CHINA DU KANG CO. LTD. - FORM 10-Q

Attached files

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EX-31.2 - CHINA DU KANG CO. LTD.	fp0002966_ex31-2.htm
EX-31.1 - CHINA DU KANG CO. LTD.	fp0002966_ex31-1.htm
EX-32.1 - CHINA DU KANG CO. LTD.	fp0002966_ex32-1.htm
EX-32.2 - CHINA DU KANG CO. LTD.	fp0002966_ex32-2.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______________to__________________.

Commission File No. 333-157281

CHINA DU KANG CO., LTD.

NEVADA	90-0531621
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

Town of Dukang, Baishui County,

A-28,Van Metropolis,#35 Tangyan Road,

Xi'an, Shaanxi, PRC, 710065

(Address of principal executive offices)

8629-88830106-822

(Issuer's telephone number)

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

[X] YES [ ] NO

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

[X] YES [ ] NO

APPLICABLE TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

[X] YES [ ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: March 31, 2011: 100,113,791

Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]

Table of Contents

10-Q – China Du Kang Co., Ltd.

FORM 10-Q

PART I

FINANCIAL STATEMENTS	4

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	26

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28

CONTROLS AND PROCEDURES	29

PART II

LEGAL PROCEEDINGS	31

RISK FACTORS	32

UNREGISTERED SALES OF EQUITY	38

SECURITIES AND USE OF PROCEEDS	38

DEFAULTS UPON SENIOR SECURITIES	38

EXHIBITS	38

SIGNATURES	39

PART I.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.




FINANCIAL REPORT

At March 31, 2011 and December 31, 2010 and
For the Three Months Ended March 31, 2011 and 2010

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.



		INDEX


			PAGE


	CONSOLIDATED BALANCE SHEETS		2

	CONSOLIDATED STATEMENTS OF OPERATIONS		3

	CONSOLIDATED STATEMENTS OF CASH FLOWS		4

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		5-28

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

							March 31,		December 31,
							2011		2010
	ASSETS						(unaudited)
	Current Assets:
		Cash and cash equivalents				$	1,314,259	$	1,994,126
		Accounts receivable					541,314		-
		Others receivable					1,370		74,210
		Prepaid expenses (Note 6)					429,005		625,696
		Inventories (Note 7)					3,586,001		3,273,993
		Due from related parties (Note 10)					-		2,577,187
			Total current assets				5,871,949		8,545,212

	Property, Plant and Equipment, net (Note 8)						4,407,002		4,424,062
	Intangible assets, net (Note 9)						2,003,396		2,003,122
	Long-term investment						1,826,456		1,814,937

	Total Assets					$	14,108,803	$	16,787,333

	LIABILITIES AND SHAREHOLDERS' EQUITY
	Current Liabilities:
		Bank loans (Note 14)				$	761,023	$	756,224
		Accounts payable					981,949		891,409
		Accrued expenses (Note 11)					222,979		160,512
		Others payable					65,968		64,136
		Land use right purchase payable					-		1,946,792
		Taxes payable					541,080		502,574
		Deferred revenue					1,524,221		1,587,115
		Due to related parties (Note 12)					16,161,963		17,018,272
		Employee security deposit					44,138		43,860
		Lease liability-current					125,147		126,314
			Total Current Liabilities				20,428,468		23,097,208

	Long-term Liabilities:
		Lease liability-long-term					910,357		934,237
			Total Long-term Liabilities				910,357		934,237
	Total Liabilities						21,338,825		24,031,445

	Commitments and Contingencies (Note 20)						-		-

	Shareholders' Equity:
		China Du Kang Co., Ltd. Shareholders' Equity
			Preferred stock, par value $0.001, 5,000,000 shares authorized;
				no shares issued and outstanding as of
				March 31, 2011 and December 31, 2010			-		-
			Common stock, par value $0.001, 250,000,000 shares authorized;
				100,113,791 shares issued and outstanding as of
				March 31, 2011 and December 31, 2010			100,114		100,114
			Additional paid-in capital				10,671,262		10,671,262
			Accumulated deficit				(17,314,061)		(17,329,753)
			Accumulated other comprehensive income				(928,374)		(881,220)
					Total China Du Kang Co., Ltd. Shareholders' equity (deficit)		(7,471,059)		(7,439,597)
		Noncontrolling Interest					241,037		195,485
			Total Shareholders' Equity (Deficit)				(7,230,022)		(7,244,112)
				Total Liabilities and Shareholders' Equity (Deficit)		$	14,108,803	$	16,787,333

See Notes to Consolidated Financial Statements

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

						For the Three Months Ended
						March 31,
						2011		2010
						(unaudited)		(unaudited)
	Revenues
		Sales of Liquor				427,679	$	290,404
		License Fees				283,817		199,838
			Gross Profit			711,496		490,242

	Costs of Revenues
		Costs of Liquor Sold				314,451		277,449
		Costs of License Fees				-		-
			Total Costs of Sales			314,451		277,449

	Gross Profit					397,045		212,793

	Operating Expenses

		Selling Expenses
			Advertising expenses			5,907		34,960
			Travel and entertainment			1,734		484
				Total Selling Expenses		7,641		35,444

		General and administrative expenses
			Payroll			78,288		51,255
			Employee benefit and pension			19,080		5,572
			Depreciation and amortization expenses			45,649		34,589
			Professional fees and consultancy fees			25,104		35,034
			Office expenses			15,842		3,284
			Vehicle expenses			9,276		7,083
			Loss on physical inventory count			25,687		-
			Travel and entertainment			11,029		45,848
			Other general and administrative expenses			33,872		1,723
				Total General and Administrative Expenses		263,827		184,388

	Total Operating Expenses					271,468		219,832

	Income (Loss) from Operation					125,577		(7,039)

	Other Income (Expenses)
		Interest income				1,520		165
		Interest expenses				(18,543)		(3,997)
		Charity donation				-		-
		Governmental subsidy				-		-
		Other income (expense)				100		105
			Total other income (expenses)			(16,923)		(3,727)

	Income (Loss) before Provision for Income Tax					108,654		(10,766)

	Provision for Income Tax					(48,781)		(25,246)

