*Table
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**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549





**FORM
      10-QSB**





(Mark
      One)





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





For
      the
      quarterly period ended March 31, 2008





o
            TRANSITIONAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 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 shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o   No 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: 25,000,000 shares of common stock, par value
      $.0001, as of May  1,
      2008.





Transitional
      Small Business Disclosure Format (check one): Yes o   No x
















DAHUA,
      INC.





Table
      of Contents





Part
                I. Financial InformationItem
                1.   Financial StatementsConsolidated Balance Sheets as of March 31, 2008 (unaudited)
                and December 31, 2007 (audited)
            3Consolidated Statements of Operations and Comprehensive
                Income for the Three Months Ended March 31, 2008 and 2007
                (Unaudited)
            5Consolidated Statements of Cash Flows for the Three
                Months
                Ended March 31, 2008 and 2007 (Unaudited)
            6Notes to Consolidated Financial
                Statements
            7Item
                2.   Management's Discussion and Analysis or
                Plan of Operation
            11Item
                3.   Controls and
                Procedures
            15Part
                II. Other InformationItem
                1.   Legal Information
            16Item
                2.   Unregistered Sales of Equity Securities and
                Use of Proceeds
            16Item
                3.   Defaults Upon Senior
                Securities
            16Item
                4.   Submission of Matters to a Vote of Security
                Holders
            16Item
                5.   Other Information
            16Item
                6.   Exhibits and Reports on Form
                8-K
            16Signatures
            17








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PART
      I. FINANCIAL INFORMATION




ITEM
      1. Financial Statements




DAHUA,
      INC.


Consolidated
      Balance Sheets as of March 31, 2008 (unaudited)
      and


December
      31, 2007 (audited)


ASSETS




March
                31, 2008
            
            December
                31, 2007Current
                assets:Cash
                and cash equivalents
            
            $
            25,520
            
            $
            1,893,626Inventory
                (note 4)
            
            
            6,905,188
            
            
            6,501,143Prepaid
                expenses
            
            
            154,200
            
            
            148,171Total
                Current Assets
            
            
            7,084,908
            
            
            8,542,940Property,
                plant & equipment:Computer
                equipment
            
            
            54,965
            
            
            52,816Office
                equipment
            
            
            97,807
            
            
            93,983Telephones
            
            
            3,192
            
            
            3,067Vehicles
            
            
            529,448
            
            
            508,748Total
                Equipment
            
            
            685,412
            
            
            658,614Less:
                Accumulated depreciation
            
            
            (167,374
            )
            
            (135,119
            )Net
                equipment
            
            
            518,038
            
            
            523,495Construction
                in progress (note 5)
            
            
            978,439
            
            
            788,896Prepaid
                construction in progress
            
            
            54,580
            
            
            —Other
                receivables (note 12)
            
            
            2,129,139
            
            
            300,054Prepaid
                tax (note 9)
            
            
            276,218
            
            
            234,608Restricted
                cash (note 8)
            
            
            707,535
            
            
            679,872Total
                Assets
            
            $
            11,748,857
            
            $
            11,069,865LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                Liabilities:Accounts
                payable
            
            $
            245,977
            
            $
            236,360Customer
                deposits (note 7)
            
            
            5,229,423
            
            
            4,994,842Short-term
                loans - related parties (note 6)
            
            
            631,891
            
            
            309,975Accrued
                interest - short-term loans, related parties (note 6)
            
            
            159,501
            
            
            151,446Other
                accruals
            
            
            133,469
            
            
            179,470Total
                Current Liabilities
            
            
            6,400,261
            
            
            5,872,093Minority
                interest in subsidiary
            
            
            961,108
            
            
            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; 25,000,000
                shares
                issued and outstanding
            
            
            2,500
            
            
            2,500Additional
                paid-in capital
            
            
            3,130,452
            
            
            3,130,452Accumulated
                deficit
            
            
            541,333
            
            
            588,884Accumulated
                other comprehensive income
            
            
            713,203
            
            
            502,940Total
                stockholders’ equity
            
            
            4,387,488
            
            
            4,224,776Total
                Liabilities and Stockholders’ Equity
            
            $
            11,748,857
            
            $
            11,069,865


See
      accompanying notes to unaudited consolidated financial
      statements


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DAHUA,
      INC.


