U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-Q





Quarterly
      Report Under Section 13 or 15 (d) of


Securities
      Exchange Act of 1934





For
      the
      Period ended June 30, 2008





Commission
      File Number 333-139910





China
      Shoe Holdings, Inc.


(Name
      of
      small business issuer in its charter)





Nevada
            1712
            20-2234410(State
                or other jurisdiction
              of
                incorporation or organization)
            (Primary
                SIC Code)
            (IRS
                Employer Identification No.)




488
      Wai
      Qingsong Road,


Waigang,
      Jiading District, Shanghai


People's
      Republic of China 201800


011-86-21-59587756


(Address,
      including zip code, and telephone number,


including
      area code, of registrant's principal executive offices)





Gu
      Xianzhong, President and CEO


488
      Wai
      Qingsong Road


Waigang,
      Jiading District, Shanghai


People's
      Republic of China 201800


011-86-21-59587756


(Mailing
      Address of Agent for Service)





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





Large
                Accelerated Filero
            Accelerated
                Filero
            Non-Accelerated
                Filero
            Smaller
                Reporting Companyx





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





There
      were 119,445,571 shares of Common Stock outstanding as of August 15,
      2008.










**Part
      I Financial Information**




**Item
      1. Financial Information**





**CHINA
      SHOE HOLDINGS, INC**




**INDEX
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**


**Page**Condensed
                  Consolidated Balance Sheets asof
                  June 30, 2008 and December 31, 2007
              
              F-2Condensed
                  Consolidated Statements of Operations And Comprehensive Incomefor
                  the three and six months ended June 30, 2008 and 2007
              
              F-3Condensed
                  Consolidated Statements of Cash Flowsfor
                  the six months ended June 30, 2008 and 2007
              
              F-4Condensed
                  Consolidated Statement of Stockholders’ Equityfor
                  the six months ended June 30, 2008
              
              F-5Notes
                  to Condensed Consolidated Financial Statements
              
              F-6
                  to F-20




F-1




**CHINA
      SHOE HOLDINGS,** **INC**


**CONDENSED** **CONSOLIDATED
      BALANCE SHEETS**


**AS
      OF JUNE 30, 2008 AND DECEMBER 31, 2007**


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


**(Unaudited)**


June
                  30,
                2008
              
              December
                  31,
                2007(Unaudited)
              
              (audited)**ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              $
              1,186,539
              
              $
              706,823Accounts
                  receivable, trade
              
              
              1,476,165
              
              
              1,071,037Inventories
              
              
              1,363,131
              
              
              529,574Other
                  receivables and prepayments
              
              
              476,296
              
              
              560,227Total
                  current assets
              
              
              4,502,131
              
              
              2,867,661Non-current
                  assets:Property,
                  plant and equipment, net
              
              
              1,724,379
              
              
              1,717,719**TOTAL
                  ASSETS**
              
              $
              6,226,510
              
              $
              4,585,380**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Current
                  liabilities:Short-term
                  bank borrowings
              
              $
              181,903
              
              $
              170,903Accounts
                  payable, trade
              
              
              354,913
              
              
              500,491Income
                  tax payable
              
              
              20,774
              
              
              -Amount
                  due to a director
              
              
              2,478
              
              
              76,049Amount
                  due to a related party
              
              
              45,111
              
              
              -Other
                  payables and accrued liabilities
              
              
              388,062
              
              
              386,208Total
                  current liabilities
              
              
              993,241
              
              
              1,133,651Stockholders’
                  equity:Preferred
                  stock, $0.001 par value; 10,000,000 shares authorized; no shares
                  issued
                  and outstanding as of June 30, 2008 and December 31, 2007
              
              
              -
              
              
              -Common
                  stock, $0.001 par value; 300,000,000 shares authorized; 119,445,571
                  and
                  100,000,000 shares issued and outstanding as of June 30, 2008 and
                  December
                  31, 2007
              
              
              119,445
              
              
              100,000Additional
                  paid-in capital
              
              
              2,937,150
              
              
              1,883,364Deferred
                  compensation cost
              
              
              (499,763
              )
              
              -Accumulated
                  other comprehensive income
              
              
              510,977
              
              
              225,226Retained
                  earnings
              
              
              2,165,460
              
              
              1,243,1395,233,269
              
              
              3,451,729**TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY**
              
              $
              6,226,510
              
              $
              4,585,380


See
      accompanying notes to condensed consolidated financial statements.




F-2




**CHINA
      SHOE HOLDINGS, INC.**


**CONDENSED
      CONSOLIDATED** **STATEMENTS
      OF OPERATIONS AND**


**COMPREHENSIVE
      INCOME**


**FOR
      THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


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


**(Unaudited)**





Three
                months ended June 30,
            
            Six
                months ended June 30,2008
            
            2007
            
            2008
            
            2007**OPERATING
                REVENUES**
            
            $
            2,306,482
            
            $
            1,954,897
            
            $
            4,664,062
            
            $
            3,128,872**COST
                OF REVENUE**
            
            
            1,639,456
            
            
            1,303,201
            
            
            3,132,651
            
            
            2,106,141**GROSS
                PROFIT**
            
            
            667,026
            
            
            651,696
            
            
            1,531,411
            
            
            1,022,731**OPERATING
                EXPENSES:**Depreciation
            
            
            53,947
            
            
            5,344
            
            
            106,025
            
            
            12,511Stock-based
                compensation
            
            
            23,468
            
            
            15,185
            
            
            23,468
            
            
            15,185Selling
                and marketing
            
            
            38,470
            
            
            -
            
            
            38,470
            
            
            -General
                and administrative
            
            
            137,263
            
            
            422,546
            
            
            414,178
            
            
            592,596Total
                operating expenses
            
            
            253,148
            
            
            443,075
            
            
            582,141
            
            
            620,292**INCOME
                FROM OPERATIONS**
            
            
            413,878
            
            
            208,621
            
            
            949,270
            
            
            402,439**OTHER
                INCOME (EXPENSE):**Interest
                income
            
            
            1,099
            
            
            348
            
            
            1,497
            
            
            525Interest
                expense
            
            
            (4,151
            )
            
            (12,599
            )
            
            (8,261
            )
            
            (17,512
            )Total
                other expense
            
            
            (3,052
            )
            
            (12,251
            )
            
            (6,764
            )
            
            (16,987
            )**INCOME
                BEFORE INCOME TAXES**
            
            
            410,826
            
            
            196,370
            
            
            942,506
            
            
            385,452Income
                tax expense
            
            
            (20,185
            )
            
            -
            
            
            (20,185
            )
            
            -**NET
                INCOME**
            
            $
            390,641
            
            $
            196,370
            
            $
            922,321
            
            $
            385,452Other
                comprehensive income:-
                Foreign currency translation gain (loss)
            
            
            (462,617
            )
            
            (15,237
            )
            
            285,751
            
            
            2,172**COMPREHENSIVE
                INCOME**
            
            $
            (71,976
            )
            $
            181,133
            
            $
            636,570
            
            $
            387,624Net
                income per share - Basic and diluted
            
            $
            (0.001
            )
            $
            0.003
            
            $
            0.009
            
            $
            0.010Weighted
                average shares outstanding - basic and diluted
            
            
            109,299,223
            
            
            70,782,802
            
            
            105,928,141
            
            
            71,139,972





See
      accompanying notes to condensed consolidated financial statements.





