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 September 30, 2009
 
 
 [ 
       ]       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)
 
 Florida
                20-8565429(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 [ ]
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Date 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 [ ] No [ ]
 
 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
                Non-accelerated
      filer
                (Do
      not check if a smaller reporting company)Accelerated
      filer
                Smaller
      reporting company
                þ
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [  ] No [X]
 
 Number of
shares of common stock outstanding as of November 17,
2009:       20,598,304
 
 CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
 
 The
discussion contained in this 10-Q under the Securities Exchange Act of 1934, as
amended, contains forward-looking statements that involve risks and
uncertainties. The issuer's actual results could differ significantly from those
discussed herein. These include statements about our expectations, beliefs,
intentions or strategies for the future, which we indicate by words or phrases
such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the
Company believes," "management believes" and similar language, including those
set forth in the discussions under "Notes to Financial Statements" and
"Management's Discussion and Analysis or Plan of Operation" as well as those
discussed elsewhere in this Form 10-Q. We base our forward-looking statements on
information currently available to us, and we assume no obligation to update
them. Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements that are subject to the "safe harbor" created by the
Private Securities Litigation Reform Act of 1995.
  
 1
 
   TABLE OF
      CONTENTSPART
      I. FINANCIAL INFORMATIONITEM
      1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
              3ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
              13ITEM
      3. QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
              15ITEM
      4. CONTROLS AND PROCEDURES
              15ITEM
      4T. CONTROLS AND PROCEDURES
              15PART
      II. OTHER INFORMATIONITEM
      1. LEGAL PROCEEDINGS
              16ITEM
      1A. RISK FACTORS
              16ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
              16ITEM
      3. DEFAULTS UPON SENIOR SECURITIES
              16ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              16ITEM
      5. OTHER INFORMATION
              16ITEM
      6. EXHIBITS
              16SIGNATURES
              17INDEX
      TO EXHIBITS
              18
 
 2
 Table of Contents
 
 
 ITEM
1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  DÉCOR
PRODUCTS INTERNATIONAL, INC.
  INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
 (UNAUDITED)
 
 
 PageCondensed
      Consolidated Balance Sheets as of September 30, 2009 and December 31,
      2008
              
              F-4Condensed
      Consolidated Statements of Operations And Comprehensive Income for the
      Three and Nine Months ended September 30, 2009 and 2008
              F-5Condensed
      Consolidated Statements of Cash Flows for the Nine Months ended September
      30, 2009 and 2008
              
              F-6Condensed
      Consolidated Statement of Stockholders’ Equity for the Nine Months ended
      September 30, 2009
              
              F-7Notes
      to Condensed Consolidated Financial Statements
              
              F-8
 
 3
 Table of Contents
 
 DÉCOR
PRODUCTS INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 AS
OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 
 September
      30, 2009
                
                
                December
      31, 2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                611,669
                
                
                $
                268,698Accounts
      receivable, trade
                
                
                13,102,871
                
                
                
                10,831,004Inventories
                
                
                461,844
                
                
                
                233,579Amount
      due from a related party
                
                
                -
                
                
                
                41,347Advances
      to suppliers
                
                
                473,675
                
                
                
                -Deposits
      and prepayments
                
                
                32,341
                
                
                
                41,490Total
      current assets
                
                
                14,682,400
                
                
                
                11,416,118Non-current
      assets:Plant
      and equipment, net
                
                
                2,697,361
                
                
                
                2,233,040Construction
      in progress
                
                
                9,580,380
                
                
                
                7,838,260TOTAL
      ASSETS
                
                $
                26,960,141
                
                
                $
                21,487,418LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable, trade
                
                $
                801,065
                
                
                $
                594,617Current
      portion of long-term bank borrowings
                
                
                1,916,046
                
                
                
                1,472,004Promissory
      notes payable
                
                
                705,000
                
                
                
                -Income
      tax payable
                
                
                669,540
                
                
                
                447,638Amount
      due to a related party
                
                
                1,288,346
                
                
                
                -Accrued
      liabilities and other payable
                
                
                792,177
                
                
                
                578,671Total
      current liabilities
                
                
                6,172,174
                
                
                
                3,092,930Long-term
      liabilities:Long-term
      bank borrowings
                
                
                283,788
                
                
                
                1,209,636Total
      liabilities
                
                
                6,455,962
                
                
                
                4,302,566Commitments
      and contingenciesStockholders’
      equity:Preferred
      stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued and
      outstanding as of September 30, 2009 and December 31, 2008
                
                
                -
                
                
                
                -Common
      stock, $0.001 par value; 100,000,000 shares authorized; 20,598,304 and
      20,000,000 shares issued and outstanding as of September 30, 2009 and
      December 31, 2008
                
                
                20,598
                
                
                
                20,000Additional
      paid-in capital
                
                
                518,896
                
                
                
                -Statutory
      reserve
                
                
                203,832
                
                
                
                203,832Accumulated
      other comprehensive income
                
                
                2,587,879
                
                
                
                2,525,096Retained
      earnings
                
                
                17,172,974
                
                
                
                14,435,924Total
      stockholders’ equity
                
                
                20,504,179
                
                
                
                17,184,852TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                $
                26,960,141
                
                
                $
                21,487,418
 
 
 See
accompanying notes to condensed consolidated financial statements.
  4
 Table of Contents
  DÉCOR
PRODUCTS INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (Currency
expressed in United States Dollars (“US$”))
 (Unaudited)
 
 Three
      months ended September 30,
                
                Nine
      months ended September 30,2009
                
                
                
                2008
                
                
                2009
                
                
                2008Revenues,
      net
                
                $
                7,442,839
                
                
                $
                6,959,832
                
                $
                17,116,465
                
                $
                20,084,864Cost of revenue(inclusive of depreciation)
                
                
                4,280,341
                
                
                
                4,378,179
                
                
                9,494,871
                
                
                11,787,678Gross
      profit
                
                
                3,162,498
                
                
                
                2,581,653
                
                
                7,621,594
                
                
                8,297,186Operating
      expenses:Sales
      and marketing
                
                
                341,045
                
                
                
                248,088
                
                
                1,001,334
                
                
                710,682Professional
      and consulting fee
                
                
                71,428
                
                
                
                1,123
                
                
                1,266,555
                
                
                107,660Stock
      based compensation
                
                
                339,096
                
                
                
                -
                
                
                339,096
                
                
                -General
      and administrative
                
                
                171,678
                
                
                
                108,179
                
                
                698,449
                
                
                346,994Total
      operating expenses
                
                
                923,247
                
                
                
                357,812
                
                
                3,305,434
                
                
                1,165,336Income
      from operations
                
                
                2,239,251
                
                
                
                2,223,841
                
                
                4,316,160
                
                
                7,131,850Other
      income (expense):Interest
      income
                
                
                384
                
                
                
                540
                
                
                4,303
                
                
                2,555Interest
      expense
                
                
                (42,956
                )
                
                
                (82,174
                )
                
                (132,278
                
                
                (237,622
                )Income
      before income taxes
                
                
                2,196,679
                
                
                
                2,142,207
                
                
                4,188,185
                
                
                6,896,783Income
      tax expense
                
                
                669,142
                
                
                
                521,751
                
                
                1,450,737
                
                
                1,715,031NET
      INCOME
                
                $
                1,527,537
                
                
                $
                1,620,456
                
                $
                2,737,448
                
                $
                5,181,752Other
      comprehensive income:-
      Foreign currency translation gain
                
                
                29,712
                
                
                
                49,837
                
                
                62,783
                
                
                1,274,540COMPREHENSIVE
      INCOME
                
                $
                1,557,249
                
                
                $
                1,670,293
                
                $
                2,800,231
                
                $
                6,456,292Net
      income per share – Basic and diluted
                
                $
                0.08
                
                
                $
                0.08
                
                $
                0.14
                
                $
                0.26Weighted
      average shares outstanding – Basic and diluted
                
                
                20,098,901
                
                
                
                20,000,000
                
                
                20,031,618
                
                
                20,000,000
 
 See
accompanying notes to condensed consolidated financial statements.
  5
 Table of Contents
  DÉCOR
PRODUCTS INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (Currency
expressed in United States Dollars (“US$”))
 (Unaudited)
 
 Nine
      months ended September 30,2009
                
                
                
