UNITED
STATES


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 March 31, 2010




OR




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




For
the transition period from  to


Commission
File Number 000-04494
  CHINA
RUITAI INTERNATIONAL HOLDINGS CO., LTD.


(Exact
name of registrant as specified in its charter)




Delaware
            
            13-5661446(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer Identification No.)Wenyang
      Town, Feicheng City, ShanDong, China
            
            271603(Address
      of principal executive offices)
            
            (Zip
      Code)




(86) 538 3850
703


(Registrant’s
telephone number, including area code)




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




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Not
Applicable.




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 o
            
            Accelerated
      filer o
            
            Non-accelerated
      filer o
              (Do
      not check if a smaller reporting company)
            
            Smaller
      reporting company x




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




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: As of May 14, 2010, there were
outstanding 26,000,000 shares of the registrant’s common stock, par value
$0.001 per share.









China Ruitai International
Holdings, Inc.




FORM
10-Q




INDEX




PART
      I—FINANCIAL INFORMATIONItem
      1.
              
              Financial
      Statements
              
              1Consolidated
      Balance Sheets
              
              1Consolidated
      Statements of Income and Comprehensive Income
              
              2Consolidated
      Statements of Cash Flows
              
              3Notes
      to Unaudited Financial Statements
              
              4Item
      2.
              
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              13Item
      3.
              
              Quantitative
      and Qualitative Disclosures About Market Risk
              
              16Item
      4T.
              
              Controls
      and Procedures
              
              16PART
      II—OTHER INFORMATIONItem
      1.
              
              Legal
      Proceedings
              
              17Item
      1A.
              
              Risk
      Factors
              
              17Item
      2.
              
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              
              17Item
      3.
              
              Defaults
      Upon Senior Securities
              
              17Item
      4.
              
              Submission
      of Matters to a Vote of Security Holders
              
              17Item
      5.
              
              Other
      Information
              
              17Item
      6.
              
              Exhibits
              
              17Signatures
              
              18










PART
I—FINANCIAL INFORMATION




The
statements contained in this quarterly report on Form 10-Q, including under
the section titled “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and other sections of this quarterly report, include
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including, without limitation, statements
regarding our or our management’s expectations, hopes, beliefs, intentions or
strategies regarding the future. The words “believe,” “may,” “will,” “estimate,”
“continue,” “anticipate,” “intend,” “expect,” “plan” and similar expressions may
identify forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. The forward-looking statements
contained in this quarterly report are based on our current expectations and
beliefs concerning future developments and their potential effects on us. There
can be no assurance that future developments affecting us will be those that we
have anticipated. These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond our control) or other assumptions that
may cause actual results or performance to be materially different from those
expressed or implied by these forward-looking statements. Should one or more of
these risks or uncertainties materialize, or should any of our assumptions prove
incorrect, actual results may vary in material respects from those projected in
these forward-looking statements. We undertake no obligation to update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable securities laws.
Unless the content otherwise requires, all references to “we,” “us,” the
“Company” or “China Ruitai” in this Quarterly Report on Form 10-Q refers to
China Ruitai International Holdings Co., Ltd.




ITEM 1.
            Financial
      Statements




CHINA
RUITAI INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARIES


Consolidated
Balance Sheets





March
      31,
              2010
            
            
            December
      31,
              2009(Unaudited)ASSETSCurrent
      Assets:Cash
      and cash equivalents
            
            $
            7,953,190
            
            
            $
            10,174,528Restricted
      cash
            
            
            32,274,000
            
            
            
            33,054,466Accounts
      receivable, net
            
            
            7,665,940
            
            
            
            4,098,729Notes
      receivable
            
            
            7,731,215
            
            
            
            7,153,450Advance
      to suppliers
            
            
            1,570,685
            
            
            
            1,649,685Inventories
            
            
            7,581,269
            
            
            
            8,132,681Other
      receivables
            
            
            499,085
            
            
            
            126,657Total
      current assets
            
            
            65,275,384
            
            
            
            64,390,196Property
      and equipment, net
            
            
            13,503,313
            
            
            
            13,204,825Commercial
      leasing assets, net
            
            
            36,607,620
            
            
            
            36,710,934Land
      use rights, net
            
            
            4,976,737
            
            
            
            4,988,817Long
      term investment
            
            
            -
            
            
            
            888,960$
            120,363,054
            
            
            $
            120,183,732LIABILITIES
      AND EQUITYCurrent
      liabilities:Short-term
      bank loans
            
            $
            25,370,298
            
            
            $
            27,195,342Accounts
      payable
            
            
            6,964,910
            
            
            
            6,175,266Notes
      payable
            
            
            48,557,700
            
            
            
            50,020,476Advance
      from customers
            
            
            619,812
            
            
            
            127,419Due
      to related party- current portion
            
            
            1,748,793
            
            
            
            2,979,171Income
      tax payable
            
            
            5,574,445
            
            
            
            5,277,239Other
      payables
            
            
            4,101,386
            
            
            
            2,900,942Loan
      from employees
            
            
            1,362,186
            
            
            
            1,476,292Total
      current liabilities
            
            
            94,299,530
            
            
            
            96,152,147Due
      to related party- long-term portion
            
            
            1,992,107
            
            
            
            1,986,114Total
      Liabilities
            
            
            96,291,637
            
            
            
            98,138,261Equity:Common
      stock ($.001 par value; 50,000,000 shares authorized, 26,000,000 shares
      issued and outstanding as of March 31, 2010 and December 31,
      2009)
            
            
            26,000
            
            
            
            26,000Additional
      paid-in capital
            
            
            2,908,171
            
            
            
            2,908,171Statutory
      reserve
            
            
            1,369,652
            
            
            
            1,369,652Retained
      earnings
            
            
            18,118,760
            
            
            
            16,179,230Accumulated
      other comprehensive income
            
            
            1,414,398
            
            
            
            1,347,371Total
      Equity of the Company’s Shareholders
            
            
            23,836,981
            
            
            
            21,830,424Noncontrolling
      interest
            
            
            234,436
            
            
            
            215,047Total
      Equity
            
            
            24,071,417
            
            
            
            22,045,471$
            120,363,054
            
            
            $
            120,183,732




See
notes to consolidated financial statements.