F-3




**CHINA
      SHOE HOLDINGS, INC.**


**CONDENSED
      CONSOLIDATED** **STATEMENTS
      OF CASH FLOWS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


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


**(Unaudited)**





Six
                months ended June 30,2008
            
            2007**Cash
                flows from operating activities:**Net
                income
            
            $
            922,931
            
            $
            385,452Adjustments
                to reconcile net income to net cashused
                in operating activities:Depreciation
            
            
            106,025
            
            
            147,665Stock-based
                compensation
            
            
            23,468
            
            
            15,185Change
                in operating assets and liabilities:Accounts
                receivable, trade
            
            
            (326,645
            )
            
            (391,157
            )Inventories
            
            
            (776,770
            )
            
            (669,626
            )Other
                receivables and prepayments
            
            
            116,583
            
            
            47,861Value-added
                tax receivable
            
            
            -
            
            
            50,502Accounts
                payable, trade
            
            
            (172,743
            )
            
            349,135Income
                tax payable
            
            
            20,185
            
            
            (20,119
            )Amount
                due to directors
            
            
            (76,202
            )
            
            -Amount
                due to related party
            
            
            43,831
            
            
            -Other
                payables and accrued liabilities
            
            
            (17,504
            )
            
            (3,747
            )Net
                cash used in operating activities
            
            
            (137,451
            )
            
            (88,849
            )**Cash
                flows from investing activities:**Purchase
                of property, plant and equipment
            
            
            (5,076
            )
            
            -Net
                cash used in investing activities
            
            
            (5,076
            )
            
            -**Cash
                flows from financing activities:**Advance
                to a director
            
            
            -
            
            
            105,482Proceeds
                from short-term bank borrowings
            
            
            -
            
            
            327,381Issuance
                of share capital
            
            
            550,000
            
            
            -Repayment
                of restricted cash
            
            
            -
            
            
            (63,736
            )Net
                cash generated from financing activities
            
            
            550,000
            
            
            369,127Foreign
                currency translation adjustment
            
            
            72,243
            
            
            2,172**NET
                CHANGE IN CASH AND CASH EQUIVALENTS**
            
            
            479,716
            
            
            282,450**CASH
                AND CASH EQUIVALENTS, BEGINNING OF PERIOD**
            
            
            706,823
            
            
            335,474**CASH
                AND CASH EQUIVALENTS, END OF PERIOD**
            
            $
            1,186,539
            
            
            617,924**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                paid for income taxes
            
            $
            20,185
            
            $
            20,119Cash
                paid for interest expenses
            
            $
            8,261
            
            $
            17,512





See
      accompanying notes to condensed consolidated financial statements




F-4




**CHINA
      SHOE HOLDINGS,** **INC**


**CONDENSED
      CONSOLIDATED** **STATEMENT
      OF STOCKHOLDERS’ EQUITY**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**


Common
                  Stock
              
              Additional
                paid-in
                  capital
              
              Deferred
                  Compensation cost
              
              
              Accumulated
                other
                comprehensive
                income
              
              Retained
                  earnings
              
              Total
                  stockholders’
                equityNo.
                  of shares
              
              AmountBalance
                  as of January 1, 2008
              
              
              100,000,001
              
              $
              100,000
              
              $
              1,883,364
              
              $
              -
              
              
              $
              225,226
              
              $
              1,243,139
              
              $
              3,451,729Shares
                  issued under private placement on January 30, 2008
              
              
              4,230,769
              
              
              4,231
              
              
              545,769
              
              
              -
              
              
              
              -
              
              
              -
              
              
              550,000Shares
                  issued for payment of commitment fees, non-cash
              
              
              571,429
              
              
              571
              
              
              39,429
              
              
              (36,667
              )
              
              
              -
              
              
              -
              
              
              3,333Shares
                  issued under Equity Incentive Plan
              
              
              14,643,372
              
              
              14,643
              
              
              468,588
              
              
              (463,096
              )
              
              
              -
              
              
              -
              
              
              20,135Net
                  income for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              922,931
              
              
              922,931Foreign
                  currency translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              285,751
              
              
              -
              
              
              285,751Balance
                  as of June 30, 2008
              
              
              119,445,571
              
              $
              119,445
              
              $
              2,937,150
              
              $
              (499,763
              )
              
              $
              510,977
              
              $
              2,165,460
              
              $
              5,233,269
              ]





See
      accompanying notes to condensed consolidated financial
      statements


F-5




**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





**NOTE** **1**  **BASIS
      OF PRESENTATION**





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





In
      the
      opinion of management, the unadjusted balance sheet as of December 31, 2007
      which has been derived from audited financial statements and these unaudited
      condensed consolidated financial statements reflect all normal and recurring
      adjustments considered necessary to state fairly the results for the periods
      presented. The results for the period ended June 30, 2008 are not necessarily
      indicative of the results to be expected for the entire fiscal year ending
      December 31, 2008 or for any future period.





These
      unaudited condensed consolidated financial statements and notes thereto should
      be read in conjunction with the Management’s Discussion and the audited
      financial statements and notes thereto included in the Annual Report on Form
      10-K for the year ended December 31, 2007.





**NOTE** **2**  **ORGANIZATION
      AND BUSINESS BACKGROUND**





China
      Shoe Holdings, Inc. (the “Company” or “CHSH”) was incorporated in the State of
      Nevada on January 24, 2005 as Indigo Technologies, Inc. On June 6, 2007, CHSH
      changed its name to China Shoe Holdings, Inc. The principal activity of CHSH,
      through its subsidiaries, is engaged
      in the manufacturing of ladies fashion footwear for shoe retailers in Japan
      and
      China. Meanwhile, the Company also produces various types of shoe soles for
      the
      domestic market in the PRC. In order to maintain a competitive advantage in
      the
      shoes manufacturing industry, the Company has developed the following
      proprietary technologies: (i) PU imitational grainy sole, (ii) TPR modified
      materials and (iii) Viscose water. The Company has registered and obtained *“Utility
      Model”* patent
      and *“Invention”* patent
      respectively for these innovations from the State Intellectual Property Office
      of the PRC in 2006.





On
      February 21, 2008, the Company, through its subsidiary, Shanghai Kanghong
      Yunheng Enterprise Development Company Limited, has established a company
      namely, Shanghai Kangjiesi Shoes Co., Ltd. to conduct the retail sales of shoes
      and leather products in the PRC. It was incorporated as a limited liability
      company under the laws of the PRC and its registered capital is amounted to
      $68,362 (equivalent to RMB 500,000).





Details
      of the Company’s subsidiaries are described below:





Name
              
              Place
                  of incorporation and kind of legal entity
              
              Principal
                  activities and place of operation
              
              Particulars
                  of issued/ registered share capital
              
              Effective
                  interest heldWholly
                  Success Technology Group Limited (“WSTG”)
              
              British
                  Virgin Islands, a limited liability company
              
              Investment
                  holding
              
              994,500
                  issued shares of $1 each
              
              100%


Shanghai
                Kanghong Yunheng Enterprise Development Company Limited
                (“SKYEDC”)
            
            PRC,
                a limited liability company
            
            Shoe
                manufacturing
            
            RMB
                15,000,000
            
            100%Shanghai
                Kangjiesi Shoes Co., Ltd. (“SKSCL”)
            
            PRC,
                a limited liability company
            
            Shoe
                retailing
            
            RMB
                500,000
            
            100%





All
      the
      companies above are collectively known as “the Company” in these condensed
      consolidated financial statements.





F-6




**CHINA
        SHOE HOLDINGS,** **INC**
 **NOTES
        TO** **CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE SIX MONTHS ENDED JUNE 30, 2008**
 **(Currency
        expressed in United States Dollars (“US$”))**
 **(** **Unaudited)**
 **NOTE** **3**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**


· Use
        of
        estimates





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





·Basis
      of
      consolidation





The
      condensed consolidated financial statements include the financial statements
      of
      CHSH and its subsidiaries.





All
      significant inter-company balances and transactions within the Company have
      been
      eliminated upon consolidation.





·Cash
      and cash
      equivalents





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





·Accounts
      receivable,
      trade





Accounts
      receivable are recorded at the invoiced amount and do not bear interest. The
      Company extends unsecured credit to its customers in the ordinary course of
      business but mitigates the associated risks by performing credit checks and
      actively pursuing past due accounts. An allowance for doubtful accounts is
      established and determined based on managements’ assessment of known
      requirements, aging of receivables, payment history, the customer’s current
      credit worthiness and the economic environment. As of June 30, 2008, the Company
      recorded no allowance for doubtful accounts.