                2008Cash
      flows from operating activities:Net
      income
                
                $
                2,737,448
                
                
                $
                5,181,752Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
                
                
                462,118
                
                
                
                301,297Write-off
      of uncollectible receivables
                
                
                186,194
                
                
                
                -Loss
      on disposal of plant and equipment
                
                
                3,214
                
                
                
                3,001Stock
      based compensation
                
                
                339,096
                
                
                
                -Changes
      in operating assets and liabilities:Accounts
      receivable, trade
                
                
                (2,430,154
                )
                
                
                462,970Advances
      to suppliers
                
                
                (473,335
                )
                
                
                -Deposits
      and prepayments
                
                
                9,229
                
                
                
                (54,498
                )Inventories
                
                
                (227,535
                )
                
                
                (462,721
                )Accounts
      payable, trade
                
                
                204,857
                
                
                
                (821,376
                )Accrued
      liabilities and other payable
                
                
                212,022
                
                
                
                (40,761
                )Promissory
      notes payable
                
                
                705,000
                
                
                
                -Income
      tax payable
                
                
                220,657
                
                
                
                (244,540
                )Net
      cash provided by operating activities
                
                
                1,948,811
                
                
                
                4,325,124Cash
      flows from investing activities:Additions
      to plant and equipment
                
                
                -
                
                
                
                (216,168
                )Payments
      on construction in progress
                
                
                (2,649,189
                )
                
                
                (4,838,502
                )Net
      cash used in investing activities
                
                
                (2,649,189
                )
                
                
                (5,054,670
                )Cash
      flows from financing activities:Proceeds
      from private placement, net of expense
                
                
                180,000
                
                
                
                -Advances
      from (repayment to) a related party
                
                
                1,349,528
                
                
                
                (711,915
                )Proceeds
      from bank borrowings
                
                
                774,570
                
                
                
                2,153,208Payments
      on bank borrowings
                
                
                (1,262,536
                )
                
                
                (1,137,665
                )Net
      cash provided by financing activities
                
                
                1,041,562
                
                
                
                303,628Effect
      of exchange rate changes on cash and cash equivalents
                
                
                1,787
                
                
                
                32,622NET
      CHANGE IN CASH AND CASH EQUIVALENTS
                
                
                342,971
                
                
                
                (393,296
                )BEGINNING
      OF PERIOD
                
                
                268,698
                
                
                
                576,995END
      OF PERIOD
                
                $
                611,669
                
                
                
                183,699SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for income taxes
                
                $
                1,230,080
                
                
                $
                1,959,571Cash
      paid for interest
                
                $
                132,278
                
                
                $
                237,622NON-CASH
      INVESTING AND FINANCING TRANSACTIONS:Construction
      in progress transfer to plant and equipment
                
                $
                927,335
                
                
                $
                -
  
 See
accompanying notes to condensed consolidated financial statements.
  6
 Table of Contents
   DÉCOR
PRODUCTS INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 (Unaudited)
 
 Common
      stock
                
                Additional
      paid-in capital
                
                Statutory
                  reserve
                
                Accumulated
                  other
                  comprehensive
                  income
                
                Retained
                  earnings
                
                Total
                  stockholders’
                  equityNo.
      of shares
                
                AmountBalance
      as of January 1, 2009
                
                20,000,000
                
                $
                20,000
                
                $
                -
                
                $
                203,832
                
                $
                2,525,096
                
                $
                14,435,924
                
                $
                17,184,852Recapitalization
      and reverse acquisition
                
                398,304
                
                
                398
                
                
                -
                
                
                -
                
                
                -
                
                
                (398)
                
                
                -Shares
      issued for private placement, net of expense
                
                200,000
                
                
                200
                
                
                179,800
                
                
                -
                
                
                -
                
                
                -
                
                
                180,000Net
      income for the period
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                2,737,448
                
                
                2,737,448Warrants
      granted for services
                
                -
                
                
                -
                
                
                339,096
                
                
                -
                
                
                -
                
                
                -
                
                
                339,096Foreign
      currency translation adjustment
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                62,783
                
                
                -
                
                
                62,783Balance
      as of September 30, 2009
                
                20,598,304
                
                $
                20,598
                
                $
                518,896
                
                $
                203,832
                
                $
                2,587,879
                
                $
                17,172,974
                
                $
                20,504,179
 
 See
accompanying notes to condensed consolidated financial statements.
   7
 Table of Contents
 DÉCOR
PRODUCTS INTERNATIONAL, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (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, 2008
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 September 30, 2009 are not necessarily indicative
of the results to be expected for the entire fiscal year ending December 31,
2009 or for any future period.
 
 These
unaudited condensed consolidated financial statements and notes thereto should
be read in conjunction with the audited financial statements of Wide Broad Group
Limited for the years ended December 31, 2008 and 2007.
  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 July
17, 2009, DCRD executed a Plan of Exchange (the “POE”) among the shareholders of
DCRD, Wide Broad Group Limited (“Wide Broad”), the shareholders of Wide Broad
and Dongguan Chditn Printing Company Limited (“Dongguan Chditn”). In accordance
with the POE, DCRD agreed to issue to Wide Broad 20,000,000 new shares of common
stock of DCRD and simultaneously retire to treasury 7,450,000 shares of common
stock held in the name of Maurice Katz (a former director), in exchange for 100%
of the capital stock of Wide Broad.
 
 Pursuant
to the POE, DCRD effectuated a 1 for 4 reverse split of its common stock and
appointed a new board of directors comprised of no less than 50% independent
directors and form an independent audit committee comprised of no less than two
individuals who meet the standards set forth by the NYSE Amex as these terms are
defined by the NYSE Amex Company Guide as amended from time to
time.
 
 On the
closing date, the shareholders of Wide Broad owned an interest in DCRD
representing 98.04% of the issued and outstanding shares. Wide Broad and
Dongguan Chditn became wholly-owned subsidiaries of DCRD operating under the
name “Dongguan CHDITN Printing Co., Ltd.” a corporation organized and existing
under the laws of the People’s Republic of China.
 
 Wide
Broad was incorporated as a BVI Business Company with limited liability in the
British Virgin Islands (“BVI”) under the BVI Business Companies Act, 2004 of the
BVI on September 28, 2006, for the purpose of holding 100% equity interest in
Dongguan Chditn.
 
 Pursuant
to a nominee agreement dated December 1, 1997 between Mr. Man Kwai Ming (“Mr.
Man”) as owner and Mr. Liu Ruisheng (“Mr. Liu”) as nominee, Mr. Liu registered
Dongguan Chditn as a limited liability company in Guangdong Province, the
People’s Republic of China (the “PRC”) on July 6, 1998 with its registered
capital of $1,234,440 (equivalent to RMB10,000,000). It is primarily engaged in
the manufacture and sales of furniture decorative paper and related products in
the PRC, with its principal place of business in Wushaliwu Economic Zone,
Chang’An Town, Dongguan City, Guangdong Province, the PRC.
 
 The stock
exchange transaction has been accounted for as a reverse acquisition and
recapitalization of DCRD whereby Wide Broad is deemed to be the accounting
acquirers (legal acquirees) and DCRD to be the accounting acquiree (legal
acquirer). The accompanying consolidated financial statements are in substance
those of Wide Broad, with the assets and liabilities, and revenues and expenses,
of DCRD being included effective from the date of stock exchange transaction.
DCRD is deemed to be a continuation of the business and operations of Wide
Broad. Accordingly, the accompanying condensed consolidated financial statements
include the following:
 
 (1)
                the
      balance sheet consists of the net assets of the accounting acquirer at
      historical cost and the net assets of the accounting acquiree at
      historical cost;
 
 (2)
                the
      financial position, results of operations, and cash flows of the
      accounting acquirer for all periods presented as if the recapitalization
      had occurred at the beginning of the earliest period presented and the
      operations of the accounting acquiree from the date of stock exchange
      transaction.
 
 The
Company and its subsidiaries are hereinafter referred to as (the
"Company").
 
 8
 Table of Contents
  DÉCOR
PRODUCTS INTERNATIONAL, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 (Unaudited)
 
 
 NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 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 accounts of DCRD and its
subsidiaries. All significant inter-company balances and transactions within the
Company have been eliminated upon consolidation.
 
 l
                Accounts
      receivable
 
 Accounts
receivable are recorded at the invoiced amount and do not bear interest, which
are due within contractual payment terms, generally 30 to 90 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 90 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.
 