1




CHINA
RUITAI INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARIES


Consolidated
Statements of Income and Comprehensive Income





Three
      months ended
                March
      31,2010
            
            
            2009(unaudited)
            
            
            (unaudited)Sales
            
            $
            10,238,256
            
            
            $
            8,231,180Cost
      of sales
            
            
            6,929,872
            
            
            
            4,976,541Gross
      profit
            
            
            3,308,384
            
            
            
            3,254,639Operating
      expenses:General
      and administrative expenses
            
            
            284,252
            
            
            
            815,233Selling
      expenses
            
            
            359,075
            
            
            
            288,977Total
      operating expense
            
            
            643,327
            
            
            
            1,104,210Commercial
      leasing income
            
            
            303,183
            
            
            
            -Cost
      of commercial leasing
            
            
            (214,007
            )
            
            
            -Income
      from operations
            
            
            2,754,233
            
            
            
            2,150,429Other
      income/(expense)Interest
      income
            
            
            391,180
            
            
            
            542,403Interest
      expense
            
            
            (578,487
            )
            
            
            (765,551
            )Other
      income/(expense)
            
            
            38,295
            
            
            
            (41,983
            )Income
      before income tax expense
            
            
            2,605,221
            
            
            
            1,885,298Income
      tax expense
            
            
            646,302
            
            
            
            471,326Net
      income
            
            
            1,958,919
            
            
            
            1,413,972Less:
      Net income attributable to the noncontrolling interest
            
            
            19,389
            
            
            
            14,140Net
      income attributable to China Ruitai InternationalHolding
      Co., Ltd.
            
            
            1,939,530
            
            
            
            1,399,832Other
      comprehensive incomeForeign
      Currency Translation Adjustment
            
            
            67,027
            
            
            
            20,012Comprehensive
      income
            
            $
            2,006,557
            
            
            $
            1,419,844Earnings
      per shareBasic
      and diluted
            
            $
            0.07
            
            
            $
            0.05Weighted
      average number of common shares outstandingBasic
      and diluted
            
            
            26,000,000
            
            
            
            26,000,000





See
notes to consolidated financial statements.




2




CHINA
RUITAI INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARIES


Consolidated
Statements of Cash Flows





Three
      months ended
                March
      31,2010
            
            
            2009(unaudited)
            
            
            (unaudited)Cash
      flows from operating activities:Net
      income
            
            $
            1,958,919
            
            
            $
            1,413,972Adjustments
      to reconcile net income to net cash provided by operation
      activitiesDepreciation
            
            
            564,625
            
            
            
            311,395Amortization
      of land use rights
            
            
            27,122
            
            
            
            26,746Stock
      based compensation
            
            
            -
            
            
            
            121,000Changes
      in operating assets and liabilities:Restricted
      cash
            
            
            879,900
            
            
            
            (9,931,952
            )Accounts
      receivable
            
            
            (3,553,625
            )
            
            
            (1,163,972
            )Notes
      receivable
            
            
            (556,011
            )
            
            
            2,607,913Advance
      to suppliers
            
            
            83,947
            
            
            
            -Inventories
            
            
            575,753
            
            
            
            52,815Other
      receivables
            
            
            (371,918
            )
            
            
            (949,364
            )Accounts
      payable
            
            
            770,749
            
            
            
            900,750Notes
      payable
            
            
            (1,613,150
            )
            
            
            9,055,602Advance
      from customers
            
            
            491,841
            
            
            
            170Income
      tax payable
            
            
            281,188
            
            
            
            215,819Other
      payables
            
            
            1,191,228
            
            
            
            6,572Net
      cash provided by operating activities
            
            
            730,568
            
            
            
            2,667,466Cash
      flows from investing activities:Purchase
      of property and equipment
            
            
            (609,265
            )
            
            
            (287,450
            )Due
      from a related party
            
            
            -
            
            
            
            (5,084,785
            )Net
      cash used in investing activities
            
            
            (609,265
            )
            
            
            (5,372,235
            )Cash
      flows from financing activities:Proceeds
      from bank loans
            
            
            6,003,851
            
            
            
            -Repayment
      of bank loans
            
            
            (7,910,301
            )
            
            
            (730,293
            )Due
      to a related party
            
            
            (347,609
            )
            
            
            -Loan
      from employees
            
            
            (118,513
            )
            
            
            238,785Net
      cash used in financing activities
            
            
            (2,372,572
            )
            
            
            (491,508
            )Effect
      of foreign exchange rate changes
            
            
            29,931
            
            
            
            6,142Net
      decrease in cash and cash equivalent
            
            
            (2,251,269
            )
            
            
            (3,196,277
            )Cash
      and cash equivalent- beginning of period
            
            
            10,174,528
            
            
            
            5,319,456Cash
      and cash equivalent-end of period
            
            $
            7,953,190
            
            
            $
            2,129,321Supplementary
      cash flow information:Cash
      paid for interest expense
            
            $
            578,487
            
            
            $
            637,819Cash
      paid for income tax
            
            $
            365,239
            
            
            $
            220,524




During
the three months ended March 31, 2010, the Company transferred its
long-term investment of $888,960 in Wenyang Xinyong Bank to Shandong Ruitai to
reduce its loan from Shandong Ruitai with the same amount. (See Note
9)




See
notes to consolidated financial statements




3




CHINA
RUITAI INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARIES


Notes
to Unaudited Consolidated Financial Statements




1.
ORGANIZATION AND DISCRIPTION OF BUSINESS




China
Ruitai International Holdings Co., Ltd. (“China Ruitai” or the “Company”) was
initially organized under the laws of the State of Delaware on November 15, 1955
as Inland Mineral Resources Corp. The Company subsequently changed its name to
Parker-Levitt Corporation, and in 1997 changed its name to Commercial Property
Corporation, and in 2006 changed its name to Shandong Ruitai Chemical Co., Ltd.
On March 12, 2007, the Company changed its name to China Ruitai International
Holdings Co., Ltd. On February 26, 2007, the Company changed its fiscal year end
from October 31 to December 31.




On August
29, 2007, the Company entered into a Share Exchange Agreement with Pacific
Capital Group Co., Ltd., (“Pacific Capital Group”), a corporation incorporated
under the laws of the Republic of Vanuatu, and the stockholders of Pacific
Capital Group (the “Stockholders”). Pursuant to the Share Exchange Agreement,
the Stockholders agreed to transfer all of the issued and outstanding shares of
common stock in Pacific Capital Group to the Company in exchange for the
issuance of an aggregate of 22,645,348 shares of the Company’s common stock to
the Stockholders, thereby causing Pacific Capital Group and Pacific Capital
Group’s majority-owned operating subsidiary, TaiAn RuiTai Cellulose Co., Ltd.
(“TaiAn Ruitai”), a Chinese limited liability company, to become wholly-owned
and majority owned-subsidiaries, respectively, of the Company. The parties
closed the share exchange contemplated by the Share Exchange Agreement on
November 8, 2007.




