UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





x
            ANNUAL
      REPORT UNDER PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
              
              FOR
      THE FISCAL YEAR ENDED DECEMBER 31, 2009  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: 000-52623




CHINA
      SPORTS HOLDING COMPANY LIMITED(Exact name of small
      business issuer as specified in its charter)




Delaware
            
            37-1532843(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (IRS
      Employer
              Identification
      No.)





Yangdai Village, Chendai
County


Jinjiang City, Fujian
Province


People’s Republic of
China


(Address
of principal executive offices)





+86
(151) 1249-4568


(Registrant’s
telephone number, including area code)





SECURITIES
REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:NONE





SECURITIES
REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:


Common
Stock, Par Value $0.001 Per Share


(Title of
Class)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES oNO x





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





Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES x    NO
o





Indicate
by check mark whether the registrant 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 (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes o No o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference Part III of this Form 10-K or
any amendment to this Form 10-K.   x





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.  See the 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
            oNon-accelerated
      filer
              (Do
      not check if a smaller reporting company)
            o
            
            Smaller
      reporting company
            x





As of the
last business day of the registrant’s most recently completed second fiscal
quarter, there was no public trading market for our common stock.





As of
April 26, 2010, there are 10,000,000 shares of common stock issued and
outstanding.





Documents Incorporated by
Reference:


None.











TABLE OF
CONTENTS





Item
      Number and Caption
            
            PagePART
      IItem
      1.
            Business
            
            1Item
      1A.
            Risk
      Factors
            
            20Item
      2.
            Properties
            
            20Item
      3.
            Legal
      Proceedings
            
            20PART
      IIItem
      5.
            Market
      for Registrant’s Common Equity, and Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            
            20Item
      6.
            Selected
      Financial Data
            
            21Item
      7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            21Item
      7A.
            Quantitative
      and Qualitative Disclosures About Market Risk
            
            26Item
      8.
            Financial
      Statements and Supplementary Data
            
            27Item
      9.
            Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
            
            27Item 9A(T).
            Controls
      and Procedures
            
            27PART
      IIIItem
      10.
            Directors,
      Executive Officers, Promoters and Corporate Governance
            
            28Item
      11.
            Executive
      Compensation
            
            30Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            
            31Item
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence
            
            32Item
      14.
            Principal
      Accountant Fees and Services
            
            32PART
      IVItem
      15.
            Exhibits,
      Financial Statement Schedules
            
            33SIGNATURES
            
            
            34







PART
I





ITEM
1. BUSINESS.





China
Sports Holding Company Limited, formerly known as Mondo Acquisition III, Inc. (“we” or the “Company”),
through Fujian Jinjiang Hengfeng Shoes & Garments Co., Ltd. (“Hengfeng”), is
in the business of designing, manufacturing and selling sports shoes, sportswear
and related accessories in the People’s Republic of China (“China” or the
“PRC”). Our mission is to become the leading supplier of professional sporting
goods in the China market by building on our fully integrated value chain and
delivering premium quality products. We generate revenues solely from the sales
of sports shoes, sportswear and related accessories in the
PRC.


Our
Corporate History and Structure





We were
incorporated under the laws of the State of Delaware on October 30, 2006. We
acquired Kobe Sport (International) Company Limited, a British Virgin Islands
company with limited liability (“Kobe Sport”) that is in the business of
production and sales of sport shoes, sportswear and accessories in accordance
with a Share Exchange Agreement dated February 12, 2010 (the “Exchange
Agreement”) by and among the Company, Kobe Sport, and the shareholders of Kobe
Sport (the “Kobe Sport Shareholders”). The closing of the transaction (the
“Closing”) took place on February 12, 2010 (the “Closing Date”). On the
Closing Date, pursuant to the terms of the Exchange Agreement, we acquired all
of the outstanding shares (the “Interests”) of Kobe Sport from the Kobe Sport
Shareholders; and the Kobe Sport Shareholders transferred and contributed all of
their Interests to us. In exchange, we issued a total of 9,000,000 shares of
common stock to the Kobe Sport Shareholders, their designees or assigns, which
totals 90% of the issued and outstanding shares of common stock of the Company
on a fully-diluted basis as of and immediately after the Closing of the Share
Exchange. Following the Share Exchange, there are 10,000,000 shares of common
stock issued and outstanding and Kobe Sport became a wholly owned subsidiary of
the Company.





Kobe
Sport is a holding company and owns a 100% issued and outstanding capital stock
of Nam Kwong Trading Company Limited (“Nam Kwong”). Hengfeng is a sino-foreign
joint stock limited liability company established in the PRC in 1992. On
December 4, 2009, Hengfeng underwent reorganization. Before the reorganization,
Hengfeng had been owned as to 94% by Nam Kwong Trading Co., an unincorporated
company registered in Hong Kong (“Nam Kwong Unincorporated”) and 6% by Fujian
Jinjiang Chenli Yangli Hengfeng Shoe-making Factory, which is a company
registered in the PRC (“Fujian Jinjiang”), according to their respective capital
contribution. Pursuant to the reorgnization, Nam Kwong Unincorporated
transferred the 94% interest in Hengfeng held by it to Nam Kwong. As a result,
through Nam Kwong, Kobe owns 94% interest in Hengfeng.





As a
further condition of the Share Exchange, Thomas A. Rose and Marc J. Ross
resigned as the officers of the Company and Qionglin Lin, Mendoza Anding Lin and
Tommy Lo were appointed as the new officers of the Company, effective
immediately at the Closing. In addition, Thomas A. Rose, Marc J. Ross and Darrin
M. Ocasio have resigned as the directors of the Company and Mendoza Anding Lin,
Qionglin Lin and Aling Lin have been appointed as the new directors of the
Company upon effectiveness of an information statement required by Rule 14f-1
promulgated under the Exchange Act of 1934 (the “Exchange Act”).





Our
organizational structure, was developed to permit the infusion of foreign
capital under the laws of the PRC and to maintain an efficient tax structure, as
well as to foster internal organizational efficiencies. It is reflected in the
following chart:




1









Market
Summary





The Chinese Sporting Goods
Market





China’s
sporting goods market experienced robust growth in recent years, at a compound
annual growth rate of 20%. The market is expected to consititue 0.3% of China’s
GDP, which is far lower than the 1-3% of developed countries. The 2008 Olympic
Games in Beijing has increased the popularity of sports in China. The 2009 East
Asian Games in Hong Kong and 2010 Asian Games in Guangzhou will continue to
cultivate the Chinese interest in sports. With the rising income levels of
Chinese consumers, their expectations of quality and branding also
increase.





The
high-end sportswear market in China is currently dominated by international
brands, such as Nike, Adidas and Puma. The middle/high-class market is dominated
by local brands such as Lining, Kangwei, Great, Doublestar and Anta. The entire
middle class market is dominated by brands from Jingjiang, such as Xtep,
Hongxing Erke and Deerway. The international brands have years of experience in
the market, advanced R&D and strong financial support for marketing. On the
other hand, the domestic brands that dominant the low-end and middle-class
market is following the rapid development of the leading international
brands.





Market Trends and Brand
Implications





Increased
disposable income inspires the pursuit of fashion.





·
            Increased
      purchasing power drives consumption.·
            Increased
      income has also lead to the increase in leisure time, which has increased
      the popularity of casual wear.





·
            Casual
      wear has become especially popular among those under 45 years old in
      China, i.e. the target consumer group for the Kobe
  brand.·
            The
      Kobe brand can meet our target consumers’ demand by providing fashionable
      casual wear.





Rapid
increase in demands in the second-and third-tier cities. We focus on the second
and third tier cities, because:





·
            Compared
      to first-tier cities, which have already been exploited by major
      international brands, the second and third-tier cities provide a lot more
      marketing opportunities for domestic sporting goods
  brands.·
            At
      the same time, the income levels in these cities are catching up to that
      in first-tier cities, which increases demand for sporting goods in these
      cities.





·
            Hengfeng’s
      franchising business model allows it to cover these target markets
      quickly.




2










Products





Hengfeng
designs, develops, and manufactures “Kobe” branded shoes, sportswear and
accessories in Jinjiang city, Fujian province. The shoes are produced by
Hengfeng internally, while the clothes and accessories are outsourced to
subcontractors.





The
Company incorporates innovate value-adding technology into its products, such as
perspiration absorption system, 3D ventilation system and polyurethane
anti-crease system to satisfy the demands and taste of target
consumers.





The
Company holds a valuable chain of 869 stores over the whole country in 2009. The
Company targets to increase the number of stores by at least 20% each year
within the coming five years, and both the turnover and net profit would be
increased in the same line as the number of stores.





Sourcing. All of our
sportswear and accessories are produced by our subcontractors. About 44% and 50%
of our sports shoes are produced by our subcontractors for the year ended
December 31, 2007 and December 31, 2008, respectively. The approximate amount of
subcontracted and self-production of each segment are as follows:





Segments
            
            Subcontracted
      ($)
            
            
            Self-production
      ($)
            
            
            Total
      Cost of Sales ($)For
      the Year Ended
              December
      31, 2007
            
            Sports
      wears
            
            
            8,308,220.65
            
            
            
            -
            
            
            
            8,308,220.65Accessories
            
            
            1,621,650.52
            
            
            
            -
            
            
            
            1,621,650.52Sports
      shoes
            
            
            10,830,679.18
            
            
            
            13,745,014.48
            
            
            
            24,575,693.66Sub-Total
            
            
            20,760,550.36
            
            
            
            13,745,014.48
            
            
            
            34,505,564.84For
      the Year Ended
              December
      31, 2008
            
            Sports
      wears
            
            
            13,159,368.01
            
            
            
            -
            
            
            
            13,159,368.01Accessories
            
            
            2,193,208.67
            
            
            
            -
            
            
            
            2,193,208.67Sports
      shoes
            
            
            15,065,668.75
            
            
            
            15,010,725.18
            
            
            
            30,076,393.94Sub-Total
            
            
            30,418,245.43
            
            
            
            15,010,725.18
            
            
            
            45,428,970.61For
      the Nine Months Ended
              September
      30, 2009
            
            Sports
      wears
            
            
            15,105,609.61
            
            
            
            -
            
            
            
            15,105,609.61Accessories
            
            
            2,820,805.64
            
            
            
            -
            
            
            
            2,820,805.64Sports
      shoes
            
            
            10,540,716.10
            
            
            
            13,890,826.81
            
            
            
            24,431,542.91Sub-Total
            
            
            28,467,131.35
            
            
            
            13,890,826.81
            
            
            
            42,357,958.16





We
believe that the use of independent contract manufacturers afford us additional
liquidity and flexibility. We do not have any long-term contracts with any of
our manufacturers; however, we have long-standing relationships with many of our
manufacturers and believe our relationships to be good.





In 2009,
we subcontracted our sports shoes production to eight (8) main factories in
Fujian province in the PRC. They are: Xinli Shoes Co., Ltd. (Jinjiang City),
which counted for 19.65% of the total
shoes subcontracted amount in 2009; Liweng Shoes Co., Ltd. (Jinjiang City),
14.08%;
Dongzheng Shoes Co., Ltd. (Jinjiang City), 13.69%; Yiming
(Jinjiang) Shoes Co., Ltd., 13.02%; Jielongbao Shoes
Co., Ltd. (Jinjiang City), 10.51%; Xinqile (Fujian)
Shoes Co., Ltd., 10.35%; Meilida Shoes
Co., Ltd. (Jinjiang City), 10.04%; and Dingfeng
Shoes Co., Ltd. (Jinjiang City), 8.66%. These 8
factories in total counted for 90% of the shoes subcontracted in
2009.





3


Additionally,
the following five (5) subcontractors produced approximately 90% of all our
sportswear and accessories. Their names and percentages are: Zifeng Clothing
Factory (Banfu Town, Zhongshan City), 30.79%; Qigao Clothing
Co., Ltd. (Heshan City), 22.56%; Guhe Clothing
Co., Ltd. (Xiamen City), 15.10%; Ouwen Sport
Products Co., Ltd. (Guangzhou City), 11.28%; and Quanhuang
Clothing & Accessories Co., Ltd. (Shishi City), 10.52%.





Shoe
Production





We
      focus on designing and producing basketball shoes, which count for 35% of
      our total shoe production for the year ended 2008. In addition, we produce
      casual shoes, jogging shoes and outdoor sports shoes, including the skiing
      shoes.
              
              The
      sole of the basketball shoes was developed and manufactured by the Company
      which combines latest technology and designs. The sole helps stabilize and
      protect the joints. The price of the sole is reasonable and very
      competitive in the industry. It has the following features:
              
              Cushioning Function:The cushioning features are divided into structural and material.
      Examples of the structural feature include the hive structure and arch
      structure. Examples of the material feature include the air cushion and
      shock absorption rubber. The index to evaluate the cushioning function, no
      matter the material test or human body test, is based on the peak value of
      the impact force during the vertical counterforce test or the peak value
      of the negative acceleration. The lower the peak value of the impact force
      or the negative acceleration, the better the cushioning function the shoe
      acquires, which will greatly reduce the chance of body
    injury.





Stabilization Function: The
middle and upper parts of the basketball shoes are also the focus of our
research and development. Those parts have the functions of stabilizing joints,
preventing ankle sprains, protecting the instep as well as the Achilles
tendon.





Non-Slip Function: The
non-slip function of the soles is also the friction function. The key relies on
the width and depth of the sole veins. The change of the vein shapes will
increase the friction force of the shoes and accordingly will effectively
improve the non-slip function. So far, the “人-shape” vain is
still the symbol of the most powerful ground-grasping capacity.





Rebounding Function: The
function tests during the R&D process are divided into two categories, (1)
Material Test: place the shoes on a test board or ground, and test the shoes
itself; (2) Human Body Test: a volunteer will put on the shoes and test the
shoes in different phases (walking, running, and vertical jumping). The vertical
jumping test reveals that there is no difference in the jumping height with or
without the shoes, which demonstrates that the springing capacity required for
jumping does not have substantial improvement. We speculate the reason could be
resulting from the shoes’ failure to correspond with the human bouncing
power.





We also
develop and manufacture the rubber sole of the skiing shoes. We apply the
country-leading “One-time Rubber Injection” technology which will reduce the
cost, improve the physical features and appearance of the product, and save
energy consumption by 15%. The Kobe-series products combine both the sport and
casual characteristics. Our skiing shoes are designed specifically for skiing
and combine a variety of technologies. The main characteristics include: the
cushioning function of the sole and the worn-free design of the shoelace. The
products adopt special enduring materials on most parts of the shoes to ensure
the comfortability.




4




In
addition, our jogging shoes also apply a variety of technologies which greatly
reduce its weight and increase its endurance. A series of new technologies are
applied in the uppers of the shoes which support the shoe body with the lightest
skeleton. The sole and the TPU-tray support the foot arches which together with
breathing cannelures prevent the fatigue of the feet after long jogging. The key
R&D concept is making the shoe sole as the continuance of the foot. The
wearer will barely feel the existence of the shoes when jogging.