 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
September 30, 2009, the Company did not record an allowance for obsolete
inventories, nor have there been any write-offs.
 
 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
                %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 September 30, 2009 and 2008 were $154,096 and
$99,048, which included $151,402 and $96,173 in cost of revenue,
respectively.
 
 Depreciation
expense for the nine months ended September 30, 2009 and 2008 were $462,118 and
$301,297 which included $453,892 and $292,802 in cost of revenue,
respectively.
  Approximately
$526,503 (equivalent to RMB3,600,020) of plant and machinery became fully
depreciated as of September 30, 2009.
 
 l
                Construction
      in progress
 
 Construction
in progress is stated at cost and represents the cost of acquiring contracts to
build the additional assembly lines and prepayments paid to equipment vendors
during the construction of the new manufacturing facility (until it is
substantially complete and ready for its intended use). 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
 
 Long-lived
assets primarily include plant and equipment and construction in progress. In
accordance with the provisions of Accounting Standards Codification ("ASC")
Topic 360-10-5, “Impairment or
Disposal of Long-Lived Assets”, the Company periodically reviews
long-lived assets for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully
recoverable or that the useful lives are no longer appropriate. Each impairment
test is based on a comparison of the undiscounted cash flows to the recorded
value of the asset. If impairment is indicated, the asset is written down to its
estimated fair value based on a undiscounted cash flow analysis. There has been
no impairment as of September 30, 2009.
 
 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.
 
 Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
 
 l
                Income
      taxes
 
 The
Company adopts the ASC Topic 740, “Income Taxes” regarding
accounting for uncertainty in income taxes prescribes the recognition threshold
and measurement attributes for financial statement recognition and measurement
of tax positions taken or expected to be taken on a tax return. In addition, the
guidance requires the determination of whether the benefits of tax positions
will be more likely than not sustained upon audit based upon the technical
merits of the tax position. For tax positions that are determined to be more
likely than not sustained upon audit, a company recognizes the largest amount of
benefit that is greater than 50% likely of being realized upon ultimate
settlement in the financial statements. For tax positions that are not
determined to be more likely than not sustained upon audit, a company does not
recognize any portion of the benefit in the financial statements. The guidance
provides for de-recognition, classification, penalties and interest, accounting
in interim periods and disclosure.
 
 For the
period ended September 30, 2009 and 2008, the Company did not have any interest
and penalties associated with tax positions. As of September 30, 2009, 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.
   9
 Table of Contents
  DÉCOR
PRODUCTS INTERNATIONAL, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 (Unaudited)
   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 statement of stockholders’
equity.
 
 Translation
of amounts from RMB into US$1 has been made at the following exchange rates for
the respective period:
 
 September
      30, 2009
                
                
                September
      30, 2008Period-end
      rate RMB:US$1 exchange rate
                
                
                6.8376
                
                
                
                6.8551Average
      rate RMB:US$1 exchange rate
                
                
                6.8425
                
                
                
                6.9989
 
 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.
 
 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, amount due from (to) a related party and
accounts payable are carried at cost which approximates fair value. The
estimated fair value of promissory notes payable and long-term borrowing was
$2.9 million and $2.6 million as of September 30, 2009 and December 31, 2008,
respectively, 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, Accounting Standards Codification (“ASC”) became the source of
authoritative U.S. GAAP recognized by the Financial Accounting Standards Board
(“FASB”) for nongovernmental entities, except for certain FASB Statements not
yet incorporated into ASC. Rules and interpretive releases of the SEC under
federal securities laws are also sources of authoritative U.S. GAAP for
registrants. The discussion below includes the applicable ASC
reference.
 
 The
Company adopted ASC Topic 810-10, “Consolidation” (formerly SFAS
No. 160, “Noncontrolling
Interests in Consolidated Financial Statements – an amendment of ARB No.
51”) effective January 2, 2009. Topic 810-10 changes the manner of
presentation and related disclosures for the noncontrolling interest in a
subsidiary (formerly referred to as a minority interest) and for the
deconsolidation of a subsidiary. The adoption of these sections did not have a
material impact on the Company’s condensed consolidated financial
statements.
 
 ASC Topic
815-10, “Derivatives and
Hedging” (formerly SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”) was adopted by the Company effective
January 2, 2009. The guidance under ASC Topic 815-10 changes the manner of
presentation and related disclosures of the fair values of derivative
instruments and their gains and losses.
 
 In April
2009, the FASB issued an update to ASC Topic 820-10, “Fair Value Measurements and
Disclosures” (“ASC 820-10) (formerly FASB Staff Position No. SFAS 157-4,
“Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly”). The
standard provides additional guidance on estimating fair value in accordance
with ASC 820-10 when the volume and level of transaction activity for an asset
or liability have significantly decreased in relation to normal market activity
for the asset or liability have significantly decreased and includes guidance on
identifying circumstances that indicate if a transaction is not orderly. The
Company adopted this pronouncement effective April 1, 2009 with no impact on its
condensed consolidated financial statements.
 
 In April
2009, the FASB issued FSP SFAS No. 107-1, “Disclosures about Fair Value of
Financial Instruments” (“ASC 825-10”). ASC 825-10 requires fair value of
financialinstrumentsdisclosure
for interim reporting periods of publicly traded companies as well as in annual
financial statements. ASC 825-10 is effective for interim periods ending after
June 15, 2009 and was adopted by the Company in the second quarter of 2009.
There was no material impact to the Company’s condensed consolidated financial
statements as a result of the adoption of ASC 825-10.
 
 In April
2009, the FASB issued FSP APB No. 28-1, “Interim Financial Reporting”
(“ASC 825-10”). ASC 825-10 requires the fair value of financialinstrumentsdisclosure in summarized financial
information at interim reporting periods. ASC 825-10 is effective for interim
periods ending after June 15, 2009 and was adopted by the Company in the second
quarter of 2009. There was no material impact to the Company’s condensed
consolidated financial statements as a result of the adoption of ASC
825-10.
 
 The
Company adopted, ASC Topic 855-10, “Subsequent Events” (formerly
SFAS 165, “Subsequent
Events”) effective April 1, 2009. This pronouncement changes the general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued.
 
 In June
2009, the FASB finalized SFAS No. 167, “Amending FASB interpretation No.
46(R)”, which was included in ASC Topic 810-10-05 “Variable Interest Entities”.
The provisions of ASC Topic 810-10-05 amend the definition of the primary
beneficiary of a variable interest entity and will require the Company to make
an assessment each reporting period of its variable interests. The provisions of
this pronouncement are effective January 1, 2010. The Company is evaluating the
impact of the statement on its consolidated financial statements.
 
 In July
2009, the FASB issued SFAS No. 168, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS 168 codified all previously issued
accounting pronouncements, eliminating the prior hierarchy of accounting
literature, in a single source for authoritative U.S. GAAP recognized by the
FASB to be applied by nongovernmental entities. SFAS 168, now ASC Topic 105-10
“Generally Accepted Accounting
Principles”, is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The adoption of this
pronouncement did not have an effect on the Company’s condensed consolidated
financial statements.
 
 In August
2009, the FASB issued an update of ASC Topic 820, “Measuring Liabilities at Fair
Value”. The new guidance provides clarification that in circumstances in
which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using prescribed
techniques. The Company adopted the new guidance in the third quarter of 2009
and it did not materially affect the Company’s financial position and results of
operations.
 
 In
October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13,
“Revenue Recognition (Topic
605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB
Emerging Issues Task Force)” which amends ASC 605-25, “Revenue Recognition:
Multiple-Element Arrangements.” ASU No. 2009-13 addresses how to
determine whether an arrangement involving multiple deliverables contains more
than one unit of accounting and how to allocate consideration to each unit of
accounting in the arrangement. This ASU replaces all references to fair value as
the measurement criteria with the term selling price and establishes a hierarchy
for determining the selling price of a deliverable. ASU No. 2009-13 also
eliminates the use of the residual value method for determining the allocation
of arrangement consideration. Additionally, ASU No. 2009-13 requires expanded
disclosures. This ASU will become effective for us for revenue arrangements
entered into or materially modified on or after April 1, 2011. Earlier
application is permitted with required transition disclosures based on the
period of adoption. The Company is currently evaluating the application date and
the impact of this standard on its condensed 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. During the first three quarters of 2009, the Company continually
monitored the collection of its accounts receivables and determined to write-off
the uncollectible receivables of $186,194 because such receivables balances are
deemed not recoverable.
 
