares authorized;none
                  issued and outstanding
              
              
              -
              
              
              -Common
                  stock: par value $.0001; 80,000,000 shares authorized;25,015,000
                  shares issued and outstanding
              
              
              2,502
              
              
              2,500Additional
                  paid-in capital
              
              
              3,131,200
              
              
              3,130,452Retained
                  earnings
              
              
              368,804
              
              
              588,884Accumulated
                  other comprehensive income
              
              
              866,863
              
              
              502,940Total
                  stockholders’ equity
              
              
              4,369,369
              
              
              4,224,776Total
                  Liabilities and Stockholders’ Equity
              
              $
              13,001,752
              
              $
              11,069,865




See
      accompanying notes to unaudited consolidated financial
      statements


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          3
          -


DAHUA,
      INC.


Consolidated
      Statements of Operations and Comprehensive Income (Loss)


(Unaudited)




Three
                    months ended
                
                Nine
                    months endedSeptember
                    30,
                
                September
                    30,2008
                
                2007
                
                2008
                
                2007RevenuesSales
                    revenues
                
                $
                -
                
                $
                6,272,503
                
                $
                -
                
                $
                11,900,437Cost
                    of goods sold
                
                
                -
                
                
                5,558,855
                
                
                -
                
                
                9,756,553Gross
                    Profit
                
                
                -
                
                
                713,648
                
                
                -
                
                
                2,143,884ExpensesAdvertising
                
                
                -
                
                
                58,139
                
                
                -
                
                
                418,806Depreciation
                
                
                28,270
                
                
                17,092
                
                
                81,978
                
                
                48,484Payroll
                    expense
                
                
                27,554
                
                
                194,152
                
                
                57,733
                
                
                423,454Other
                    general and administrative
                
                
                43,405
                
                
                399,737
                
                
                190,026
                
                
                1,157,104Total
                    expenses
                
                
                99,229
                
                
                669,120
                
                
                329,737
                
                
                2,047,848Net
                    income (loss) from operations
                
                
                (99,229
                )
                
                44,528
                
                
                (329,737
                )
                
                96,036Other
                    Income (expense)Interest
                    expense
                
                
                -
                
                
                (1,921
                )
                
                -
                
                
                (60,972
                )Other
                    revenues
                
                
                -
                
                
                3
                
                
                -
                
                
                439Interest
                    income
                
                
                5,311
                
                
                3,680
                
                
                54,825
                
                
                11,550Total
                    other income (expense)
                
                
                5,311
                
                
                1,762
                
                
                54,825
                
                
                (48,983
                )Net
                    income (loss) before taxes and minority interest
                
                
                (93,918
                )
                
                46,290
                
                
                (274,912
                )
                
                47,053Provision
                    for income taxes
                
                
                -
                
                
                (15,276
                )
                
                -
                
                
                (15,528
                )Net
                    income (loss) before minority interest
                
                
                (93,918
                )
                
                31,014
                
                
                (274,912
                )
                
                31,525Minority
                    interest in subsidiary income (loss)
                
                
                (18,783
                )
                
                6,203
                
                
                (54,832
                )
                
                6,305Net
                    income (loss)
                
                $
                (75,135
                )
                $
                (24,811
                )
                $
                (220,080
                )
                $
                25,220Foreign
                    currency translation adjustment............
                
                $
                31,654
                
                $
                56,847
                
                $
                363,923
                
                $
                154,291Comprehensive
                    income (loss)
                
                $
                (43,481
                )
                $
                81,658
                
                $
                143,843
                
                $
                179,511Basic
                    and diluted income (loss) per share
                
                $
                (0.00
                )
                $
                0.00
                
                $
                (0.01
                )
                $
                0.00Weighted
                    average common shares outstanding
                
                
                25,015,000
                
                
                25,000,000
                
                
                25,014,917
                
                
                25,000,000


See
      accompanying notes to unaudited consolidated financial statements




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          4
          -




DAHUA,
      INC.


Consolidated
      Statements of Cash Flows


(Unaudited)




Nine
                  months ended September 30,2008
              
              2007Cash
                  Flows from Operating Activities:Net
                  income
              
              $
              (220,080
              )
              $
              25,220Adjustments
                  to reconcile net income to net cash provided by operating
                  activities:Depreciation
              
              
              81,978
              
              
              48,484Minority
                  interest
              
              
              (54,832
              )
              
              6,305Stock
                  issued for services
              
              
              750
              
              
              -Changes
                  in operating assets and liabilities:Inventory
              
              
              (183,938
              )
              
              3,796,741Tax
                  prepaid
              
              
              (180,176
              )
              
              (571,597
              )Account
                  payable
              
              
              -
              
              
              (281,220
              )Prepaid
                  expenses
              
              
              (12,881
              )
              
              -Customer
                  deposits
              
              
              907,131
              
              
              (1,275,419
              )Accrued
                  interest
              
              
              17,171
              
              
              60,972Other
                  accruals
              
              
              (51,744
              )
              
              50,744Net
                  cash provided by operating activities.
              
              
              303,379
              
              
              1,860,230Cash
                  Flows from Investing Activities:Purchase
                  of equipment
              
              
              (16,888
              )
              
              (29,519
              )Construction
                  in progress
              
              
              (830,939
              )
              
              (1,040,102
              )Prepaid
                  construction in progress
              
              
              (116,292
              )
              
              -Other
                  receivable
              
              
              -
              
              
              (277,641
              )Net
                  cash used in investing activities
              
              
              (964,119
              )
              
              (1,347,262
              )Cash
                  Flows from Financing Activities:Payments
                  made on related party loans
              
              
              -
              
              
              (1,749,385
              )Net
                  proceeds from loans payable-related parties...
              
              
              514,002
              
              
              -Net
                  proceeds from other receivable
              
              
              144,340
              
              
              -Net
                  cash provided (used in) financing activities...
              
              
              658,342
              
              
              (1,749,385
              )Effect
                  of rate changes on cash
              
              
              134,998
              
              
              65,687Decrease
                  in cash and cash equivalents
              
              
              132,600
              
              
              (1,170,730
              )Cash
                  and cash equivalents, beginning of period
              
              
              1,893,626
              
              
              2,338,835Cash
                  and cash equivalents, end of period
              
              $
              2,026,226
              
              $
              1,168,105Supplemental
                  disclosure of cash flow information:Income
                  taxes paid in cash
              
              $
              -
              
              $
              524,360Sales
                  taxes paid in cash
              
              $
              -
              
              $
              776,614Non-cash
                  activitiesStock
                  issued for services
              
              $
              750
              
              $
              -




See
      accompanying notes to unaudited consolidated financial statements




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          5
          -





DAHUA
      INC.





NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





**1.
      Nature of operations**





Dahua,
      Inc. (“Dahua”) was incorporated on March 8, 2002 in the State of Delaware as
      Norton Industries Corp. (“Norton”). The name was changed to Dahua, Inc. on
      February 7, 2005 as result of a reverse acquisition in which Norton acquired
      all
      capital shares of Bauer Invest Inc. ("Bauer"). Incident to the reverse
      acquisition the Company paid $100,000 to the previous shareholders of Norton
      for
      shares of stock that were canceled. The acquisition was accounted for as a
      reverse merger, as the post acquisition owners and control persons of Dahua
      are
      substantially the same as the pre acquisition owners and control persons of
      Bauer and the $100,000 paid to purchase and cancel the previous shares was
      treated as an adjustment to paid in capital.





