U.S.
Securities and Exchange Commission


Washington,
D.C. 20549





FORM
10-Q





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





For
the Quarterly Period Ended June 30, 2010





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





For
the Transition Period From ____to _____





000-53272


(Commission
File Number)





DÉCOR PRODUCTS
INTERNATIONAL, INC.


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





Nevada
              20-8211061(State
      or other jurisdiction of
              (IRS
      Employer Identification No.)incorporation
      or organization)





No.
6 Economic Zone, Wushaliwu, Chang’an Town


Dongguan, Guangdong
Province, China


(Address
of principal executive offices)





(86)
769-85533948


(Issuer's
telephone number, including area code)





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes o 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
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer
            oNon-accelerated
      filer
            o(Do not check if a
      smaller reporting company)Accelerated
      filer
            oSmaller
      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





Number of
shares of common stock outstanding as of June 30,
2010:          6,866,101





TABLE
OF CONTENTS




Page No.PART
      I. FINANCIAL INFORMATIONITEM
      1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                  F-1ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
                  20ITEM
      3. QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
                  26ITEM
      4. CONTROLS AND PROCEDURES
                  26PART
      II. OTHER INFORMATIONITEM
      1. LEGAL PROCEEDINGS
                  26ITEM
      1A. RISK FACTORS
                  26ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
                  27ITEM
      3. DEFAULTS UPON SENIOR SECURITIES
                  27ITEM
      4. REMOVED AN RESERVED
                  27ITEM
      5. OTHER INFORMATION
                  27ITEM
      6. EXHIBITS
                  27SIGNATURES
                  28INDEX
      TO EXHIBITS
                  28





ITEM
1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





DÉCOR
PRODUCTS INTERNATIONAL, INC.





INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





(UNAUDITED)





PageCondensed
      Consolidated Balance Sheets as of June 30, 2010 and December 31,
      2009
                F-2Condensed
      Consolidated Statements of Operations And Comprehensive Income for the
      Three and Six Months ended June 30, 2010 and 2009
                F-3Condensed
      Consolidated Statements of Cash Flows for the Six Months ended June 30,
      2010 and 2009
                F-4Condensed
      Consolidated Statement of Stockholders’ Equity for the Six Months ended
      June 30, 2010
                F-5Notes
      to Condensed Consolidated Financial Statements
                F-6
      – F-19


F-1


DÉCOR
PRODUCTS INTERNATIONAL, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS


AS
OF JUNE 30, 2010 AND DECEMBER 31, 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)





June 30, 2010
                        
                        
                        December 31, 2009(Unaudited)
                        
                        
                        (Audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                        
                        $
                        569,202
                        
                        
                        $
                        777,332Accounts
      receivable, trade
                        
                        
                        13,518,800
                        
                        
                        
                        13,203,074Inventories
                        
                        
                        858,361
                        
                        
                        
                        276,149Advances
      to suppliers
                        
                        
                        1,489,055
                        
                        
                        
                        1,320,231Deposits
      and prepayments
                        
                        
                        12,393
                        
                        
                        
                        335,221Total
      current assets
                        
                        
                        16,447,811
                        
                        
                        
                        15,912,007Non-current
      assets:Plant
      and equipment, net
                        
                        
                        9,243,633
                        
                        
                        
                        8,095,917Construction
      in progress
                        
                        
                        7,534,507
                        
                        
                        
                        6,041,515TOTAL
      ASSETS
                        
                        $
                        33,225,951
                        
                        
                        $
                        30,049,439LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable, trade
                        
                        $
                        1,034,487
                        
                        
                        $
                        665,542Short-term
      bank borrowings
                        
                        
                        -
                        
                        
                        
                        570,408Current
      portion of long-term bank borrowings
                        
                        
                        475,435
                        
                        
                        
                        1,118,791Convertible
      notes payable, net
                        
                        
                        1,718,572
                        
                        
                        
                        1,220,708Convertible
      promissory notes payable
                        
                        
                        405,000
                        
                        
                        
                        405,000Amount
      due to a related party
                        
                        
                        978,815
                        
                        
                        
                        1,328,126Income
      tax payable
                        
                        
                        673,439
                        
                        
                        
                        520,473Accrued
      liabilities and other payable
                        
                        
                        916,577
                        
                        
                        
                        695,711Total
      current liabilities
                        
                        
                        6,202,325
                        
                        
                        
                        6,524,759Long-term
      liabilities:Long-term
      bank borrowings
                        
                        
                        1,028,112
                        
                        
                        
                        71,046Total
      liabilities
                        
                        
                        7,230,437
                        
                        
                        
                        6,595,805Commitments
      and contingenciesStockholders’
      equity:Preferred
      stock, $0.001 par value; 1,666,667 shares authorized; none of shares
      issued and outstanding, respectively
                        
                        
                        -
                        
                        
                        
                        -Common
      stock, $0.001 par value; 33,333,333 shares authorized; 6,866,101 and
      6,866,101 shares issued and outstanding. respectively
                        
                        
                        6,866
                        
                        
                        
                        6,866Additional
      paid-in capital
                        
                        
                        2,126,130
                        
                        
                        
                        2,126,130Statutory
      reserve
                        
                        
                        795,215
                        
                        
                        
                        795,215Accumulated
      other comprehensive income
                        
                        
                        2,742,665
                        
                        
                        
                        2,586,657Retained
      earnings
                        
                        
                        20,324,638
                        
                        
                        
                        17,938,766Total
      stockholders’ equity
                        
                        
                        25,995,514
                        
                        
                        
                        23,453,634TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
                        $
                        33,225,951
                        
                        
                        $
                        30,049,439





See
accompanying notes to condensed consolidated financial
statements.


F-2


DÉCOR
PRODUCTS INTERNATIONAL, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





Three months ended June 30,
                    
                    
                    Six months ended June 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Revenues,
      net
                    
                    $
                    7,611,445
                    
                    
                    $
                    5,667,632
                    
                    
                    $
                    12,880,324
                    
                    
                    $
                    9,673,626Cost of revenue(inclusive of depreciation)
                    
                    
                    4,442,311
                    
                    
                    
                    3,048,275
                    
                    
                    
                    7,623,951
                    
                    
                    
                    5,214,530Gross
      profit
                    
                    
                    3,169,134
                    
                    
                    
                    2,619,357
                    
                    
                    
                    5,256,373
                    
                    
                    
                    4,459,096Operating
      expenses:Sales
      and marketing
                    
                    
                    321,815
                    
                    
                    
                    367,666
                    
                    
                    
                    606,029
                    
                    
                    
                    660,289Professional
      and consulting fee
                    
                    
                    90,350
                    
                    
                    
                    1,195,127
                    
                    
                    
                    174,178
                    
                    
                    
                    1,195,127General
      and administrative
                    
                    
                    177,131
                    
                    
                    
                    329,308
                    
                    
                    
                    370,143
                    
                    
                    
                    526,771Total
      operating expenses
                    
                    
                    589,296
                    
                    
                    
                    1,892,101
                    
                    
                    
                    1,150,350
                    
                    
                    
                    2,382,187Income
      from operations
                    
                    
                    2,579,838
                    
                    
                    
                    727,256
                    
                    
                    
                    4,106,023
                    
                    
                    
                    2,076,909Other
      income (expense):Interest
      income
                    
                    
                    734
                    
                    
                    
                    3,531
                    
                    
                    
                    1,405
                    
                    
                    
                    3,919Interest
      expense
                    
                    
                    (330,417
                    )
                    
                    
                    (47,256
                    )
                    
                    
                    (657,801
                    )
                    
                    
                    (89,322
                    )Income
      before income taxes
                    
                    
                    2,250,155
                    
                    
                    
                    683,531
                    
                    
                    
                    3,449,627
                    
                    
                    
                    1,991,506Income
      tax expense
                    
                    
                    (670,864
                    )
                    
                    
                    (454,601
                    )
                    
                    
                    (1,063,755
                    )
                    
                    
                    (781,595
                    )NET
      INCOME
                    
                    $
                    1,579,291
                    
                    
                    $
                    228,930
                    
                    
                    $
                    2,385,872
                    
                    
                    $
                    1,209,911Other
      comprehensive income:-
      Foreign currency translation gain
                    
                    
                    7,444
                    
                    
                    
                    1,127
                    
                    
                    
                    156,008
                    
                    
                    
                    33,071COMPREHENSIVE
      INCOME
                    
                    $
                    1,586,735
                    
                    
                    $
                    230,057
                    
                    
                    $
                    2,541,880
                    
                    
                    $
                    1,242,982Net
      income per share – Basic
                    
                    $
                    0.23
                    
                    
                    $
                    0.03
                    
                    
                    $
                    0.35
                    
                    
                    $
                    0.18Net
      income per share – Diluted
                    
                    $
                    0.20
                    
                    
                    $
                    0.03
                    
                    
                    $
                    0.30
                    
                    
                    $
                    0.18Weighted
      average common stock outstanding – Basic
                    
                    
                    6,866,101
                    
                    
                    
                    6,666,667
                    
                    
                    
                    6,866,101
                    
                    
                    
                    6,666,667Weighted
      average common stock outstanding – Diluted
                    
                    
                    7,914,435
                    
                    
                    
                    6,666,667
                    
                    
                    
                    7,914,435
                    
                    
                    
                    6,666,667





See
accompanying notes to condensed consolidated financial
statements.