 10
 Table of Contents
 
 DÉCOR
PRODUCTS INTERNATIONAL, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 (Unaudited)
 
 NOTE
5 – INVENTORIES
 
 Inventories
consist of the following:
 
 September
      30, 2009
                
                December
      31, 2008(Unaudited)
                
                (Audited)Raw
      materials
                
                $
                293,933
                
                
                $
                151,771Work-in-process
                
                
                18,382
                
                
                
                17,780Finished
      goods
                
                
                136,949
                
                
                
                43,804Packaging
      materials and supplies
                
                
                12,580
                
                
                
                20,224$
                461,844
                
                
                $
                233,579
 
 For the
period ended September 30, 2009 and 2008, the Company recorded no allowance for
slow moving and obsolete inventories.
  NOTE
6 – CONSTRUCTION IN PROGRESS
 
 During
2007, the Company anticipated the construction of a new manufacturing facility
to expand its production capacity. Total estimated costs to be incurred for
construction of a new manufacturing facility are approximately $12,607,321
(equivalent to RMB86,304,676). The construction is scheduled to be fully
completed in the fourth quarter of 2009. As of September 30, 2009, the Company
incurred and expended $9,580,380 in “Construction in progress”.
  NOTE
7 – AMOUNT DUE TO A RELATED PARTY
 
 As of
September 30, 2009, amount due to a related party represented temporary advances
made by the director of the Company, which was unsecured, interest-free with no
fixed repayment term.
  NOTE
8 – PROMISSORY NOTES PAYABLE
 
 On June
1, 2009, the Company’s subsidiary, Dongguan Chditn entered into 4 promissory
notes with Precursor Management, Inc. (“PMI”) for the aggregate principal amount
of $705,000 to pay for certain transaction fees and professional fees associated
with becoming a “public company”, with an interest rate of 6.5% per annum, fully
payable on September 30, 2009. On November 19, 2009 all parties to these
agreements, guaranties and notes mutually agreed to extend the payment date
until December 30, 2009.
  NOTE
9 – ACCRUED LIABILITIES AND OTHER PAYABLE
 
 Accrued
liabilities and other payable consist of the following:
 
 September
      30, 2009
                
                December
      31, 2008(Unaudited)VAT
      payable
                
                $
                216,642
                
                
                $
                165,503Accrued
      payroll and benefit costs
                
                
                410,777
                
                
                
                310,636Accrued
      professional and consulting fees
                
                
                162,116
                
                
                
                100,872Other
      payables
                
                
                2,642
                
                
                
                1,660$
                792,177
                
                
                $
                578,671
 
 
 NOTE
10 – LONG-TERM BANK BORROWINGS
 
 Long-term
bank borrowings were as follows:
 
 September
      30, 2009
                
                
                December
      31, 2008(Unaudited)Bank
      loans, payable to financial institutions in the PRC:Equivalent
      to RMB3,440,000 with interest rate at 7.84% per annum payable monthly,
      repayable by September 20, 2010
                (a)
                
                $
                503,100
                
                
                $
                627,353Equivalent
      to RMB3,150,000 with interest rate at 6.62% per annum payable monthly,
      repayable by August 20, 2009
                (a)
                
                
                -
                
                
                
                459,572Equivalent
      to RMB4,000,000 with interest rate at 5.84% per annum payable monthly,
      repayable by January 8, 2010
                (b)
                
                
                585,001
                
                
                
                -Equivalent
      to RMB400,000 with interest rate at 5.84% per annum payable monthly,
      repayable by January 19, 2010
                (b)
                
                
                58,500
                
                
                
                -Equivalent
      to 4,506,914 with interest rate at 9.83% per annum, with monthly principal
      and interest payments of $43,229, repayable by January 16,
      2011
                (c)
                
                
                659,137
                
                
                
                999,986Equivalent
      to RMB2,694,668 with interest rate at 9.83% per annum, with monthly
      principal and interest payments of $25,645, repayable by January 17,
      2011
                (c)
                
                
                394,096
                
                
                
                594,729Total
      bank borrowings
                
                
                
                2,199,834
                
                
                
                2,681,640Less:
      current portion
                
                
                
                (1,916,046
                )
                
                
                (1,472,004
                )Long-term
      bank borrowings, net of current portion
                
                
                $
                283,788
                
                
                $
                1,209,636
 
 As of
September 30, 2009, the minimum future payments of the aggregate bank borrowings
are as follows:
 
 Period
      ending September 30:2010
                
                $
                1,916,0462011
                
                
                283,788Total
      borrowings
                
                $
                2,199,834
 
 (a)
                These
      banking facilities were guaranteed by the directors of the Company and
      secured by the real properties held by the directors of the Company
      situated in the PRC.
 
 (b)         These
banking facilities were guaranteed by the directors of the Company.
 
 (c)
                These
      borrowings were secured by certain plant and machinery with an aggregate
      net book value of $1,233,462 as of September 30,
  2009.
 
 NOTE
11 – STOCKHOLDERS’ EQUITY
 
 On July
17, 2009, DCRD executed the Plan of Exchange (the “POE”) among the shareholders
of DCRD, Wide Broad, the shareholders of Wide Broad and Dongguan Chditn. The POE
stated that the capital of DCRD consists of 100,000,000 authorized shares of
common stock, par value $0.001, of which 9,043,214 shares were issued and
outstanding.
 
 Pursuant
to the POE Agreement, DCRD issued 20,000,000 new shares of common stock of DCRD
to Wide Broad and simultaneously retired to treasury stock 7,450,000 shares of
common stock held in the name of Maurice Katz (a former director), in exchange
for 100% of the capital stock of Wide Broad.
 
 Concurrently,
DCRD effectuated a 1 for 4 reverse split of its common stock. All common stock
and per share data for all periods presented in these financial statements have
been restated to give effect to the reverse stock split.
 
 On August
18, 2009, the Company executed an Offshore Stock Purchase Agreement (the
“Agreement”) with a private investor, Mr. Zhang Zijian, to purchase 200,000
shares of restricted common stock for an aggregate amount of $200,000 or $1 per
share. As a result of this transaction, the investor owns 0.97% of the issued
and outstanding common stock of the Company. The proceeds were used to fund the
working capital.
 
 As of
September 30, 2009, the Company had a total of 20,598,304 shares of its common
stock issued and outstanding.
 
 11
 Table of Contents
 DÉCOR
PRODUCTS INTERNATIONAL, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 (Unaudited)
 
 NOTE
12 – INCOME TAXES
 
 For the
nine months ended September 30, 2009 and 2008, the local (United States) and
foreign components of income from continuing operations before income taxes were
comprised of the following:
 
 Nine
      months ended September 30,2009
                
                
                2008Tax
      jurisdictions from:-
      Local
                
                $
                (360,521
                )
                
                $
                --
      Foreign
                
                
                4,548,706
                
                
                
                6,896,783Income
      before income taxes
                
                $
                4,188,185
                
                
                $
                6,896,783
 
 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 Florida 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 period ended September 30, 2009, Wide Broad suffered from an operating loss
of $1,290,520 while generated an operating income of $23,800 for the period
ended September 30, 2008.
 
 The
PRC
 
 On March
16, 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China (the “New CIT Law”). The new CIT Law, among
other things, imposes a unified income tax rate of 25% for both domestic and
foreign invested. Starting from January 1, 2008, Dongguan Chditn is entirely
subject to the unified income tax rate of 25% on the taxable income under the
New CIT Law.
 
 A
reconciliation of income tax rate to the effective income tax rate for the
period ended September 30, 2009 and 2008 is as follows:
 
 Nine
      months ended September 30,2009
                
                
                2008Income
      before income taxes
                
                $
                5,839,226
                
                
                $
                6,872,983Statutory
      income tax rate
                
                
                25
                %
                
                
                25
                %Income
      tax expense at statutory tax rate
                
                
                1,459,807
                
                
                
                1,718,246Tax
      effect of non-taxable income
                
                
                (9,070
                )
                
                
                (3,215
                )Income
      tax expense
                
                $
                1,450,737
                
                
                $
                1,715,031
 
 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 13- STOCK BASED COMPENSATION
   In
September 2009, the Company entered into an Investor Relations Consulting
Agreement with an Investor Relations (IR) firm, in which the Company agreed to
issue warrants to purchase an aggregate of 400,000 shares of its common stock to
the IR firm. These warrants are irrecoverable, non-cancelable and have an
exercise price of $1.4 per share, with piggy back registration rights. As of
September 30, 2009, none of these warrants were exercised.
 