Bauer
      Invest Inc. was incorporated on December 10, 2003, under the laws of the
      Territory of the British Virgin Islands (“BVI”). Bauer has had no operations
      other than the acquisition of 80% of Beijing Dahua Real Estate Development,
      Ltd.
      (“Subsidiary”) on May 25, 2004. The Subsidiary is a corporation established on
      September 24, 2001 in the People’s Republic of China (“PRC”). The acquisition
      was accounted for as a reverse merger, as the post acquisition owners and
      control persons of Bauer are substantially the same as the pre- acquisition
      owners and control persons of the subsidiary. These financial statements are
      essentially those of the Subsidiary with a recapitalization to show the effects
      due to the reverse mergers. The consolidated entity is hereafter referred to
      as
‘the Company’.





The
      Company engages in the development of real estate and the sale of commodity
      housing. The Company has completed all of the construction on its current
      development project and all of the houses are sold or available for
      sale.





Zhuolu
      Dahua Real Estate Development Ltd was established on May 21, 2008 in the
      People’s Republic of China (“PRC”). It is the wholly-owned subsidiary of Beijing
      Dahua Real Estate Development, Ltd.




The
      Company engages in the development of real estate and the sale of commodity
      housing .
      The
      company is now in the process of getting the permits needed to get the lot
      and
      to begin the construction.





**2.
      Basis of Presentation**





The
      consolidated financial statements include the accounts of Dahua, Inc., Bauer
      Invest, Inc., Beijing Dahua Real Estate Development Ltd and Zhuolu Dahua Real
      Estate Development Ltd. All inter-company accounts and transactions have been
      eliminated in consolidation. The Company records minority interest expense,
      which reflects the 20% portion of the earnings of Beijing Dahua Real Estate
      Development, Ltd. allocable to holders of the minority interest.





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




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          6
          -




**3.
      Summary of Significant Accounting Policies**





Economic
      and Political Risks





The
      Company faces a number of risks and challenges as a result of having primary
      operations and markets in the PRC. Changing political climates in the PRC could
      have a significant effect on the Company’s business.





Cash
      and Cash Equivalents





For
      purposes of the statements of cash flows, cash and cash equivalents includes
      cash on hand and demand deposits held by banks. Deposits held in financial
      institutions in the PRC are not insured by any government entity or
      agency.





Trade
      Accounts Receivable





Trade
      accounts receivable are recognized and carried at original invoice amount less
      an allowance for any uncollectible amounts. An estimate for doubtful accounts
      is
      made when collection of the full amount becomes questionable. The Company had
      no
      trade accounts receivable at September 30, 2008.





Inventories





Inventories
      consist primarily of land acquisition and development costs, engineering,
      infrastructure, capitalized interest, and construction costs. The inventories
      are valued at cost based on the level of completion using the weighted-average
      method.





Property,
      Plant, and Equipment





Property,
      plant, and equipment are carried at cost less accumulated depreciation, which
      is
      computed using the straight-line method over the useful lives of the assets.
      Upon disposal of assets, the cost and related accumulated depreciation are
      removed from the accounts and any gain or loss is included in income. Property
      and equipment are depreciated over their estimated useful lives as
      follows:




Computer
                  equipment
              
              
              3yearsOffice
                  equipment
              
              
              7yearsVehicles
              
              
              7years


Depreciation
      expense for the nine-month periods ended September 30, 2008 and 2007 was $81,978
      and $48,484, respectively.





Long-term
      assets of the Company are reviewed annually to assess whether the carrying
      value
      has become impaired, according to the guidelines established in Statement of
      Accounting Standards (SFAS) No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets.”* The
      Company also evaluates the periods of amortization to determine whether
      subsequent events and circumstances warrant revised estimates of useful lives.
      No impairment of assets was recorded in the periods reported.





Revenue
      Recognition





The
      Company recognizes revenue on the sale of a house when the consummation of
      a
      sale is evidenced by: 1) a contractual arrangement that is binding to both
      parties; 2) the exchange of all consideration (i.e. the seller has transferred
      to the buyer the usual risks and rewards of ownership and the buyer has made
      payment in full to the seller); 3) the arrangement of all permanent financing
      for which the seller is responsible and; 4) the performance of all conditions
      precedent to closing. No revenue is recognized when the Company’s receivable is
      subject to future subordination, as is the case when the Company guarantees
      a
      bank loan for the period prior to the certification of title
      transfer.




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          7
          -




Advertising
      Expenses





Advertising
      costs are expensed as incurred. Advertising expense amounted to $0 and $418,806
      for the nine-month periods ended September 30, 2008 and 2007.





Foreign
      Currency and Comprehensive Income





The
      accompanying consolidated financial statements are presented in United States
      (“US”) dollars. The functional currency is the Yuan Renminbi (“RMB”) of the PRC.
      The consolidated financial statements are translated into US dollars from RMB
      at
      period-end exchange rates for assets and liabilities, and weighted average
      exchange rates for revenues and expenses. Capital accounts are translated at
      their historical exchange rates when the capital transactions
      occurred.





During
      July 2005, China changed its foreign currency exchange policy from a fixed
      RMB/US dollar exchange rate into a flexible rate under the control of China’s
      government. We used the Closing Rate Method in translation of the financial
      statements.





RMB
      is
      not freely convertible into the currency of other nations. All such exchange
      transactions must take place through authorized institutions. There is no
      guarantee the RMB amounts could have been, or could be, converted into US
      dollars at rates used in translation.





Taxes





Deferred
      tax assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective tax bases. Deferred tax
      assets and liabilities are measured using enacted tax rates expected to apply
      to
      taxable income in the years in which those temporary differences are expected
      to
      reverse. The effect on deferred tax assets and liabilities of a change in tax
      rates is recognized in the statement of operations in the period that includes
      the enactment date. A valuation allowance is provided for deferred tax assets
      if
      it is more likely than not these items will either expire before the Company
      is
      able to realize their benefits, or that future deductibility is uncertain.
      Nearly all differences in tax bases and financial statement carrying values
      are
      permanent differences. Therefore, the Company has recorded no deferred tax
      assets or liabilities.





Estimates





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




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          8
          -




Earnings
      Per Share





Basic
      earnings per common share ("EPS") are calculated by dividing net income by
      the
      weighted average number of common shares outstanding during the year. Diluted
      EPS is calculated by adjusting the weighted average outstanding shares, assuming
      conversion of all potentially dilutive securities, such as stock options and
      warrants. The numerators and denominators used in the computations of basic
      and
      diluted EPS are presented in the following table:




For
                  the nine months endedSeptember
                  30, 2008
              
              September
                  30, 2007NUMERATOR
                  FOR BASIC AND DILUTED EPSNet
                  income to common stockholders
              
              $
              (220,080
              )
              $
              25,220DENOMINATORS
                  FOR BASIC AND DILUTED EPSWeighted
                  average shares of common stock outstanding
              
              
              25,014,917
              
              
              25,000,000Add:
                  dilutive equity securities outstanding
              
              
              -
              
              
              -Denominator
                  for diluted EPS
              
              
              25,014,917
              
              
              25,000,000EPS-Basic
              
              $
              (0.01
              )
              $
              0.00EPS-Diluted
              
              $
              (0.01
              )
              $
              0.00
  The
      Company had no potentially dilutive securities outstanding at September 30,
      2008
      and 2007.





**4.
      Inventory**





Inventory
      represents completed houses available for sale at September 30, 2008. During
      2005, the Company completed all of its housing construction. As of September
      30,
      2008, 60 units were sold, 14 units were reserved with clients’ deposits, and one
      unit was available for sale.





