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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2010

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

For the transition period from _____________to _____________

Commission File No. 333-134287

CHINA INTERACTIVE EDUCATION, INC.(Exact name of registrant as specified in its charter)

|Nevada                                                         | 98-0643339                          
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)

Block C, Zhennan Road, South DistrictZhongshan City, Guangdong ProvincePeoples Republic of China
(Address of principal executive offices)

(86) 0760-2819888
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]     No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [  ]     No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and
smaller reporting company in Rule 12b-2 of the Exchange Act.

|Large Accelerated Filer [ 
]                  |  | Accelerated Filer [  ]       
|--------------------------------------------- |  | -----------------------------
|Non-Accelerated Filer [ 
]                    |  | Smaller reporting company [X]
|(Do not check if a smaller reporting company) |  |                              

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

Yes [  ]     No [X]

The number of shares outstanding of each of the issuers classes of common equity, as of August 18, 2010, is as follows:

|Class of Securities             | Shares Outstanding
|------------------------------- | ------------------
|Common Stock, $0.0001 par value | 65,000,000        

1

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|Table of Contents             
|------------------------------
|                              
|                              
|PART I   FINANCIAL INFORMATION
|                              
|ITEM 1                        
|                              
|ITEM 2                        
|                              
|ITEM 3                        
|                              
|ITEM 4(T).                    
|                              
|PART II   OTHER INFORMATION   
|                              
|ITEM 1                        
|                              
|ITEM 1A.                      
|                              
|ITEM 2                        
|                              
|ITEM 3                        
|                              
|ITEM 4                        
|                              
|ITEM 5                        
|                              
|ITEM 6                        
|                              
|SIGNATURES                    

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CHINA INTERACTIVE EDUCATION,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (AMOUNTS EXPRESSED
IN US DOLLARS)

|ASSETS                                                                               |  
|------------------------------------------------------------------------------------ | -
|                                                                                     |  
|                                                                                     |  
|Current assets                                                                       |  
|Cash and cash equivalents                                                            | $
|Accounts receivable, net of
      allowance of $720,112 and $nil as of June 30, 2010 |  
|and
      December 31, 2009 respectively                                             |  
|Inventories                                                                          |  
|Deposits, prepayments and
      other receivables                                    |  
|Total current assets                                                                 |  
|Property, plant and equipment , net                                                  |  
|Intangible assets, net                                                               |  
|Total assets                                                                         | $
|                                                                                     |  
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                 |  
|Current liabilities                                                                  |  
|Accounts and notes
      payable                                                     | $
|Other payables and
      accrued expenses                                            |  
|Advances from customers                                                              |  
|Value added and other
      taxes payable                                            |  
|Income tax payable                                                                   |  
|Due to related parties                                                               |  
|Total current liabilities                                                            |  
|Total liabilities                                                                    |  
|                                                                                     |  
|Commitments and Contingencies                                                        |  
|                                                                                     |  
|Shareholders' Equity                                                                 |  
|Preferred stock, $0.001 par value, 10,000,000
      shares authorized,               |  
|none issued
      and outstanding                                                    |  
|Common stock, $0.001 par value, 200,000,000
      shares authorized,                 |  
|65,000,000 shares
      issued and outstanding                                       |  
|Additional paid-in capital                                                           |  
|Statutory reserves                                                                   |  
|Retained earnings                                                                    |  
|Accumulated other comprehensive income                                               |  
|Total shareholders' equity                                                           |  
|Total liabilities and shareholders' equity                                           | $
|                                                                                     |  
|                                                                                     |  
|See accompanying notes to condensed consolidated financial
      statements.        

3

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CHINA INTERACTIVE EDUCATION, INC.CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)(AMOUNTS EXPRESSED IN US DOLLARS)

|                                                                             |   | Three months ended |   |   | Six months ended |  
|---------------------------------------------------------------------------- | - | ------------------ | - | - | ---------------- | -
|                                                                             |   | June 30,           |   |   | June 30,         |  
|                                                                             |   | 2010               |   |   | 2009             |  
|                                                                             |   |                    |   |   |                  |  
|Revenue                                                                      | $ | 11,364,984         |   | $ | 3,535,064        |  
|                                                                             |   |                    |   |   |                  |  
|Cost of sales                                                                |   | (8,197,087         | ) |   | (1,016,281       | )
|                                                                             |   |                    |   |   |                  |  
|Gross profit                                                                 |   | 3,167,897          |   |   | 2,518,783        |  
|Operating expenses :                                                         |   |                    |   |   |                  |  
|Selling expenses                                                             |   | (289,459           | ) |   | (17,232          | )
|General and administrative
      expenses                                    |   | (304,189           | ) |   | (89,902          | )
|Research and development
      expenses                                      |   | (73,451            | ) |   | (394,275         | )
|                                                                             |   |                    |   |   |                  |  
|                                                                             |   | (667,099           | ) |   | (501,409         | )
|                                                                             |   |                    |   |   |                  |  
|Income from operation                                                        |   | 2,500,798          |   |   | 2,017,374        |  
|Bank interest income                                                         |   | 30                 |   |   | 10               |  
|                                                                             |   |                    |   |   |                  |  
|Income before provision for income tax                                       |   | 2,500,828          |   |   | 2,017,384        |  
|Provision for income taxes                                                   |   | (328,069           | ) |   | (323,730         | )
|                                                                             |   |                    |   |   |                  |  
|Net income                                                                   |   | 2,172,759          |   |   | 1,693,654        |  
|Other comprehensive income :                                                 |   |                    |   |   |                  |  
|Foreign currency translation
      adjustment                                |   | (101,298           | ) |   | (382,432         | )
|                                                                             |   |                    |   |   |                  |  
|Total comprehensive income                                                   | $ | 2,071,461          |   | $ | 1,311,222        |  
|                                                                             |   |                    |   |   |                  |  
|Weighted average number of shares :                                          |   |                    |   |   |                  |  
|- Basic and diluted                                                          |   | 65,000,000         |   |   | 60,400,000       |  
|Earnings per common share                                                    |   |                    |   |   |                  |  
|- Basic and diluted                                                          | $ | 0.03               |   | $ | 0.03             |  
|                                                                             |   |                    |   |   |                  |  
|See accompanying notes to
      condensed consolidated financial statements. |  