Pacific
Capital Group was incorporated on November 23, 2006 under the laws of the
Republic of Vanuatu as a holding company, for the purposes of seeking and
consummating a merger or acquisition with a business entity.  On April 26,
2007, following the approval by the relevant governmental authorities in the
People’s Republic of China (the “PRC”), Pacific Capital Group acquired a 99%
ownership interest in TaiAn Ruitai, which was formed in the PRC on November 10,
1999 by $2,391,840. As a result of the transaction, TaiAn Ruitai became a 99%
majority-owned subsidiary of Pacific Capital Group.




TaiAn
Ruitai is the only one of these affiliated companies that is engaged in business
operations. China RuiTai and Pacific Capital Group are holding companies, whose
business is to hold an equity ownership interest in TaiAn Ruitai. TaiAn Ruitai
is engaged in the production, sales, and exportation of deeply processed
chemicals, with a primary focus on non-ionic cellulose ether products. TaiAn
Ruitai’s assets exist solely in the PRC, and its revenues are derived from its
operations therein.




2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES




Basis
of presentation




The
accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) and include the financial statements of the
Company and its subsidiaries.




The
accompanying unaudited consolidated financial statements as of March 31, 2010,
and for the three months ended March 31, 2010 and 2009 have been prepared in
accordance with GAAP for interim financial information and with the instructions
to Form 10-Q and Rule 8-03 of Regulation S-X applicable to smaller reporting
companies. In the opinion of management, all adjustments necessary for a fair
statement of the results for the interim periods have been made, and all
adjustments are of a normal recurring nature (or a description of the nature and
amount of any adjustments other than normal recurring adjustments). The
unaudited consolidated interim financial statements should be read in
conjunction with the Company’s audited consolidated financial statements and
notes thereto for the year ended December 31, 2009 that are included in the
Company’s 2009 annual report on 10-K filed with the Securities and Exchange
Commission.




4




Principle
of consolidation




The
consolidated financial statements include China Ruitai International Co., Ltd.,
Pacific Capital Group Co., Ltd. and TaiAn RuiTai Cellulose Co., Ltd. All
inter-company transactions and balances have been eliminated in
consolidation.




Use
of Estimates




The
preparation of unaudited interim consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported
and disclosed in the financial statements and the accompanying notes. Actual
results could differ materially from these estimates. Management evaluates the
estimates on an ongoing basis, including those related to accounts receivable
and useful lives of property and equipment, fair values of warrant to purchase
our common stock, and income taxes. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities.




Recently
issued accounting pronouncements




In
January 2010, the FASB issued the following ASC Updates:




ASU No.
2010-01—Equity (Topic 505): Accounting for Distributions to Shareholders with
Components of Stock and Cash. This Update clarifies that the stock portion of a
distribution to shareholders that allows them to elect to receive cash or stock
with a potential limitation on the total amount of cash that all shareholders
can elect to receive in the aggregate is considered a share issuance that is
reflected in EPS prospectively and is not a stock dividend for purposes of
applying Topics 505 and 260 (Equity and Earnings Per Share). The amendments in
this Update are effective for interim and annual periods ending on or after
December 15, 2009 with retrospective application.




ASU No.
2010-02—Consolidation (Topic 810): Accounting and Reporting for Decreases in
Ownership of a Subsidiary. This Update amends ASC 810 subtopic 10 and related
guidance to clarify that the scope of the decrease in ownership provisions of
the Subtopic and related guidance applies to (i) a subsidiary or group of assets
that is a business or nonprofit activity; (ii) a subsidiary that is a business
or nonprofit activity that is transferred to an equity method investee or joint
venture; and (iii) an exchange of a group of assets that constitutes a business
or nonprofit activity for a non-controlling interest in an entity, but does not
apply to: (i) sales of in substance real estate; and (ii) conveyances of
petroleum and gas mineral rights. The amendments in this Update are effective
beginning in the period that an entity adopts FAS 160 (now included in ASC 810
subtopic 10).




ASU No.
2010-05—Compensation—Stock Compensation (Topic 718): Escrowed Share Arrangements
and the Presumption of Compensation. This Update simply codifies EITF Topic
D-110, “Escrowed Share Arrangements and the Presumption of Compensation and does
not change any existing accounting standards.




ASU No.
2010-06—Fair Value Measurements and Disclosures (Topic 820): Improving
Disclosures about Fair Value Measurements.  This Update amends ASC 820
subtopic 10 that requires new disclosures about transfers in and out of Levels 1
and 2 and activity in Level 3 fair value measurements. This Update also amends
ASC 820 subtopic 10 to clarify certain existing disclosures. The new disclosures
and clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures
about purchases, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measurements, which are effective for fiscal
years beginning after December 15, 2010.




The
Company expects that the adoption of the above updates issued in January 2010
will not have any significant impact on its financial position and results of
operations.




5




3. ACCOUNTS
RECEIVABLE, NET




Accounts
receivable consist of receivables for sales of product on credit. Accounts
receivable as of March 31, 2010 and December 31, 2009 was $7,665,940 and
$4,098,729 respectively.





March
      31,
                2010
            
            
            December
      31,
                2009(Unaudited)Accounts
      receivable
            
            $
            9,217,616
            
            
            $
            5,705,298Less:
      Allowance for doubtful accounts
            
            
            (1,551,676
            )
            
            
            (1,606,569
            )$
            7,665,940
            
            
            $
            4,098,729




Allowance
for doubtful accounts movement for three months ended March 31,
2010:





December
      31,
                2009
            
            
            Provision
            
            
            Reverse
            
            
            Write-off
            
            
            March
      31,
                2010Allowance
      for doubtful accounts
            
            $
            (1,606,569
            )
            
            $
            (61,160
            )
            
            $
            116,053
            
            
            $
            -
            
            
            $
            (1,551,676
            )




4. NOTES
RECEIVABLE




Notes
receivables of $7,731,215 as of March 31, 2010 and $7,153,450 as of December 31,
2009 represents bank acceptance notes the Company received from customers for
sales of products. The notes are with maturity duration of 3 to 6 months, and
are accepted by banks.




5. INVENTORIES




Inventories
on March 31, 2010 and December 31, 2009 consisted of the following:





March
      31,
            
            
            December
      31,2010
            
            
            2009(Unaudited)Raw
      materials
            
            $
            2,949,060
            
            
            $
            2,467,368Work
      in progress
            
            
            952,274
            
            
            
            931,629Finished
      goods
            
            
            3,679,935
            
            
            
            4,733,684$
            7,581,269
            
            
            $
            8,132,681




6. PROPERTY
AND EQUIPMENT, NET




Property
and equipment as of March 31, 2010 and December 31, 2009 consisted of the
following:





March
      31,
                2010
            
            
            December
      31,
                2009(Unaudited)Buildings
            
            $
            8,326,420
            
            
            $
            8,296,979Machinery
      and equipment
            
            
            10,194,068
            
            
            
            9,653,846Office
      equipment and furniture
            
            
            76,811
            
            
            
            76,589Motor
      vehicles
            
            
            466,473
            
            
            
            465,069Construction
      in progress
            
            
            434,084
            
            
            
            339,156Less:
      Accumulated depreciation
            
            
            (5,994,543
            )
            
            
            (5,626,814
            )$
            13,503,313
            
            
            $
            13,204,825




The
depreciation expenses were $350,618 and $311,395 for the three months ended
March 31, 2010 and 2009 respectively.