Consolidated
      Statement of Operations and Comprehensive
      Income


(Unaudited)




Three
                months endedMarch
                31,2008
            
            2007RevenuesSales
                revenues
            
            $
            —
            
            $
            3,127,922Cost
                of goods sold
            
            
            —
            
            
            2,111,563Gross
                Profit
            
            
            —
            
            
            1,016,359ExpensesAdvertising
            
            
            —
            
            
            219,198Depreciation
            
            
            26,214
            
            
            15,155Payroll
                expense
            
            
            16,455
            
            
            86,640Other
                general and administrative
            
            
            50,638
            
            
            463,228Total
                expenses
            
            
            93,307
            
            
            784,221Net
                income (loss) from operations
            
            
            (93,307
            )
            
            232,138Other
                income (expense)Interest
                expense
            
            
            —
            
            
            (31,088
            )Other
                revenues
            
            
            —
            
            
            434Interest
                income
            
            
            33,868
            
            
            3,411Total
                other income (expense)
            
            
            33,868
            
            
            (27,243
            )Net
                income (loss) before taxes and minority interest
            
            
            (59,439
            )
            
            204,895Provision
                for income taxes
            
            
            —
            
            
            (67,615
            )Net
                income (loss) before minority interest
            
            
            (59,439
            )
            
            137,280Minority
                interest in subsidiary income (loss)
            
            
            (11,888
            )
            
            27,456Net
                income (loss)
            
            $
            (47,551
            )
            $
            109,824Foreign
                currency translation adjustment
            
            
            210,263
            
            
            36,036Comprehensive
                income
            
            $
            162,712
            
            $
            145,860Basic
                and diluted earnings per share
            
            $
            (0.00
            )
            $
            0.00Weighted
                average common shares outstanding
            
            
            25,000,000
            
            
            25,000,000


See
      accompanying notes to unaudited consolidated financial
      statements


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DAHUA,
      INC.


Consolidated
      Statements of Cash Flows


(Unaudited)




Three
                months ended
              March
                31,2008
            
            2007Cash
                flows from operating activities:Net
                income (loss)
            
            $
            (47,551
            )
            $
            109,824Adjustments
                to reconcile net income (loss) to net cash provided by (used in)
                operating
                activities:Depreciation
            
            
            26,214
            
            
            15,155Minority
                interest
            
            
            (11,888
            )
            
            27,456Changes
                in operating assets and liabilities:Inventory
            
            
            (136,681
            )
            
            718,997Prepaid
                construction in progress
            
            
            (53,471
            )
            
            —Prepaid
                tax
            
            
            (31,413
            )
            
            (134,087
            )Customer
                deposits
            
            
            30,707
            
            
            (658,030
            )Accrued
                interest
            
            
            1,854
            
            
            31,088Other
                accruals
            
            
            (52,221
            )
            
            11,201Net
                cash provided by (used in)operating activities.
            
            
            (274,450
            )
            
            121,604Cash
                flows from investing activities:Other
                receivables
            
            
            (1,779,953
            )
            
            (15,619
            )Purchase
                of property, plant and equipment
            
            
            —
            
            
            (21,688
            )Construction
                in progress
            
            
            (154,243
            )
            
            —Net
                cash used in investing activities
            
            
            (1,934,196
            )
            
            (36,707
            )Cash
                flows from financing activities:Proceeds
                from loans payable related parties
            
            
            303,018
            
            
            —Payments
                on loans payable related parties
            
            
            —
            
            
            (193,121
            )Net
                cash used in financing activities
            
            
            303,018
            
            
            (193,121
            )Effect
                of rate changes on cash
            
            
            37,522
            
            
            20,763Increase
                (decrease) in cash and cash equivalents
            
            
            (1,868,106
            )
            
            (87,461
            )Cash
                and cash equivalents, beginning of period
            
            
            1,893,626
            
            
            2,338,835Cash
                and cash equivalents, end of period
            
            $
            25,520
            
            $
            2,251,374Supplemental
                disclosure of cash flow information:Interest
                paid in cash
            
            $
            —
            
            $
            —Income
                taxes paid in cash
            
            $
            —
            
            $
            226,027


See
      accompanying notes to unaudited consolidated financial statements




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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.





**2.
      Basis of Presentation**





The
      consolidated financial statements include the accounts of Dahua, Inc., Bauer
      Invest, Inc. and Beijing Dahua Real Estate Development, Ltd. All material
      intercompany 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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**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 include
      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 March 31, 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,
      plant and equipment are depreciated over their estimated useful lives as
      follows:





Computer
                equipment
            
            
            3
                yearsOffice
                equipment
            
            
            7
                yearsVehicles
            
            
            7
                years





Depreciation
      expense for the three months periods ended March 31, 2008 and 2007 was $26,214
      and $15,155, 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


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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.