	Net Income (Loss)					59,873		(36,012)

		Less: Net income attributable to noncontrolling interest				44,181		18,160

	Net Income (Loss) attributable to
	China Du Kang Co., Ltd.				$	15,692	$	(54,172)

	Basic and Fully Diluted Earnings per Share				$	0.00	$	(0.00)

	Weighted average shares outstanding					100,113,791		100,113,791

See Notes to Consolidated Financial Statements

CHINA DU KANG CO., LTD. AND SUBSIDIARIES

F/K/A AMSTAR FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


			For the Three Months Ended
			March 31,
			2011		2010
			(unaudited)		(unaudited)
	Operating Activities

	Net income (loss)	$	15,692	$	(54,172)
	Adjustments to reconcile net income (loss) to
	net cash provided (used) by operating activities:
	Minority interest		44,181		18,160
	Depreciation		89,608		89,327
	Amortization		12,404		2,454
	Changes in operating assets and liabilities:
	(Increase)/Decrease in accounts receivable		(539,729)		-
	(Increase)/Decrease in others receivable		73,096		50,993
	(Increase)/Decrease in prepaid expenses		200,075		311,938
	(Increase)/Decrease in inventories		(290,375)		(395,199)
	Increase/(Decrease) in accounts payable		84,634		170,689
	Increase/(Decrease) in accrued expenses		61,268		38,079
	Increase/(Decrease) in other payable		1,421		6,995
	Increase/(Decrease) in taxes payable		35,213		(20,314)
	Increase/(Decrease) in deferred revenue		(72,754)		63,531
	Increase/(Decrease) in lease liabilities		(31,685)		(32,436)
	Net cash provided (used) by operating activities		(316,951)		250,045

	Investing Activities

	Purchase of fixed assets		(77,067)		(28,820)
	Purchase of land use right		(1,953,410)		-
	Advances to related parties		(303,540)		-
	Net cash (used) by investing activities		(2,334,017)		(28,820)

	Financing Activities

	Repayments of bank loans		-		(292,567)
	Proceeds from related parties		1,929,510		742,374
	Repayments to related parties		(1,518)		(1,026,358)
	Net cash provided (used) by financing activities		1,927,992		(576,551)

	Increase (decrease) in cash		(722,976)		(355,326)
	Effects of exchange rates on cash		43,109		24,881
	Cash at beginning of period		1,994,126		619,472
	Cash at end of period	$	1,314,259	$	289,027

	Supplemental Disclosures of Cash Flow Information:
	Cash paid (received) during year for:
	Interest	$	13,270	$	3,997
	Income taxes	$	-	$	-

See Notes to Consolidated Financial Statements

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 1-	BASIS OF PRESENTATION

		The accompanying unaudited financial statements of China Du Kang Co., Ltd. and subsidiaries, (the “Company” or "Du Kang") were prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Management of the Company (“Management”) believes that the following disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited financial statements and the notes for the year ended December 31, 2010.

		These unaudited financial statements reflect all adjustments, consisting only of normal recurring adjustments that, in the opinion of Management, are necessary to present fairly the financial position and results of operations of the Company for the periods presented. Operating results for the three months ended March 31, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

	Note 2-	ORGANIZATION AND BUSINESS BACKGROUND

		China Du Kang Co., Ltd (“China Du Kang” or the “Company”) was incorporated as U. S. Power Systems, Inc., in the State of Nevada on January 16, 1987. On or about June 8, 2006 the Company’s name was changed to Premier Organic Farms Group, Inc. On or about November 30, 2006 the name was changed to Amstar Financial Holdings, Inc. (“AFLH”). On or about March 18, 2008 the name was changed to its current name of China Du Kang Co., Ltd. with its corporate charter still residing in Nevada. The Company changed its fiscal year ending from September 30 to December 31 in February 2008.

		The Company had been engaged in the business to provide various financial services since it's incorporated. The Company was not successful and discontinued the majority of its operation by December 31, 2007.

		On January 10, 2008, the Company entered into a Plan of Exchange Agreement (the “Exchange Agreement”) with Hong Kong Merit Enterprise Limited (“Merit”), a holding company incorporated in Hong Kong. Pursuant to the terms of the Exchange Agreement, the Company agreed to issue post split 88,000,000 shares of its common stock to the shareholders of Merit in exchange for Merit to transfer all of its issued and outstanding shares of common stock to the Company, thereby causing Merit to become a wholly-owned subsidiary of the Company. The parties closed the transaction contemplated by the Agreement on February 11, 2008.

		This transaction is being accounted for as a reverse merger, since the shareholders of Merit owns a majority of the outstanding shares of the Company’s common stock immediately following the share exchange. Merit is deemed to be the acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will reflected in the consolidated financial statements for periods prior to the share exchange will be those of Merit and its subsidiaries and will be recorded at the historical cost basis. After completion of the share exchange, the Company‘s consolidated financial statements will include the assets and liabilities of both Du Kang and Merit, the historical operations of Merit and the operations of the Company and its subsidiaries from the closing date of the share exchange.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 2-	ORGANIZATION AND BUSINESS BACKGROUND (continued)

		Merit was incorporated on September 8, 2006 in Hong Kong under the Companies Ordinances as a Limited Liability company. Merit was formed for the purpose of seeking and consummating a merger or acquisition with a business entity organized as a private corporation, partnership, or sole proprietorship.

		On January 22, 2008, Merit entered into a Share Purchase Agreement (the “Purchase Agreement”) with the owners of Shaanxi Huitong Food Co., Inc. ("Huitong"), a limited liability company incorporated in the People's Republic of China ("PRC") on August 9, 2007 with a registered capital of $128,200 (RMB1,000,000). Pursuant to the Purchase Agreement, Merit agreed to purchase 100% of the equity ownership in Huitong for a cash consideration of $136,722 (RMB 1,000,000). The local government approved the transaction on February 1, 2008. Subsequent to the completion of the acquisition, Huitong became a wholly-owned subsidiary of Merit.