 The
Company adopted ASC 718 using the Black-Scholes Option Pricing Model to measure
the fair value of warrants on the grant date, with the following weighted
average assumptions:
 
 Expected
      life (in years)
                
                
                1Volatility
                
                
                60
                %Risk
      free interest rate
                
                
                3.46
                %Dividend
      yield
                
                
                0
                %Weighted
      average fair value
                
                
                0.85
 
 The
Company recognized $339,096 as stock based compensation at their fair values for
the nine months ended September 30, 2009.
  12
 Table of Contents
 DÉCOR
PRODUCTS INTERNATIONAL, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 (Unaudited)
 NOTE
14 – CONCENTRATIONS OF RISK
 
 The
Company is exposed to the following concentrations of risk:
 
 (a)         Major
customers
 
 For the
three and nine months ended September 30, 2009 and 2008, there was no customer
who accounts for 10% or more of the Company’s revenues.
 
 For the
three and nine months ended September 30, 2009 and 2008, 100% of the Company’s
revenues were derived from customers located in the PRC.
 
 (b)         Major
vendors
 
 For the
three and nine months ended September 30, 2009, the vendors who account for 10%
or more of the Company’s purchases and its outstanding balance at period-end
date, are presented as follows:
 
 Three
      months ended September 30, 2009
                
                September
      30, 2009Vendor
                
                
                Purchases
                
                Percentage
                  of
      purchases
                
                Accounts
                  payable,
      tradeVendor
      A
                
                
                $
                643,624
                
                18%
                
                $
                -Vendor
      B
                
                
                484,110
                
                13%
                
                
                -Vendor
      C
                
                
                
                389,792
                
                11%
                
                
                163,495Total:
                
                $
                1,517,526
                
                42%
                
                $
                163,495
 
 Nine
      months ended September 30, 2009
                
                September
      30, 2009Vendor
                
                
                Purchases
                
                Percentage
                  of
      purchases
                
                Accounts
                  payable,
      tradeVendor
      A
                
                
                $
                1,757,003
                
                21%
                
                $
                -Vendor
      B
                
                
                
                1,271,310
                
                15%
                
                
                -Vendor
      C
                
                
                
                1,069,629
                
                13%
                
                
                163,495Total:
                
                $
                4,097,942
                
                49%
                
                $
                163,495
 
 For the
three and nine months ended September 30, 2008, the vendors who account for 10%
or more of the Company’s purchases and its outstanding balance at period-end
date, are presented as follows:
 
 Three
      months ended September 30, 2008
                September
      30, 2008Vendor
                
                
                Purchases
                
                Percentage
                  of
      purchases
                Accounts
                  payable,
      tradeVendor
      A
                
                
                $
                1,719,138
                
                50%
                $
                -Total:
                
                $
                1,719,138
                
                50%
                $
                -
 
 Nine
      months ended September 30, 2008
                September
      30, 2008Vendor
                
                
                Purchases
                
                Percentage
                  of
      purchases
                Accounts
                  payable,
      tradeVendor
      A
                
                
                $
                3,646,697
                
                33%
                $
                -Vendor
      C
                
                
                
                1,331,415
                
                12%
                
                103,994Total:
                
                $
                4,978,112
                
                45%
                $
                103,994
 
 For the
three and nine months ended September 30, 2009 and 2008, 100% of the Company’s
purchases were derived from vendors located in the PRC.
 
 (c)         Credit
risk
 
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of accounts receivable. The Company performs
ongoing credit evaluations of its customers' financial condition, but does not
require collateral to support such receivables.
 
 (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, all of borrowings were at fixed
rates.
 
 (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
15 – 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 December 31, 2010 and 2017, respectively.
Total rent expenses for the period ended September 30, 2009 and 2008 was
$147,670 and $137,366, respectively.
 
 As of
September 30, 2009, future minimum rental payments due under non-cancelable
operating leases in the next five years and thereafter are as
follows:
 Year
      ending September 30:2010
                
                $
                193,0502011
                
                
                206,2132012
                
                
                210,6002013
                
                
                210,6002014
                
                
                230,345Thereafter
                
                
                1,098,191Total
                
                $
                2,148,999
 
 (b)
                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 forth quarter of 2009. Total estimated construction costs
are approximately $12,607,321 (equivalent to RMB86,304,676). As of September 30,
2009, the Company paid $10,528,326 to the third party equipment vendors and
contractors and was recorded as construction in progress.
  NOTE
16 – SUBSEQUENT EVENTS
 
 The
Company evaluated subsequent events through November 19, 2009, the date the
financial statements were issued, and there were no subsequent events which
impacted the Company’s financial position or results of operations as of
September 30, 2009 or which required disclosure.
 
 13
 Table of Contents
 
 
 ITEM 2.MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 
 FORWARD
LOOKING STATEMENTS
 
 Certain
statements in this report, including statements of our expectations, intentions,
plans and beliefs, including those contained in or implied by "Management's
Discussion and Analysis" and the Notes to Consolidated Financial Statements, are
"forward-looking statements", within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
subject to certain events, risks and uncertainties that may be outside our
control. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”,
“will”, and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. We undertake no obligation to
update or revise any forward-looking statements. These forward-looking
statements include statements of management's plans and objectives for our
future operations and statements of future economic performance, information
regarding our expansion and possible results from expansion, our expected
growth, our capital budget and future capital requirements, the availability of
funds and our ability to meet future capital needs, the realization of our
deferred tax assets, and the assumptions described in this report underlying
such forward-looking statements. Actual results and developments could differ
materially from those expressed in or implied by such statements due to a number
of factors, including, without limitation, those described in the context of
such forward-looking statements, our expansion and acquisition strategy, our
ability to raise additional capital to finance our activities; the
effectiveness, profitability, and the marketability of our products; the future
trading of the common stock of DCRD; the ability of DCRD to operate as a public
company; our ability to protect our proprietary information; general economic
and business conditions; the volatility of our operating results and financial
condition; our ability to attract or retain qualified senior management
personnel and research and development staff; and other risks detailed from time
to time in its filings with the SEC, or otherwise.
 
 DESCRIPTION
OF BUSINESS
 
 General
 
 As used
herein the terms "We", the "Company", "DCRD", the "Registrant," or the "Issuer"
refers to Décor Products International, Inc., its subsidiaries and predecessors,
unless indicated otherwise. We were incorporated under the laws of the state of
Florida on January 11, 2007 where we were primarily engaged in customized mural
painting services that cater to customer needs and budgets.
 
 On July
17, 2009, DCRD executed a Plan of Exchange (the “POE”) among the shareholders of
DCRD, Wide Broad Group Limited (“Wide Broad”), the shareholders of Wide Broad
and Dongguan Chditn Printing Company Limited (“Dongguan Chditn”). In accordance
with the POE, DCRD agreed to issue to Wide Broad 20,000,000 new shares of common
stock of DCRD and simultaneously retire to treasury 7,450,000 shares of common
stock held in the name of Maurice Katz (a former director), in exchange for 100%
of the capital stock of Wide Broad.
 
 Pursuant
to the POE, DCRD effectuated a 1 for 4 reverse split of its common stock and
appointed a new board of directors comprised of no less than 50% independent
directors and form an independent audit committee comprised of no less than two
individuals who meet the standards set forth by the NYSE Amex as these terms are
defined by the NYSE Amex Company Guide as amended from time to
time.
 
 On the
closing date, the shareholders of Wide Broad owned an interest in DCRD
representing 98.04% of the then issued and outstanding shares. Wide Broad and
Dongguan Chditn became wholly-owned subsidiaries of DCRD operating under the
name “Dongguan CHDITN Printing Co., Ltd.” a corporation organized and existing
under the laws of the People’s Republic of China.
 
 Wide
Broad was incorporated as a BVI Business Company with limited liability in the
British Virgin Islands (“BVI”) under the BVI Business Companies Act, 2004 of the
BVI on September 28, 2006, for the purpose of holding 100% equity interest in
Dongguan Chditn.
 