F-3


DÉCOR
PRODUCTS INTERNATIONAL, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”))


(Unaudited)





Six months ended June 30,2010
                  
                  
                  2009Cash
      flows from operating activities:Net
      income
                  
                  $
                  2,385,872
                  
                  
                  $
                  1,209,911Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
                  
                  
                  625,493
                  
                  
                  
                  308,022Write-off
      of uncollectible receivables
                  
                  
                  -
                  
                  
                  
                  219,025Consulting
      service fee, non cash
                  
                  
                  -
                  
                  
                  
                  300,000Loss
      on disposal of plant and equipment
                  
                  
                  -
                  
                  
                  
                  3,213Interest
      expenses, non-cash
                  
                  
                  497,864
                  
                  
                  
                  -Changes
      in operating assets and liabilities:Accounts
      receivable, trade
                  
                  
                  (259,270
                  )
                  
                  
                  (857,866
                  )Inventories
                  
                  
                  (578,831
                  )
                  
                  
                  (376,548
                  )Advances
      to suppliers
                  
                  
                  158,646
                  
                  
                  
                  (438,389
                  )Deposits
      and prepayments
                  
                  
                  138,493
                  
                  
                  
                  29,226Accounts
      payable, trade
                  
                  
                  364,749
                  
                  
                  
                  602,783Promissory
      notes payable
                  
                  
                  -
                  
                  
                  
                  705,000Income
      tax payable
                  
                  
                  150,203
                  
                  
                  
                  6,085Accrued
      liabilities and other payable
                  
                  
                  402,415
                  
                  
                  
                  222,878Net
      cash provided by operating activities
                  
                  
                  3,885,634
                  
                  
                  
                  1,933,340Cash
      flows from investing activities:Payments
      on plant and equipment
                  
                  
                  (1,150,512
                  )
                  
                  
                  -Payments
      on construction in progress
                  
                  
                  (2,367,731
                  )
                  
                  
                  (1,501,383
                  )Net
      cash used in investing activities
                  
                  
                  (3,518,243
                  )
                  
                  
                  (1,501,383
                  )Cash
      flows from financing activities:Advances
      (to) from a related party
                  
                  
                  (314,906
                  )
                  
                  
                  541,570Proceeds
      from short-term bank borrowings
                  
                  
                  -
                  
                  
                  
                  774,488Proceeds
      from long-term bank borrowings
                  
                  
                  1,024,179
                  
                  
                  
                  -Payments
      on short-term bank borrowings
                  
                  
                  (570,614
                  )
                  
                  
                  -Payments
      on long-term bank borrowings
                  
                  
                  (716,647
                  )
                  
                  
                  (949,457
                  )Net
      cash (used in) provided by financing activities
                  
                  
                  (577,988
                  )
                  
                  
                  366,601Effect
      of exchange rate changes on cash and cash equivalents
                  
                  
                  2,467
                  
                  
                  
                  2,589NET
      CHANGE IN CASH AND CASH EQUIVALENTS
                  
                  
                  (208,130
                  )
                  
                  
                  801,147CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                  
                  
                  777,332
                  
                  
                  
                  268,698CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                  
                  $
                  569,202
                  
                  
                  
                  1,069,845SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for income taxes
                  
                  $
                  913,552
                  
                  
                  $
                  775,510Cash
      paid for interest
                  
                  $
                  159,937
                  
                  
                  $
                  89,322NON-CASH
      INVESTING AND FINANCING TRANSACTIONS:Transfer
      of construction in progress to plant and equipment
                  
                  $
                  905,730
                  
                  
                  $
                  686,810Transfer
      of advances to suppliers to plant and equipment
                  
                  $
                  243,102
                  
                  
                  $
                  -




See
accompanying notes to condensed consolidated financial
statements.


F-4


DÉCOR
PRODUCTS INTERNATIONAL, INC.


CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY


FOR
THE SIX MONTHS ENDED JUNE 30, 2010


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





Common
      stock
                                                
                                                
                                                Additional
                                                
                                                
                                                Statutory
                                                
                                                
                                                Accumulated
                                                  other
                                                  comprehensive
                                                
                                                
                                                Retained
                                                
                                                
                                                Total
                                                  stockholders’No.
      of shares
                                                
                                                
                                                Amount
                                                
                                                
                                                paid-in
      capital
                                                
                                                
                                                reserve
                                                
                                                
                                                income
                                                
                                                
                                                earnings
                                                
                                                
                                                equityBalance
      as of January 1, 2010, as restated
                                                
                                                
                                                6,866,101
                                                
                                                
                                                $
                                                6,866
                                                
                                                
                                                $
                                                2,126,130
                                                
                                                
                                                $
                                                795,215
                                                
                                                
                                                $
                                                2,586,657
                                                
                                                
                                                $
                                                17,938,766
                                                
                                                
                                                $
                                                23,453,634Net
      income for the period
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                2,385,872
                                                
                                                
                                                
                                                2,385,872Foreign
      currency translation adjustment
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                156,008
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                156,008Balance
      as of June 30, 2010
                                                
                                                
                                                6,866,101
                                                
                                                
                                                $
                                                6,866
                                                
                                                
                                                $
                                                2,126,130
                                                
                                                
                                                $
                                                795,215
                                                
                                                
                                                $
                                                2,742,665
                                                
                                                
                                                $
                                                20,324,638
                                                
                                                
                                                $
                                                25,995,514





See
accompanying notes to condensed consolidated financial
statements.


F-5


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





NOTE
1 – BASIS OF PRESENTATION





The
accompanying unaudited condensed consolidated financial statements have been
prepared by management in accordance with both accounting principles generally
accepted in the United States of America (“GAAP”) and the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures
normally included in audited financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information not
misleading.





In the
opinion of management, the consolidated balance sheet as of December 31, 2009
which has been derived from audited financial statements and these unaudited
condensed financial statements reflect all normal and recurring adjustments
considered necessary to state fairly the results for the periods presented. The
results for the period ended June 30, 2010 are not necessarily indicative of the
results to be expected for the entire fiscal year ending December 31, 2010 or
for any future period.





These
unaudited condensed consolidated financial statements and notes thereto should
be read in conjunction with the Management’s Discussion and the audited
financial statements and notes thereto included in the Annual Report on Form
10-K for the year ended December 31, 2009.





NOTE
2 – ORGANIZATION AND BUSINESS BACKGROUND





Décor
Products International, Inc. (“DCRD” or the “Company”) was organized under the
laws of the State of Florida on January 11, 2007 as Murals by Maurice, Inc. On
July 1, 2009, the Company changed to its current name.





On April
8, 2010, the Company approved the Plan of Merger for the purpose of
re-domiciling the Company to the State of Nevada and authorized a 1 for 3
reverse split of its common stock. All common stock and per share data for all
periods presented in these condensed consolidated financial statements have been
restated to give effect to the reverse stock split.





The
Company, through its subsidiaries, mainly engaged in the manufacture and sales
of furniture decorative paper and related products in the People’s Republic of
China (the “PRC”). All the customers are located in the PRC.





Description of
subsidiaries





Name
                              
                              Place of incorporation
                                and kind of
                                legal entity
                              
                              Principal activities
                                and place of operation
                              
                              Particulars of
                                issued/
                                registered share
                                capital
                              
                              Effective
                                interest
                                heldWide
      Broad Group Limited (“Wide Broad”)
                              
                              British
      Virgin Islands, a limited liability company
                              
                              Investment
      holding
                              
                              1,000
      issued shares of US$1 each
                              
                              
                              100
                              %Dongguan
      CHDITN Printing Co., Ltd. (“CHDITN”)
                              
                              The
      PRC, a limited liability company
                              
                              Sales
      and manufacture of furniture decorative paper and related products in the
      PRC
                              
                              RMB13,876,092
                              
                              
                              100
                              %





The
Company and its subsidiaries are hereinafter referred to as (the
"Company").


F-6


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





The
accompanying condensed consolidated financial statements reflect the application
of certain significant accounting policies as described in this note and
elsewhere in the accompanying condensed consolidated financial statements and
notes.





l
            Use
      of estimates





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





l
            Basis
      of consolidation





The
condensed consolidated financial statements include the financial statement of
DCRD and its subsidiaries. All significant inter-company balances and
transactions within the Company have been eliminated upon
consolidation.





l
              Cash
      and cash equivalents





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





l
            Accounts
      receivable





Accounts
receivable are recorded at the invoiced amount and do not bear interest, which
are due within contractual payment terms, generally 90 to 180 days. Credit is
extended based on evaluation of a customer's financial condition. Accounts
receivable outstanding longer than the contractual payment terms are considered
past due. Past due balances over 180 days and over a specified amount are
reviewed individually for collectibility. Management reviews the adequacy of the
allowance for doubtful accounts on an ongoing basis, using historical collection
trends and aging of receivables. Management also periodically evaluates
individual customer’s financial condition, credit history and the current
economic conditions to make adjustments in the allowance when it is considered
necessary. When receivable balances are determined to be uncollectible, these
balances are written off. The Company does not have any off-balance-sheet credit
exposure related to its customers.





