China Tractor Holdings, Inc. - FORM 10-K

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EX-32.2 - China Tractor Holdings, Inc.	v181203_ex32-2.htm
EX-31.2 - China Tractor Holdings, Inc.	v181203_ex31-2.htm
EX-32.1 - China Tractor Holdings, Inc.	v181203_ex32-1.htm
EX-31.1 - China Tractor Holdings, Inc.	v181203_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ending December 31, 2009

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from ________ to ________.

Commission file number 000-52716

China Tractor Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware		98-0445019
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification number)

Kalun Industrial Park JiuTai Economic Development Zone ChangChun City, P.R.China		130507
(Address of Principal Executive Offices)		(Zip Code)

86-431-82561001

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act: None

Title of Each Class

Common Stock, $.001 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. o

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

YES x NO o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company ý

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $703,054 as of June 30, 2009 (based on the closing price for such stock as of June 30, 2009).

As of April 1, 2010, there were 18,340,539 shares of common stock, par value $0.001 per share, of the registrant outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

	PART I	4
Item 1.	Business	4
Item 1A.	Risk Factors
Item 1B.	Unresolved Staff Comments
Item 2.	Properties	8
Item 3.	Legal Proceedings	8
Item 4.	Submission of Matters to a Vote of Security Holders	8

	PART II	9
Item 5.	Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	9
Item 6.	Selected Financial Data	10
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 8.	Financial Statements and Supplementary Data	17
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	17
Item 9A.	Controls and Procedures	17
Item 9B.	Other Information	18

	PART III	19
Item 10.	Directors and Executive Officers of the Registrant	19
Item 11.	Executive Compensation	21
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	22
Item 13.	Certain Relationships and Related Transactions	22
Item 14.	Principal Accounting Fees and Services	23

	PART IV	25
Item 15.	Exhibits	25

PART I

ITEM 1. BUSINESS

History

References in this Form 10-K to the “Company,” “we,” “our” and “us” refer to China Tractor Holding, Inc. and our consolidated subsidiaries.

We were incorporated in the state of Delaware on April 13, 2004 as Royaltech Corp., with our principal place of business in Montreal, Quebec, Canada. At that time, we were a developmental stage company in the business of the development, manufacturing and marketing of biotech products. In September 2008, we consummated a share exchange with Densen Equipment Ltd., whereby we acquired all the assets of Densen Equipment Ltd. in exchange for approximately 91.3% of our common stock.

As a result of the share exchange with Densen Equipment Ltd., Densen Machinery Investment Limited, a Hong Kong limited corporation ("Densen Machinery"), became our wholly-owned subsidiary. In June 2005, Densen Machinery invested an aggregate of $15,180,000 to establish Changchun Densen Agricultural Machinery Equipment Co., Ltd. (“Changchun Densen”). Changchun Densen commenced operations on September 27, 2005 and is engaged in the research, development and production of low-speed vehicles, including tractors and construction machinery. Changchun Densen acquired certain trademark rights from Changchun Tractor (Group) Co., Ltd. on January 9, 2007 for a 3% equity interest in Densen Machinery. Changchun Densen changed its corporate name to Changchun Densen Changtuo Agricultural Machinery Equipment Co., Ltd. On November 20, 2007, Changchun Densen and State-owned Assets Supervision and Administration Commission of Changchun (the “Commission”) started a joint venture to establish Chang Tuo Agricultural Machinery Equipment Group Co., Ltd. (“Chang Tuo”). Up until December 1, 2009, the business operation of Chang Tuo was the sole business of the Company.

On December 1, 2009, the Company entered into a letter of intent to transfer all shares owned by the Company in Chang Tuo to the Commission. As a result, on December 1, 2009, the Company lost control over Chang Tuo as the Commission took over Chang Tuo’s management and operations. Accordingly, Chang Tuo is reported as a discontinued operation in accordance with ASC 205-20. The shares of Chang Tuo will be sold to the Commission at the price of approximately $9,799,333 (RMB67,000,000). The transfer of the shares is expected to be completed on or about May 1, 2010.

Description of Business

We currently do not have any operations. Upon the closing of the transfer of the shares in Chang Tuo, to be completed on or about May 1, 2010, we expect to receive a sum of $9,799,333. Management has not yet decided on the future plans.

Reports to Security Holders

We file reports with the Securities and Exchange Commission, or SEC, including annual reports and quarterly reports as well as other information we are required to file pursuant to securities laws. You may read and copy materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC which is http://www.sec.gov.

SPECIAL NOTE ON FORWARD LOOKING STATEMENTS

In addition to historical information, this Annual Report on Form 10-K contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the sections entitled “Business”, “Risk Factors”, and “Management’s Discussion and Analysis or Plan of Operation.” Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date thereof. We undertake no obligation to revise or publicly release the results of any revision of these forward-looking statements. Readers should carefully review the risk factors described in this Annual Report and in other documents that we file from time to time with the Securities and Exchange Commission.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other “forward-looking” information. There may be events in the future that we are not able to accurately predict or control. You should be aware that the occurrence of any of the events described in these risk factors and elsewhere in this Annual Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements.

Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this report.

We cannot give any guarantee that these plans, intentions or expectations will be achieved. All forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those factors described in the “Risk Factors” section of this Annual Report.

RISKS ASSOCIATED WITH INVESTING IN OUR COMMON STOCK

There can be no assurance that an established trading market will develop.

Although quotations for our common stock appear on the OTC Bulletin Board, the absence of a large trading volume in the common stock indicates there is no established trading market for the common stock. We can provide no assurance an established trading market will develop in the future or that you will be able to sell all or any portion of the holdings when you choose.

If a trading market for our common stock does develop, trading prices may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

In the event a trading market develops, the market price of our common stock may be based on factors that may not be indicative of future market performance. Consequently, the market price of our common stock may vary greatly. If a market for our common stock develops, there is a significant risk our stock price may fluctuate dramatically in the future in response to any of the following factors, some of which are beyond our control:

·	variations in our quarterly operating results;

·	announcements that our revenue or income/loss levels are below analysts' expectations;

·	general economic slowdowns;

·	changes in market valuations of similar companies;

·	announcements by us or our competitors of significant contracts; or

·	acquisitions, strategic partnerships, joint ventures or capital commitments.

This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than trading of securities listed on a quotation system like Nasdaq or a stock exchange like the American Stock Exchange. Accordingly, our stockholders may have difficulty reselling any of their shares.

There is no assurance our common stock will remain on the OTC Bulletin Board.

In order to maintain the quotation of our common stock on the OTC Bulletin Board, we must remain a reporting company under the Securities Exchange Act of 1934. It is possible our common stock could be removed from the OTC Bulletin Board and be traded on the Pink Sheets. In either venue, an investor may find it difficult to obtain accurate quotations as to the market value of the common stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital.

We are subject to the reporting requirements of the federal securities laws.

We are a public reporting company in the United States and, accordingly, subject to the information and reporting requirements of the Securities Exchange Act of 1934 and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports and other information with the SEC will cause our expenses to be higher than they would be if we were a privately-held company. We are also required to prepare our financial statements in accordance with US GAAP, which further increases our operating expenses.

We have no dividend history and have no intention to pay dividends in the foreseeable future.

We have never paid dividends on or in connection with any class of our common stock and do not intend to pay any dividends to common stockholders for the foreseeable future.

Our officers, directors and principal stockholders own approximately 85% of our outstanding shares of common stock, allowing these stockholders to control matters requiring approval of our stockholders.

All of our officers and directors as a group own, in the aggregate, approximately 61.4% of our outstanding shares of common stock, giving them such concentrated control reduces your ability to influence the direction of the company and may adversely affect the price of our common stock. Control over matters requiring approval by our security holders, including the election of directors.

Trading of our stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.

Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission (see above for a discussion of penny stock rules), FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend their customers buy our common stock, which may limit your ability to buy and sell our stock, which could have an adverse effect on the market price for our shares and on your ability to dispose of your securities.

ITEM 2. DESCRIPTION OF PROPERTY

None.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. Reserved

PART II

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

(a) Market Information. The following chart sets forth the closing high and low sales prices of our common stock for each quarter from January 1, 2007 through December 31, 2009.

	High		Low
2010 First Quarter	$	0.10	$	0.10

2009 by Quarter
January 1 - March 31	$	1.80		1.20
April 1 - June 30	$	1.20		1.20
July 1 - September 30*	$	1.20		.75
October 1 - December 31*	$	1.31		0.45

2008 by Quarter
January 1 - March 31	$	1.80		1.20
April 1 - June 30	$	1.20		1.20
July 1 - September 30*	$	1.20		.75
October 1 - December 31*	$	1.31		0.45

* A reverse split of one for fifteen was effected on August 12, 2008.

1	Our common stock received approval to be quoted on the OTC Bulletin Board on June 21, 2007.

On April 15, 2010, the closing price for shares of our common stock, as reported by the Over-the-Counter Bulletin Board, was $0.10.

No prediction can be made as to the effect, if any, that future sales of shares of our common stock or the availability of our common stock for future sale will have on the market price of our common stock prevailing from time-to-time. The registration of additional shares of our common stock and the sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock.

(b) Record Holders. As of April 9, 2010, there were 123 registered holders of our common stock. As of April 9, 2010, there were 18,340,539 shares of common stock issued and outstanding.

(c) Dividends. We have not paid dividends on our common stock in the past and do not anticipate doing so in the foreseeable future. We currently intend to retain future earnings, if any, to fund the development and growth of our business. In addition, the Loan and Security Agreement with Access Capital requires that we obtain their consent prior to paying any dividends.

(d) Sales of Unregistered Securities

During the period covered by this report we did not issue any other securities that were not registered under the Securities Act of 1933, as amended, except as previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K.