6




7. LAND
USE RIGHTS, NET




Land use
rights, net consist of the following:





March
      31,
                2010
            
            
            December
      31,
                2009(Unaudited)Land
      use right
            
            
            5,426,275
            
            
            
            5,409,952Less:
      Accumulated amortization(449,538
            )
            
            
            (421,135
            )$
            4,976,737
            
            
            $
            4,988,817




Amortization
expenses were $27,122 and $26,746 for the three months ended March 31, 2010 and
2009, respectively.




8. COMMERCIAL
LEASING ASSETS




On
December 31, 2009, Shandong Ruitai Chemicals Co., Ltd.(“Shandong Ruitai”) and
TaiAn Ruitai entered into a Set-Off Agreement to settle the outstanding balance
Shandong Ruitai owed to TaiAn Ruitai. Pursuant to the terms of the Set-Off
Agreement, TaiAn Ruitai agreed to allow Shandong Ruitai to repay a total of
$31,745,649 in return for Shandong Ruitai’s transfer of 100% of its ownership
interest in real estate property located in Beijing, China, commonly known as
Taishan Building or Building No. 36, Xibahe Dongli, Chaoyang District, Beijing,
China (“Taishan Building” or the “Property”). In conjunction with the Set-Off
Agreement, the parties engaged an appraisal firm certified by local government
to perform an independent appraisal of the Property.  The firm appraised
the fair market value of the Property as of December 31, 2009 to be
$36,710,934.




Taishan
Building is a residential building with 47 apartments and is entirely rented to
Beijing Shengmei Hotel Management Company, operated as a budget hotel, for a
period ending March 31, 2028. The Company treats Taishan Building as commercial
leasing assets and provides depreciation over 43 years At March 31, 2010, the
net carrying value of the building was $36,607,620.




9. LONG
TERM INVESTMENT




The
long-term investment of $888,960 as of December 31, 2009 represented equity
investments in the Wenyang Xinyong Bank, a local state owned bank in Wenyang
County, Shandong Province, PRC. The long-term investment represented
approximately 2% of the equity ownership. The investments are transferable in
accordance with the laws of the PRC. The investments were carried with cost
method. The Company did not purchase any additional long-term investment in the
three months ended March 31, 2010 and 2009, respectively. Dividend income on
these investments is recorded when received. There were no dividend received in
the three months ended March 31, 2010 and 2009, respectively.




On March
31, 2010, the Company signed Investment Transfer Agreement (“the Agreement”)
with Shandong Ruitai. Pursuant to the Agreement, long-term investment in Wenyang
Xinyong Bank was transferred to Shandong Ruitai at its carrying value of
$888,960. As an exchange, Shandong Ruitai reduced its balance of loan to the
Company accordingly.




7




10.
SHORT-TERM BANK LOANS




Short-term
bank loans at March 31, 2010 and December 31, 2009 consist of the
following:





March
      31,
                2010
            
            
            December
      31,
                2009(Unaudited)Loan
      from China Citic Bank Qingdao Branch, with an interest rate of 5.841%,
      guaranteed by Shandong Ashide Chemicals Co., Ltd., matured on September
      21, 2010
            
            
            2,934,000
            
            
            
            2,925,174Loan
      from China Communication Bank Tai’an Branch, with an interest rate of
      5.841%, guaranteed by Shandong Ashide Chemicals Co., Ltd. , matured on
      June 11, 2010
            
            
            1,467,000
            
            
            
            1,462,587Loan
      from Agricultural Bank of China Wenyang Branch, with an interest rate of
      6.903%, guaranteed by Feicheng Golden Dragon Co., Ltd. , matured on May
      28, 2010
            
            
            2,934,000
            
            
            
            2,925,174Loan
      from Bank of China Feicheng Branch, with an interest rate of 5.31%,
      guaranteed by Shandong Ashide Chemicals, maturing on May 25,
      2010
            
            
            1,026,900
            
            
            
            1,023,811Loan
      from Bank of China Feicheng Branch, with an interest rate of 5.31%,
      guaranteed by Shandong Ashide Chemicals Co., Ltd., maturing on June 1,
      2010
            
            
            1,320,300
            
            
            
            1,316,329Loan
      from Bank of China Feicheng Branch, with an interest rate of 5.841%,
      guaranteed by Shandong Ashide Chemicals Co., Ltd.  , maturing on
      April 22, 2010
            
            
            1,467,000
            
            
            
            1,462,587Loan
      from Bank of China Feicheng Branch, with an interest rate of 5.31%,
      guaranteed by Shandong Ashide Chemicals Co., Ltd., maturing on June 13,
      2010
            
            
            1,467,000
            
            
            
            1,462,587Loan
      from Bank of China Feicheng Branch, with an interest rate of 5.31%,
      guaranteed by Shandong Ashide Chemicals Co., Ltd., maturing on March 9,
      2011
            
            
            2,200,500
            
            
            
            -Loan
      from Feicheng Rural Credit Cooperatives, with an interest rate of 5.31%,
      guaranteed by Shandong Juyuan Mining Group Co., Ltd and the Company’s
      shareholder Lv Xingfu, maturing on May 28, 2010
            
            
            880,200
            
            
            
            877,552Loan
      from Feicheng Rural Credit Cooperatives, with an interest rate of 5.31%,
      guaranteed by Shandong Juyuan Mining Group Co., Ltd and the Company’s
      shareholder Lv Xingfu, maturing on January 19, 2011
            
            
            1,120,788
            
            
            
            -Loan
      from Feicheng Rural Credit Cooperatives, with an interest rate of 5.31%,
      guaranteed by Shandong Juyuan Mining Group Co., Ltd and the Company’s
      shareholder Lv Xingfu, maturing on January 19, 2011
            
            
            1,217,610
            
            
            
            -Loan
      from Feicheng Rural Credit Cooperatives, with an interest rate of 5.31%,
      guaranteed by Shandong Juyuan Co., Ltd., and the Company’s shareholder Lv
      Xingfu , maturing on January 18, 2011
            
            
            1,467,000
            
            
            
            -Loan
      from Shanghai Pudong Development Bank Jinan Branch, with an interest rate
      of 5.31%, guaranteed by Shandong Ashide Chemicals Co., Ltd. , maturing on
      Augus 20, 2010
            