Sportswear
Production





We
      focus on tracksuits, basketball wears and t-shirts, which counted for 30%,
      25% and 25%, respectively, of our 2009 sportswear production. In addition,
      we have casual wear collection and a small portion of fashion wear
      collection.
              
              Our
      Kobe branded sportswear has its unique features. We selected and purchased
      raw materials ourselves; fabrics produced by weaving companies in
      accordance with our requirements on color, function and vain developed by
      our internal designing departments; as well as, environmentally friendly
      products produced with Nano Technologies.
              
              Warm-Keeping Feature:
      Our outdoor sport suits are designed in a way that both keep warm and
      light and portable. We add special ceramic powders such as chromium oxide,
      magnesium oxide, zirconium oxide into compound fiber liquids such as
      polyester fiber. The minor ceramic powder on the Nano-level can absorb
      visible lights such as sunlight and transfer the lights into heat, and can
      also reflect the infrared rays produced by human body, which enable the
      material to acquire superior warm-keeping capacities.  In
      addition, following the bionics principles, we design the internal
      structure of the polyester fiber referring to that of the poly bears,
      which enable the fiber to acquire both lightness and warm-keeping
      features. On the other hand, manufacturing the suits or fibers into two or
      three-layer which increase the number of non-circulating layers is also
      one of the traditional measures to keep warm.





Antibiotic and Antiodour Features:We add antibiotic chemicals into the fiber and make sure they will not be
easily worn out. We also make sure the antibiotic chemicals are non-poisonous or
little poisonous. In addition, by combining certain chemicals together, we are
able to effectively shield the ultraviolet.





Sports
Accessories





We mainly
produce the following sports accessories: sports bag, wristlet, basketball,
travel bag, hat, sport socks, and scarf, etc.





Basketball: our basketballs
are manufactured in compliance with International Basketball Association
standards and borne our brand name. Advantages include: high-quality inner tube
material; special outer skin material, non-slip, enduring, and sweat absorption,
etc.





Shields: our designed shields
have good flexibility and supporting capacity and equal pressure on specially
made Coolprene materials.





Sport & Casual Bags: they
are portable, fashionable, humanity designs and structures and have streamlined
production techniques. We target customers for use of studying, traveling and
outdoor exploring.





Sport & Casual Socks:
they have sweat absorption design, streamline production techniques and
comprehensive cushion protection.





Production
Capacity





We
currently have four production lines with a total capacity of 2.4 millions pairs
of sports shoes per year. It contributes about 45% - 55% of total sports shoes
sold each year. The remaining 45% - 55% of total sports shoes are subcontracted
out each year. We plan to set up 6 more production lines in 2010 and increase in
total capacity to 6 millions pairs of sports shoes per year. We believe that
self-owned production can better control quality than
subcontracted.




5




Raw
Materials and Suppliers





Leather,
plastic, rubber, thread and other basic components are our main raw materials
for the production of shoes. The Company's principal required raw material is
quality leather, which it purchases from a selected group of Chinese suppliers.
The global availability of common upper materials and specialty leathers
eliminates any reliance by the Company upon a sole supplier. The Company
purchases all of its other raw materials and component parts from a variety of
sources, none of which is believed by the Company to be a dominant supplier.
Alternative sources of supply are believed to be available to the
Company.  Our top five (5) raw material suppliers are as
below:





Suppliers
            
            Supplied
      Raw Materials
            
            Percentage
      of Total Supplied Amount in 2009Jinjiang
      Daxin Shoes Co., Ltd.
            
            Leather,
      plastic, rubber, thread and other basic components
            
            10.34%Jinjiang
      Zhongyu Leather & Clothes Co., Ltd.
            
            Leather
            
            9.00%Jinjiang
      Libao Industrial Chemicals Co., Ltd.
            
            Chemicals
            
            7.92%Jinjiang
      Lianfa Shoes Materials Co., Ltd.
            
            Leather,
      plastic, rubber, thread and other basic components
            
            7.68%Quanzhou
      Baoshu Packing Co., Ltd.
            
            Shoes
      boxes
            
            7.68%Total
            
            
            
            42.62%





Product
Design and Development





Our
principal goal in product design is to generate new and exciting sport shoes and
sportswear or accessories in all of our product lines with contemporary and
progressive styles and comfort-enhancing performance features. Targeted to the
active, youthful and style-savvy, we design most new styles to be fashionable
and marketable to the 15 to 24 year-old consumer, while substantially all
of our lines appeal to the broader range of 15 to 45 year-old
consumers.





We
believe that our products’ success is related to our ability to recognize trends
in the footwear markets and to design products that anticipate and accommodate
consumers’ ever-evolving preferences. We are able to quickly translate the
latest fashion trends into stylish, quality footwear at a reasonable price by
analyzing and interpreting current and emerging lifestyle trends. Lifestyle
trend information is compiled and analyzed by our designers from various
sources, including the review and analysis of modern music, television, cinema,
clothing, alternative sports and other trend-setting media; traveling to
domestic and international fashion markets to identify and confirm current
trends; consulting with our retail and e-commerce customers for information on
current retail selling trends; participating in major footwear trade shows to
stay abreast of popular brands, fashions and styles; and subscribing to various
fashion and color information services. In addition, a key component of our
design philosophy is to continually reinterpret and develop our successful
styles in our brands’ image.





Our
products are designed and developed primarily by our in-house design staff. To
promote innovation and brand relevance, we utilize dedicated design teams, who
report to our senior design executives and focus on each of the men’s and
women’s categories. In addition, we utilize outside design firms on an
item-specific basis to supplement our internal design efforts. The design
process is extremely collaborative, as members of the design staff frequently
meet with the heads of retail, merchandising, sales, production and sourcing to
further refine our products to meet the particular needs of the target
market.





After a
design team arrives at a consensus regarding the fashion themes for the coming
season, the designers then translate these themes into our products. These
interpretations include variations in product color, material structure and
embellishments, which are arrived at after close consultation with our
production department. Prototype blueprints and specifications are created and
forwarded to our manufacturers for a design prototype. The design prototypes are
then sent back to our design teams. Our major retail customers may also review
these new design concepts. Customer input not only allows us to measure consumer
reaction to the latest designs, but also affords us an opportunity to foster
deeper and more collaborative relationships with our customers. We also
occasionally order limited production runs that may initially be tested in our
concept stores. By working closely with store personnel, we obtain customer
feedback that often influences product design and development. Our design teams
can easily and quickly modify and refine a design based on customer
input.





Quality
Control





We
believe that quality control is an important and effective means of maintaining
the quality and reputation of our products. Our quality control program is
designed to ensure that not only finished goods meet our established design
specifications, but also that all goods bearing our trademarks meet our
standards for quality. Our quality control personnel perform an array of
inspection procedures at various stages of the production process, including
examination and testing of prototypes of key raw materials prior to manufacture,
samples and materials at various stages of production and final products prior
to shipment. Our employees are on-site at each of our major manufacturers to
oversee production. For some of our lower volume manufacturers, our staff is
on-site during significant production runs or we will perform unannounced visits
to their manufacturing sites to further monitor compliance with our
manufacturing specifications.




6




Sales
and Marketing





Sales
breakdown: our sports shoes sales counted for 70% and 65% of the total sales in
our fiscal year ended December 31, 2007 and 2008. We also estimated that our
shoes sales in 2009 will be decreased to 57% of the total sales. In the
contrary, our sports wears sales are estimated to be increasing from 25% for the
year ended December 31, 2007 to 36% of the total sales in 2009.  The
revenue margin in sports shoes is lower than sports wears and sports
accessories. The charts of sales breakdown by segment and margin by segment are
as below:











Sales and Marketing
Strategies





Product Orientation:
Middle-ranged priced professional and functional sporting goods with high
technical content. The products represent comfort, quality and high sports
performance.





Target Consumers: 15-45 year
olds: secondary school and university students that have a taste for fashion;
middle-aged individuals that have a high purchase power and preference for
quality.





Target Market: we mainly
focus on second and third-tier cities with trendy consumers and professional
athletes.





Expansion of Sales Network:
Although international brands such as Nike and Adidas have a high market share,
domestic brands are more capable of penetrating into smaller cities and
provinces. We plan to expand our sales channel to second and third-tier cities
of primary markets, and first and second-tier cities. Therefore, our strategy is
to focus on brand promotion in first-tier cities, establish many retail outlets
in second-tier cities and open flagship stores in third-tier cities. Below are
our different levels of targeted markets:





Area
            
            Primary
      Market
            
            Secondary
      Market
            
            Tertiary
      MarketNorthern
      China
            
            Beijing
              Tianjin
            
            Hebei
              Inner
      Mongolia
            
            ShanxiNortheast
      China
            
            Liaoning
            
            Heilongjiang
            
            JilinEastern
      China
            
            Shanghai
              Zhejiang
            
            Jiangsu
              Fujian
            
            Anhui,
      Shandong
              JiangxiSouthern
      China
            
            Guangdong
              Hunan
            
            Henan
              Hubei
            
            Guangxi
      Zhuang A.R.
              HainanSouthwest
      China
            
            Chongqing
              Sichuan
            
            Guizhou
              Yunnan
            
            TibetNorthwest
      China
            
            Shaanxi
              Qinghai
            
            Gansu
              Ningxia
      Hui A.R.
            
            Xinjiang
      Uygur A.R.





7





The map
below shows our sales network and the locations of our franchise
stores:









In
addition, we also sponsor sports events to gain a higher brand exposure or
sponsor gyms, which are a main exercising venue for the target consumer group.
The Kobe brand is able to infiltrate the target consumers’ daily lives and hence
cultivate brand loyalty. Further, we plan to design a website with a large
online media company that represents the unique characteristics of the Kobe
brand.





Business
Model





Franchising





Franchising
is popular among enterprises in the sporting goods industry due to the following
advantages: sales staff of franchisees are placed closed to, and hence can
influence target consumers; market reaction can be quickly observed; enables
refunds and exchange, which improves the brand’s credibility; shortens the
period of time for products to be introduced to the market; and Easy to manage,
where the sales functions are subcontracted to outsiders.





Hengfeng,
as the franchisor,grants the franchisees the right to distribute its products, techniques,
and trademarks for a percentage of gross monthly sales. We also provide the
franchisees with advertising, staff training and other support services.
Franchising standardizes the shop design, product display, products, service,
brand image and management.





Self-owned





Self-owned
stores have the following advantage: increase in profit margin per item sold for
the Company although self owned shops need to take up their owned running costs
and increase in time required for the management to run the shops, sales staff
of the Company would be closed to customers and react quickly for any
change in consumers’ taste.





We do not
have any self-owned shops up to date. However, we plan to set up 50 self-owned
shops in year 2010 which will increase our revenue 20% per year for coming five
years.




8




Our
development plan for the franchising and self-owned stores is as
below:





2009
            
            
            2010
      (e)
            
            2011
      (e)
            
            
            2012
      (e)No.
      of Franchisees
            869
            
            
            1,243
            
            1,492
            
            
            1,790No.
      of Self-Owned
            0
            
            
            50
            
            60
            
            
            72Total
            869
            
            
            1,293
            
            1,552
            
            
            1,862





Competition





Competition
in the sport shoes and sportswear industry is intense. Although we believe that
we do not compete directly with any single company with respect to its entire
range of products, our products compete with other branded products within their
product category as well as with private label products sold by retailers,
including some of our customers. Our sport shoes compete with sports shoes
offered by international companies such as Nike, Inc., adidas AG, Puma AG, and
New Balance Athletic Shoe, Inc. and PRC companies such as Anta Sports Products
Limited, Li Ning Company Limited and Qiaodan (China) Co., Ltd. In varying
degrees, depending on the product category involved, we compete on the basis of
style, price, quality, comfort and brand name prestige and recognition, among
other considerations. These and other competitors pose challenges to our market
share in our major domestic markets and may make it more difficult to establish
our products in the PRC. We also compete with numerous manufacturers, importers
and distributors of footwear for the limited shelf space available for the
display of such products to the consumer. Moreover, the general availability of
contract manufacturing capacity allows ease of access by new market entrants.
Many of our competitors are larger, have been in existence for a longer period
of time, have achieved greater recognition for their brand names, have captured
greater market share and/or have substantially greater financial, distribution,
marketing and other resources than we do. We cannot be certain that we will be
able to compete successfully against present or future competitors, or that
competitive pressures will not have a material adverse effect on our business,
financial condition and results of operations.





Growth
Strategy





We intend
to improve our sales network, production capacity, increase our research
expenditure and brand promotion of the Kobe brand, a brand that belongs to
Fujian Jingjiang Hengfeng Shoes & Garment Co., Ltd., by using the following
means:





Expand Sales Network: To
provide training, advertising and marketing assistance, and renovation subsidies
to franchisees and increase the number of franchisees from 869 in 2009 to 1862
by 2012, representing approximately the rate of 114% within 3
years.





Expand Production Facility:
To construct a new factory of 20,000m2 and increase the 4 production lines to
10, which would raise annual production capacity from 2.4 million to 6 million
pairs by 2010.





Diversify Products: To
diversify products from basketball shoes to other types of shoes and clothes for
outdoor activities, and to keep the product mix of 43%: 57% of sports wears and
accessories to sports shoes.





IT System Upgrades: Introduce
Management Information System (MIS) to efficiently monitor sales and inventory
status of various stores and franchisees to conduct sales analysis and
forecasts





Research and Development: To
improve on existing technology, such as the perspiration absorption system, to
increase the competitiveness of Kobe products.





Human Capital: To hire an
experienced design team to introduce innovative and Trendy products targeted for
consumers’ taste and preference in order to further boost sales.





Intellectual
Properties





We own
and utilize a variety of trademarks, including the Kobe trademark. We
continuously look to increase the number of our trademarks and potential design
patents where necessary to protect valuable intellectual property. We regard our
trademarks and other intellectual property as valuable assets and believe that
they have significant value in the marketing of our products. We vigorously
protect our trademarks against infringement, including through the use of cease
and desist letters, administrative proceedings and lawsuits.





We rely
on trademark, patent, copyright and trade secret protection, non-disclosure
agreements and licensing arrangements to establish, protect and enforce
intellectual property rights in our logos, trade names and in the design of our
products. In particular, we believe that our future success will largely depend
on our ability to maintain and protect the Kobe trademark and other key
trademarks. Despite our efforts to safeguard and maintain our intellectual
property rights, we cannot be certain that we will be successful in this regard.
Furthermore, we cannot be certain that our trademarks, products and promotional
materials or other intellectual property rights do not or will not violate the
intellectual property rights of others, that our intellectual property would be
upheld if challenged, or that we would, in such an event, not be prevented from
using our trademarks or other intellectual property rights. Such claims, if
proven, could materially and adversely affect our business, financial condition
and results of operations. In addition, although any such claims may ultimately
prove to be without merit, the necessary management attention to and legal costs
associated with litigation or other resolution of future claims concerning
trademarks and other intellectual property rights could materially and adversely
affect our business, financial condition and results of operations.