As of
June 30, 2010, the Company did not record an allowance for doubtful
accounts.





l
            Inventories





Inventories
consist of raw papers, painting materials and components used in the manufacture
of the Company’s products and the related parts and supplies. Inventories are
stated at the lower of cost or net realizable value, with cost being determined
on a weighted average basis. Costs include purchased cost of papers and painting
inks, direct labor and manufacturing overhead costs. The Company periodically
reviews historical sales activity to determine excess, slow moving items and
potentially obsolete items and also evaluates the impact of any anticipated
changes in future demand. The Company provides inventory allowances based on
excess and obsolete inventories determined principally by customer
demand.





As of
June 30, 2010, the Company did not record an allowance for obsolete inventories,
nor have there been any write-offs.


F-7


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





l
            Advances
      to suppliers





The
Company makes advances to certain vendors for purchase of its inventory items or
material. The advances to suppliers are interest free and unsecured. Advances to
suppliers are recorded when payment is made by the Company and relieved against
inventory when goods are received. All inventory items or raw materials relating
to these advances are subsequently made delivery to the Company.





l
            Plant
      and equipment





Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational and after taking into account their estimated residual
values:





Depreciable life
                
                Residual valuePlant
      and machinery
                3-10
      years
                
                
                3
                %Leasehold
      improvement
                10
      years
                
                
                0
                %Motor
      vehicles
                3-5
      years
                
                
                3
                %Office
      equipment
                3-5
      years
                
                
                3
                %





Expenditure
for repairs and maintenance is expensed as incurred. When assets have retired or
sold, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the results of
operations.





Depreciation
expense for the three months ended June 30, 2010 and 2009 were $331,332 and
$156,360, which included $369,494 and $153,951 in cost of revenue,
respectively.





Depreciation
expense for the six months ended June 30, 2010 and 2009 were $625,493 and
$308,022, which included $619,816 and $302,490 in cost of revenue,
respectively.





As of
June 30, 2010, certain plant and machinery with the aggregate net book value of
$1,003,484 were pledged as securities in connection with long-term bank
borrowings.





Approximately
$718,430 (equivalent to RMB 4,891,504) of plant and machinery became fully
depreciated as of June 30, 2010.





l
            Construction
      in progress





Construction
in progress is stated at cost and represents the cost of acquiring contracts to
build a new manufacturing facility for laminated board with an area of 100,000
square feet, adjacent feet, adjacent to the existing facility. Total estimated
construction costs are approximately $30 million (equivalent to RMB 205
million). The construction is scheduled to be fully completed in the first
quarter of 2011. No provision for depreciation is made on construction in
progress until such time as the relevant assets are completed and put into
operational use. No capitalized interest was incurred during the period of
construction.





l
            Valuation
      of long-lived assets





In
accordance with the provisions of the provision of Accounting Standards
Codification (“ASC”) Topic 360-10-5, “Impairment or Disposal of Long-Lived
Assets”, all long-lived assets such as plant and equipment and
construction in progress held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is evaluated by a comparison of the carrying amount of assets
to estimated discounted net cash flows expected to be generated by the assets.
If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amounts of the assets exceed the
fair value of the assets. There has been no impairment as of June 30,
2010.


F-8


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





l
            Revenue
      recognition





In
accordance with the ASC Topic 605, “Revenue Recognition”, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price
is fixed or determinable and collectibility is reasonably assured.





The
Company derives revenues from the sales of furniture decorative paper and
related products. The Company recognizes its revenues net of value-added taxes
("VAT"). The Company is subject to VAT which is levied on the majority of the
products at the standard rate of 17% on the invoiced value of sales. Output VAT
is borne by customers in addition to the invoiced value of sales and input VAT
is borne by the Company in addition to the invoiced value of purchases to the
extent not refunded for export sales. The Company experienced no material
product returns and recorded no reserve for sales returns for the six months
ended June 30, 2010 and 2009.





Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.





l
            Comprehensive
      income





ASC Topic
220,“Comprehensive
Income”, establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income as defined
includes all changes in equity during a period from non-owner sources.
Accumulated other comprehensive income, as presented in the accompanying
condensed consolidated statement of stockholders’ equity, consists of changes in
unrealized gains and losses on foreign currency translation. This comprehensive
income is not included in the computation of income tax expense or
benefit.





l
            Income
      taxes





The
provision for income taxes is determined in accordance with the provisions of
ASC Topic 740, “Income
Taxes” (“ASC 740”). Under this method, 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 basis. Deferred tax assets and
liabilities are measured using enacted income tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Any effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.





ASC 740
prescribes a comprehensive model for how companies should recognize, measure,
present, and disclose in their financial statements uncertain tax positions
taken or expected to be taken on a tax return. Under ASC 740, tax positions must
initially be recognized in the financial statements when it is more likely than
not the position will be sustained upon examination by the tax authorities. Such
tax positions must initially and subsequently be measured as the largest amount
of tax benefit that has a greater than 50% likelihood of being realized upon
ultimate settlement with the tax authority assuming full knowledge of the
position and relevant facts.





For the
six months ended June 30, 2010 and 2009, the Company did not have any interest
and penalties associated with tax positions. As of June 30, 2010, the Company
did not have any significant unrecognized uncertain tax positions.





The
Company conducts major businesses in the PRC and is subject to tax in this
jurisdiction. As a result of its business activities, the Company files tax
returns that are subject to examination by the foreign tax
authority.


F-9


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





l
            Net
      income per share





The
Company calculates net income per share in accordance with ASC Topic 260,“Earnings per Share.” Basic
income per share is computed by dividing the net income by the weighted-average
number of common stock outstanding during the period. Diluted income per share
is computed similar to basic income per share except that the denominator is
increased to include the number of additional common stock that would have been
outstanding if the potential common stock equivalents had been issued and if the
additional common stock were dilutive.





l
            Foreign
      currencies translation





Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the statement of operations.





The
reporting currency of the Company is the United States Dollars ("US$"). The
Company's subsidiary in the PRC maintain its books and records in its local
currency, Renminbi Yuan ("RMB"), which is functional currency as being the
primary currency of the economic environment in which the entity
operates.





In
general, for consolidation purposes, assets and liabilities of its subsidiaries
whose functional currency is not US$ are translated into US$, in accordance with
ASC Topic 830-30, “Translation
of Financial Statement”, using the exchange rate on
the balance sheet date. Revenues and expenses are translated at average rates
prevailing during the period. The gains and losses resulting from translation of
financial statements of foreign subsidiaries are recorded as a separate
component of accumulated other comprehensive income within the condensed
statement of stockholders’ equity.





Translation
of amounts from RMB into US$1 has been made at the following exchange rates for
the respective period:





June 30, 2010
                
                
                June 30, 2009Period-end
      RMB:US$1 exchange rate
                
                
                6.8086
                
                
                
                6.8448Period
      average RMB:US$1 exchange rate
                
                
                6.8348
                
                
                
                6.8432





l
            Related
      parties





Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operational decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.





l
            Segment
      reporting





ASC Topic
280, “Segment
Reporting” establishes standards for reporting information about
operating segments on a basis consistent with the Company’s internal
organization structure as well as information about geographical areas, business
segments and major customers in financial statements. The Company operates in
one reportable operating segment in the PRC.


F-10


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





l
              Fair
      value measurement





ASC Topic
820-10, “Fair Value
Measurements and Disclosures” ("ASC 820-10") establishes a new framework
for measuring fair value and expands related disclosures. Broadly, ASC 820-10
framework requires fair value to be determined based on the exchange price that
would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants. ASC 820-10 establishes a
three-level valuation hierarchy based upon observable and non-observable inputs.
These tiers include: Level 1, defined as observable inputs such as quoted prices
in active markets; Level 2, defined as inputs other than quoted prices in active
markets that are either directly or indirectly observable; and Level 3, defined
as unobservable inputs in which little or no market data exists, therefore
requiring an entity to develop its own assumptions.





For
financial assets and liabilities, fair value is the price the Company would
receive to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets or liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.





l
                Financial
      instruments





Cash and
cash equivalents, accounts receivable, advances to suppliers, deposits and
prepayments, accounts payable, amount due to a related party, income tax
payable, accrued liabilities and other payable are carried at cost which
approximates fair value. The estimated fair value of bank borrowings,
convertible notes payable and promissory notes payable was approximately $3.6
million as of June 30, 2010, based on current market prices or interest rates.
Any changes in fair value of assets or liabilities carried at fair value are
recognized in other comprehensive income for each period.





l
            Recent
      accounting pronouncements





The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and does not believe the future adoption of any such
pronouncements may be expected to cause a material impact on its financial
condition or the results of its operations.