ITEM 6. SELECTED FINANCIAL DATA

We are a “smaller reporting company” as defined by Regulation S-K and as such, are not providing the information contained in this item pursuant to Regulation S-K.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and notes thereto and the other financial information included elsewhere in this report.

Note on Forward Looking Statements

This yearly report on Form 10-K includes and incorporates by reference “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 with respect to our financial condition, results of operations, plans, objectives, future performance and business, which are usually identified by the use of words such as “will,” “may,” “anticipates,” “believes,” “estimates,” “expects,” “projects,” “plans,” “predicts,” “continues,” “intends,” “should,” “would,” or similar expressions. We intend for these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with these safe harbor provisions.

These forward-looking statements reflect our current views and expectations about our plans, strategies and prospects, which are based on the information currently available and on current assumptions.

We cannot give any guarantee that these plans, intentions or expectations will be achieved. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those Risk Factors set forth in our Form 8-K filed with the SEC on September 15, 2008. Listed below and discussed elsewhere in this yearly report are some important risks, uncertainties and contingencies that could cause our actual results, performances or achievements to be materially different from the forward-looking statements included in this yearly report. These risks, uncertainties and contingencies include, but are not limited to, the following:

You should read this document with the understanding that our actual future results may be materially different from what we expect. We may not update these forward-looking statements, even though our situation may change in the future. We qualify all of our forward-looking statements by these cautionary statements.

History

We are a Delaware Corporation incorporated on April 13, 2004 under the name Royaltech Corp. From inception to September 2008, we were a developmental stage company focused on developing and manufacturing clinical diagnostic kits in the People’s Republic of China (“PRC”). From inception to September 2008, we had not manufactured or sold any products, and had limited operating history.

On September 9, 2008, we entered into a share exchange agreement with by Densen Equipment Ltd. (“DEL”), which resulted in a change of control. For acquiring all the assets of DEL, the former shareholders of DEL acquired over 90% of the issued and outstanding shares of our common stock. The former officers and directors of DEL were also appointed to serve as our officers and directors. Following the acquisition of these assets, we changed our corporate name to China Tractor Holdings, Inc. and our business is focused on the research, production, and sales of low-speed vehicles, tractors and construction machinery in the PRC, through our wholly owned subsidiary, Densen Machinery Investment Limited, incorporated in Hong Kong in April 2005 ("Densen Machinery"). For further details regarding the share exchange transaction with DEL, please see our Current Report on Form 8-K, filed with the SEC on September 15, 2008.

Up until December 1, 2009 Our corporate structure is summarized in the chart below and the accompanying summary:

On December 1, 2009, the Company entered into a letter of intent to transfer all shares owned by the Company in Chang Tuo to the Commission. As a result, on December 1, 2009, the Company lost control over Chang Tuo as the Commission has taken over its management and operations. Accordingly, Chang Tuo is reported as a discontinued operation in accordance with ASC 205-20. The shares of Chang Tuo will be sold to the Commission at the price of approximately $9,799,333 (RMB67,000,000). The transfer of the shares is expected to be completed on or about May 1, 2010.

After the completion of the transaction, the Company will have no substantial business operations until it enters a new industry through merger or acquires other operational entities. As a direct result of the incident, the Company has experienced significant operating losses for the year ended December 31, 2009. The discontinued operation and the ensuing operating losses raises substantial doubt as to the Company's ability to continue as a going concern. Management is attempting to evaluate other potential industries to enter.

Overview

At the present time, our business is solely comprised of the business of our wholly-owned subsidiary, Densen Machinery. Densen Machinery invested $15,180,000 to establish Changchun Densen Agricultural Machinery Equipment Co., Ltd. (“Changchun Densen”) on September 2005. Changchun Densen is engaged in the research and development and production of low-speed vehicles, tractors and construction machinery. In November 2007, Changchun Densen and SOASACC entered into a joint venture to establish Chang Tuo Chang Tuo to put itself in a better position in the marketplace. As of September 30, 2008, the total registered capital of Chang Tuo was RMB200,000,000 ($29.3 million) and was engaged in the research, development, production, and sale of low-speed vehicles, tractors and construction machineries, and sales of agricultural machineries and accessories.

Densen Machinery is a recipient of subsidies and tax incentives from the Chinese government as part of its plan to promote the development of agriculture in the northeast regions of China. The major markets for our products are located mainly in the provinces of Jilin, Liaoning, Heilongjiang and Shandong. For the changing of our business operation strategy, ownership in Chang Tuo will be wholly transferred in a nearly future, we’ve reported Chang Tuo as discontinued operation in our financial statement at the year ended December 31, 2009.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States (“US GAAP”) requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments: allowance for doubtful accounts; income taxes; and asset impairment.

Revenue Recognition

In accordance with US GAAP, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collection of the resulting receivable is reasonably assured.

Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collect ability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as advances from customers. Please see Note 1 of our financial statements.

Allowance for doubtful accounts

We maintain an allowance for doubtful accounts to reduce trade receivable amounts to their estimated realizable value. A judgment is required when we assess the realization of accounts receivables, including assessing the probability of collection and the current credit-worthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision for doubtful accounts could be required.. In estimating the provision for doubtful accounts, we consider:

(i)	the aging of the accounts receivable;

(ii)	trends within and ratios involving the age of the accounts receivable;

(iii)

the customer mix in each of the aging categories and the nature of the receivable;

(iv)	our historical provision for doubtful accounts;

(v)	the credit worthiness of the customer;

(vi)	the economic conditions of the customer’s industry as well as general economic conditions, among other factors.

Income taxes

We account for income taxes in accordance with ASC 740 “Income Taxes”, previously SFAS No. 109, which prescribes the use of the liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we establish a valuation allowance. To the extent we establish a valuation allowance, or increase or decrease this allowance in a period, we increase or decrease our income tax provision in our statement of operations. If any of our estimates of our prior period taxable income or loss prove to be incorrect, material differences could impact the amount and timing of income tax benefits or payments for any period. In addition, as a result of the significant change in the Company’s ownership, the Company's future use of its existing net operating losses may be limited.

We are subject to numerous domestic and foreign tax jurisdictions and tax agreements and treaties among the various taxing authorities. Our operations in these jurisdictions are taxed on various bases: income before taxes, deemed profits and withholding taxes based on revenue. The calculation of our tax liabilities involves consideration of uncertainties in the application and interpretation of complex tax regulations in a multitude of jurisdictions across our global operations.

We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. The tax liabilities are reflected net of realized tax loss carry forwards. We adjust these reserves upon specific events; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is different from our current estimate of the tax liabilities. If our estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when the contingency has been resolved and the liabilities are no longer necessary.

Changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of income taxes that we provide during any given year.

Asset Impairment

We periodically evaluate the carrying value of other long-lived assets, including, but not limited to, property and equipment and intangible assets, when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flows from such asset is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Significant estimates are utilized to calculate expected future cash flows utilized in impairment analyses. We also utilize judgment to determine other factors within fair value analyses, including the applicable discount rate.

Results of Operations for the years ended December 31, 2009 and 2008

CHINA TRACTOR HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE GAINS/LOSS

YEARS ENDED DECEMBER 31, 2009 AND 2008

		2009			2008			Change
								Amount			%

Net revenue		$	18,991		$	191,191		$	(172,200	)		(90	%)
Cost of sales			(159,058	)		(70,313	)		(88,745	)		126	%

Gross profit/(loss)			(140,067	)		120,878			(260,945	)		(216	%)
Operating expenses:
	Selling and general and administrative expenses		(349,539	)		(211,149	)		(138,390	)		66	%
	Impairment loss of assets					(2,543	)		2,543			(100	%)
(Loss) from operations			(489,606	)		(92,814	)		(396,792	)		428	%
Other income			966			117,697			(116,731	)		(99	%)

Income/(loss) before income taxes			(488,640	)		24,883			(513,523	)		(2,064	%)
Discontinued operations, net of tax			(3,328,549	)		1,481,203			(4,809,752	)		(325	%)

Net income/(loss)			(3,817,189	)		1,506,086			(5,323,275	)		(353	%)
Net income/(loss) attributable to noncontrolling interest			114,516			(800,299	)		914,815			(114	%)

Net Income/(loss) attributable to China Tractor Holdings, Inc.			(3,702,673	)		705,787			(4,408,460	)		(625	%)
Other comprehensive income/(loss)			39,701			943,830			(904,129	)		(96	%)

Comprehensive income/(loss)			(3,662,972	)		1,649,617			(5,312,589	)		(322	%)

Comprehensive (loss) attributable to noncontrolling interest			(1,203	)		(77,369	)		(76,166	)		(98	%)

Net profit/(loss) attributable to stockholders		$	(3,664,175	)	$	1,572,248			(5,236,423	)		(342	%)

Revenue

Revenue for the year ended December 31, 2009 was $18,991, compared to $191,191 for 2008, a decrease of $172,200 or 90%. The decrease mainly resulted from Densen transfering its operation to Chang Tuo in 2008, and the decline in its business operations in 2009. In 2007, we established Chang Tuo with SOASACC and transferred all business operations to Chang Tuo in 2008, resulting in almost all finished tractors and raw materials being sold by Chang Tuo in 2009. In 2009, Densen primarily played a management role.

Cost of sales

Cost of sales for the year ended December 31, 2009 increased to $159,058 from $70,313 for 2008, an increase of $88,745 or 126%. The increase is resulted from the impairment loss of raw materials. The cost of sales for the year 2009 included $16,939 from sales of raw materials and $142,119 from impairment loss of inventory.

Gross profit (loss)

The gross loss for 2009 was $140,067, a decrease of $260,945 or 216% compared to gross profit of $120,878 for 2008. The decrease is due to no business operation and all revenue was resulted from the sales of out-of-date raw materials in 2009. The cost of sales for year 2009 included $16,939 from sales of raw materials and $142,119 from impairment loss of inventory.