9




The laws
of certain foreign countries do not protect intellectual property rights to the
same extent or in the same manner as do the laws of the PRC. Although we
continue to implement protective measures and intend to defend our intellectual
property rights vigorously, these efforts may not be successful or the costs
associated with protecting our rights in certain jurisdictions may be
prohibitive. From time to time we discover products in the marketplace that are
counterfeit reproductions of our products or that otherwise infringe upon
intellectual property rights held by us. Actions taken by us to establish and
protect our trademarks and other intellectual property rights may not be
adequate to prevent imitation of our products by others or to prevent others
from seeking to block sales of our products as violating trademarks and
intellectual property rights. If we are unsuccessful in challenging a third
party’s products on the basis of infringement of our intellectual property
rights, continued sales of such products by that or any other third party could
adversely impact the Kobe brand, result in the shift of consumer preferences
away from our products and generally have a material adverse effect on our
business, financial condition and results of operations.





All
products and logos below are protected by patents issued by the Trademark Office
State Administration for Industry and Commerce of People’s Republic of
China.





Date
            Number
            Registered
      Trademark12/21/1999
            1345896
            FREE
      AIR FEET/天足概念06/14/2000
            1408187
            KB8Kobe/科比11/21/2001
            1669434
            AirŸcarter
              新飞人‧卡特01/16/2004
            3740958
            (Exhibit
      ‘a’)05/08/2004
            ZC4052099SL
            (Exhibit
      ‘b’)06/28/2006
            3740959
            KB806/28/2006
            3740970
            科比07/28/2006
            3750412
            天足概念08/07/2006
            3750413
            FREE
      AIR FEET01/07/2007
            3829504
            KOBE812/21/2007
            ZC3976339SL
            KING
      JAMES05/16/2008
            4185429
            科比飞人










Environmental
Protection





Compliance
with national, provincial or local provisions which have been enacted or adopted
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment have not had, nor are they
expected to have, any material effect on the capital expenditures, earnings or
competitive position of the Company. The Company uses and generates certain
substances and wastes that are or can be regulated or may be deemed hazardous
under certain national, provincial or local regulations with respect to the
environment. The Company from time to time works with government agencies to
resolve cleanup issues at waste sites and other regulatory issues.




10




Properties





Our
corporate headquarter and factory is located at Yangdai Village, Chendai County,
Jinjiang City, Fujian Province in the PRC, which consist of an aggregate of
approximately 50,000 square meters.  Such facility, which is situated
on approximately 7,500 square meters of developed land, is leased from the
Chinese government for a period of 50 years and is scheduled to expire in
2057.





Insurance





We have
obtained insurance for our properties, including our office building, factory
and equipment, etc. for a total of $2,000,000 insured amount, from September 1,
2009 until September 1, 2010, which we renew annually.





Employees





As of the
date hereof, we have approximately 1000 full-time employees. The breakdown of
our employees by department is:





General
      and Administration Department
            
            
            60Production
      Department
            
            
            600Shoe
      Sole Department
            
            
            250Sales
      Department
            
            
            40Research
      and Development
            
            
            50





We have
employment agreements with our employees for one-year term which are subject to
renew every year. We believe we have good relations with our
employees.





ITEM
1A. RISK FACTORS.





You
should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities.  The statements contained in or
incorporated herein that are not historic facts are forward-looking statements
that are subject to risks and uncertainties that could cause actual results to
differ materially from those set forth in or implied by forward-looking
statements. If any of the following risks actually occurs, our business,
financial condition or results of operations could be harmed. In that case, you
may lose all or part of your investment.





Risks
Relating to Our Business





The
effects of the recent global economic slowdown may continue to have a negative
impact on our business, results of operations or financial
condition.





The
recent global economic slowdown has caused disruptions and extreme volatility in
global financial markets, increased rates of default and bankruptcy, and
declining consumer and business confidence, which has led to decreased levels of
consumer spending, particularly on discretionary items such as footwear and
sports wear. These macroeconomic developments have and could continue to
negatively impact our business, which depends on the general economic
environment and levels of consumer spending in the PRC and other parts of the
world that affect not only the ultimate consumer, but also retailers, who are
our primary direct customers. As a result, we may not be able to maintain or
increase our sales to existing customers, make sales to new customers, open and
operate new retail stores, maintain sales levels at our existing stores,
maintain or increase our international operations on a profitable basis, or
maintain or improve our earnings from operations as a percentage of net sales.
If the global economic slowdown continues for a significant period or continues
to worsen, our results of operations, financial condition, and cash flows could
be materially adversely affected.





Our
results of operations are cyclical and could be adversely affected by
fluctuations in the raw materials such as artificial leather, shoes sole and
fabric.





We are
largely dependent on the cost and supply of raw materials such as artificial
leather, shoes sole and fabric and the selling price of our products, which are
determined by constantly changing and volatile market forces of supply and
demand as well as other factors over which we have little or no control. These
other factors include:





•
            
            competing
      demand for the raw materials,





•
            
            environmental
      and conservation regulations, and





•
            
            economic
      conditions,





11




We cannot
assure you that all or part of any increased costs experienced by us from time
to time can be passed along to consumers of our products, in a timely manner or
at all.





Substantially
all of our business, assets and operations are located in the PRC.





Substantially
all of our business, assets and operations are located in PRC. The economy of
PRC differs from the economies of most developed countries in many respects. The
economy of PRC has been transitioning from a planned economy to a
market-oriented economy. Although in recent years the PRC government has
implemented measures emphasizing the utilization of market forces for economic
reform, the reduction of state ownership of productive assets and the
establishment of sound corporate governance in business enterprises, a
substantial portion of productive assets in PRC is still owned by the PRC
government. In addition, the PRC government continues to play a significant role
in regulating industry by imposing industrial policies. It also exercises
significant control over PRC’s economic growth through the allocation of
resources, controlling payment of foreign currency-denominated obligations,
setting monetary policy and providing preferential treatment to particular
industries or companies. Some of these measures benefit the overall economy of
PRC, but may have a negative effect on us.





Our
management has no experience in managing and operating a public company. Any
failure to comply or adequately comply with federal securities laws, rules or
regulations could subject us to fines or regulatory actions, which may
materially adversely affect our business, results of operations and financial
condition.





Our
current management has no experience managing and operating a public company and
relies in many instances on the professional experience and advice of third
parties including its attorneys and accountants. Failure to comply or adequately
comply with any laws, rules, or regulations applicable to our business may
result in fines or regulatory actions, which may materially adversely affect our
business, results of operation, or financial condition and could result in
delays in achieving the development of an active and liquid trading market for
our stock.





Our
business and the success of our products could be harmed if we are unable to
maintain our brand image.





Our
success to date has been due in large part to the strength of the Kobe brand,
and to a lesser degree, the reputation of our fashion brands. If we are unable
to timely and appropriately respond to changing consumer demand, our brand name
and brand image may be impaired. Even if we react appropriately to changes in
consumer preferences, consumers may consider our brand image to be outdated or
associate our brand with styles of footwear that are no longer popular. In the
past, several footwear companies including ours have experienced periods of
rapid growth in revenues and earnings followed by periods of declining sales and
losses. Our business may be similarly affected in the future.





Our
plans to expand our production, to increase research and development and to
improve and upgrade our internal control and management system will require
capital expenditures in 2010.





Our plans
to expand our production, to increase our research and development and to
improve and upgrade our internal control and management system will require
capital expenditures in 2010. We may also need further funding for working
capital, investments, potential acquisitions and research and development and
other corporate requirements. We cannot assure you that cash generated from our
operations will be sufficient to fund these development plans, or that our
actual capital expenditures and investments will not significantly exceed our
current planned amounts. If either of these conditions arises, we may have to
seek external financing to satisfy our capital needs. Our ability to obtain
external financing at reasonable costs is subject to a variety of uncertainties.
Failure to obtain sufficient external funds for our development plans could
adversely affect our business, financial condition and operating
performance.





We
derive all of our revenues from sales in the PRC and any downturn in the Chinese
economy could have a material adverse effect on our business and financial
condition.





All of
our revenues are generated from sales in the PRC. We anticipate that revenues
from sales of our products in the PRC will continue to represent the substantial
portion of our total revenues in the near future. Our sales and earnings can
also be affected by changes in the general economy since purchases of pork
products are generally discretionary for consumers. Our success is influenced by
a number of economic factors which affect disposable consumer income, such as
employment levels, business conditions, interest rates, oil and gas prices and
taxation rates. Adverse changes in these economic factors, among others, may
restrict consumer spending, thereby negatively affecting our sales and
profitability.





12




Our
planned expansion could be delayed or adversely affected by, among other things,
difficulties in obtaining sufficient financing, technical difficulties, or human
or other resource constraints.





Our
planned expansion could be delayed or adversely affected by, among other things,
difficulties in obtaining sufficient financing, technical difficulties, or human
or other resource constraints. Moreover, the costs involved in these projects
may exceed those originally contemplated. Costs savings and other economic
benefits expected from these projects may not materialize as a result of any
such project delays, cost overruns or changes in market circumstances. Failure
to obtain intended economic benefits from these projects could adversely affect
our business, financial condition and operating performances.





We
encounter substantial competition in our business and any failure to compete
effectively could adversely affect our results of operations.





Competition
in the sport shoes and sportswear industry is intense. Although we believe that
we do not compete directly with any single company with respect to its entire
range of products, our products compete with other branded products within their
product category as well as with private label products sold by retailers,
including some of our customers. Our sport shoes compete with sports shoes
offered by international companies such as Nike, Inc., adidas AG, Puma AG, and
New Balance Athletic Shoe, Inc. and PRC companies such as Anta Sports Products
Limited, Li Ning Company Limited and Qiaodan (China) Co., Ltd. We anticipate
that our competitors will continue to expand and seek to obtain additional
market share with competitive price and performance characteristics. Aggressive
expansion of our competitors or the entrance of new competitors into our markets
could have a material adverse effect on our business, results of operations and
financial condition.





Our
limited operating history may not serve as an adequate basis to judge our future
prospects and results of operations.





Our
limited operating history in the sports goods industry may not provide a
meaningful basis for evaluating our business. Hengfeng entered into its current
line of business “Kobe” branded shoes, sportswear and accessories in 2003,
although it is established in 1992. Although its revenues have grown rapidly
since its inception, we cannot guaranty that we will maintain profitability or
that we will not incur net losses in the future. We will continue to encounter
risks and difficulties that companies at a similar stage of development
frequently experience, including the potential failure to:





·
            obtain
      sufficient working capital to support our
  expansion;





·
            expand
      our product offerings and maintain the high quality of our
      products;





·
            manage
      our expanding operations and continue to fill customers’ orders on
      time;





·
            maintain
      adequate control of our expenses allowing us to realize anticipated income
      growth;





·
            implement
      our product development, sales, and acquisition strategies and adapt and
      modify them as needed;





·
            successfully
      integrate any future acquisitions;
and





·
            anticipate
      and adapt to changing conditions in the sportswear industry resulting from
      changes in government regulations, mergers and acquisitions involving our
      competitors, technological developments and other significant competitive
      and market dynamics.





If we are
not successful in addressing any or all of the foregoing risks, our business may
be materially and adversely affected.





We
need to manage growth in operations to maximize our potential growth and achieve
our expected revenues and our failure to manage growth will cause a disruption
of our operations resulting in the failure to generate revenue at levels we
expect.





In order
to maximize potential growth in our current and potential markets, we believe
that we must expand our producing operations. This expansion will place a
significant strain on our management and our operational, accounting, and
information systems. We expect that we will need to continue to improve our
financial controls, operating procedures, and management information systems. We
will also need to effectively train, motivate, and manage our employees. Our
failure to manage our growth could disrupt our operations and ultimately prevent
us from generating the revenues we expect.




13




We
cannot assure you that our growth strategy will be successful which may result
in a negative impact on our growth, financial condition, results of operations
and cash flow.





One of
our strategies is to develop self-owned stores. However, many obstacles to
entering such new markets exist including, but not limited to, established
companies in such existing markets in the PRC. We cannot, therefore, assure you
that we will be able to successfully overcome such obstacles and establish our
products in any additional markets. Our inability to implement this organic
growth strategy successfully may have a negative impact on our growth, future
financial condition, results of operations or cash flows.





If
we need additional capital to fund our growing operations, we may not be able to
obtain sufficient capital and may be forced to limit the scope of our
operations.





If
adequate additional financing is not available on reasonable terms, we may not
be able to expand our production lines and to develop self-owned stores, and we
would have to modify our business plans accordingly. There is no assurance that
additional financing will be available to us.





In
connection with our growth strategies, we may experience increased capital needs
and accordingly, we may not have sufficient capital to fund our future
operations without additional capital investments. Our capital needs will depend
on numerous factors, including (i) our profitability; (ii) the release of
competitive products by our competition; (iii) the level of our investment in
research and development; and (iv) the amount of our capital expenditures,
including acquisitions. We cannot assure you that we will be able to obtain
capital in the future to meet our needs.





In recent
years, the securities markets in the United States have experienced a high level
of price and volume volatility, and the market price of securities of many
companies have experienced wide fluctuations that have not necessarily been
related to the operations, performances, underlying asset values or prospects of
such companies. For these reasons, our securities can also be expected to be
subject to volatility resulting from purely market forces over which we will
have no control. If we need additional funding we will, most likely, seek such
funding in the United States (although we may be able to obtain funding in the
PRC) and the market fluctuations affect on our stock price could limit our
ability to obtain equity financing.





If we
cannot obtain additional funding, we may be required to: (i) limit our
expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate
capital expenditures. Such reductions could materially adversely affect our
business and our ability to compete.





Even if
we do find a source of additional capital, we may not be able to negotiate terms
and conditions for receiving the additional capital that are favorable to us.
Any future capital investments could dilute or otherwise materially and
adversely affect the holdings or rights of our existing shareholders. In
addition, new equity or convertible debt securities issued by us to obtain
financing could have rights, preferences and privileges senior to the Units. We
cannot give you any assurance that any additional financing will be available to
us, or if available, will be on terms favorable to us.





Need
for additional employees.





The
Company’s future success also depends upon its continuing ability to attract and
retain highly qualified personnel. Expansion of the Company’s business and the
management and operation of the Company will require additional managers and
employees with industry experience, and the success of the Company will be
highly dependent on the Company’s ability to attract and retain skilled
management personnel and other employees. There can be no assurance that the
Company will be able to attract or retain highly qualified personnel.
Competition for skilled personnel in the construction industry is significant.
This competition may make it more difficult and expensive to attract, hire and
retain qualified managers and employees.