Advertising
      Expenses





Advertising
      costs are expensed as incurred. Advertising expense amounted to $0 and $219,198
      for the three months periods ended March 31, 2008 and 2007.





Foreign
      Currency and Comprehensive Income





The
      accompanying financial statements are presented in United States (“US”) dollars.
      The functional currency is the Yuan Renminbi (“RMB”) of the PRC. The 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 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 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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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, using the treasury stock method. The numerators and denominators
      used
      in the computations of basic and diluted EPS are presented in the following
      table:





For
                the three months endedMarch
                31, 2008
            
            March
                31, 2007NUMERATOR
                FOR BASIC AND DILUTED EPSNet
                income (loss) to common stockholders
            
            $
            (47,551
            )
            $
            109,824DENOMINATORS
                FOR BASIC AND DILUTED EPSWeighted
                average shares of common stock outstanding
            
            
            25,000,000
            
            
            25,000,000Add:
                dilutive equity securities outstanding
            
            
            —
            
            
            —Denominator
                for diluted EPS
            
            
            25,000,000
            
            
            25,000,000EPS-Basic
            
            $
            (0.00
            )
            $
            0.00EPS-Diluted
            
            $
            (0.00
            )
            $
            0.00




The
      Company had no potentially dilutive securities outstanding at March 31,
      2008.





**4.
      Inventory**





Inventory
      represents completed houses available for sale at March
      31,
      2008 .
      During
      2005, the Company completed all of its construction-in-progress. As of March
      31,
      2008 ,
      60
      units were sold, 13 units were reserved with clients’ deposits, 2 units were
      available for sale and one unit was kept by the company.





**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 March
      31 ,
      2008,
      the balance of construction in progress was $978,439 (including capitalized
      interest of $20,599).




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**6.
      Related Party Transactions**




Short-term
      loans due to related parties had balances of $791,392 (including accrued
      interest of $159,501) at March 31, 2008. The loans carry an annual interest
      rate
      of 6 percent and are due on demand. The interest amounts, which were accrued for
      the
      three months periods ended March 31, 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 March
      31 ,
      2008
      was $5,229,423. Of the 13 units reserved, 3 unit’s deposits are money received
      from bank arrangements (see note 8) in the amounts of $975,922. 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 Banks
      have withheld 5% of the loan, which was a percentage ranging from 5% to 20%
      in
      June 2006, and deposited such funds into a segregated account in each bank.
      At
      March 31 ,
      2008 ,
      the
      balance of this separate account was $707,535. 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 7.





**9.
      Tax**





The
      Company made no provision for sales tax and income tax for the three months
      periods ended March 31, 2008 for the reason that no sales revenue was recognized
      for the three months ended March 31, 2008. The houses that the company reserved
      didn’t meet the requirement of revenue recognition.





As
      of
      March 31, 2008, the Company has a prepaid tax of $276,218.





**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.
      As of March 31, 2008, there were 25,000,000 shares of common stock issued and
      outstanding, and no shares of preferred stock were issued and
      outstanding.





**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.


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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 receivables**





Other
      receivables primarily represent loans due from outside parties. As of March
      31 ,
      2008,
      the balance of other receivables (including accrued interest) was $2,129,239.
      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
      March
      of 2008 the Financial Accounting Standards Board (FASB) issued Statement of
      Financial Accounting Standards (SFAS) No. 161, “ *Disclosures
      about Derivative Instruments and Hedging Activities—an amendment of FASB
      Statement No. 133* ,
      “ *Accounting
      for Derivatives and Hedging Activities* .”
SFAS
      No. 161 has the same scope as Statement No. 133 but requires enhanced
      disclosures about (a) how and why an entity uses derivative instruments, (b)
      how
      derivative instruments and related hedged items are accounted for under
      Statement No. 133 and its related interpretations, and (c) how derivative
      instruments and related hedged items affect an entity’s financial position,
      financial performance, and cash flows. SFAS No. 161 is effective for financial
      statements issued for fiscal years and interim periods beginning after November
      15, 2008, with early application encouraged. The statement encourages, but
      does
      not require, comparative disclosures for earlier periods at initial adoption.
      SFAS No. 161 has no effect on the Company’s financial position, statements of
      operations, or cash flows at this time.





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





The
      discussion in this quarterly report on Form 10-QSB 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


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July
      2003, we began to develop our first real estate project, Dahua Garden (the
      "First Phase"), which consists of 76 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 March 31, 2008, out of 76 luxury residential units, 60
      units have been sold, 13 units were reserved with clients' deposits, 2 units
      were available for sale and one unit was kept by the company.