In
September 2009, the Financial Accounting Standard Board (“FASB”) issued certain
amendments as codified in ASC Topic 605-25, “Revenue Recognition;
Multiple-Element Arrangements.”  These amendments provide
clarification on whether multiple deliverables exist, how the arrangement should
be separated, and the consideration allocated. An entity is required to allocate
revenue in an arrangement using estimated selling prices of deliverables in the
absence of vendor-specific objective evidence or third-party evidence of selling
price. These amendments also eliminate the use of the residual method and
require an entity to allocate revenue using the relative selling price method.
The amendments significantly expand the disclosure requirements for
multiple-deliverable revenue arrangements. These provisions are to be applied on
a prospective basis for revenue arrangements entered into or materially modified
in fiscal years beginning on or after June 15, 2010, with earlier application
permitted. The Company will adopt the provisions of these amendments in its
fiscal year 2011 and is currently evaluating the impact of these amendments to
its consolidated financial statements.





In March
2010, the FASB issued Accounting Standards Update (“ASU”) 2010-11, “Derivatives and Hedging (Topic 815)
— Scope Exception Related to Embedded Credit Derivatives.” ASU 2010-11
clarifies that the only form of an embedded credit derivative that is exempt
from embedded derivative bifurcation requirements are those that relate to the
subordination of one financial instrument to another. As a result, entities that
have contracts containing an embedded credit derivative feature in a form other
than such subordination may need to separately account for the embedded credit
derivative feature. The provisions of ASU 2010-11 will be effective on July 1,
2010 and are not expected to have a significant impact on the Company’s
consolidated financial statements.


F-11


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





In
April 2010, the FASB issued ASU 2010-13, Compensation–Stock Compensation (Topic 718):
Effect of Denominating the Exercise Price of a Share-Based Payment Award in the
Currency of the Market in Which the Underlying Equity Security Trades. ASU 2010-13 provides
guidance on the classification of a share-based payment award as either equity
or a liability. A share-based payment that contains a condition that is not a
market, performance, or service condition is required to be classified as a
liability. ASU 2010-13 is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2010 and is not expected
to have a significant impact on the Company’s financial statements.





In May
2010, the FASB issued ASU 2010-19, Foreign Currency (Topic 830):
Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The
amendments in ASU 2010-19 are effective as of the announcement date of March 18,
2010. The Company does not expect the provisions of ASU 2010-19 to have a
material effect on the financial position, results of operations or cash flows
of the Company.





In July
2010, the FASB issued new accounting guidance that will require additional
disclosures about the credit quality of loans, lease receivables and other
long-term receivables and the related allowance for credit losses. Certain
additional disclosures in this new accounting guidance will be effective for the
Company on December 31, 2010 with certain other additional disclosures that will
be effective on March 31, 2011. The Company does not expect the adoption of this
new accounting guidance to have a material impact on its consolidated financial
statements.





NOTE
4 – ACCOUNTS RECEIVABLE





The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. Management
periodically evaluates individual customer receivables and considers a
customer’s financial condition, credit history and the current economic
conditions. For the six months ended June 30, 2010 and 2009, the Company
recorded no allowance for doubtful accounts.





Up to
July 31, 2010, the Company has subsequently recovered from approximately 21% of
the accounts receivable as of June 30, 2010.





NOTE
5 – INVENTORIES





Inventories
consist of the following:





June 30, 2010
                
                
                December 31, 2009(Unaudited)
                
                
                (Audited)Raw
      materials
                
                $
                405,603
                
                
                $
                168,909Work-in-process
                
                
                19,904
                
                
                
                26,553Finished
      goods
                
                
                420,550
                
                
                
                61,082Packaging
      materials and supplies
                
                
                12,304
                
                
                
                19,605$
                858,361
                
                
                $
                276,149





For the
six months ended June 30, 2010 and 2009, the Company recorded no allowance for
slow moving and obsolete inventories.


F-12


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





NOTE
6 – CONVERTIBLE NOTES PAYABLE





On
November 10, 2009, the Company, through its subsidiary, CHDITN and Zhuang,
Jinghua (“Mr. Zhuang”) entered into a Subsidiary Loan Agreement (the “Loan
Agreement”). Pursuant to the terms of the Loan Agreement, Mr. Zhuang advanced
$340,000 (equal to RMB 2,321,350) to CHDITN and the fund was used to set up new
printing production lines. The Company agreed to convert the loan amount into
common stock of the Company at a fixed conversion price of $3 per share, equal
to 113,334 shares (post reverse split) of its common stock, any time before the
maturity day upon the written notice from Mr. Zhuang. Interest was carried at
the rate of 8% per annum, quarterly payable, with a maturity date of November
10, 2010.





Concurrently,
on November 10, 2009, the Company, through its subsidiary, CHDITN and Shi Quan
Ling (“Mr. Shi”) entered into a Subsidiary Loan Agreement (the “Loan
Agreement”). Pursuant to the terms of the Loan Agreement, Mr. Shi advanced
$2,000,000 (equal to RMB 6,827,500) to CHDITN and the fund was used to set up
new printing production lines. The Company agreed to convert the loan amount
into common stock of the Company at a fixed conversion price of $3 per share,
equal to 666,667 shares (post reverse split) of its common stock, any time
before the maturity day upon the written notice of Mr. Shi. Interest was carried
at a rate of 8% per annum, quarterly payable, with a maturity date of November
10, 2010.





In
connection with the Loan Agreements, the Company also agreed to issue warrants
to Mr. Zhuang and Mr. Shi, for consideration of $10, respectively, as incentive
for Mr. Zhuang and Mr. Shi to lend money to the Company. The warrants entitled
Mr. Zhuang and Mr. Shi to purchase 113,334 and 666,667 shares (post reverse
split) of its common stock from the Company respectively at any time or times on
or after November 10, 2009 with the expiry of November 10, 2014 at the exercise
price per share of $3 or as subsequently adjusted under the warrant
agreements.





In
addition, the President of the Company, Mr. Liu Rui Sheng (“Mr. Liu”), entered
into a Pledge Agreement with Mr. Zhuang, Mr. Shi and Greentree Financial Group,
Inc. as Escrow Agent. Pursuant to the Pledge Agreement, Mr. Liu agreed to
irrevocably pledge to Mr. Zhuang and Mr. Shi with 4,510,667 shares (post reverse
split) of his own common stock as collateral for the Loan Agreements between
CHDITN and Mr. Zhuang and Mr. Shi.





On
December 17, 2009, the Company received net aggregate proceeds of $2,081,000,
net of expenses and deductions of prepaid interests, from Mr. Shi and Mr.
Zhuang.





The
Company determined that the convertible notes are recorded in accordance with
ASC Topic 470-20, “Debt with
conversion and other options”, the warrants and related convertible notes
should be accounted for as two separate instruments (equity and debt
instruments). The accounting for these instruments reflects the notion that the
consideration received upon issuance must be allocated between equity and debt
components. Proceeds from the sale of a debt instrument with stock purchase
warrants are allocated to the two elements, based on the relative fair values of
the debt instrument without the warrants and of the warrants themselves at time
of issuance. The portion of the proceeds allocated to the warrants is accounted
for as additional paid-in capital. The remainder of the proceeds is allocated to
the debt instrument portion of the transaction as debt discount.





June 30, 2010
                
                
                December 31, 2009(Unaudited)
                
                
                (Audited)Notional
      amount of the convertible notes payable to Mr. Zhuang and Mr. Shi, net of
      expenses
                
                $
                2,081,000
                
                
                $
                2,081,000Less:
      debt discount, unamortized
                
                
                (362,428
                )
                
                
                (860,292
                )Convertible
      notes payable, net
                
                $
                1,718,572
                
                
                $
                1,220,708


F-13


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





The
convertible notes are discounted for the fair value of warrants on the grant
date using Black-Scholes Option Pricing Model under ASC Topic 718, with the
following assumptions. The discount is being amortized over the life of the debt
using the effective interest method. For the six months ended June 30, 2010, the
Company recognized $497,864 as amortization of debt discount and recorded as
interest expense in the statement of operations.





Expected
      life (in years)
                
                
                5Volatility
                
                
                159
                %Risk
      free interest rate
                
                
                0.31
                %Dividend
      yield
                
                
                0
                %Weighted
      average fair value
                
                
                0.93





NOTE
7 – AMOUNT DUE TO A RELATED PARTY





As of
June 30, 2010, amount due to a related party of $978,815 represented temporary
advances made by Mr. Liu, the director of the Company, which was unsecured,
interest-free with no fixed repayment term.