Selling, general and administrative expenses

Selling, general and administrative expenses increased to $349,538 in 2009 from $211,149 in 2008, an increase of $138,389 or 66%. The increase generally resulted from the increase of agency fee, which is $207,139 and $52,562 respectively for the years ended December 31, 2009 and 2008. Agency fee mainly includes audit fees.

Provision for impairment of assets

The provision for impairment of assets in 2008 represents the provision for accounts receivable of $2,543.

Other income/(expenses)-net

Other income-net for 2009 was $966, compared to $117,697 for 2008. Other income for 2009 mainly consisted of subsidies from governments for international business development of $2,924 while other expenses mainly consisted of interest. Other income for the year ended December 31, 2009 mainly consisted of subsidies from governments for agricultural machinery manufacturers of $71,816.

Non-controlling interest

Non-controlling interest resulted in loss of $113,313 and gain of $877,668 for 2009 and 2008 respectively, representing the 3% minority interest of Changchun Tractor in Densen.

Other comprehensive income

Other comprehensive loss in 2009 was $39,701 compared to comprehensive income of $943,830 in 2008. It represents the foreign currency translation income resulted from appreciation of RMB against the US dollar.

Net income/(loss)

Net loss in the year ended December 31, 2009 was $3,664,175, compared to net income of $1,572,248 in 2008. This mainly resulted from discontinued operations of Chang Tuo. Subsidy income in Chang Tuo for the years ended December 31, 2009 and 2008 was $5,847 and $871,845 respectively. Interest expense in Chang Tuo for the years ended December 31, 2009 and 2008 was $741,136 and $11,274 respectively. In addition, loss on disposal of operations of Chang Tuo was $3,264,057 in 2009.

Liquidity and Capital Resources

China Tractor generally finances its operations from short-term loans from domestic banks. As of December 31, 2009, we had cash and cash equivalents of $15,967 which represented an increase of $15,549 from $418 as of December 31, 2008.

Operating Activities

The net cash provided in operating activities in 2009 was $1,154,073 compared to net cash used in operating activities was $1,641,809 in 2008. The net cash inflow from operating activities in 2009 was mainly due to the decrease in receivable from sale of discontinued operation of $1,030,412.

Investing Activities

Net cash used for investing activities amounted to $5,776,160 in 2009, primarily due to increase in payments for construction in progress.

Financing Activities

Net cash provided by financing activities was $2,658,891 in the year ended December 31, 2009 which included an inflow by short-term loans; a net inflow from related party borrowings of $612,383 and a net inflow from third party borrowings of $1,315,613.

Going forward, over the next 12 months, China Tractor intends to continue to rely on short-term loans to fund its operational cash needs.

Inflation

In the opinion of management, inflation has not had a material effect on the Company's financial condition or results of its operations.

Trends and uncertainties

The consolidated financial statements of the Company have been prepared in accordance with US GAAP assuming the Company will continue as a going concern. Under that assumption, it is expected that assets will be realized and liabilities will be satisfied in the normal course of business. On December 1, 2009, the Company signed a letter of intent to transfer all shares owned by the Company in Chang Tuo to SOASACC. After the completion of the transaction, the Company will have no substantial business operations until it enters a new industry through merger or acquisition of other operating entities. As a direct result of this transfer of ownership, the Company has experienced significant operating losses for the year ended December 31, 2009. The discontinued operation and the ensuing operating losses raise substantial doubt as to the Company's ability to continue as a going concern. Management is attempting to evaluate other potential industries to enter.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors at December 31, 2009 or 2008.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a “smaller reporting company” as defined by Regulation S-K and as such, are not providing the information contained in this item pursuant to Regulation S-K.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Consolidated Financial Statements and Notes thereto and the report of Goldman Parks Kurland Mohidin LLP, our independent registered public accounting firm, are set forth on pages F-1 through F-22 of this Report.

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

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of controls and procedures.

As of the end of the period covered by this Annual Report, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer (“the Certifying Officers”), conducted evaluations of the Company’s disclosure controls and procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosures. Based on this evaluation, the Certifying Officers have concluded that the Company’s disclosure controls and procedures were not effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company’s disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder due to material weaknesses in its internal control over financial reported as described below. In addition, disclosure controls and procedures were not effective because management requires a better understanding of its disclosure obligations under the Exchange Act.

Management’s Report on Internal Controls Over Financial Reporting.

Our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)

Internal control over financial reporting is promulgated under the Exchange Act as a process designed by, or under the supervision of, our CEO and CFO and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition or disposition of our assets that could have a material effect on the financial statements.

Readers are cautioned that internal control over financial reporting, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Therefore, even effective internal control over financial reporting can only provide reasonable assurance with respect to the financial statement preparation and presentation.

Our management, under the supervision and with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures and internal controls over financial reporting as defined in Exchange Act Rules 13a-15(e) and (f) and 15d-15(e) and (f) as of the end of the period covered by this Report based upon the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on such evaluation, our management has made an assessment that our internal control over financial reporting is not effective as of December 31, 2009 for the following reasons:

a.	Our internal accounting staff do not have sufficient U.S. GAAP knowledge and experiences

b.	Our senior financial staff lacks knowledge of internal control obligations, including Section 404

c.	The audit committee oversight was not effective in 2009.

We plan to take the following steps to remediate the significant deficiencies in internal control over financial reporting that are identified above.

a. Hire a senior accounting staff who has experiences in U.S. GAAP and SOX 404 to oversee the financial reporting process in order to ensure the Company’s compliance with U.S. GAAP and security laws.

b. Provide training to accounting staff on U.S. GAAP

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

Changes in internal control over financial reporting.

No significant changes were made in our internal control over financial reporting during the Company’s fourth quarter of 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The following table sets forth the names and ages of our current directors and executive officers, the principal offices and positions with us held by each person and the date such person became a director or executive officer. Each year the stockholders elect the members of our Board of Directors

The following sets forth the name and position of each of our current executive officers and directors.

Name	Age	Title
Lau San	58	CEO, Chairman
Liu Jingdong	33	President, Director
Chen Guocheng	46	CFO, Director
Changfu Wang	68	Independent Director
Dr. Baoyun Qiao	44	Independent Director

LAU San Chairman of the Board of Directors and Chief Executive Officer. Mr. Lau became our Chairman and Chief Executive Officer on September 9, 2008, upon consummation of our share exchange with Densen. Mr. Lau is the founder of Densen and Changchun Densen, and served as Chairman of these two companies since their inception in 2005. From 1992 to 2005, Mr. Lau was mainly engaged in real estate development through Densen Investment Co., Ltd., which was established in December 1991. In 2003, Mr. Lau was elected as member of the Chinese People's Political Consultative Conference of Heilongjiang Province Vice President of the Overseas Friendship Association of Heilongjiang Province and Vice President of the Federation of Chinese Businessmen. Mr. Lau graduated from University of Heilongjiang, with a Masters degree in Law.

Jingdong LIU President and Director. Mr. Liu became President and Director on September 9, 2008, upon consummation of our share exchange with Densen. Mr. Liu has been the President of Changchun Densen since its inception in 2005, and is in charge of purchasing and sales management. Mr. Liu graduated with a Bachelor of Economic Management from the North York University of Canada in 2004. Mr. Jingdong Liu is the son of Mr. Lau San.

Guocheng CHEN Chief Financial Officer and Director. Mr. Chen became a Director and our Chief Financial Officer on September 9, 2008, upon consummation of our share exchange with Densen. Mr. Chen has been the Chief Financial Officer of Changchun Densen since October 2005. He has 25 years experience in corporate accounting and finance. From 2001 to October 2005, he served as the Chief Financial Officer of Changchun Dahe Company, a Hong Kong listed company. From 1984 to 2001, Mr. Chen worked for Shulan Mining Bureau, and held the positions of Financial Controller, Chief Financial Officer, and Director of Operations. Mr. Chen graduated with a Bachelor of Industrial Accounting from Jilin Economic Trade College.

Changfu WANG Independent Director. Mr. Wang became our Independent Director on September 9, 2008, upon consummation of our share exchange with Densen. Before joining us, Mr. Wang was a top provincial official. He served as Vice Secretary General of Heilongjiang provincial government from March 2003 to March 2008. During the period of 1965 to 2003, Mr. Wang was engaged in forestry resource management for Heilongjiang provincial government and served as Director of Bureau for Main Office of Heilongjiang Forestry Industry. Mr. Wang graduated with a Bachelor of Forestry Industry from Northeast Forestry Industry College.

Dr. Baoyun QIAO Independent Director. Dr. Qiao became our Independent Director on September 9, 2008 upon consummation of our share exchange with Densen. He is a Professor of Economics and Dean at the China Academy of Public Finance and Policy, at the Central University of Finance and Economics since July, 2008. Dr. Qiao graduated from Georgia State University, where he earned his Ph.D. in economics. He has been a senior research associate of Georgia State University since January, 2003. He has published numerous papers and his research interest is in the area of finance, public economics, development economics and macroeconomics as well as China’s economy. Professor Qiao has served as the Vice President of Chinese Economist Society since 2007.

Code of Conduct and Ethics

Our Board of Directors adopted a Code of Business Conduct and Ethics. As adopted, our Code of Business Conduct and Ethics sets forth written standards designed to deter wrongdoing and to promote:

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

full, fair, accurate, timely and understandable disclosure in reports and documents we file with, or submit to, the SEC and in other public communications made by us;

compliance with applicable governmental laws, rules and regulations;

the prompt internal reporting of violations of the code to an appropriate person or persons identified in the Code; and

accountability for adherence to the Code.