 Pursuant
to a nominee agreement dated December 1, 1997 between Mr. Man Kwai Ming (“Mr.
Man”) as owner and Mr. Liu Ruisheng (“Mr. Liu”) as nominee, Mr. Liu registered
Dongguan Chditn as a limited liability company in Guangdong Province, the
People’s Republic of China (the “PRC”) on July 6, 1998 with its registered
capital of $1,234,440 (equivalent to RMB10,000,000). It is primarily engaged in
the manufacture and sales of furniture decorative paper and related products in
the PRC, with its principal place of business in Wushaliwu Economic Zone,
Chang’An Town, Dongguan City, Guangdong Province, the PRC.
 
 Since the
reverse merger was consummated, we have continued operations of CHDITN, a
company specializing in the production and sales of high quality decor paper
such as furniture decorative paper, wood-grain paper, and paperboard. We have
taken a leadership position in introducing advanced microcomputer intaglio
(gravure) printing production equipment to the market. We also conduct research
and development in manufacturing 30g -120g PU paper, polyester paper, melamine
paper, wear-proof paper, 3D wood grain paper, as well as different kinds of
environmental friendly decorative papers.
 
 Décor Paper and Our
Market
 
 Decor, or
decoration, paper is a specialty paper used to finish the surface of wood
materials. Wood-grain decor paper, used in the manufacture of furniture and
laminated flooring, is one of the fastest growing grades of paper in the world.
The production of decor paper requires very specific technological
know-how.
 
 Apart
from China’s dominant position as the Number 1 furniture exporter in the world,
the rapid growth in disposable income in China has created a huge domestic
market. China has become a major consumer of furniture and other household
furnishings, which, in turn, has created a high demand for decor paper used in
furniture and laminate flooring manufacture.
 
 In 1997,
China had a 3.2% market share in the global decor paper market; by 2010, we
believe that China will have a 25% market share, according to the report in “The
first peak of National decor paper industry seminar in 2005. With a current
capacity of 96 million meters of decor paper capacity, we are one of the largest
high-class decor paper manufacturers in China with an estimated 7% market
share.
 
 Decorative
base paper is used to furnish the surface of interior decorative materials, such
as laminated board, which has wide application in interior decoration of
buildings, transportation vehicles, processed products such as fortified wooden
floorboard, furniture and composite office wares as well as interior decoration
of hotels, home and workplace. Decorative base paper includes melamine,
polyester, PU (Polyurethane), finish foil, painting paper, etc.
 
 Decor
paper is the type of demands driving, which are highly affected by furniture and
fortified wooden floorboard industries. Architectural decorative material
industry grows fast in recent years because of the prosperity of real estate all
over the world. According to disclosure information from DILONG’s prospectus (a
listed company in Chinese stock market), China fortified wooden floorboard
output is over 200 million square meters in 2006. It takes over 60% of the whole
floor production. And the panel furniture is becoming the mainstream of
furniture production; its market share is over 80% now.
 
 We now
have 2 production lines, its year production capacity is 96 million meters. It
is one of the largest high-class decor paper manufacturers in China with an
estimated 7% market share. We conduct research and development in manufacturing
30g -120g PU paper, polyester paper, melamine paper, wear-proof paper, 3D wood
grain paper, as well as different kinds of environmental friendly decorative
papers.
 
 We plan
to expand the range of business, from decor paper supplier only to focusing on
decorative board, such as melamine, production business, so as to gain
competitive advantage. The whole package service helps to increase our market
share in the whole industry. We explain that demand for decor paper as surface
materials expects to decrease in the future. And melamine as surface materials
has brighter prospect and been widely used. Melamine board takes 50% market
share in kitchen furniture industry for the reason that it can be cleaned
easily.
  Our
Products
 
 PU (PolyUrethane)
Paper
   ·
                Produced
      by superficial PU printing using original
paper.
   ·
                Width
      is 1.27 meters; each packaged roll has a volume between 1250 and 2500
      meters; specification is 30g-60g.
   ·
                Product
      characteristics:
   ·
                The
      wood patterned paper surface passes through special handling; the surface
      is durable, pliable but hard to break, doesn’t degrade easily, and is
      environmental friendly.
   ·
                Suitable
      for adhering to particleboard, medium density fiberboard (MDF), high
      density fiberboard (HDF), cardboard, plywood, and
    furniture.
  Paint Paper
  ·
                Width
      is 1.27 meters; the specification is
30g-60g.
   ·
                Product
      characteristics:
   ·
                Pre-soaked
      paint paper is a form of high anti-avulsion decorating paper which has
      high flexibility after soaking, and is easily adhered to
      surfaces.
   ·
                Suitable
      for particleboard, MDF and HDF, cardboard, plywood, and curved
      surfaces
  Polyester
Paper
  ·
                Width
      1.27 meters, specification is 30g; each packaged roll is generally between
      1250 meters and 2500 meters
   ·
                Product
      characteristics:
   ·
                Easily
      adheres to most wooden surfaces, thus is one of the furniture industry’s
      most commonly used covering
materials.
  Melamine Furniture Surface
Paper
  ·
                Suitable
      for post-soaking, paste-pressed melamine board and reinforced floor board
      surfaces.
   ·
                The
      common paper thickness is
60-80g/meter.
   ·
                Product
      characteristics:
   ·
                Compared
      to polyester paper, melamine paper is more resistant to wear, heat, fire
      or smoke, and easier to clean. Melamine paper is fungus and mould proof
      and anti-static.
   ·
                Excellent
      texture and clear color has met the national standards of Europe and
      America. The design is diverse, environmentally friendly, and cost
      effective. Conforms to the current environmental protection
      trends.
  
 Table of Contents
  Intellectual
Property
  We have
no patents or copyrights. We do have a registered trademark named "CHDITN”. The
trademark is classified as No. 16 according to the International Classification
of Goods. The time of validity for the trademark is from October 7, 2004 to
October 7, 2014 with unlimited renewals. The trademark was issued by the
Trademark Office under the State Administration for Industry and Commerce,
PRC.
  Customers
  For
current production, the number of decor paper customers is about 139, with total
sales revenues RMB 117 million. CHDITN has adopted a sales and marketing
strategy of not relying on a few major customers. CHDITN tries to maintain a
constant number of customers which will utilize 80-100% capacity of the current
decor paper production lines. The following table depicts the top ten customers
and the amount of sales that customer accounts for the nine months ended
September 30, 2009:
  Ranking
                
                Customer
                
                Profit
      margin (%)
                
                
                %
      of total sales1
                
                Guangzhou
      Panyu District Hengguang Material Factory
                
                
                49.10
                %
                
                
                3.70
                %2
                
                Shenzhen
      Jiajingyali Wood Product Co., Ltd.
                
                
                45.90
                %
                
                
                3.50
                %3
                
                Shenzhen
      Liuxing Industrial Co., Ltd
                
                
                44.90
                %
                
                
                2.70
                %4
                
                Chengdu  Lianlida
      Furniture Accessories Co., Ltd
                
                
                42.50
                %
                
                
                2.70
                %5
                
                Guangzhou
      Huadu District Wangfa Furniture Factory
                
                
                45.80
                %
                
                
                2.60
                %6
                
                Chengdu
      Shuanghu Industrial Co., Ltd.
                
