UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K





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


For the fiscal year ended December 31, 2010





o    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ___________





Commission file number: 0-49852





DAHUA INC.


(Exact Name of Registrant as Specified in its Charter)




Delaware

04-3616479(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)





8th Floor, Officer Tower 3, Henderson Center, 18# Jianguomennei Street


Dongcheng District, Beijing, China 100005


(Address of principal executive offices)





86-10-6480-1527


Registrant’s telephone number, including area code





Securities registered under Section 12(b) of the Exchange Act:                      None








Securities registered under Section 12(g) of the Exchange Act:  Common Stock, Par Value $0.001 Per Share








Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o No x





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o No x





Indicate by check mark 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 had submitted and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or shorter period that the registrant was required to submit and post such files). The registrant has not been phased into the Interactive Data reporting system. Yes o No o




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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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.  See the definitions of “large accelerated filer,” “accelerated flier,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





(Check One):  Large accelerated filer £, Accelerated filer £, Non-accelerated filer £, (Do not check if a smaller reporting company) Smaller reporting company x





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




The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity as of a specified date within the past 60 days: Since there is no trading market for Registrant's securities, no estimate as to the market value can be given.





The number of shares outstanding of Registrant's common stock as of March 31, 2011 was 25,015,000.




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DAHUA INC.





FORM 10-K


For the Year Ended December 31, 2010





PART I




Item 1.Description of Business
4Item 2.Description of Property
11Item 3.Legal Proceedings
12Item 4.(Remove and Reserved)
12PART IIItem 5.Market for Common Equity and Related Stockholder Matters
12Item 6.Management's Discussion and Analysis or Plan of Operation
13Item 7.Financial Statements
22Item 8.Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.Item 9A(T).Controls and Procedures
39Item 9B.Other Information
3940PART IIIItem 10.Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
40Item 11.Executive Compensation
43Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
44Item 13Certain Relationships and Related Transactions
46Item 14.Exhibits
48Item 15.Principal Accountant Fees and Services
49Signatures
50




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Item 1.   Description of Business





Background





Dahua Inc. (the “Company”) was incorporated on March 8, 2002, in the State of Delaware under the name of Norton Industries Corp. ("Norton") as a blank check company for the purpose of either merging with or acquiring an operating company with operating history and assets. In June 2002, the Company filed a registration statement on Form 10-SB with the Securities and Exchange Commission ("SEC") in order to become a Section 12(g) registered company under the Securities Exchange Act of 1934, as amended. The registration statement became effective on or about August 10, 2002.





From March 8, 2002, to January 30, 2005, Norton conducted virtually no business other than organizational matters and filings of periodic reports with the SEC pursuant to the reporting requirements of Securities Exchange Act of 1934, as amended. The promoters, control persons and affiliates of Norton were Mr. Jianjun Zhang, Waywood Investments Ltd. ("Waywood"), Comp Hotel International Ltd. ("Comp Hotel"), and South Sea Petroleum Holdings Ltd. ("South Sea Petroleum"). Waywood is a small business consulting firm organized in the British Virgin Islands. Mr. Jianjun Zhang is the sole shareholder of Waywood. From Norton's inception in March 2002, to February 2003, Waywood owned 100% of Norton, and Mr. Jianjun Zhang, from March 2002 to January 2005, was the sole director and officer of Norton. On February 26, 2003, Waywood sold 85%, or 4,250,000 shares, of Norton's capital shares to Comp Hotel for $42,500 in cash. Comp Hotel is a travel-related service provider operating in Hong Kong, and is controlled by South Sea Petroleum, a Hong Kong corporation, whose principal business is the exploration and production of crude oil in Indonesia.





On January 30, 2005, Waywood and Comp Hotel entered into a Share Exchange Agreement with Bauer Invest Inc. for a reverse acquisition. Pursuant to the agreement, Waywood and Comp Hotel sold all of their capital stock, or 5,000,000 shares of common stock, to Bauer for retirement in exchange for $100,000 in cash and 5%, or 1,000,000 shares of Norton’s post-merger common stock. To effectuate the reverse acquisition, Norton issued 19,000,000 shares of its common shares to 108 shareholders of Bauer in exchange for 100% of shares in Bauer on a pro rata basis, i.e. the number of shares received by each shareholder is proportionate to the number of shares he/she had originally owned in Bauer. Following the transaction, on February 7, 2005, the name of Norton was changed to Dahua Inc.





Bauer is a holding company, which conducts its business through its 80% owned subsidiary Beijing Dahua Real Estate Development, Ltd., an operating company organized in the People's Republic of China (“Dahua Real Estate”). As a result of the reverse acquisition, Bauer became our wholly owned subsidiary, and the shareholders of Bauer became our controlling shareholders. This transaction was accounted for as a recapitalization, rather than a business combination. Under accounting principles generally accepted in the United States of America, after completion of this transaction, the Company files prior historical financial information of Bauer and its subsidiaries for the years prior to the acquisition on a stand-alone basis. The continuing operations of the Company will reflect the consolidated operations of Dahua and its subsidiaries.





On May 12, 2005, Dahua Real Estate increased its registered capital, in which the Company increased its investment in Dahua Real Estate by $2,265,600 and the minority shareholder of Dahua Real Estate increased its investment by $566,265. Dahua Project Management Group ("Dahua Group") advanced the Company funds to allow for the increase in investment, which amount was recorded as short-term loans-related parties. On September 21, 2005, the Company issued, on a pro rata basis, an aggregate of 4,750,000 shares of its common stock to shareholders of Dahua Group in exchange for the conversion of the short-term loan ($2,265,600) to equity shares. In connection with issuance of additional shares, pursuant to a no-dilution clause of the Share Exchange Agreement dated January 30, 2005 the Company entered into with Comp Hotel and Waywood, on September 21, 2005, the Company issued 212,500 and 37,500 shares of our common stock to Comp Hotel and Waywood, respectively.




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Bauer was incorporated on December 10, 2003, under the laws of the British Virgin Islands. On May 25, 2004, the shareholders of Dahua Group transferred to Bauer 80% of the capital stock of Dahua Real Estate in exchange for all the capital stock of Bauer. Dahua Group is a Beijing Municipal Government licensed construction project supervising business entity in Beijing, China. This transaction was accounted for as a recapitalization of Dahua Real Estate, rather than a business combination. Before the stock transfer, the shareholders of Dahua Group owned 80% of capital stock of Dahua Real Estate, and Beijing Dahua Bidding Agency owned the remaining 20%. Beijing Dahua Bidding Agency is a Chinese corporation servicing construction companies in biddings for major construction projects. After the transfer, the shareholders of Bauer replaced the shareholders of Dahua Group as holder of 80% of the capital stock of Dahua Real Estate, while Beijing Dahua Bidding Agency still owns the remaining 20%. Both Bauer and Dahua Group were owned by the same group of shareholders in the same proportions prior to the acquisition by Norton.





Prior to the acquisition, other than owning 80% of Dahua Real Estate's capital stock, Bauer had no operations. Dahua Real Estate was incorporated in China on September 24, 2001, to engage in the development, construction, and sale of luxury single-family housing units. Both Norton and Bauer were non-operating shell companies and incurred minimal costs to acquire Bauer or Dahua Real Estate, and therefore there was no need for adjustments for any costs incurred by Norton or Bauer to be “pushed down” in the accounts of Norton, Bauer or Dahua Real Estate. Dahua Real Estate did not incur any other costs which were required to be "pushed down" for the completion of the transaction.





The promoters, control persons and affiliates of Bauer Invest, Inc. and Dahua Real Estate are Mr. Yonglin Du and Dahua Group. Prior to the acquisition, a group of shareholders owned 100% of Dahua Group, and the same group of the shareholders owned 100% of Bauer in the same shareholding proportion as they owned Dahua Group. At present, the same group of shareholders own 95% of Dahua Inc. Yonglin Du, our CEO and President, also acts as president of Dahua Group and Bauer. In 2000, Mr. Du founded Dahua Group and has since been its Chairman of the Board of Directors and Chief Executive Officer. Dahua Group is a Beijing Municipal Government licensed construction project supervising business entity which is operating in Beijing, China. Since January 30, 2005, Mr. Du has been our Chairman of the Board of Directors and Chief Executive Officer.





The Company has not been involved in any bankruptcy, receivership or similar proceedings.





Business





The Company, through its 80% owned subsidiary Beijing Dahua Real Estate Development Ltd. ("Beijing Dahua Real Estate"), engages in the business of development, construction and sale of luxury single-family homes in Beijing and its circumjacent areas, in China.





Completed Projects





In July 2003, the Company began to develop its first real estate project. The project is called the first phase of Dahua Garden (the "First Phase"), which consists of 75 luxury residential housing units, all of which are single houses ranging from approximately 2,000 to 5,000 square feet, each with 3-4 bedrooms with built-in closets and adjacent bathrooms, an open eat-in kitchen, a family room, a living room, and an attic solarium for indoor sun bathing. Those homes are within reasonable driving distances from Beijing metropolitan areas. The project is located at the northern skirt of Beijing, China. The property being developed sits on a hot spring, spewing 10,000 cubic meters per day providing every house with hot spring water for baths. The water temperature at the mouth of the hot spring is over 60 degrees centigrade. The surplus hot spring water is discharged into the surrounding creeks and ponds, making them unfrozen all year round.