A copy of our Code of Business Conduct and Ethics has been filed with the SEC as an exhibit to this report. The Code of Business Conduct and Ethics is available at our website at www.densen.com.cn. We will provide a copy, without charge, to any person desiring a copy of the Code of Business Conduct and Ethics, by written request to Kalun Industrial Zone, Jiutai Economic Development Zone, Changchun City, Jilin Province, People’s Republic of China, Attention: CTHL Corporate Secretary.

Director Independence

The Board has reviewed each of the directors’ relationships with the Company in conjunction with the definitions set out in NASDAQ Rule 4200(a)(15) and has affirmatively determined that two of our directors, Changfu Wang and Baoyun Qiao, are independent of management and free of any relationship that would interfere with the independent judgment as members of the Board of Directors or any committee thereof.

Committees of the Board of Directors

Our Board of Directors in its entirety acts as the audit committee, nominating committee and compensation committee. Our Board of Directors may create an audit committee, nominating committee and compensation committee in the future. Our Board of Directors intends to adopt charters for these committees at such time as the committee is created.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities (“ten percent stockholders”) to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and ten percent stockholders are charged by the SEC regulations to furnish us with copies of all Section 16(a) forms they file.

Based solely upon a review of copies of Section 16(a) reports and representations received by us from reporting persons, and without conducting any independent investigation of our own, in fiscal year 2009, our officers, directors and ten percent stockholders are in compliance with Section 16(a), except that the Form 3s filed by each of our officers and directors, Lau San, Liu Jingdong, Chen Guochen, Wang Changfu, and Qiao Baoyun were late.

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth the compensation paid by the Company for services rendered for the past two completed fiscal years to the principal executive officer at the end of the year ended December 31, 2008. We did not have any officer whose cash compensation exceeded $100,000. No equity awards were given to our officers and directors.

SUMMARY COMPENSATION TABLE

Name and Principal

Position

Year

Salary

($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

($)

All Other

Compensation

($)

Total

($)

Lau San

2009

Nil

CEO &

Chairman(1)

2008

Nil

(1) Lau San became our CEO on September 9, 2008.

Following the share exchange and reorganization effected on September 9, 2008, we have decided, and our Chief Executive Officer has agreed that no compensation will be paid in 2008 and 2009.

Director Compensation

Directors of our company may be paid for their expenses incurred in attending each meeting of the directors. In addition to expenses, directors may be paid a sum for attending each meeting of the directors or may receive a stated salary as director. No payment precludes any director from serving our company in any other capacity and being compensated for such service. During the fiscal year ended December 31, 2009, our compensation to our directors is set forth in the following table.

DIRECTOR COMPENSATION


Name (a)	Fees Earned or Paid in Cash ($)		Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)		Non-Qualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Lau San		0	0	0		0	0	0		0
Liu Jingdong		0	0	0		0	0	0		0
Chen Guochen		0	0	0		0	0	0		0
Wang Changfu		0	0	0		0	0	0		0
Qiao Baoyun		0	0	0		0	0	0		0

Following the share exchange and reorganization effected on September 9, 2008, we have decided, and our Board of Directors have agreed that no compensation will be paid to them in 2008 and 2009.

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

The table sets forth below certain information regarding the beneficial ownership of our common stock, our only class of outstanding voting securities, as of April 6, 2009, based on 18,340,539 aggregate shares of common stock outstanding as of such date, by: (i) each person who is known by us to own beneficially more than 5% of our outstanding common stock with the address of each such person, (ii) each of our present directors and officers, and (iii) all officers and directors as a group.

Unless otherwise indicated, we believe all persons named in the table have sole voting and investment power with respect to all common shares beneficially owned by them.

Name and Address of Beneficial Owner	Title, if any	Amount and Nature of Beneficial Ownership		Percentage of Common Stock
Lau Lau San	CEO & Chairman		10,000,000		54.6	%
Liu Jingdong	President, Director		1,000,000		5.5	%
Chen Guocheng	CFO, Director		200,000		1.1
Changfu Wang	Independent Director		50,000		*
Dr. Baoyun Qiao	Independent Director		30,000		*

All of our officers and directors as a group (5 individuals)			11,280,000		61.4	%

*less than 1%

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

As of December 31, 2009 and 2008, due from related parties was summarized as follows:

	2009		2008

Lau San	$	284,553	$	-
Mudanjiang Binjiang Garden City		-		1,900,128

Total due from related parties	$	284,553	$	1,900,128

A director of the Company, Mr. Lau San, borrowed money from the Company. These amounts are interest-free, unsecured and repayable on demand.

Due to related parties

As of December 31, 2009 and 2008, due to related parties was summarized as follows:

	2009		2008

Lau San	$	-	$	1,005,084
Changchun Junming Machinery Co., Ltd. (“CJMCL”)		149,105		148,734
Shenzhen Junsheng Property Management Co., Ltd. (“SJPMCL”)		14,626		14,590
Zhongji North Machinery Co., Ltd. (“Zhongji North”)		409,524		413,666

Total due to related parties	$	573,255	$	1,582,074

The Company borrowed from CJMCL, which is controlled by Mr. Lau San, a director of the Company for use in operations. The loan bore no interest and the principal is due upon demand.

The Company borrowed from SJPMCL, which is controlled by Ms. Yang, Fengyan, Mr. Lau San’s wife, for use in operations. The loan bore no interest and the principal is due upon demand.

The Company, as noncontrolling shareholder of Zhongji North, borrowed from Zhongji North, to fund the Company’s operations. These amounts are interest-free, unsecured and the principal is due upon demand.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following table sets forth fees billed to us by our independent registered public accounting firms during the fiscal years ended December 31, 2009 and December 31, 2008 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as audit fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.

	December 31, 2009		December 31, 2008
Audit Fees	$	90,000	$	90,000
Audit Related Fees	$	-	$	-
Tax Fees	$	-	$	-
All Other Fees	$	-	$	-
TOTAL	$	90,000	$	90,000

Audit Committee Policies

The Board of Directors is solely responsible for the approval in advance of all audit and permitted non-audit services to be provided by the independent auditors (including the fees and other terms thereof), subject to the de minimus exceptions for non-audit services provided by Section 10A(i)(1)(B) of the Exchange Act, which services are subsequently approved by the Board of Directors prior to the completion of the audit. None of the fees listed above are for services rendered pursuant to such de minimus exceptions.

Part IV

ITEM 15. EXHIBITS

Item Number		Description
(3)		Articles of Incorporation and By-laws

3.1		Certificate of Incorporation (incorporated by reference from our Registration Statement on Form SB-2, filed on February 13, 2006)

3.2		Certificate of Amendment filed with the Delaware Secretary of State on July 31, 2008 effective August 12, 2008 (incorporated by reference from our Current Report on Form 8-K, filed on August 12, 2008)

3.3		Bylaws (incorporated by reference from our Registration Statement on Form SB-2 filed on February 13, 2006)

(10)		Material Contracts

10.1		Licensing Agreement dated October 2004 between Royaltech Corp. and Mr. Kang Zhang (incorporated by reference from our Registration Statement on Form SB-2 filed on February 13, 2006)

10.2		Investment Agreement dated January 10, 2006 between Royaltech Corp. and Aventech Capital Inc. for 350,000 shares (incorporated by reference from our Registration Statement on Form SB-2 filed on February 13, 2006)

10.3		Investment Agreement dated January 10, 2006 between Royaltech Corp. and Alliance PKU Management Consultants Ltd for 350,000 shares (incorporated by reference from our Registration Statement on Form SB-2 filed on February 13, 2006)

10.4		Investment Agreement dated January 10, 2006 between Royaltech Corp. and Hong Sheng for 30,000 shares (incorporated by reference from our Registration Statement on Form SB-2 filed on February 13, 2006)

10.5		Form of Subscription Agreement (incorporated by reference from our Registration Statement on Form SB-2 filed on February 13, 2006)

10.6		Pro-Forma Invoice dated December 22, 2004 from China Westerprises Canada Holdings to Royaltech Corp. (incorporated by reference from our Registration Statement on Form SB-2 filed on February 13, 2006)

10.7		Pro-Forma Invoice dated August 11, 2005 from China Westerprises Canada Holdings to Royaltech Corp. (incorporated by reference from our Registration Statement on Form SB- 2 filed on February 13, 2006)

10.8		Share Exchange Agreement, entered into on September 8, 2008, by and among Royaltech, Densen, and the shareholders of all the outstanding shares of Densen. (incorporated by reference from our Current Report on Form 8-K, filed on September 15, 2008)

10.9		Stock Purchase Agreement, entered into on September 8, 2008, by and between Royaltech and FirsTrust Group Inc. (incorporated by reference from our Current Report on Form 8-K, filed on September 15, 2008)

(21)		Subsidiaries of the registrant

21.1*		List of Subsidiaries

(31)		Section 302 Certification

31.1*		Certification of Registrant’s Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.

31.2*		Certification of Registrant’s Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.

(32)		Section 906 Certification

32.1*		Certification of Registrant’s Chief Executive Officer pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

32.2*		Certification of Registrant’s Chief Financial Officer pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350

* filed herewith

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders of China Tractor Holdings, Inc.