NOTE
8 – ACCRUED LIABILITIES AND OTHER PAYABLE





Accrued
liabilities and other payable consist of the following:





June 30, 2010
                
                
                December 31, 2009(Unaudited)
                
                
                (Audited)VAT
      payable
                
                $
                102,769
                
                
                $
                -Accrued
      payroll and benefit costs
                
                
                486,511
                
                
                
                453,629Accrued
      professional and consulting fees
                
                
                324,373
                
                
                
                239,132Accrued
      rental expenses
                
                
                -
                
                
                
                -Other
      payables
                
                
                2,924
                
                
                
                2,950$
                916,577
                
                
                $
                695,711


F-14


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





NOTE
9 – LONG-TERM BANK BORROWINGS





Long-term
bank borrowings were as follows:





June 30, 2010
                
                
                December 31, 2009(Unaudited)
                
                
                (Audited)Bank
      loans, payable to financial institutions in the PRC:Equivalent
      to RMB0 (2009: RMB2,240,000) with effective interest rate ranging from
      5.67% to 7.84% per annum, payable monthly, due September 20,
      2010
                (a)
                
                $
                -
                
                
                $
                327,620Equivalent
      to RMB7,000,000 with effective interest rate of 4.8% per annum, payable
      monthly, due March 8, 2015
                (a)
                
                
                1,028,112
                
                
                
                -Equivalent
      to RMB2,029,973 (2009: RMB3,696,756) with effective interest rate ranging
      from 7.02% to 9.83% per annum, with monthly principal and interest
      payments of $43,231, due January 16, 2011
                (b)
                
                
                298,148
                
                
                
                540,683Equivalent
      to RMB1,207,080 (2009: RMB2,198,393) with effective interest rate ranging
      from 7.02% to 9.83% per annum, with monthly principal and interest
      payments of $25,712, due January 17, 2011
                (b)
                
                
                177,287
                
                
                
                321,534Total
      bank borrowings
                
                
                
                1,503,547
                
                
                
                1,189,837Less:
      current portion
                
                
                
                (475,435
                )
                
                
                (1,118,791
                )Long-term
      bank borrowings, net of current portion
                
                
                $
                1,028,112
                
                
                $
                71,046





As of
June 30, 2010, the minimum future payments of the aggregate bank borrowings in
the next five years are as follows:





Period
      ending June 30:2011
                
                $
                475,4352012
                
                
                80,1462013
                
                
                330,3572014
                
                
                346,5672015
                
                
                271,042Total
      borrowings
                
                $
                1,503,547





(a)
            These
      borrowings were guaranteed by Mr. Liu, the director of the Company and
      collateralized by the real properties held by the director of the Company
      situated in the PRC.





(b)
            These
      borrowings were collateralized by certain plant and machinery with an
      aggregate net book value of $1,003,484 as of June 30,
  2010.


F-15


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





NOTE
10 – STOCKHOLDERS’ EQUITY





Warrants
outstanding as of June 30, 2010 are summarized as follows (warrants were not
issued to employees):





Warrants outstandingNumber of
                  warrants
                
                
                Exercise price
                  range per
                  share
                
                
                Weighted
                  average
                  exercise price
                  per share
                
                
                Weighted
                  average grant-date fair value
                  per shareWarrants
      granted for services
                
                
                400,000
                
                
                $
                1.40
                
                
                $
                1.40
                
                
                $
                0.85Warrants
      granted for convertible notes payable
                
                
                2,340,000
                
                
                
                1.00
                
                
                
                1.00
                
                
                
                0.93Warrants
      granted for convertible promissory notes payable
                
                
                405,000
                
                
                
                1.00
                
                
                
                1.00
                
                
                
                0.93Balance
      as of December 31, 2009 and June 30, 2010
                
                
                3,145,000
                
                
                $
                1 –
      1.4
                
                
                $
                1.05
                
                
                $
                0.92





For the
six months ended June 30, 2010, there was no movement in the warrants
outstanding.





NOTE
11 – INCOME TAXES





For the
six months ended June 30, 2010 and 2009, the local (United States) and foreign
components of income (loss) before income taxes were comprised of the
following:





Six months endedJune 30,2010
                
                
                2009Tax
      jurisdictions from:-
      Local
                
                $
                (516,864
                )
                
                $
                --
      Foreign
                
                
                3,966,491
                
                
                
                1,991,506Income
      before income taxes
                
                $
                3,449,627
                
                
                $
                1,991,506





The
effective tax rate in the periods presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. The Company has subsidiaries that operate in various countries: United
States, BVI and the PRC that are subject to taxes in the jurisdictions in which
they operate, as follows:





United
States of America





The
Company is registered in the State of Nevada and is subject to the tax laws of
the United States of America.





British
Virgin Island





Under the
current BVI law, Wide Broad is not subject to tax on its income or profits. For
the six months ended June 30, 2010 and 2009, Wide Broad suffered from an
operating loss of $171,856 and $1,170,115, respectively.





The
PRC





The
Company’s operating subsidiary, CHDITN is subject to the Corporate Income Tax
Law of the People’s Republic of China (the “New CIT Law”) at a unified income
tax rate of 25%. A reconciliation of income tax rate to the effective income tax
rate for the three and six months ended June 30, 2010 and 2009 is as
follows:





Six months endedJune 30,2010
                      
                      
                      2009Income
      before income taxes from the PRC
                      
                      $
                      4,138,347
                      
                      
                      $
                      3,161,621Statutory
      income tax rate
                      
                      
                      25
                      %
                      
                      
                      25
                      %Income
      tax expense at statutory tax rate
                      
                      
                      1,034,587
                      
                      
                      
                      790,405Tax
      effect of capitalized items
                      
                      
                      -
                      
                      
                      
                      (8,810
                      )Tax
      effect of non-deductible items
                      
                      
                      29,168
                      
                      
                      
                      -Income
      tax expense
                      
                      $
                      1,063,755
                      
                      
                      $
                      781,595


F-16


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





No
provision for deferred tax assets or liabilities has been made, since the
Company has no material temporary difference between the tax bases of assets and
liabilities and their carrying amounts.





NOTE
12 – CONCENTRATIONS OF RISK





The
Company is exposed to the following concentrations of risk:





(a)         Major
customers





For the
three and six months ended June 30, 2010 and 2009, there is no customer who
accounts for 10% or more of the Company’s revenues.





(b)         Major
vendors





For the
three and six months ended June 30, 2010 and 2009, the vendor who accounts for
10% or more of the Company’s purchases and its outstanding balance at period-end
date, are presented as follows:





Three months endedJune30,2010
                        
                        
                        June 30, 2010Vendor
                        
                        Purchases
                        
                        
                        Percentage
                          of purchases
                        
                        
                        Accounts
                          payable, tradeVendor
      A
                        
                        $
                        930,245
                        
                        
                        
                        23
                        %
                        
                        $
                        -Vendor
      B
                        
                        
                        634,481
                        
                        
                        
                        16
                        %
                        
                        
                        -Vendor
      C
                        
                        
                        518,203
                        
                        
                        
                        13
                        %
                        
                        
                        294,746Vendor
      D
                        
                        
                        395,369
                        
                        
                        
                        10
                        %
                        
                        
                        -Total:
                        
                        $
                        2,478,298
                        
                        
                        
                        62
                        %
                        
                        $
                        294,746





Six months endedJune 30, 2010
                        
                        
                        June 30, 2010Vendor
                        
                        Purchases
                        
                        
                        Percentage
                          of purchases
                        
                        
                        Accounts
                          payable, tradeVendor
      A
                        
                        $
                        1,499,754
                        
                        
                        
                        22
                        %
                        
                        $
                        -Vendor
      B
                        
                        
                        1,090,414
                        
                        
                        
                        16
                        %
                        
                        
                        -Vendor
      C
                        
                        
                        805,382
                        
                        
                        
                        12
                        %
                        
                        
                        294,746Total:
                        
                        $
                        3,395,550
                        
                        
                        
                        50
                        %
                        
                        $
                        294,746


F-17





Three months endedJune30,2009
                        
                        
                        June 30, 2009Vendor
                        
                        Purchases
                        
                        
                        Percentage
                          of purchases
                        
                        
                        Accounts
                          payable, tradeVendor
      A
                        
                        $
                        511,060
                        
                        
                        
                        18
                        %
                        
                        $
                        390,808Vendor
      B
                        
                        
                        601,795
                        
                        
                        
                        21
                        %
                        
                        
                        -Vendor
      E
                        
                        
                        425,259
                        
                        
                        
                        15
                        %
                        
                        
                        260,373Vendor
      F
                        
                        
                        325,102
                        
                        
                        
                        12
                        %
                        
                        
                        160,984Total:
                        
                        $
                        1,863,216
                        
                        
                        
                        66
                        %
                        
                        $
                        812,165





Six months endedJune30,2009
                        
                        
                        June 30, 2009Vendor
                        
                        Purchases
                        
                        
                        Percentage
                          of purchases
                        
                        
                        Accounts
                          payable, tradeVendor
      A
                        
                        $
                        787,118
                        
                        
                        
                        17
                        %
                        
                        $
                        390,808Vendor
      B
                        
                        
                        1,113,261
                        
                        
                        
                        23
                        %
                        
                        
                        -Vendor
      E
                        
                        
                        679,765
                        
                        
                        
                        14
                        %
                        
                        
                        260,373Vendor
      F
                        
                        
                        542,159
                        
                        
                        
                        11
                        %
                        
                        
                        160,984Total:
                        
                        $
                        3,122,303
                        
                        
                        
                        65
                        %
                        
                        $
                        812,165





(c)         Credit
risk





Financial
instruments that are potentially subject to credit risk consist principally of
accounts receivable. The Company believes the concentration of credit risk in
its accounts and retention receivables is substantially mitigated by its ongoing
credit evaluation process and relatively short collection terms. The Company
does not generally require collateral from customers. Credit is extended based
on evaluation of a customer's financial condition. The Company evaluates the
need for an allowance for doubtful accounts based upon factors surrounding the
credit risk of specific customers, historical trends and other
information.