4

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CHINA INTERACTIVE EDUCATION, INC.CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(AMOUNTS EXPRESSED IN US
DOLLARS EXCEPT FOR NUMBER OF SHARE)

|                                                                             |  |              |  |   |         |  |   |            |  |   |          |  |   |               |  |   | Accumulated |  |   |           | 
|---------------------------------------------------------------------------- |  | ------------ |  | - | ------- |  | - | ---------- |  | - | -------- |  | - | ------------- |  | - | ----------- |  | - | --------- | 
|                                                                             |  |              |  |   |         |  |   | Additional |  |   |          |  |   |               |  |   | other       |  |   |           | 
|                                                                             |  | Common stock |  |   | paid-in |  |   | Statutory  |  |   | Retained |  |   | comprehensive |  |   |             | 
|                                                                             |  | Shares       |  |   | Amount  |  |   | capital    |  |   | reserves |  |   | earnings      |  |   | income      |  |   | Total     | 
|Balance, December 31, 2009                                                   |  | 65,000,000   |  | $ | 65,000  |  | $ | 1,128,000  |  | $ | 87,884   |  | $ | 3,540,507     |  | $ | 388,017     |  | $ | 5,209,408 | 
|Net income for the six months ended June 30, 2010                            |  | --           |  |   | --      |  |   | --         |  |   | --       |  |   | 1,131,876     |  |   | --          |  |   | 1,131,876 | 
|Foreign currency translation adjustment                                      |  | --           |  |   | --      |  |   | --         |  |   | --       |  |   | --            |  |   | 41,812      |  |   | 41,812    | 
|Balance, June 30, 2010 (Unaudited)                                           |  | 65,000,000   |  | $ | 65,000  |  | $ | 1,128,000  |  | $ | 87,884   |  | $ | 4,672,383     |  | $ | 429,829     |  | $ | 6,383,096 | 
|                                                                             |  |              |  |   |         |  |   |            |  |   |          |  |   |               |  |   |             |  |   |           | 
|See accompanying notes to condensed consolidated financial
      statements. | 

5

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CHINA INTERACTIVE EDUCATION,
INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)(AMOUNTS EXPRESSED IN US DOLLARS)

|                                                                                    |   | Six months ended June 30, |  
|----------------------------------------------------------------------------------- | - | ------------------------- | -
|                                                                                    |   | 2010                      |  
|Cash flows from operating
      activities:                                         |   |                           |  
|Net income                                                                          | $ | 1,131,876                 |  
|Adjustments to reconcile net income to cash
      provided by operating activities: |   |                           |  
|Depreciation of property, plant and
      equipment                                 |   | 48,994                    |  
|Amortization of
      intangible assets                                             |   | 110,165                   |  
|Allowance for doubtful debts                                                        |   | 718,145                   |  
|(Increase) decrease in assets :                                                     |   |                           |  
|Accounts receivable                                                                 |   | (3,817,185                | )
|Inventories                                                                         |   | (2,713,928                | )
|Deposits, prepayments and other
      receivables                                   |   | 315,312                   |  
|Increase (decrease) in liabilities :                                                |   |                           |  
|Accounts and notes payable                                                          |   | 1,300,188                 |  
|Other payables and accrued
      expenses                                           |   | 233,670                   |  
|Advance from customers                                                              |   | 415,447                   |  
|Value added and other taxes
      payable                                           |   | 2,305,870                 |  
|Income tax payable                                                                  |   | 211,525                   |  
|Net cash provided by operating activities                                           |   | 260,079                   |  
|                                                                                    |   |                           |  
|Cash flows from investing activities
      :                                        |   |                           |  
|Purchase of property, plant and equipment                                           |   | (71,411                   | )
|Purchase of intangible assets                                                       |   | (3,232                    | )
|Advance to related company                                                          |   | -                         |  
|Net cash used in investing activities                                               |   | (74,643                   | )
|                                                                                    |   |                           |  
|Cash flows from financing
      activities:                                         |   |                           |  
|Advance from related parties                                                        |   | 842,824                   |  
|Repayment to related parties                                                        |   | (1,044,477                | )
|Net cash used in financing activities                                               |   | (201,653                  | )
|                                                                                    |   |                           |  
|Effect of foreign currency translation                                              |   | (14,831                   | )
|Net decrease in cash and cash equivalents                                           |   | (31,048                   | )
|Cash and cash equivalents, beginning of period                                      |   | 351,544                   |  
|Cash and cash equivalents, end of period                                            | $ | 320,496                   |  
|Supplemental disclosure information                                                 |   |                           |  
|Income taxes
      paid                                                             | $ | 116,546                   |  
|                                                                                    |   |                           |  
|See accompanying notes to the
      condensed consolidated financial statements.   

6

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CHINA INTERACTIVE EDUCATION, INC.NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 DESCRIPTION OF BUSINESS AND ORGANIZATION

China Interactive Education, Inc (CIE or the Company) was
incorporated in the State of Delaware on August 28, 2000 for the purpose of
developing online internet community portals. On December 4, 2009, the Company
changed its legal domicile from Delaware to Nevada by merging into a
wholly-owned subsidiary, China Interactive Education, Inc., which the Company
established in the State of Nevada for the sole purpose of effecting the change
of domicile to Nevada, which the Company deeded to be a more favorable
jurisdiction with a well recognized body of corporate law and no state income
tax. The Companys name was changed from Find the World Interactive, Inc. to
China Interactive Education, Inc. On December 11, 2009, the Company completed a
reverse acquisition of MenQ Technology Group Limited (MenQ).

As of June 30, 2010, details of the Companys wholly-owned
subsidiaries are as follows:

|                                              | Place and date of                                          |                 |                                                                                                                          
|--------------------------------------------- | ---------------------------------------------------------- | --------------- | -------------------------------------------------------------------------------------------------------------------------
|Subsidiaries
      names                     | incorporation                                              | Paid-up capital | Principal activities                                                                                                     
|MenQ Technology Group Limited (MenQ)        | British Virgin Islands
      (BVI) July 2, 2009          | $50,000         | Intermediate holding company                                                                                             
|Wisegate International Limited (Wisegate)   | British Virgin Islands (BVI)
      May 30, 2007          | $50,000         | Licensing of a patent of a global
      positioning systems (GPS) technology and as an intermediate holding
      company
|MenQ International Limited
      (MenQ HK)  | Hong Kong July
      28, 2006                              | HK$10,000       | Development and
      sales of electronic products                                                                       
|Clever Aim Development Limited (Clever Aim) | Hong Kong August 3, 2009                                   | HK$10,000       | Intermediate holding company                                                                                             
|MenQ Technology Limited (MenQ
      China)  | Peoples Republic of
      China (PRC) December 25, 2008 | RMB1,000,000    | Development and
      sales of electronic products                                                                       

Reverse Acquisition

On December 11, 2009, the Company entered into a share exchange
agreement (Share Exchange Agreement) under which the Company issued
60,400,000 shares of the Company, to the sole shareholder of MenQ in exchange
for all the issued and outstanding shares of MenQ (the Share Exchange).
Immediately following the Share Exchange, the shareholder of MenQ owned
approximately 92.9% of the Companys total issued and outstanding share capital
on an as-if converted and fully-diluted basis.

As a result, the Share Exchange has been accounted for as a
reverse acquisition using the purchase method of accounting, whereby MenQ is
deemed to be the accounting acquirer and the CIE to be the accounting acquiree.
The financial statements before the date of Share Exchange are those of MenQ
with the results of CIE being consolidated from the date of Share Exchange. The
equity section and the earnings per share have been retroactively restated to
reflect the reverse acquisition and no goodwill has been recorded.

MenQ Technology Group Limited (MenQ) is a company
incorporated with limited liability on July 2, 2009 in the British Virgin
Islands, with a registered and paid up capital of $50,000.