We have audited the consolidated statements of financial position of China Tractor Holdings, Inc. and Subsidiaries (the “Company”) as of December 31, 2009 and 2008 and the related consolidated statements of operations and other comprehensive income (loss), stockholders’ equity and cash flows for each of the years ended December 31, 2009 and 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred a loss of $3,702,673, including loss from continuing operations of $488,640, that raises substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Goldman Parks Kurland Mohidin LLP

Goldman Parks Kurland Mohidin LLP

Encino, California

April 15, 2010

F-1

FINANCIAL INFORMATION

CHINA TRACTOR HOLDINGS, INC.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS OF DECEMBER 31, 2009 AND 2008

	2009			2008

ASSETS
Current assets
Cash and cash equivalents	$	15,967		$	1,979,153
Accounts receivable		-			2,275,976
Other receivables, net of allowance for doubtful accounts		53,053			470,632
Advance to suppliers		-			554,376
Inventories, net		-			8,960,235
Prepaid expenses		-			8,754
Taxes recoverable		57,952			663,836
Assets held for sale		4,729,298			-
Due from related parties		284,553			1,900,128
Total current assets		5,140,823			16,813,090

Property, plant and equipment, net		1,981			21,832,068
Construction in progress		-			600,398
Intangible assets		484,610			553,465
Land use right		700,267			3,071,373
Land use right deposit		-			1,038,174
Long-term equity investments		392,189			1,877,836
Receivable from sale of discontinued operation		9,799,333			-
Deferred tax asssets		-			30,394

TOTAL ASSETS	$	16,519,203		$	45,816,798

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Short-term loans	$	731,294		$	4,376,878
Accounts payable		459,026			6,628,498
Advance from customers		11,954			282,235
Salary payable		26,745			116,823
Accrued expenses and other payables		380,408			718,450
Borrowing from third parties		1,316,328			-
Due to related parties		573,255			1,582,074

Total current liabilities		3,499,010			13,704,958

STOCKHOLDERS’ EQUITY
Comon shares, authorized, issued and outstanding; 18,310,539 shares as of December 31, 2009 and 2008, par value $0.001 per share		1,831			1,831
Additional paid-in capital		15,183,276			15,183,276
Accumulated other comprehensive income		2,540,091			2,501,593
Accumulated deficit		(5,119,841	)		(1,417,168	)

TOTAL CHINA TRACTOR HOLDINGS, INC. SHAREHOLDERS' EQUITY		12,605,357			16,269,532
Noncontrolling Interest		414,836			15,842,308
TOTAL STOCKHOLDERS’ EQUITY		13,020,193			32,111,840

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	16,519,203		$	45,816,798

The accompanying notes are an integral part of these consolidated financial statements.

F-2

CHINA TRACTOR HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

YEARS ENDED DECEMBER 31, 2009 AND 2008

	2009			2008

Net revenue	$	18,991		$	191,191
Cost of sales		(159,058	)		(70,313	)

Gross profit/(loss)		(140,067	)		120,878
Operating expenses:
Sales and marketing expenses		(12,435	)		(631	)
General and administrative expenses		(337,104	)		(210,518	)
Provision for impairment of assets		-			(2,543	)

Profit/(Loss) from operations		(489,606	)		(92,814	)
Equity in earnings in investee		-			26,065
Government grant income		2,924			71,816
Other income		95			20,083
Interest expense		(1,930	)		-
Other expenses		(123	)		(267	)

Income/(loss) before income taxes		(488,640	)		24,883

Income tax expenses		-			-

Income/(loss) from continuing operations		(488,640	)		24,883
Discontinued operations, net of income taxes (including loss on disposal of $3,264,057 in 2009)		(3,328,549	)		1,481,203

Net income/(loss)		(3,817,189	)		1,506,086

Less: Net income attributable to noncontrolling interest		114,516			(800,299	)

Net Income/(loss) attributable to China Tractor Holdings, Inc.		(3,702,673	)		705,787

Other comprehensive income/(loss)		39,701			943,830

Comprehensive income/(loss)		(3,662,972	)		1,649,617

Comprehensive (loss) attributable to noncontrolling interest		(1,203	)		(77,369	)

Comprehensive income/(loss) attributable to China Tractor Holdings, Inc.	$	(3,664,175	)	$	1,572,248

Basic and diluted income/(loss) per commom share:
Basic	$	(0.20	)	$	0.04
Diluted		(0.20	)		0.04

Weighted average common shares outstanding:
Basic		18,310,539			18,310,539
Diluted		18,310,539			18,310,539

The accompanying notes are an integral part of these consolidated financial statements.

F-3

CHINA TRACTOR HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2009 AND 2008

	2009			2008
Cash flows from operating activities:
Net income/loss	$	(3,817,189	)	$	1,506,086
Adjustments to reconcile net income/(loss) to cash provided (used) by operating activities:
Loss from discontinued operations		3,328,549			-
Depreciation and amortization		67,557			766,377
Provision for doubtful receivables		-			80,981
Investment income		-			(125,113	)
Deferred tax assets		-			(29,922	)
Changes in operating assets and liabilities:
Accounts receivable		-			(2,240,654	)
Inventories		161,602			(7,523,917	)
Advances to suppliers		-			527,885
Other receivables		96,370			(310,173	)
Prepaid expenses		-			(5,425	)
Due from related party		1,030,412			-
Accounts payable		(6,128	)		5,535,605
Advance from customers		-			235,935
Accrued expenses and other current liabilities		292,900			(59,474	)
Cash provided by operating activities		1,154,073			(1,641,809	)

Cash flows from investing activities:
Cash paid for long- term investment		-			(545,801	)
Purchase of property and equipment and other long-term assets		(3,797,425	)		(1,927,085	)
Cash decrease due to disposal of subsidiaries		(1,978,735	)		-
Cash increase due to acquisition of subsidiaries		-			207
Net cash used for investing activities		(5,776,160	)		(2,472,679	)

Cash flows from financing activities:
Proceeds from short-term loan		803,985			4,308,952
Proceeds from (payments to) related parties - net		612,383			(1,097,430	)
Proceeds from third party borrowings		1,315,613			-
Repayments of short-term loan		(73,090	)		-
Net cash provided by financing activities		2,658,891			3,211,522

Effect of exchange rate changes on cash		10			167,880

Net increase (decrease) in cash and cash equivalents		(1,963,186	)		(735,086	)

Cash and cash equivalents, beginning balance		1,979,153			2,714,239

Cash and cash equivalents, ending balance	$	15,967		$	1,979,153

Supplemental cash flow data:
Income tax paid		-			-
Interest paid		-			-

The accompanying notes are an integral part of these consolidated financial statements.

F-4

CHINA TRACTOR HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 2008 AND 2009

	Shares		Common Stock		Additional Paid-in Capital		Other comprehensive income (loss)		Accumulated deficit			Total
Balance December 31, 2007		16,720,354		1,672		15,183,228	$	1,557,763	$	(2,122,955	)	$	14,619,708

Recapitalization of Densen on reverse acquisition		1,590,185		159		48							207
Foreign Currency Translation								943,830		-			943,830
Net income								-		705,787			705,787

Balance December 31, 2008		18,310,539		1,831		15,183,276	$	2,501,593	$	(1,417,168	)	$	16,269,532

Foreign Currency Translation				-				38,498		-			38,498
Net income				-				-		(3,702,673	)		(3,702,673	)

Balance December 31, 2009	$	18,310,539	$	1,831	$	15,183,276	$	2,540,091	$	(5,119,841	)	$	12,605,357

The accompanying notes are an integral part of these consolidated financial statements

F-5

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 1 - ORGANIZATION AND PROPOSED BUSINESS OPERATIONS

China Tractor Holdings, INC. ("China Tractor") was incorporated in April 2005 in Hong Kong. In June 2005, China Tractor signed an agreement with Densen Investment Limited (“Densen Investment”) to obtain assets from Densen Investment. China Tractor invested $15,180,000 to establish Changchun Densen Agriculture Machinery Manufacturing Co., Ltd. (“Changchun Densen”) on September 27, 2005. Changchun Densen is engaged in the R&D and production of low-speed vehicles, tractors and construction machinery. According to the revised articles of association dated January 9, 2007, Changchun Tractor (Group) Co., Ltd. (“Changchun Tractor”) invested a trademark of $471,445 to Changchun Densen. After this investment, Changchun Tractor obtained 3% equity in Changchun Densen. On April 23, 2007, the company name of Changchun Densen was changed to Changchun Densen Changtuo Agriculture Machinery Manufacturing Co., Ltd. Based on an agreement signed on November 20, 2007, Changchun Densen and State-owned Assets Supervision and Administration Commission of Changchun (“SOASACC”) jointly invested to establish Chang Tuo Agricultural Machinery Equipment Group Co., Ltd. (“Chang Tuo”). The total registered capital of Chang Tuo is RMB200,000,000 ($29.3 million) which includes 50% (RMB100,000,000) from SOASACC, 47.5% (RMB95,000,000) from Changchun Densen and 2.5% (RMB5,000,000) from the operator, Mr. Yu Han. Chang Tuo is engaged in the R&D and production of low-speed vehicles, tractors and construction machineries, and sales of agricultural machinery and accessories.

Pursuant to the Share Exchange Agreement by and among Royaltech Corp. (“Royaltech”), a Delaware corporation, China Tractor, and the shareholders of all the outstanding shares of Densen Machinery, on September 9, 2008 (the “Closing Date”), Royaltech issued 16,720,354 shares of its common stock for all the issued and outstanding shares of China Tractor. The former shareholders of China Tractor acquired 91.3% of the issued and outstanding shares of Royaltech. This transaction resulted in a change in control of Royaltech to the former shareholders of China Tractor. Immediately after the closing of the Share Exchange and the Stock Purchase Agreements, Royaltech had 18,310,539 shares of Common Stock issued and outstanding. In connection with the change in control, Mr. Lau San became Chairman of the Board of Directors and Chief Executive Officer, Mr. Lau Jingdong became President, and Mr. Chen Guocheng became Chief Financial Officer of Royaltech. This transaction was accounted for as a recapitalization of China Tractor and not as a business combination. Accordingly, no pro forma information is presented. The historical financial statements are those of China Tractor.

The share exchange agreement also states Royaltech’s existing shareholders assumed all the liabilities of Royaltech at the date of merger.