The
loss of the services of our key employees, particularly the services rendered by
Qionglin Lin, our General Manager and Director, Mendoza Anding Lin, our
President, CEO and Chairman, Tommy Lo, our Chief Executive Officer, and Aling
Lin, our Director, could harm our business.





Our
success depends to a significant degree on the services rendered to us by our
key employees.  If we fail to attract, train and retain sufficient
numbers of these qualified people, our prospects, business, financial condition
and results of operations will be materially and adversely affected. In
particular, we are heavily dependent on the continued services of Qionglin Lin,
our General Manager and Director, Mendoza Anding Lin, our President, CEO and
Chairman, Tommy Lo, our Chief Executive Officer, and Aling Lin, our Director.
The loss of any key employees, including members of our senior management team,
and our inability to attract highly skilled personnel with sufficient experience
in our industry could harm our business.




14




Our
ability to compete could be jeopardized ff we are unable to protect our
intellectual property rights or if we are sued for intellectual property
infringement.





We
believe that our trademarks and other proprietary rights are important to our
success and our competitive position. We use trademarks on nearly all of our
products and believe that having distinctive marks that are readily identifiable
is an important factor in creating a market for our goods, in identifying us and
in distinguishing our goods from the goods of others. We consider our trademarks
to be among our most valuable assets, and we have registered these trademarks in
many countries. In addition, we own many other trademarks that we utilize in
marketing our products. We believe that our trademarks are generally sufficient
to permit us to carry on our business as presently conducted. While we
vigorously protect our trademarks against infringement, we cannot assure you
that we will be able to secure patents or trademark protection for our
intellectual property in the future or that protection will be adequate for
future products. Further, we have been sued for patent and trademark
infringement and cannot be sure that our activities do not and will not infringe
on the intellectual property rights of others. If we are compelled to prosecute
infringing parties, defend our intellectual property or defend ourselves from
intellectual property claims made by others, we may face significant expenses
and liability as well as the diversion of management’s attention from our
business, each of which could negatively impact our business or financial
condition.





In
addition, the laws of foreign countries where we source and distribute our
products may not protect intellectual property rights to the same extent as do
the laws of the PRC. We cannot assure you that the actions we have taken to
establish and protect our trademarks and other intellectual property rights
outside the PRC will be adequate to prevent imitation of our products by others
or, if necessary, successfully challenge another party’s counterfeit products or
products that otherwise infringe on our intellectual property rights on the
basis of trademark infringement. Continued sales of these products could
adversely affect our sales and our brand and result in the shift of consumer
preference away from our products. We may face significant expenses and
liability in connection with the protection of our intellectual property rights
outside the PRC, and if we are unable to successfully protect our rights or
resolve intellectual property conflicts with others, our business or financial
condition could be adversely affected.





Our
principal stockholder is able to control substantially all matters requiring a
vote of our stockholders and his interests may differ from the interests of our
other stockholders.





As of the
date hereof, Anding Lin, our President, beneficially owned 63% of our
outstanding common stock. Mr. Lin may have different interests than our
other stockholders, and because he is able to control substantially all matters
requiring approval by our stockholders, he may direct the operations of our
business in a manner contrary to the interests of our other stockholders.
Matters that require the approval of our stockholders include the election of
directors and the approval of mergers or other business combination
transactions. Mr. Lin also has control over our management and affairs. As
a result of such control, certain transactions are not possible without the
approval of Mr. Lin, including proxy contests, tender offers, open market
purchase programs or other transactions that can give our stockholders the
opportunity to realize a premium over the then-prevailing market prices for
their shares of our common stock.





Our
failure to comply with increasingly stringent environmental regulations and
related litigation could result in significant penalties, damages and adverse
publicity for our business.





In recent
years, the government of China has become increasingly concerned with the
degradation of China’s environment that has accompanied the country’s rapid
economic growth.  In the future, we expect that our operations and
properties will be subject to extensive and increasingly stringent laws and
regulations pertaining to, among other things, the discharge of materials into
the environment and the handling and disposition of wastes (including solid and
hazardous wastes) or otherwise relating to protection of the environment.
Failure to comply with any laws and regulations and future changes to them may
result in significant consequences to us, including civil and criminal
penalties, liability for damages and negative publicity.  We cannot
assure you that additional environmental issues will not require currently
unanticipated investigations, assessments or expenditures, or that requirements
applicable to us will not be altered in ways that will require us to incur
significant additional costs.





We
will incur significant costs to ensure compliance with United States corporate
governance and accounting requirements.





We will
incur significant costs associated with our public company reporting
requirements, costs associated with newly applicable corporate governance
requirements, including requirements under the Sarbanes-Oxley Act of 2002 and
other rules implemented by the Securities and Exchange Commission. We expect all
of these applicable rules and regulations to significantly increase our legal
and financial compliance costs and to make some activities more time consuming
and costly. We also expect that these applicable rules and regulations may make
it more difficult and more expensive for us to obtain director and officer
liability insurance and we may be required to accept reduced policy limits and
coverage or incur substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to attract and retain
qualified individuals to serve on our board of directors or as executive
officers. We are currently evaluating and monitoring developments with respect
to these newly applicable rules, and we cannot predict or estimate the amount of
additional costs we may incur or the timing of such costs.





15




We
may not be able to meet the accelerated filing and internal control reporting
requirements imposed by the Securities and Exchange Commission resulting in a
possible decline in the price of our common stock and our inability to obtain
future financing.





As
directed by Section 404 of the Sarbanes-Oxley Act, as amended by SEC Release No.
33-8934 on June 26, 2008, the Securities and Exchange Commission adopted rules
requiring each public company to include a report of management on the company’s
internal controls over financial reporting in its annual reports.  In
addition, the independent registered public accounting firm auditing a company’s
financial statements must also attest to and report on management’s assessment
of the effectiveness of the company’s internal controls over financial reporting
as well as the operating effectiveness of the company’s internal controls.
Commencing with its annual report for the year ending December 31, 2010, we will
be required to include a report of management on its internal control over
financial reporting.  The internal control report must include a
statement





·
            Of
      management’s responsibility for establishing and maintaining adequate
      internal control over its financial
reporting;





·
            Of
      management’s assessment of the effectiveness of its internal control over
      financial reporting as of year end;
and





·
            Of
      the framework used by management to evaluate the effectiveness of our
      internal control over financial
reporting.





Furthermore,
in the following year, our independent registered public accounting
firm is required to file its attestation report separately on our
internal control over financial reporting on whether it believes that we have
maintained, in all material respects, effective internal control over financial
reporting.





While we
expect to expend significant resources in developing the necessary documentation
and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there
is a risk that we may not be able to comply timely with all of the requirements
imposed by this rule.  In the event that we are unable to receive a
positive attestation from our independent registered public accounting firm with
respect to our internal controls, investors and others may lose confidence in
the reliability of our financial statements and our stock price and ability to
obtain equity or debt financing as needed could suffer.





In
addition, in the event that our independent registered public accounting firm is
unable to rely on our internal controls in connection with its audit of our
financial statements, and in the further event that it is unable to devise
alternative procedures in order to satisfy itself as to the material accuracy of
our financial statements and related disclosures, it is possible that we would
be unable to file our Annual Report on Form 10-K with the Securities and
Exchange Commission, which could also adversely affect the market price of our
securities and our ability to secure additional financing as
needed.





The
transaction involves a reverse merger of a foreign company into a domestic shell
company, so that there is no history of compliance with United States securities
laws and accounting rules.





In order
to be able to comply with United States securities laws, Kobe
Sport prepared its financial statements for the first time under U.S.
generally accepted accounting principles and recently had its initial audit of
its financial statements in accordance with Public Company Accounting
Oversight Board (United States). As the Company does not have a
long term familiarity with U.S. generally accepted accounting principles, it may
be more difficult for it to comply on a timely basis with SEC reporting
requirements than a comparable domestic company.





Risks
Relating to the People's Republic of China





Certain
political and economic considerations relating to the PRC could adversely affect
our company.





The PRC
is transitioning from a planned economy to a market economy. While the PRC
government has pursued economic reforms since its adoption of the open-door
policy in 1978, a large portion of the PRC economy is still operating under
five-year plans and annual state plans. Through these plans and other economic
measures, such as control on foreign exchange, taxation and restrictions on
foreign participation in the domestic market of various industries, the PRC
government exerts considerable direct and indirect influence on the economy.
Many of the economic reforms carried out by the PRC government are unprecedented
or experimental, and are expected to be refined and improved. Other political,
economic and social factors can also lead to further readjustment of such
reforms. This refining and readjustment process may not necessarily have a
positive effect on our operations or future business development. Our operating
results may be adversely affected by changes in the PRC’s economic and social
conditions as well as by changes in the policies of the PRC government, such as
changes in laws and regulations (or the official interpretation thereof),
measures which may be introduced to control inflation, changes in the interest
rate or method of taxation, and the imposition of restrictions on currency
conversion in addition to those described below.





16




The
recent nature and uncertain application of many PRC laws applicable to us create
an uncertain environment for business operations and they could have a negative
effect on us.





The PRC
legal system is a civil law system. Unlike the common law system, the civil law
system is based on written statutes in which decided legal cases have little
value as precedents. In 1979, the PRC began to promulgate a comprehensive system
of laws and has since introduced many laws and regulations to provide general
guidance on economic and business practices in the PRC and to regulate foreign
investment. Progress has been made in the promulgation of laws and regulations
dealing with economic matters such as corporate organization and governance,
foreign investment, commerce, taxation and trade. The promulgation of new laws,
changes of existing laws and the abrogation of local regulations by national
laws could have a negative impact on our business and business
prospects.





Currency
conversion could adversely affect our financial condition.





The PRC
government imposes control over the conversion of Renminbi into foreign
currencies. Under the current unified floating exchange rate system, the
People’s Bank of China publishes an exchange rate, which we refer to as the PBOC
exchange rate, based on the previous day’s dealings in the inter-bank foreign
exchange market. Financial institutions authorized to deal in foreign currency
may enter into foreign exchange transactions at exchange rates within an
authorized range above or below the PBOC exchange rate according to market
conditions.





Pursuant
to the Foreign Exchange Control Regulations of the PRC issued by the State
Council which came into effect on April 1, 1996, and the Regulations on the
Administration of Foreign Exchange Settlement, Sale and Payment of the PRC which
came into effect on July 1, 1996, regarding foreign exchange control, conversion
of Renminbi into foreign exchange by Foreign Investment Enterprises, or FIEs,
for use on current account items, including the distribution of dividends and
profits to foreign investors, is permissible. FIEs are permitted to convert
their after-tax dividends and profits to foreign exchange and remit such foreign
exchange to their foreign exchange bank accounts in the PRC. Conversion of
Renminbi into foreign currencies for capital account items, including direct
investment, loans, and security investment, is still under certain restrictions.
On January 14, 1997, the State Council amended the Foreign Exchange Control
Regulations and added, among other things, an important provision, which
provides that the PRC government shall not impose restrictions on recurring
international payments and transfers under current account items.





Enterprises
in the PRC (including FIEs) which require foreign exchange for transactions
relating to current account items, may, without approval of the State
Administration of Foreign Exchange, or SAFE, effect payment from their foreign
exchange account or convert and pay at the designated foreign exchange banks by
providing valid receipts and proofs.





Convertibility
of foreign exchange in respect of capital account items, such as direct
investment and capital contribution, is still subject to certain restrictions,
and prior approval from the SAFE or its relevant branches must be
sought.





Furthermore,
the Renminbi is not freely convertible into foreign currencies nor can it be
freely remitted abroad. Under the PRC’s Foreign Exchange Control Regulations and
the Administration of Settlement, Sales and Payment of Foreign Exchange
Regulations, Foreign Invested Enterprises are permitted either to repatriate or
distribute its profits or dividends in foreign currencies out of its foreign
exchange accounts, or exchange Renminbi for foreign currencies through banks
authorized to conduct foreign exchange business. The conversion of Renminbi into
foreign exchange by Foreign Invested Enterprises for recurring items, including
the distribution of dividends to foreign investors, is permissible. The
conversion of Renminbi into foreign currencies for capital items, such as direct
investment, loans and security investment, is subject, however, to more
stringent controls.





Our
operating company is a FIE to which the Foreign Exchange Control Regulations are
applicable. Accordingly, we will have to maintain sufficient foreign exchange to
pay dividends and/or satisfy other foreign exchange requirements.





Exchange
rate volatility could adversely affect our financial condition.





Since
1994, the exchange rate for Renminbi against the United States dollar has
remained relatively stable, most of the time in the region of approximately
RMB8.28 to $1.00. However, in 2005, the Chinese government announced that it
would begin pegging the exchange rate of the Chinese Renminbi against a number
of currencies, rather than just the U.S. dollar and, the exchange rate for the
Renminbi against the U.S. dollar became RMB8.02 to $1.00. If we decide to
convert Chinese Renminbi into United States dollars for other business purposes
and the United States dollar appreciates against this currency, the United
States dollar equivalent of the Chinese Renminbi we convert would be reduced.
There can be no assurance that future movements in the exchange rate of Renminbi
and other currencies will not have an adverse effect on our financial
condition.





17




Since
our assets are located in the PRC, any dividends of proceeds from liquidation
are subject to the approval of the relevant Chinese government
agencies.





Our
operating assets are located inside the PRC. Under the laws governing Foreign
Invested Enterprises in the PRC, dividend distribution and liquidation are
allowed but subject to special procedures under the relevant laws and rules. Any
dividend payment will be subject to the decision of the board of directors and
subject to foreign exchange rules governing such repatriation. Any liquidation
is subject to the relevant government agency’s approval and supervision as well
as the foreign exchange control. This may generate additional risk for our
investors in case of dividend payment and liquidation.





It
may be difficult to affect service of process and enforcement of legal judgments
upon our company and our officers and directors because they reside outside the
United States.





As our
operations are presently based in the PRC and our director and officer resides
in the PRC, service of process on our company and such director and officer may
be difficult to effect within the United States. Also, our main assets are
located in the PRC and any judgment obtained in the United States against us may
not be enforceable outside the United States.





Due
to various restrictions under PRC laws on the distribution of dividends by our
PRC Operating Companies, we may not be able to pay dividends to our
stockholders.