		Huitong was formed for the purpose of seeking and consummating a merger or acquisition with a business entity organized as a private corporation, partnership, or sole proprietorship. On December 26, 2007, Huitong executed an acquisition agreement with shareholders of Shaanxi Xidenghui Technology Stock Co., Ltd. ("Xidenghui"), whereby Huitong agreed to acquire 98.24% of the equity ownership of Xidenghui from the shareholders. Subsequent to completion of the acquisition agreement, Xidenghui became a majority-owned subsidiary of Huitong.

		Xidenghui was incorporated in Weinan City, Shaanxi Province, PRC on March 29, 2001 under the Company Law of PRC. Xidenghui was engaged in the business of production and distribution of distilled spirit with a brand name of “Xidenghui”. Currently, its principal business is to hold an equity ownership interest in Shannxi Baishui Dukang Liquor Co., Ltd. (“Baishui Dukang”) and Shaanxi Baishui Dukang Liquor Brand Management Co., Ltd. (“Brand Management”).

		Baishui Dukang was incorporated in Baishui County, Shanxi Province, PRC on March 1, 2002 under the Company Law of PRC. Baishui Dukang was principally engaged in the business of production and distribution of distilled spirit (liquor) with a brand name of “Baishui Du Kang”. On May 15, 2002, Xidenghui invested inventory and fixed assets with a total fair value of $ 4,470,219 (RMB 37,000,000) to Baishui Dukang and owns 90.51% of Baishui Dukang’s equity interest ownership, thereby causing Baishui Dukang to become a majority-owned subsidiary of Xidenghui.

		On October 30, 2007, Xidenghui executed an agreement with Mr. Zhang Hongjun, a PRC citizen, to establish a joint venture, Shaanxi Baishui Dukang Liquor Brand Management Co., Ltd. ("Brand Management"). Pursuant to the agreement, Xidenghui contributed cash of $95,704 (RMB 700,000), and owns 70% equity interest ownership therein. Brand Management was subsequently incorporated on November 12, 2007. Upon the completion of incorporation, Brand Management became a majority-owned subsidiary of the Xidenghui. Brand Management is principally engaged in the business of distribution of Baishui Dukang’s liquor and manage the franchise of the “Baishui Du Kang” brand name.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 2-	ORGANIZATION AND OPERATIONS (continued)

		Baishui Dukang and Brand Management are the two of these affiliated companies that are engaged in business operations. Du Kang, Merit, Huitong, and Xidenghui are holding companies, whose business is to hold an equity ownership interest in Baishui Dukang and Brand Management. All these affiliated companies are hereafter referred to as the "Company". Currently, the Company is principally engaged in the business of production and distribution of distilled spirit with the brand name of “Baishui Dukang”. The Company also licenses the brand name to other liquor manufactures and liquor stores. The Company's structure is summarized in the following chart.

Under the PRC regulations on acquisition of businesses, commonly referred to as "SAFE" regulations (State Administration of Foreign Exchange), which were jointly adopted on August 8, 2006 by six PRC regulatory agencies with jurisdictional Authority, a Chinese entity may not be owned or controlled directly by foreign investors or shareholders but may be acquired in a two-step transaction with a wholly owned foreign enterprise (“WOFE”).

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 2-	ORGANIZATION AND OPERATIONS (continued)

		China Du Kang is the US holding company for Merit, a Hong Kong entity organized under the Companies Ordinance as a limited liability company. Merit was established as a WOFE corporation for the purpose of effecting an acquisition transaction with Huitong, a WOFE corporation incorporated in PRC. Huitong in turn majority owns Xidenghui, which was a Chinese holding company. Xidenghui had two subsidiaries, Baishui Dukang and Brand Management.

		This arrangement provides separate holding companies for the United States, Hong Kong, and PRC. This allows the Company to lawfully conduct operations in China while ownership is represented in shares of the U. S. holding company.

	Note 3-	CONTROL BY PRINCIPAL OWNERS

		The directors, executive officers, their affiliates, and related parties own, directly or indirectly, beneficially and in the aggregate, the majority of the voting power of the outstanding capital of the Company. Accordingly, directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital and the dissolution, merger or sale of the Company's assets.

	Note 4-	GOING CONCERN

		As reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit of $17,314,061 at March 31, 2011 that includes losses of $102,071 and $515,951 for the year ended December 31, 2010 and 2009, respectively. In addition, The Company had a working capital deficiency of $14,556,519 and a shareholders' deficiency of $7,230,022 at March 31, 2011. These factors raise substantial doubt about its ability to continue as a going concern.

		Management has taken steps to revise the Company's operating and financial requirements. The Company is actively pursuing additional funding and a potential merger or acquisition candidate and strategic partners, which would enhance owners' investment. However, there can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing stockholders.

		The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

		The Company relied heavily for its financing needs on its affiliates, shareholders/directors as more fully disclosed in Note 12.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES

		Basis of Presentation

		The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). This basis of accounting differs from that used in the statutory accounts of the Company, which are prepared in accordance with the "Accounting Principles of China " ("PRC GAAP"). Certain accounting principles, which are stipulated by US GAAP, are not applicable in the PRC GAAP. The difference between PRC GAAP accounts of the Company and its US GAAP consolidated financial statements is immaterial.

		The consolidated financial statements include the accounts of the Company and all its majority-owned subsidiaries which require consolidation. Inter-company transactions have been eliminated in consolidation.

		Certain amounts in the prior year's consolidated financial statements and notes have been revised to conform to the current year presentation.

		Use of Estimates

		The preparation of financial statements in conformity with generally accepted accounting principles 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 date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results when ultimately realized could differ from those estimates.

		Subsequent Events

		The Company evaluated subsequent events through the date of issuance of these financial statements. We are not aware of any significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on our consolidated financial statements.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Foreign Currencies Translation

		The Company maintains its books and accounting records in PRC currency "Renminbi" ("RMB"), which is determined as the functional currency. Transactions denominated in currencies other than RMB are translated into RMB at the exchange rates quoted by the People’s Bank of China (“PBOC”) prevailing at the date of the transactions. Monetary assets and liabilities denominated in currencies other than RMB are translated into RMB using the applicable exchange rates quoted by the PBOC at the balance sheet dates. Exchange differences are included in the statements of changes in owners' equity. Gain and losses resulting from foreign currency transactions are included in operations.