            
            2,934,000
            
            
            
            2,925,174Loan
      from Shanghai Pudong Development Bank Jinan Branch, with an interest rate
      of 5.31%, guaranteed by Shandong Ashide Chemicals Co., Ltd. , maturing on
      September 3, 2010
            
            
            2,934,000
            
            
            
            2,925,174Loan
      from Bank of China Feicheng Branch, with an interest rate of 5.841%,
      guaranteed by Shandong Ashide Chemicals Co., Ltd., maturing on January 28,
      2010
            
            
            -
            
            
            
            438,776Loan
      from Bank of China Feicheng Branch, with an interest rate of 5.841%,
      guaranteed by Shandong Ashide Chemicals Co., Ltd., maturing on March 24,
      2010
            
            
            -
            
            
            
            877,552Loan
      from Bank of China Feicheng Branch, with an interest rate of 5.841%,
      guaranteed by Shandong Ashide Chemicals Co., Ltd., maturing on March 17,
      2010
            
            
            -
            
            
            
            1,316,328Loan
      from Bank of China Feicheng Branch, with an interest rate of 5.841%,
      guaranteed by Shandong Ashide Chemicals Co., Ltd., maturing on February
      26, 2010
            
            
            -
            
            
            
            1,462,587Loan
      from Feicheng Rural Credit Cooperatives, with an interest rate of 5.31%,
      guaranteed by Shandong Juyuan Mining Group Co., Ltd and the Company’s
      shareholder Lv Xingfu, maturing on January 18, 2010
            
            
            -
            
            
            
            1,117,416Loan
      from Feicheng Rural Credit Cooperatives, with an interest rate of 5.31%,
      guaranteed by Shandong Juyuan Mining Group Co., Ltd and the Company’s
      shareholder Lv Xingfu, maturing on January 24, 2010
            
            
            -
            
            
            
            1,213,947Loan
      from Feicheng Rural Credit Cooperatives, with an interest rate of 5.31%,
      guaranteed by Shandong Juyuan Mining Group Co., Ltd and the Company’s
      shareholder Lv Xingfu, maturing on January 17, 2010
            
            
            -
            
            
            
            1,462,587$
            25,370,298
            
            
            $
            27,195,342




The
interest expenses for these bank loans were $387,503 and $409,837 for the three
months ended March 31 2010 and 2009. The Weighted average interest rates for
these bank loans were 5.6170% and 5.6755% at March 31, 2010 and 2009,
respectively.




8




11. RELATED
PARTY BALANCE TRANSACTIONS AND BALANCES




Purchase




The
Company purchases hot steam from Shandong Ruitai Chemicals Co., Ltd.(“Shandong
Ruitai”) which is owned by Mr. Xingfu Lv, the President, and Mr. Dianming Ma,
the CEO of the Company. The Company purchased hot steam of $1,158,975 and
$635,119 from Shandong Ruitai for the three months ended March 31, 2010 and
2009, respectively. The
amount of the purchased hot steam was either included in the balance of
inventory as of the period end or included in the amount of cost of sales for
the period.  It is impractical for the Company to show separately how
much the related party purchase amount was distributed to these two
accounts.




Sale
of long term investment




The
long-term investment of $888,960 as of December 31, 2009 represented equity
investments in the Wenyang Xinyong Bank, a local state owned bank in Wenyang
County, Shandong Province, PRC. The long-term investment represented
approximately 2% of the equity ownership. The investments are transferable in
accordance with the laws of the PRC. The investments were carried with cost
method. The Company did not purchase any additional long-term investment in the
three months ended March 31, 2010 and 2009, respectively. Dividend income on
these investments is recorded when received. There were no dividend received in
the three months ended March 31, 2010 and 2009, respectively.




9




On March
31, 2010, the Company signed Investment Transfer Agreement (“the Agreement”)
with Shandong Ruitai. Pursuant to the Agreement, long-term investment in Wenyang
Xinyong Bank was transferred to Shandong Ruitai at its carrying value of
$888,960. As an exchange, Shandong Ruitai reduced its balance of loan to the
Company accordingly.




Due
to related party




On
December 31, 2009, the Company and Shadong Ruitai signed a Set-Off Agreement,
pursuant which, Shadong Ruitai agrees that the Company may repay $4,965,285
within two years, and $1,992,107 could be repaid after one year. The interest
shall be calculated at a rate of 7.2% per annum.




The
balance of amount due to related party was as follows:





March
      31,
                2010
            
            
            December
      31,
                2009(Unaudited)Due
      from Shandong Ruitai-current portion
            
            $
            1,748,793
            
            
            $
            2,979,171Due
      from Shandong Ruitai-long-term portion
            
            
            1,992,107
            
            
            
            1,986,114Total
            
            $
            3,740,900
            
            
            $
            4,965,285




12. NOTES
PAYABLE




The
Company issued certain notes payable to suppliers which are guaranteed by the
banks. These notes payable were issued as replacements of the accounts payable.
The terms of these notes payable vary depending on the negotiations with the
suppliers. Typical terms are six months. On the maturity dates, the note holders
present these notes to the banks to draw cash based on the note amounts.
The Company is subject to a bank fee of 0.05% on notes payable
amounts.




For
issuance of the notes by the banks, the Company is required to make a cash
deposit Between 50% and 100% of the face amount of the notes in the banks
without withdrawal until the notes are settled. Restricted cash for this purpose
amounted to $32,274,000 and $33,054,466 as of March 31, 2010 and December 31,
2009, respectively.




13. COMMERCIAL
LEASING INCOME AND COST OF COMMERCIAL LEASING




Taishan
Building is a residential building with 47 apartments and is entirely rented to
Beijing Shengmei Hotel Management The Company operated as a budget hotel for a
period ending March 31, 2028. The rental income $303,183 was treated as
commercial leasing income and depreciation expense $214,007 was recorded as cost
of commercial leasing.




14. INCOME
TAXES




The tax
payables balance of $5,574,445 represents the income tax accrual of TaiAn Ruitai
, and TaiAn Ruitai is subject to PRC income tax at a rate of 25%.




Income
tax expense of $646,302 and $471,326 for the three months ended March 31, 2010
and 2009, respectively, represents PRC current income taxes.




10




The
Company has not recorded tax provision for U.S. and Vanuatu tax purposes as they
have no assessable profits arising in or derived from United States or
Vanuatu.