F-7




**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





· Inventories





Inventories
      include direct materials, labor and factory overhead and are stated at lower
      of
      cost or market value, cost being determined on a FIFO. The Company periodically
      reviews historical sales activity to determine excess, slow moving items and
      potentially obsolete items and also evaluates the impact of any anticipated
      changes in future demand. The Company provides inventory allowances based on
      excess and obsolete inventories determined principally by customer demand.
      As of
      June 30, 2008, the Company did not record an allowance for obsolete inventories,
      nor have there been any write-offs.





·Property,
      plant and
      equipment, net





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





Depreciablelife
            
            ResidualvalueBuildings
            
            
            20
                years
            
            
            5
            %Plant
                and machinery
            
            
            10
                years
            
            
            5
            %Office
                equipments
            
            
            10
                years
            
            
            5
            %Motor
                vehicles
            
            
            5
                years
            
            
            5
            %





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





·Impairment
      of long-lived
      assets





In
      accordance with SFAS No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* ,
      long-lived assets and certain identifiable intangible assets held and used
      by
      the Company are reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. Recoverability
      of assets to be held and used is evaluated by a comparison of the carrying
      amount of assets to estimated discounted net cash flows expected to be generated
      by the assets. If such assets are considered to be impaired, the impairment
      to
      be recognized is measured by the amount by which the carrying amounts of the
      assets exceed the fair value of the assets. There has been no impairment as
      of
      June 30, 2008.





·Revenue
      recognition





The
      Company derives revenues from the sale of self-manufactured products. The
      Company recognizes its revenues net of value added taxes (“VAT”). The Company is
      subject to VAT which is levied on the majority of the products of Shanghai
      at
      the rate of 17% on the invoiced value of sales. Output VAT is borne by customers
      in addition to the invoiced value of sales and input VAT is borne by the Company
      in addition to the invoiced value of purchases to the extent not refunded for
      export sales.





In
      accordance with the SEC’s Staff Accounting Bulletin No. 104, *Revenue
      Recognition* ,
      the
      Company recognizes revenue when persuasive evidence of an arrangement exists,
      transfer of title has occurred or services have been rendered, the selling
      price is fixed or determinable and collectibility is reasonably assured.





F-8




**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**




(a) Sale
      of
      products





The
      Company recognizes revenue from the sale of products upon delivery to the
      customers and the transfer of title and risk of loss. The Company experienced
      no
      product returns and has recorded no reserve for sales returns for the six months
      ended June 30, 2008.





(b) Interest
      income





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





·Cost
          of
          revenue





Cost
      of
      revenues consists primarily of material costs, direct labor, depreciation and
      manufacturing overheads, which are directly attributable to the manufacture
      of
      products.





·Income
      taxes





The
      Company accounts for income tax using SFAS No. 109 *“Accounting
      for Income Taxes”* ,
      which
      requires the asset and liability approach for financial accounting and reporting
      for income taxes. Under this approach, deferred income taxes are provided for
      the estimated future tax effects attributable to temporary differences between
      financial statement carrying amounts of assets and liabilities and their
      respective tax bases, and for the expected future tax benefits from loss
      carry-forwards and provisions, if any. Deferred tax assets and liabilities
      are
      measured using the enacted tax rates expected in the years of recovery or
      reversal and the effect from a change in tax rates is recognized in the
      condensed consolidated statement of operations and comprehensive income in
      the
      period of enactment. A valuation allowance is provided to reduce the amount
      of
      deferred tax assets if it is considered more likely than not that some portion
      of, or all of the deferred tax assets will not be realized.





Effective
      January 1, 2007, the Company also adopts
      the provisions of the Financial Accounting Standards Interpretation No. 48, *“Accounting
      for Uncertainty in Income Taxes” (“* FIN
      48 *”)* .
      FIN 48
      prescribes a recognition threshold and measurement process for recording in
      the
      financial statements uncertain tax positions taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on de-recognition, classification,
      interest and penalties, accounting in interim periods, disclosures and
      transitions. In
      connection with the adoption of FIN No. 48, the Company has analyzed the filing
      positions in all of the jurisdictions where the Company is required to file
      income tax returns, as well as all open tax years in these jurisdictions. There
      was no impact on the condensed consolidated financial statements. The Company
      did not have any unrecognized tax benefits and there was no effect on the
      financial condition or results of operations for the period ended June
      30, 2008.





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





F-9




**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**




·Net
      income per
      share





The
      Company calculates net income per share in accordance with SFAS No. 128, *“Earnings
      per Share.”* Basic
      income per share is computed by dividing the net income by the weighted-average
      number of common shares outstanding during the period. Diluted income per share
      is computed similar to basic income per share except that the denominator is
      increased to include the number of additional common shares that would have
      been
      outstanding if the potential common stock equivalents had been issued and if
      the
      additional common shares were dilutive.





·Comprehensive
      income





SFAS
      No.
      130, *“Reporting
      Comprehensive Income”* ,
      establishes standards for reporting and display of comprehensive income, its
      components and accumulated balances. Comprehensive income as defined includes
      all changes in equity during a period from non-owner sources. Accumulated
      comprehensive income consists of changes in unrealized gains and losses on
      foreign currency translation. This comprehensive income is not included in
      the
      computation of income tax expense or benefit.





·Foreign
      currencies
      translation





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





The
      functional and reporting currency of the Company is the United States dollars
      (“US$”). The accompanying condensed consolidated financial statements have been
      expressed in US$. In addition, the
      Company’s operating subsidiaries in the PRC, SKYEDC and SKSCL maintain its books
      and records in their local currency, the Renminbi Yuan (“RMB”), which is
      functional currency as being the primary currency of the economic environment
      in
      which its operations are conducted.





The
      reporting currency of the Company is the United States dollar ("US dollars").
      The Company's subsidiaries in the PRC, SKYEDC and SKSCL maintain their books
      and
      records in its local currency, the Renminbi (“RMB”), which is functional
      currency as being the primary currency of the economic environment in which
      these entities operate.





In
      general, for consolidation purposes, assets and liabilities of its
      subsidiaries whose functional currency is not the US dollars are
      translated into US dollars, in accordance with SFAS No 52. “ *Foreign
      Currency Translation”* ,
      using
      the exchange rate on the balance sheet date. Revenues and expenses are
      translated at average rates prevailing during the period. The gains and losses
      resulting from translation of financial statements of foreign subsidiaries
      are
      recorded as a separate component of accumulated other comprehensive income
      within the statement of stockholders’ equity.





Translation
      of amounts from RMB into United States dollars (“US$”) has been made at the
      following exchange rates for the respective period:





2008
            
            2007Months
                end RMB:US$ exchange rate
            
            6.872
            
            
            7.3141Average
                monthly RMB:US$ exchange rate
            
            7.073
            
            
            7.5633




F-10




**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





·Related
      parties





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





·Segment
      reporting





SFAS
      No.
      131 *“Disclosures
      about Segments of an Enterprise and Related Information”* establishes standards for reporting information about operating segments on
      a
      basis consistent with the Company’s internal organization structure as well as
      information about geographical areas, business segments and major customers
      in
      the financial statements. The Company operates in one principal reportable
      segment in Japan and the PRC.





·Fair
      value of financial
      instruments





The
      Company values its financial instruments as required by Statement of Financial
      Accounting Standard (SFAS) No. 107, “ *Disclosures
      about Fair Value of Financial Instruments* ”.
      The
      estimated fair value amounts have been determined by the Company, using
      available market information and appropriate valuation methodologies. The
      estimates presented herein are not necessarily indicative of amounts that the
      Company could realize in a current market exchange.





The
      Company’s financial instruments primarily consist of cash and cash equivalents,
      accounts receivable, receivable from a third party, prepayments and deposits,
      short-term bank loan, other payables and accrued liabilities and income tax
      payable.





As
      of the
      balance sheet date, the estimated fair values of the financial instruments
      were
      not materially different from their carrying values as presented due to the
      short term maturities of these instruments and that the interest rates on the
      borrowings approximate those that would have been available for loans of similar
      remaining maturity and risk profile at respective year ends.