**5.
      Construction in progress**





Construction
      in progress represents the cost of the new building, which the Company is
      constructing. The new building will have four stories. The Company plans to
      use
      two stories for its office and administration, and give out the other two
      stories (lease free) to the home owner association. The home owner association
      will hire a third party to collect usage fee and maintain the facilities at
      their cost. As of September 30, 2008, the balance of construction in progress
      was $1,696,698.





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          9
          -





**6.
      Related Party Transactions**





Short-term
      loans due to related parties had balances of $1,038,669 and $461,421 (including
      accrued interest) at September 30, 2008 and December 31, 2007, respectively.
      The
      loans carry an annual interest rate of 6 percent and are due on demand. Interest
      accrued on the loans was $17,596 and $60,972 for
      the
      nine months period-ended September
      30 ,
      2008
      and 2007 .
      The interest amounts, which were accrued for
      the
      nine months periods ended September
      30 ,
      2008 ,
      were capitalized as construction in progress.





**7.
      Customer deposits**





Customer
      deposits consist of down payments received on sales contracts for houses. When
      all of the conditions set forth in the Company’s revenue recognition policy are
      met, the Company will recognize the down payments as revenue. The aggregate
      of
      the customers’ deposits at September 30, 2008 was $6,283,089. Of the 14 units
      reserved, 3 unit’s deposits are money received from bank arrangements (see note
      8) in the amounts of $1,004,649. Accordingly, the bank has liens against these
      3
      units.





**8** **.
      Off-Balance Sheet Arrangements**





The
      Company entered into an agreement with two banks that extended mortgage loans
      to
      its home buyers, where the Company agrees to provide a certain limited
      guarantee, which covers the risk before the conveyance of title upon closing.
      Upon initiating the loan on behalf of the buyer for the down payment, the Bank
      has withheld a percentage ranging from 5% to 20% of the loan and deposited
      such
      funds into a segregated account in each bank. At September 30, 2008, the balance
      of this separate account was $730,748. Since the Company does not recognize
      revenue when its receivables are subject to future subordination, the entire
      amount that could become payable to the bank under the limited guarantee is
      recorded as a liability on the balance sheet and is included in customer
      deposits, as is explained in note 6.





**9.
      Tax**





The
      Company made no provision for sales tax and income tax for the nine months
      periods ended September 30, 2008 for the reason that no sales revenue was
      recognized for the nine months ended September 30, 2008. The houses that the
      company reserved didn’t meet the requirement of revenue
      recognition.





As
      of
      September 30, 2008, the Company has a prepaid tax of $435,983 in which prepaid
      income tax is $320,790 and prepaid sales tax is $115,193.





**10** **.
      Stock**





The
      Company is authorized to issue up to 80,000,000 shares of common stock, $.0001
      par value, and 20,000,000 shares of preferred stock, $.0001 par value per share.
      For the help that Pacific Services provided in the company’s financial reporting
      in the United States, the company issued 15,000 shares of the Company’s Common
      Stock, $0.0001 par value per share to Pacific Services Inc. The fair value
      of
      this share paid for services is $0.05. As of September 30, 2008, there were
      25,015,000 shares of common stock issued and outstanding, and no shares of
      preferred stock were issued and outstanding.





-
          10
          -





**11.
      Contingencies**





The
      Company has not, historically, carried any property or casualty insurance.
      No
      amounts have been accrued for any liability that could arise from the lack
      of
      insurance. Management feels the chances of such an obligation arising are
      remote.





Deposits
      in banks in the PRC are not insured by any government entity or agency, and
      are
      consequently exposed to risk of loss. Management believes the probability of
      a
      bank failure, causing loss to the Company, is remote.





**12.
      Other receivable**





Other
      receivable primarily represent loans due from outside parties. As of September
      30 ,
      2008, the balance of other receivable (including accrued interest) was $173,537.
      The loans due from outside parties carry an annual interest rate of 6 percent
      and are due within two years.





**13.
      Recent Accounting Pronouncements**





I n
      December 2007, the Financial Accounting Standards Board ("FASB") issued FASB
      Statements No.141 (revised 2007), "Business Combinations" ("FAS 141(R)") and
      No.
      160, "Noncontrolling Interests in Consolidated Financial Statements" ("FAS
      160"). These standards aim to improve, simplify, and converge internationally
      the accounting for business combinations and the reporting of noncontrolling
      interests in consolidated financial statements. The provisions of FAS 141 (R)
      and FAS 160 are effective for the fiscal year beginning June 1, 2009. We are
      currently evaluating the provisions of FAS 141(R) and FAS 160.





In
      February 2007, the FASB issued Statement No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment to FASB
      Statement No. 115". This statement permits companies to choose to measure many
      financial instruments and other items at fair value. The objective is to improve
      financial reporting by providing entities with the opportunity to mitigate
      volatility in reported earnings caused by measuring related assets and
      liabilities differently without having to apply complex hedge accounting
      provisions. This Statement is expected to expand the use of fair value
      measurement of accounting for financial instruments. This statement applies
      to
      all entities, including not for profit. The fair value option established by
      this statement permits all entities to measure eligible items at fair value
      at
      specified election dates. This statement is effective as of the beginning of
      an
      entity's first fiscal year that begins after November 15, 2007.The Company
      is
      currently assessing the impact adoption of SFAS No. 159 will have on its
      financial statements.





In
      December 2006, the FASB issued SFAS No. 157 "Fair Value Measurements" which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles and expands disclosure about fair
      value
      measurements. The statement clarifies that the exchange price is the price
      in an
      orderly transaction between market participants to sell the asset or transfer
      the liability in the market in which the reporting entity would transact for
      the
      asset or liability, that is, the principal or most advantageous market for
      the
      asset or liability. It also emphasizes that fair value is a market-based
      measurement, not an entity-specific measurement, and that market participant
      assumptions include assumptions about risk and effect of a restriction on the
      sale or use of an asset. The provisions are effective for fiscal years beginning
      after November 15, 2007. The Company is currently assessing the impact of the
      statement.




-
          11
          -




Item
      2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





The
      discussion in this quarterly report on Form 10-Q contains forward-looking
      statements. Such statements are based upon beliefs of management, as well as
      assumptions made by and information currently available to management of the
      Company as of the date of this report. These forward-looking statements can
      be
      identified by their use of such verbs as "expect", "anticipate", "believe"
      or
      similar verbs or conjugations of such verbs. If any of these assumptions prove
      incorrect or should unanticipated circumstances arise, the actual results of
      the
      Company could materially differ from those anticipated by such forward-looking
      statements. The Company assumes no obligation to update any such forward-looking
      statements.





Overview





We,
      through our subsidiary Beijing Dahua Real Estate Development Ltd., are engaged
      in the business of development, construction and sale of luxury residential
      single-family homes in Beijing, China. In July 2003, we began to develop our
      first real estate project, Dahua Garden (the "First Phase"), which consists
      of
      75 luxury residential units, all of which are single-family houses ranging
      from
      approximately 2,000 to 5,000 square feet, each with 3 - 4 bedrooms. The
      construction site is located at the northern skirt of Beijing, China. The
      construction began in July 2003 and was completed in December 2005. As of
      September 30, 2008, out of 75 luxury residential units, 60 units have been
      sold,
      14 units were reserved with clients' deposits, and one unit was available for
      sale.





We
      are
      currently in the process of applying with Beijing municipal and Changping
      district government agencies for the requisite licenses, permits, and approvals
      in order to start the Second Phase of Dahua Garden. But, in August 2006, the
      Chinese government issued a number of new rules and regulations for real estate
      developers, like us, in an attempt to push down rising house prices by cutting
      down luxury single family house constructions and favoring construction of
      apartment buildings. Under the government’s new policy, (i) no single family
      houses can be built, if the construction has not started, without special
      construction permits; (ii) All permits previously issued have to be re-reviewed
      and re-approved; and (iii) the land previously acquired for luxury housing
      construction has to be revalued and sold to the people who offer the most money
      for the land in an auction. Because of those new government policies, we have
      incurred a long delay for obtaining the consents and approvals to commence
      our
      construction for the second phase of Dahua Garden.