The
Wholly-Foreign Owned Enterprise Law (1986), as amended and The Wholly-Foreign
Owned Enterprise Law Implementing Rules (1990), as amended and the Company Law
of the PRC (2006) contain the principal regulations governing dividend
distributions by wholly foreign owned enterprises. Under these regulations,
wholly foreign owned enterprises may pay dividends only out of their accumulated
profits, if any, determined in accordance with PRC accounting standards and
regulations. Additionally, such companies are required to set aside a certain
amount of their accumulated profits each year, if any, to fund certain reserve
funds. These reserves are not distributable as cash dividends except in the
event of liquidation and cannot be used for working capital purposes. The PRC
government also imposes controls on the conversion of RMB into foreign
currencies and the remittance of currencies out of the PRC. We may experience
difficulties in completing the administrative procedures necessary to obtain and
remit foreign currency for the payment of dividends from the Company’s
profits.





Furthermore,
if our subsidiaries in China incur debt on their own in the future, the
instruments governing the debt may restrict its ability to pay dividends or make
other payments. If we or our subsidiaries are unable to receive all of the
revenues from our operations through these contractual or dividend arrangements,
we may be unable to pay dividends on our common stock.





The
Chinese government exerts substantial influence over the manner in which we must
conduct our business activities.





We are
dependent on our relationship with the local government in the province in which
we operate our business. Chinese government has exercised and continues to
exercise substantial control over virtually every sector of the Chinese economy
through regulation and state ownership. Our ability to operate in China may be
harmed by changes in its laws and regulations, including those relating to
taxation, environmental regulations, land use rights, property and other
matters. We believe that our operations in China are in material compliance with
all applicable legal and regulatory requirements. However, the central or local
governments of these jurisdictions may impose new, stricter regulations or
interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such
regulations or interpretations. Accordingly, government actions in the future,
including any decision not to continue to support recent economic reforms and to
return to a more centrally planned economy or regional or local variations in
the implementation of economic policies, could have a significant effect on
economic conditions in China or particular regions thereof, and could require us
to divest ourselves of any interest we then hold in Chinese
properties.





Future
inflation in China may inhibit our ability to conduct business in China. In
recent years, the Chinese economy has experienced periods of rapid expansion and
high rates of inflation. Rapid economic growth can lead to growth in the money
supply and rising inflation. If prices for our products rise at a rate that is
insufficient to compensate for the rise in the costs of supplies, it may have an
adverse effect on profitability. These factors have led to the adoption by
Chinese government, from time to time, of various corrective measures designed
to restrict the availability of credit or regulate growth and contain inflation.
High inflation may in the future cause Chinese government to impose controls on
credit and/or prices, or to take other action, which could inhibit economic
activity in China, and thereby harm the market for our products.




18




If
our land use rights are revoked, we would have no operational
capabilities.





Under
Chinese law land is owned by the state or rural collective economic
organizations. The state issues to tenants the rights to use property. Use
rights can be revoked and the tenants forced to vacate at any time when
redevelopment of the land is in the public interest. The public interest
rationale is interpreted quite broadly and the process of land appropriation may
be less than transparent. Each of our operating subsidiaries rely on these land
use rights as the cornerstone of their operations, and the loss of such rights
would have a material adverse effect on our company.





Risks
Relating to Our Securities





In
order to raise sufficient funds to expand our operations, we may have to issue
additional securities at prices which may result in substantial dilution to our
shareholders.





If we
raise additional funds through the sale of equity or convertible debt, our
current stockholders’ percentage ownership will be reduced. In addition, these
transactions may dilute the value of our securities outstanding. We may have to
issue securities that may have rights, preferences and privileges senior to our
common stock. We cannot provide assurance that we will be able to raise
additional funds on terms acceptable to us, if at all. If future financing is
not available or is not available on acceptable terms, we may not be able to
fund our future needs, which would have a material adverse effect on our
business plans, prospects, results of operations and financial
condition.





Our
securities have not been registered under the Securities Act, and cannot be sold
without registration under the Securities Act or any exemption from
registration.





Our
securities should be considered a long-term, illiquid investment. Our securities
have not been registered under the Securities Act, and cannot be sold without
registration under the Securities Act or any exemption from registration. In
addition, our securities are not registered under any state securities laws that
would permit their transfer. Because of these restrictions and the absence of an
active trading market for the securities, a shareholder will likely be unable to
liquidate an investment even though other personal financial circumstances would
dictate such liquidation.





We
are not likely to pay cash dividends in the foreseeable future.





We
currently intend to retain any future earnings for use in the operation and
expansion of our business. Accordingly, we do not expect to pay any cash
dividends in the foreseeable future, but will review this policy as
circumstances dictate. Should we determine to pay dividends in the future, our
ability to do so will depend upon the receipt of dividends or other payments
from our PRC operating subsidiary may, from time to time, be subject to
restrictions on its ability to make distributions to us, including restrictions
on the conversion of RMB into U.S. dollars or other hard currency and other
regulatory restrictions.





We
may be subject to the penny stock rules which will make our securities more
difficult to sell.





If we are
able to obtain a listing of our securities on a national securities exchange, we
may be subject in the future to the SEC’s “penny stock” rules if our securities
sell below $5.00 per share. Penny stocks generally are equity securitieswith a price of less than $5.00. The penny
stock rules require broker-dealers to deliver a standardized risk disclosure
document prepared by the SEC which provides information about penny stocks and
the nature and levelof risks in the penny
stock market. The broker-dealer must also provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson, and monthly account statements
showing the market value of each penny stock held in the customer’s account. The
bid and offer quotations, and the broker-dealer and salesperson compensation
information must be given to the customer orally or in writing prior to
completing the transaction and must be given to the customer in writing before
or with the customer’s confirmation.





In
addition, the penny stock rules require that prior to a transaction, the broker
dealer must make a special written determination that the penny stockis a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction.The penny stock rules are burdensome and may
reduce purchases of any offerings and reduce the trading activity for our
securities. As long as our securities are
subject to the penny stock rules, the holders of such securities may find it
more difficult to sell their securities.




19




Our
securities have not been listed for trading on the OTC Bulletin Board or on any
stock exchange and there can be no assurance that there will be a market
developed for our securities in the future.





Our
securities have not been quoted or listed for trading on the OTC Bulletin Board
or on any stock exchange. Although our management will apply to a senior
exchange for listing of our securities, there can be no assurance that a public
market for our shares will be developed. Consequently, investors may not be able
to liquidate their investment or liquidate it at a price that reflects the value
of the business. Even if a public market should develop, the price may be highly
volatile. Because there may be a low price for our securities, many brokerage
firms may not be willing to effect transactions in the securities. Even if an
investor finds a broker willing to effect a transaction in our securities, the
combination of brokerage commissions, transfer fees, taxes, if any, and any
other selling costs may exceed the selling price. Further, many lending
institutions will not permit the use of such securities as collateral for any
loans.





ITEM
1B. UNRESOLVED STAFF COMMENTS





Not
applicable.





ITEM
2. PROPERTIES.





Our
corporate headquarter and factory is located at Yangdai Village, Chendai County,
Jinjiang City, Fujian Province in the PRC, which consist of an aggregate of
approximately 50,000 square meters.  Such facility, which is situated
on approximately 7,500 square meters of developed land, is leased from the
Chinese government for a period of 50 years and is scheduled to expire in
2057.





ITEM
3. LEGAL PROCEEDINGS.





To the
best of our knowledge, none of our directors or executive officers have been
convicted in a criminal proceeding, excluding traffic violations or similar
misdemeanors, or has been a party to any judicial or administrative proceeding
during the past five years that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
federal or state securities laws, except for matters that were dismissed without
sanction or settlement. Except as set forth in our discussion below in “Certain
Relationships and Related Transactions,” none of our directors, director
nominees or executive officers has been involved in any transactions with us or
any of our directors, executive officers, affiliates or associates which are
required to be disclosed pursuant to the rules and regulations of the
SEC.





ITEM
4. (REMOVED AND RESERVED).






20







PART
II





ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.





Market
Information





Our
common stock has not been quoted or listed for trading on the Over-The-Counter
Bulletin Board (“OTCBB”) or on any stock exchange and therefore there is no
public trading market for our common stock.





Holders





As of the
date hereof, there are 10,000,000 shares of common stock issued and outstanding.
There are 13 shareholders of our common stock.





Dividend
Policy





Since
inception we have not paid any dividends on our common stock. We currently do
not anticipate paying any cash dividends in the foreseeable future on our common
stock. Although we intend to retain our earnings, if any, to finance the
exploration and growth of our business, our Board of Directors will have the
discretion to declare and pay dividends in the future. Payment of dividends in
the future will depend upon our earnings, capital requirements, and other
factors, which our Board of Directors may deem
relevant.





Securities
Authorized for Issuance Under Equity Compensation Plans





We
presently do not have any equity based or other long-term incentive programs. In
the future, we may adopt and establish an equity-based or other long-term
incentive plan if it is in the best interest of the Company and our stockholders
to do so.




ITEM
6. SELECTED FINANCIAL DATA.





Not
applicable because we are a smaller reporting company.






21





ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION.


The
following discussion and analysis of the results of operations and financial
condition for the fiscal years ended December 31, 2009 and 2008, should be read
in conjunction with our financial statements, and the notes to those financial
statements that are included elsewhere in this Form 10-K. References in this
section to “we,” “us,” “our,” or the “Company” are to the consolidated business
of Kobe Sport, Nam Kwong and Hengfeng.
 
 Our
discussion includes forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Actual results and the timing of events could
differ materially from those anticipated in these forward-looking statements as
a result of a number of factors, including those set forth under the Risk
Factors, Cautionary Notice Regarding Forward-Looking Statements and Business
sections in this From 10-K. We use words such as “anticipate,” “estimate,”
“plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,”
“may,” “will,” “should,” “could,” and similar expressions to identify
forward-looking statements.
 
 COMPANY
OVERVIEW
 
 The
Company, operating through its PRC subsidiary, Hengfeng, designs, develops, and
manufactures “Kobe” brand shoes, sportswear and accessories in Jinjiang city,
Fujian province. Around 50% of the shoes are produced by Hengfeng internally,
while the clothes and accessories are outsourced to subcontractors. The Company
incorporates innovate value-adding technology into its products, such as
perspiration absorption system, 3D ventilation system and polyurethane
anti-crease system to satisfy the demands and taste of target consumers. The
Company holds a valuable chain of 869 stores over the whole country in 2009. The
Company targets to increase the number of stores by at least 20% each year
within the coming five years, and both the turnover and net profit would be
increased in the same line as the number of stores.
 
 The main
focus of the Company is on second and third-tier cities with trendy consumers
and professional athletes. The targeted customers are those within 15-45 year
olds, who are secondary school and university students that have a taste for
fashion and those middle-aged individuals that have a high purchase power and
preference for quality. Their products are middle-ranged priced for
professionals and functional sporting goods with high technical
content.
 
 The
principal factor affecting our financial performance is the size of our sales
network. The market demand is so material that the increase of the number of
sales points within our sales network can proportionally raise up our turnover
and net profit. We plan to open more retail shops. They are mainly franchised
and only a few to be self owned. Our turnover and net profit can be increased in
line of the number of retail shops within our sales network.
 
 RESULTS
OF OPERATIONS
 
 Results of Operations for
the Year ended December 31, 2009 Compared to the Year ended December 31,
2008
 
 Until
December 31, 2009, the Company had not conducted any active operations since
inception, except for its efforts to locate a suitable acquisition or merger
transaction. No revenue had been generated by the Company during such
period.
 
 Net
income (loss) for the years ended December 31, 2009 and 2008 was $1,194 and
($861).  Net loss for the period from October 30, 2006 (Date of
Inception) to December 31, 2009 was $2,957.
 LIQUIDITY
AND CAPITAL RESOURCES
 
 On August
15, 2008, the Company paid $10,000 to its sole stockholder, which was accounted
for as a return of capital. At December 31, 2009, the Company had cash of $4,543
and working capital of $4,543.


22


The
Company’s present material commitments are professional and administrative fees
and expenses associated with the preparation of its filings with the SEC and
other regulatory requirements. In the event that the Company engages in any
merger or other business combination with an operating company, it will have
additional material commitments. Although the Company from time to time may
engage in discussions regarding a merger or other combination with an operating
company, we cannot offer any assurances that we will engage in any merger or
other combination with an operating company within the next twelve
months.


OFF-BALANCE SHEET
ARRANGEMENTS
 
 We do not
have any off-balance sheet arrangements, financings, or other relationships with
unconsolidated entities or other persons, also known as “special purpose
entities” (SPEs).
 
 ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 Not
applicable because we are a smaller reporting company.


ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.





The
financial statements begin on page F-1.





ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.





Prior to
our reverse acquisition transaction with Kobe Sport, our independent registered
public accounting firm was RBSM LLP (“RBSM”), while Kobe Sport’s independent
registered public accounting firm was AGCA CPA Limited. On March 1, 2010, in
connection with the change in control transaction, our board of directors
approved the dismissal of RBSM, as our independent auditor, effective
immediately. Concurrent with the decision to dismiss RBSM as our independent
auditor, our board of directors elected to appoint AGCA, Inc. (“AGCA”) as our
new independent auditor.





RBSM’s
reports on the financial statements of the Company for the years ended December
31, 2008 and 2007 did not contain an adverse opinion or a disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles, except, RBSM’s audit reports for the years ended December
31, 2008 and 2007 stated that several factors raised substantial doubt about the
Company’s ability to continue as a going concern and that the financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.





In
connection with the audit and review of the financial statements of the Company
through March 1, 2010, there were no disagreements on any matter of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedures, which disagreements if not resolved to their satisfaction would have
caused them to make reference in connection with RBSM’s opinion to the subject
matter of the disagreement.





In
connection with the audited financial statements of the Company for the years
ended December 31, 2008 and 2007 and interim unaudited financial statement
through March 1, 2010, there have been no reportable events with the Company as
set forth in Item 304(a)(1)(v) of Regulation S-K.





Prior to
March 1, 2010, the Company did not consult with AGCA regarding (1) the
application of accounting principles to a specified transactions, (2) the type
of audit opinion that might be rendered on the Company’s financial statements,
(3) written or oral advice was provided that would be an important factor
considered by the Company in reaching a decision as to an accounting, auditing
or financial reporting issues, or (4) any matter that was the subject of a
disagreement between the Company and its predecessor auditor as described in
Item 304(a)(1)(iv) or a reportable event as described in Item 304(a)(1)(v) of
Regulation S-K.






23




ITEM
9A(T). CONTROLS AND PROCEDURES.





Evaluation
of Disclosure Controls and Procedures





Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report. Based upon that evaluation, the
Company’s CEO and CFO concluded that the Company’s disclosure controls and
procedures are effective 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 SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CFO, as appropriate, to allow timely decisions regarding required
disclosure.





Management’s
Annual Report on Internal Control over Financial Reporting.





The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting for the
Company.  Our internal control system was designed to, in general,
provide reasonable assurance to the Company’s management and board regarding the
preparation and fair presentation of published financial statements, but because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





Our
management assessed the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2009.  The framework used by
management in making that assessment was the criteria set forth in the document
entitled “ Internal Control – Integrated Framework” issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on that assessment,
our management has determined that as of December 31, 2009, the Company’s
internal control over financial reporting was effective for the purposes for
which it is intended.