·Recently
          issued accounting
          standards





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





In
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), *"Business
      Combinations"* ("SFAS
      No. 141R"). SFAS No. 141R will change the accounting for business combinations.
      Under SFAS No. 141R, an acquiring entity will be required to recognize all
      the
      assets acquired and liabilities assumed in a transaction at the acquisition-date
      fair value with limited exceptions. SFAS No. 141R will change the accounting
      treatment and disclosure for certain specific items in a business combination.
      SFAS No. 141R applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. Accordingly, any business
      combinations the Company engages in will be recorded and disclosed following
      existing GAAP until January 1, 2009. The Company expects SFAS No. 141R will
      have
      an impact on accounting for business combinations once adopted but the effect
      is
      dependent upon acquisitions at that time. The Company is still assessing the
      impact of this pronouncement.




F-11




**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





In
      December 2007, the FASB issued SFAS No. 160, *"Noncontrolling
      Interests in Consolidated Financial Statements—An Amendment
      of
      ARB No. 51, or SFAS No. 160"* ("SFAS
      No. 160"). SFAS No. 160 establishes new accounting and reporting standards
      for
      the noncontrolling interest in a subsidiary and for the deconsolidation of
      a
      subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after
      December 15, 2008. The Company believes that SFAS 160 should not have a material
      impact on the consolidated financial position or results of
      operations.





In
      March
      2008, the FASB issued SFAS No. 161, *"Disclosures
      about Derivative Instruments and Hedging Activities"* ("SFAS
      No. 161"). SFAS 161 requires companies with derivative instruments to disclose
      information that should enable financial-statement users to understand how
      and
      why a company uses derivative instruments, how derivative instruments and
      related hedged items are accounted for under FASB Statement No. 133 *"Accounting
      for Derivative Instruments and Hedging Activities"* and how
      derivative instruments and related hedged items affect a company's financial
      position, financial performance and cash flows. SFAS 161 is effective for
      financial statements issued for fiscal years and interim periods beginning
      after
      November 15, 2008. The adoption of this statement is not expected to have a
      material effect on the Company's future financial position or results of
      operations.




In
      May
      2008, the FASB issued SFAS No. 162, *“The
      Hierarchy of Generally Accepted Accounting Principles”* (“SFAS
      No. 162”). This statement identifies the sources of accounting principles
      and the framework for selecting the principles to be used in the preparation
      of
      financial statements in conformity with generally accepted accounting principles
      (GAAP) in the United States. This statement is effective 60 days following
      the
      SEC’s approval of the Public Company Accounting Oversight Board amendments to AU
      Section 411, *“The
      Meaning of Present Fairly in Conformity With Generally Accepted Accounting
      Principles”* .
      The
      Company does not expect the adoption of SFAS No. 162 to have a material
      effect on the financial condition or results of operations of the
      Company.


**NOTE** **4**  **ACCOUNTS
      RECEIVABLE, TRADE**





The
      majority of the Company’s sales are on open credit terms and in accordance with
      terms specified in the contracts governing the relevant transactions. The
      Company evaluates the need of an allowance for doubtful accounts based on
      specifically identified amounts that management believes to be uncollectible.
      If
      actual collections experience changes, revisions to the allowance may be
      required. Based upon the aforementioned criteria, management has determined
      that
      no allowance for doubtful accounts is required for the six months ended June
      30 ,
      2008
      and 2007.





**NOTE** **5**  **INVENTORIES**


June
                  30,
                2008
              
              December
                  31,
                2007(unaudited)
              
              (audited)Raw
                  materials
              
              $
              705,857
              
              $
              224,795Work
                  in process
              
              
              507,529
              
              
              124,214Finished
                  goods
              
              
              149,745
              
              
              180,565$
              1,363,131
              
              $
              529,574




F-12





**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





For
      the
      six months ended June
      30 ,
      2008
      and 2007, the Company did not record an allowance for obsolete inventories,
      nor
      have there been any write-offs.





**NOTE** **6**  **OTHER
      RECEIVABLES AND PREPAYMENTS**





Other
      receivables and prepayments consisted of the following:





June
                30,
              2008
            
            December
                31,
              2007(unaudited)
            
            (audited)Advances
                to employees
            
            $
            43,657
            
            $
            41,017Prepayments
            
            
            354,922
            
            
            457,973Other
                receivables
            
            
            77,717
            
            
            61,237$
            476,296
            
            $
            560,227





The
      prepayments represented the deposits to suppliers for materials consumptions.
      The balances are subsequently settled upon the delivery of
      materials.





Other
      receivables represented temporary advances to various independent third parties
      and the Company is expected to collect the receivables within the next twelve
      months.





**NOTE** **7**  **PROPERTY,
      PLANT AND EQUIPMENT, NET**





Property,
      plant and equipment, net, consisted of the following:





June
                30,
              2008
            
            December
                31,
              2007(unaudited)
            
            (audited)Buildings
            
            $
            403,046
            
            $
            403,046Plant
                and machinery
            
            
            1,822,779
            
            
            1,822,779Office
                equipment
            
            
            44,178
            
            
            38,954Motor
                vehicles
            
            
            29,452
            
            
            29,452Foreign
                translation difference
            
            
            375,760
            
            
            214,2992,675,215
            
            
            2,508,530Less:
                accumulated depreciation
            
            
            (832,598
            )
            
            (726,573
            )Less:
                foreign translation difference
            
            
            (118,238
            )
            
            (64,238
            )Property,
                plant and equipment, net
            
            $
            1,724,379
            
            $
            1,717,719





Depreciation
      expense for the three months ended June 30, 2008 and 2007 were $53,947 and
      $5,344, respectively.





Depreciation
      expense for the six months ended June 30, 2008 and 2007 were $106,025 and
      $147,665, respectively.




F-13




**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





**NOTE** **8**  **SHORT-TERM
      BANK BORROWINGS**





As
      of
      June 30, 2008, the short-term bank loans consist of three individual bank loans
      with aggregate amount of RMB1,250,000 (2007: RMB1,250,000) payable to a
      financial institution, guaranteed by an independent third party, with interest
      rate ranged from 7.29% to 8.21% (2007: 7.38%) per annum payable quarterly,
      with
      principals due between August 20 to October 20, 2008.





As
      of
      June 30, 2008 and December 31, 2007, the short-term bank borrowings were
      $181,903 and $170,903 respectively.





**NOTE** **9**  **OTHER
      PAYABLES AND ACCRUED LIABILIITES**





Other
      payables and accrued liabilities consisted of the followings:





June
                30,
              2008
            
            December
                31,
              2007(unaudited)
            
            (audited)Salaries
                and welfare payable
            
            $
            86,769
            
            $
            79,347Advances
                from customers
            
            
            6,842
            
            
            13,395Accrued
                expenses
            
            
            73,074
            
            
            146,230Advances
                from third parties
            
            
            116,418
            
            
            109,378VAT
                payable
            
            
            93,484
            
            
            9,355Other
                payables
            
            
            11,475
            
            
            28,503$
            388,062
            
            $
            386,208





**NOTE** **10
      INCOME TAXES**





For
      the
      period ended June 30, 2008 and 2007, the local (“the United States”) and foreign
      components of income before income taxes were comprised of the
      following:





Six
                months ended June 30,2008
            
            2007(unaudited)
            
            (unaudited)Tax
                jurisdictions:-
                Local
            
            $
            (23,468
            )
            $
            (15,185
            )-
                Foreign
            
            
            965,974
            
            
            400,637Income
                before income taxes
            
            $
            942,506
            
            $
            385,452




F-14





**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





The
      provision for income taxes consisted of the following:




Six
                months ended June 30,2008
            
            2007Current:-
                Local
            
            $
            -
            
            $
            --
                Foreign
            
            
            20,185
            
            
            -Deferred:-
                Local
            
            
            -
            
            
            --
                Foreign
            
            
            -
            
            
            -Provision
                for income taxes
            
            $
            20,185
            
            $
            -





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





*United
      States of America*





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





*British
      Virgin Islands*





Under
      the
      current BVI law, the Company is not subject to tax on income. For the years
      ended June 30, 2008 and 2007, the Company’s subsidiary did not incurred any
      income or loss.