In
      the
      newly-publicized layout of Changping district the purpose of the land on which
      the Second Phase of Dahua Garden located has been recognized as residential
      land. We are now in the process of applying for the first-degree development
      of
      this land.




We,
      through our subsidiary Zhuolu Dahua Real Estate Development Ltd. which was
      established on May 21, 2008 and was wholly-owned by Beijing Dahua Real Eatate
      Development Ltd. , engage in the business of development, construction and
      sale
      of luxury residential single-family homes in Zhuolu county, Hebei province
      which
      is about 140 kilometers faraway from Beijing. The first phase will consist
      of
      246 luxury residential units, all of which are single-family houses ranging
      from
      approximately 2,000 to 5,000 square feet, each with 3 - 4 bedrooms. We are
      now
      in the process of getting the permits needed to begin the
      construction.




-
          12
          -




Results
      of Operations





For
      the Three Months Ended September 30, 2008 and 2007





Revenues





We
      began
      our First Phase of Dahua Garden construction, which consists of 75 luxury
      residential units, in July 2003. The construction was completed in December
      2005. For the three months ended September 30, 2008, no sales revenue was
      recognized in this quarter. The following table sets forth certain information
      about our sales of housing units:




Cumulative
                  Balance as ofSeptember
                  30, 2008
              
              June
                  30, 2008
              
              December
                  31, 2007Units
                  sold
              
              
              60
              
              
              60
              
              
              60Units
                  reserved with deposits
              
              
              14
              
              
              13
              
              
              13Units
                  available for sales
              
              
              1
              
              
              2
              
              
              2Total
              
              
              75
              
              
              75
              
              
              75
  Nine
                  months
              
              Three
                  months
              
              Six
                  monthsended
              
              ended
              
              endedSeptember
                  30, 2008
              
              September
                  30, 2008
              
              June
                  30, 2008Houses
                  sold
              
              
              -
              
              
              -
              
              
              -Houses
                  reserved
              
              
              1
              
              
              -
              
              
              -


For
      the
      three months ended September 30, 2008 and 2007, we recognized sales revenues
      of
      $0 and $6,272,503 from the sale of our housing units, respectively





Cost
      of
      Goods Sold





Cost
      of
      goods sold consists primarily of land acquisition and development costs,
      engineering, infrastructure, capitalized interest, and construction costs.
      For
      the three months ended September 30, 2008 and 2007, our cost of goods sold
      was
      $0 and $5,558,855, respectively





Operating
      Expenses





For
      the
      three months ended September 30, 2008, our operating expenses were $99,229,
      a
      decrease of $569,891, or 85.2%, as compared to $669,120 for the same period
      of
      prior year mainly due to the fundamental completion of the construction and
      the
      sales.




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          13
          -




Net
      Income





For
      the
      three months ended September 30, 2008, we had a net loss of $75,135, or $0.00
      per share, as compared with a net loss of $24,811, or $0.00 per share, for
      the
      same period of the prior year.





For
      the Nine Months Ended September 30, 2008 and 2007





Revenues





We
      began
      our First Phase of Dahua Garden construction, which consists of 75 luxury
      residential units, in July 2003. The construction was completed in December
      2005. For the nine months ended September 30, 2008, no sales revenue was
      recognized by the company . For
      the
      same period in 2007, we recognized sales revenues of $11,900,437.





Cost
      of
      Goods Sold





Cost
      of
      goods sold consists primarily of land acquisition and development costs,
      engineering, infrastructure, capitalized interest, and construction costs.
      For
      the nine months ended September 30, 2008 and 2007, our cost of goods sold were
      $0 and $9,756,553 respectively. As compared to 2007, because no sales revenue
      was recognized in 2008, no cost of goods sold was recognized
      accordingly.





Operating
      Expenses





During
      the nine months ended September 30, 2008, our operating expenses were $329,737
      as compared to $2,047,848 during the nine-month period in 2007, a decrease
      of
      $1,718,111 or 83.9%, mainly due to the fundamental completion of the
      construction and the sales.





Net
      Income





For
      the
      nine months ended September 30, 2008, we had a net loss of $220,080, or $0.01
      per share, as compared with a net income of $25,220 or $0.00 per share, for
      the
      same period of the prior year.





Liquidity
      and Capital Resources





Since
      inception, our operations have been primarily funded by equity capital,
      unsecured short-term loans from Dahua Project Management Group ("Dahua Group"),
      our affiliate, and customer deposits that we received from our pre-sale of
      housing units.





After
      receiving the Residential Housing Pre-sale Permit issued by the government,
      we
      are permitted to sell the residential units to be built to the public, which
      is
      common practice in China. Upon execution of a binding purchase contract between
      the developer and a homebuyer, a deposit and installment payments are required
      to be made to the developer, which we use to construct our residential housing
      units. As of September 30, 2008, our customer deposit balance was
      $6,283,089.





We
      also
      borrow from time to time based on a verbal line of credit agreement from Dahua
      Group, our affiliate. The funds borrowed are unsecured and there is no upper
      limit on the amount of money that we can borrow as long as there are funds
      available and we need it for our operations. The money we borrow under this
      arrangement bears interest at an annual rate of 6%, repayable within 30 days
      upon demand by the lender. As of September 30, 2008, the short-term loans due
      to
      related parties had a balance of $858,825, and accrued interest of
      $179,844.




-
          14
          -




As
      of
      September 30, 2008, we had cash and cash equivalents balance of $2,026,226.
      For
      the nine months ended September 30, 2008, our operating activities provided
      $303,379 of net cash. During the nine months ended September 30, 2008, our
      investing activities used $964,119 of net cash, mainly for the cost of the
      new
      building, which we are constructing. For the same period, the financing
      activities provided net cash of $658,342 from net proceeds on loans payable
      from
      related parties and on receivable others.




Our
      First
      Phase of Dahua Garden was completed in December 2005. We are currently applying
      with Beijing municipal and Changping district governmental agencies for all
      the
      requisite licenses, permits, and approvals to start our Second Phase of Dahua
      Garden. It is estimated that approximately $60.5 million is needed to complete
      the Second Phase. In addition to customer deposits, and short-term loans (line
      of credit) from Dahua Group, the proceeds generated from sale of the First
      Phase
      will also be used to finance the Second Phase development. There are no material
      commitments for capital expenditures.





While
      there can be no assurance that we will have sufficient funds over the next
      twelve months, we believe that funds generated from the sale of our First Phase
      of Dahua Garden housing units, purchaser deposits from pre-sale contracts,
      and
      the line of credit provided by our affiliate, Dahua Group, will be adequate
      to
      meet our anticipated operating expenses, capital expenditure and debt
      obligations for at least the next twelve months. Nevertheless, our continuing
      operating and investing activities may require us to obtain additional sources
      of financing. In that case, we may seek financing from institutional investors,
      banks, or other sources of financing. There can be no assurance that any
      necessary additional financing will be available to us on commercially
      reasonable terms, if at all.