7

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On September 8, 2009, the Company changed its name from Mighty Genius Holdings Limited to MenQ Technology Group Limited.

MenQ of its own has not carried out any substantive operations except for investment holding. Through its wholly-owned subsidiaries, MenQ primarily engages in the development and sales of electronic products based on a computer programming
technology.

Since their incorporation, 100% of the equity interests in Wisegate and Clever Aim have always been held by MenQ.

Restructuring

On September 7, 2009, pursuant to a restructuring plan (Restructuring), MenQ through Wisegate, acquired 100% equity interests in MenQ HK from Mr. Chen Ruofei and another minority shareholder, who are both PRC residents.

On October 10, 2009, also pursuant to the Restructuring, MenQ through Clever Aim, acquired 100% equity interests in MenQ China from Mr. Chen Ruofei, Mr. Chen Tiannan and other minority shareholders, who are all PRC residents. On October 10, 2009,
the local government of the PRC issued the certificate of approval regarding the change in shareholding of MenQ China and its transformation from a PRC domestic company to a wholly-foreign owned enterprise.

On September 21, 2009, as part of the Restructuring, Mr. Chen Ruofei, Mr. Chen Tiannan and other minority shareholders (MenQ HK and MenQ China Former Shareholders) through Future Billion Limited (Future Billion, a company
incorporated in the BVI, established and controlled by MenQ HK and MenQ China Former Shareholders), entered into an option agreement (Option Agreement) with Mr. Liu Hai Qi (the Granter, the sole legal shareholder and director
of MenQ).

Pursuant to the Option Agreement, Future Billion obtained the right and option to acquire all outstanding shares (Option Shares) in MenQ at an exercise price of $1 per share during the exercise period of five years commencing
on the ninetieth day after the effectiveness of a registration statement under the Securities Act to be filed by a United States public reporting shell company, with which MenQ intends to enter into a share exchange agreement for the purposes of a
reverse merger with that shell company.

Pursuant to the Option Agreement, the Granter further agrees, among others, that throughout the exercise period of the Option Agreement, without the prior written approval of Future Billion:

|(i)   | he will not increase the number of authorized shares of the MENQs common stock;                                                                                                                                                  
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                   
|(ii)  | he will keep available the services of current officers and employees of MENQ and its subsidiaries;                                                                                                                               
|      |                                                                                                                                                                                                                                   
|(iii) | MENQ and its subsidiaries do not declare, accrue, set aside or pay any dividend or make any other distribution,
nor do they repurchase, redeem or otherwise reacquire any equity, shares of
capital stock or any other securities;
|      |                                                                                                                                                                                                                                   
|(iv)  | MENQ and its subsidiaries do not sell or otherwise issue any equity, shares of capital stock or any other securities.                                                                                                             

The primary purpose of the Option Agreement is to enable MenQ HK and MenQ China Former Shareholders to reacquire ultimate controlling legal ownership of MenQ HK and MenQ China in compliance with regulatory requirements of the PRC.

8

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During and after the Restructuring, there has been no change to the composition of the board of directors of MenQ HK and MenQ China. The boards of directors of MenQ HK and MenQ China have continued to comprise representatives of MenQ HK and MenQ
China Former Shareholders. Therefore, MenQ HK and MenQ China are still under the same operating and management control of MenQ HK and MenQ China Former Shareholders. As a result of the Option Agreement, MenQ HK and MenQ China Former Shareholders,
through Future Billion, continue to bear the residual risks and rewards relating to MenQ HK and MenQ China. As a result, the Restructuring has been accounted for as a recapitalization of MenQ HK and MenQ China with no adjustment to the historical
basis of their assets and liabilities. The Restructuring has been accounted for using the "as if" pooling method of accounting and the operations were consolidated as if the Restructuring had occurred as of the beginning of the earliest period
presented and the current corporate structure had been in existence throughout the periods covered by these financial statements.

NOTE 2   SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation and consolidation

These interim condensed consolidated financial statements are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been included.
The results reported in the condensed consolidated financial statements for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The following (a) condensed consolidated balance sheet as of
December 31, 2009, which was derived from audited financial statements, and (b) the unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial
statements and accompanying footnotes of the Company for the year ended December 31, 2009.

These condensed consolidated financial statements include the financial statements of CIE and its subsidiaries. All significant inter-company balances or transactions have been eliminated on consolidation.

The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. All significant intercompany accounts,
transactions and cash flows are eliminated on consolidation.

Revenue recognition

Revenue is recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectibility is reasonably assured.

Revenue from providing technology development services and granting the technology patent right to its customer is recognized net of sales discounts and returns and business taxes once the services have been rendered to its customers and the Company
has the right to receive the income. Revenue from sales of the Companys products is recognized when the significant risks and rewards of ownership have been transferred to the buyer, at the time when the products are delivered to and accepted
by its customers, the price is fixed or determinable as stated on the sales contract, and collectibility is reasonably assured. Customers do not have a general right of return on products shipped. Product returns to the Company were insignificant
during past years. There are no post-shipment obligations, price protection or bill and hold arrangements.

9

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Research and development expenses

Research and development costs are charged to expense when
incurred.

Advertising and promotion costs

The Company expenses advertising and promotion costs as
incurred. Advertising and promotion expenses charged to operations were
$1,525,404 and $54,705 for the six months ended June 30, 2010 and 2009,
respectively.

Shipping and handling cost

Technological products sold by the Company are normally
collected by customers at the Companys premises. During the periods ended June
30, 2010 and 2009, shipping and handling costs were insignificant.

Foreign Currency

The Company uses the United States dollars (U.S. Dollar or
US$ or $) for financial reporting purposes. The PRC subsidiaries within the
Company maintain their books and records in their functional currency, Chinese
Renminbi (RMB) and Hong Kong dollars (HK$), being the lawful currency in the PRC and Hong Kong. Assets and liabilities are translated into US Dollars using
the applicable exchange rates prevailing at the balance sheet date. Items on the
statement of operations are translated at average exchange rates during the
reporting period. Equity accounts are translated at historical rates.
Adjustments resulting from the translation of the Companys financial statements
are recorded as accumulated other comprehensive income.

The exchange rates used to translate amounts in RMB and HK$
into U.S. Dollars for the purposes of preparing the consolidated financial
statements are as follows:-

|                                                     | As of June 30, 2010         | As of December 31, 2009
|---------------------------------------------------- | --------------------------- | -----------------------
|Balance sheet items, except for equity accounts      | US$1=RMB6.7886              | US$1=RMB6.8282         
|                                                     | US$1=HK$7.7838              | US$1=HK$7.7850         
|                                                     |                             |                        
|                                                     | Three months ended June 30,
|                                                     | 2010                        | 2009                   
|Items in the statements of operations and cash flows | US$1=RMB6.8235              | US$1= RMB6.8299        
|                                                     | US$1=HK$7.739               | US$1=HK$7.7634         
|                                                     |                             |                        
|                                                     | Six months ended June 30,  
|                                                     | 2010                        | 2009                   
|Items in the statements of operations and cash flows | US$1=RMB6.8072              | US$1= RMB6.8155        
|                                                     | US$1=HK$7.7740              | US$1=HK$7.7496         

No representation is made that the RMB amounts could have been,
or could be, converted into U.S. dollars at the above rates.