		The Company’s financial statements are translated into the reporting currency, the United States Dollar (“US$”). Assets and liabilities of the Company are translated at the prevailing exchange rate at each reporting period end. Contributed capital accounts are translated using the historical rate of exchange when capital is injected. Income and expense accounts are translated at the average rate of exchange during the reporting period. Translation adjustments resulting from translation of these consolidated financial statements are reflected as accumulated other comprehensive income (loss) in the consolidated statements of changes in shareholders’ equity.

		The exchange rates used for foreign currency translation were as follows (USD$1 = RMB):

		Period Covered	Balance Sheet Date Rates	Average Rates

		Three months ended March 31, 2011	6.57010	6.58940
		Three months ended March 31, 2010	6.83610	6.83603
		Year ended December 31, 2010	6.61180	6.66103
		Year ended December 31, 2009	6.83720	6.84088

		Statement of Cash Flows

		In accordance with FASB ASC 830-230, “Statement of Cash Flows”, cash flows from the Company’s operations is calculated based upon the functional currency. 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.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Revenue Recognition

		The Company recognizes revenue when the earnings process is complete, both title and the risks and rewards of ownership are transferred or services have been rendered and accepted, the selling price is fixed or determinable, and collectability is reasonably assured.

		(1) Sales of Liquor

		The Company generally sells liquor to liquor distributors with which the Company executed an exclusive distributor contract, pursuant to which the distributor cannot act as a distributor for any other products of the third party. The Company recognizes liquor sales revenue when the significant risks and rewards of ownership have been transferred pursuant to PRC law, including such factors as when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, sales and value-added tax laws have been complied with, and collectability is reasonably assured. The Company generally recognizes revenue from sales of liquor when its products are shipped.

		The Company does not provide an unconditional right of return, price protection or any other concessions to our customers. Sales returns and other allowances have been immaterial in our operation.

		(2) License Fees

		(a) License fees from liquor manufactures

		We authorize liquor manufacturers who comply with our requirements to use certain sub brand names of “Baishui Dukang” to process the production of liquor and to sell to customers within the designated area in a certain period of time. The amount of license fee varies based on the sales territory and the number of sub brand names. We generally collect the entire license fee when the license agreement is executed, and then recognize license fee revenue over the beneficial period described by the agreement, as the revenue is realized or realizable and earned.

		(b) License fees from liquor stores

		We also authorize liquor stores who comply with our requirements to exclusively sell certain sub brand names of “Baishui Dukang” products within the designated area in a certain period of time. The amount of license fee varies based on the sales territory and the number of sub brand names. We generally collect the entire license fee when the agency agreement is executed, and then recognize license fee revenue over the beneficial period described by the agreement, as the revenue is realized or realizable and earned.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Deferred Revenue

		Deferred revenue consists of prepayments to the Company for products that have not yet been delivered to the customers and franchise fees received upfront for services have not yet been rendered and accepted. Payments received prior to satisfying the Company’s revenue recognition criteria are recorded as deferred revenue.

		Cost of License Fees

		Costs of franchise fees principally include the costs to prepare the franchise contracts and the payroll to employees who are responsible for inspection and monitoring the franchisees. These expenses are immaterial and therefore included in the general and administrative expenses.

		Cash and Cash Equivalents

		Cash and cash equivalents include cash on hand, deposits in banks with maturities of three months or less, and all highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less.

		Others Receivable

		Others receivable principally includes advance to employees who are working on projects on behalf of the Company. After the work is finished, they will submit expense reports with supporting documents to the accounting department. Upon being properly approved, the expenses are debited into the relevant accounts and the advances are credited out. Cash flows from these activities are classified as cash flows from operating activities.

		Concentrations of Credit Risk

		Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents with high-quality institutions. Deposits held with banks in PRC may not be insured or exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand and therefore bear minimal risk.

		Fair Value of Financial Instruments

		The carrying value of financial instruments including cash and cash equivalents, receivables, prepaid expenses, accounts payable, and accrued expenses, approximates their fair value due to the relatively short-term nature of these instruments.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Inventories

		Inventories are stated at the lower of cost or market value. Actual cost is used to value raw materials and supplies. Finished goods and work-in-progress are valued on the weighted-average-cost method. Elements of costs in finished good and work-in-progress include raw materials, direct labor, and manufacturing overhead.

		Baishui Dukang, one of our subsidiaries, is engaged in the distillery business. Pursuant to the production requirement, all spirits that are newly distilled from sorghum, so call “liquor base”, must be barrel-aged for several years, so we bottle and sell only a portion of our liquor base inventory each year. We classify barreled liquor base as work-in-progress. Following industry practice, we classify all barreled liquor base as a current asset.

		Property, Plant and Equipment

		Property, plant and equipment are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.

		When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.

		Depreciation is calculated on a straight-line basis over the estimated useful life of the assets without residual value. The percentages or depreciable life applied are:

			Building and warehouses	20 years
			Machinery and equipment	7-10 years
			Office equipment and furniture	5 years
			Motor vehicles	5 years
			Leased assets	Lease duration

		Intangible Assets

		Intangible assets are carried at cost. Amortization is calculated on a straight-line basis over the estimated useful life of the assets without residual value. The percentages or amortizable life applied are:

			Land use right	50 years
			Trade Mark	10 years

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Land Use Right

		All land belongs to the State in PRC. Enterprises and individuals can pay the State a fee to obtain a right to use a piece of land for commercial purpose or residential purpose for an initial period of 50 years or 70 years, respectively. The land use right can be sold, purchased, and exchanged in the market. The successor owner of the land use right will reduce the amount of time which has been consumed by the predecessor owner.

		The Company owns the right to use three pieces of land, approximately 657 acre, 2.4 acre, and 7.8 acre, located in Weinan City, Shaanxi Province for through February, 2051, March 2055, and May 2059. The costs of these land use rights are amortized over their prospective beneficial period, using the straight-line method with no residual value.

		Valuation of Long-Lived assets

		Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

		Long-term Investment

		On March 1, 2006, Xidenghui executed an investment agreement with Shaanxi Yichuan Nature Park Co., Inc., pursuant to which, Xidenghui agreed to invest cash of $1,596,254 (RMB 12,000,000) to establish a joint-venture named Shaanxi Yellow-river Wetlands Park Co., Ltd., and owns 7.9% equity ownership interest therein. Shaanxi Yellow-river Wetlands Park Co., Ltd. is engaged in the business of recreation and entertainment.