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The construction began in July 2003 and was completed in December 2005. As of December 31, 2010, 67 units have been sold, 8 units were reserved with clients' deposits.





New projects in progress





Changping District government publicized a new layout which was named Future Science & Technology Park at the beginning of 2010. The newly publicized layout includes the plot which the company was applying for as the Second Phase of Dahua Garden.  The Company is now negotiating with the Development and Construction Future Science & Technology Park of Beijing Co., Ltd concerning future compensation to Dahua Real Estate for costs incurred during Phase II construction.





The Company changed the operation plan and got another smaller plot south to the First Phase. The new Second Phase consists of four 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, and a public service building. The Company has got all the permits needed and is now in the process of construction.  The Company plans to complete it in 2011.





We, through our subsidiary Zhuolu Dahua Real Estate Development Ltd. (“Zhuolu Dahua Real Estate”) which was established on May 21, 2008 and was wholly-owned by Beijing Dahua  Real Estate, engage in the business of development, construction and sale of luxury residential single-family homes in Zhuolu county, Hebei province. The first phase of this project, known as Xuanyuan Lakefront, consists of 246 villas, all of which are single-family houses ranging from approximately 2,000 to 5,000 square feet, each with 3 – 4 bedrooms.





Zhuolu County, located 2 hours north of Beijing is said to be the birthplace of the Chinese nation. Historical records and explorations indicate that it is an ancient battlefield where three Emperors - Huang, Yan and Chiyou held a fight. Emperor Huang allied with Yan, and defeated Chiyou. The winners merged their languages, customs, and living habits, to form the Huaxia people, predecessor of the Han people, the principal part of the Chinese nation. Today, most of Chinese people still call themselves "descendants of Emperor Huang and Yan ", and Zhuolu is the place where all these stories began. Therefore, every year it attracts numerous visitors from all over China, even the world, to come here for a "root-searching journey".





Besides its historical significance, summer in Zhuolu is delightfully cool due to its geological conditions, with temperatures ranging from 20°C to 30°C. Each summer, many people from Beijing or nearby cities come here for recreation to escape from scorching heat and polluted air. A huge variety of vegetables grow here, including tomatoes, peas, potatoes, cucumbers, eggplants, etc. Urban people can taste the freshest vegetables, along with mineral spring water locals have drunk for generations.





Located east of Zhuolu and 2 hours drive from Beijing central region by Highway, Xuanyuan Lakefront is near the Xuanyuan lake, a beautiful and tranquil lake. There is also a spring called Emperor Huang spring nearby. In legend, while fighting against Chiyou, Emperor Huang often bathed in the spring to recover his strength quickly and think out ways to deal with his enemy. The water from this spring is natural mineral water containing healthy minerals and trace elements. Morever, Xuanyuan Lakefront is next to an apricot orchard. During springtime the trees will be in full blossom and the air is full of sweet scent.





Since acquiring the land, we have been working on applying for construction permit approval necessary for development and have already received the following permits from the local government.




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o    National land use permit


o   Construction land planning permit


o   Construction engineering planning permit


o   Project construction permit





The Company is now in the process of developing this project. As of December 31, 2010, 22 units were reserved with clients' deposits.





Home Construction





We act as the general contractor for our residential home developments and hire subcontractors for all construction activities. The use of subcontractors enables us to reduce our investment in direct labor costs, equipment and facilities. We generally price our housing only after we have entered into construction contracts with subcontractors, an approach which improves our ability to estimate costs accurately.





As the general contractor, we select our subcontractors for construction through a competitive bidding process. In addition to the bid price, our criteria includes the bidders' experience, reputation, recommendations and references from other developers. The construction prices are capped and cover all materials and labor needed to complete the construction under the construction contract. The bid-winning subcontractor will make advance payments for all materials and labor. We make payments to the subcontractors over time upon completion and acceptance of certain phases of construction according to agreed-upon milestones specified in the construction contract.





As the general contractor, we are responsible for all planning, scheduling and budgeting operations. There is an on-site superintendent who oversees the subcontractors. We supervise the construction of our project, coordinate the activities of subcontractors and suppliers, subject their work to quality and cost controls and assure compliance with zoning and building codes.





Subcontractors typically are retained on a project-by-project basis to complete construction at a fixed price. Agreements with our subcontractors are generally entered into after competitive bidding on an individual basis. We generally obtain information from prospective subcontractors and suppliers with respect to their financial conditions and abilities to perform under their agreements prior to commencement of a formal bidding process. The services performed for us by subcontractors are generally readily available from a number of qualified subcontractors.





We use, to the extent feasible, standardized materials in our commercial construction and homebuilding operations in order to permit efficiencies in construction and material purchasing that can result in higher margins. Our subcontractors generally negotiate the purchase of major raw material components such as concrete, lumber and structural steel. They are responsible for what they purchase and for what they pay. Raw materials used in our operations are generally readily available from a number of sources but prices of such raw materials may fluctuate due to various factors, including supply and demand.





As the general contractor, we are not subject to any bonding and/or insurance requirements under Chinese law and common practice in housing construction. We may suffer heavy or total losses in the event of fire, earthquake or other disasters.





To date, we have not encountered any problems that would affect the delivery date of our units, nor have we experienced a significant increase in prices of materials.





The units available for sale are subject to government inspections prior to transfer of title to buyers. The purpose of the inspection is to ensure that real estate developers adhere to government standards of quality and safety.




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Other Government regulations that we must adhere to are:





o
Any structures being constructed must be for residential and commercial use;





o
All structures must be within certain dimensions;





o
Public infrastructures must be in place, such as electrical and telephone poles, underground pipe systems;





o
There must be various safety access routes in case of emergencies such as fire or earthquake;





o
Construction must not violate environmental laws in effect; and





o
Compliance with certain infrastructure standards.





To date we have not violated any of the above-noted regulations.





We typically obtain all necessary development approvals, complete a satisfactory environmental assessment of the site, secure any necessary financing and complete other due diligence deemed appropriate by us prior to becoming obligated to commence the construction.





Acquisition of Land-Use Rights





The residential home development process in China generally consists of three phases: (1) acquisition of land-use rights; (2) land development and construction; and (3) sale. The development cycles vary depending on the extent of the government approvals required, the size of the development, necessary site preparation, weather conditions and marketing results.





Sales and Marketing





Our sales and marketing activities are conducted principally through our sales employees. They are paid by base salary, plus sales commission, which is 0.3% of gross sales. We have no single customer that will account for any substantial portion of our sales revenues.





Our residential homes are targeted toward buyers who desire high quality property with many attractive features on which to build luxury homes for use as their primary residences, vacation retreats, retirement residences, or investments. Our target buyers include upper and middle class Chinese citizens and foreign nationals working in Beijing and the surrounding area, such as Shanxi and Hebei provinces, ranging from 30 to 60 years of age, including private entrepreneurs, senior executives, technology elites, college professors and self-employed professionals. The foreign nationals are expatriates of foreign companies based in China. Our strategy for remaining competitive in this market involves building on our reputation of offering quality homes; using our own sales offices and personnel; and offering properties with many appealing features, such as trails, water access, creeks, and attractive views.





We sell our homes through our sales representatives who typically work from sales offices located in the model homes at the development site. Sales representatives assist potential buyers by providing them with basic floor plans, price information, development and construction timetables, preview of model homes and the selection of options. Our sales representatives are trained by us and generally have had prior experience selling new homes in the local market. We also market our homes for sale through direct mailing to an identified population of prospective buyers and, to a lesser extent, through other media, including newspapers, television and radio advertising, airplane advertising, product tie-ins, billboards and other signage.




8




Homes are sometimes sold prior to or during construction using sales contracts which are accompanied by cash deposits. After receiving the Residential Housing Pre-sale Permit issued by the government, we, the developer, are permitted by government authorities 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 the buyer, a deposit, ranging from 10% to 20% of the sales price, is required to be made to the developer, which we use to construct our residential units. As of December 31, 2010, the balance of our customer deposits was $5,765,711.





Our sales are made pursuant to a standard sales contract. Subject to particular contract provisions, we generally permit purchasers to cancel their contractual obligations in the event mortgage approvals are unobtainable within a specified period of time and under certain other circumstances, including rescission rights which may be given under local law. Accordingly, there is a possibility that home buyers, even though they have put down a certain amount of deposit, turn out choosing not to purchase our housing units which creates an uncertainty and risk to our results of operations.  To date we have two contracts that have been cancelled.





To assist in the marketing of our homes and to limit our liability for certain construction defects, we sell our homes subject to a limited warranty that is provided by our subcontractors. We don't provide any kind of warranty to homebuyers. Our subcontractors are responsible for the cost to repair major structural defects, roofing, internal walls, heating, tiling problems, if any, for a certain period of time, from one to five years. The foregoing repair costs are limited by our subcontractors' policy to the repair, replacement or payment of the reasonable cost of repair or replacement of such warranted items not to exceed an aggregate amount equal to the final sales price of the home covered by the warranty. Once all homes have been constructed and sold, we do not have any post-sale obligations.