The value of RMB against U.S. dollars and other currencies may
fluctuate and is affected by, among other things, changes in Chinas political
and economic conditions. Any significant revaluation of RMB may materially
affect the Companys financial condition in terms of U.S. dollar reporting.

10

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Fair value

ASC Topic 820, Fair Value Measurement and Disclosures,
defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. This topic also establishes a fair
value hierarchy which requires classification based on observable and
unobservable inputs when measuring fair value. There are three levels of inputs
that may be used to measure fair value:

|Level 1- | Quoted prices in active markets for identical
      assets or liabilities.                                                                                                                                                                                                                                                   
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                              
|Level 2- | Observable inputs other than Level 1 prices
      such as quoted prices for similar assets or liabilities; quoted prices in
      markets that are not active; or other inputs that are observable or can be
      corroborated by observable market data for substantially the full term of
      the assets or liabilities.
|         |                                                                                                                                                                                                                                                                                                                              
|Level 3- | Unobservable inputs that are supported by
      little or no market activity and that are significant to the fair value of
      the assets or liabilities.                                                                                                                                                                  

The carrying values of cash and cash equivalents, trade and
other receivables and payables, and short-term debts approximate fair values due
to their short maturities.

There were no assets and liabilities measured at fair value on
a recurring or nonrecurring basis as of June 30, 2010 and December 31, 2009.

Recent accounting pronouncements

Effective January 1, 2010, the Company adopted the provisions
in ASU 2010-06, Fair Value Measurements and Disclosures (ASC Topic 820):
Improving Disclosures about Fair Value Measurements, which requires new
disclosures related to transfers in and out of levels 1 and 2 and activity in
level 3 fair value measurements, as well as amends existing disclosure
requirements on level of disaggregation and inputs and valuation techniques. The
adoption of the provisions in ASU 2010-06 did not have an impact on the
Companys consolidated financial statements.

In February 2010, the Financial Accounting Standards Board
(FASB) issued authoritative guidance that amends the disclosure requirements
related to subsequent events. This guidance includes the definition of a
Securities and Exchange Commission filer, removes the definition of a public
entity, redefines the reissuance disclosure requirements and allows public
companies to omit the disclosure of the date through which subsequent events
have been evaluated. This guidance is effective for financial statements issued
for interim and annual periods ending after February 2010. This guidance did not
materially impact the Companys results of operations or financial position, but
did require changes to the Companys disclosures in its financial statements.

In April 2010, the FASB issued ASU No.
2010-13CompensationStock Compensation (Topic 718), which addresses the
classification of an employee share-based payment award with an exercise price
denominated in the currency of a market in which the underlying equity security
trades. This Update provides amendments to Topic 718 to clarify that an employee
share-based payment award with an exercise price denominated in the currency of
a market in which a substantial portion of the entitys equity securities trades
should not be considered to contain a condition that is not a market,
performance, or service condition. Therefore, an entity would not classify such
an award as a liability if it otherwise qualifies as equity. The amendments in
this Update are effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2010. The Company expects that
the adoption of the amendments in this Update will not have any significant
impact on its financial position and results of operations.

Other accounting standards that have been issued or proposed by
the FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the Companys
Consolidated Financial Statements upon adoption.

11

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NOTE 3   ACCOUNTS RECEIVABLE, NET

|                                      |   | June 30,    |   |   | December 31, | 
|------------------------------------- | - | ----------- | - | - | ------------ | 
|                                      |   | 2010        |   |   | 2009         | 
|                                      |   | (Unaudited) |   |   |              | 
|Accounts receivable                   | $ | 14,920,969  |   | $ | 11,006,809   | 
|Less: Allowance for doubtful accounts |   | (720,112    | ) |   | --           | 
|                                      |   |             |   |   |              | 
|Accounts receivable, net              | $ | 14,200,857  |   | $ | 11,006,809   | 

NOTE 4   INVENTORIES

|                 |   | June 30,    |  |   | December 31, | 
|---------------- | - | ----------- |  | - | ------------ | 
|                 |   | 2010        |  |   | 2009         | 
|                 |   | (Unaudited) |  |   |              | 
|Raw materials    | $ | 444,504     |  | $ | 566,125      | 
|Work in progress |   | 240,585     |  |   | 246,152      | 
|Finished goods   |   | 3,195,278   |  |   | 340,088      | 
|                 |   |             |  |   |              | 
|Total            | $ | 3,880,367   |  | $ | 1,152,365    | 

NOTE 5   DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

|                                         |   | June 30,    |  |   | December 31, | 
|---------------------------------------- | - | ----------- |  | - | ------------ | 
|                                         |   | 2010        |  |   | 2009         | 
|                                         |   | (Unaudited) |  |   |              | 
|Purchase deposits                        |   | 150,697     |  |   | 536,364      | 
|Prepaid for operating expenses           |   | 135,728     |  |   | 67,272       | 
|Other receivables, net of $nil allowance |   | 57,217      |  |   | 52,600       | 
|                                         |   |             |  |   |              | 
|Total                                    | $ | 343,642     |  | $ | 656,236      | 

NOTE 6   PROPERTY, PLANT AND EQUIPMENT, NET

|                                                      |   | June 30,    |   |   | December 31, |  
|----------------------------------------------------- | - | ----------- | - | - | ------------ | -
|                                                      |   | 2010        |   |   | 2009         |  
|                                                      |   | (Unaudited) |   |   |              |  
|Furniture, fixtures and equipment                     | $ | 47,066      |   | $ | 59,058       |  
|Leasehold improvement                                 |   | 154,626     |   |   | 132,479      |  
|Motor vehicles                                        |   | 214,555     |   |   | 151,729      |  
|Plant and machinery                                   |   | 99,547      |   |   | 98,582       |  
|                                                      |   |             |   |   |              |  
|Total cost                                            |   | 515,794     |   |   | 441,848      |  
|Less: Accumulated depreciation and
      amortization |   | (88,161     | ) |   | (38,951      | )
|                                                      |   |             |   |   |              |  
|Net                                                   | $ | 427,633     |   | $ | 402,897      |  

Depreciation expenses in aggregate for the periods ended June
30, 2010 and 2009 were $48,994 and $611 respectively.

12

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NOTE 7   INTANGIBLE ASSETS

|                                                          |   | June 30,    |   |   | December 31, |  
|--------------------------------------------------------- | - | ----------- | - | - | ------------ | -
|                                                          |   | 2010        |   |   | 2009         |  
|                                                          |   | (Unaudited) |   |   |              |  
|Exclusive rights to computer programming
      technology | $ | 1,105,997   |   | $ | 1,096,361    |  
|Less: Accumulated amortization                            |   | (628,228    | ) |   | (514,757     | )
|                                                          |   |             |   |   |              |  
|Net                                                       | $ | 477,769     |   | $ | 581,604      |  

Each of the exclusive rights has a term of five years and
relates to a computer programming technology under several patents based on
which the Company develops its electronic products. These exclusive rights were
acquired from Mr. Chen Ruofei (CEO and President of the Company) and Mr. Zhou Yi
(a director of the Company).