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 our Second Phase of Dahua Garden, which will include 250
      units
      of luxury single-family houses located in Changping District, Beijing, China,
      on
      an approximately 267,000 square-meter site with a community clubhouse, creeks,
      ponds, and professionally manicured gardens and landscape. Each will be 3,000
      to
      5,000 square feet in size to be sold for 4.5 to 6 million Yuan, or approximately
      $550,000 to $720,000 US. We will serve as the sole developer of the project,
      including construction and sales.





In
      August
      2006, the Chinese government issued a number of new rules and regulations for
      real estate developers, like us, in an attempt to reduce rising house prices
      by
      restricting 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 highest bidder in an auction.
      Because of those new government policies, we have incurred a long delay in
      obtaining the consents and approvals to commence our construction for the second
      phase of Dahua Garden. On May 9, 2007, we contacted the Beijing Municipal
      Commission of Urban Planning, the agency which is responsible for the issuance
      of construction permits, for our construction approval time frame guidance.
      We
      were told two weeks later that our construction permit is very much likely
      to be
      issued for two reasons: (1) We have completed our First Phase of Dahua Garden;
      and (2) We acquired this land almost ten (10) years ago. It is expected that
      we
      may obtain our construction approvals by the middle of 2008. However, there
      is
      no assurance that we will obtain those consents or the necessary government
      approvals. If the consents and approvals are not obtained, we may have to cease
      our Second Phase of single luxury family house operations, and change our
      business plan to build apartment buildings. As the governmental policy regarding
      the auctioning off of land previously acquired for luxury housing construction
      is vague, and no specific or detailed outline has been issued, we are basing
      our
      business plan on the assumption that if we do not receive the permits and
      licenses required to build luxury housing, we will instead build apartment
      buildings. As of the date of this report, we don’t have any current plan or
      arrangements for the development of apartment buildings. In the event the
      situation changes and we believe that there is a likely possibility of the
      land
      being auctioned, we will notify the Commission.





Results
      of Operations





For
      the Three Months Ended March 31, 2008 and 2007





Revenues





We
      began
      our First Phase of Dahua Garden construction, which consists of 76 luxury
      residential units, in July 2003. The construction was completed in December
      2005. For the three months ended March


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31,
      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 ofMarch
                31, 2008
            
            March
                31, 2007Units
                sold
            
            
            60
            
            
            36Units
                reserved with deposits
            
            
            13
            
            
            27Units
                available for sale
            
            
            2
            
            
            13Units
                kept by the company
            
            
            1
            
            
            —Total
            
            
            76
            
            
            76








Three
                months
            
            Three
                monthsended
            
            endedMarch
                31, 2008
            
            March
                31, 2007Houses
                sold
            
            
            —
            
            
            6Houses
                reserved
            
            
            —
            
            
            (3
            )





For
      the
      three months ended March 31, 2008 and 2007, we recognized sales revenues of
      $0
      and $3,127,922 respectively from the sale of our housing units.





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 March 31, 2008 and 2007, our cost of goods sold was
      $0
      and $2,111,563, respectively.





Operating
      Expenses





For
      the
      three months ended March 31, 2008, our operating expenses were $93,307, a
      decrease of $690,914, or 88.1%, as compared to $784,221 for the same period
      of
      the prior year.





Net
      Income





For
      the
      three months ended March 31, 2008, we had a net  loss  of
      $47,551, or $0.00 per share, as compared with a net income of $109,824, 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.


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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 March 31, 2008, our customer deposit balance was
      $5,229,423.





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 March 31, 2008, the short-term loans due to
      related parties had a balance of $631,891, and accrued interest of
      $159,501.





As
      of
      March 31, 2008, we had cash and cash equivalents balance of $25,520. For the
      three months ended March 31, 2008, our operating activities used $274,450 of
      net
      cash. During the three months ended March 31, 2008, our investing activities
      used $1,934,196 of net cash, mainly from the increase in other receivables.
      For
      the same period, the financing activities provided net cash of $303,018 as
      a
      result of proceeds from related party loans.





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 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 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 March 31, 2008, the balance of this separate account
      was $707,535. 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.





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Item
      3. 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-QSB. 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.





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 six 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;


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(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
      errors 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.




PART
      II. OTHER INFORMATION





Item
      1. Legal Information: None.




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




Item
      3. Defaults Upon Senior Securities: None.




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




Item
      5. Other Information: None.




Item
      6. Exhibits 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.




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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 OfficerMay
                14, 2008
            
            May
                14, 2008


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