Home Buyer Financing and Deed Application





We do not provide financing to prospective homebuyers. Approximately 25% of homebuyers in China currently use their savings or funds from their relatives to pay for the houses they buy. We are permitted to sell our homes before they are built. It usually takes 18 to 20 months from ground breaking to completion, within which the homebuyers make installment payments to the developer. At the time of completion and delivery, the purchase price will have been paid in full. After viewing the model units, the potential buyer usually leaves 30,000 yuan, or $4,530, refundable deposit, upon receipt of which we will hold the unit for that buyer. The potential buyer may withdraw the commitment within two weeks and receive a full refund of said deposit. The parties may also enter into a binding contract, and the buyer is required to make a 10% to 20% down payment at the time of signing. Thereafter, the buyer makes installment payments every 2 to 3 months until the purchase price is paid in full. The actual payment terms vary on a case-by-case basis depending on negotiations.





The majority of homebuyers in China need to finance their homes with mortgage loans from banks. To facilitate their mortgage application, most developers in China, including us, are involved in the buyers' mortgage application process. We first initiate negotiations with two banks to obtain a blanket lending commitment which covers all potential buyers for the homes to be built by us. If a potential buyer needs financing, we conduct a preliminary screening of the buyer's creditworthiness. Then we forward the mortgage applications to the banks for further processing, which usually take 30 to 60 days. Upon approval of the mortgage extended to each buyer by the banks, the loan proceeds are transferred directly to our bank account, rather than the buyer's. We have not, and will not receive any finder's fees or referral fees from the banks.





It is customary in China that developers may, depending on the type of property, use up to 95% of the loan proceeds so obtained to meet their working capital needs. The banks require that 5% to 20% of the proceeds be set aside. On our balance sheets, such loan proceeds are treated as customer deposits. We have not taken any measure to safeguard customer deposits because currently Chinese law does not require that such deposits be placed in an escrow or trust account for safeguarding purpose.




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The life of a mortgage loan in China can be up to 30 years. Because our project is considered luxury housing, the maximum life of mortgage loans is 20 years. The mortgage rates, which are flexible in nature, are dictated by the Chinese central government based on prime commercial lending rates from time to time. Due to competition among lending institutions, mortgage rates can be adjusted downward by up to 10%. The mortgage rates currently range from 6.1% to 6.6%, which are applied to primary residence and second home, respectively.





Unlike the United States, deeds for newly-built homes in China are applied for by the developer with the government, which owns the land. Upon issuance of the deeds, the developer distributes the deeds to individual homeowners. In order to obtain government approval of deeds, the developer must have obtained all requisite permits and licenses and paid all fees and taxes. Before the actual issuance of deeds, the ownership of the real property remains with the developer even if the homes have already been sold. Generally, the developer will wait until all homes are completed to apply for the deeds in a blanket application, which takes approximately 40 to 60 days. Before the issuance of deeds, the title to the homes legally remains with the developer.





Regulation





Real estate development is a highly regulated industry in China, and we are subject to extensive local, district, municipal and national rules and regulations regarding permitting, zoning, subdivision, utilities and water quality. Regulation is carried on by municipal, district, and national authorities, of which the municipal and district governments have the greatest regulatory impact. The City of Beijing, in and nearby which we operate, has been adopting increasingly restrictive regulations associated with development activities, including the adoption of more restrictive ordinances, greater emphasis on land use planning, pressure to increase the number of low density residential developments, and heightened public concern aimed at limiting development as a means to control growth. Such regulation may delay development of our properties and result in higher developmental and administrative costs.





To date, we are in material compliance with these laws and regulations.





Environmental Matters





We are subject to China's national and local environmental protection laws. These laws could hold us liable for the costs of removal and remedy of certain hazardous substances or wastes released on our property regardless of whether we were responsible for the presence of hazardous substances. The presence of hazardous substances, or the failure to properly remedy them, may have a material adverse effect on our results of operations and financial condition. As of December 31, 2010, we are not aware of any material noncompliance, liability or claim relating to hazardous or toxic substances in connection with our property and operations. To date, we have not incurred any costs in complying with environmental laws and regulations. We believe that we are in material compliance with these laws and regulations.





Patents and Trademarks





We do not own any patents or trademarks.





Product Research and Development





To date we have not conducted any product research and development. We do not plan to conduct any product research and development activities in the next twelve months.




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Employees





As of December 31, 2010, we had 65 full-time employees. The increase was mainly due to the construction of DAHUA Phase II and Zhuolu. We expect that there will be no significant changes in the number of employees in the coming twelve months. None of our employees is represented by trade unions. We consider our employee relations to be satisfactory.





Item 2.   Description of Property





Our executive offices moved from 19th Floor, Building C, Tianchuangshiyuan, Huizhongbeili, Chaoyang District, Beijing, China, 100012 to 8th Floor, Officer Tower 3, Henderson Center, 18# Jianguomennei Street Dongcheng District, Beijing, China 100005 which was newly bought by Dahua Group. We have contracted with Dahua Group to provide administrative and management services. Included in those services are the payment of officer salaries and provision of office space and other shared costs and services. We believe that these facilities are adequate for our current and anticipated needs.





We began our clubhouse construction in April 2007 and completed the construction in December 2009. The Company made an expansion in 2010 to add an interlayer in the building acting as an exhibition hall of the Company.  The expansion was over in December 31, 2010 and the cost was transferred to the fixed assets as Land and buildings.





Investment Policies





At present we have no established policy with respect to investments on real estate or interests in real estate. However, we intend that substantially all of our investments will be residential luxurious single-family houses. The purpose of such investments will primarily be generating sales revenues. There are no limitations on the percentage of assets which may be invested in any one investment or type of investment. Our Board of Directors may set such policy without a vote of our shareholders. We will not invest in real estate mortgages, and we will not invest in securities of or interests in real estate investment trusts, partnership interests, or other persons primarily engaged in real estate activities.





We do not plan to limit the geographical area in which we may invest, but we expect that all of our investments will be made in metropolitan Beijing, China or circumjacent land. We have no current plans to form a joint venture or other arrangements with third parties to engage in real estate development.





We may finance our investments through both public and private secured and unsecured debt offerings, as well as public and private placements of our equity securities. The equity securities may include both common and preferred equity issues. There are currently no restrictions on the amount of debt that we may incur. Since inception, our operating activities have been mainly financed by equity capital, an unsecured line of credit provided by Dahua Group, our affiliate, and purchaser deposits received from our pre-sale of the units of Dahua Garden and Zhuolu.





Description of Real Estate and Operating Data





One of our completed real estate projects is the First Phase of Dahua Garden, which is located in the northern suburban areas of Beijing, China, approximately 20 kilometers from the downtown of Beijing. It consists of 75 luxurious residential units, each ranging from 2,000 to 5,000 square feet in size with 3 to 4 bedrooms. The residential units are constructed on a piece of land, approximately 20,000 square meters. The construction of all of the units has been completed and they are being sold to the public. As the developer, we do not have title to the land, the use of which is licensed from the Chinese government for a period of 70 years expiring on April 27, 2073, but we own all the residential units constructed thereon until such units are sold. There are no material mortgages, liens or other encumbrances against the land or residential units. Upon conveyance of title to the residential units to the buyer, the land use rights will be passed to the buyer.




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Changping District government publicized a new layout which was named Future Science & Technology Park at the beginning of 2010. The newly publicized layout includes the plot which the Company was applying for as the Second Phase of Dahua Garden.  The Company is now negotiating with the Changping District about the Development and Construction of the Future Science & Technology Park of Beijing Co., Ltd for compensation to cover costs, already incurred by the Company, for Phase II.





The Company changed the operation plan and got another smaller plot south of the First Phase. The new Second Phase consists of four 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, and a public service building. The Company has got all the permits needed and is now in the process of construction.  The Company plans to complete development in 2011.





We, through our subsidiary Zhuolu Dahua Real Estate which was established on May 21, 2008 and is wholly-owned by Beijing Dahua  Real Estate, are engaging 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. The residential units are constructed on a piece of land, approximately 31,200 square meters. We have received all the permits needed and are now in the process of construction. As the developer, we do not have title to the land, the use of which is licensed from the Chinese government for a period of 70 years expiring on March 25, 2078, but we own all the residential units constructed thereon until such units are sold. There are no material mortgages, liens or other encumbrances against the land or residential units. Upon conveyance of title to the residential units to the buyer, the land use rights will be passed to the buyer.





Item 3.   Legal Proceedings





There are no legal actions pending against us nor are any legal actions contemplated by us.





Item 4.   (Removed and Reserved)





PART II





Item 5.   Market for Common Equity and Related Stockholder Matters





Market Information





Our common stock has been quoted on the OTC Bulletin Board under the symbol "DHUA.OB" since December 14, 2007.  Trading in our common stock has been minimal with limited or sporadic quotations and there is no established public trading market for our shares.   On March 30, 2011, our stock was downgraded to the OTC Pink Sheets market under the same symbol.  There has been no trading of our stock on the OTC Pink market.