Off-Balance
      Sheet Arrangements





We
      entered into an agreement with two banks (the “Banks”) that extended mortgage
      loans to our home buyers, where we agree to provide a certain limited guarantee,
      which covers the risk before the conveyance of title upon closing. Upon
      initiating the loan on behalf of the buyer for the down payment, the Banks
      have
      withheld a percentage ranging from 5% to 20% of the loan and deposited such
      funds into a segregated account in each bank. At September 30, 2008, the balance
      of this separate account was $730,748. Since the Company does not recognize
      revenue when its receivables are subject to future subordination, the entire
      amount that could become payable to the banks under the limited guarantee is
      recorded as a liability on the balance sheet and is included in customer
      deposits.





Item
      3. QUALITATIVE AND QUANTITIVE DISCLOSURES ABOUT MARKET RISK





The
      Company is subject to the following market risks, including but not limit
      to:





General
      Real Estate Risk





(i)  The
      real
      estate development industry in general, and the residential luxury real estate
      development industry in particular, is a high risk industry, subject to changes
      in general economic conditions, fluctuating interest rates, and changing demand
      for the types of developments being considered. Volatility in local and regional
      land use demands, as well as changing supply and demand for the specific uses
      for which the real property is being developed, are also factors in assessing
      the relative risks of the business. The demand for residential real estate
      development is particularly sensitive to changing interest rates and shifting
      demographics. Both of these factors affecting the demand for residential housing
      are highly unpredictable over both the short-and long-term. If market conditions
      change dramatically and unfavorably to us, we may go out of
      business.




-
          15
          -




(ii) We
      need
      permits, licenses or approvals from government authorities to begin our
      construction of the second phase project. If we fail to obtain all required
      licenses, permits, or approvals, we may have to cease our
      operations.





(iii) Recent
      PRC regulations relating to cutting down luxury single family house
      constructions may limit our ability to implement our business plan. If no
      consents and approvals are obtained, we may have to cease our second phase
      of
      single luxury family house operations, and change our business plan to build
      apartment buildings.





Risk
      Relating to Property Sales





The
      Company may not be able to sell a property at a particular time for our full
      value, particularly in a poor market.





Foreign
      Currency Exchange Rate Risk





The
      Company is doing all our business in P.R. China. All the revenue and profit
      is
      denominated in RMB. When RMB depreciates, it may adversely affect the company's
      financial performance.





Item
      4T. CONTROLS AND PROCEDURES





*(i)
      Evaluation of Disclosure Controls and Procedures*





Our
      management evaluated, with the participation and under the supervision of our
      Chief Executive Officer and Chief Financial Officer, the effectiveness of our
      disclosure controls and procedures as of the end of the period covered by this
      Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive
      Officer and our Chief Financial Officer concluded that our disclosure controls
      and procedures are effective to ensure that information we are required to
      disclose in reports that we file or submit under the Securities Exchange Act
      of
      1934, as amended, is accumulated and communicated to our management, including
      our Chief Executive Officer and our Chief Financial Officer, as appropriate
      to
      allow timely decisions regarding required disclosure and that such information
      is recorded, processed, summarized and reported within the time periods
      specified in Securities and Exchange Commission rules and forms.





*(ii)
      Changes in Internal Control Over Financial Reporting*





There
      has
      been no change in our internal control over financial reporting that occurred
      during our last fiscal quarter that has materially affected or is reasonably
      likely to materially affect our internal control over financial reporting,
      except as follows:





On
      December 6, 2006, we identified two material weaknesses in our internal control
      over financial reporting related to construction interest accounting. The amount
      of $51,220 interest expense was incorrectly shown as capitalized construction
      interest. These material weaknesses resulted in the restatements of our
      previously reported financial statements for the year ended December 31, 2005
      and for the quarters ended March 31, June 30, and September 30, 2006. The
      restatement resulted in (i) an increase in net loss of $40,736 for the quarter
      ended March 31, 2006; (ii) a decrease in total assets of $50,920; and (iii)
      a
      decrease in stockholders' equity of $40,736. The restatement has no impact
      on
      the statement of cash flows.




-
          16
          -




In
      connection with this restatement, management assessed the effectiveness of
      the
      Company’s internal control over financial reporting, and identified the
      following deficiencies:





(a)
      We
      lacked adequate resources with sufficient technical expertise to properly
      account for construction in accordance with U.S. general accepted according
      principles; and




(b)
      We
      lacked consistent and effective review and supervision to ensure that the review
      of accounts entries supporting our construction interest provision was conducted
      in sufficient detail by someone other than the preparer of such
      entries.





Over
      the
      past nine months, we have taken steps to strengthen our ability to identify
      and
      resolve GAAP construction accounting issues as they arise. Specifically, we
      have
      implemented new controls and procedures to substantially mitigate the risks
      associated with the material weaknesses identified above:





(1)
      We
      provided additional training to our accounting staff on the requirements of
      the
      U.S. generally accepted accounting principles to increase their familiarity
      with
      those standards, and ensure their proper application of the U.S. GAAP to various
      transactions, including construction accounting, and other financial statements
      matters;





(2)
      We
      designated an experienced individual who is expected to provide additional
      review over our presentation and disclosure in financial statements and to
      provide further technical accounting expertise in applying U.S. generally
      accepted accounting principles; and





(3)
      We
      adopted procedures to conduct additional detailed transaction review and control
      activities to confirm that our financial statements for each period, present
      fairly, in all material respects, our financial positions, results of operations
      and cash flows for the periods presented in conformity with U.S. generally
      accepted accounting principles.





(4)
      We
      adopted procedures to solicit the services of the outside consulting firm to
      assist in complex and non-routine accounting transactions.





Our
      CEO
      and CFO do not expect that our internal controls and procedures will prevent
      all
      error and all fraud. Although our internal controls were designed to provide
      reasonable assurance of achieving their objectives, a control system, no matter
      how well conceived and operated, can provide only reasonable, not absolute,
      assurance that the objectives of the system are met. Further, the design of
      a
      control system must reflect the fact that there are resource constraints, and
      the benefits of controls must be considered relative to their costs. Because
      of
      the inherent limitations in all control systems, no evaluation of controls
      can
      provide absolute assurance that all control issues and instances of fraud,
      if
      any, have been detected. These inherent limitations include the realities that
      judgments in decision-making can be faulty and that breakdowns can occur because
      of simple error or mistake. Additionally, controls can be circumvented by the
      individual acts of some persons, by collusion of two or more people or by
      management override of the control. The design of any system of controls is
      also
      based partly on certain assumptions about the likelihood of future events,
      and
      there can be no assurance that any design will succeed in achieving its stated
      goals under all potential future conditions.





-
          17
          -





PART
      II. OTHER INFORMATION





Item
      1. Legal Information: None.





Item
      1A. Risk Factors :





Investing
      in shares of our common stock involves a high degree of risk. You should
      carefully consider the following risk factors, in addition to the other
      information set forth in this report, before you purchase these shares. The
      risks and uncertainties described below are those we have identified as
      material. If any of the events contemplated by the following discussion of
      risks
      should occur, our business, financial condition and results of operations may
      suffer. As a result, the trading price of our common stock could decline and
      you
      could lose part or all of your investment in our common stock.




Risks
      Related to Our Business




WE
      LACK
      AN OPERATING HISTORY UPON WHICH AN EVALUATION OF OUR FUTURE SUCCESS OR FAILURE
      CAN BE MADE.





We
      were
      incorporated in March 2002 as a blank check company for the purpose of seeking
      to complete a merger or business acquisition. We conducted virtually no business
      until January 30, 2005, when we acquired Bauer Invest Ltd. Bauer is a holding
      company, which conducts its business through its 80% owned subsidiary Beijing
      Dahua Real Estate Development, Ltd., a private company operating in the People's
      Republic of China (“Dahua Real Estate”). Dahua Real Estate was incorporated on
      September 24, 2001, to engage in the development and sale of luxury
      single-family houses in Beijing, China. The acquisition of Bauer was accounted
      for as a recapitalization, rather than a business combination. Accordingly,
      the
      historical operations of Bauer and its subsidiaries were represented as our
      historical operations. Our limited operating history makes it difficult for
      you
      to evaluate our business and future prospects.