		Xidenghui finished the investment contribution in September 2007. As the project is currently ongoing, the Management believes the amount invested approximates the fair value and uses the cost method to record the investment.

		Advertising Costs

		The Company expenses advertising costs as incurred or the first time the advertising takes place, whichever is earlier, in accordance with the FASB ASC 720-35, “Advertising Costs”. The advertising costs were $5,907, and $34,960 for the three months ended March 31, 2011 and 2010, respectively.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Research and Development Costs

		Research and development costs relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed when incurred in accordance with the FASB ASC 730, "Research and Development". Research and development costs were immaterial for the year three months March 31, 2011 and 2010, respectively.

		Value-added Tax ("VAT")

		Sales revenue represents the invoiced value of goods, net of a value-added tax (VAT). All of the Company’s products that are sold in PRC are subject to a Chinese value-added tax at a rate of 17% of the gross sales price or at a rate approved by the Chinese local government. This VAT may be offset by VAT paid on purchase of raw materials included in the cost of producing the finished goods. The Company presents VAT on a net basis.

		Sales Tax

		Baishui Dukang produces and distributes distilled liquor, which is subject to sales tax in PRC. Sales tax rate is $0.14 (RMB1.00) per kilogram and 10%-20% of gross sales revenue. The Company presents sales tax on a net basis.

		Related Parties

		For the purposes of these financial statements, parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

		Due from/to Affiliates

		Due from/to affiliates represent temporally short-term loans to/from affiliates, which are directly or indirectly, beneficially and in the aggregate, majority-owned and controlled by directors and principal shareholders of the Company. These loans are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. Cash flows from due from related parties are classified as cash flows from investing activities. Cash flows from due to related parties are classified as cash flows from financing activities.

		Loans from Directors and Officers

		Loans from directors and officers are temporally short-term loans from our directors and officers to finance the Company’s operation due to lack of cash resources. These loans are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. Cash flows from these activities are classified as cash flows from financing activates.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Lease

		On March 4, 2002, Baishui Dukang signed a lease agreement with Shaanxi Sanjiu Dukang Liquor Production Co., Ltd ("Sanjiu"), pursuant to which Baishui Dukang agreed to lease the liquor production facility of Sanjiu, including all the fixed assets and the piece of land that the fixed assets attached, for a period of 20 years, which was latterly extended to 30 year. On February 3, 2005, Sanjiu was acquired by Shannxi Baishui Dukang Liquor Development Co., Ltd, an affiliate of the Company. On April 30, 2005, Baishui Dukang signed a complementary lease agreement with Shannxi Baishui Dukang Liquor Development Co., Ltd, pursuant to which Baishui Dukang agreed to continue to lease the liquor production facility for the rest of the original 30-year period. Baishui Dukang also agreed to pay $362,450 (RMB 3,000,000) to the local government to continue the lease and to absorb the pension and unemployment insurance expenses of Sanjiu's original employees. All the pension and unemployment insurance payments were to be made directly to the local China Social Security Administration to satisfy all of the pension and unemployment insurance expenses that were required in connection with the original Sanjiu employees.

		Pursuant to the lease agreement, Baishui Dukang is required to absorb the pension and unemployment insurance expenses of Sanjiu's original employees until they all reach their retirement age. Pursuant to the applicable laws in PRC, male employees retire when they reach 60 years old, while female employees retire when they reach 55 years old. Accordingly, Sanjiu’s original employees will gradually retire until Year 2032. The pension and unemployment insurance expenses are based on a certain percentage of the employees’ gross payroll. The percentage may be changed as the applicable law is amended. In practice, the expenses can be based on the local average salary published by the local government. Over the life of the lease, the Management anticipates the percentage will remain the same while the local average salary will increase 4% annually. The number of employees that we need to absorb their pension and unemployment insurance expenses will gradually decrease as Sanjiu’s original employees reach their retirement ages. To the best of our estimation, we anticipate the future payment for pension and unemployment insurance expenses for Sanjiu’s original employees as rental payment follows:

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 5-		SIGNIFICANT ACCOUNTING POLICIES (continued)

		Lease (continued)