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Holders





As of December 31, 2010, there were 111 holders of record for our common shares. We have only one class of stock outstanding.





Stock Options, Warrants and Convertible Securities





We have not granted any stock options or warrants to purchase shares of our common stock, and we have not issued and do not have any securities outstanding that may be converted into our common shares or have any rights convertible or exchangeable into shares of our common stock.





Dividends





We have not paid any dividends since our incorporation and do not anticipate paying dividends in the foreseeable future. We intend to retain future earnings, if any, to fund the expansion and growth of our business.





There are no restrictions in our Articles of Incorporation or Bylaws that prevent us from declaring dividends. The Delaware Revised Statutes, however, do prohibit us from declaring dividends, after giving effect to the distribution of the dividend if: (i) we would not be able to pay our debts as they become due in the usual course of business; or (ii) our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.





Securities Authorized for Issuance under Equity Compensation Plans





We do not have any compensation plan under which equity securities are authorized for issuance.





Rule 144 Shares





As of December 31, 2010, there were 25,015,000 shares of common stock issued and outstanding, of which 17,452,000 are “restricted securities”, as that term is defined under Rule 144 of the Securities Act of 1933. Under Rule 144, such shares can be publicly sold, subject to volume restrictions and certain restrictions on the manner of sale, commencing one year after their acquisition.





In general, under Rule 144 as currently in effect, any of our affiliates and any person or persons whose sales are aggregated who has beneficially owned his or her restricted shares for at least one year, may be entitled to sell in the open market within any three-month period a number of shares of common stock that does not exceed the greater of (i) 1% of the then outstanding shares of our common stock, or (ii) the average weekly trading volume in the common stock during the four calendar weeks preceding such sale. Sales under Rule 144 are also affected by limitations on manner of sale, notice requirements, and availability of current public information about us. Non-affiliates, who have held their restricted shares for one year may be entitled to sell their shares under Rule 144 without regard to any of the above limitations, provided they have not been affiliates for the three months preceding such sale.





Item 6.   Management's Discussion and Analysis or Plan of Operation





We were incorporated on March 8, 2002 in the State of Delaware under the name of Norton Industries Corp. ("Norton") as a blank check company for the purpose of either merging with or acquiring an operating company with operating history and assets. From March 8, 2002 to January 30, 2005, Norton had conducted virtually no business other than organizational matters and the filings of periodic reports with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended.




13




On January 30, 2005, Norton entered into a share exchange agreement, by which Norton acquired all of the capital shares of Bauer Invest Inc. Bauer is a holding company, which conducts its business through its 80% owned subsidiary Beijing Dahua Real Estate Development, Ltd., an operating company organized in China ("Beijing Dahua Real Estate"). As a result of this transaction, Bauer became our wholly owned subsidiary. This transaction was accounted for as a recapitalization, rather than a business combination. Under accounting principles generally accepted in the United States of America, after completion of this transaction, we filed prior historical financial information of Bauer and its subsidiaries, on a stand-alone basis, for two years prior to the acquisition. Our continuing operations reflect the consolidated operations of Dahua and its subsidiaries.





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 December 31, 2010, out of 75 luxury residential units, 67 units have been sold, 8 units were reserved with clients' deposits.





On May 21, 2008 we established Zhuolu Dahua Real Estate Development Ltd which was wholly-owned by Beijing Dahua Real Estate Development Ltd. and 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 of the project which is known as Xuanyuan Lakefront 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 have got all the permits needed and are now in the process of construction. The company wants to create a demonstration base of ecological buildings circumjacent to Beijing. As of December 31, 2010, 22 units were reserved with clients' deposits.





Changping District government publicized a new layout which was named Future Science & Technology Park at the beginning of 2010. The newly publicized layout includes the plot which the company was applying for as the Second Phase of Dahua Garden.  The Company is now negotiating with the Changping District about the Development and Construction of the Future Science & Technology Park of Beijing Co., Ltd about future compensation to Dahua Real Estate for cost incurred during the development of Phase II.





The Company changed the operation plan and got another smaller plot south of the First Phase. The new Second Phase consists of four 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, and a public service building. The Company has got all the permits needed and is now in the process of construction.  The company plans to complete development  in 2011.




Results of Operations





Years Ended December 31, 2010 and 2009





Revenues





We began our First Phase of Dahua Garden construction, which consists of 75 luxury residential units, in July 2003. The construction was substantially completed in December 2005. As of December 31, 2010, we have sold 67 units out of 75 units.  We recognized sales revenues of $0 and $2,545,171 from the sale of our housing units, for the years ended December 31, 2010 and 2009, respectively.





Cost of Goods Sold




14




Cost of goods sold consists primarily of land acquisition and development costs, engineering, infrastructure, capitalized interest, and construction costs. For the years ended December 31, 2010 and 2009, our cost of goods sold was $0 and $3,499,839 respectively.





Operating Expenses





For the year ended December 31, 2010, our operating expenses increased by $1,161,342, or 209%, to $1,715,991 from $554,649 in the prior year, mainly due to the impairment loss of inventory which totaled 727,759 for the year ended December 31, 2010. Changping District government publicized a new layout which was named Future Science & Technology Park at the beginning of 2010. The newly publicized layout includes the plot which the Company was applying for as the Second Phase of Dahua Garden.  The Company is now negotiating with the Changping District about the Development and Construction of the Future Science & Technology Park of Beijing Co., Ltd for compensation to cover costs, already incurred by the Company, for Phase II.  The Company booked the cost incurred as impairment loss.





The payroll expense also increased $100,859. Because the Company is currently ramping-up construction of our Zhoulu Dahua Real Estate project and have added additional employees.  The Company has also increased its advertising efforts for the Zhoulu Dahua Real Estate project, and has seen an increase of $47,619 in advertising expense. Other general and administrative expenses increased $240,163, or 79% over the prior year due, primarily due to increases in indirect utilities and repairs to homes in phase one.  The Company was also litigated against and was required to pay the defendant approximately $26,000 in damages.





Net Income





For the year ended December 31, 2010, we had net loss of $1,156,574 or $ 0.05 per share, as compared with net loss of $902,327, or $0.04per share, for the year of 2009.  As the Company continues to ramp-up development of the Zhoulu Dahua Real Estate project, it will continue to absorb expenses related to operation and cost of sales, without seeing immediate increases in revenues.  Once homes are complete, the Company will begin to recognize revenues matched to current expenses.





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 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 for 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 December 31, 2010, our customer deposit balance was $5,765,711.





We also borrow from time to time based on a verbal line of credit agreement from Dahua Group, our affiliate. There was no written line of credit agreement until June 20, 2005, to recapture the credit arrangement. The funds borrowed are unsecured and there is no upper limit on the amount of money that we can borrow. 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 December 31, 2010, the short-term loans due to related parties had balance of $9,175,967, plus accrued interest of $561,893.




15




On May 12, 2005, Beijing Dahua Real Estate Development, Ltd, our operating subsidiary, increased its registered capital, in which Dahua increased its investment by $2,265,600 and the minority shareholder increased its investment by $566,265. Dahua Group advanced funds to us to allow for the increase in investment. On September 21, 2005, we issued 4,750,000 shares to Dahua Group at the price of $0.477 per share in exchange for the short-term loans Dahua Group provided. At the same time, according to the Shares Exchange Agreement signed on January 30, 2005, it is our responsibility to maintain the ownership percentage held by Comp Hotel International Ltd. ("Comp Hotel") and Waywood Investments Ltd. ("Waywood"). In this regard, we issued 212,500 shares and 37,500 shares to Comp Hotel and Waywood, respectively. There was no cash inflow from this issuance. After the capital increase, the subsidiary's registered capital is $4,036,145, of which we, through Bauer, hold 80% of the shares of Dahua Real Estate.





As of December 31, 2010, we had cash and cash equivalent balance of $64,402. For the year ended December 31, 2010, our operating activities used $6,934,371 of net cash, largely due to the increase of inventory. For the year ended December 31, 2010, the investing activities used $347,311 of net cash, mainly due to the expansion of the clubhouse and due from related parties. For the same period, the financing activities provided $7,278,316 of net cash, which was due to advances of loan payable to related parties.





We are also now in the process of construction of the project in Zhuolu through our subsidiary Zhuolu Dahua Real Estate Development Ltd. The first phase of Xuanyuan Lakefront will consist of 246 luxury residential units. It is estimated that approximately $17.5 million is needed to complete the project.





In addition to customer deposits, and short-term loans (line of credit) from Dahua Group, the proceeds generated from sale of the First Phase of Dahua Garden will also be used to finance projects 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 a bank that extended mortgage loans to our home buyers, whereby we agreed 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 the bank. At December 31, 2010, the balance of this separate account was $759,580. 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. See Note 8 of Notes to the Consolidated Financial Statements for further details.





Critical Accounting Policies and Estimates





Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, which are based on our historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that revenue recognition is one of our more significant judgments and estimates used in the preparation of our financial statements.




16




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.





Inventory Valuation and Related Prepaid Construction Costs





At each balance sheet date, we review the carrying amounts of our tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.





Recoverable amount is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.