(d)         Exchange
rate risk





The
reporting currency of the Company is US$, to date the majority of the revenues
and costs are denominated in RMB and a significant portion of the assets and
liabilities are denominated in RMB. As a result, the Company is exposed to
foreign exchange risk as its revenues and results of operations may be affected
by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates
against US$, the value of RMB revenues and assets as expressed in US$ financial
statements will decline. The Company does not hold any derivative or other
financial instruments that expose to substantial market risk.





(e)         Interest
rate risk





As the
Company has no significant interest-bearing assets, the Company’s income and
operating cash flows are substantially independent of changes in market interest
rates.





The
Company’s interest-rate risk arises from bank borrowings. Borrowings issued at
variable rates expose the Company to cash flow interest-rate risk. Borrowings
issued at fixed rates expose the Company to fair value interest-rate risk.
Company policy is to maintain approximately all of its borrowings in fixed rate
instruments. At the period-end, the bank borrowings were both at fixed and
floating rates.


F-18


DÉCOR
PRODUCTS INTERNATIONAL, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009


(Currency
expressed in United States Dollars (“US$”), except for number of
shares)


(Unaudited)





(f)         Economic
and political risks





The
Company's operations are conducted in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.





The
Company's operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Company's results may be adversely affected by changes in the political and
social conditions in the PRC, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation.





NOTE
13 – COMMITMENTS AND CONTINGENCIES





(a)
            Operating
      lease commitments





The
Company’s subsidiary in the PRC is committed under several non-cancelable
operating leases of office premises and manufacturing facility with a term of 10
years with fixed monthly rentals, due through December 31, 2020. Total rent
expenses for the period ended June 30, 2010 and 2009 was $105,728 and $98,874,
respectively.





As of
June 30, 2010, future minimum rental payments due under non-cancelable operating
leases in the next five years and thereafter are as follows:





Period
      ending June 30:2011
                
                $
                202,6852012
                
                
                211,4972013
                
                
                211,4972014
                
                
                224,7162015
                
                
                237,934Thereafter
                
                
                924,419Total
                
                $
                2,012,748





(b)
            Consultancy
      fee commitment





The
Company is committed to pay a monthly fee to Interactive Investors, Inc. for a
one-year service of management consulting, business advisory, shareholder
information and public relations, expiring on August 31, 2010. As of June 30,
2010, the Company has future minimum contingent payment of $41,600 in the next
12 months.





(c)
            Capital
      commitment





The
Company is committed under a number of agreements with an independent
contractors or suppliers in relation to the construction of the new
manufacturing facility for business expansion. The construction is expected to
be completed in the first quarter of 2011. Total estimated construction
costs are approximately $30 million (equivalent to RMB 205 million). As of June
30, 2010, the Company paid $7,534,507 to the third party equipment vendors and
contractors and was recorded as construction in progress. The aggregate
contingent payments related to the third party contractors and the addition of
new plants and equipments are approximately $3.3 million.


F-19


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





FORWARD
LOOKING STATEMENTS





This
Quarterly Report on Form 10-Q contains forward-looking statements regarding
future events and our future results that are subject to the safe harbors
created under the Securities Act of 1933 and the Securities Exchange Act of
1934. Forward-looking statements are based on current expectations, estimates,
forecasts and projections about us, our future performance and the industries in
which we operate as well as on our management’s assumptions and beliefs.
Statements that contain words like “believe”, “expect”, “anticipate”,
“optimistic”, “intend”, “will”, or variations of such words and similar
expressions are forward-looking statements. In addition, any statements that
refer to trends in our businesses, future financial results, and our liquidity
and business plans are forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which are only
predictions and are subject to risks and uncertainties, including those
discussed in “Part II, Item 1A-Risk Factors” of this Form 10-Q. Therefore,
actual results may differ materially and adversely from those expressed in any
forward-looking statements. We do not guarantee future results, and actual
results, developments and business decisions may differ from those contemplated
by those forward-looking statements. We undertake no obligation to update these
forward-looking statements to reflect events or circumstances occurring after
the date of this Form 10-Q.





OVERVIEW





We
develop and manufacture décor paper through our wholly owned subsidiary Wide
Broad Group Limited (“Wide Broad”), which is a holding company that wholly owns
Dongguan CHDITN Printing Company Limited (“CHDITN”), a producer of furniture
decorative paper in Dongguan Province in the central region of the People’s
Republic of China (“PRC” or “China”). As used herein the terms “Our”, "We", the
"Company", "DCRD", the "Registrant," or the "Issuer" refers to Décor Products
International, Inc., its subsidiaries and predecessors, unless indicated
otherwise. Our focus is to develop, manufacture and sell décor paper products
including polyurethane paper, polyester paper and melamine paper. Our business
is based in China and CHDITN has an estimated 7% market share of the décor paper
market in China.





Additionally,
we believe we can diversify and introduce laminated boards to our existing
customers. We have commenced development of a production line for laminated
boards, which we anticipate will be completed in the first quarter of
2011.





In July
2009, we executed a Plan of Exchange (the “POE”) among the shareholders of DCRD,
Wide Broad, the shareholders of Wide Broad and CHDITN. Pursuant to the POE, DCRD
acquired one hundred percent (100%) of the issued and outstanding share capital
of Wide Broad from the Wide Broad Shareholders in an exchange for a new issuance
20,000,000 shares of common stock of DCRD and the simultaneous retirement to
treasury of 7,450,000 shares of common stock (the “Control Shares”) held in the
name of Maurice Katz (our former President). Also pursuant to the POE, DCRD
affected a 1 for 4 reverse split of the Common Stock of DCRD.





CHDITN is
currently a wholly-owned subsidiary of Wide Broad and after the post share
exchange, CHDITN became a wholly-owned indirect subsidiary of
DCRD.


20


On April
8, 2010, our Board of Directors and consenting shareholder holding a majority of
issued and outstanding common stock approved our reincorporation from Florida to
Nevada by means of a merger between us and a newly formed wholly-owned Nevada
subsidiary, in which the subsidiary was the surviving entity.  Our
reincorporation became effective on May 25, 2010. Additionally, a reverse stock
split occurred simultaneously with the Reincorporation, which featured an
exchange ratio in which every three (3) shares of Florida Corporation common
stock were converted into one (1) share of Nevada Corporation common
stock.





Unless
otherwise indicated, all information in this Form 10-Q has been adjusted to
reflect a 1-for-3 reverse split of our common stock..





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





Management’s
Discussion and Analysis of Financial Condition and Results of Operations is
based upon our Condensed Consolidated Financial Statements, which we have
prepared in accordance with U.S. generally accepted accounting principles. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenue
and expenses, and related disclosure of contingent assets and liabilities.
Estimates are based on historical experience, knowledge of economic and market
factors and various other assumptions that management believes to be reasonable
under the circumstances. Actual results may differ from those
estimates.





On a
regular basis we evaluate our estimates, assumptions and judgments and make
changes accordingly. An accounting policy is deemed to be critical if it
requires an accounting estimate to be made based on assumptions about matters
that are highly uncertain at the time the estimate is made, if different
estimates reasonably could have been used, or if changes in the estimate that
are reasonably likely to occur could materially impact the financial statements.
We believe that the estimates, assumptions and judgments involved in revenue
recognition, receivables and allowances for doubtful accounts, accruals,
stock-based compensation, , inventories, deferred costs, income taxes,
impairment of long-lived assets, and valuation and impairment of investments
have the greatest potential impact on our condensed consolidated financial
statements, so we consider these to be our critical accounting
policies.





RECENT
ACCOUNTING PRONOUNCEMENTS





For a
description of the new accounting standards that affect us, see Note 3 of notes
to our condensed consolidated financial statements included under Part I, Item 1
of this Quarterly Report on Form 10-Q.





RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2010 AND 2009





For the three months ended June 30,
                        
                        
                        For the six months ended June 30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Revenue,
      net
                        
                        $
                        7,611,445
                        
                        
                        $
                        5,667,632
                        
                        
                        $
                        12,880,324
                        
                        
                        $
                        9,673,626Cost
      of Revenue:
                        
                        $
                        4,442,311
                        
                        
                        $
                        3,048,275
                        
                        
                        $
                        7,623,951
                        
                        
                        $
                        5,214,530Operating
      Expenses:
                        
                        $
                        589,296
                        
                        
                        $
                        1,892,101
                        
                        
                        $
                        1,150,350
                        
                        
                        $
                        2,382,187Income
      from Operations:
                        
                        $
                        2,579,838
                        
                        
                        $
                        727,256
                        
                        
                        $
                        4,106,023
                        
                        
                        $
                        2,076,909Interest
      Expenses:
                        
                        $
                        330,417
                        
                        
                        $
                        47,256
                        
                        
                        $
                        657,801
                        
                        
                        $
                        89,322Income
      Taxes:
                        
                        $
                        670,864
                        
                        
                        $
                        454,601
                        
                        
                        $
                        1,063,755
                        
                        
                        $
                        781,595Net
      Income:
                        
                        $
                        1,579,291
                        
                        
                        $
                        228,930
                        
                        
                        $
                        2,385,872
                        
                        
                        $
                        1,209,911Other
      Comprehensive Income:
                        
                        $
                        7,444
                        
                        
                        $
                        1,127
                        
                        
                        $
                        156,008
                        
                        
                        $
                        33,071Total
      Comprehensive Income:
                        
                        $
                        1,586,735
                        
                        
                        $
                        230,057
                        
                        
                        $
                        2,541,880
                        
                        
                        $
                        1,242,982


21


Revenues





We had
revenues of $7,611,445 and $12,880,324 for the three and six months ended June
30, 2010, respectively, compared to the revenues of $5,667,632 and $9,673,626
for the same periods ended June 30, 2009, respectively. The increases in sales
revenues were due primarily to the sales of our décor paper,
which generated an increased in the second quarter of 2010 by $1,943,813
and increased in first six months of 2010 by $3,206,698, compared to the same
periods in 2009. Management believes this was primarily because of the
recovery from global financial crisis, which had significant negative impact on
our revenues in 2009 and commencement of production of the third décor paper
printing line.





In 2010
and beyond, after the commencement of our new production line for laminated
boards which is expected to be completed in the first quarter of 2011, we expect
that our net sale revenues will grow steadily from 2011 due to our core
production switching from the decor paper to laminated board, which we believe
is considerably more profitable.





Cost
of Revenue





Cost of
revenue primarily includes cost of supplies to manufacture our décor paper. We
had $4,442,311 and $3,048,275 in cost of sales, or 58.36% and 53.78% of sales
revenues, during the three months ended June 30, 2010 and 2009, respectively.
The cost of revenue as a percentage of revenue increased during the second
quarter of 2010 mainly due to increase in purchase price of raw materials, ink
and paper.





During
the six months ended June 30, 2010 and 2009, we had $7,623,951 and $5,214,530 in
cost of sales, or 59.19% and 53.90% of sales revenues, respectively. The cost of
revenue as a percentage of revenue increased due to due to increase in purchase
price of raw materials, ink and paper.





Operating
Expenses





The
following table summarizes our operating expenses:





Three months ended June 30,
                    
                    
                    Six months ended June 30,2010
                    
                    
                    % of net
                      sales
                    
                    
                    2009
                    
                    
                    % of net
                      sales
                    
                    
                    2010
                    
                    
                    % of net
                      sales
                    
                    
                    2009
                    
                    
                    % of
                      net
                      sales(in
      thousands)
                    
                    
                    (in
      thousands)Sales
      and marketing
                    
                    $
                    321.82
                    
                    
                    
                    4.2
                    %
                    
                    $
                    367.66
                    
                    
                    
                    6.5
                    %
                    
                    $
                    606.03
                    
                    
                    
                    4.7
                    %
                    
                    $
                    660.29
                    
                    
                    
                    6.8
                    %Professional,
      Consulting Fees
                    
                    
                    90.35
                    
                    
                    
                    1.2
                    %
                    
                    
                    1,195.13
                    
                    
                    
                    21.1
                    %
                    
                    
                    174.18
                    
                    
                    
                    1.4
                    %
                    
                    
                    1,195.13
                    
                    
                    
                    12.4
                    %General
      and Administrative
                    
                    
                    177.13
                    
                    
                    
                    2.3
                    %
                    
                    
                    329.31
                    
                    
                    
                    5.8
                    %
                    
                    
                    370.14
                    
                    
                    
                    2.9
                    %
                    
                    
                    526.77
                    
                    
                    
                    5.5
                    %Total
      net operating expenses
                    
                    $
                    589.30
                    
                    
                    
                    7.7
                    %
                    
                    $
                    1,892.10
                    
                    
                    
                    33.4
                    %
                    
                    $
                    1,150.35
                    
                    
                    
                    9.0
                    %
                    
                    $
                    2,382.19
                    
                    
                    
                    24.7
                    %





We had
operating expenses of $589,296 and $1,150,350 for the three and six months ended
June 30, 2010, respectively, compared to the operating expenses of $1,892,101
and $2,382,187 for the same periods ended June 30, 2009, respectively. The
significant decrease in operating expenses during the six months ended June 30,
2010 was due primarily to the professional and consulting fee of $1,195,127
incurred in connection with the services rendered for the plan of exchange
transaction in 2009.


22


OTHER
INCOME (EXPENSE)





Interest
Expense





We had
interest expenses of $330,417 and $657,801 for the three and six months ended
June 30, 2010, respectively, compared to the operating expenses of $47,256 and
$89,322 for the same periods ended June 30, 2009, respectively. The significant
increases in interest expenses during the three and six months ended June 30,
2010 was primary due to amortization of debt discount arising from
convertible notes payable.





Income
Tax Expense





We had
income taxes of $670,864 and $1,063,755 for the three and six months ended June
30, 2010, respectively, compared to the income taxes of $454,601 and $781,595
for the same periods ended June 30, 2009, respectively. The increase in
income tax expense in the second quarter and first six months of 2010 compared
with the second quarter and first six months of 2009 was primarily due to
increase an in taxable income.





Net Income





We had
net income of $1,579,291 and $2,385,872 for the three and six months ended June
30, 2010, respectively, compared to the net income of $228,930 and $1,209,911
for the same periods ended June 30, 2009, respectively. The net income in these
periods was due primarily to sales of our décor paper. Our net income is a
function of revenues, cost of sales and other expenses as described
above.





The net
income increased in the second quarter of 2010 by $1,350,361 compared to the
same period in 2009 was due primarily to the increase in sale revenue  as a
result of the recovery from global financial crisis, which had significant
impact on our revenues in 2009, offset by the non-cash amortization of debt
discount of $248,672 arising from convertible notes payable and the decrease in
operating expenses by $1,302,805.





Our total
net income during the six months ended June 30, 2010 increased by $1,175,961
compared to the same period ended June 30, 2009, which was due primarily to
increase in sale revenue as a result of the recovery from global financial
crisis, which had significant impact on our revenues in 2009,  offset by
the non-cash amortization of debt discount of $497,864 arising from convertible
notes payable and the decrease in operating expenses by $2,029,114.





Liquidity
and Capital Resources





Balance
Sheet and Cash Flows





Cash
flows provided by operating activities were $3,885,634 and $1,933,340 for the
six months ended June 30, 2010 and 2009, respectively. Positive cash flows from
operations for the six months ended June 30, 2010 resulted primarily from our
net income of $2,385,872, an increase in advances to suppliers by
$158,646, a decrease in deposits and prepayments by $138,493 and an
increase in accrued liabilities and other payables by $402,415, partially offset
by increases in accounts receivable and inventories by $259,270 and
$578,831, respectively, plus increases in accounts payable and income tax
payable by $364,749 and $150,203, respectively. Positive cash flows from
operations for the six months ended June 30, 2009 resulted primarily from our
net income of $1,209,911, a decrease in advances to suppliers by
$438,389, a decrease in deposits and prepayments by $29,226, partially
offset by the increases in accounts receivable and inventories by $857,866 and
$376,548, respectively, and the decrease in accounts payable, promissory note
payable, income tax payable and accrued liabilities by $602,783, $705,000,
$6,085, and $222,878, respectively.


23


Cash
flows used in investing activities were $3,518,243 and $1,501,383 for the six
months ended June 30, 2010 and 2009, respectively. The cash flows used in
investments for the six months ended June 30, 2010 was due to the payments of
$1,150,512 to acquire plant and equipment and $2,367,731 to construction in
progress. The cash flows used in investments for the six months ended June 30,
2009 was primary due to the payment of $1,501,383 to construction in
progress.





Cash
flows used in financing activities were $577,988 during the six months ended
June 30, 2010, compared to cash flows of $366,601 provided by financing
activities during the six months ended June 30, 2009. Cash outflows during the
six months ended June 30, 2010 were due primarily to the repayment to a related
party of $314,906, and the payments on bank borrowings of total $1,287,261,
offset by the proceeds from long-term bank borrowings of $1,024,179. Cash
inflows during the six months ended June 30, 2009 were due primarily to the
proceeds from short-term bank borrowings of $774,488 and advance from a related
party of $541,570, offset by the payments of $949,457 to long-term bank
borrowings.





Liquidity





We
project that we will need additional capital to fund operations over the next 6
months. We anticipate we will need an additional $2,000,000 per year in
2010 and 2011.





Overall,
we have funded our cash needs from inception through June 30, 2010 with a series
of debt and equity transactions, primarily with related parties. If we are
unable to receive additional cash from our related parties, we may need to rely
on financing from outside sources through debt or equity transactions. Our
related parties are under no legal obligation to provide us with capital
infusions. Failure to obtain such financing could have a material adverse effect
on operations and financial condition.