*The
      PRC*





All
      the
      Company’s PRC subsidiaries are subject to the Corporate Income Tax governed by
      the Income Tax Law of the PRC. Effective from January 1, 2008, the Corporate
      Income Tax Law of the PRC (the “New CIT Law”) is followed. Under the New CIT
      Law, SKYEDC, as a foreign investment enterprise continues to enjoy the unexpired
      tax holidays from a full exemption of income tax for the first two profit making
      years with a 50% exemption of income tax for the next three years. SKSCL is
      a
      domestic company which is entitled to the tax rate reduction from 33% to 25%.





The
      reconciliation of income tax rate to the effective income tax rate for the six
      months ended June 30, 2008 and 2007 is as
      follows:





Six
                months ended June 30,2008
            
            2007(unaudited)
            
            (unaudited)Income
                before taxes from PRC operation
            
            $
            965,974
            
            $
            400,637Statutory
                income tax rate
            
            
            25
            %
            
            33
            %Income
                tax expense at statutory tax rate
            
            
            241,493
            
            
            132,210Effect
                from tax holiday
            
            
            (221,308
            )
            
            (132,210
            )Income
                tax expenses
            
            $
            20,185
            
            $
            -




F-15




**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





The
      Company adopted the provisions of FIN 48 on January 1, 2007. This interpretation
      prescribes a recognition threshold and measurement attribute for the tax
      positions taken, or expected to be taken, on a tax return. The Company files
      tax
      returns in the various tax jurisdictions in which its subsidiaries operate
      in
      the PRC. The United States tax returns of its tax years 2006 to 2007 remain
      open
      to examination by IRS. The PRC 2007 tax returns have been filed and
      cleared.





**NOTE** **11
      AMOUNT DUE TO A DIRECTOR**





The
      balance due to director, Mr. Gu Xianzhong represented unsecured advances which
      are interest-free and has no fixed terms of repayment.





**NOTE** **12
      AMOUNT DUE TO A RELATED PARTY**





The
      balance due to the son of Mr. Gu Xianzhong represented unsecured advances which
      are interest-free and has no fixed terms of repayment.





**NOTE** **13
      CAPITAL TRANSACTIONS**





On
      January 30, 2008, the Company entered into a Regulation S Subscription Agreement
      (the “Agreement A”) with Mr. Yu Guorui, a resident and national of the PRC (the
“Investor”). Pursuant to the Agreement, the Company issued 4,230,769 shares of
      common stock to the Investor for $550,000 at a price of $0.13 per share. The
      price was
      negotiated by the parties and based upon the average closing price for the
      Company’s common stock at its market quoted price on the closing date during the
      month preceding the subscription agreement. The
      Company intends to utilize the funds received primarily on expansion of its
      retail store operations in China.





On
      March
      24, 2008, the Company entered into an Equity Line Agreement (the “ELA”) and a
      Registration Rights Agreement (the “RRA”) with Magellan Global Fund, L.P.
      (“Magellan”), a Delaware limited partnership, to issue and sell the common stock
      of the Company to Magellan up to $2,000,000. Upon execution of the ELA March
      24,
      2008, the Company issued 571,429 shares of restricted common stock at a price
      of
      $0.07 per share to ELA for the payment of commitment fees amounted to $40,000.
      The price was based on the closing bid price of the Company’s common stock at
      its market quoted price on the closing date of the sale of common
      stock.





On
      April
      25, 2008, the Company approved and adopted the 2008 Equity Incentive Plan (the
      “EIP”) for the purpose to provide additional incentive to employees, directors
      and consultants. The EIP permits the grant of incentive stock options,
      non-statutory stock options, restricted stock, restricted stock units, stock
      appreciation rights, performance units and performance shares. On May 1, 2008,
      the Company issued 14,643,372 shares of restricted common stock under the EIP
      with a fair market value of $0.033 per share. The fair market value was based
      on
      the last trade or closing ask price of the Company’s common stock on the over
      the
      counter bulletin board.





As
      of
      June 30, 2008 and December 31, 2007, the Company has 119,445,571 and 100,000,000
      shares of common stocks issued and outstanding.





F-16





**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





**NOTE** **14
      EQUITY INCENTIVE PLAN**





On
      April
      25, 2008, the Company approved and adopted the 2008 Equity Incentive Plan (the
      “EIP”) for the purpose to provide additional incentive to employees, directors
      and consultants. The EIP permits the grant of incentive stock options,
      non-statutory stock options, restricted stock, restricted stock units, stock
      appreciation rights, performance units and performance shares. On May 1, 2008,
      the Company granted an aggregate of 14,643,372 shares of restricted common
      stock. The shares issued vest over a four-year period, and at issue resulted
      in
      total deferred compensation of $483,231. The fair values of these restricted
      stock awards are equal to the fair value of the Company’s stock on the date of
      grant. Such restricted stock is subject to the risk of forfeiture upon the
      occurrence of certain events. During the six months ended June 30, 2008, the
      Company recognized $20,135 of compensation expense under the plan. As of June
      30, 2008, there was $463,096 of unrecognized compensation expense related to
      the
      nonvested restricted stock. This cost is expected to be recognized over a
      four-year period.





The
      following table summarizes the status of the Company’s nonvested restricted
      stock awards during the six months ended June 30, 2008:




Nonvested
                restricted stock
              andstock
                unit awardsNumber
                of shares
            
            Weighted
                average grant date fair valuesOutstanding
                at beginning of period
            
            
            -
            
            $
            -Granted
            
            
            14,643,372
            
            
            0.033Vested
            
            
            (610,140
            )
            
            0.033Outstanding
                at end of period
            
            
            14,033,232
            
            $
            0.033




**NOTE
      1** **5**  **SEGMENT
      REPORTING, GEOGRAPHICAL INFORMATION**





The
      Company considers its business activities to constitute one single segment.
      The
      Company’s chief operating decision maker use these results to make operating and
      strategic decisions. The geographic distribution of the Company’s customers is
      located in Japan and the PRC.





An
      analysis of the Company’s revenues and net assets by region are as follows:




Three
                months ended June 30,2008
            
            2007Revenue:-
                Japan
            
            $
            1,229,939
            
            $
            1,702,881-
                The PRC
            
            
            1,076,543
            
            
            252,016


$
            2,306,482
            
            $
            1,954,897





F-17




**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**




Six
                months ended June 30,2008
            
            2007Revenue:-
                Japan
            
            $
            2,201,466
            
            $
            2,356,990-
                The PRC
            
            
            2,462,596
            
            
            771,882$
            4,664,062
            
            $
            3,128,872




As
                of June 30,2008
            
            2007Net
                assets (liabilities):-
                U.S.
            
            $
            537,874
            
            $
            1,966-
                BVI
            
            
            (68,995
            )
            
            (5,752
            )-
                The PRC
            
            
            4,764,390
            
            
            2,885,741$
            5,233,269
            
            $
            2,881,995




**NOTE
      1** **6**  **CONCENTRATION
      AND RISK**





(a) Major
      customers and vendors





For
      the
      three and six months ended June 30, 2008 and 2007, 100% of the Company’s assets
      were located in the PRC. 49% and 47% of the Company’s revenues were derived from
      customers located in Japan for the three and six months ended June 30, 2008.





For
      the
      three months ended June 30, 2008, customers who account for 10% or more of
      revenues are presented as follows:





Customers
            
            
            Revenues
            
            Percentage
              of
                revenues
            
            
            Accounts
              receivable,
                tradeCustomer
                A
            
            
            $
            360,922
            
            16%
            
            
            $
            125,564Customer
                B
            
            
            
            265,048
            
            12%
            
            
            
            97,653Customer
                C
            
            
            
            264,059
            
            11%
            
            
            
            141,877Customer
                D
            
            
            
            246,815
            
            11%
            
            
            
            120,616Customer
                E
            
            
            
            231,710
            
            10%
            
            
            
            183,550Total:
            
            $
            1,368,554
            
            60%
            Total:
            
            $
            669,260





For
      the
      six months ended June 30, 2008, customers who account for 10% or more of
      revenues are presented as follows:





F-18




**CHINA
      SHOE HOLDINGS, INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





Customers
            
            
            Revenues
            
            Percentage
              of
                revenues
            
            
            Accounts
              receivable,
                tradeCustomer
                A
            
            
            $
            765,861
            
            17%
            
            
            $
            125,564Customer
                B
            
            
            
            641,111
            
            14%
            
            
            
            153,678Customer
                C
            
            
            
            603,578
            
            14%
            
            
            
            141,877Customer
                D
            
            
            
            500,695
            
            11%
            
            
            
            183,550Customer
                E
            
            
            
            457,863
            
            10%
            
            
            
            120,616Customer
                F
            
            
            
            446,625
            
            10%
            
            
            
            97,653Total:
            
            $
            3,415,733
            
            76%
            Total:
            
            $
            822,938





For
      the
      three and six months ended June 30, 2007, there are no customers who account
      for
      10% or more of revenues.