Amortization expenses for the periods ended June 30, 2010 and
2009 were $110,165 and $109,840 respectively.

NOTE 8   INCOME TAXES

The Company is subject to income tax on an entity basis on
income arising from the tax jurisdiction in which they operate.

Wisegate is incorporated in the British Virgin Islands (BVI)
and is, therefore, not subject to any income tax in the BVI. However, during the
six months ended June 30, 2009, Wisegate generated patent license fees and
related service revenue from PRC resident enterprises. According to the PRC
Income Tax Law on Foreign Invested Enterprises and Foreign Enterprises, which
was effective for periods before January 1, 2008, and the PRC Unified Enterprise
Income Tax Law, which has been effective from January 1, 2008, Wisegate is
generally subject to a withholding income tax at 20% on its patent license fees
and on service revenue generated from PRC resident enterprises. As Wisegate has
no permanent establishment within the PRC, it is allowed a reduced withholding
income tax rate of 10% according to the relevant regulation on the
implementation of the PRC income tax law.

MenQ HK and Clever Aim are Hong Kong-incorporated companies and
are, therefore, subject to a Hong Kong profits tax of 16.5% on its income
generated from Hong Kong for the six months ended June 30, 2010 and 2009,
respectively.

MenQ China is a PRC-registered company is, therefore, subject
to PRC income tax at 25% on its income generated from the PRC for the six months
ended June 30, 2010 and 2009.

No provision for other taxes is made as the Company and MenQ do
not have any taxable income in the U.S. or the British Virgin Islands.

13

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NOTE 8   INCOME TAXES  Continued

The Companys income tax expense consisted of:

|         |   | Three months ended |  |   | **Six months
      ended** | 
|-------- | - | ------------------ |  | - | -------------------------- | 
|         |   | June 30,           |  |   | **June
    30,**           | 
|         |   | 2010               |  |   | 2009                       | 
|         |   | (Unaudited)        |  |   | (Unaudited)                | 
|Current  | $ | 328,069            |  | $ | 323,730                    | 
|Deferred |   | -                  |  |   | -                          | 
|         |   |                    |  |   |                            | 
|         | $ | 328,069            |  | $ | 323,730                    | 

Significant components of the net deferred tax assets were as
follows:

|                             |   | June 30,    |   |   | December 31, | 
|---------------------------- | - | ----------- | - | - | ------------ | 
|                             |   | 2010        |   |   | 2009         | 
|                             |   | (Unaudited) |   |   |              | 
|Allowance for doubtful debts | $ | 179,536     |   | $ | -            | 
|Less: Valuation allowance    |   | (179,536    | ) |   | -            | 
|                             |   |             |   |   |              | 
|Net deferred tax assets      | $ | -           |   | $ | -            | 

As of June 30, 2010 and 2009, valuation allowance of $179,536
and $nil, respectively, was provided to the deferred tax assets, due to the
uncertainty of the deductibility by tax authority.

NOTE 9   STOCKHOLDERS EQUITY

On December 11, 2009, which was the date of the Share Exchange
as set out in Note 1, the Company issued 60,400,000 shares of the Company, to
the sole shareholder of MenQ in exchange for all the issued and outstanding
shares of MenQ.

NOTE 10   STATUTORY RESERVES

In accordance with the PRC Companies Law, the Companys PRC
subsidiaries were required to transfer 10% of their profits after tax, as
determined in accordance with accounting standards and regulations of the PRC,
to the statutory surplus reserve and a percentage of not less than 5%, as
determined by management, of the profits after tax to the public welfare fund.
With the amendment of the PRC Companies Law which was effective from January 1,
2006, enterprises in the PRC were no longer required to transfer any profit to
the public welfare fund. Any balance of public welfare fund brought forward from
December 31, 2005 should be transferred to the statutory surplus reserve. The
statutory surplus reserve is non-distributable.

14

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NOTE 11   EARNINGS PER SHARE

Basic earnings per common share is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted income per common share is computed
similarly to basic income per common share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued.

All per share data including earnings per share (EPS) has been
retroactively restated to reflect the reverse acquisition on December 11, 2009
whereby the 60,400,000 shares of common stock issued by the Company (nominal
acquirer) to the shareholder of CIE (nominal acquiree) are deemed to be the
number of shares outstanding for the period prior to the reverse acquisition.
For the period after the reverse acquisition, the number of shares considered to
be outstanding is the actual number of shares outstanding during that
period.

The following table is a reconciliation of the net income and
the weighted average shares used in the computation of basic and diluted
earnings per share for the periods presented :

|                                          |   | Three months
      ended |  |   | Six months
      ended | 
|----------------------------------------- | - | ------------------------ |  | - | ---------------------- | 
|                                          |   | June 30,                 |  |   | June 30,               | 
|                                          |   | 2010                     |  |   | 2009                   | 
|                                          |   | (Unaudited)              |  |   | (Unaudited)            | 
|Net income                                | $ | 2,172,759                |  | $ | 1,693,654              | 
|                                          |   |                          |  |   |                        | 
|Weighted average number of
      shares : |   |                          |  |   |                        | 
|Basic and diluted                         |   | 65,000,000               |  |   | 60,400,000             | 
|                                          |   |                          |  |   |                        | 
|Net income per share :                    |   |                          |  |   |                        | 
|Basic and
      diluted                   | $ | 0.03                     |  | $ | 0.03                   | 

NOTE 12 RELATED PARTY TRANSACTIONS

|                                                                                               |   | June 30,    |  |   | December 31, | 
|---------------------------------------------------------------------------------------------- | - | ----------- |  | - | ------------ | 
|                                                                                               |   | 2010        |  |   | 2009         | 
|                                                                                               |   | (Unaudited) |  |   |              | 
|Amount due to related parties:                                                                 |   |             |  |   |              | 
|                                                                                               |   |             |  |   |              | 
|- Mr. Chen Ruofei (a)(b), director, Chief
      Executive Officer and President of the Company | $ | 801,684     |  | $ | 255,318      | 
|- Mr. Chen Tiannam (a)(b), Chairman of the Company                                             |   | 275,262     |  |   | 1,037,266    | 
|- Mr. Lam Hak Kwun (a), former director                                                        |   | 65,370      |  |   | 65,370       | 
|- Mr. He Wei Dong (a), director of the Company                                                 |   | 20,623      |  |   | -            | 
|                                                                                               |   |             |  |   |              | 
|                                                                                               | $ | 1,162,939   |  | $ | 1,357,954    | 

|(a) | The amounts are unsecured, non-interest bearing and
      without fixed repayment term.                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------
|(b) | Mr. Chan Ruofei and Mr. Chen Tiannam are also two of the
      major shareholders of Future Billion (see Note 1 for further
    details).