This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management’s report
in this annual report.





Changes
in Internal Control over Financial Reporting





No change
in our system of internal control over financial reporting occurred during the
period covered by this report, fourth quarter of the fiscal year ended December
31, 2009 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.





ITEM
9B. Other Information.





Not
applicable.






24




PART
III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.





Directors
and Executive Officers





The
following table set forth our directors, executive officers, significant
employees, as well as their ages and the positions they held, as of December 31,
2009.
 
 NAME
              AGE
              POSITIONThomas A. Rose
              48
              President and DirectorMarc J. Ross
              47
              Secretary and DirectorDarrin
      M. Ocasio
              39
              Director
 
 Thomas
A. Rose, President and Director
 
 Mr. Rose
has served as President and Director of the Company since its inception. Since
February 2000, Mr. Rose has been a member of Sichenzia Ross Friedman Ference
LLP, a New York city based law firm that provides representation in all matters
involving the securities industry, as well as in all general corporate and
litigation matters. From 1991 until 1999, Mr. Rose was a partner of Schneck,
Weltman & Hashmall LLP. Mr. Rose received his Juris Doctor Degree from the
Benjamin N. Cardozo School of Law in 1986 and a B.S. in Finance from New York
University in 1983.
 
 Marc
J. Ross, Secretary and Director
 
 Mr. Ross
has served as Secretary and Director of the Company since its inception. Since
May 1998, Mr. Ross has been a founding member of Sichenzia Ross Friedman Ference
LLP, a New York city based law firm that provides representation in all matters
involving the securities industry, as well as in all general corporate and
litigation matters. Mr. Ross received his B.A. in Economics from the State
University of New York at Albany in 1984 and his Juris Doctor degree from
Hofstra University School of Law in 1987.
 
 Darrin
M. Ocasio, Director
 
 Mr.
Ocasio has served as Director of the Company since its
inception.  Since 2000, Mr. Ocasio has been an attorney at Sichenzia
Ross Friedman Ference LLP, a New York city based law firm that provides
representation in all matters involving the securities industry, as well as in
all general corporate and litigation matters.  Mr. Ocasio has been a
member of Sichenzia Ross Friedman Ference LLP since 2005.  Mr. Ocasio
received his Juris Doctor Degree from New York Law School in 2000.
 
 The term
of office of each director expires at our annual meeting of stockholders or
until their successors are duly elected and qualified.
 
 On
February 12, 2010, we completed a reverse merger transaction with Kobe Sports in
which results change of control of the Company. Specifically, Thomas A. Rose and
Marc J. Ross resigned as the officers of the Company and Qionglin Lin, Mendoza
Anding Lin and Tommy Lo were appointed as the new officers of the Company,
effective immediately at the Closing. In addition, Thomas A. Rose, Marc J. Ross
and Darrin M. Ocasio have resigned as the directors of the Company and Mendoza
Anding Lin, Qionglin Lin and Aling Lin have been appointed as the new directors
of the Company upon effectiveness of an information statement required by Rule
14f-1 promulgated under the Exchange Act of 1934.





The
following table sets forth the names, ages, and positions of our current
executive officer and director. Executive officers are elected annually by our
Board of Directors.  Each executive officer holds his office until he
resigns, is removed by the Board, or his successor is elected and
qualified.  Directors are elected annually by our stockholders at the
annual meeting.  Each director holds his office until his successor is
elected and qualified or his earlier resignation or removal.






25


Name
              
              Age
              
              PositionMendoza
      Anding Lin
              
              33
              
              President,
      CEO and ChairmanQionglin
      Lin
              
              41
              
              General
      Manager and DirectorAling
      Lin
              
              23
              
              DirectorWing
      Sang Tommy Lo
              
              43
              
              Chief
      Financial OfficerWenwei
      Yuan
              
              46
              
              Vice
      General ManagerYongchun
      Lai
              
              30
              
              Finance
      ManagerLiping
      Cai
              
              38
              
              Sales
      & Operation ManagerMingzhong
      Lin
              
              42
              
              Product
      Department ManagerDong
      Shen
              
              39
              
              Administration
      Manager


Mendoza
Anding Lin, President, CEO and Chairman





Mr. Lin
is the President of Heng Feng Shoes & Clothing Co., Ltd. at Jinjiang City,
Fujian Province since 2009. Previously he served as the General Manager of a
foreign trade company in Hong Kong from 2001 to 2003. He was also the General
Manager of Chaoba Shoe Material Co., Ltd. at Quanzhou City, Fujian Province from
1999 to 2001. Mr. Lin graduated from Huaqiao University (Quanzhou) with a
bachelor’s degree in 2000.




Qionglin
Lin, General Manager and Director





Mr. Lin
is the General Manager of Heng Feng Shoes & Clothing Co., Ltd. at Jinjiang
City, Fujian Province since 2003. Mr. Lin served as the General Manager of
Hengchao Shoes Co., Ltd. at Quanzhou City, Fujian Province from 2001 to 2003.
Before that, he was the factory manager of Hengfeng Shoes Manufacturing Factory
from 1990 to 2000. Mr. Lin graduated from Huaqiao University (Quanzhou) with a
bachelor’s degree in 1993.





Aling
Lin, Board Director





Ms. Lin
is a board director and cashier of Heng Feng Shoes & Clothing Co., Ltd. at
Jinjiang City, Fujian Province since 2007. She previously served as an account
in Heng Feng from 2006 to 2007. Ms. Lin graduated from National Institute of
Technology, School of Beijing with a bachelor’s degree in 2007.





Wing
Sang Tommy Lo, Chief Financial Officer





Mr. Lo is
the Chief Financial Officer of Heng Feng Shoes & Clothing Co., Ltd. at
Jinjiang City, Fujian Province since November 2009. Before that, he served as
the Chief Financial Officer and Vice President in Finance (Group Accounts) and
the Group Company Secretary in a Singapore listed company and a Hong Kong listed
company respectively. He is a member of the Hong Kong Institute of Certified
Public Accountants, the Association of Chartered Certified Accountants, the
Institute of Chartered Secretaries and Administrators, the Hong Kong Institute
of Company Secretaries and a Certified Public Accountant in Hong Kong. He has
more than 20 years experience in accounting. He graduated from City University
of Hong Kong with a bachelor’s degree in Accountancy.





Wenwei
Yuan, Vice General Manager





Mr. Yuan
is the Vice General Manager of Heng Feng Shoes & Clothing Co., Ltd. at
Jinjiang City, Fujian Province since 2003. Mr. Yuan served as General Manager of
Zhengyi Sporting Products Co., Ltd., a subsidiary of Zhengda Group in Fujian
Province from 2000 to 2003. He was also the General Manager of Aolin Champion
Sports Ltd. from 1995 to 2000 and a Chinese delegation official of the 12th
Federation International Basketball Association from 1993 to 1995. He graduated
from Beijing Sport University with a bachelor’s degree in 1988.





Yongchun
Lai, Finance Manager





Mr. Lai
is the Finance Manager of Heng Feng Shoes & Clothing Co., Ltd. at Jinjiang
City, Fujian Province since 2006. Before that, he served as the Financial
Manager at Xing Quan Shoes & Plastics Co., Ltd. from 2004 to 2006. He was
also an accountant at Heng Chao Shoes Co., Ltd. from 2001 to 2004. He graduated
from PLA Military Economics Academy in Wuhan with a bachelor’s degree in
2003.





Liping
Cai, Sales & Operation Manager





Ms. Cai
is the Sales & Operation Manager of Heng Feng Shoes & Clothing Co., Ltd.
at Jinjiang City, Fujian Province since 2007. Ms. Cai was the General Manager in
Marketing Development at Anta Sports Co., Ltd. at Jinjiang City, Fujian Province
from 1997 to 2007. Before that, she served as the Sales Manager at Zhengda Shoes
Co., Ltd. in Quanzhou City, Fujian Province from 1992 to 1997. She graduated
from Zhejiang GongShang University with a marketing bachelor’s degree in
1995.




26





Mingzhong
Lin, Product Department Manager





Mr. Lin
is the Product Department Manager of Heng Feng Shoes & Clothing Co., Ltd. at
Jinjiang City, Fujian Province since 2003. Previously, Mr. Lin served as the
Manufacture Manager of Heng Chao Shoes Co., Ltd., at Jinjiang City, Fujian
Province from 2001 to 2003. He was also an Assistant Factory Manager at Heng
Feng Shoes Manufacturing Factory at Jinjiang City, Fujian Province from 1990 to
2000. He graduated from Liming Vocational University (Quanzhou) with a
bachelor’s degree in 1990.





Dong
Shen, Administration Manager





Mr. Shen
is the Administration Manager of Heng Feng Shoes & Clothing Co., Ltd. at
Jinjiang City, Fujian Province since 2004. Previously he served as an
Administrative Assistant at Chaoba Shoes Material Co., Ltd. from 1999 to 2004.
Mr. Shen graduated from Xihua University with a bachelor’s degree in
1996.





Employment
Agreements





We
currently do not have employment agreement with any our directors and executive
officers.





Family
Relationships





Mendoza
Anding Lin and Qionglin Lin are brothers. Except as stated above, there are no
family relationships between any of our directors or executive officers and any
other directors or executive officers.





Involvement
in Certain Legal Proceedings





To the
best of our knowledge, none of our directors or executive officers have been
convicted in a criminal proceeding, excluding traffic violations or similar
misdemeanors, or has been a party to any judicial or administrative proceeding
during the past five years that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
federal or state securities laws, except for matters that were dismissed without
sanction or settlement. Except as set forth in our discussion below in “Certain
Relationships and Related Transactions,” none of our directors, director
nominees or executive officers has been involved in any transactions with us or
any of our directors, executive officers, affiliates or associates which are
required to be disclosed pursuant to the rules and regulations of the
SEC.





Code
of Ethics





Currently
we do not have a code of ethics that applies to our officers, employees and
directors.






27





ITEM
11. EXECUTIVE COMPENSATION





Executive
Compensation Summary





The
following table sets forth all cash compensation paid by the Company, for the
year ended December 31, 2009 and 2008.  The table below sets forth the
positions and compensations for each officer and director of the
Company.


Name
      and Principal Position
            
            Year
            
            Salary
              ($)
            
            
            Bonus
              ($)
            
            
            Stock
      Awards
              ($)
            
            Option
      Awards
              ($)
            
            
            Non-Equity
      Incentive Plan Compensation ($)
            
            
            Non-Qualified
      Deferred Compensation Earnings
              ($)
            
            
            All
      Other Compensation
              ($)
            
            
            Totals
              ($)Thomas
      A. Rose, President and Director (1)
            
            2009
            
            $
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            02008
            
            $
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            0Marc
      J. Ross, Secretary and Director (1)
            
            2009
            
            $
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            02008
            
            $
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            0Darrin
      M. Ocasio Director (1)
            
            2009
            
            $
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            02008
            
            $
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            0Mendoza
      Anding Lin, President, CEO & Chairman
            
            2009
            
            $
            28,907
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            28,9072008
            
            $
            26,925
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            26,925Qionglin
      Lin, General Manager and Director
            
            2009
            
            $
            30,664
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            30,6642008
            
            $
            28,940
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            28,940Aling
      Lin, Director
            
            2009
            
            $
            5,397
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            5,3972008
            
            $
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            0Wing
      Sang Tommy Lo, CFO
            
            2009
            
            $
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            $
            0





(1)
            On
      February 12, 2010, Thomas A. Rose and Marc J. Ross resigned as the
      officers of the Company effective immediately. In addition, Thomas A.
      Rose, Marc J. Ross and Darrin M. Ocasio have resigned as the directors of
      the Company effective ten (10) days following the filing and mailing of a
      Schedule 14f-1.




No
retirement, pension, profit sharing, stock option or insurance programs or other
similar programs have been adopted by the Company for the benefit of its
employees.
 
 Our
directors will not receive a fee for attending each board of directors meeting
or meeting of a committee of the board of directors. All directors will be
reimbursed for their reasonable out-of-pocket expenses incurred in connection
with attending board of director and committee meetings.




28




ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.




Pre-Share
Exchange
 
 The
following table sets forth certain information regarding our securities
beneficially owned for (i) each stockholder known to be the beneficial owner of
more than 5% of the Company’s outstanding shares of commons tock, (ii) each
executive officer and director, and (iii) all executive officers and directors
as a group, on a pro forma basis prior to the Closing of the Share
Exchange.
 
 Name
      and Address
              
              Amount
      and Nature of Beneficial Ownership
              
              Percentage
      of ClassMondo
      Management Corp. (1)
                61
      Broadway, 32nd
      Floor
                New
      York, NY  10006
              
              1,000,000
              
              100%Thomas
      A. Rose
                61
      Broadway, 32nd
      Floor
                New
      York, NY  10006
              
              0
              
              0%Marc
      J. Ross
                61
      Broadway, 32nd
      Floor
                New
      York, NY  10006
              
              0
              
              0%Darrin
      M. Ocasio
                61
      Broadway, 32nd
      Floor
                New
      York, NY  10006
              
              0
              
              0%All
      Officers and Directors as a group (3 individuals)
              
              0
              
              0%
 
 (1)
              Gregory
      Sichenzia, Marc J. Ross, Richard A. Friedman, Michael Ference, Thomas A.
      Rose, Jeffrey Fessler and Darrin M. Ocasio have shared voting and
      dispositive power over the shares of common stock held by Mondo Management
      Corp.
 
 Post-Share
Exchange




The
following table sets forth certain information as of the date hereof with
respect to the beneficial ownership of our common stock, the sole outstanding
class of our voting securities, by (i) each stockholder known to be the
beneficial owner of 5% or more of the outstanding common stock of the Company,
(ii) each executive officer and director, and (iii) all executive officers and
directors as a group.





Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities.  Common Stock subject to options, warrants or
convertible securities exercisable or convertible within 60 days as of the date
hereof are deemed outstanding for computing the percentage of the person or
entity holding such options, warrants or convertible securities but are not
deemed outstanding for computing the percentage of any other person and is based
on 10,000,000 shares of common stock issued and outstanding on a fully converted
basis as of the date hereof.






29





Name
      and Address of Beneficial Owner (1)(2)
            
            Amount
      and Nature of Beneficial Ownership
            
            Percent
      of Class (3)Mendoza
      Anding Lin (4)
            
            6,300,000
            
            63%Worldluck
      Holdings Limited (5)
            
            1,800,000
            
            18%Qionglin
      Lin
            
            0
            
            0Aling
      Lin
            
            0
            
            0Tommy
      Lo (6)
            
            0
            
            0All
      Executive Officers and Directors as a group (4 persons)
            
            6,300,000
            
            63%





(1)
            Unless
      otherwise indicated, the persons or entities identified herein have sole
      voting and investment power with respect to the shares shown as
      beneficially held by them, subject to community property laws where
      applicable.