If the recoverable amount of an asset (or cash-generating units) is estimated to be less than its carrying amount, the carrying amount of the asset (cash- generating unit) is reduced to its recoverable amount. An impairment loss is recognized as an expense immediately.





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 (“Beijing 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.




17




WE WILL NEED ADDITIONAL FINANCING TO CARRY OUT THE PROJECT IN ZHUOLU. IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING, WE MAY HAVE TO DELAY THE IMPLEMENTATION OF OUR PROJECTS, 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, 67 houses were sold and 8 houses were reserved with clients’ deposits at December 31, 2010. We are now in the process of construction of Xuanyuan Lakefront in Zhuolu county in Hebei province through our subsidiary Zhuolu Dahua Real Estate. It is estimated that we needed approximately $17.5 million in order to complete the 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 and (iii) short-term borrowings from Dahua Group, our affiliate, to finance our projects. 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.





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.





CHANGPING DISTRICT GOVERNMENT PUBLICIZED A NEW LAYOUT WHICH AFFECTED OUR ORIGINAL SECOND PHASE





Changping district government publicized a new layout which was named Future Science & Technology Park at the beginning of this year. The newly publicized layout includes the plot which the company was applying for as the Second Phase of Dahua Garden.  The Company is now negotiating with the Changping District about the Development and Construction of the Future Science & Technology Park of Beijing Co., Ltd about compensating Dahua Real Estate for costs incurred during our development of Phase II. Our operation will be materially impaired.





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 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.




18




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.





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.





19





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:





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





o
Lengthy and unpredictable sales cycles;





o
Changes in our operating expenses; and





o
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.





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:




20




o
The extent of government involvement;





o
Level of development; and





o
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:





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





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





o      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





o      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.





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.




21




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 December 31, 2010. 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 PINK SHEETS 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 Pink Sheets, 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.





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:




22




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





o      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;





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





o     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 7.   Financial Statements





The following report of independent registered public accounting firm and the consolidated financial statements of the Company are included below:





Report of Independent Registered Public Accounting Firm
25Consolidated Balance Sheets
26Consolidated Statements of Operations and Comprehensive Income (Loss)
27Consolidated Statements of Changes in Stockholders’ Equity
28Consolidated Statements of Cash Flows
29Notes to Consolidated Financial Statements
30
 23


























Dahua, Inc.





Consolidated Financial Statements





For the Years Ended December 31, 2010 and 2009






































24














25





DAHUA, INC.


CONSOLIDATED BALANCE SHEETS





December 31, 2010


December 31, 2009ASSETSCurrent assets:Cash and cash equivalents

$
64,402


$
65,801Inventory-short-term


3,799,024



3,615,644Prepaid expenses


18,497



42,603Total Current Assets


3,881,923



3,724,048Property, plant and equipment, net of accumulated depreciation


1,648,108



1,574,567Deferred taxes


930,291



480,700Due from related parties


173,046



-Inventory-long-term


11,096,095



3,278,726Other receivables, net


910



4Prepaid tax


620,620



569,340Restricted cash


759,580



734,317Total Assets

$
19,110,573


$
10,361,702LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
409,091


$
423,940Customer deposits


5,765,711



3,681,057Short-term loans - related parties


9,175,967



1,683,423Accrued interest - short-term loans, related parties


561,893



229,373Other accruals


255,827



225,593Total Current Liabilities


16,168,489



6,243,386Dahua Inc. stockholders' equity:Preferred stock: par value $0.0001; 20,000,000 shares authorized;none issued and outstanding


-



-Common stock: par value $0.0001; 80,000,000 shares authorized;25,015,000 shares issued and outstanding


2,502



2,502Additional paid-in capital


3,131,200



3,131,200Retained earnings (deficit)


(1,717,388
)


(560,814
)Accumulated other comprehensive income


1,003,912



788,324Total Dahua Inc. stockholders' equity


2,420,226



3,361,212Non-controlling interest


521,858



757,104Total Equity


2,942,084



4,118,316Total Liabilities and Equity

$
19,110,573


$
10,361,702





See accompanying notes to consolidated financial statements




26




DAHUA, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS AND


COMPREHENSIVE INCOME (LOSS)




Year ended December 31,2010


2009Revenues:Sales revenues

$
-


$
2,545,171Cost of goods sold


-



3,499,839Gross profit


-



(954,668
)Expenses:Advertising


47,619



-Bad-debts


-



797Depreciation


153,001



107,262Payroll expense


241,660



140,801Impairment loss


727,759



-Other general and administrative


545,952



305,789Total expenses


1,715,991



554,649Income (loss) from operations


(1,715,991
)


(1,509,317
)Other income (expense)Other income


11,817Interest income


3,331



5,438Total other income (expense)


15,148



5,438Income before income taxes


(1,700,843
)


(1,503,879
)Income tax expense (benefit)


(255,126
)


(375,970
)Net income (loss)


(1,445,717
)


(1,127,909
)Less: Net income (loss) attributable to the non-controlling interest


(289,143
)


(225,582
)Net income (loss) attributable to Dahua Inc.

$
(1,156,574
)

$
(902,327
)Earnings per share - basic and diluted:Net income (loss) attributable to Dahua Inc. common stockholders

$
(0.05
)

$
(0.04
)Weighted -average shares outstanding, basic and diluted


25,015,000



25,015,000Dahua Inc. Comprehensive Income (loss)Net income (loss)

$
(1,445,717
)

$
(1,127,909
)Other comprehensive income (loss), net of taxForeign currency translation adjustment


269,485



4,432Comprehensive income (loss)

$
(1,176,232
)

$
(1,123,477
)Comprehensive loss (income) attributable to the non-controlling interest


235,246



224,696Comprehensive income (loss) attributable to Dahua Inc.

$
(940,986
)

$
(898,781
)





See accompanying notes to consolidated financial statements




27




DAHUA, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


Year ended December 31,2010


2009Cash Flows from Operating Activities:Net loss

$
(1,275,632
)

$
(1,127,909
)Adjustments to reconcile  net income to net cashProvided by operating activities:Depreciation


153,001



107,262Changes in operating assets and liabilities:Inventory


(7,617,282
)


1,945,709Deferred taxes


(425,211
)


(375,970
)Prepaid tax


(18,111
)


133,466Prepaid expenses


10,104



(17,880
)Accounts payable


(56,273
)


114,608Customer deposits


1,927,531



(1,759,647
)Accrued interest


318,318



39,091Restricted cash


(2,424
)


(2,393
)Other accruals


51,608



(25,806
)Net cash used in operating activities:


(6,934,371
)


(969,469
)Cash Flows from Investing Activities:Property, plant & equipment


(177,146
)


(138,850
)Proceeds from other receivables


-



161,568Other receivables repayments


(886
)


-Due from related parties


(169,279
)


659Net cash provided by (used in) investing activities:


(347,311
)


23,377Cash Flows from Financing Activities:Advances of loans payable - related parties


7,278,316



834,840Net cash provided  financing activities:


7,278,316



834,840Effect of rate changes on cash


1,967



118Increase (decrease) in cash and cash equivalents


(1,399
)


(111,134
)Cash and cash equivalents, beginning of period


65,801



176,935Cash and cash equivalents, end of period

$
64,402


$
65,801Supplemental disclosure of cash flow information:Interest paid in cash

$
-


$
-Income taxes paid in cash

$
-


$
14,645





See accompany notes to consolidated financial statements




28




DAHUA


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY








AccumulatedAdditional





other


Non-controllingCommon


Common


Paid in


Retained


comprehensive


Interest


TotalShare


Stock


Capital


Earnings


Income



20%


EquityBalance January 1, 2009


25,015,000


$
2,502


$
3,131,200


$
341,513


$
784,778


$
981,800


$
5,241,793Net Income (loss)














(902,327
)






(225,582
)


(1,127,909
)Foreign currency translation


















3,546



886



4,432Balance December 31, 2009


25,015,000


$
2,502


$
3,131,200


$
(560,814
)

$
788,324


$
757,104


$
4,118,316Net Income (loss)














(1,156,574
)






(289,143
)


(1,445,717
)Foreign currency translation


















215,588



53,897



269,485Balance December 31, 2010


25,015,000


$
2,502


$
3,131,200


$
(1,717,388
)

$
1,003,912


$
521,858


$
2,942,084





See accompany notes to consolidated financial statements





29





DAHUA INC.


NOTES TO 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. (“Beijing Dahua”) 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.





Zhuolu Dahua Real Estate Development, Ltd. (“Zhuolu Dahua”) 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.





These financial statements are essentially those of Beijing Dahua and Zhuolu Dahua 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 the construction of the First Phase of Dahua Garden and all of the houses are sold or available for sale. The Company is now engaging in the development of real estate and the sale of commodity housing in Zhuolu county in Hebei province. The company has got all the permits needed and is now in the process of 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, 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 People’s Republic of China (“PRC”). All necessary adjustments have been made to present the financial statements in accordance with US GAAP.




30





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 December 31, 2010.