                
                37.70
                %
                
                
                2.40
                %7
                
                Sichuan
      Jiazhidu Furniture Co., Ltd
                
                
                42.60
                %
                
                
                2.40
                %8
                
                Shenzhen
      Baoan District Honghe Wood Factory
                
                
                43.40
                %
                
                
                2.30
                %9
                
                Guangzhou
      Zengcheng District Yueyunyangguang Stickers Factory
                
                
                46.50
                %
                
                
                2.10
                %10
                
                Guangdong
      Guangsheng Decorative Material Co., Ltd
                
                
                40.50
                %
                
                
                2.00
                %Total
                
                
                
                
                
                
                
                
                26.5
                %
 
 Competition
  We
compete with several other Chinese decor paper manufacturers, as well as
European manufacturers. Major decorative paper manufacturer mainly dominate in
German, as well as Spain, and Japan. The decorative base paper industry in the
PRC is still in its early development stage and with low concentration. There
are over one hundred companies engaged in this industry now. Most of them are
small scale with low output. Decorative paper manufacturing bases mainly
distribute in those areas such as JiangSu, ZheJiang, HeBei, TianJin, ShanDong ,
ShangHai and GuangDong province.
  Our major
domestic competitors include: Wanli Industrial (Melamine paper: 7.59 million
pieces in 2007; Decor paper: 6,726 tons in 2007), Beijing Jingnan Decorative
Materials Plant (10 production lines; Decor paper: 5000 tones; Decorative board:
400,000 pieces), Hebei Hengyuan Industrial (Decor paper: 6 production lines with
annual 3000 tones; Soakage paper: 8 production lines with 15 million pieces.),
The Interprint Group, China (4 production lines, Decor paper: yearly 3500
tones). We have a distinct advantage over these manufacturers in that they are
all located in Zhejiang Province in Eastern China (near Shanghai). The Zhejiang
Province is a large producer of furniture, the second largest in China, however,
well behind Guangzhou and Shenzhen – two of our key markets in southern
China.
  We also
have competition from a number of integrated paper companies such as Shandong
Lunan Paper which produces decor paper on smaller paper machines. We have a
freight cost advantage, as well as newer technology when compared to Shandong
Lunan Paper.
  In
addition, we compete with European decor paper producers such as Schattdecor and
Arjowiggins, However, we have significant freight cost advantage, as well as
lower labor costs compared to Schattdecor and Arjowiggins.
  Competitive
Advantages
   ·  Nine
years of decor paper manufacturing history
   ·  Very
profitable business – after tax margins 20%
   ·  Experienced,
proven, and motivated management
   ·  Sales
force located in the major furniture producing regions
   ·  State-of-the-art
technology and high quality control
   ·  Geographic
advantage – freight cost advantage
  RESULTS
OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND
2008
  
 
 For
      the three months ended September 30,
                
                
                For
      the nine months ended September 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Sales:
                
                $
                7,442,839
                
                
                $
                6,959,832
                
                
                $
                17,116,465
                
                
                $
                20,084,864Cost
      of Goods Sold:
                
                $
                4,280,341
                
                
                $
                4,378,179
                
                
                $
                9,494,871
                
                
                $
                11,787,678Operating
      Expenses:
                
                $
                923,247
                
                
                $
                357,812
                
                
                $
                3,305,434
                
                
                $
                1,165,336Income
      from Operations:
                
                $
                2,239,251
                
                
                $
                2,223,841
                
                
                $
                4,316,160
                
                
                $
                7,131,850Interest
      Expenses:
                
                $
                42,956
                
                
                $
                82,174
                
                
                $
                132,278
                
                
                $
                237,622Income
      Taxes:
                
                $
                669,142
                
                
                $
                521,751
                
                
                $
                1,450,737
                
                
                $
                1,715,031Net
      Income:
                
                $
                1,527,537
                
                
                $
                1,620,456
                
                
                $
                2,737,448
                
                
                $
                5,181,752Other
      Comprehensive Income:
                
                $
                29,712
                
                
                $
                49,837
                
                
                $
                62,783
                
                
                $
                1,274,540Total
      Comprehensive Income:
                
                $
                1,557,249
                
                
                $
                1,670,293
                
                
                $
                2,800,231
                
                
                $
                6,456,292
 
 
 Table of Contents
 
 Revenues
 
 We had
revenues of $7,442,839 and $17,116,465 for the three and nine months ended
September 30, 2009, respectively, compared to the revenues of $6,959,832 and
$20,084,864 for the same periods ended September 30, 2008, respectively. The
sales revenues were due primarily to the sales of our décor paper. The revenues
increased in the third quarter of 2009 by $483,007 compared to the same period
in 2008 was due primarily to the recovery from global financial crisis, which
had impact on our revenues significantly in 2008.
 
 However,
our total revenues during the nine months ended September 30, 2009 decreased by
$2,968,399 compared to the same period ended September 30, 2008, which was due
primarily to economic downturn as a result of the global financial crisis during
the second half of 2008 which had a negative impact on our sales during the
first and second quarters of 2009. Even though sales increased during the third
quarter of 2009, the increase still failed to cover the decrease in sales in the
first and second quarter of 2009.
  After the
new production line for laminated board is fully starting September 2009, we
expect that our sale revenues will grow steadily from 2010 due to our core
production switching from the decor paper to laminated board, which is
considerably more profitable.
 
 Cost
of Revenue
 
 Cost of
revenue primarily includes cost of supplies to manufacture our décor paper. We
had $4,280,341 and $4,378,179 in cost of sales, or 57.51% and 62.91% of sales
revenues, during the three months ended September 30, 2009 and 2008,
respectively. The cost of revenue as a percentage of revenue decreased due to
the more efficient use of supplies.
 
 During
the nine months ended September 30, 2009 and 2008, we had $9,494,871 and
$11,787,678 in cost of sales, or 55.47% and 58.69% of sales revenues,
respectively. The cost of revenue as a percentage of revenue decreased due to
the more efficient use of supplies.
 
 Expenses
 
 We had
operating expenses of $923,247 and $3,305,434 for the three and nine months
ended September 30, 2009, respectively, compared to the operating expenses of
$357,812 and $1,165,336 for the same periods ended September 30, 2008,
respectively. The significant increase in operating expenses during the nine
months ended September 30, 2009 was due primarily to the professional and
consulting fee of $1,266,555 incurred in connection with the services rendered
for the plan of exchange transaction. In addition, we had non-cash consulting
expenses of $339,096 during the third quarter of 2009 as a result of 400,000
warrants (the “Warrants”) granted to an investor relations firm. The Warrants
are irrecoverable, non-cancelable and have an exercise price of $1.4 per share,
with piggy back registration rights, expire on September 1, 2010, the cost of
which was valued by using the Black-Scholes Option Pricing Model according to
ASC 718.
 
 Income
Taxes
 
 We had
income taxes of $669,142 and $1,450,737 for the three and nine months ended
September 30, 2009, respectively, compared to the income taxes of $521,751 and
$1,715,031 for the same periods ended September 30, 2008,
respectively.
 
 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. We have 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 Florida 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 period ended September 30, 2009, Wide Broad suffered from an operating loss
of $1,290,520 while generated an operating income of $23,800 for the period
ended September 30, 2008.
 
 The
PRC
 
 On March
16, 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China (the “New CIT Law”). The new CIT Law, among
other things, imposes a unified income tax rate of 25% for both domestic and
foreign invested. Starting from January 1, 2008, CHDITN is entirely subject to
the unified income tax rate of 25% on the taxable income under the New CIT
Law.
 
 Net Income
 
 We had
net income of $1,527,537 and $2,737,448 for the three and nine months ended
September 30, 2009, respectively, compared to the net income of $1,620,456 and
$5,181,752 for the same periods ended September 30, 2008, 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 decreased in the third quarter of 2009 by $92,919 compared to the same
period in 2008 was due primarily to the increase in sale revenue offset by the
non-cash consulting expenses of $339,096 incurred during the third quarter of
2009 as a result of 400,000 warrants (the “Warrants”) granted to an investor
relationships firm. The Warrants are irrecoverable, non-cancelable and have an
exercise price of $1.4 per share, with piggy back registration rights, expire on
September 1, 2010, the cost of which was valued by using the Black-Scholes
Option Pricing Model according to ASC 718.
 
 Our total
net income during the nine months ended September 30, 2009 decreased by
$2,444,304 compared to the same period ended September 30, 2008, which was due
primarily to the decrease in sales revenues by $2,968,399 and the increase in
operating expenses by $2,140,098.
 
 Impact
of Inflation
 
 We
believe that inflation has had a negligible effect on operations. We believe
that we can offset inflationary increases in the cost of operations by
increasing sales and improving operating efficiencies.
 
 Liquidity
and Capital Resources
 
 Cash
flows provided by operating activities were $1,948,811 and $4,325,124 for the
nine months ended September 30, 2009 and 2008, respectively. Positive cash flows
from operations for the nine months ended September 30, 2009 were due primarily
to the net income of $2,737,448, the increase in accounts payables by
$204,857, the increase in accrued liabilities and other payables by $212,022,
plus the increase in promissory notes payable by 705,000, partially offset by
the increases in accounts receivable by $2,430,154. Positive cash flows from
operations for the nine months ended September 30, 2008 were due primarily to
the net income of $5,181,752 and the collection in accounts receivable by
$462,970, partially offset by the increase in inventory by $462,721, and the
decrease in accounts payable by $821,376.
 