(2)
            Except
      as otherwise stated, the address is Yangdai Village,
      Chendai County, Jinjiang City, Fujian Province, People’s Republic of
      China.





(3)
            Applicable
      percentage of ownership is based on 10,000,000 shares of common stock
      issued and outstanding after the Share Exchanges. Beneficial ownership is
      determined in accordance with the rules of the Securities and Exchange Act
      of 1934 and generally includes voting or investment power with respect to
      such securities. Common stock subject to securities exercisable for or
      convertible into common stock that are currently exercisable or
      exercisable within sixty (60) days are deemed to be beneficially owned by
      the person holding such options, warrants, rights, conversion privileges
      or similar obligations, for the purpose of computing the percentage of
      ownership of such person, but are not treated as outstanding for the
      purpose of computing the percentage ownership of any other
      person.





(4)
            Mr.
      Lin owns 70% of the issued and outstanding shares of Kobe Sport. These
      6,300,000 shares were issued to Mr. Lin pursuant to the Exchange Agreement
      at the closing of the Share
Exchange.





(5)
            Worldluck
      Holdings Limited (“Worldluck”) owns 20% of the issued and outstanding
      shares of Kobe Sport. These 1,800,000 shares were issued to Worldluck
      pursuant to the Exchange Agreement at the closing of the Share Exchange.
      Yan Sui William Hui is the sole director of Worldluck and therefore has
      voting and control power over the shares held by
  Worldluck.





(6)
            Mr.
      Lo serves as CFO of Hengfeng in connection with the reverse acquisition
      process pursuant to certain Financial Advisor Agreement between Hengfeng
      and TimeRich Capital Consulting Limited where Mr. Lo is the Director,
      dated November 1, 2009. Mr. Lo previously received 100,000 HK dollars as
      compensation and shall receive certain amount of shares from the public
      company equal to 700,000 HK
dollars.




30




ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.




Mondo Acquisition III, Inc.(prior to closing of the reverse acquisition transaction on February 12,
2010)
 
 Thomas A.
Rose, President and Director, is a partner at Sichenzia Ross Friedman Ference
LLP, an entity providing legal services to the Company. The Company recorded the
fair value of such legal services to reflect all the costs of doing business in
the Company’s financial statements.
 
 Marc J.
Ross, Secretary and Director of the Company, is a partner at Sichenzia Ross
Friedman Ference LLP, an entity providing legal services to the Company. The
Company recorded the fair value of such legal services to reflect all the costs
of doing business in the Company’s financial statements.
 
 Darrin M.
Ocasio, Director of the Company, is a partner at Sichenzia Ross Friedman Ference
LLP, an entity providing legal services to the Company. The Company recorded the
fair value of such legal services to reflect all the costs of doing business in
the Company’s financial statements.
 
 The
Company utilizes the office space and equipment of its officers and directors at
no cost. Management estimates such costs to be immaterial.
 
 None of
our directors is independent as defined under the Nasdaq Marketplace
Rules.




Kobe
Sport (International) Company Limited and its subsidiaries





As of
December 31, 2009 and 2008, the Company had advances from Fujian Kobe Sports
Goods Co., Ltd. (“Fujian Kobe”) for a total of $0 and $399,438,
respectively.  Fujian Kobe is owned by Mr. Anding Lin, the President
of Hengfeng, who holds 70% of Kobe Sport’s total shares. The above amounts due
to related parties were non-interest bearing, unsecured and without fixed
repayment date.





As of
December 31, 2009, the Company had advances from Mr. Qionglin Lin for a total of
$3,148,707.  The above loan is unsecured, bears interest at 10% per
annum and is repayable in one lump sum on or before September 22, 2010. The
Company recognized interest income of $219,587 on such loan for the year ended
December 31, 2009.





Fujian
Jinjiang Chenli Yangli Hengfeng Shoe-making Factory (the 6% minority shareholder
of Hengfeng) provided guarantees for the Company’s short-term bank loan of
$109,838 and $175,578 as of December 31, 2009 and December 31, 2008,
respectively.





Reorganization Related
Transactions





Kobe
Sport was incorporated with limited liability on September 25, 2009 under the
International Business Companies Act in the British Virgin Islands and owns a
100% issued and outstanding capital stock of Nam Kwong. Hengfeng is a
sino-foreign joint stock limited liability company established in the PRC. On
December 4, 2009, Hengfeng underwent reorganization. Before the reorganization,
Hengfeng had been owned as to 94% by Nam Kwong Trading Co. (“Nam Kwong
Unincorporated”, an unincorporated company registered in Hong Kong) and 6% by
another unrelated minority shareholder, which is a company registered in the
PRC, according to their respective capital contribution. Pursuant to the
reorgnization, Nam Kwong Unincorporated transferred the 94% interest in Hengfeng
held by it to Nam Kwong. As a result, through Nam Kwong, Kobe owns 94% interest
in Hengfeng.





Both
before and after the reorganization, Nam Kwong Unincorporated, Nam Kwong and
Kobe have all been beneficially owned and controlled by Mr. Anding Lin, who is
also the President of Hengfeng.





31


Other
than the above, none of the following persons has any direct or indirect
material interest in any transaction to which we are a party since our
incorporation or in any proposed transaction to which we are proposed to be a
party:
 
 (A)
              Any
      of our directors or officers;(B)
              Any
      proposed nominee for election as our director;(C)
              Any
      person who beneficially owns, directly or indirectly, shares carrying more
      than 10% of the voting rights attached to our common stock;
    or(D)
              Any
      relative or spouse of any of the foregoing persons, or any relative of
      such spouse, who has the same house as such person or who is a director or
      officer of any parent or subsidiary of our
  company.


ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES





(1)
Audit Fees





Effective March 1, 2010, we engaged AGCA, Inc. as our
independent registered public accounting firm to examine our financial
statements for the fiscal year ended December 31, 2009.RBSM
LLP was our independent registered public
accounting firm engaged to examine the Company’s financial statements for the
fiscal year ended December 31, 2008.
 
 The audit fee of AGCA, Inc. is $10,000 for professional
services rendered for the audit of our annual financial statements for the
fiscal year ended December 31, 2009.RBSM LLP was paid aggregate fees of approximately $1,000 for
professional services rendered for the audit of our annual financial statements
for the fiscal year ended December 31, 2008 and for the reviews of the financial
statements included in our Quarterly Reports on Form 10-Q for the periods ended
March 31, 2008, June 30, 2008 and September 30, 2008.


(2)
Audit-Related Fee





There
were no fees billed in each of the last two fiscal years for assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit or review of the Company’s financial
statements.




(3)
Tax Fee





There
were no fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning.





(4)
All Other Fees





There
were no other fees billed in each of the last two fiscal years for products and
services provided by the principal accountant, other than the services reported
above.





(5)
Pre-Approval Policies and Procedures





Before
the accountant is engaged by the issuer to render audit or non-audit services,
the engagement is approved by the Company’s the board of directors acting as the
audit committee.






32




PART
IV





ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.





(a) The
following documents are filed as part of this report:





(1) Financial
Statements and Report of Independent Registered Public Accounting Firm, which
are set forth in the index to Consolidated Financial Statements on
pages F-1 through F-10 of this report.




Report
      of Independent Registered Public Accounting Firm— RBSM
      LLPReport
      of Independent Registered Public Accounting Firm— AGCA,
      Inc.Balance
      SheetsStatements
      of Income and Comprehensive IncomeStatements
      of Shareholders’ EquityStatements
      of Cash FlowsNotes
      to Financial Statements




(2)
Financial Statement Schedule: None.





(3)
Exhibits





ExhibitNo.
            
            Description2.1
            
            Share
      Exchange Agreement by and between the Company and Kobe Sport
      (International) Company Limited, dated February 12, 2010 (Incorporated by
      reference to exhibit 2.1 on Form 8-K filed on February 12,
      2010).3.1
            
            Articles
      of Incorporation (Incorporated by reference to exhibit 3.1 on Form 10-SB
      filed on May 2, 2007).3.2
            
            Bylaws
      (Incorporated by reference to exhibit 3.2 on Form 10-SB filed May 2,
      2007).21.1
            
            List
      of subsidiaries of the Registrant *31.1
            
            Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 *31.2
            
            Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 *32.1
            
            Certification
      of Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
      *32.2
            
            Certification
      of Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
      *





*
            Filed
      herein.


33





SIGNATURES





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





CHINA
      SPORTS HOLDING COMPANY LIMITEDDate: May
      14, 2010
            By:
            /s/
      Mendoza Anding
      LinMendoza
      Anding LinPresident,
      Chief Executive Officer and Chairman





Date:
      May 14, 2010
            By:
            /s/
      Wing Sang Tommy
      LoWing
      Sang Tommy LoChief
      Financial Officer and Principal Accounting Officer





In
accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.





Name
            
            Title
            
            Date/s/
      Mendoza Anding
      Lin
            
            President,
      Chief Executive Officer and
            
            May
      14, 2010Mendoza
      Anding Lin
            
            Chairman/s/
      Wing Sang Tommy
      Lo
            
            Chief
      Financial Officer and Principal
            
            May
      14, 2010Wing
      Sang Tommy Lo
            
            Accounting
      Officer/s/
      Qionglin Lin
            
            General
      Manager and Director
            
            May
      14, 2010Qionglin
      Lin/s/
      Aling Lin
            
            Director
            
            May
      14, 2010Aling
      Lin




34






CHINA SPORTS HOLDING COMPANY
LIMITED
 FORMERLY
KNOWN AS MONDO ACQUISITION III, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 
 
 -
TABLE OF CONTENTS -
  PageFinancial
      Statements:Reports
      of Independent Registered Certified Public Accounting Firm
                F-2
      -  F-3Balance
      Sheet as of December 31, 2009 and 2008
                F-4Statements of Losses for the Years Ended December 31, 2009 and 2008, and
      From October 30, 2006
                  (Date
      of Inception) through December 31, 2009
                F-5Statements of Stockholders’ Equity for the Period from Inception (October
      30, 2006) through December 31, 2009
                F-6Statements
      of Cash Flows for the Years Ended December 31, 2009 and 2008, and From
      October 30, 2006
                  (Date
      of Inception) through December 31, 2009
                F-7Notes
      to Financial Statements
                F-8
      -  F-11
   F-1
  RBSM
LLP
 CERTIFIED
PUBLIC ACCOUNTANTS
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 Board of
Directors,
 China
Sports Holding Company Limited
 formerly
known as Mondo Acquisition III, Inc.
 61
Broadway, 32nd
Floor
 New York,
NY 10006
 
 We have
audited the accompanying balance sheet of China Sports Holding Company Limited,
formerly known as Mondo Acquisition III, Inc. (a development stage company) as
of December 31, 2008 and the related statements of losses, stockholder’s equity,
and cash flows for the year ended December 31, 2008, and for the period October
30, 2006 (date of inception) through December 31, 2008. These financial
statements are the responsibility of the company’s management. Our
responsibility is to express an opinion on the financial statements based upon
our audits.
 
 We have
conducted our audit in accordance with the standards of the Public Company
Accounting oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining on test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statements presentation. We believe our audit provide a
reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of China Sports Holding Company
Limited, formerly known as Mondo Acquisition III, Inc. (a development stage
company) as of December 31, 2008 and the related statements of losses,
stockholder’s equity, and cash flows for the year ended December 31, 2008, and
for the period October 30, 2006 (date of inception) through December 31,
2008  in conformity with accounting principles generally accepted in
the United States of America.
 
 The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in the Note 1(b) to the accompanying
financial statements, the Company is in the development stage and has not
established a source of revenues. This raises substantial doubt about the
company’s ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
 
 
 /s/ 
      RBSM LLPCertified
      Public Accountants
 
 
 New York,
New York
 March 6,
2009
 F-2
 
 AGCA,Inc.Certified
      Public AccountantsMember of Alliott Group, a worldwide alliance of independent
      firms
                  
                  411
      E. Huntington Drive, Suite 308, Arcadia, CA 91006· Website:
      www.agcacpa.com
                  · Phone: (626)
      446-4000   · Fax: (626)
      446-4002· E-mail:
      info@agcacpa.com
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 To
the Board of Directors and Stockholders of
 China
Sports Holding Company Limited (formerly known as Mondo Acquisition III,
Inc.)
 Jinjiang,
China
 
 We
have audited the accompanying balance sheet of China Sports Holding Company
Limited, formerly known as Mondo Acquisition III, Inc. (a development stage
company) as of December 31, 2009 and the related statements of losses,
stockholders’ equity, and cash flows for the year then ended,.  The
financial statements of China Sports Holding Company Limited, formerly known as
Mondo Acquisition III, Inc (a development stage company) as of December 31, 2008
were audited by other auditors whose report dated  March 6, 2009
expressed an unqualified opinion on those statements. China Sports Holding
Company Limited is responsible for these financial statements our responsibility
is to express an opinion on these financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of China Sports Holding Company
Limited, formerly known as Mondo Acquisition III, Inc. (a development stage
company) as of December 31, 2009 and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
 
 
 
 /s/
AGCA, Inc.
 Arcadia,
California
 May
12, 2010
 F-3
 
 CHINA
SPORTS HOLDING COMPANY LIMITED
 FORMERLY
KNOWN AS MONDO ACQUISITION III, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 BALANCE
SHEET
 AS
OF DECEMBER 31, 2009 and 2008
 
 
 December
      31,
                    2009
                  
                  
                  December
      31,
                    2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                  
                  $
                  4,543
                  
                  
                  $
                  6,138Total
      Assets
                  
                  $
                  4,543
                  
                  
                  $
                  6,138LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accrued
      expenses related to incorporation
                  
                  $
                  -
                  
                  
                  $
                  1,493Accounts
      payable
                  
                  
                  -
                  
                  
                  
                  1,296Total
      Current Liabilities
                  
                  
                  -
                  
                  
                  
                  2,789Long
      Term Liabilities:
                  
                  
                  -
                  
                  
                  
                  -Total
      Liabilities
                  
                  
                  -
                  
                  
                  
                  2,789Commitments
      and ContingenciesStockholders’
      Equity:Preferred
      stock, par value $0.001; 10,000,000 shares authorized, no issued and
      outstanding as of December 31, 2009 and 2008,
      respectively
                  
                  
                  -
                  
                  
                  
                  -Common
      stock, $0.001 par value; 40,000,000 authorized; 1,000,000 issued and
      outstanding as of December 31, 2009 and 2008,
      respectively
                  
                  
                  1,000
                  
                  
                  
                  1,000Additional
      paid in capital
                  
                  
                  6,500
                  
                  
                  
                  6,500Accumulated
      deficit during development stage
                  
                  
                  (2,957
                  )
                  