The
Company has a deferred tax asset on net operating losses of approximately
$184,280 as of March 31, 2010. The ultimate realization of deferred tax
assets depends on the generation of future taxable income during the periods in
which those net operating losses are available. The Company considers projected
future taxable income and tax planning strategies in making its assessment. At
present, the Company does not have a sufficient operation in the United States
to conclude that it is more-likely-than-not that the Company will be able to
realize all of its tax benefits in the near future and therefore a valuation
allowance of $184,280 was established for the full value of the deferred tax
asset.




A
valuation allowance will be maintained until sufficient positive evidence exists
to support the reversal of any portion or all of the valuation allowance. Should
the Company start operation in the United States in future periods with
supportable trend, the valuation allowance will be reversed
accordingly.




15. CONCENTRATIONS
AND CREDIT RISKS




At March
31, 2010 and December 31, 2009, the Company had a credit risk exposure of cash
in banks of $7,953,190 and $10,174,528 respectively that is uninsured by the
government authority. To limit exposure to credit risk relating to deposits, the
Company primarily places cash deposits only with large financial institution in
the PRC with acceptable credit rating.




The
Company’s operations are carried out in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC as well as by the general
state of the PRC’s economy. The business may be influenced by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of
taxation, among other things.




Major
Customers




During
the three months ended March 31, 2010 and 2009, the Company’s four largest
customers together accounted for 27% and 31%, respectively, of the Company’s net
revenue.




Major
Suppliers




During
the three months ended March 31, 2010 and 2009, the Company’s four largest
suppliers together accounted for 51% and 52%, respectively, of the Company’s
total purchases.




16. WARRANT




During
March 2008 the Company engaged a consultant to conduct a program of investor
relations activities, for a primary period of twelve months ended February 28,
2009, and continue on a month-to-month basis thereafter upon mutual consent. The
terms of the agreement are for the consultant to receive a cash payment per
month plus a warrant to purchase 150,000 shares of the Company’s restricted
common stock at a price of $3.05 per share. The warrant has a term of four (4)
years and is vested 50% on March 1, 2008 and 50% on September 30, 2008. The
Management valued the warrant at $1.16 per share using the Black-Schole pricing
model with assumptions summarized below, for a total of $174,000, which will be
amortized over the prospective beneficial period.





Grant
      Date
            
            
            Exercise
            
            
            
            Risk
      Free
            
            
            ExpectedStock
      Price
            
            
            Price
            
            Warrant
      Life
            
            Interest
      Rate
            
            
            Volatility$
            2.90
            
            
            $
            3.05
            
            4.0
      years
            
            
            2.00
            %
            
            
            51
            %




Risk free
interest rate: Current interest rate of short-dated government bonds such as
discount rate on U.S. Government Treasury Bills with 30 days left until
maturity.




11




Volatility:
51% is the volatility of the Company’s common stock price October 9, 2007
through March 3, 2008, which is the only available period for our common stocks
price quoted in the OTCBB at the time when we valued the cost of the
warrant.




Warrant
costs charged to operation as consultant fees for the three months ended March
31, 2010 and 2009 were $0 and $29,000, respectively.




On May
19, 2008, the Company engaged a consultant to as its exclusive investment banker
and agent for a one-year period ended May 19, 2009, and subject to cancellation
by thirty (30) days written notice by certified mail. One of the compensation to
the consultant is to issue the consultant a warrant to purchase 200,000 shares
of the Company’s common stock at a price of $4.00 per share. The warrant has a
term of five (5) years and was issued on May 19, 2008. The Management valued the
warrant at $1.84 per share using the Black-Schole pricing model with assumptions
summarized below, for a total of $368,000, which will be amortized over the
prospective beneficial period.





Grant
      Date
            
            
            Exercise
            
            
            
            Risk
      Free
            
            
            ExpectedStock
      Price
            
            
            Price
            
            Warrant
      Life
            
            Interest
      Rate
            
            
            Volatility$
            4.00
            
            
            $
            4.00
            
            5.0
      years
            
            
            2.00
            %
            
            
            51
            %




Risk free
interest rate: Current interest rate of short-dated government bonds such as
discount rate on U.S. Government Treasury Bills with 30 days left until
maturity.




Volatility:
51% is the volatility of our common stock price October 9, 2007 through May 19,
2008, which is the only available period for our co cost of the
warrant.




Warrant
costs charged to operation as consultant fees for the three months ended March
31, 2010 and 2009 were $0 and $92,000, respectively.




17.
EARNINGS PER SHARE


The
following table sets forth the computation of basic and diluted earnings per
share for the periods presented:
  Three
      months ended
                March
      31,2010
              
              
              2009Numerator
      used in basic net income per share:
              
              (unaudited)
              
              
              (unaudited)Net
      income attribute to China Ruitai International
                Holding
      Co., Ltd
              
              $
              1,939,530
              
              
              $
              1,399,832Shares
      (denominator):Weighted
      average common shares outstanding
              
              
              26,000,000
              
              
              
              26,000,000Plus:
      weighted average incremental shares from
                assumed exercise
      of options
              
              
              -
              
              
              
              -WWeighted
      average common shares outstanding
                used
      in computing diluted net income per common
                share
              
              
              26,000,000
              
              
              
              26,000,000Earnings
      per ordinary share-basic and diluted
              
              $
              0.07
              
              
              $
              0.05
  As of
March 31, 2010 and 2009, the Company had 350,000 outstanding warrants that could
potentially dilute basic income per share in the future, which were excluded in
the computation of diluted income per share in the periods presented, as their
effect would have been anti-dilutive since the exercise price of these options
was higher than average market price during the three months ended March 31,
2010 and 2009.
  18.
SUBSEQUENT EVENT
  Management
has considered all events occurring through May 17, 2010, the date the financial
statements have been issued, and has determined that there are no such events
that are material to the financial statements, or all such material events have
been fully disclosed.




12




ITEM 2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS




Results of
Operations




The
following discussion and analysis provides information that we believe is
relevant to an assessment and understanding of our results of operations and
financial condition for the three months ended March 31, 2010.  The
following discussion should be read in conjunction with the Financial Statements
and related Notes appearing elsewhere in this Form 10-Q.




Results
of Operations for the Three Month Period Ended March 31, 2010 Compared to the
Three Month Period Ended March 31, 2009




Revenue




Revenue.  During
the three month period ended March 31, 2010, we had revenues of $10,238,256 as
compared to revenues of $8,231,180 during the three month period ended March 31,
2009, an increase of approximately 24.4%. The increase in revenue was primarily
attributable to: (i)  an increase in total units sold as a result of
the general improvement in the global economy; and (ii) our maintenance of a
stable sales price to our customers while our competitors increased their sales
prices dramatically due to the increase in cost of raw material. As a result of
the pricing competition, some of our smaller competitors were forced out of
business, and we were able go gain a portion of their market share.