Inventory





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 & equipment





Property, plant & 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.  Equipment is depreciated over their estimated useful lives as follows:







Computer equipment
3 yearsOffice equipment
7 yearsVehicles
7 yearsLand and Buildings
20 years





Depreciation expense for the years ended December 31 2010 and 2009 was $153,001 and $107,262, 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 the Accounting Standards Codification (“ASC Topic”) 360. The Company also evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. No impairment of long-term assets was recorded in the periods reported.




31




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.





Advertising Expenses





Advertising costs are expensed as incurred.  Advertising expense amounted to $47,619 and $0 for the years ended December 31, 2010 and 2009, respectively.





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.





Estimates




32





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.





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:




2010


2009NUMERATOR FOR BASIC AND DILUTED EPSNet income to common stockholders

$
(1,156,574
)

$
(902,327
)DENOMINATORS FOR BASIC AND DILUTED EPSWeighted average shares of common stock outstanding


25,015,000



25,015,000Add: dilutive equity securities outstanding


-



-Denominator for diluted EPS


25,015,000



25,015,000EPS – Basic

$
(0.05
)

$
(0.04
)EPS – Diluted

$
(0.05
)

$
(0.04
)




The Company had no potentially dilutive securities outstanding at December 31, 2010 and 2009.





Going Concern





The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has incurred substantial recurring losses, which raises substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.





The Company has available cash and cash equivalents of approximately $64,402 at December 31, 2010 which it intends to utilize for working capital purposes and to continue developing its business. To supplement its cash resources, the Company has been pursuing a number of alternative financing arrangements with related parties. We are currently looking to secure additional working capital to provide the necessary funds for us to execute our business plan. However, we continue to incur significant operating losses and the resultant reduction of our cash position.  We cannot assure that we will be able to obtain additional funding, and the lack thereof would have a material adverse impact on our business. The aforementioned factors raise substantial doubt about our ability to continue as a going concern.





33





4.Inventory





Inventories consist primarily of compulsory land acquisition and removal compensation costs, prophase engineering cost, infrastructure cost, capitalized interest, indirect development costs, auxiliary public establishment costs and construction and installation project costs, etc in Zhuolu Dahua and Dahua Phase II. It also represents completed houses available for sale at December 31, 2009 in Beijing Dahua. During 2005, the Company completed its housing construction of the First Phase of Dahua Garden. Of all the units completed in Beijing Dahua Phase I and Zhuolu Dahua, as of December 31, 2010, 67 units were sold, 30 units were reserved with clients’ deposits.





As of December 31, 2010 and 2009, inventory in Beijing Dahua and project in Zhuolu was as follows:





Inventory in Beijing Dahua


Inventory in Zhuolu


Inventory in Beijing DahuaPhase I


Dahua


Phase IIDecember 31, 2010

$
3,799,024


$
6,871,818


$
4,224,2773,799,024



6,871,818



4,224,277Inventory in Beijing Dahua


Inventory in Zhuolu


Inventory in Beijing DahuaPhase I


Dahua


Phase IIDecember 31, 2009

$
3,615,644


$
2,186,142


$
1,092,5843,615,644



2,186,142



1,092,584





5. Property, plant and equipment





Property, plant & equipment are carried at cost less accumulated depreciation, which is computed using the straight-line method over the useful lives of the assets.  Property, plant and equipment for December 31, 2010 and 2009 are as following:





2010


2009Land and building

$
1,433,382


$
1,213,000Computers


62,068



58,130Telephone


3,394



3,282Office equipment


108,411



103,999Motor vehicles


573,677



559,717Sub Total


2,180,932



1,938,128Accumulated Depreciation


(532,824
)


(363,561
)Total

$
1,648,108


$
1,574,567








34





6. Related Party Transactions





Short-term loans due to related parties had balances of $9,175,967 and $1,683,423 (not including accrued interest) at December 31, 2010 and 2009 respectively.  The loans carry an annual interest rate of 6 percent and are due on demand.  Interest accrued on the loans was $561,893 and $229,373 for the years ended December 31, 2010 and 2009 respectively.





Due from related parties has a balance of $173,046 at December 31, 2010.  It represents the money that Zhuolu Dahua Wine Brew House (“Dahua Wine”), whose president was also Mr. Du Yong-lin borrowed from the company to buy the equipment. The Company has concluded that this related party loan between the Company and Dahua Wine constituted a prohibited transaction under Section 402 of the Sarbanes-Oxley Act of 2002.





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 was $5,765,711 and $3,681,057 at December 31, 2010 and 2009 respectively. Of all the 30 units reserved, one unit’s deposits are money received from bank arrangements (see note 8) in the amounts of $531,505. Accordingly, the bank has liens against this unit.





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 December 31, 2010 and 2009, the balance of this separate account was $759,580 and $734,317 respectively. 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 a provision for sales tax, which totaled $0 and $152,775 respectively for the year ended December 31, 2010 and 2009. The sales tax is calculated on the basis of sales revenues. The provision for sales tax is included as part of cost of goods sold. The Company made no provision for sales tax because the Company did not recognize sales revenue in 2010.





35





Income tax expense (benefit) consists of the following:





Year Ended December 31,Current:

2010


2009Foreign

$
-


$
-Deferred:Foreign


(255,126
)


(375,970
)(255,126
)


(375,970
)Income tax expense (benefit)

$
(255,126
)

$
(375,970
)





A reconciliation of income tax expense (benefit) to the amount computed using statutory rates is as follow





Year Ended December 31,2010


2009Tax at statutory rate

$
(255,126
)

$
(375,970
)Non-deductible expenses


-



-$
(255,126
)

$
(375,970
)





The Company has implemented ASC Topic 740, which provides for a liability approach to accounting for income taxes.  Total deferred tax assets and liabilities as of December 31, 2010 are as follows:





Year Ended December 31,2010


2009Deferred tax assets - Tax NOL

$
930,291


$
480,700Deferred tax liabilities


-



-Net deferred tax asset (liability)

$
930,291


$
480,700





Deferred income taxes result from the effect of transactions that are recognized in different periods for financial and tax reporting purposes.





Deferred income taxes are recognized for the tax consequences of temporary differences by applying statutory tax rates to differences between the financial reporting and the tax bases of existing assets and liabilities.  These temporary differences related primarily to bad debt provisions and losses on the sale of property.





The company has a net operating loss carryforward of approximately $3,721,164 expiring in 2030 due to the reason that the company was in the process of construction and didn’t recognize sales revenue in these two years.  The tax benefit of these net operating loss carryforwards, based on an effective tax rate of 25% is approximately $930,291 .




36





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 December 31, 2010, there were 25,015,000 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.





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 December 31, 2010, the balance of others receivable was $8,460.  The company made a provision of $7,550 for bad-debts for other receivable for the reason that collection of the full amount becoming questionable





13. Leases




The Company leased in 1997 a pond and filled it and leveled up for land exploitation from an outside party for approximately $ 32,500 per year which will end in 2047. This lease is for an initial term of 50 years and requires fixed annual payments. In the year ended December 31, 2010 the Company paid approximately $38,404 for the lease payment. These leases contain renewal and right of first refusal options and require the adherence to certain covenants and conditions. Rental expense is recognized on the straight-line basis, although rental payments vary over the lease terms. Future minimum lease payments are as follows:






Year ending December 31,


2011

$
32,5002012

$
32,5002013

$
32,5002014

$
32,5002015

$
32,500Thereafter

$
1,040,500$
1,203,000





37





14.  Accounting Standards Updates





The Company has evaluated recent accounting standards updates through AU 2011-02, and their adoption has not had or is not expected to have a material impact on the Company’s consolidated financial statements or note disclosures.





15. Subsequent Events





The Company has evaluated all subsequent events through the date that these consolidated financial statements were issued.  Per our evaluation, we noted no significant subsequent event that requires disclosure.








38





Item 8.   Changes In and Disagreements with Accountants on Accounting and Financial Disclosure





There are no changes in and disagreements with accountants on accounting and financial disclosure.





Item 9A (T).  Controls and Procedures





(a) Evaluation of disclosure controls and procedures.





In connection with the preparation of this annual report, an evaluation was carried out by the Registrant’s management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Registrant’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of December 31, 2010. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.





The Company’s management, with the participation of its chief executive officer and chief financial officer, evaluated the effectiveness of its disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.  Based on that evaluation, the Company’s management concluded that disclosure controls and procedures were not effective as of December 31, 2010.





(b)Management’s Report on Internal Control over Financial Reporting





The management of the Registrant is responsible for establishing and maintaining adequate internal control over financial reporting. The Registrant’s internal control over financial reporting is a process, under the supervision of the principal executive officer and the principal financial officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Registrant’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that:





●
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Registrant’s assets;





●
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the board of directors; and





●
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Registrant’s assets that could have a material effect on the financial statements.





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.