At June
30, 2010, we had cash and cash equivalents of $569,202 on hand, of which
$501,758 was held by our subsidiary in China. The amount of cash available for
transfer from CHDITN will be limited both by the liquidity needs of CHDITN and
the restriction on currency exchange by Chinese-government mandated requirements
including currency exchange controls on certain transfers of funds outside of
China.





Currently,
we have enough cash to fund our operations for about six months. This is based
on our current cash flows from operating activities and financing activities,
our positive working capital and projected revenues. However, if the projected
revenues fall short of needed capital we may not be able to sustain our capital
needs. We will then need to obtain additional capital through equity or debt
financing to sustain operations for an additional year. Our current level of
operations would require capital of approximately $2,000,000 per year starting
in 2010. Modifications to our business plans may require additional capital for
us to operate. For example, if we are unable to raise additional capital in the
future we may need to curtail our number of product offers or limit our
marketing efforts to the most profitable geographical areas. This may result in
lower revenues and market share for us. In addition, there can be no assurance
that additional capital will be available to us when needed or available on
terms favorable to us, and if funds are raised in the future through issuance of
preferred stock or debt, these securities could have rights, privileges or
preference senior to those of our common stock and newly issued debt could
contain debt covenants that impose restrictions on our operations. Further, any
sale of newly issued debt or equity securities could result in additional
dilution to our current shareholders. In addition, there may be further dilution
if the two convertible loans with total principal amount of $2,340,000,
dated  November 10, 2009 and four promissory notes with total
principal amount of $405,000, dated December 4, 2009, are converted into equity
pursuant to the terms and conditions of the notes by the end of
2010.





On a
long-term basis, liquidity is dependent on continuation and expansion of
operations, receipt of revenues, additional infusions of capital and debt
financing. However, there can be no assurance that we will be able to obtain
additional equity or debt financing in the future, if at all. If we are unable
to raise additional capital, our growth potential will be adversely affected.
Additionally, we will have to significantly modify our business
plan.


24


Demand
for the products and services will be dependent on, among other things, market
acceptance of our products, décor paper market and laminated board market in
general, and general economic conditions, which are cyclical in nature. Inasmuch
as a major portion of our activities is the receipt of revenues from the sales
of our products, our business operations may be adversely affected by our
competitors and prolonged recession periods.





Our
success will be dependent upon implementing our plan of operations and the risks
associated with our business plans. We are specializing in the production and
sales of high quality decor paper such as furniture decorative paper, wood-grain
paper, and paperboard. We plan to strengthen our position in these markets. We
also plan to expand our operations through marketing our products and our
concept.





The
company had new bank loan of approximately $1,024,179 during the 2010 to improve
liquidity.





Off-balance
sheet arrangements





At June
30, 2010, we do not have any off-balance sheet arrangements.





Contractual
obligations and other commitments





Our
obligations under contractual obligations and commercial commitments at June 30,
2010 were as follows:




Payments Due by PeriodTotal
                  
                  
                  Less
                    than1 year
                  
                  
                  1-3 years
                  
                  
                  3-5years
                  
                  
                  More Than
                    5 yearsOperating
      leases
                  
                  $
                  2,012,748
                  
                  
                  $
                  202,685
                  
                  
                  $
                  422,994
                  
                  
                  $
                  462,650
                  
                  
                  $
                  924,419Consultancy
      fee
                  
                  
                  41,600
                  
                  
                  
                  41,600
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Purchase
      commitments
                  
                  
                  3,300,000
                  
                  
                  
                  3,300,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Total
                  
                  $
                  5,354,348
                  
                  
                  $
                  3,544,285
                  
                  
                  $
                  422,994
                  
                  
                  $
                  462,650
                  
                  
                  $
                  924,419





Operating
leases





We lease
certain facilities under non-cancelable operating leases that expire at various
dates beyond 2015.





Consultancy
fee commitment





The
Company is committed to pay a monthly fee to Interactive Investors, Inc. for a
one-year service of management consulting, business advisory, shareholder
information and public relations, expiring on August 31, 2010. As of June 30,
2010, the Company has future minimum contingent payment of $41,600 in the next
12 months.


25


Purchase
commitments





The
Company is committed under a number of agreements with an independent
contractors or suppliers in relation to the construction of the new
manufacturing facility for business expansion. Construction is expected to be
completed in the first quarter of 2011. Total estimated construction costs are
approximately $30 million (equivalent to RMB 205 million). As of June 30, 2010,
the Company paid $7,534,507 to the third party equipment vendors and contractors
and was recorded as construction in progress. The aggregate contingent payments
related to the third party contractors and the addition of new plants and
equipment are approximately $3.3 million.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





The
information to be reported under this item is not required of smaller reporting
companies.





ITEM
4. CONTROLS AND PROCEDURES.





(a)
Evaluation of disclosure controls and procedures.





Our
management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as
of the end of the period covered by this Quarterly Report on Form 10-Q. In
designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives. In addition, the design of disclosure controls and procedures must
reflect the fact that there are resource constraints and that management is
required to apply its judgment in evaluating the benefits of possible controls
and procedures relative to their costs.





Based on
our evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are designed at a
reasonable assurance level and are effective to provide reasonable assurance
that information we are required to disclose in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in Securities and Exchange Commission rules
and forms, and that such information is accumulated and communicated to our
management, including our chief executive officer and chief financial officer,
as appropriate, as appropriate to allow timely decisions regarding required
disclosure.





(b)
Changes in internal control over financial reporting.





There was
no change in our internal controls over financial reporting identified in
connection with the evaluation that occurred during the period covered by this
Quarterly Report on Form 10-Q that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.





PART II. OTHER
INFORMATION





ITEM
1.      LEGAL PROCEEDINGS





None.





ITEM
1A. RISK FACTORS





Smaller
reporting companies are not required to provide the information required by this
Item.


26


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





None.





ITEM
3.      DEFAULTS UPON SENIOR SECURITIES





None.





ITEM
4.     REMOVED AND RESERVED





None.





ITEM
5.      OTHER INFORMATION





On April
1, 2010, the Company approved to withdraw its registration statement initially
filed on Form S-1 with the Securities and Exchange Commission on February 10,
2010. The Company withdrew its registration statement so that it can have
sufficient time to review and possibly amend the registration statement prior to
its effectiveness. No securities have been sold pursuant to the registration
statement.





On April
8, 2010, the Board of Directors and consenting shareholder holding a majority of
issued and outstanding Common Stock approved a change the domicile of the
Company from Florida to Nevada.  The change of domicile, or
reincorporation, was effected by means of a merger between the Company and a
newly formed wholly-owned Nevada subsidiary of the Company, in which the
subsidiary was the surviving entity.  This change of domicile became
effective upon the filing of articles of merger with the Secretary of State of
the states of Florida and Nevada in accordance with applicable state laws,
effective May 25, 2010.





On April
8, 2010, the Board of Directors approved and recommended a combination of the
shares of common stock of DCRD, such that every three (3) shares of common stock
$.001 par value would be combined into one (1) share of common stock upon
effectiveness of the Reincorporation Merger.  In the share
combination, referred to as a reverse stock split or “Reverse Split”, the par
value of Common Stock did not change.  All the fractional shares resulting
from the combination were rounded up to the nearest whole share. Since it was
contemplated that the reverse stock split would occur simultaneously with the
Reincorporation, management determined that the objective and substantive effect
of the reverse stock split would be accomplished under and pursuant to the
Merger Agreement, which featured an exchange ratio in which every three (3)
shares of Florida Corporation common stock were converted into one (1) share of
Nevada Corporation common stock. On May 25, 2010, our common stock began trading
on a split-adjusted basis on the OTC Bulletin Board.





ITEM
6. EXHIBITS





3.1
            Agreement
      and Plan of Merger between Decor Products International, Inc. and DCRD
      Merger Sub, Inc. effective as of May 25, 2010 (1)3.2
            Articles
      of Incorporation of DCRD Merger Sub, Inc. (1)3.3
            Bylaws
      of Decor Products International, Inc. (1)31.1
            Certification
      of Chief Executive Officer31.2
            Certification
      of Chief Financial Officer32.1
            Statement
      required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002.32.2
            Statement
      required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002











27


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, there
unto duly authorized.




DÉCOR
      PRODUCTS INTERNATIONAL, INC.Date:
      August 23, 2010
            By:
            /s/ Rui Sheng LiuRui
      Sheng Liu
              President
      and Chief Executive Officer





INDEX
TO EXHIBITS




Exhibit No.
            Description3.1
            Agreement
      and Plan of Merger between Decor Products International, Inc. and DCRD
      Merger Sub, Inc. effective as of May 25, 2010 (1)3.2
            Articles
      of Incorporation of DCRD Merger Sub, Inc. (1)3.3
            Bylaws
      of Decor Products International, Inc. (1)31.1
            Certification
      of Chief Executive Officer31.2
            Certification
      of Chief Financial Officer32.1
            Statement
      required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002.32.2
            Statement
      required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002


28