Estimated Pension and Unemployment Insurance Expenses

	Pension Insurance Expense					Unemployment Insurance Expense					Total
Year	Province average salary (RMB)	Annual increase rate	Percentage	No. of employees	Estimated pension insurance expense (RMB)	City average salary (RMB)	Annual increase rate	Percentage	No. of employees	Estimated pension insurance expense	USD$1.00 = RMB¥6.61180 @12/31/2010		Present Value as of December 31, 2010 (the incremental interest rate is 8%)
											(RMB)	(USD)	(RMB)	(USD)
2010	13,784	4%	20%	316	871,143	10,980	4%	2.50%	316	86,745	957,888	144,876
2011	14,335	4%	20%	309	885,919	11,420	4%	2.50%	309	88,217	974,136	147,333	835,165	126,314
2012	14,909	4%	20%	301	897,502	11,876	4%	2.50%	301	89,370	986,872	149,259	783,411	118,487
2013	15,505	4%	20%	282	874,483	12,351	4%	2.50%	282	87,078	961,561	145,431	706,776	106,896
2014	16,125	4%	20%	268	864,312	12,846	4%	2.50%	268	86,065	950,377	143,740	646,811	97,827
2015	16,770	4%	20%	258	865,344	13,359	4%	2.50%	258	86,168	951,512	143,911	599,614	90,688
2016	17,441	4%	20%	244	851,123	13,894	4%	2.50%	244	84,752	935,875	141,546	546,074	82,591
2017	18,139	4%	20%	228	827,124	14,449	4%	2.50%	228	82,362	909,486	137,555	491,367	74,317
2018	18,864	4%	20%	215	811,162	15,027	4%	2.50%	215	80,772	891,935	134,900	446,189	67,484
2019	19,619	4%	20%	199	780,828	15,629	4%	2.50%	199	77,752	858,580	129,856	397,689	60,148
2020	20,404	4%	20%	173	705,963	16,254	4%	2.50%	173	70,297	776,260	117,405	332,925	50,353
2021	21,220	4%	20%	148	628,103	16,904	4%	2.50%	148	62,544	690,647	104,457	274,265	41,481
2022	22,068	4%	20%	135	595,849	17,580	4%	2.50%	135	59,332	655,182	99,093	240,909	36,436
2023	22,951	4%	20%	113	518,698	18,283	4%	2.50%	113	51,650	570,348	86,262	194,181	29,369
2024	23,869	4%	20%	102	486,933	19,015	4%	2.50%	102	48,487	535,420	80,979	168,787	25,528
2025	24,824	4%	20%	77	382,290	19,775	4%	2.50%	77	38,067	420,357	63,577	122,698	18,557
2026	25,817	4%	20%	52	268,497	20,566	4%	2.50%	52	26,736	295,233	44,652	79,792	12,068
2027	26,850	4%	20%	41	220,167	21,389	4%	2.50%	41	21,923	242,091	36,615	60,583	9,163
2028	27,924	4%	20%	25	139,618	22,244	4%	2.50%	25	13,903	153,521	23,219	35,573	5,380
2029	29,041	4%	20%	18	104,546	23,134	4%	2.50%	18	10,410	114,957	17,387	24,664	3,730
2030	30,202	4%	20%	12	72,485	24,059	4%	2.50%	12	7,218	79,703	12,055	15,834	2,395
2031	31,410	4%	20%	6	37,692	25,022	4%	2.50%	6	3,753	41,446	6,268	7,624	1,153
2032	32,667	4%	20%	1	6,533	26,023	4%	2.50%	1	651	7,184	1,087	1,224	185
Total					11,825,175					1,177,507	13,002,682	1,966,587	7,012,153	1,060,551

We consolidate Sanjiu into our consolidated financial statement based on FASB ASC 810-10-25 (FIN 46R). Since Sanjiu had ceased operation when we executed the lease agreement, we will consolidate the leased assets and the lease payment obligation, including the $362,450 (RMB 3,000,000) paid directly to the local government and the payments that were to be made directly to the local China Social Security Administration to satisfy all of the pension and unemployment insurance payments that were required in connection with the original Sanjiu employees in our consolidated financial statements.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Pension and Employee Benefits

		Full time employees of the PRC entities participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to accrue for these benefits based on certain percentages of the employees' salaries. The Management believes full time employees who have passed the probation period are entitled to such benefits. The total provisions for such employee benefits was $17,515 and $5,572 for the three months ended March 31, 2011 and 2010, respectively.

		Government Subsidies

		The Company records government grants as current liabilities upon reception. A government subsidy revenue is recognized only when there is reasonable assurance that the Company has complied with all conditions attached to the grant. The Company recognized government subsidy of $0 and $0 for the three months ended March 31, 2011 and 2010, respectively.

		Income Taxes

		The Company accounts for income tax in accordance with FASB ASC 740-10-25, which requires the asset and liability approach for financial accounting and reporting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

		Effective January 1, 2007, the Company adopted a new FASB guidance, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The new FASB guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The new FASB guidance also provides guidance on de-recognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition. In accordance with the new FASB guidance, the Company performed a self-assessment and concluded that there were no significant uncertain tax positions requiring recognition in its consolidated financial statements.

		The Company accounts for income taxes in interim periods in accordance with FASB ASC 740-270, "Interim Reporting". The Company has determined an estimated annual effect tax rate. The rate will be revised, if necessary, as of the end of each successive interim period during the Company's fiscal year to its best current estimate. The estimated annual effective tax rate is applied to the year-to-date ordinary income (or loss) at the end of the interim period.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Statutory Reserves

		Pursuant to the applicable laws in PRC, PRC entities are required to make appropriations to three non-distributable reserve funds, the statutory surplus reserve, statutory public welfare fund, and discretionary surplus reserve, based on after-tax net earnings as determined in accordance with the PRC GAAP, after offsetting any prior years’ losses. Appropriation to the statutory surplus reserve should be at least 10% of the after-tax net earnings until the reserve is equal to 50% of the Company's registered capital. Appropriation to the statutory public welfare fund is 5% to 10% of the after-tax net earnings. The statutory public welfare fund is established for the purpose of providing employee facilities and other collective benefits to the employees and is non-distributable other than in liquidation. Beginning from January 1, 2006, enterprise is no more required to make appropriation to the statutory public welfare fund. The Company does not make appropriations to the discretionary surplus reserve fund.

		Since the Company has been accumulating deficiency, no contribution has been made to statutory surplus reserve fund and statutory public welfare reserve fund to date. The company will be required to make contribution to the statutory surplus reserve fund and statutory public welfare reserve fund upon the achievement of positive retained earnings, which means elimination of accumulated deficit and making further positive net income.

		Comprehensive Income

		FASB ASC 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income, as presented in the accompanying statements of changes in owners' equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

		Segment Reporting

		FASB ASC 820, “Segments Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. The Company currently operates in two principal business segments.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Earnings (Loss) Per Share

		The Company reports earnings per share in accordance with FASB ASC 260, “Earnings Per Share” , which 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 (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There are no potentially dilutive securities outstanding (options and warrants) for the three months ended March 31, 2011 and 2010, respectively.

		Fair Value of Measurements

		Accounting principles generally accepted in the United States define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

		Level 1:	Unadjusted quoted prices in active markets for identical assets or liabilities.

		Level 2:	Input other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company.

		Level 3:	Unobservable inputs. Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability.

		An asset or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 and Level 2 assets or liabilities.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Recent Accounting Pronouncements

		In January 2011, the FASB temporarily deferred the disclosures regarding troubled debt restructurings which were included in the disclosure requirements about the credit quality of financing receivables and the allowance for credit losses which was issued in July 2010. In April 2011, the FASB issued additional guidance and clarifications to help creditors in determining whether a creditor has granted a concession, and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. The new guidance and the previously deferred disclosures are effective July 1, 2011 applied retrospectively to January 1, 2011. Prospective application is required for any new impairments identified as a result of this guidance. The Management does not expect the adoption of this new guidance will have a material effect on the Company’s financial position and results of operations.