39




The Registrant’s management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Our management has concluded that material weaknesses existed as of December 31, 2010 with respect to compliance with Section 402 of the Sarbanes-Oxley Act of 2002.  As reported in the Company’s Annual Report on Form 10-K, the Company concluded that certain related party loans between the Company and Zhuolu Dahua Wine Brew House (“Dahua Wine”), constituted prohibited transactions under Section 402 of the Sarbanes-Oxley Act of 2002.  Because of the Company’s inability to eliminate the occurrence of related party loans, which were paid back subsequent to the year-end, the Company concluded that a material weakness continues to exist with respect to its compliance with Section 402 of the Sarbanes-Oxley Act of 2002. Based on that evaluation, the Company’s management concluded that because of the existence of certain related party loans in violation of Section 402 of the Sarbanes-Oxley Act of 2002 contributed to in part by a lack of review and approval of these related party loans by independent directors constituting a significant deficiency in internal control over financial reporting, and that internal controls over financial reporting were not effective as of December 31, 2010.





(c) Changes in internal controls over financial reporting.





During the fourth quarter ended on December 31, 2010, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.





(d) Attestation Report of the Registered Public Accounting Firm





This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Commission that permit us to provide only management’s report in this annual report.





Item 9B.  Other Information





There were no events requiring disclosure that had not been made under Form 8-K in the fourth quarter of our fiscal year.





PART III





Item 10.   Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act





Directors and Executive Officers





Each of our directors is elected by the shareholders to a term of one year and serves until his or her successor is elected and qualified, or until he or she resigns or is removed from office. Each of our officers is elected by the board of directors to a term of one year and serves until his or her successor is duly elected and qualified, or until he or she resigns or is removed from office. The board of directors has no nominating or compensation committees. The board of directors does not have an audit committee financial expert.




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The name, age and position of our officers and directors are set forth below:





Name

Age

Position HeldDu Yonglin

69

President, Chief Executive Officer and DirectorWang Wulong

71

DirectorMeng Hua

35

Chief Financial OfficerZeng Qinna

33

Corporate Secretary





The following is a brief description of business experience of each of our directors and executive officers during the past five years.





Mr. Yonglin Du has been our Chairman, Chief Executive Officer and President since January 30, 2005.  From 1982 to 2003, Mr. Du held various positions in China's petroleum and petrochemical industries, including Deputy Director of the Research Institute of Daqing Oilfield, Head of Petroleum and Petrochemical Division of the State Planning Commission, Deputy Director of the Energy Institute of the State Planning Commission, President of Shanghai Petroleum and Natural Gas Company. In 2000, he founded Dahua Project Management Group Co. Ltd. ("Dahua Group"), of which he has been serving as its Chairman of the Board of Directors and Chief Executive Officer. Dahua Group is a Beijing Municipal Government licensed construction project supervising business entity located in Beijing, China.





Mr. Wulong Wang has been our Director since January 30, 2005. A graduate of Beijing Post and Telecommunication University, Mr. Wang is a senior engineer and China's registered Consulting Engineer. He joined China's State Planning Commission in 1979, and served as its Deputy Chief of Investment Bureau from 1988 to 1992, Chief of Key Construction Bureau from 1992 to 1994, Chief of Investment Bureau from 1994 to 1995. From 1995 to 2002, Mr. Wang served as the President of China International Engineering Consulting Co. Limited, and from 2002 to the present as a member of the Expert Committee of China Engineering Consulting Co. Limited, as well as a member of the Economic Commission of Chinese National People's Political Consultative Conference.





Ms. Hua Meng has been our Chief Financial Officer since January 30, 2005. She graduated from the Central University of Finance and Economics of China in July 2003 with a master degree in accounting. Ms. Meng is a Certified Public Accountant in China. From July 1999 to May 2000, she was employed at Beijing Baisheng Light Industry Development Co. Ltd. as an accountant. From July 2003 to the present, Ms. Meng has also been chief financial officer of Dahua Project Management Group Co., Ltd., a Beijing Municipal Government licensed construction project supervising business entity in Beijing, China.





Ms. Qinna Zeng has been our Corporate Secretary since January 30, 2005. She graduated from the Central University of Finance and Economics in China in July 2003 with a master degree in finance. From July 1999 to August 2000, Ms. Zeng worked for the Lichuan Branch of People's Bank of China as a statistician. From July 2003 to the present, Ms. Zeng has also been corporate secretary of Dahua Project Management Group Co. Ltd., a Beijing Municipal Government licensed construction project supervising business entity in Beijing, China.




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None of our directors and officers has ever held any position in a reporting company.





Significant Employees





There are no significant employees other than our executive officers.





Family Relationships





There are no family relationships among directors or officers.





Involvement in Certain Legal Proceedings





During the past five years, none of our officers, directors, promoters or control persons has had any involvement in any of the following events:





1.     Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;





2.     Any conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offenses;





3.     Being subject to any order, judgment or decree, not substantially reversed, suspended or vacated, of any court of competent jurisdiction, permanently enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking business; and/or





4.    Being found by a court of competent jurisdiction, in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.





Code of Ethics





We had adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code of ethics may be obtained by any person, without charge, who sends a written request to Dahua Inc. c/o Corporate Secretary, 8th Floor, Officer Tower 3, Henderson Center, 18# Jianguomennei Street Dongcheng District, Beijing, China 100005





Section 16(a) Beneficial Ownership Reporting Compliance





Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership of our equity securities with the Securities and Exchange Commission. Officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) filings. To our knowledge, for the year ended December 31, 2010, based solely on a review of the copies of such reports furnished to us and representations by these individuals that no other reports were required during the year ended December 31, 2010, all Section 16(a) filing requirements applicable to our directors, officers and greater than 10% beneficial owners have been timely filed.




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Item 11.  Executive Compensation





Summary Compensation Table








SUMMARY COMPENSATION TABLE





Non-


Nonquali-Equity


fiedIncentive


Deferred


AllName and








Stock


Option


Plan


Compensation


OtherPrincipal


Salary


Bonus


Awards


Awards


Compensation


Earnings


Compensation


TotalPosition
Year

($)


($)


($)


($)


($)


($)


($)


($)Yonglin Du
2010


29,542



-



-



-



-



-



-



29,542CEO and
2009


29,290



-



-



-



-



-



-



29,290PresidentHua Meng
2010


14,180



-



-



-



-



-



-



14,180CFO
2009


8,787



-



-



-



-



-



-



8,787





(i)  The annual salaries paid Mr. Du were 200,000 yuan, or approximately $29,542, and Ms. Meng 96,000 yuan, or approximately $14,180, respectively.





At the end of the last completed fiscal year, there were no “most highly compensated executive officers” as that term is defined in Item 402(m) (2) of Regulation S-K, and there were no additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as our executive officer.





Outstanding Equity Awards at Fiscal Year-End Table





We do not have any equity incentive plans. No option or stock awards have been granted to any of our executive officers or directors since our inception. Pursuant to Item 402(m)(5) of Regulation S-K, the Outstanding Equity Awards at Fiscal Year-End Table is omitted because there has been no compensation awarded to, earned by, or paid to any of the named executive officers or directors required to be reported in that table.





Compensation of Directors





The members of the Board of Directors are not compensated by us for their service as members of the Board of Directors, but may be reimbursed for reasonable expenses incurred in connection with attendance of meetings of the board of directors. There are no arrangements pursuant to which directors are or will be compensated in the future for any services provided as a director.




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Employment Contracts, Termination of Employment, Change-in-Control Arrangements





We have not entered employment agreements with our executive officers. There are no compensatory plans or arrangements, including payments to be received from us, with respect to a named executive officer, if such plan or arrangement would result from the resignation, retirement or any other termination of such executive officer's employment with us or form a change-in-control of us or a change in the named executive officer's responsibilities following a change-in-control.





Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters





Security Ownership of Certain Beneficial Owners





The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 31, 2011, each person who is known by us to own beneficially more than 5% of our outstanding common stock. We have only one class of securities outstanding. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed below, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.


Name and Address of

Amount & Nature ofTitle of Class

Beneficial Owner

Beneficial Owner

Percent of ClassCommon Stock

Yonglin Du

1,900,000 shares

7.60%8thFloor, Officer Tower 3,Henderson Center,18# Jianguomennei StreetDongcheng District,Beijing, China 100005





Security Ownership of Management





The following table sets forth certain information, as of March 31, 2011, as to each class of our equity securities beneficially owned by all of our directors and nominees, each of the named executive officers, and our directors and executive officers as a group.





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Name and Address of

Amount & Nature ofTitle of Class

Beneficial Owner(1)

Beneficial Owner

Percent of ClassCommon Stock

Yonglin Du(2)

1,900,000 shares

7.60
%8thFloor, Officer Tower 3,Henderson Center,18# Jianguomennei StreetDongcheng District,Beijing, China 100005Common Stock

Qinna Zeng (3)

72,500 shares

*(4
)#1712, Courtyard 5,Beiyuan Road, Chaoyang District,BeijingCommon Stock

Hua Meng (5)

15,000 shares

*# 8104, Courtyard11, Anning Zhuang,Xisanqi, Haidian District,BeijingCommon Stock

Wang Wulong

Nil

Nilc/o Dahua Inc.8thFloor, Officer Tower 3,Henderson Center,18# Jianguomennei StreetDongcheng District,Beijing, China 100005All officers and directorsas a group

1,987,500 shares

7.95
%





(1)           The persons named above do not have any specified rights to acquire, within 60 days of the date of this registration statement any options, warrants or rights and no conversion privileges or other similar obligations exist.