Cost of Sales.
 During the three month period ended March 31, 2010, our cost of sales was
$6,929,872 as compared to costs of sales of $4,976,541 for the three month
period ended March 31, 2009, an increase of approximately 39.3%. This increase
in cost of sales resulted primarily from an overall increase in the costs of raw
materials, especially cotton. .




Operating
Expenses




Our
operating expenses are divided into selling expenses and general and
administrative expenses, both of which are discussed below:




Selling Expenses.
 Selling expenses, which consist of sales commissions, freight charges,
travel and other selling expenses, totaled $359,075 for the three month period
ended March 31, 2010 as compared to $288,977 for the three month period ended
March 31, 2009, an increase of approximately 24.3%. This increase results
primarily from an increase in transportation costs experienced by the Company
and the commissions paid to a salesperson due to a 24.4% increase in
sales.




General and Administrative
Expenses.  General and administrative expenses totaled $284,252 for
the three month period ended March 31, 2010 as compared to $815,233 for the
three month period ended March 31, 2009, a decrease of approximately 65.1%.
There were three primary drivers behind this decrease. : First, in the current
period, we had lower costs relating to the research and development of new
products.  In the first quarter of 2009, we  invested
$160,598 in experimental research on a new EC line but there are no similar
costs incurred on first quarter of 2010. Second, due to the financial crisis
last year, we adopted a very conservative method of .allocating for bad
debts.  However, the upturn in the economy this year helped us collect
some of the accounts receivable which we perceived as bad debt last year. In
total, the bad debt for Accounts Receivable, Other Accounts Receivable and
Prepaid Expense reversed $280,793 in the first quarter of 2010. For example, one
client, Shanghai Jin Yi Power Station Co, Ltd., repaid $126,100 to us which we
initially perceived as uncollectible due to a successful merger and acquisition.
Third, the service period of the warrants that we issued to service providers
expired during the year ended December 31, 2009. In the first quarter of 2009,
we recognized a $121,000 expense for the warrants and the expense was fully
amortized through May 2009. There are no additional warrants issued or related
expense charged in the first quarter of 2010.




13




Income
From Operations




For the
three month period ended March 31, 2010, our income from operations was
$2,754,233 as compared to income from operations of $2,150,429 for the three
month period ended March 31, 2009, an increase of approximately 28.1%. This
increase was primarily attributable to a decrease in operating expenses, and a
combination of increase in sales plus other rental income from a newly acquired
commercial property in Beijing. On December 30, 2009, the Company entered into a
set off agreement with its related party, Shandong Ruitai Chemicals Co.,
Ltd.  TaiAn, our subsidiary, agreed to allow Shandong Ruitai to
satisfy a total of $31,745,649 in debt owed by Shandong Ruitai in return for
Shandong Ruitai’s transfer of 100% of its ownership interest in real property
located in Beijing, China, commonly known as Taishan Building or Building No.
36, Xibahe Dongli, Chaoyang District, Beijing, China (the “Taishan Building” or
the “Property”). As a result, starting in the first quarter of 2010, the Taishan
Building has generated  rental income
of  $303,183.




Interest
Income




For the
three month period ended March 31, 2010, our interest income was $391,180 as
compared to interest income of $542,430 for the three month period ended March
31, 2009, a decrease of approximately $151,223, or 27.9%. This decrease resulted
primarily from the full repayment of the loan from the related party, Shandong
Ruitai Chemicals Co., Ltd., on December 31, 2009, which reduced interest income
from related parties by approximately $381,618.




Interest
Expense




For the
three month period ended March 31, 2010, we incurred interest expense in the
amount of $578,487 as compared to interest expense of $765,551 for the three
month period ended March 31, 2009, a decrease of approximately 24.4%. The
decrease in interest expense resulted primarily from the decrease of the
weighted-average interest rate for the bank loan from 5.6755% at March 31, 2009
to 5.6170% at March 31, 2010, as well as the decrease of the interest paid for
discounted notes receivable.




Income
Tax Expense




Our
income tax expense was $646,302 for the three month period ended March 31, 2010
as compared to $471,326 for the three month period ended March 31, 2009, an
increase of $174,976, or approximately 37.1%.  This increase is primarily
attributable to an increase in profits before income taxes and minority interest
increased from $1,885,298 in the three month period ended March 31, 2009 to
$2,605,221 for the three month period ended March 31, 2010, an increase of
approximately 38%.




Net
Income




We had
net income of $1,939,530 for the three month period ended March 31, 2010 as
compared to $1,399,832 for the three month period ended March 31, 2009, an
increase of $539,698, or approximately 38.6%.  This increase is primarily
attributable to an increase in sales revenue and a decrease in general and
administrative expenses.




Inventories




As of
March 31, 2010, we had inventories of $7,581,269 as compared to inventories of
$8,132,681 as of March 31, 2009, a decrease of $551,412, or approximately 6.8%.
The decrease in inventories from 2010 to 2009 was the result of an increase in
demand for our products along with the improvement in the economy and the
improvement of inventory control efficiency.




Liquidity and Capital
Resources




We
anticipate that the existing cash and cash equivalents on hand, together with
the net cash flows generated from its business activities, will be sufficient to
meet the working capital requirements for its on-going projects and to sustain
the business operations for the next twelve months.




14




Total
Current Assets & Total Assets




As of
March 31, 2010: (i) our total current assets were $65,275,384 as compared to
total current assets of $64,390,196 at December 31, 2009, an increase of
$885,188, or approximately 1.4%; and (ii) our total assets were $120,363,054 as
of March 31, 2010 compared to $120,183,732 as of December 31, 2009, an increase
of $179,322, or approximately 0.1%  Our total assets increased due to
changes that we experienced in cash and cash equivalents, accounts receivable,
restricted cash, and the selling of the equity investments, and all of which are
discussed below.




Cash and Cash
Equivalents.  As of March 31, 2010, our cash and cash equivalents
were $7,953,190 as compared to $10,174,528 at December 31, 2009, a decrease of
$2,221,338, or approximately 21.8%.  This decrease was primarily
attributable to a repayment of the note payable, short-term borrowings, and due
to related parties. In addition, this decrease was also due to cash purchases of
equipment of $609,265.




Accounts Receivable.
 As of March 31, 2010, our accounts receivable were $7,665,940 as compared
to accounts receivable of $4,098,729 at December 31, 2009, an increase of
$3,567,211, or approximately 87%.  This increase was primarily
attributable to our increased sales generally.




Restricted Cash. As
of March 31, 2010, our restricted cash was $32,274,000 as compared to restricted
cash of $33,054,466 at December 31, 2009, a decrease of $780,466, or
approximately 2.4%.  This decrease was primarily attributable to an overall
reduction in a note payable and short-term borrowings.