15

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NOTE 13   COMMITMENTS AND CONTINGENCIES

Operating Leases Commitments as of June 30, 2010

In the normal course of business, the Company entered into
operating lease agreements to rent office space and plant and equipment. The
Company was obligated under operating leases requiring minimum rentals as of
June 30, 2010 as follows:

|                             |   | (Unaudited) | 
|---------------------------- | - | ----------- | 
|Payable within:              |   |             | 
|- remainder of 2010          | $ | 158,994     | 
|- 2011                       |   | 180,914     | 
|- 2012                       |   | 31,127      | 
|                             |   |             | 
|Total minimum lease payments | $ | 371,035     | 

During the periods ended June 30, 2010 and 2009, rental
expenses under operating leases amounted to $148,604 and $16,814, respectively.

Commitments pursuant to a partnership agreement

On May 20, 2009, the Company entered into a three-year term
partnership agreement with Beijing Normal University for research and
development purposes. Under the partnership agreement, the Company is obligated
to pay the requiring research and development expense not less than
approximately $147,000 annually until May 2012.

NOTE 14  CONCENTRATION OF RISKS

Credit risk

As of June 30, 2010 and December 31, 2009, approximately 98% of
the Companys cash included cash on hand and deposits in accounts maintained
within the PRC where there is currently no rule or regulation in place for
obligatory insurance to cover bank deposits in the event of bank failure.
However, the Company has not experienced any losses in such accounts and
believes it is not exposed to any significant risks on its cash in bank
accounts.

For the six months ended June 30, 2010, five customers
accounted for 23%, 17%, 15%, 14% and 11% of the Companys revenue. For the six
months ended June 30, 2009, four customers accounted for 22%, 14%, 14% and 12%
of the Companys revenue. There was no other single customer who accounted for
more than 10% of the Companys revenue for the periods ended June 30, 2010 and
2009.

As of June 30, 2010, five customers accounted for 26%, 16%,
15%, 14% and 11% of total accounts receivable of the Company. As of December 31,
2009, three customers accounted for 46%, 25% and 21% of accounts receivable of
the Company. Except as disclosed, no other customer accounted for 10% or more of
the Companys accounts receivable as of June 30, 2010 and December 31, 2009.

Currency convertibility risk

Substantially all of the Companys businesses are transacted in
RMB, which is not freely convertible into foreign currencies. All foreign
exchange transactions take place either through the Peoples Bank of China or
other banks authorized to buy and sell foreign currencies at the exchange rates
quoted by the Peoples Bank of China. Approval of foreign currency payments by
the Peoples Bank of China or other regulatory institutions requires submitting
a payment application form together with suppliers invoices, shipping documents
and signed contracts. These requirements imposed by the PRC government
authorities may restrict the ability of the Companys PRC subsidiaries to
transfer funds to the parent through loans, advances or cash dividends.

16

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NOTE 15   SEGMENT DATA

The Company believes that throughout the six months ended June
30, 2010 and 2009, it operated in one operating segment  development and sale
of electronic products based on a computer programming technology.

The following table sets out the analysis of the Companys
revenue by products and services.

|                                                                     |   | Three months
      ended |  |   | Six months
      ended | 
|-------------------------------------------------------------------- | - | ------------------------ |  | - | ---------------------- | 
|                                                                     |   | June 30,                 |  |   | June 30,               | 
|                                                                     |   | 2010                     |  |   | 2009                   | 
|                                                                     |   | (Unaudited)              |  |   | (Unaudited)            | 
|Revenue from external
      customers:                               |   |                          |  |   |                        | 
|Interactive classroom solutions products                             | $ | 7,859,789                |  | $ | -                      | 
|Electronic learning products                                         |   | 3,505,195                |  |   | -                      | 
|Licensing of patent and related technology
      developmentservices |   | -                        |  |   | 3,423,155              | 
|Other electronic
      products                                      |   | -                        |  |   | 111,909                | 
|                                                                     |   |                          |  |   |                        | 
|Total                                                                | $ | 11,364,984               |  | $ | 3,535,064              | 

The following table sets out the analysis of the Companys
revenue by customers located in different geographical areas

|                                       |   | Three months
      ended |  |   | Six months
      ended | 
|-------------------------------------- | - | ------------------------ |  | - | ---------------------- | 
|                                       |   | June 30,                 |  |   | June 30,               | 
|                                       |   | 2010                     |  |   | 2009                   | 
|                                       |   | (Unaudited)              |  |   | (Unaudited)            | 
|Revenue from external
      customers: |   |                          |  |   |                        | 
|PRC                                    | $ | 11,145,447               |  | $ | 3,423,155              | 
|Other countries                        |   | 219,537                  |  |   | 111,909                | 
|                                       |   |                          |  |   |                        | 
|Total                                  | $ | 11,364,984               |  | $ | 3,535,064              | 

17

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

Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such
as believe, expect, anticipate, project, target, plan, optimistic, intend, aim, will or similar expressions which are intended to
identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other
financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China, as well as all
assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in
Item 1A, Risk Factors described in our Annual Report on Form 10-K for our fiscal year ended December 31, 2009, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to
differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business,
financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments
to any forward-looking statements to reflect changes in our expectations or future events.

Use of Certain Defined Terms

Except as otherwise indicated by the context, references in this report to (i) the Company, we, us, and our are to the combined business of China Interactive Education, Inc., a Nevada corporation, and
its consolidated subsidiaries; (ii) MenQ BVI are to MenQ Technology Group Limited, a BVI limited company; (iii) Wisegate are to Wisegate International Limited, a BVI limited company; (iv) MenQ HK are to MenQ
International Limited, a Hong Kong limited company; (v) Clever Aim are to Clever Aim Development Limited, a Hong Kong limited company; (vi) MenQ China are to MenQ Technology Limited, a PRC limited company; (vii)
SEC are to the United States Securities and Exchange Commission; (viii) Securities Act are to Securities Act of 1933, as amended; (ix) Exchange Act are to the Securities Exchange Act of 1934, as amended; (x)
PRC and China are to Peoples Republic of China excluding Hong Kong, Macao, and Taiwan; (xi) Hong Kong are to the Hong Kong Special Administrative Region of the Peoples Republic of China; (xii)
Renminbi and RMB are to the legal currency of China; and (xiii) U.S. dollars, $ and US$ are to United States dollars.

Overview of Our Business

Through our Hong Kong and PRC subsidiaries, we are an education solutions company that provides new era educational concepts, equipment and products to educational institutions including elementary, middle and high schools, professional training
schools, and to individual students in China. We were organized to meet what we believe is an unmet need for educational resources throughout the PRC. Based on the PRC governments statistical yearbook for 2007, the government invests more than
$104 billion on education each year.However, just as economic development is not even throughout the PRC, there is an uneven allocation of educational resources in the PRC. In general, only students who pass the numerous national
examinations, which are given at various stages of the educational process, can obtain better educational opportunities at a higher level. We believe that this examination-oriented education has created a market for products to improve the
efficiency and performance of students and teachers.