(2)           Yonglin Du is our CEO, President and a director.





(3)           Qinna Zeng is our Corporate Secretary.





(4)           Less than one percent of the total number of shares outstanding.





(5)           Hua Meng is our Chief Financial Officer.





We do not have any securities that are convertible into common stock.




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Changes in Control





There are no arrangements that the management is aware of that may result in changes in control as that term is defined by the provisions of Item 403(c) of Regulation S-K. There are no provisions within our Articles or Bylaws that would delay or prevent a change of control.





Item 13   Certain Relationships and Related Transactions





(a) Transactions with Related Persons





None.





(b) Parents





None.





(c) Promoters and Control Persons





Prior to the reverse merger on January 30, 2005, Comp Hotel International Ltd. ("Comp Hotel") and Waywood Investment Ltd. ("Waywood") collectively owned 100% of capital stock of our predecessor, Norton Industries Corp. On January 30, 2005, Comp Hotel and Waywood entered into a share exchange agreement with Bauer Invest Inc., a British Virgin Islands corporation ("Bauer"), pursuant to which Comp Hotel and Waywood sold all outstanding capital shares, or 5,000,000 shares of common stock of Norton, to Bauer in exchange for $100,000 in cash and 5% of the post-acquisition shares. As a result, Waywood and Comp Hotel received 150,000 and 850,000 shares, respectively, of our common stock. The numbers of shares they received were proportionate to the respective numbers of shares they originally owned in Norton Industries Corp.





Waywood Investment Ltd. ("Waywood") is the sole promoter of our predecessor, Norton Industries Corp ("Norton"). Waywood is a small business consulting firm incorporated in the British Virgin Islands. Jianjun Zhang is the sole shareholder of Waywood. From inception of Norton until the reverse merger of Norton on January 30, 2005, Mr. Zhang was the sole director and executive officer of Norton. On February 26, 2003, Waywood entered into a stock purchase agreement with Comp Hotel International Ltd., a British Virgin Islands corporation ("Comp Hotel"), pursuant to which Comp Hotel acquired 4,250,000 shares, or 85%, of Norton's common stock from Waywood in exchange for $42,500 in cash. Comp Hotel is a travel-related service provider operating in Hong Kong, and is controlled by South Sea Petroleum Holdings Limited, a Hong Kong corporation, whose principal business is the exploration and production of crude oil in Indonesia. Immediately prior to the date of reverse merger between Bauer Invest and Norton Industries Corp., Comp Hotel, owned 85%, and Waywood owned 15%, of Norton's issued and outstanding shares, respectively.





In connection with issuance of additional common shares as a result of capital increase in our subsidiary, pursuant to a no-dilution clause of the Share Exchange Agreement dated January 30, 2005, on September 21, 2005, we issued 212,500 and 37,500 shares of our common stock to Comp Hotel and Waywood, respectively.




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Related Party Transaction





Set forth below is a chart of all related party transaction (lines of credit) extended to us as of December 31, 2010:





Party

Current Loan Balance

DateDahua Project Management Group

$
2,889,263

October 2001Donghui Du


8,014

December 2001Dahua Weiye Investment Co.


6,120,809

February 2009Dahua Farming


157,881

October 2001Total

$
9,175,967Party

Current Receivables

DateBalanceDahua Wine

$
173,046

October 2010Total

$
173,046


All the related parties set forth above are parties in which Mr. Yonglin Du, our president and CEO, holds an executive position. Donghui Du is Mr. Yongling Du’s son.





We entered a written loan agreement with Dahua Project Management Group. Please see Exhibit 10. 6.  All other loans or lines of credit are extended based on verbal agreements. All the loans so borrowed are unsecured. The money we borrow from them bears interest at an annual rate of 6%, then prevailing market rate, repayable within 30 days upon demand by lender.





Dahua wine is also a company in which Mr. Yonglin Du, our president and CEO, holds an executive position. It borrowed money from the Company for short-term setting up cost which are due within a year.





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Item 14.  Exhibits





(a) The following exhibits are filed as part of this report.





Exhibit

Number

Description


2.1
Share Exchange Agreement dated January 30, 2005 between Norton Industries Corp. and Bauer Invest, Inc. (Incorporated by reference to Current Report on Form 8-K filed on February 1, 2005, Commission File No. 0-49852).





2.2
Share Exchange Agreement dated January 26, 2003 between Norton Industries Corp. and Comp Hotel International Ltd. (Incorporated by reference to Registration Statement on Form SB-2/A filed on November 14, 2005, Commission File No. 333-122622).





2.3
Share Transfer Agreement dated May 25, 2004 between Bauer Invest, Inc. and Dahua Project Management Group Co., Ltd. (Incorporated by reference to Registration Statement on Form SB-2/A filed on November 14, 2005, Commission File 333-122622).





3.1
Articles of Incorporation (Incorporated by reference to Registration Statement on Form 10-SB filed on June 10, 2002, Commission File No. 0-49852).





3.2
Certificate of Amendment of Articles of Incorporation (Incorporated by reference to Registration Statement on Form SB-2 filed on February 8, 2005, Commission File No. 333-122622).





3.3
Bylaws (Incorporated by reference to Registration Statement on Form 10-SB filed on June 10, 2002 Commission File No. 0-49852).





4.1
Specimen Stock Certificate (Incorporated by reference to Registration Statement on Form 10-SB/A filed on July 29, 2002, Commission File No. 0-49852).





10.1
Land Use Rights Transfer Agreement (Incorporated by reference to Registration Statement on Form SB-2/A filed on November 14, 2005, Commission File No. 333-122622)





10.2
Agreement dated September 24, 2003, between Beijing Dahua Real Estate and Aocheng Construction Management Ltd. (Incorporated by reference to Registration Statement on Form SB-2/A filed on November 14, 2005, Commission File No. 333-122622)





10.3
National Land Use Permit issued on October 20, 2003 (Incorporated by reference to Registration Statement on Form SB-2/A filed on November 14, 2005, Commission File No. 333-122622)





10.4
Development Planning Permit issued on September 4, 2003 (Incorporated by reference to Registration Statement on Form SB-2/A filed on November 14, 2005, Commission File No. 333-122622)





10.5
Development Construction Permit issued on September 28, 2003 (Incorporated by reference to Registration Statement on Form SB-2/A filed on November 14, 2005, Commission File No. 333-122622).





10.6
Line of Credit Agreement between Beijing Dahua Real Estate and Dahua Project Management Group (Incorporated by reference to Registration Statement on Form SB-2/A filed on November 14, 2005, Commission File No. 333-122622).





10.7
Agreement between Beijing Dahua Real Estate Development Ltd. and Beijing Dahua Gonghong Economic Research Center dated June 18, 2003 (Incorporated by reference to Registration Statement on Form SB-2/A filed on March 8, 2006, Commission File No. 333-122622).





10.8
Agreement between Beijing Dahua Real Estate Development Ltd. and Beijing Dahua Gonghong Economic Research Center dated June 2004 (Incorporated by reference to Registration Statement on Form SB-2/A filed on March 8, 2006, Commission File No. 333-122622).





14.1
Code of Business Conduct and Ethics (Incorporated by reference to Registration Statement on Form SB-2 filed on February 8, 2005, Commission File No. 333-122622).





21
Subsidiaries of the Registrant (Incorporated by reference to Registration Statement on Form SB-2/A filed on November 14, 2005, Commission File No. 333-122622).





31.1
Section 302  Certification by CEO.





31.2
Section 302  Certification by CFO.





32.1
Section 906  Certification by CEO





32.2
Section 906 Certification by CFO.




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Item 15   Principal Accountant Fees and Services





The following is a summary of the fees billed to us by our principal accountants during the fiscal years ended December 31, 2010 and 2009:





Fee category

2010


2009Audit fees

$
47,000


$
42,000Audit-related fees


-



-Tax fees


4,500



3,850All other fees


-



-Total fees

$
51,500


$
45,850





Audit Fees consists of fees for professional services rendered by our principal accountants for the audit of our annual financial statements or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.





As of December 31, 2010, we did not have an audit committee. Our Board of Directors reviewed and pre-approved all audit and non-audit services provided by Child, Van Wagoner & Bradshaw, PLLC and has determined that the firm's provision of such services to us during fiscal 2010 is compatible with and did not impair the independence of Child, Van Wagoner & Bradshaw, PLLC. It is the practice of our Board of Directors to consider and approve in advance all auditing and non-auditing services provided to us by our independent auditors in accordance with the applicable requirements of the Securities and Exchange Commission.





49





SIGNATURES





In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.








DAHUA, INC.





Date: May 4, 2011





By: /s/ Yonglin DuYonglin Du, President andChief Executive Officer

(Principal Executive Officer)





In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:





/s/ Yonglin Du


May 4, 2011Yonglin Du, President, Chief Executive Officer


Dateand Director

(Principal Executive Officer)/s/ Hua Meng


May 4, 2011Hua Meng, Chief Financial Officer


Date(Principal Financial Officer and Principal Accounting Officer)/s/ Wulong Wang


May 4, 2011Wulong Wang, Director


Date





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