On September 19, 2008, Royaltech amended Article I of its Certificate of Incorporation to change its corporate name from “Royaltech Corp.) to “China Tractor Holdings, Inc.” (“China Tractor”, or “the Company”, or “We”, or “us”)

F-6

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

On December 1, 2009, the Company entered into a stock transfer agreement to transfer all shares owned in Chang Tuo to SOASACC. Such agreement will be implemented in the near future. In the meantime, as of December 31, 2009, the statements of operations of the Company report the results of operations of Chang Tuo as discontinued operations.

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of China Tractor, its 100%-owned subsidiary, Densen machinery, its 97%-owned subsidiary Changchun Densen for the year ended December 31, 2009 and 2008. All significant inter-company accounts and transactions were eliminated in consolidation.

Basis of Presentation

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), assuming the Company will continue as a going concern. Under that assumption, it is expected assets will be realized and liabilities will be satisfied in the normal course of business. On December 1, 2009, the Company signed a letter of intent to transfer all shares owned by the Company in Chang Tuo to SOASACC. As discussed in Note 19 to the financial statements, Chang Tuo was reported as discontinued operation as the Company lost its control before the end of 2009. After the completion of the transaction, the Company will have no substantial business operations until it enters a new industry through merger or acquires other operational entities. As a direct result of the incident, the Company has experienced significant operating losses for the year ended December 31, 2009. The discontinued operation and the ensuing operating losses raises substantial doubt as to the Company's ability to continue as a going concern. Management is attempting to evaluate other potential industries to enter.

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.

F-7

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Risks and Uncertainties

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.

Comprehensive Income

The Company adopted the provisions of ASC 220 “Reporting Comprehensive Income”, previously SFAS No. 130, establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements.

ASC 220 defines comprehensive income is comprised of net income and all changes to the statements of stockholders' equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders, including adjustments to minimum pension liabilities, accumulated foreign currency translation, and unrealized gains or losses on marketable securities.

Foreign Currency Transactions

The reporting currency of the Company is the US $. The functional currency of PRC subsidiaries is RMB. The financial statements of PRC subsidiaries are translated to United States dollars using quarter-end exchange rates as to assets and liabilities and average exchange rates as to revenues, expenses and cash flows. Capital accounts are translated at their historical exchange rates when the capital transaction occurred. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

The balance sheet amounts with the exception of equity at December 31, 2009 were translated 6.8372 RMB to $1.00 compared to 6.8542 RMB at December 31, 2008. The equity accounts were stated at their historical exchange rate. The average translation rates applied to the income and cash flow statement amounts for the years ended December 31, 2009 and 2008 were 6.84092 RMB and 6.96225 RMB to $1.00 respectively.

Translations adjustments resulting from this process are included in accumulated other comprehensive loss in the consolidated statement of stockholders’ equity and were $2,540,091 and $2,501,593 as of December 31, 2009 and 2008, respectively.

F-8

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Cash and Cash Equivalents

For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. The Company maintains cash with various banks and trust companies located in China. Cash accounts are not insured or otherwise protected. Should any bank or trust company holding cash deposits become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose the cash on deposit with that particular bank or trust company.

Accounts Receivable

The Company’s policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Accounts are written off against the allowance when it becomes evident collection will not occur.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined on a weighted average basis and includes all expenditures incurred in bringing the goods to the point of sale and putting them in a saleable condition. In assessing the ultimate realization of inventories, the management makes judgments as to future demand requirements compared to current or committed inventory levels. Our reserve requirements generally increase as our projected demand requirements; or decrease due to market conditions and product life cycle changes. The Company estimates the demand requirements based on market conditions, forecasts prepared by its customers, sales contracts and orders in hand.

In addition, the Company estimates net realizable value based on intended use, current market value and inventory ageing analyses. The Company writes down inventories for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventories and their estimated market value based upon assumptions about future demand and market conditions.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. All ordinary repair and maintenance costs are expensed as incurred. Expenditures for maintenance and repairs are expensed as incurred. Major renewals and betterments are charged to the property accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed in the current period.

F-9

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of assets as set out below.

	Estimated Useful Life
Plant and Building	30-40 years
Machinery and Equipment	10 years
Office Furniture and Equipment	5 years
Transportation Equipment	5 years

Construction in progress represents direct costs of construction or acquisition and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until on item is completed and ready for intended use.

Capitalized Interest

Interest associated with major development and construction projects is capitalized and included in the cost of the project. When no debt is incurred specifically for a project, interest is capitalized on amounts expended on the project using weighted-average cost of the Company’s outstanding borrowings. Capitalization of interest ceases when the project is substantially complete or development activity is suspended for more than a brief period. Capitalized interest for the years ended of December 31, 2009 and 2008 were $60,723 and Nil respectively.

Land Use Rights

Land use right is stated at cost less accumulated amortization. Amortization is provided using the straight-line method over the designated terms of the lease of 50 years obtained from the relevant PRC land authority.

Other Intangible Assets

Other intangible assets include non-patent techniques, trademarks and capitalized accounting software. The cost of intangible assets is stated at cost less accumulated amortization. Amortization is provided using the straight-line method over estimated useful lives.

F-10

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Long-Term Investment

The Company accounted for its 5% investment in Zhongji North Machinery Co., Ltd, (Zhongji North) using the cost method, under which the share of Zhongji North’ net income is recognized in the period in which it is earned.

Impairment of Long-Lived Assets

In accordance with ASC 360, “Property, Plant and Equipment”, previously SFAS No. 144, the Company reviews the carrying values of long-lived assets, including property, plant and equipment, land use right and other intangible assets, whenever facts and circumstances indicate the assets may be impaired. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is considered impaired, the impairment is measured by the amount by which the carrying amount the asset exceeds the fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs of disposal. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Credit losses and other-than-temporary impairments declines in fair value that are not expected to recover are expensed.

Revenue Recognition

The Company recognizes sales in accordance with United States Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” and SAB No. 104, “Revenue Recognition.” The Company recognizes revenue when the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services were rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured. After the customers of the Company taking the goods and signing on the shipping order, the Company considers the signed shipping order as customer acceptance and the risk of goods is transferred, as the price in invoice or sales contract with customers is fixed, the Company recognize revenue accordingly. Revenue is not recognized until title and risk of loss is transferred to the customer, which occurs upon delivery of goods, and objective evidence exists that customer acceptance provisions have were met. Provisions for discounts and returns are provided for at the time the sale is recorded, and are recorded as a reduction of sales. The Company bases its estimates on historical experience taking into consideration the type of products sold, the type of customer, and the type of specific transaction in each arrangement. Revenues represent the invoiced value of goods, net of value added tax (“VAT”).

F-11

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

The Company provides a product warranty to customers; meanwhile, as an assembling company, all parts are purchased from related suppliers, suppliers provide a same terms warranty to the Company as that the Company provides to customers. In case customers claim problem products to the Company, the Company will claim the related parts to suppliers accordingly. Further more, the labor costs and overheads related to the problem products are not material compared to the parts cost, so the company do not accrue any warranty liabilities in financial statements.

The Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers. Deposits or advance payments from customers prior to delivery of goods and passage of title of goods are recorded as advanced from customers.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740 “Income Taxes”, previously SFAS No. 109. Under this method, deferred income taxes are recognized for the estimated tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts and each year-end based on enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized when, in management’s opinion; it is more likely than not that some portion of the deferred tax assets will not be realized. The provision for income taxes represents current taxes payable net of the change during the period in deferred tax assets and liabilities.

Earnings (loss) Per Share

The Company reports earnings per share in accordance with the provisions of ASC 260 “Earnings Per Share”, previously SFAS No. 128. ASC 260 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock using the treasury method.

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation dates.

F-12

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Fair Value of Financial Instruments

ASC 820 “Fair Value Measurements and Disclosures”, previously FAS 157, adopted January 1, 2008, defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for current receivables and payables qualify as financial instruments. Management concluded the carrying values are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their stated interest rate approximates current rates available. The three levels are defined as follows:

· Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

· Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

The assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of December 31, 2009 are as follows:

The Company's financial instruments include cash and cash equivalents, restricted cash, accounts receivable, notes receivables, other receivables, accounts payable, notes payable and convertible notes payable. Cash and cash equivalents consist primarily of high rated money market funds at a variety of well-known institutions with original maturities of three months or less. Restricted cash represents time deposits on account to secure short-term bank loans and notes payable. Management estimates that the carrying amounts of the non related party financial instruments approximate their fair values due to their short-term nature.

Fair Value Measurements at Reporting Date Using Quoted Prices in

	Carrying value as Of December 31		Active markets For identical Assets		Significant other Observable Inputs		Significant Unobservable Inputs
	2009		(Level 1)		(Level 2)		(Level 3)

Cash and cash equivalents	$	15,967	$	15,967		-		-

F-13

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Concentration of Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and trade and bills receivables. As of December 31, 2009, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in the PRC, which management believes are of high credit quality. With respect to trade receivables, the Company extends credit based on an evaluation of the customer’s financial condition. The Company generally does not require collateral for trade receivables and maintains an allowance for doubtful accounts of trade receivables.

Noncontrolling Interests

Effective January 1, 2009, the Company adopted the provisions of ASC 810, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements-reported in equity” for reporting noncontrolling interest (“NCI”) in a subsidiary. As a result, the Company reported NCI as a separate component of Stockholders’ Equity in the Condensed Consolidated Balance Sheet. Additionally, the Company reported the portion of net income and comprehensive income (loss) attributed to the Company and NCI separately in the Condensed Consolidated Statement of Operations. The Company also included a separate column for NCI in the Consolidated Statement of Changes in Equity. All related disclosures were adjusted accordingly. Prior year amounts associated with NCI in the financial statements and accompanied footnotes were retrospectively adjusted to conform to the adoption.