WE
      WILL
      NEED ADDITIONAL FINANCING TO CARRY OUT OUR SECOND PHASE PROJECT. IF WE ARE
      UNABLE TO OBTAIN ADDITIONAL FINANCING, WE MAY HAVE TO DELAY THE IMPLEMENTATION
      OF OUR SECOND PHASE PROJECT, AND OUR ABILITY TO INCREASE REVENUE WILL BE
      MATERIALLY IMPAIRED.





Since
      inception, we have been dependent on short-term loans and customer deposits
      to
      meet our cash requirements. As of December 31, 2005 we completed the
      construction of our First Phase of Dahua Garden project consisting of 75 luxury
      single-family houses. Of 75 units, 60 houses were sold, 14 houses were reserved
      with clients’ deposits and one unit was available for sale. We are currently
      applying with Beijing municipal and Changping district governmental agencies
      for
      all the requisite licenses, permits, and approvals to start our Second Phase
      of
      Dahua Garden. To date we have not received any licenses, permits or approvals
      from governmental authorities to commence our Second Phase construction. We
      expect to obtain the licenses, permits and approvals by the end of 2008. It
      is
      estimated that we need approximately $60.5 million in order to complete our
      Second Phase project. We intend to use (i) our proceeds from sales of our First
      Phase housing units, (ii) customer deposits from our pre-sale of the housing
      units in the Second Phase, and (iii) short-term borrowings from Dahua Group,
      our
      affiliate, to finance our Second Phase of Dahua Garden. At present we do not
      have any arrangements for additional financing. If we are unable to obtain
      additional financing on terms acceptable to us, we may have to delay or curtail
      our Second Phase project, and our ability to increase revenue will be materially
      impaired.




-
          18
          -


IF
      WE
      RAISE ADDITIONAL CAPITAL THE VALUE OF YOUR INVESTMENT MAY DECREASE.





If
      we
      need to raise additional capital to implement or continue operations, we will
      likely issue additional equity or convertible debt securities. If we issue
      equity or convertible debt securities, the net tangible book value per share
      may
      decrease, the percentage ownership of our current stockholders may be diluted
      and such equity securities may have rights, preferences or privileges senior
      to
      or more advantageous than our common stockholders.





WE
      NEED
      PERMITS, LICENSES OR APPROVALS FROM GOVERNMENT AUTHORITIES TO BEGIN OUR
      CONSTRUCTION OF THE SECOND PHASE PROJECT. IF WE FAIL TO OBTAIN ALL REQUIRED
      LICENSES, PERMITS, OR APPROVALS, WE MAY HAVE TO CEASE OUR OPERATIONS.





Before
      we
      can develop a property, we must obtain a variety of approvals from local and
      municipal governments with respect to such matters as zoning, density,
      subdivision, traffic considerations, site planning and environmental issues.
      Although there are currently no unfavorable rulings that would have a
      significant adverse effect on the development of our proposed Second Phase
      of
      Dahua Garden, there is no assurance that we will be able to obtain all required
      licenses, permits, or approvals from government authorities. If we fail to
      obtain all required licenses, permits, or approvals, we may have to cease our
      operations.





RECENT
      PRC REGULATIONS RELATING TO CUTTING DOWN LUXURY SINGLE FAMILY HOUSE
      CONSTRUCTIONS MAY LIMIT OUR ABILITY TO IMPLEMENT OUR BUSINESS PLAN. IF NO
      CONSENTS AND APPROVALS ARE OBTAINED, WE MAY HAVE TO CEASE OUR SECOND PHASE
      OF
      SINGLE LUXURY FAMILY HOUSE OPERATIONS, AND CHANGE OUR BUSINESS PLAN TO BUILD
      APARTMENT BUILDINGS.




In
      August
      2006, the Chinese government issued a series of rules and regulations in an
      attempt to push down rising house prices in China by cutting down luxury single
      family house constructions and supporting construction of apartment buildings.
      Under the government’s new policy, (i) no single family houses can be built, if
      the construction has not started, without special construction permits. All
      permits issued previously have to be re-reviewed and re-approved; and (2) the
      land previously acquired for luxury housing construction have to be revalued
      and
      sold to the people who offer the most money for the land. Because of those
      new
      government policies, we have incurred a long delay for obtaining the consents
      and approvals to commerce our construction for the second phase of Dahua
      Garden.





In
      the
      newly-publicized layout of Changping district the purpose of the land on which
      the Second Phase of Dahua Garden located has been recognized as residential
      land. We are now in the process of applying for the first-degree development
      of
      this land.





-
          19
          -





WE
      HAVE
      IDENTIFIED MATERIAL WEAKNESSES IN OUR INTERNAL CONTROL OVER FINANCIAL REPORTING,
      WHICH COULD CONTINUE TO IMPACT NEGATIVELY OUR ABILITY TO REPORT OUR RESULTS
      OF
      OPERATIONS AND FINANCIAL CONDITION ACCURATELY AND IN A TIMELY MANNER ***.***





The
      Company has identified material weaknesses in our internal control over
      financial reporting as of December 31, 2006 and March 31, 2007 because of
      material weaknesses identified in management’s assessment of the effectiveness
      of such internal control as of that dates related to construction interest
      accounting. These material weaknesses have resulted in the restatements of
      our
      previously reported financial statements for the quarter ended March 31, 2006.
      The Company has taken the necessary actions to remediate the material weakness
      identified. These material weaknesses, if not remediated or fail to remediate,
      could create an increased risk of misstatement of financial results, which,
      if
      material, may require future restatement thereof.  A failure to
      achieve and maintain effective internal controls over our financial reporting
      could result in the loss of investor confidence in the reliability of our
      financial statements, which in turn could harm our business and negatively
      impact the market value of our common stock. Moreover, we anticipate that we
      will incur considerable costs and devote significant management time and other
      resources to comply with Section 404 of the Sarbanes-Oxley Act and other
      requirements.





WE
      ACT AS
      GENERAL CONTRACTOR ON OUR CONSTRUCTION PROJECTS, AND IF ANY OF OUR
      SUBCONTRACTORS SHOULD FAIL TO COMPLETE THEIR JOBS ON TIME, OUR BUSINESS COULD
      BE
      DISRUPTED.





We
      act as
      general contractor on our construction projects. We hire unaffiliated
      subcontractors to do work for us. In the event that any of our subcontractors
      should fail to complete their jobs on time, our business could be disrupted,
      which will have an adverse effect on our results of operation and our financial
      condition.





WE
      ARE
      VULNERABLE TO CONCENTRATION RISKS BECAUSE OUR OPERATIONS ARE EXCLUSIVELY IN
      THE
      BEIJING, CHINA MARKET.





We
      operate our business in Beijing, China. All of our revenues will be derived
      from
      the sale of our luxury single-family houses in Beijing, China. Although some
      of
      our customers are from the neighboring areas in Beijing, we may not be able
      to
      generate adequate revenue if local business conditions in Beijing change
      adversely. These changes may include business downsizing, industry slowdowns,
      local oversupply or reduction in demand for real estate properties, and changes
      in local governmental policies. Operating exclusively in Beijing exposes us
      to
      greater economic risks than if we operated in several geographic regions. Any
      adverse changes in business conditions in Beijing, China, could adversely impact
      our financial condition, results of operations and cash flow.