		In December 2010, FASB issued an amendment to the disclosure of supplementary pro forma information for business combinations. The amendments in this ASU specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. The adoption of this new guidance did not have a material effect on the Company’s financial position and results of operations.

		In December 2010, FASB issued an amendment to goodwill impairment test. The amendments modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. The qualitative factors are consistent with the existing guidance and examples, which require that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. The adoption of this new guidance did not have a material effect on the Company’s financial position and results of operations.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 5-	SIGNIFICANT ACCOUNTING POLICIES (continued)

		Recent Accounting Pronouncements (continued)

		In April 2010, FASB issued an amendment to Stock Compensation. The amendment clarifies that an employee stock-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity shares trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The adoption of this new guidance did not have a material effect on the Company’s financial position and results of operations.

		In January 2010, the FASB issued additional disclosure requirements for fair value measurements. The guidance requires previous fair value hierarchy disclosures to be further disaggregated by class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the statement of financial position. In addition, significant transfers between Levels 1 and 2 of the fair value hierarchy are required to be disclosed. These additional requirements became effective January 1, 2010 for quarterly and annual reporting. The adoption of this new guidance did not have a material effect on the Company’s financial position and results of operations. In addition, the fair value disclosure amendments also require more detailed disclosures of the changes in Level 3 instruments. These changes are effective beginning January 1, 2011.The adoption of these new guidances did not have a material effect on the Company’s financial position and results of operations.

		In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force, that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing 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 objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. The ASU is effective beginning January 1, 2011. The adoption of this new guidance did not have a material effect on the Company’s financial position and results of operations.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 6-	PREPAID EXPENSES

		Prepaid expenses consist of the following:
				March 31,		December 31,
				2011		2010
				(unaudited)

		Machinery and parts	$	38,204	$	39,626
		Raw materials and supplies		324,908		485,372
		Packing and supply materials		56,244		96,626
		Office expenses		9,649		4,072
		Total	$	429,005	$	625,696

	Note 7-	INVENTORIES

		Inventories consist of following:
				March 31,		December 31,
				2011		2010
				(unaudited)

		Finished goods	$	987,989	$	948,300
		Work-in-progress		2,176,344		1,985,260
		Raw materials		55,696		102,934
		Supplies and packing materials		365,972		237,499
			$	3,586,001	$	3,273,993

	Note 8-	PROPERTY, PLANT AND EQUIPMENT

		The following is a summary of property, plant and equipment:
				March 31,		December 31,
				2011		2010
				(unaudited)

		Building and warehouses	$	3,191,180	$	3,171,057
		Machinery and equipment		2,031,088		2,015,433
		Office equipment and furniture		183,448		182,278
		Motor vehicles		343,223		341,059
		Leased assets		2,314,875		2,300,810
				8,063,814		8,010,637

		Less: Accumulated depreciation		(3,996,104)		(3,849,240)
				4,067,710		4,161,397

		Add: Construction in progress		339,292		262,665

		Total	$	4,407,002	$	4,424,062

		Depreciation expense charged to operations was $89,608 and $89,327 for the three months ended March 31, 2011 and 2010, respectively.

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 9-	INTANGIBLE ASSETS

		The following is a summary of intangible assets, less amortization:
					March 31,		December 31,
					2011		2010
					(unaudited)

		Land use right		$	2,020,148	$	2,007,407
		Trade Mark of "Xidenghui"			68,492		68,060
		Trade Mark of "Baishui Du Kang"			25,114		24,955
		Total intangible assets			2,113,754		2,100,422

		Less: Accumulated amortization			(110,358)		(97,300)

		Total intangible assets, net		$	2,003,396	$	2,003,122

		Amortization expense charged to operations was $12,404 and $2,454 for the three months ended March 31, 2011 and 2010, respectively.

	Note 10-	DUE FROM RELATED PARTIES

		Due from related parties consists of the following:
					March 31,		December 31,
					2011		2010
		Name of Related Party	Description		(unaudited)

			Non-consolidated
		Shaanxi Yellow-river Wetlands Park Co., Ltd.	subsidiary	$	-	$	1,777,125
		Shaanxi Gurong Agriculture Development Co., Ltd.	Affiliate		-		385,674
		Shaanxi Zhongke Spaceflight Agriculture
		Development Stock Co., Ltd.	Affiliate		-		15,102
		Shaanix Mining New Energy Co., Ltd.	Affiliate		-		399,286
		Total		$	-	$	2,577,187

	Note 11-	ACCRUED EXPENSES

		Accrued expenses consist of the following:
					March 31,		December 31,
					2011		2010
					(unaudited)

		Accrued payroll		$	30,972	$	26,448
		Accrued employee benefits			59,688		59,312
		Accrued pension and employee benefit			87,178		69,824
		Accrued office expenses			45,141		4,928
		Total		$	222,979	$	160,512

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Note 12-	DUE TO RELATED PARTIES

		Due to related parties consists of the following:

						March 31,		December 31,
						2011		2010
		Name of Related Party		Description		(unaudited)

		Shaanxi Dukang Group Co., Ltd.		Affiliate	$	1,900,111	$	3,354,548
		Shaanxi Baishui Dukang Marketing Management Co., Ltd.		Affiliate		13,390		13,306
		Shaanxi Baishui Dukang Commercial and Trade Co., Ltd.		Affiliate		75,141		74,668
		Shaanxi Baishui Dukang Spirits Industry Development Co., Ltd.		Affiliate		1,319,799		865,303
		Shaanxi Baishui Shiye Co., Ltd.		Affiliate		386,965		399,649
		Shaanxi Lantian Fuping Investment Co., Ltd.		Affiliate		304,409		302,489
		Shaanxi Changjiang Petrol Co., Ltd.		Affiliate		254,182		252,579
		Mr. Hongjun Zhang		Shareholder		2,412,147		2,095,957
		Mr. Guoqi Diao		Prior director of Xidenghui		13,330		406,482
		Ms. Ping Li		Secretary of the Board		606,581		602,755
		Mr. Pingjun Nie		Shareholder		4,554,761		4,526,035
		Ms. Hong Ge		Prior director of Xidenghui		275,407		273,670
		Mr.Hailong Tian		Prior director of Xidenghui		2,880,055		2,861,891
		Ms. Ming Chen		Shareholder		354,013		182,387
		Mr. Shengli Wang		Prior director of Xidenghui		811,672		806,553
		Total			$	16,161,963	$	17,018,272