Statement of Cash Flows

In accordance with ASC 230, “Statement of Cash Flows”, previously SFAS No. 95, cash flows from the Company's operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

Recent Accounting Pronouncements

Noncontrolling Interests (Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements”, an amendment of ARB No. 51). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. We adopted SFAS 160 on January 1, 2009. As a result, we reclassified financial statement line items within our Condensed Consolidated Balance Sheets and Statements of Income and Comprehensive Income for the prior period to conform to this standard.

F-14

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Business Combinations (Included in ASC 805 “Business Combinations”, previously SFAS No. 141(R)). This ASC guidance revised SFAS No. 141, “Business Combinations” and addresses the accounting and disclosure for identifiable assets acquired, liabilities assumed, and noncontrolling interests in a business combination. The adoption of this standard had no material impact on the Company’s financial statements.

Intangibles-Goodwill and Other (Included in ASC 350”, previously FASB staff position (“FSP”) FAS 142-3, Determination of the Useful Life of Intangible Assets). FSP FAS 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, “Goodwill and Other Intangible Assets”. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP FAS 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. The adoption of this standard had no material effect on the Company's financial statements.

Business Combinations (Included in ASC 805, previously FSP No. 141R-1 “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”). FSP 141R-1 amends the provisions in FASB Statement 141R for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. FSP 141R-1 eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria in Statement 141R and instead carries forward most of the provisions in SFAS 141 for acquired contingencies. FSP 141R-1 is effective for contingent assets and contingent liabilities acquired in evaluating the impact of SFAS 141(R). The management is in the process of evaluating the impact of adopting this standard on the Company’s financial statements.

Fair Value Measurements and Disclosures (Included in ASC 820, previously FSP No. 157-4, “Determining Whether a Market is Not Active and a Transaction Is Not Distressed”). FSP No. 157-4 clarifies when markets are illiquid or that market pricing may not actually reflect the “real” value of an asset. If a market is determined to be inactive and market price is reflective of a distressed price then an alternative method of pricing can be used, such as a present value technique to estimate fair value. FSP No. 157-4 identifies factors to be considered when determining whether or not a market is inactive. FSP No. 157-4 would be effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009 and shall be applied prospectively. The adoption of this standard had no material effect on the Company's financial statements.

F-15

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Investments - Debt and Equity Securities - Overall - Transition and Open Effective Date Information (Included in ASC 320-10-65, previously FASB Staff Position No. 115-2 and Statement of Financial Accounting Standards No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”). ASC 320-10-65 amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities through increased consistency in the timing of impairment recognition and enhanced disclosures related to the credit and noncredit components of impaired debt securities that are not expected to be sold. In addition, increased disclosures are required for both debt and equity securities regarding expected cash flows, credit losses, and securities with unrealized losses. The adoption of this statement had no material impact on the Company’s financial statements.

Interim Disclosures about Fair Value of Financial Instruments (Included in ASC 825 “Financial Instruments”, previously FSP SFAS No. 107-1). This guidance requires that the fair value disclosures required for all financial instruments within the scope of SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”, be included in interim financial statements. This guidance also requires entities to disclose the method and significant assumptions used to estimate the fair value of financial instruments on an interim and annual basis and to highlight any changes from prior periods. FSP 107-1 was effective for interim periods ending after September 15, 2009. The adoption of FSP 107-1 had no material impact on the Company’s financial statements.

Subsequent Events (Included in ASC 855 “Subsequent Events”, previously SFAS No. 165). SFAS No.165, “Subsequent Events” establishes accounting and disclosure requirements for subsequent events. SFAS 165 details the period after the balance sheet date during which we should evaluate events or transactions that occur for potential recognition or disclosure in the financial statements, the circumstances under which we should recognize events or transactions occurring after the balance sheet date in its financial statements and the required disclosures for such events. We adopted this statement effective June 1, 2009 and have evaluated all subsequent events through the filing date with the SEC.

Accounting for Transfers of Financial Assets (To be included in ASC 860 “Transfers and Servicing”, previously SFAS No. 166, “Accounting for Transfers of Financial Assets - an Amendment of FASB Statement No. 140”). SFAS 166 addresses information a reporting entity provides in its financial statements about the transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets. Also, SFAS 166 removes the concept of a qualifying special purpose entity, limits the circumstances in which a transferor derecognizes a portion or component of a financial asset, defines participating interest and enhances the information provided to financial statement users to provide greater transparency. SFAS 166 is effective for the first annual reporting period beginning after November 15, 2009 and will be effective for us as of January 1, 2010. The management is in the process of evaluating the impact of adopting this standard on the Company’s financial statements.

F-16

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Consolidation of Variable Interest Entities – Amended (To be included in ASC 810 “Consolidation”, previously SFAS 167 “Amendments to FASB Interpretation No. 46(R)”). SFAS 167 amends FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities,” to require an enterprise to perform an analysis to determine the primary beneficiary of a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity. SFAS 167 also requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. SFAS 167 is effective for the first annual reporting period beginning after November 15, 2009 and will be effective for us as of January 1, 2010. The management is in the process of evaluating the impact of adopting this standard on the Company’s financial statements.

FASB Accounting Standards Codification (Accounting Standards Update “ASU” 2009-1). In June 2009, the Financial Accounting Standard Board (“FASB”) approved its Accounting Standards Codification (“Codification”) as the single source of authoritative United States accounting and reporting standards applicable for all non-governmental entities, with the exception of the SEC and its staff. The Codification is effective for interim or annual financial periods ending after September 15, 2009 and impacts our financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There were no changes to the content of our financial statements or disclosures as a result of implementing the Codification.

As a result of our implementation of the Codification during the year ended December 31, 2009, previous references to new accounting standards and literature are no longer applicable. In the current year financial statements, we will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

In August 2009, the FASB issued Accounting Standards Update No. 2009-05 (“ASC Update 2009-05”), an update to ASC 820, Fair Value Measurements and Disclosures. This update provides amendments to reduce potential ambiguity in financial reporting when measuring the fair value of liabilities. Among other provisions, this update provides clarification that in circumstances, in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the valuation techniques described in ASC Update 2009-05. ASC Update 2009-05 will become effective for the Company’s annual financial statements for the year ended December 31, 2009. The adoption of ASC 820 had no material impact on the Company’s financial statements.

F-17

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

In October 2009, the FASB issued Accounting Standards Update, 2009-13, Revenue Recognition (Topic 605) “Multiple Deliverable Revenue Arrangements - A Consensus of the FASB Emerging Issues Task Force”. This update provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted. The management is in the process of evaluating the impact of adopting this standard on the Company’s financial statements.

NOTE 3 ACCOUNTS RECEIVABLE

As of December 31, 2009 and 2008, the Company’s accounts receivable consisted of the following:

	2009			2008

Accounts receivable	$	2,590		$	2,278,559
Less: Allowance for doubtful accounts		(2,590	)		(2,583	)

Accounts receivable, net	$	-		$	2,275,976

NOTE 4 INVENTORIES

Inventories, by major categories, as of December 31, 2009 and 2008 were as follows:

	2009			2008

Raw materials	$	140,998		$	4,435,034
Work in progress		-			1,119,496
Low value consumables		461			123,437
Packaging materials		-			1,579
Materials on consignment for further processing		737			18,638
Finished goods		-			3,284,065
		142,196			8,982,249

Less: Allowance for obsolete inventories		(142,196	)		(22,014	)

Inventories, net	$	-		$	8,960,235

F-18

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 5 TAXES RECOVERABLE

As of December 31, 2009 and 2008, tax recoverable comprised the following:

	2009			2008

Input VAT	$	1,788,216		$	7,115,252
Unpaid VAT transfer out		286			96
Output VAT		(1,806,416	)		(6,177,609	)
Input VAT Transfer Out		-			(20	)
VAT Paid		14,811			-
Offset input VAT of FA		61,067			239,240
IIT payable		-			(164	)
Corporate income tax		-			(512,959	)

Total	$	57,952		$	663,836

Changchun Densen is subject to value-added tax at a low rate of 13% and an ordinary rate of 17% for its tractor sales and raw materials sales respectively.

NOTE 6 OTHER RECEIVABLES

As of December 31, 2009 and 2008, other receivables comprised the following:

	2009		2008

Advance to employees for business purposes	$	3,372	$	123,698
Prepayment		5,803		28,827
Rebate receivable				48,496
Other		43,878		284,201
		53,053		485,222
Less: Allowance for doubtful accounts		-		(14,590	)

Total other receivables, net	$	53,053	$	470,632

NOTE 7 PROPERTY, PLANT AND EQUIPMENT

As of December 31, 2009 and 2008, property, plant and equipment consisted of the following:

	2009			2008

Cost:
Plant and Building					20,940,518
Machinery and Equipment					1,967,750
Office Furniture and Equipment	$	4,141		$	125,881
Transportation Equipment		-			296,274
Total at cost		4,141			23,330,423

Less: Accumulated depreciation		(2,160	)		(1,498,355	)

Total property, plant and equipment, net	$	1,981		$	21,832,068

F-19

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Depreciation for the years ended December 31, 2009 and 2008 was $4,159 and $641,735 respectively.

NOTE 8 CONSTRUCTION IN PROGRESS

As of December 31, 2008, construction in progress was as follow:


Phase II plant project		$	600,398

The Company started the construction of phase II plant in 2008 to increase the production of tractors.

NOTE 9 ASSETS HELD FOR SALE

As of December 31, 2009, assets held for sale was as follow:


Phase II plant project		$	4,729,298

The Company started the construction of phase II plant in 2008. On December 1, 2009, the Company entered into a letter of intent to transfer all shares owned by the Company in Chang Tuo Agricultural Machinery Equipment Group Co., Ltd. (“Chang Tuo”) to SOASACC, the Company discontinued the construction of phase II plant and plans to transfer it to SOASACC as well.