WE
      DEPEND
      ON KEY PERSONNEL FOR THE SUCCESS OF OUR BUSINESS. OUR BUSINESS MAY BE SEVERELY
      DISRUPTED IF WE LOSE THE SERVICES OF OUR CEO OR FAIL TO SUCCESSFULLY RECRUIT
      QUALIFIED MANAGERIAL PERSONNEL HAVING EXPERIENCE IN BUSINESS.





Our
      success is heavily dependent upon the continued service of Yonglin Du, our
      chief
      executive officer. Mr. Du has valuable personal relationships with government
      agencies and executive officers in the industry. A good personal relationship
      is
      sometimes crucial for doing business in China. If Mr. Du is unable or unwilling
      to continue in his position, we may not be able to easily replace him. Loss
      of
      his services could delay our applications for construction permit and land
      acquisition, and our business may be severely disrupted. We do not maintain
      key-man insurance on the life of Mr. Du. In addition, in order to successfully
      implement and manage our business plan; we will be dependent upon, among other
      things, successfully recruiting qualified managerial personnel having experience
      in business. Competition for qualified individuals is intense. There can be
      no
      assurance that we will be able to retain existing employees or that we will be
      able to find, attract and retain qualified personnel on acceptable
      terms.




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          20
          -




OUR
      OFFICERS AND DIRECTORS ARE SUBJECT TO CONFLICTS OF INTEREST, AND THERE IS A
      RISK
      THAT THEY MAY PLACE THEIR INTERESTS AHEAD OF YOURS.





We
      believe that our officers and directors will be subject to conflicts of
      interest. The conflicts arise from their relationships with our affiliate.
      Yonglin Du, our chief executive officer, also serves as president and a director
      of Dahua Project Management Group Co. Ltd. (“Dahua Group”), a Beijing Municipal
      Government licensed construction project supervising business entity. Hua Meng,
      our chief financial officer, and Qinna Zeng, our corporate secretary, are also
      employed by Dahua Group. They may have conflicts of interest in allocating
      time,
      services, and functions between us and Dahua Group, in which any of them are
      or
      may become involved. Mr. Du anticipates devoting a minimum of twenty to
      thirty-two hours per week of his business hours, and each of Ms. Meng and Ms.
      Zeng fifteen to twenty hours of their business hours to our business activities.
      If and when the business operations increase and a more extensive time
      commitment is needed, they are prepared to devote more time to our affairs,
      in
      the event that becomes necessary.





To
      ensure
      that potential conflicts of interest are avoided or declared to us and to comply
      with the requirements of the Sarbanes-Oxley Act of 2002, our Board of Directors,
      on January 30, 2005, adopted a Code of Business Conduct and Ethics, among other
      things, to reduce potential conflicts of interest. Conflicts of interest must,
      to the extent possible, be avoided, and any material transaction or relationship
      involving a potential conflict of interest must be reviewed and approved in
      advance by a majority of the board of directors, or, if required by law, a
      majority of disinterested stockholders. No personal loans will be made to
      executive officers and directors.





All
      our
      transactions with affiliates have been and will be made on terms no less
      favorable to us than could have been obtained from unaffiliated third parties.
      Our policy is to require that a majority of board members approve all
      transactions between us and our officers, directors, principal stockholders
      and
      their affiliates.





WE
      HAVE
      NOT CARRIED PROPERTY OR CASUALTY INSURANCE. ANY BUSINESS DISRUPTION,
      LITIGATION OR NATURAL DISASTER MIGHT RESULT IN SUBSTANTIAL COSTS AND DIVERSION
      OF RESOURCES.





The
      insurance industry in China is still at an early stage of development. Insurance
      companies in China offer limited business insurance products, and do not, to
      our
      knowledge, offer business liability insurance. As a result, we do not have
      any
      business liability insurance coverage for our operations. Any business property
      loss, natural disaster or litigation might result in substantial costs and
      diversion of resources.




-
          21
          -




OUR
      QUARTERLY OPERATING RESULTS, REVENUES AND EXPENSES MAY FLUCTUATE SIGNIFICANTLY,
      WHICH COULD HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR COMMON
      STOCK.





Our
      operating results, revenues and expenses may fluctuate significantly from
      quarter to quarter due to a variety of factors including:





l
            The
                timing, size and execution of sales contracts and home
                deliveries;





l
            Lengthy
                and unpredictable sales cycles;





l
            Changes
                in our operating expenses; and





l
            Fluctuations
                in general economic conditions.





We
      believe that period-to-period comparisons of our results of operations are
      not a
      good indication of future performance. It is possible that our operating results
      will be below your expectations. In that event, the trading price of our common
      stock may fall.





MANY
      OF
      OUR COMPETITORS ARE SIGNIFICANTLY LARGER THAN WE ARE, AND THEY HAVE GREATER
      FINANCIAL RESOURCES AND HAVE MORE EXPERIENCED MANAGERS THAN WE DO.





We
      are a
      small company and have little market share in our target market. The market
      of
      residential housing development in Beijing, China, is highly competitive. We
      compete with numerous entities, many of which are significantly larger than
      we
      are, and have greater financial resources and have more experienced managers
      than we do. As a result, they may be able to respond more quickly to new or
      emerging house plans or construction materials and changes in customer demands
      or to devote greater resources to the development, promotion and sale of their
      products or services than we can. If we cannot compete effectively, we may
      never
      become profitable. Although no one of our competitors currently dominates or
      significantly influences the market, they could adversely affect
      us.





THE
      RESIDENTIAL REAL ESTATE DEVELOPMENT INDUSTRY IS A HIGH RISK INDUSTRY. IF MARKET
      CONDITIONS CHANGE DRAMATICALLY UNFAVORABLY TO US, WE MAY GO OUT OF
      BUSINESS.





The
      real
      estate development industry in general, and the residential luxury real estate
      development industry in particular, is a high risk industry, subject to changes
      in general economic conditions, fluctuating interest rates, and changing demand
      for the types of developments being considered. Volatility in local and regional
      land use demands, as well as changing supply and demand for the specific uses
      for which the real property is being developed, are also factors in assessing
      the relative risks of the business. The demand for residential real estate
      development is particularly sensitive to changing interest rates and shifting
      demographics. Both of these factors affecting the demand for residential housing
      are highly unpredictable over both the short-and long-term. If market conditions
      change dramatically and unfavorably to us, we may go out of
      business.





-
          22
          -




Risks
      Related to Doing Business in China




POLITICAL
      AND ECONOMIC POLICIES IN CHINA COULD AFFECT OUR BUSINESS IN UNPREDICTABLE
      WAYS.





Substantially
      all of our assets are located in China and substantially all of our revenues
      are
      expected to derive from our operations in China. Therefore, our results of
      operations and prospects are subject, to a significant degree, to economic
      and
      political developments in China. The economy of China differs from the economies
      of most developed countries in many respects, including:





l
            The
                extent of government involvement;





l
            Level
                of development; and





l
            Allocation
                of resources.





The
      economy of China has been in transition from a planned economy to a more
      market-oriented economy. Although in recent years the Chinese government has
      implemented measures emphasizing the utilization of market forces and the
      reduction of state ownership of productive assets, a substantial portion of
      productive assets in China is still owned by the Chinese government, which
      continues to play a significant role in regulating China's economic development,
      setting monetary policy and providing preferential treatment to particular
      industries or companies. Political and economic policies in China could affect
      our business in unpredictable ways. If there are any unfavorable changes in
      government policies, such as government control over capital expenditures,
      changes in monetary policy, or changes in planning and zoning policy, we may
      experience delays or other problems in obtaining government permits or licenses
      to start or complete our projects.