For
      the
      three and six months ended June 30, 2008 and 2007, there are no vendors who
      account for 10% or more of purchases.





(b)  Credit
      risk





Financial
      instruments that potentially subject the Company to significant concentrations
      of credit risk consist principally of cash and trade accounts receivable. The
      Company performs ongoing credit evaluations of its customers’ financial
      condition, but does not require collateral to support such
      receivables.





(c)  Interest
      rate risk





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





The
      Company’s interest-rate risk arises from short-term borrowings. Borrowings
      issued at variable rates expose the Company to cash flow interest-rate risk.
      Borrowings issued at fixed rates expose the Company to fair value interest-rate
      risk. Company policy is to maintain approximately all of its borrowings in
      fixed
      rate instruments. As of June 30, 2008, all of borrowings were at fixed
      rates.





(d)  Exchange
      rate risk





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





F-19




**CHINA
      SHOE HOLDINGS,** **INC**


**NOTES
      TO** **CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


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


**(** **Unaudited)**





**NOTE** **17**  **OPERATING
      LEASE COMMITMENT**





The
      Company rented offices, factories and retail shops under non-cancelable
      operating lease agreements. As of June 30, 2008, the future minimum rental
      payments required for the coming years are as follows:





Period
                endedJune
                30,2009
            
            
            79,0222010
            
            
            84,3482011
            
            
            55,482Thereafter
            
            
            111,246$
            330,098





For
      the
      six months ended June 30, 2008 and 2007, rental expenses were $27,092 and
      $30,161 respectively.





F-20




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




***Special
      Note Regarding Forward Looking Statements***




This
      Quarterly Report on Form 10-Q, including the following “Management's Discussion
      and Analysis of Financial Condition and Results of Operations,” 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 (the “Exchange Act”). Such statements include, among others, those
      concerning our expected financial performance and strategic and operational
      plans, 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 that a number of risks
      and uncertainties could cause actual results of the Company to differ materially
      from those anticipated, expressed or implied in the forward-looking statements.
      The words “believe,” “expect,” “anticipate,” “project,” “targets,” “optimistic,”
“intend,” “aim,” “will” or similar expressions are intended to identify
      forward-looking statements. All statements other than statements of historical
      fact are statements that could be deemed forward-looking statements. Risks
      and
      uncertainties that could cause actual results to differ materially from those
      anticipated include risks related to 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; any statements of belief or intention;
      any of the factors mentioned in the “Risk Factors” section of our “Report of
      Unscheduled Material Events or Corporate Changes” on Form 8-K for the years
      ended December 31, 2006 and December 2005, and other risks mentioned in this
      Form 10-Q. The Company assumes no obligation and does not intend to update
      any
      forward-looking statements, except as required by law.




***Use
      of terms***





Except
      as
      otherwise indicated by the context, references in this Form 10-K to “CHSH,”
“we,” “us,” “our,” “our Company,” or “the Company” are to China Shoe Holdings,
      Inc., a Nevada corporation, and its consolidated subsidiaries. Unless the
      context otherwise requires, all references to (i)“WSTG” are to Wholly Success
      Technology Group Limited, a limited liability company incorporated in the
      British Virgin Islands; (ii)“SKYEDC” are to Shanghai Kanghong Yunheng Enterprise
      Development Company Limited., a limited liability company incorporated in the
      People's Republic of China; (iii)”SKSCL” are to Shanghai Kangjiesi Shoes Company
      Limited., a limited liability company incorporated in the People's Republic
      of
      China  (iv) “BVI” are to British Virgin Islands; (v) “PRC” and “China” are
      to the People's Republic of China; (vi) “U.S. dollar,” “$” and “US$” are to
      United States dollars; (vii) “RMB” are to Yuan of China; (viii) “Securities Act”
are to the Securities Act of 1933, as amended; and “Exchange Act” are to the
      Securities Exchange Act of 1934, as amended.




F-21





***Overview***




The
      Company continued to implement its growth strategy for the three months ended
      June 30, 2008 through slightly higher marketing efforts to be placed on the
      ladies footwear for the domestic market.





Apart
      from the manufacturing business, during the three months ended June 30, 2006,
      the Company commenced its retail business in
      Shanghai region through selling its own developed brands of “Kanggies” and
“CCR”.





The
      Company continued to strengthen its balance sheet in 2007 and for the three
      months ended of June 30, 2008. Total assets and stockholders' equity have both
      increased.





***Our
      Business***




We
      are an
      independent, single facility-based, private label designer, manufacturer and
      marketer of a broad line of woman's shoes in which the footwear are generally
      sold under its customers' brand names. We also manufactures shoe component
      such
      as soles for other shoe manufacturers.





We
      sold
      shoes and shoe components to approximately forty customers in Japan and China.
      Our factory is located in Jiading Township, a suburb of Shanghai in the People's
      Republic of China.





We
      also
      conduct retail sales of our own developed ladies shoes and leather products
      in
      the People’s Republic of China, mainly in the Shanghai region.





***Recent
      Development***




On
      July
      3, 2007, a closing was held pursuant to an Agreement and Plan of Reorganization,
      dated as of June 29, 2007, (the “Agreement”) by and among the Company, WSTG, a
      BVI Corporation, and WSTG's shareholders. Pursuant to the Agreement, each
      shareholder of WSTG exchanged all of his shares in WSTG for shares in The
      Company with an aggregate of 69,615,000 shares in the Company being issued
      in
      exchange for the shares in WSTG. In addition to the stock exchange transaction,
      CHSH agreed to issue an additional 15,185,000 restricted shares of common stock
      of the Company to China Venture Partners, Inc. for consulting services at a
      par
      value of $0.001 per share. The shares were issued in lieu of cash payment of
      $60,000 pursuant to a contract for consulting services dated June 1,
      2007.





WSTG
      is
      the owner of all the outstanding shares of SKYEDC, a limited liability company
      organized under the laws of the People's Republic of China (“PRC”) and a
      manufacturer of woman's shoes, casual shoes and shoe components.





Under
      the
      terms of the Agreement, all of the officers of the Company resigned, WSTG was
      permitted to appoint two directors, representing 50% of the Company's Board
      of
      Directors and WSTG and the Company agreed not to file a registration statement
      on Form SB-2 allowing for insiders' share sales for a period of one year or
      to
      file a registration statement on From S-8 for nine months. CVP provides general
      business consulting services, specializing in the needs of entities with
      interests in the PRC.




F-22





On
      January 30, 2008, the Company entered into a Regulation S Subscription Agreement
      (the “Agreement”) with Mr. Yu Guorui, a resident and national of the PRC (the
“Investor”). Pursuant to the Agreement, the Company sold 4,230,769 shares of
      common stock to the Investor for $550,000 at a market price of $0.13 per share.
      The Company intends to utilize the funds received primarily on expansion of
      its
      planned retail store operations in the PRC.





On
      February 21, 2008, the Company, through its subsidiary, SKYEDC, has established
      a company namely, Shanghai Kangjiesi Shoes Co. Ltd., to conduct the sales of
      shoes and leather products in the PRC. It was incorporated as a limited
      liability company under the laws of the PRC and its registered capital is
      amounted to $68,362 (equivalent to RMB 500,000).