                  
                  (4,151
                  )Total
      Stockholders' Equity
                  
                  
                  4,543
                  
                  
                  
                  3,349Total
      Liabilities and Stockholders' Equity
                  
                  $
                  4,543
                  
                  
                  $
                  6,138
 
 See
the accompanying footnotes to audited financial statements
 
 F-4
 
 
 CHINA
      SPORTS HOLDING COMPANY LIMITED
                    FORMERLY
      KNOWN AS MONDO ACQUISITION III, INC.(A
      DEVELOPMENT STAGE COMPANY)STATEMENT
      OF OPERATIONSFOR
      THE  YEARS  ENDED DECEMBER 31, 2009
      AND  2008
                    FROM
      OCTOBER 30, 2006 (DATE OF INCEPTION) TO DECEMBER 31,
  2009
 
 
 For
      the Year
                    Ended
                    December
      31,
                    2009
                  
                  
                  For
      the Year
                    Ended
                    December
      31,
                    2008
                  
                  
                  For
      the Period
                    From October
      30,
                    2006
                    (Date
      of Inception)
                    to
                    December
      31,
                    2009Operating
      Expenses:Selling,
      general and administrative
                  
                  $
                  102
                  
                  
                  $
                  861
                  
                  
                  $
                  4,253(Loss)
      from Operations:
                  
                  
                  (102
                  )
                  
                  
                  (861
                  )
                  
                  
                  (4,253
                  )Other
      Income
                  
                  
                  1,296
                  
                  
                  
                  -
                  
                  
                  
                  1,296Net
      Income (Loss)
                  
                  $
                  1,194
                  
                  
                  $
                  (861
                  )
                  
                  $
                  (2,957
                  )Net
      loss per common share (basic and fully diluted)
                  
                  $
                  0.001
                  
                  
                  $
                  (0.001
                  )
                  
                  $
                  (0.003
                  )Weighted
      average of common shares outstanding (basic and fully
      diluted)
                  
                  
                  1,000,000
                  
                  
                  
                  1,000,000
                  
                  
                  
                  1,000,000
 
 See
the accompanying footnotes to audited financial statements
 
 F-5
 
 CHINA
SPORTS HOLDING COMPANY LIMITED
 FORMERLY
KNOWN AS MONDO ACQUISITION III, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 STATEMENT
OF STOCKHOLDER'S EQUITY
 FROM
OCTOBER 30, 2006 (DATE OF INCEPTION) TO DECEMBER 31, 2009
 
 Preferred
      stock
                    
                    
                    Common
      stock
                    
                    
                    Paid-in-
                    
                    
                    Accumulated
                      deficit
      during developmentShares
                    
                    
                    Amount
                    
                    
                    Shares
                    
                    
                    Amount
                    
                    
                    capital
                    
                    
                    stage
                    
                    
                    TotalBalance-
      October 30, 2006
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Common
      stock issued to founders
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,000,000
                    
                    
                    
                    1,000
                    
                    
                    
                    16,500
                    
                    
                    
                    -
                    
                    
                    
                    17,500Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (1,493
                    )
                    
                    
                    (1,493
                    )Balance
      - December 31, 2006
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,000,000
                    
                    
                    
                    1,000
                    
                    
                    
                    16,500
                    
                    
                    
                    (1,493
                    )
                    
                    
                    16,007Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (1,797
                    )
                    
                    
                    (1,797
                    )Balance
      -December 31,  2007
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,000,000
                    
                    
                    
                    1,000
                    
                    
                    
                    16,500
                    
                    
                    
                    (3,290
                    )
                    
                    
                    14,210Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (861
                    )
                    
                    
                    (861
                    )Return
      of capital to founders
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (10,000
                    )
                    
                    
                    -
                    
                    
                    
                    (10,000
                    )Balance
      - December 31, 2008
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    1,000,000
                    
                    
                    $
                    1,000
                    
                    
                    $
                    6,500
                    
                    
                    $
                    (4,151
                    )
                    
                    $
                    3,349Net
      Income
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,194
                    
                    
                    
                    1,194Balance
      - December 31, 2009
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    1,000,000
                    
                    
                    $
                    1,000
                    
                    
                    $
                    6,500
                    
                    
                    $
                    (2,957
                    )
                    
                    $
                    4,543
 
 See
the accompanying footnotes to audited financial statements
 
 F-6
 
 CHINA
SPORTS HOLDING COMPANY LIMITED
 FORMERLY
KNOWN AS MONDO ACQUISITION III, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 STATEMENT
OF CASH FLOWS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 FROM
OCTOBER 30, 2006 (DATE OF INCEPTION) TO DECEMBER 31, 2009
 
 For
      the Year
                    Ended
                    December
      31,
                    2009
                  
                  
                  For
      the Year
                    Ended
                    December
      31,
                    2008
                  
                  
                  For
      the Period
                    From
                    October
      30, 2006
                    (Date
      of Inception )
                    to
      December 31,
                    2009Cash
      Flow from Operating Activities:Net
      income (loss)
                  
                  $
                  1,194
                  
                  
                  $
                  (861
                  )
                  
                  $
                  (2,957
                  )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Changes
      in operating assets and liabilities:Accounts
      payable and accrued expenses
                  
                  
                  (2,789
                  )
                  
                  
                  -
                  
                  
                  
                  -Net
      Cash Used By Operating Activities
                  
                  
                  (1,595
                  )
                  
                  
                  (861
                  )
                  
                  
                  (2,957
                  )Cash
      Flow from Investing Activities:
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Cash
      Flow from Financing Activities:Proceeds
      from issuance of common stock to founders
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  17,500Return
      of capital to founders
                  
                  
                  -
                  
                  
                  
                  (10,000
                  )
                  
                  
                  (10,000)Net
      Cash Provided (used) By Financing Activities:
                  
                  
                  -
                  
                  
                  
                  (10,000
                  )
                  
                  
                  7,500Net
      (Decrease)/Increase in Cash and Cash Equivalents
                  
                  
                  (1,595
                  )
                  
                  
                  (10,861
                  )
                  
                  
                  4,543Cash
      and Cash Equivalents at beginning of period
                  
                  
                  6,138
                  
                  
                  
                  16,999
                  
                  
                  
                  -Cash
      and Cash Equivalents at end of period
                  
                  $
                  4,543
                  
                  
                  $
                  6,138
                  
                  
                  $
                  4,543
 
 See
the accompanying footnotes to audited financial statements
 
 F-7
 
 CHINA
SPORTS HOLDING COMPANY LIMITED
 FORMERLY
KNOWN AS MONDO ACQUISITION III, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
 (a)
                  Organization
      and Business:China
      Sports Holding Company Limited, formerly known as Mondo Acquisition III,
      Inc. (the “Company”), a wholly owned subsidiary of Mondo Management Corp.,
      was incorporated in the state of Delaware on October 30, 2006 for the
      purpose of raising capital that is intended to be used in connection with
      its business plans which may include a possible merger, acquisition or
      other business combination with an operating business.
                    
                    On
      February 12,  2010, the Company completed a share exchange with
      Kobe Sport (International) Company Limited (“Kobe Sport”).  As a
      result of the share exchange, the Company is no longer a shell company
      and, through its subsidiaries, primarily engages in design, manufacturing
      and sales of sports shoes, sportswear and related accessories.
                    
                    On
      March 12,  2010, the Company received written consents in lieu
      of a meeting of stockholders from a shareholder holding 6,300,000 voting
      shares representing approximately 63% of the total voting stock of the
      Company to amend its Articles of Incorporation to change its name from
      “Mondo Acquisition III, Inc.” to “China Sports Holding Company Limited”.
      The change in name became effective on April 20,
  2010.
 
 (b)
                  Development
      Stage Company:The
      Company is currently a development stage company under the provisions of
      Accounting Standards Codification (“ASC”) Topic 915“Development Stage
      Entities” (formerly known as Statement of Financial Accounting
      Standards (“SFAS”) No. 7). .  As a result, cumulative amounts for the
      statements of operations and cash flows are included from the date of
      inception, October 30, 2006.
                    
                    On
      completion of the share exchange with Kobe Sport (International) Company
      Limited on February 12, 2010, the Company started business in design,
      manufacturing and sales of sports shoes, sportswear and related
      accessories.(c)
                  Use
      of Estimates:
                    
                    The
      preparation of financial statements in conformity with accounting
      principles generally accepted in the United States requires management to
      make estimates and assumptions that affect the amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the
      date of the balance sheet and reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.
 
 (d)
                  Cash
      and Cash Equivalents:
                    
                    For
      purposes of the statement of cash flows, the Company considers highly
      liquid financial instruments purchased with original maturities of three
      months or less to be cash
equivalents.
 
 F-8
  CHINA
SPORTS HOLDING COMPANY LIMITED
 FORMERLY
KNOWN AS MONDO ACQUISITION III, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
 
 (e)
                  Income
      Taxes:
 
 The
Company has implemented the provisions in accordance with ASC 740 (formerly,
SFAS No. 109,Accounting for
Income Taxes)   which requires that income tax accounts be
computed using the liability method. Deferred taxes are determined based upon
the estimated future tax effects of differences between the financial reporting
and tax reporting bases of assets and liabilities given the provisions of
currently enacted tax laws.
 
 Any
deferred tax asset is considered immaterial and has been fully offset by a
valuation allowance because at this time the Company believes that it is more
likely than not that the future tax benefit will not be realized as the Company
has no current operations.
 
 In une
2006, the FASB issued FASB ASC 740-10-25  prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. ASC
740-10-25 also provides guidance on recognition, classification, treatment of
interest and penalties, and disclosure of such positions. Effective January 1,
2007, the Company adopted the provisions of ASC 740-10-25, as required. As a
result of implementing ASC 740-10-25, there has been no adjustment to the
Company’s financial statements and the adoption of ASC 740-10-25 did not have a
material effect on the Company’s consolidated financial statements for the years
ended December 31, 2009, and 2008.
 
 (f)
                  Loss
      per Common Share:
 
 Basic
loss per share is calculated using the weighted-average number of common shares
outstanding during each reporting period. Diluted loss per share includes
potentially dilutive securities such as outstanding options and warrants, using
various methods such as the treasury stock or modified treasury stock method in
the determination of dilutive shares outstanding during each reporting period.
The Company does not have any potentially dilutive instruments.
 
 (g)
                  Fair
      Value of Financial Instruments:
 
 The
carrying value of cash equivalents and accrued expenses approximates fair value
due to the short period of time to maturity.
 
 NOTE
2 - RECENT ACCOUNTING PRONOUNCEMENTS:
  Management
does not believe that there are any recently issued accounting pronouncements
but not yet effective accounting standards that could have a material effect on
the accompanying financial statements.
  F-9
 
 CHINA
SPORTS HOLDING COMPANY LIMITED
 FORMERLY
KNOWN AS MONDO ACQUISITION III, INC.
 (DEVELOPMENT
STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 NOTE
3 - CAPITAL STOCK:
 
 The total
number of shares of capital stock which the Company shall have authority to
issue is fifty million (50,000,000). These shares shall be divided into two
classes with 40,000,000 shares designated as common stock at $.001 par value
(the “Common Stock”) and 10,000,000 shares designated as preferred stock at
$.001 par value (the “Preferred Stock”). The Preferred stock of the Company
shall be issued by the Board of Directors of the Company in one or more classes
or one or more series within any class and such classes or series shall have
such voting powers, full or limited, or no voting powers, and such designations,
preferences, limitations or restrictions as the Board of Directors of the
Company may determine, from time to time.
 
 Holders
of shares of Common Stock shall be entitled to cast one vote for each share held
at all stockholders' meetings for all purposes, including the election of
directors. The Common Stock does not have cumulative voting rights.
 
 No holder
of shares of stock of any class shall be entitled as a matter of right to
subscribe for or purchase or receive any part of any new or additional issue of
shares of stock of any class, or of securities convertible into shares of stock
of any class, whether now hereafter authorized or whether issued for money, for
consideration other than money, or by way of dividend.
 
 On
December 8, 2006, the Company issued 1,000,000 shares of Common Stock to Mondo
Management Corp. at a purchase price of $.0175 per share, for an aggregate
purchase price of $17,500.
 
 The
Company had 1,000,000 shares of common stock issued and outstanding at December
31, 2009 and December 31, 2008. As of December 31, 2009 and December 31, 2008
the Company had no preferred stock issued and outstanding.
 
 NOTE
4 - RELATED PARTIES:
 
 The
officers, directors and stockholders of the Company are affiliated with
Sichenzia Ross Friedman Ference LLP, an entity providing legal services to the
Company at no cost. The Company recorded the fair value of such legal services
to reflect all the costs of doing business in the Company’s financial
statements.
 
 NOTE
5 - INCOME TAXES:
 
 For
income tax reporting purposes, the Company's aggregate unused net operating
losses of approximately $2,900 will expire through 2028, subject to limitations
of Section 382 of the Internal Revenue Code, as amended. The deferred tax asset
related to the carry forward was deemed to be approximately $900. The Company
has provided a valuation reserve against the full amount of the net operating
loss benefit, because in the opinion of management based upon the development
stage and the likelihood of a future Section 382 limitation it is more likely
than not that the benefits will not be realized.
 
 F-10
  CHINA
SPORTS HOLDING COMPANY LIMITED
 FORMERLY
KNOWN AS MONDO ACQUISITION III, INC.
 (DEVELOPMENT
STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
  NOTE
6 - SUBSEQUENT EVENTS:
 
 On
February 12, 2010, the Company completed a share exchange with Kobe Sport
(International) Company Limited (“Kobe Sport”) pursuant to a share exchange
agreement ("Share Exchange Agreement”) under which the Company issued 9,000,000
shares of its common stock, par value $0.001, to the shareholders of Kobe Sport
(the “Kobe Sport Shareholders”) in exchange for all the issued and outstanding
shares of Kobe Sport (the “Share Exchange”).  As a result of the Share
Exchange, Kobe Sport has become the Company’s wholly-owned subsidiary and Kobe
Sport Shareholders acquired 90% of the Company’s issued and outstanding
stock.  Effective from the share exchange, the Company is no longer a
shell company and, through its subsidiaries, primarily engages in design,
manufacturing and sales of sports shoes, sportswear and related
accessories.  The Share Exchange will be accounted for as a reverse
acquisition whereby Kobe Sport is deemed to be the accounting acquirer (legal
acquiree) and the Company to be the accounting acquiree (legal
acquirer).
 
 On March
12,  2010, the Company received written consents in lieu of a meeting
of stockholders from a shareholder holding 6,300,000 voting shares representing
approximately 63% of the total voting stock of the Company to amend its Articles
of Incorporation to change its name from “Mondo Acquisition III, Inc.” to “China
Sports Holding Company Limited”. The change in name became effective on April
20, 2010.