 Cash
flows used in investing activities were $2,649,189 and $5,054,670 for the nine
months ended September 30, 2009 and 2008, respectively. The cash flows used in
investments for both periods were due primarily to the payments to construction
in progress, which were $2,649,189 and $4,838,502 for the nine months ended
September 30, 2009 and 2008, respectively.
 
 Cash
flows provided by financing activities were $1,041,562 and $303,628 for the nine
months ended September 30, 2009 and 2008, respectively. Positive cash flows from
financing activities during the nine months ended September 30, 2009 were due
primarily to proceeds from net private placement of $180,000, a loan from a
related party in the amount of $1,349,528 and a bank loan in the amount of
$774,570, offset by the payments on bank loan of $1,262,536. Positive cash flows
from financing activities during the nine months ended September 30, 2008 were
due primarily to a bank loan in the amount of $2,153,208, offset by the payments
on bank loan of $1,137,665, plus the repayments to the loan from a related party
in the amount of $711,915.
 
 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 September 30, 2009 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.
 
 We had
cash of $611,669 on hand as of September 30, 2009. 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.
 
 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.
 
 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 aggressively marketing our products
and our concept.
 
 14
 Table of Contents
 
 ITEM 3. QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUTMARKET RISK
 
 The
information to be reported under this item is not required of smaller reporting
companies.
 
 ITEM
4. CONTROLS AND PROCEDURES.
 
 We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in reports filed under the Securities Exchange Act of
1934 (“Exchange Act”) is recorded, processed, summarized and reported within the
specified time periods. Our Chief Executive Officer and its Chief Financial
Officer (collectively, the “Certifying Officers”) are responsible for
maintaining our disclosure controls and procedures. The controls and procedures
established by us are designed to provide reasonable assurance that information
required to be disclosed by the issuer in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Commission’s rules and forms.
 
 As of the
end of the period covered by this report, the Certifying Officers evaluated the
effectiveness of our disclosure controls and procedures. Based on the
evaluation, the Certifying Officers concluded that our disclosure controls and
procedures were effective to provide reasonable assurance that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the applicable rules and forms, and that it is accumulated
and communicated to our management, including the Certifying Officers, as
appropriate to allow timely decisions regarding required
disclosure.
 
 The
Certifying Officers have also concluded, based on their evaluation of our
controls and procedures that as of September 30, 2009, our internal controls
over financial reporting are effective and provide a reasonable assurance of
achieving their objective.
 
 The
Certifying Officers have also concluded that there was no change in our internal
controls over financial reporting identified in connection with the evaluation
that occurred during our fourth fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
 
 ITEM 4T. CONTROLS AND
PROCEDURES
 
 (a) Conclusions
regarding disclosure controls and procedures. Disclosure controls and
procedures are the Company’s controls and other procedures that are designed to
ensure that information required to be disclosed by the Company in the reports
that the Company files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files
under the Exchange Act is accumulated and communicated to the Company’s
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
Management is responsible for establishing and maintaining adequate internal
control over financial reporting.
 
 Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-14(c) promulgated under the Exchange Act as of September 30,
2009, and, based on their evaluation, as of the end of such period, the our
disclosure controls and procedures were effective as of the end of the period
covered by the Quarterly Report,
 
 (b) Management’s
Report On Internal Control Over Financial Reporting. It is management’s
responsibilities to establish and maintain adequate internal controls over the
Company’s financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a
process designed by, or under the supervision of, the issuer’s principal
executive and principal financial officers and effected by the issuer’s
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of Consolidated Financial
Statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
 
 •           Pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the issuer;
and
 
 
 •           Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of Consolidated Financial Statements in accordance with generally
accepted accounting principles and that receipts and expenditures of the issuer
are being made only in accordance with authorizations of management of the
issuer; and
 
 
 •           Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the issuer’s assets that could have a
material effect on the Consolidated Financial Statements.
 
 As of the
end of the period covered by the Quarterly Report, an evaluation was carried out
under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our internal control over financial reporting.
 
 Management
assessed the effectiveness of our internal control over financial reporting as
of September 30, 2009. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework.
 
 Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, internal controls over financial
reporting were effective as of the end of the period covered by the
Report.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. All internal control systems, no matter
how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Because of the inherent
limitations of internal control, there is a risk that material misstatements may
not be prevented or detected on a timely basis by internal control over
financial reporting. However, these inherent limitations are known features of
the financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
 
 This
Quarterly Report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this Quarterly
Report.
 
 (c) Changes in
internal control over financial reporting. There were no changes in our
internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that
occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
 
 15
 Table of Contents
 
 PART II. OTHER
INFORMATION
 
 ITEM
1.      LEGAL PROCEEDINGS
 
 None.
 
 ITEM
1A. RISK FACTORS
 
 The
information to be reported under this item has not changed since it was
disclosed in the previously filed amendment to the Current report on Form 8-K/A,
dated August 31, 2009.
 
 ITEM
2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF PROCEEDS
 
 On August
18, 2009, we entered into an Offshore Stock Purchase Agreement (the “Stock
Purchase Agreement”) with a private investor, Mr. Zhang, Zijian (“Mr. Zhang”),
pursuant to which Mr. Zhang purchased 200,000 shares of restricted common stock
for an aggregate amount of $200,000, or $1.00 per share. As a result, Mr. Zhang
owns 0.97% of the issued and outstanding shares of our common stock. The
proceeds from the Stock Purchase Agreement were used to fund our working
capital.  These shares were sold pursuant to Regulation
S.
 
 On
September 22, 2009, we entered into an Investor Relations Consulting Agreement
(the “Consulting Agreement”) with an Investor Relations firm, pursuant to which
we granted 400,000 warrants priced at $1.40 per share, for the services rendered
in connection with management consulting, business advisory, shareholder
information and public relations. The warrants are irrecoverable, non-cancelable
with piggy back registration rights and were exempt from registration pursuant
to Regulation D.
 
 ITEM
3.      DEFAULTS UPON SENIOR SECURITIES
 
 None.
 
 ITEM
4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None.
 
 ITEM
5.      OTHER INFORMATION
 
 On June
16, 2009, the Board of Directors of the Company adopted a resolution approving a
four to one reverse split of our common stock. The reverse split combines the
Company’s outstanding Common Stock on the basis of 4 outstanding shares being
changed to 1 outstanding share. Each shareholder’s percentage ownership in the
Company (and relative voting power) will remain essentially unchanged as a
result of the reverse split. The reverse split took effective on July 24,
2009.
 
 ITEM
6. EXHIBITS
 
 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
 
 
 Reports on Form 8-K filed in
the first quarter of 2009
 
 (1)
                On
      July 24, 2009, we filed a current report in Form 8-K to announce a Plan of
      Exchange entered between and among us, Wide Broad Group Ltd., a company
      organized and existing under the laws of the British Virgin Islands (“Wide
      Broad”), Man Kwai Ming, an individual and Smart Approach Investments
      Limited, a British Virgin Islands corporation, each a “Wide Broad
      Shareholder”, Dongguan CHDITN Printing Co., Ltd., a company organized and
      existing under the laws of the People’s Republic of China (“CHDITN”), the
      shareholders of CHDITN and our Majority
  Shareholder.
 
 (2)
                On
      August 6, 2009, we filed a current report in Form 8-K to announce a press
      release discussing a proposed private placement by the
      Company.(3)
                On
      August 31, 2009, we filed an amendment to current report in Form 8-K/A to
      amend the current report in Form 8-K filed on July 24, 2009.
 Reports on Form 8-K filed
subsequent to the first quarter of 2009
 
 (1)
                On
      November 5, 2009, we filed a current report in Form 8-K to announce change
      in our certifying accountant.
 
 (2)
                  
                  (3)
                On
      November 6, 2009, we filed a current report in Form 8-K to announce change
      in our Chief Financial Officer.
                  
                  On November 17, 2009, we filed an amendment to the current
      report in Form 8-K/A to amend the current report in Form 8-K filed on
      November 6, 2009.
 
 16
 Table of Contents
 
 
 
 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:
      November 19, 2009
                By:
                /s/ Rui Sheng LiuRui
      Sheng Liu
                  President
      and Chief Executive Officer
 
 17
 Table of Contents
 
 
 INDEX
TO EXHIBITS
 
 Exhibit
      No.
                
                Description31.1
                
                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