On
      March
      17, 2008, the Company entered into an Equity Line Agreement (the “Agreement”)
      with Magellan Global Fund, L.P., a Delaware limited partnership (the
“Investor”), pursuant to which the Company agreed to sell and issue and the
      Investor agreed to purchase from the Company up to $2,000,000 of the Company’s
      common stock with a par value of $0.001 per share. Upon the execution of the
      Agreement, the Company shall issue to the Investor a restricted stock
      certificate of the Company’s common stock in an amount equal to $40,000 divided
      by the closing bid price on the closing date (571,429 shares). In addition,
      upon
      effectiveness of a registration statement pursuant to the Agreement, the Company
      will issue an additional $40,000 of common stock to the Investor priced at
      the
      closing bid price of the day the registration statement is declared effective
      by
      the United States Securities and Exchange Commission. The Company intends to
      use
      the funds from this offering for its execution of Company’s retail
      strategy.




On
      April
      25, 2008, the Company approved and adopted the 2008 Equity Incentive Plan (the
      “EIP”) for the purpose to provide additional incentive to employees, directors
      and consultants. The EIP permits the grant of incentive stock options,
      non-statutory stock options, restricted stock, restricted stock units, stock
      appreciation rights, performance units and performance shares.





On
      May 1,
      2008, the Company issued 14,643,372 shares of restricted common stock under
      the
      EIP with a fair market value of $0.033 per share. The fair market value was
      based on the last trade or closing ask price of the Company’s common stock on
      the over the counter bulletin board.





WSTG
      is
      the owner of all the outstanding shares of SHKH, a limited liability company
      organized under the laws of the People's Republic of China (“PRC”) and a
      manufacturer of woman's shoes, casual shoes and shoe components.





Under
      the
      terms of the Agreement, all of the officers of the Company resigned, WSTG was
      permitted to appoint two directors, representing 50% of the Company's Board
      of
      Directors and WSTG and the Company agreed not to file a registration statement
      on From SB-2 allowing for insiders' share sales for a period of one year or
      to
      file a registration statement on From S-8 for nine months. CVP provides general
      business consulting services, specializing in the needs of entities with
      interests in the PRC.




F-23





**Results
      of Operations**





(1)
      The
      following table summarizes the results of our operations during the three-months
      period ended June 30 2008 and 2007, and provides information regarding the
      dollar and percentage increase or (decrease) from the three-months period ended
      June 30, 2008 to the three months period ended June 30, 2007.





All
      amount, other than percentages, in millions of U.S dollars


**3
                    Months Ended June 30,****Item**
              
              **2008**
              
              **2007**
              
              **Increase**
                    **(Decrease)**
              
              **%
                      Increase**
                    **(%
                      Decrease)**Operating
                  Revenues
              
              $
              2.31
              
              $
              1.95
              
              $
              0.36
              
              $
              18.5
              %Cost
                  of Revenues
              
              
              1.64
              
              
              1.30
              
              
              0.34
              
              
              26.2
              %Gross
                  Profit
              
              
              0.67
              
              
              0.65
              
              
              0.02
              
              
              3.1
              %Operating
                  Expenses-
                  Depreciation
              
              
              0.05
              
              
              0.01
              
              
              0.04
              
              
              400.0
              %-
                  Stock based compensation
              
              
              0.02
              
              
              0.02
              
              
              -
              
              
              --
                  Selling & marketing
              
              
              0.04
              
              
              -
              
              
              0.04
              
              
              N/A-
                  General & administrative
              
              
              0.14
              
              
              0.42
              
              
              (0.28
              )
              
              (66.7
              %)Other
                  Income (Expenses)
              
              
              (0.003
              )
              
              (0.012
              )
              
              (0.01
              )
              
              (75.0
              %)Net
                  Income
              
              
              0.39
              
              
              0.20
              
              
              0.19
              
              
              95.0
              %


***Three
      Months Ended June 30, 2008 Compared to Three Months Ended June 30,
      2007***





***Revenue:*** Commencing from the three months ended June 30, 2008, our revenues are generated
      from manufacturing and retailing business, revenue was $2.31 million for the
      three months ended June 30, 2008 as compared to $1.95 million for the three
      months ended June 30, 2007, representing an increase by 18.5%. The increase
      in
      revenue was mainly contributed to the increased in the proportion of sales
      into
      the domestic sales and the revenue derived from retailing business.





***Cost
      of Revenue and Gross Profit:*** Cost of
      revenue and gross profit were respectively $1.64 million and $0.67 million
      for
      the three months ended June 30, 2008 as compared to $1.30 million and $0.65
      million for the three months ended June 30, 2007, representing an increase
      by
      26.2% and 3.1% respectively. The substantial growth in gross profit was
      attributable to a tighten control on cost of production.





***Operating
      Expenses:*** Operating expenses was $0.25 million for the three months ended June 30, 2008
      as
      compared to $0.44 million for the three months ended June 30, 2007, representing
      a decrease by 43.2%. The decreased was mainly
      attributable to the decreased in the agency expenses and entertainment expenses
      connected with serving the Japanese customers as a closer business connection
      with the Japanese customers have been established in the current period of
      2008.




F-24





***Income
      Tax Expenses:*** China
      Shoe Holdings, Inc. is subject to United States federal income tax rate. No
      provision for income taxes in the United States has been made as China Shoe
      Holdings, Inc. had no United States taxable income during the three months
      ended
      June 30, 2008.





Our
      wholly owned subsidiary Wholly Success Technology Group Limited (“WSTG”) was
      incorporated in the British Virgin Island and, under the current laws of the
      BVI, is not subject to income taxes.





Starting
      from the first quarter of 2007, Shanghai Kanghong Yunheng Enterprise Development
      Company Limited (“SKYEDC”), a subsidiary of the Company, which operates in the
      PRC, is exempted from the PRC state and local enterprise income tax for the
      first two profitable financial years of operation and a 50% relief from the
      PRC
      state corporate income tax for the following three years. Accordingly, it was
      not subject to tax in 2007.





On
      March
      16, 2007, the National People's Congress of the PRC determined to adopt a new
      corporate income tax law in its fifth plenary session. The new corporate income
      tax law unifies the application scope, tax rate, tax deduction and preferential
      policy for both domestic and foreign-invested enterprises. The new corporate
      income tax law will be effective on January 1, 2008. According to the new
      corporate income tax law, the applicable income tax law rate for our operating
      subsidiaries may be subject to change. As the implementation detail has not
      yet
      been announced, we cannot be sure of the potential impact of such new corporate
      income tax law on our financial position and operating results.





Our
      subsidiary, Shanghai Kangjiesi Shoes Co., Ltd (“SKSCL”) which operates in the
      PRC, is conducting shoes retailing business in the People’s Republic of China.
      SKSCL is subject to a corporate income tax rate of 25% .





Income
      taxes expense was $0.02 million for the three months ended June 30, 2008. The
      Company started to pay taxes during the three months ended June 30, 2008 because
      of the commencement of the retail business from SKSCL during the three months
      ended June 30, 3008.





***Net
      income:*** Net
      income was $0.39 million for the three months ended June 30, 2008 as compared
      to
      $0.20 million for the three months ended June 30, 2007, representing an increase
      by 95%, the increase was mainly attributable to the increase in the greater
      proportion of sales from the domestic market and revenue derived from the
      retailing business.





(2)
      The
      following table summarizes the results of our operations during the six-months
      period ended June 30 2008 and 2007, and provides information regarding the
      dollar and percentage increase or (decrease) from the six-months period ended
      June 30, 2007 to the six months period ended June 30, 2008.