Our principal businesses include (1) the provision of new era e-classroom and e-library solutions, (2) the distribution of computer based ELPs embedded with Beijing Normal Universitys educational materials in computer programs and with self
developed wireless technology and (3) the design and manufacture of GPS products via ODMs and OEMs based on self-developed technology.

18

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On May 20, 2009, we entered into a three-year partnership agreement with Beijing Normal University, one of the top teaching universities in China with a 100-year history. Under this joint strategic partnership, we cooperate in the
development of various aspects of IT applied in education. As a result of this collaboration, we founded the IT Applied in Education Institute in May, 2009 to conduct joint research and development of cutting edge interactive education methodologies
and content, applying computer and internet technologies for use in education. The IT Applied in Education Institute focuses on the computerization of education systems and the digitization of supplemental study systems, including, but not limited
to: (a) cost effective mini intelligent terminals and software suitable for access of high-speed 3G wireless networks; (b) terminals with embedded educational software platforms; (c) virtual experiment labs and sensor-based lab networks; and (d)
specific internet service platforms for teachers and students. Under the partnership agreement, Beijing Normal University has authorized us to exclusively promote and distribute our jointly researched and developed products. We share the right to
use such products, and we share 50% of the net profits from our sale of our jointly researched and developed products.

A majority of our revenues are derived from (1) sales of comprehensive sets of ELPs, including hardware with educational content certified and authorized by Beijing Normal University under the partnership agreement and sales of interactive classroom
solutions products and (2) development fees from customers for providing educational content in computer programs. In the past, the majority of our revenue was generated from distributing our self-developed technologies in GPS and education products
to overseas customers. Starting from 2009, we have been shifting our focus to the education market in the PRC. We plan to expand our sales network to all primary and secondary schools in all provinces of China with the help of educational policies,
such as The Tenth Five-Year Development Outline for Educational Information Technology, for the development of IT in education and computerized teaching matters, and to the individual electronic ELP market.

The chart below presents our corporate structure.



Our company headquarters is located in southern China, in the City of Zhongshan in Guangdong Province and our sales offices are located in the Shenzhen Special Economic Zone and City of Guangzhou in Guangdong Province.

We file annual, quarterly and other reports, proxy statements and other information with the SEC. You may obtain and copy any document we file with the SEC at the SECs public reference room at 100 F Street, NE, Room 1580, Washington, D.C.
20549. You may obtain information on the operation of the SECs public reference facilities by calling the SEC at 1-800-SEC-0330. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC at its
principal office at 100 F Street, NE, Room 1580, Washington, D.C. 20549-1004. The SEC maintains an Internet website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. Our SEC filings, including exhibits filed therewith, are accessible through the Internet at that website. You may also request a copy of our SEC filings, at no cost to you, by writing or telephoning us at: China
Interactive Education, Inc., Block C, Zhennan Road, South District, Zhongshan City, Guangdong Province, 518040 Peoples Republic of China, attention Corporate Secretary, telephone (+86) 0760-2819888. We will not send exhibits to the documents,
unless the exhibits are specifically requested and you pay our fee for duplication and delivery.

19

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Results of Operations

Three month period ended June 30, 2010 as compared to three month period ended June 30, 2009

Revenue. Our sales revenue increased to $11.36 million in the three months ended June 30, 2010, from $3.54 million for the same period in 2009, representing a 221% increase. During the 2010 period, we changed our
principal business from the provision of licensing of patent and related technology development services, or PLFs, to the sale of educational learning products, or ELPs and interactive classroom solutions products or ICSPs, under
our own Five
Best Students brand. The increase in revenue reflects acceptance of this change by our customers.

Cost of Sales. Our cost of sales increased by $7.18 million, or 707%, to $8.2 million in the three months ended June 30, 2010, from $1.02 million for the same period in 2009. The cost of sales per sales ratio changed from
29% to 72% for the three months ended June 30, 2009 and 2010, respectively. The increment in cost of sales represents the difference in cost structure in providing licensing revenue and product revenue, in connection with our change from providing
PLFs to providing ELPs and ICSPs during the 2010 period.

Gross Profit and Gross Margin. Our gross profit increased by $0.65 million, or 26%, to $3.17 million in the three months ended June 30, 2010, from $2.52 million for the same period in 2009. Gross profit as a percentage of
net revenue was 28% and 71% for the three months ended June 30, 2010 and 2009, respectively. The decrease in gross profit percentage represents the different gross margin in providing licensing revenue in the 2009 period and product revenue in the
2010 period.

Selling Expenses. In the three months ended June 30, 2010, our selling and promotion expenses increased by $0.27 million, to $0.29 million, from $0.02 million for the same period in 2009. During the 2010
period, we incurred expense on a marketing campaign regarding its change in business and in the build up of
our own Five Best Students brand. The cost of advertisement and consultancy fee related to brand building in the second quarter
of 2010 totaled approximately $0.29 million.

General and Administrative Expenses.In the three months ended June 30, 2010, our general and administrative expenses increased by $0.21 million,
to $0.3 million, from $0.09 million for the same period in 2009. The increase
was because MenQ China's factory in Zhongshan commenced operations in May 2009.

Research and Development Expenses.In the three months ended June 30, 2010, our research and development expenses decreased by $0.32 million, to $0.07 million, from $0.39 million for the same period in 2009.
The decrease was because the Company devoted resources in 2009 to develop the
education programs. Fewer resources were required in the 2010 period to further develop these programs.

Income Before Income Taxes. Our income before income taxes increased by $0.48 million, or 24%, to $2.5 million in the three months ended June 30, 2010, from $2.02 million for the same period in 2009, primarily due to the
increase in sales and gross profit which was partially offset by the increase in marketing expenses during the 2010 period.

Net Income. In the three months ended June 30, 2010, we generated a net income of $2.17 million, an increase of $0.48 million, or 28%, from $1.69 million for the same period in 2009, as a result of the factors described
above.

Six month period ended June 30, 2010 as compared to six month period ended June 30, 2009

Revenue. During the six-month period ended June 30, 2010, we had revenue from sales of our ELPs and ICSPs of $14.94 million as compared to net sales of $6.7 million during the six-month period ended June 30, 2009, an increase
of 123%. This increase is mainly attributable to a change of our principal business from provision of licensing of patent and related technology development services, or PLFs, to providing educational learning products, or ELPs, and interactive
classroom solutions products or ICSPs, under our own Five Best Students brand. The increase in revenue reflects acceptance of this change by our customers.

Cost of Sales. Cost of sales, consisting of raw materials, direct labor and manufacturing overhead, was $10.56 million for the six-month period ended June 30, 2010, as compared to $2.2 million for the same period of 2009, an
increase of 379%. The increase in cost of sales is in line with the increase in sales and also represents the difference in cost structure in providing licensing revenue and product revenue, in connection with our change from providing PLFs to
providing ELPs and ICSPs during the 2010 period.