Long
Term Investment. As of March 31, 2010, we did not have any long
term investments as compared to long term investments of $888,960
at December 31, 2009, a decrease of $888,960, or 100%.  This decrease was
primarily attributable to our transfer of a long-term investment of $888,960 in
Wenyang Xinyong Bank to Shandong Ruitai to reduce its loan from Shandong Ruitai
by the same amount during the three month period ended March 31,
2010.




Total
Current Liabilities




As of
March 31, 2010, our total current liabilities were $94,299,530 as compared to
total current liabilities of $96,152,147 at December 31, 2009, a decrease of
$1,852,617, or approximately 1.9%.  This decrease  was primarily
attributable to a decrease in notes payable, short-term borrowings, and accounts
payable as discussed below.




Notes Payable.
 As of March 31, 2010, our notes payable were $48,557,700 as compared to
notes payable of $50,020,476 as of December 31, 2009, a decrease of $1,462,776,
or approximately 2.9%. This decrease was attributable to continued repayment of
the note payable outstanding.




Short-term bank
loans.  As of March 31, 2010,  short-term bank loans were
$25,370,298 as compared to short-term bank loans of $27,195,342 as of
December 31, 2009, a decrease of $1,825,044, or approximately 6.7%. The
decrease in our short-term bank loans was attributable to continued repayment of
the short-term borrowings.




Accounts Payable.
 As of March 31, 2010, our accounts payable was$6,964,910 as compared to
accounts payable of $6,175,266 as of December 31, 2009, an increase of $789,644,
or approximately 12.8%. The increase in our accounts payable was attributable to
an increase in the purchase of the raw material.




Operating
Activities




Net cash
of $730,568 was provided by operating activities during the three month period
ended March 31, 2010 compared to net cash used by operating activities of
$2,667,466 during the three month period ended March 31, 2009, representing a
decrease of $1,936,898.  The decrease in net cash provided by our operating
activities was primarily attributable to the following five reasons: (i) since
the nature of the restricted cash was directly associated with the daily
operating business, there was a reclassification of $9,931,952 restricted cash
from financing activities to operating activities(the restricted cash for the
three month period ended March 31, 2010 was $879,900); (ii) there was a
$2,607,913 decrease in notes receivable for the three month period ended March
31, 2009 and a $556,011 increase in notes receivable for the three month period
ended March 31, 2010; (iii) there was a $1,163,972 decrease in accounts
receivable for the three month period ended March 31, 2009 and a $3,553,625
decrease in accounts receivable for the three month period ended March 31, 2010,
which is a difference of $2,389,653; (iv) there was a $9,055,602 increase
in  notes payable for the three month period ended March 31, 2009 and
a $1,613,150 decrease in notes payable for the three month period ended March
31, 2010; and (v) there was a $6,572 increase in the payables and accrued
expenses for the three month period ended March 31, 2009 and a $1,191,228
increase in  the payables and accrued expenses for the three month
period ended March 31, 2010, which is a difference of $1,184,656.




15




Investing
Activities




During
the three month period ended March 31, 2010, the net cash used in investing
activities was $609,265, as compared to net cash used in investing activities of
$5,372,235 for the three month period ended March 31, 2009, a decrease of
$4,762,970 in the cash used in investing activities. This
decrease  was primarily attributable to the increase of purchase of
fixed assets of $321,815 and a repayment of loans to a related
party.




Financing
Activities




During
the three month period ended March 31, 2010, the net cash used by financing
activities was $2,372,572 as compared to net cash provided by financing
activities of $491,508 for the three month period ended March 31, 2009, an
increase of $1,881,064. This change in net cash used by financing activities was
primarily attributable to the net effect of the repayment of $1,906,450 of bank
loans. In addition, the loan due to the related party, Shandong RuiTai,
increased from $0 in the three month period ended March 31, 2009 to $347,609 for
the three month period ended March 31, 2010.




Off
Balance Sheet Arrangements




The
Company does not have any off-balance sheet arrangements.




ITEM 3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Not
Applicable.




ITEM 4T.
            CONTROLS
      AND PROCEDURES




Disclosure
controls and procedures




The
Securities and Exchange Commission defines the term “disclosure controls and
procedures” to mean the company's controls and other procedures of an issuer
that are designed to ensure that information required to be disclosed in the
reports that it files or submits under the Securities Exchange Act of 1934 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 an issuer in the reports
that it files or submits under the Securities Exchange Act of 1934 is
accumulated and communicated to the issuer’s management, including its principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.  The Company maintains such a system of controls and
procedures in an effort to ensure that all information which it is required to
disclose in the reports it files under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
under the SEC's rules and forms and that information required to be disclosed is
accumulated and communicated to principal executive and principal financial
officers to allow timely decisions regarding disclosure.




As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our chief executive officer and
chief financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures.  Based on this evaluation, our
chief executive officer and chief financial officer concluded that our
disclosure controls and procedures are designed to provide reasonable assurance
of achieving the objectives of timely alerting them to material information
required to be included in our periodic SEC reports and of ensuring that such
information is recorded, processed, summarized and reported with the time
periods specified.  Our chief executive officer and chief financial
officer also concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this report to provide
reasonable assurance of the achievement of these objectives.




16




Changes
in internal control over financial reporting




There was
no change in our internal control over financial reporting that occurred during
the three months ended March 31, 2010 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.




PART II
– OTHER INFORMATION




ITEM 1.
            LEGAL
      PROCEEDINGS




We are
not a party to any pending legal proceedings, and no such proceedings are known
to be contemplated. None of our directors, officers or affiliates, and no owner
of record or beneficial owner of more than 5.0% of our securities, or any
associate of any such director, officer or security holder is a party adverse to
us or has a material interest adverse to us in reference to pending
litigation.




ITEM 1A.
            RISK
      FACTORS




Not
Applicable.


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


None.




ITEM 3.
            DEFAULTS
      UPON SENIOR SECURITIES




None.




ITEM 4.
            SUBMISSION
      OF MATTERS TO A VOTE OF
  SECURITY  HOLDERS




None.




ITEM 5.
            OTHER
      INFORMATION




None.




ITEM 6.
            EXHIBITS




(a)
      The following exhibits are filed
herewith:




Exhibit
              Number
            
            Description31.1
            
            Certification
      of Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
            
            Certification
      of Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            
            Certification
      of Principal Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2
            
            Certification
      of Principal Financial Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.




17




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 thereunto
duly authorized.




CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.Date:
      May 17, 2010
              By:
              /s/ Dian Min MaDian
      Min Ma, Chief Executive Officer(Principal
      Executive Officer)




Date:
      May 17, 2010
              By:
              /s/ Gang MaGang
      Ma, Chief Financial Officer(Principal
      Financial Officer and Chief Accounting Officer)
  18