F-25





All
      amount, other than percentages, in millions of U.S dollars


**6
                  Months Ended June 30,****Item**
              
              **2008**
              
              **2007**
              
              **Increase**
                    **(Decrease)**
              
              **%
                    Increase**
                  **(%
                    Decrease)**Operating
                  Revenues
              
              $
              4.66
              
              $
              3.13
              
              $
              1.53
              
              $
              48.9
              %Cost
                  of Revenues
              
              
              3.13
              
              
              2.11
              
              
              1.02
              
              
              48.3
              %Gross
                  Profit
              
              
              1.53
              
              
              1.02
              
              
              0.51
              
              
              50.0
              %Operating
                  Expenses-
                  Depreciation
              
              
              0.11
              
              
              0.01
              
              
              0.10
              
              
              1000.0
              %-
                  Stock based compensation
              
              
              0.02
              
              
              0.02
              
              
              -
              
              
              --
                  Selling & marketing
              
              
              0.04
              
              
              -
              
              
              0.04
              
              
              N/A-
                  General & administrative
              
              
              0.41
              
              
              0.59
              
              
              (0.18
              )
              
              (30.5
              %)Other
                  Income (Expenses)
              
              
              (0.007
              )
              
              (0.017
              )
              
              (0.01
              )
              
              (58.8
              %)Net
                  Income
              
              
              0.92
              
              
              0.39
              
              
              0.53
              
              
              135.9
              %


***Six
      Months Ended June 30, 2008 Compared to Six Months Ended June 30,
      2007***





***Revenue:*** Commencing from the three months ended June 30, 2008, our revenues are generated
      from both manufacturing and retailing business, revenue was $4.66 million for
      the six months ended June 30, 2008 as compared to $3.13 million for the six
      months ended June 30, 2007, representing an increase by 48.9%. The increase
      in
      revenue was mainly contributed to the increased in the proportion of sales
      into
      the domestic sales and the revenue derived from retailing business.





***Cost
      of Revenue and Gross Profit:*** Cost of
      revenue and gross profit were respectively $3.13 million and $1.53 million
      for
      the six months ended June 30, 2008 as compared to $2.11 million and $1.02
      million for the six months ended June 30, 2007, representing an increase by
      48.3% and 50.0% respectively. The substantial growth in gross profit was
      attributable to a tighten control on cost of production.





***Operating
      Expenses:*** Operating expenses was $0.58 million for the six months ended June 30, 2008
      as
      compared to $0.62 million for the six months ended June 30, 2007, representing
      a
      decrease by 6.5%. The decreased was mainly
      attributable to the decreased in the agency expenses and entertainment expenses
      connected with serving the Japanese customers as a closer business connection
      with the Japanese customers have been established in the current period of
      2008.





***Income
      Tax Expenses:*** China
      Shoe Holdings, Inc. is subject to United States federal income tax rate. No
      provision for income taxes in the United States has been made as China Shoe
      Holdings, Inc. had no United States taxable income during the six months ended
      June 30, 2008.




Our
      wholly owned subsidiary Wholly Success Technology Group Limited (“WSTG”) was
      incorporated in the British Virgin Island and, under the current laws of the
      BVI, is not subject to income taxes.




F-26





Starting
      from the first quarter of 2007, Shanghai Kanghong Yunheng Enterprise Development
      Company Limited (“SKYEDC”), a subsidiary of the Company, which operates in the
      PRC, is exempted from the PRC state and local enterprise income tax for the
      first two profitable financial years of operation and a 50% relief from the
      PRC
      state corporate income tax for the following three years. Accordingly, it was
      not subject to tax in 2007.





On
      March
      16, 2007, the National People's Congress of the PRC determined to adopt a new
      corporate income tax law in its fifth plenary session. The new corporate income
      tax law unifies the application scope, tax rate, tax deduction and preferential
      policy for both domestic and foreign-invested enterprises. The new corporate
      income tax law will be effective on January 1, 2008. According to the new
      corporate income tax law, the applicable income tax law rate for our operating
      subsidiaries may be subject to change. As the implementation detail has not
      yet
      been announced, we cannot be sure of the potential impact of such new corporate
      income tax law on our financial position and operating results.





Our
      subsidiary, Shanghai Kangjiesi Shoes Co., Ltd (“SKSCL”) which operates in the
      PRC, is conducting shoes retailing business in the People’s Republic of China.
      SKSCL is subject to a corporate income tax rate of 25% .





Income
      taxes expense was $0.02 million for the three months ended June 30, 2008. The
      Company started to pay taxes during the six months ended June 30, 2008 because
      of the commencement of the retail business from SKSCL during the three months
      ended June 30, 3008.





***Net
      income:*** Net
      income was $0.92 million for the six months ended June 30, 2008 as compared
      to
      $0.39 million for the six months ended June 30, 2007, representing an increase
      by135.9%, the increase was mainly attributable to the increase in the greater
      proportion of sales from the Japanese market.





**Liquidity
      and Capital Resources**





**Error!
      Not a valid link.**




***Operating
      Activities:***





Net
      cash
      used in operating activities was $0.14 million for the six months ended June
      30,
      2008, which is an increase of $0.05 million from $0.09 million as compared
      with
      the corresponding period in 2007. The increase was mainly due to the increased
      in other payables and accrued liabilities, advance to employees and inventories
      and the decreased in accounts receivables and prepayment.





***Investing
      Activities:***





Net
      cash
      used in investing activities for the six months ended June 30, 2008 was $0.01
      million. The increase was attributable to the acquisition of fixed
      assets.




F-27





***Financing
      Activities:***





Net
      cash
      provided by financing activities in the six months ended June 30, 2008 totaled
      $0.55 million as compared to $0.37 million in the corresponding period of 2007.
      The increase of cash provided by financing activities was mainly attributable
      to
      the proceeds from newly issued share capital of USD550,000





***Short
      Term Bank Borrowings:***





The
      Company utilizes short term bank borrowings to provide for its liquidity needs
      as the Company is typically paid for its product adequate to allow the Company
      to operate at present levels and to sustain moderate growth.




Management
      believes that the Company's reputation for quality production will result in
      more large orders that will be difficult to fill without significant plant
      expansion and to explore the feasibility of entering the retail shoe market
      in
      China. However, the Company does not have any commitments for additional
      financing and no assurance is given that any additional financing will be
      available or that, if available, it will be on terms that are favorable to
      our
      shareholders.





F-28


**ITEM
      3. CONTROLS AND PROCEDURES**




Members
      of our management, including our Chief Financial Officer and Principal
      Accounting and Financial Officer, have evaluated the effectiveness of our
      disclosure controls and procedures, as defined by paragraph (e) of Exchange
      Act
      Rules 13a-15or 15d-15, as of June 30, 2008, the end of the period covered by
      this report. Based upon that evaluation, Mr. Gu Xianzhong concluded that our
      disclosure controls and procedures are effective.




**INTERNAL
      CONTROL OVER FINANCIAL REPORTING**




There
      were no changes in our internal control over financial reporting or in other
      factors identified in connection with the evaluation required by paragraph
      (d)
      of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended
      March 31, 2008 that have materially affected, or are reasonably likely to
      materially affect, our internal control over financial reporting.





**PART
      II: OTHER INFORMATION**





**Item
      1. Legal Proceedings**




**None.**





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**




Previously
      reported on Form 8-K filed February 4, 2008 and Form 8-K A-1 filed May 1,
      2008.





**Item
      3. Defaults Upon Senior Securities**




None.





**Item
      4. Submission of Matters to a Vote of Security Holders**




No
      items
      during the period covered by this report.





**Item
      5. Other Information**




None.




F-29





**Item
      6. Exhibits and Reports on Form 8-K**





a)
            EXHIBITS31.1
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002





31.2
            Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002





32
            Certifications
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to 18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002




b)
      REPORTS ON FORM 8-K




The
      Company filed a Form 8-K, dated June 6, 2007. The Company filed additional
      reports on Form 8-K after the close of the period covered by this
      report.





F-30





**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      Registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.


**China
                  Shoe Holdings, Inc.**
                (Registrant)Date:
                August 18, 2008
            By:
            /s/
                Gu XianzhongGu
                Xianzhong
              President
                and CEO




Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, this
      Report has been signed below by the following persons on behalf of the
      registrant and in the capacities and on the dates indicated.





NAME
            
            TITLE
            
            DATE/s/
                Gu Xianzhong
            
            President
                and CEO
            
            August
                19, 2008Gu
                Xianzhong/s/
                Angus Cheung Ming
            
            Chief
                Financial Officer
            
            August
                19, 2008Angus
                Cheung Ming
            
            (Principal
                Financial and Accounting Officer)




F-31