F-20

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 10 LAND USE RIGHTS

As of December 31, 2009, land use rights were as follows:

	2009			2008

Cost of land use right	$	712,382		$	3,950,862

Less: Accumulated amortization		(12,115	)		(113,278	)
		700,267			3,767,195

Less: Impairment loss on land use right		-			(695,822	)

Land use rights, net	$	700,267		$	3,071,373

The Company obtained the right from the relevant PRC land authority for forty nine years to use the land on which the office premises, production facilities and warehouse of the Company are situated.

Amortization expense for the year ended December 31, 2009 was $12,109. The estimated annual amortization for land use rights for the next five years as of December 31, 2009 and thereafter is expected to be as follows by years:

2010	$	14,538
2011		14,538
2012		14,538
2013		14,538
2014		14,538
Thereafter		627,577

Total	$	700,267

NOTE 11 LAND USE RIGHTS DEPOSIT

Land use right deposit as of December 31, 2008 was $1,038,174. The land use right deposit represented the prepayment to obtain the land use rights in the future.

NOTE 12 OTHER INTANGIBLE ASSETS

As of December 31, 2009 and 2008, the Company’s intangible assets were summarized as follows:

	Useful life	2009			2008

Amortizable intangible assets:
Trademark	10 years	$	539,695		$	538,356
Capitalized accounting software	10 years		6,875			14,185
Non-patent techniques	10 years		87,755			87,538
Total at historical cost			634,325			640,079

Less: Total accumulated amortization			(149,715	)		(86,614	)

Other intangible assets, net		$	484,610		$	553,465

F-21

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Other intangible assets were stated at cost less accumulated amortization. The amortization of other intangible assets for the years ended December 31, 2009 and 2008 was $63,398 and $61,758 respectively. The estimated amortization expense for the next five years as of December 31, 2009 and thereafter is expected to be as follows by years:


2010	$	63,433
2011		63,433
2012		63,433
2013		63,433
2014		63,433
Thereafter		167,445

Total	$	484,610

NOTE 13 LONG-TERM INVESTMENTS

As of December 31, 2009 and 2008, the Company’s investment consisted of:

	2009			2008

Zhongji North Machinery Co., Ltd.		5%	392,189		24%	$ 1,877,836

Zhongji North was established on November 22, 2007 and the total registered capital is RMB50,000,000. Zhongji North’s principal activities are development, manufacturing, sale and foreign trading of agricultural machineries and other machineries, manufacturing and sale of parts and accessories of agricultural machineries and other machineries.

F-22

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 14 SHORT-TERM LOANS

Short-term loans are due to various financial institutions which are normally due within one year. As of December 31, 2009, the Company’s short term loans consisted of the following:

	2009		2008

From Jilin Jiutai Rural Commercial Bank Chengqu-Branch, due from March 27, 2009 to March 24, 2010. With interest at 11.16%, secured by the Company’s land use right.	$	731,294	$

Loan from Jilin bank Changchun Ruixiang Sub-Branch, due from December 10, 2008 to November 26, 2009. with interest rate at 7.2540% per annum, pledged by the Company’s building and land use right.				4,376,878

Total short-term loans	$	731,294	$	4,376,878

NOTE 15 ACCRUED EXPENSES AND OTHER PAYABLES

As of December 31, 2009 and 2008, the accrued expenses and other liabilities of the Company were summarized as follows:

	2009		2008

Accrued expenses	$	195,756	$	-
Acquisition of assets		94,133		63,109
Warrant Deposit		21,289		109,013
borrowing from third party		-		542,441
Others		69,230		3,887

Total accrued expenses and other payables	$	380,408	$	718,450

The security deposit is deposit from clients for the maintenance of tractors.

NOTE 16 BORROWING FROM THIRD PARTY

As of December 31, 2009, the borrowing from third party was summarized as follows:


Zheng Yin	$	146,258
Shanghai Sibo Education Co., Ltd.		1,170,070

Total accrued expenses and other payables	$	1,316,328

F-23

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

The borrowing from third party has no repayment term and bore no interest. Borrowed for operational use, they will be repaid in the near future.

NOTE 17 RELATED PARTY BALANCE AND TRANSCATIONS

Due from related parties

As of December 31, 2009 and 2008, due from related parties was summarized as follows:

	2009		2008

Lau San	$	284,553	$	-
Mudanjiang Binjiang Garden City		-		1,900,128

Total due from related parties	$	284,553	$	1,900,128

A director of the Company, Mr. Lau San, borrowed money from the Company. These amounts are interest-free, unsecured and repayable on demand.

Due to related parties

As of December 31, 2009 and 2008, due to related parties was summarized as follows:

	2009		2008

Lau San	$	-	$	1,005,084
Changchun Junming Machinery Co., Ltd. (“CJMCL”)		149,105		148,734
Shenzhen Junsheng Property Management Co., Ltd. (“SJPMCL”)		14,626		14,590
Zhongji North Machinery Co., Ltd. (“Zhongji North”)		409,524		413,666

Total due to related parties	$	573,255	$	1,582,074

F-24

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

The Company borrowed from CJMCL, which is controlled by Mr. Lau San, a director of the Company for use in operations. The loan bore no interest and the principal is due upon demand.

The Company borrowed from SJPMCL, which is controlled by Ms. Yang, Fengyan, Mr. Lau San’s wife, for use in operations. The loan bore no interest and the principal is due upon demand.

NOTE 18 GOVERNMENT GRANT INCOME

The Company records government grants when received and shows it as government grant income on the face of consolidated statements of operations and other comprehensive income (loss). All subsidies are nonrefundable.

In 2009, Changchun Densen received a $2,924 subsidy from Jiutai Municipal Bureau of Finance (“JMBF”) for the international business development. In 2008, Changchun Densen received a $71,816 subsidy from JMBF for the improvement of the assembly line of big and medium tractors.

NOTE 19 NONCONTROLLING INTERESTS

Noncontrolling interests on the consolidated statement of income and comprehensive income of $(114,516) and $800,299 for the years ended December 31, 2009 and 2008 respectively, represented the noncontrolling shareholders’ proportionate share of the net income/(loss) of the Company.

NOTE 20 DISCONTINUED OPERATION

On December 1, 2009, the Company entered into a letter of intent to transfer all shares owned by the Company in Chang Tuo to SOASACC. As of December 31, 2009, the Company lost control over Chang Tuo as SOASACC took over the management and operations of Chang Tuo. Accordingly, Chang Tuo is reported as a discontinued operation in accordance with ASC 205-20. The estimated transfer price is $9,799,333 (RMB67,000,000). The final agreement is expected to be closed around May 1, 2010.

NOTE 21 INCOME TAX

Changchun Densen is governed by the Income Tax Law of the PRC concerning the private-run enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriated tax adjustments.

F-25

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Changchun Densen is exempt from income tax in PRC for two years starting from the 1st profitable year or 2008, whichever is earlier, and subject to 50% discount on normal income tax rate for the following three years.

The pre-tax accounting income/(loss) of our subsidiaries were as follows, for the years ended December 31, 2009 and 2008:

	2009			2008

Changchun Densen	$	(488,640	)	$	24,883

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the years ended December 31, 2009 and 2008:

	2009	2008

US statutory rates	34.0%	34.0%
Tax rate difference	（9.0%）	（9.0%）
Valuation allowance	（25.0%）	（25.0%）
Effect of tax holiday	0.0%	0.0%
Non-deductable expenses	0.0%	0.0%
Equity in earnings of investee	0.0%	0.0%

Tax per financial statements	0.0%	0.0%

NOTE 22 OPERATING RISK

(a)	Country risk

Currently, the Company’s revenues are primarily derived from the sale of agriculture tractors to customers in the People’s Republic of China (“PRC”). The Company hopes to expand its operations to other countries, however, such expansion has not commenced and there is no assurance that the Company will be able to achieve such expansion. Therefore, a downturn or stagnation in the economic environment of the PRC could have a material adverse effect on the Company’s financial condition.

(b)	Products risk

In addition to competing with other manufacturers of agricultural machinery, the Company competes with larger PRC companies which have greater funds available for expansion, marketing, research and development and the ability to attract more qualified personnel. These PRC companies may be able to offer products at a lower price. There can be no assurance the Company will remain competitive should this occur.

F-26

CHINA TRACTOR HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

(c)	Exchange risk

The Company can not guarantee the Renminbi, US dollar exchange rate will remain steady, therefore the Company could post the same profit for two comparable periods and post higher or lower profit depending on exchange rate of Renminbi and US dollars. The exchange rate could fluctuate depending on changes in the political and economic environments without notice.

(d)	Political risk

Currently, PRC is in a period of growth and is openly promoting business development in order to bring more business into PRC. Additionally PRC currently allows a Chinese corporation to be owned by a United States corporation. If the laws or regulations relating to ownership of a Chinese corporation are changed by the PRC government, the Company's ability to operate the PRC subsidiaries could be affected.

(e)	Interest risk

The Company is exposed to interest rate risk arising from short-term variable rate borrowings from time to time. The Company’s future interest expense will fluctuate in line with any change in borrowing rates. The Company does not have any derivative financial instruments as of December 31, 2009 and 2008 and believes its exposure to interest rate risk is not material.

F-27

SIGNATURES

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

Dated: April 15, 2010

	/s/ Lau San
	Lau San
	Chief Executive Officer and Chairman

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

Signature	Title	Date

/s/ Lau San	Chief Executive Officer and Chairman	April 15, 2010
Lau San

/s/ Chen Guocheng	Chief Financial Officer and Director	April 15, 2010
Chen Guochen

/s/ Liu Jingdong	President and Director	April 15, 2010
Glenn Peipert

/s/ Changfu Wang	Director	April 15, 2010
Changfu Wang

Dr. Baoyun Qiao	Director

China Tractor Holdings, Inc. Reports

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