OUR
      ASSETS, OFFICERS AND DIRECTORS ARE LOCATED OUTSIDE OF THE U.S. IT IS DIFFICULT
      TO EFFECT SERVICE OF PROCESS AND ENFORCEMENT OF LEGAL JUDGMENTS UPON US AND
      OUR
      OFFICERS AND DIRECTORS.





Our
      assets, officers and directors are located in China. As a result, it may be
      difficult to effect service of process within the United States and enforce
      judgment of the US courts obtained against us and our executive officers and
      directors. Particularly, our shareholders may not be able to:




l Effect
      service of process within the United States on us or any of our executive
      officers and directors;




l Enforce
      judgments obtained in U.S. courts against us based upon the civil liability
      provisions of the U.S. federal securities laws;




l Enforce,
      in a court in China, judgments of U.S. courts based on the civil liability
      provisions of the U.S. federal securities laws; and




l Bring
      an
      original action in a court in China to enforce liabilities against us or any
      of
      our executive officers and directors based upon the U.S. federal securities
      laws.




-
          23
          -




GOVERNMENT
      CONTROL OF CURRENCY CONVERSION MAY AFFECT OUR ABILITY TO PAY DIVIDENDS DECLARED,
      IF ANY, IN FOREIGN CURRENCIES.





It
      is
      expected that a substantial portion of our revenues, if any, will be in “yuan”,
      the national currency of China, which is currently not a freely convertible
      currency. A portion of our revenues may have to be converted into US dollars
      to
      make payment of dividends declared, if any, in respect of our common shares.
      Under China's existing foreign exchange regulations, we will be able to pay
      dividends in foreign currencies without prior approval from the State
      Administration of Foreign Exchange of China by complying with certain procedural
      requirements. However, the Chinese government may take measures at its
      discretion in the future to restrict access to foreign currencies if foreign
      currencies become scarce in China. We may not be able to pay dividends in
      foreign currencies to our shareholders if the Chinese government restricts
      access to foreign currencies for current account transactions.





FLUCTUATIONS
      IN THE EXCHANGE RATE BETWEEN THE CHINESE CURRENCY AND THE UNITED STATES DOLLAR
      MAY BRING DOWN OUR OPERATING INCOME.





The
      functional currency of our operations in China is "Yuan." Results of our
      operations are translated at average exchange rates into United States dollars
      for purposes of reporting results. As a result, fluctuations in exchange rates
      may adversely affect our expenses and results of operations as well as the
      value
      of our assets and liabilities. On
      July 21, 2005, the Chinese government changed its decade-old policy of
      pegging the value of yuan to the U.S. dollar. Under the new policy, Yuan is
      permitted to fluctuate within a narrow and managed band against a basket of
      certain foreign currencies. This change in policy has resulted in an
      approximately 17.6% appreciation of the yuan against the U.S. dollar between
      July 21, 2005 and September 30, 2008. Our revenues and costs are
      denominated in yuan, and our financial assets are also denominated in yuan.
      Any
      significant fluctuations in the exchange rate between the yuan and the United
      States dollar may bring down our operating income and lower our stock price.
      We
      have no current plans to undertake any hedging activity to minimize exchange
      rate fluctuations.




Risks
      Related to Investment in Our Securities




OUR
      COMMON STOCK IS QUOTED ON THE OVER-THE-COUNTER BULLETIN BOARD WHICH MAY MAKE
      IT
      MORE DIFFICULT FOR STOCKHOLDERS TO SELL THEIR SHARES AND MAY CAUSE THE MARKET
      PRICE OF OUR COMMON STOCK TO DECREASE.





Because
      our common stock is quoted on the OTC Bulletin Board, the liquidity of our
      common stock is impaired, not only in the number of shares that are bought
      and
      sold, but also through delays in the timing of transactions, and limited
      coverage by security analysts and the news media of us. As a result, prices
      for
      shares of our common stock may be lower than might otherwise prevail if our
      common stock was traded on NASDAQ or a national securities exchange, like the
      American Stock Exchange.





THERE
      HAS
      BEEN LOW VOLUME AND THEREFORE AN INACTIVE MARKET FOR OUR COMMON STOCK, OUR
      STOCK
      PRICE MAY BE VOLATILE OR MAY DECLINE REGARDLESS OF OUR OPERATING PERFORMANCE,
      AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR ABOVE YOUR STOCK PURCHASE
      PRICE.





If
      you
      purchase shares of our common stock, you may not be able to resell those shares
      at or above your original purchase price. An active or liquid market in our
      common stock may not develop or, if it does develop, it may not be sustainable.
      The market price of our common stock may fluctuate significantly in response
      to
      numerous factors, many of which are beyond our control.




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          24 -




OUR
      COMMON STOCK IS DEEMED A PENNY STOCK. AS A RESULT, TRADING OF OUR SHARES IS
      SUBJECT TO SPECIAL REQUIREMENTS THAT COULD IMPEDE OUR SHAREHOLDERS' ABILITY
      TO
      RESELL THEIR SHARES.




The
      shares offered by this prospectus constitute penny stock under the Securities
      Exchange Act of 1934 (the “Exchange Act”). The shares will remain penny stock
      for the foreseeable future. As defined in Rule 3a51-1 of the Exchange Act,
      penny
      stocks generally are equity securities with a price of less than $5.00, other
      than securities registered on certain national securities exchanges or quoted
      on
      the NASDAQ system, provided that current price and volume information with
      respect to transactions in such securities is provided by the exchange or
      system.





Section
      15(g) of the Exchange Act and Rule 15g-2 of the Exchange Act require
      broker-dealers dealing in penny stocks to provide potential investors with
      a
      document disclosing the risks of penny stocks and to obtain a manually signed
      and dated written receipt of the document before effecting any transaction
      in a
      penny stock for the investor's account. Moreover, Rule 15g-9 of the Exchange
      Act
      requires broker-dealers in penny stocks to approve the account of any investor
      for transactions in such stocks before selling any penny stock to that investor.
      This procedure requires the broker-dealer to:




l Obtain
      from the investor information concerning his or her financial situation,
      investment experience and investment objectives;




l Reasonably
      determine, based on that information, that transactions in penny stocks are
      suitable for the investor and that the investor has significant knowledge and
      experience to be reasonably capable of evaluating the risks of penny stock
      transactions;




l Provide
      the investor with a written statement setting forth the basis on which the
      broker-dealer made the determination in (ii) above; and




l Receive
      a
      signed and dated copy of such statement from such investor, confirming that
      it
      accurately reflects the investor's financial situation, investment experience
      and investment objectives.





Compliance
      with these requirements may make it more difficult for investors in our common
      stock to resell the shares to third parties or to otherwise dispose of
      them.





Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds:
      None




Item
      3. Defaults Upon Senior Securities: None.




Item
      4. Submission of Matters to a Vote of Security Holders: None.




Item
      5. Other Information: None.





-
          25 -





Item
      6. Exhibits and Reports On Form 8-K.





(a)
      Exhibits





Exhibit
                No.
            
            Description31.1
            
            Section
                302 Certification of CEO31.2
            
            Section
                302 Certification of CFO32.1
            
            Section
                906 Certification of CEO32.2
            
            Section
                906 Certification of CFO





(b)
      Reports on Form 8-K: None.




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.





DAHUA,
      INC.




By:
            /s/
                Yonglin Du
            
            By:
            /s/
                Meng HuaYonglin
                Du, Chief Executive Officer and President
            
            
            Meng
                Hua, Chief Financial OfficerNovember
                14, 2008
            
            
            November
                14, 2008




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          26 -