20

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Gross Profit and Gross Margin. Our gross profit
decreased by $0.12 million, or 3%, to $4.38 million in the six months ended June
30, 2010, from $4.49 million for the same period in 2009. Gross profit as a
percentage of net revenue was 29% and 67% for the six months ended June 30, 2010
and 2009, respectively. The decrease in gross profit represents the different
gross margin in providing licensing revenue in the 2009 period and product
revenue in the 2010 period.

Selling Expenses. In the six months ended June
30, 2010, our selling and promotion expenses increased by $2.24 million, to $2.3 million, from $0.06 million for the same period in 2009.
During the 2010 period, we incurred expense on a marketing campaign regarding
our change in business and on a build up of our own Five Best Students brand.
The cost of advertisement and the consultancy fee related to brand building in
the second quarter of 2010 totaled approximately $1.5 million. This was offset
by an allowance for doubtful accounts receivable of $0.7 million that was recorded in
the period based on management review of collectability of accounts
receivable.

General and Administrative Expenses.In the six
months ended June 30, 2010, our general and administrative expenses increased by
$0.36 million to $0.54 million, from $0.18 million for the same period
in 2009. The increase was because MenQ Chinas factory in Zhongshan commenced
operations in May 2009.

Research and Development Expenses.In the six
months ended June 30, 2010, our research and development expenses decreased by
$0.53 million, to $0.07 million, from $0.6 million for the same period
in 2009. The decrease was because the Company devoted resources in 2009 to
develop the education programs . Fewer resources were required
in the 2010 period to further develop these programs.

Income Before Income Taxes. Our income before
income taxes decreased by $2.19 million, or 60%, to $1.46 million in the six
months ended June 30, 2010, from $3.65 million for the same period in 2009,
primarily due to the increase in selling expense.

Net Income. In the six months ended June 30,
2010, we generated a net income of $1.13 million, a decrease of $1.91 million,
or 63%, from $3.04 million for the same period in 2009, as a result of the
factors described above.

Liquidity and Capital Resources

As of June 30, 2010, we had cash and cash equivalents of
$320,496, being cash on hand and bank deposits. The following table provides
detailed information about our net cash flow for financial statement periods
presented in this report. To date, we have financed our operations primarily
through cash flows from operations.

|Cash Flow Summary (Amounts
      expressed in U.S. dollar) (Unaudited)
|----------------------------------------------------------------------
|                                                                      
|                                                                      
|                                                                      
|Net cash provided by operating activities                             
|Net cash used in investing activities                                 
|Net cash used in financing activities                                 
|Effects of foreign currency translation                               
|Net decrease in cash and cash equivalents                             
|Cash and cash equivalents at beginning of period                      
|Cash and cash equivalents at end of period                            

Operating activities

Net cash provided by operating activities was approximately
$0.26 million for the six months ended June 30, 2010 which was mainly
attributable to a $1.13 million net income offset by a cash outflow of $1.06
million due to increase in net current assets (excluding due to related
parties).

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Investing activities

Our main uses of cash for investing activities are payments for the acquisition of property, plant and equipment and intangible assets.

Net cash used in investing activities for the six months ended June 30, 2010 was approximately $0.07 million, primarily a result of payments to acquire property, plant and the equipment and intangible assets in MenQ China.

Financing activities

Net cash used in financing activities for the six months ended June 30, 2010 was approximately $0.2 million which was mainly attributable to the advances from related parties of $0.84 million and repayment to related parties of $1
million in the six months ended June 30, 2010.

We believe that our cash on hand and cash flow from operations will meet our present cash needs for the next 12 months. We may, however, in the future, require additional cash resources due to changed business conditions, implementation of our
strategy to ramp up our marketing efforts and increase brand awareness, or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt
securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree
to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit
our ability to expand our business operations and could harm our overall business prospects.

Obligations under Material Contracts

On May 20, 2009, we entered into a partnership agreement with Beijing Normal University. Pursuant to the partnership agreement, we are required to pay no less than RMB 1 million (approximately USD$147,000) per year to Beijing Normal University
for research and development purposes. We were required to pay RMB 300,000 (approximately USD$44,200) within 15 working days after the establishment of the IT Applied in Education Institute and are required pay the remaining amount in no less
than RMB 150,000 (approximately USD$22,060) increments every three months. This agreement is for a term of three years. On August 2, 2009, we entered into a supplemental agreement with Beijing Normal University, pursuant to which we agreed to
share 50% of the net profits from our sale of jointly researched and developed products under the partnership agreement.

Inflation

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor the price
change in education solutions industry and continually maintain effective cost control in operations.

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Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital
expenditures or capital resources that is material to an investor in our securities.

Seasonality

Our revenue stream is not currently affected by seasonality, since our ELPs and ICSPs are newly launched. However, we may experience seasonal fluctuations in our revenue in some regions in the PRC in the near future as parents and students tend to
make purchases for schooling items prior to or at the beginning of each school year in August and September.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and
reported within the time period specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30,
2010. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2010, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our
disclosure controls and procedures were effective to satisfy the objectives for which they are intended.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the six months ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1.   LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise
from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

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ITEM 1A.   RISK FACTORS.

Not applicable.

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

We have not sold any equity securities during the period ended
June 30, 2010 which sale was not previous disclosed in a current report on Form
8-K filed during that period.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.   (REMOVED AND RESERVED).

ITEM 5.   OTHER INFORMATION.

We have no information to include that was required to be but
was not disclosed in a report on Form 8-K during the period covered by this Form
10-Q. There have been no material changes to procedures by which security
holders may recommend nominees to our board of directors.

ITEM 6. EXHIBITS.

The following exhibits are filed as part of this report or
incorporated by reference:



|**Exhibit No.** | **Description**                                                                                           
|--------------- | ----------------------------------------------------------------------------------------------------------
|                |                                                                                                           
|31.1            | Certifications of Chief Executive Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.
|                |                                                                                                           
|31.2            | Certifications of Chief Financial Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.
|                |                                                                                                           
|32.1            | Certification of Chief Executive Officer Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002. 
|                |                                                                                                           
|32.2            | Certification of Chief Financial Officer Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002. 

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SIGNATURES

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

CHINA INTERACTIVE EDUCATION, INC.

|Dated: August 19, 2010 | /s/ Ruofei
      Chen     
|---------------------- | --------------------------
|                       | Ruofei Chen               
|                       | Chief Executive Officer   
|                       |                           
|                       |                           
|                       |                           
|Dated: August 19, 2010 | /s/ Ting Pong
      Cheung
|                       | Ting Pong Cheung          
|                       | Chief Financial Officer   

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EXHIBIT INDEX

|**Exhibit No.** | **Description**                                                                                           
|--------------- | ----------------------------------------------------------------------------------------------------------
|                |                                                                                                           
|31.1            | Certifications of Chief Executive Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.
|                |                                                                                                           
|31.2            | Certifications of Chief Financial Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.
|                |                                                                                                           
|32.1            | Certification of Chief Executive Officer Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002. 
|                |                                                                                                           
|32.2            | Certification of Chief Financial Officer Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002. 

26

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