	Note 13-	SALES OF LIQUOR TO RELATED PARTY

		The Company generally sells liquor to liquor distributors. Some of these liquor distributors are our affiliates, which are directly or indirectly, beneficially and in the aggregate, majority-owned and controlled by directors and principal shareholders of the Company. The amount sold to these affiliates follows:




						For the Three Months Ended
						March 31,
						2011		2010
		Name of Related Party	Description			(unaudited)		(unaudited)

		Shaanxi Dukang Group Co., Ltd.	Affiliate		$	358,244	$	218,969
		Shaanxi Baishui Dukang Commercial and Trade Co., Ltd.	Affiliate			-		56,167
		Shanxi Baishui Shiye Co., Ltd.	Affiliate			67,803		-
					$	426,047	$	275,136

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Note 14-	BANK LOANS

		Bank loan consists of the following as of March 31, 2011:
				Loan			Monthly		Guaranteed
		Financial Institutions		Amount	Duration		Interest Rate		By
		Baishui Branch of Agriculture Bank of China	$	761,023	08/02/2010-08/01/2011		6.372%		Buildings
		Total	$	761,023

		Interest expense charged to operations for this bank loan was $13,270 for the three months ended March 31, 2011. The weighted-average outstanding bank loan balance is $761,023; and the weighted-average monthly interest rate is 5.829‰.




		Bank loan consists of the following as of December 31, 2010:
				Loan			Annual		Guaranteed
		Financial Institutions		Amount	Duration		Interest Rate		By
		Baishui Branch of Agriculture Bank of China	$	756,224	08/02/2010-08/01/2011		6.372%		Buildings
		Total	$	756,224

		Interest expense charged to operations for this bank loan was $20,124 for the year ended December 31, 2010. The weighted-average outstanding bank loan balance is $305,144; and the weighted-average monthly interest rate is 5.49‰.



	Note 15-	SEGMENT REPORTING

		The Company operates in two reportable business segments that are determined based upon differences in products and services. Summarized information by business segment for the year ended December 31, 2010 and 2009 is as follows:


							For the Three Months Ended
							March 31,
							2011		2010
							(unaudited)		(unaudited)
		REVENUE
		Sales of Liquor				$	427,679	$	290,404
		Franchise Fees					283,817		199,838

		COST OF SALES
		Sales of Liquor				$	314,451	$	277,449
		Franchise Fees					-		-

		GROSS PROFITS
		Sales of Liquor				$	113,228	$	12,955
		Franchise Fees					283,817		199,838

							March 31,		December 31,
							2011		2010
							(unaudited)

		TOTAL ASSETS OF LIQUOR PRODUCTION AND DISTRIBUTION				$	12,507,829	$	12,314,784

		TOTAL ASSETS OF BRAND NAME FRANCHISE				$	4,718,292	$	3,574,991

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 15-	SEGMENT REPORTING (continued)

		Major Customers

		There were nine major customers who made sales approximately 5% or more of the Company’s total sales as summarized in the following:

					For the Three Months Ended March 31,
					2011			2010
					(unaudited)			(unaudited)

		Major	Type of			Percentage of			Percentage of
		Customer	Customer		Revenue	Total Revenue		Revenue	Total Revenue
		Shaanxi Dukang Group Co., Ltd.	Distributor	$	358,244	50.35%	$	218,969	44.67%
		Shaanxi Baishui Dukang Shiye Co., Ltd.	Distributor		67,803	9.53%		56,167	11.46%
		Mr. Jincai Bai'	Licensee		43,203	6.07%		-	-
		Ms. Xiaoyan Shi	Agent		50,403	7.08%		-	-
		Mr. Anxian Xie	Agent		43,203	6.07%		48,381	9.87%
		Ms. Xiaoli Du	Agent		36,002	5.06%		-	-
		Ms. Sue Dong	Agent		36,002	5.06%		45,616	9.30%
		Total		$	634,860	89.23%	$	369,133	75.30%

		Major Suppliers

		There were six major customers who made sales approximately 5% or more of the Company’s total sales as summarized in the following:

					For the Three Months Ended March 31,
					2011			2010
					(unaudited)			(unaudited)

		Major				Percentage of			Percentage of
		Suppliers			Purchase	Total Purchase		Purchase	Total Purchase
		Sichuan Yibingong Mould Factory Co., Ltd.		$			$	26,985	30.37%
		Hunan Xinshiji Taochi Co., Ltd.			61,871	25.42%		-	-
		Hunan Fengling Liangyou China Co., Ltd.			27,426	11.27%		43,003	48.39%
		Wenxi Hongye Glass CO.,Ltd.			-	-		11,253	12.66%
		Shanxi Wenxiyingfa Glass Co., Ltd.			68,097	27.98%		6,527	7.34%
		Sichuan Guangan Defeng Glass Co., Ltd.			13,879	5.70%		-	-
		Yuncheng Aofeng Glass Co., Ltd.			50,799	21%		-	-
		Total		$	222,072	91.24%	$	87,766	98.78%

CHINA DU KANG CO., LTD. AND SUBSIDIARIES
F/K/A AMSTAR FINANCIAL HOLDINGS, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Note 19-	STATEMENT OF CONSOLIDATED COMPRESENTATIVE INCOME

				For the Three Months Ended
				March 31,
				2011		2010
				(unaudited)		(unaudited)

		Net income	$	59,873	$	(36,012)
		Other comprehensive income, net of tax:
		Effects of foreign currency conversion		(45,783)		(1,102)
		Total other comprehensive, not of tax		(45,783)		(1,102)
		Comprehensive income		14,090		(37,114)
		Comprehensive income attributable to
		the noncontrolling interest		45,552		18,166
		Comprehensive income attributable to
		China Du Kang Co., Ltd.	$	(31,462)	$	(55,280)

	Note 20-	COMMITMENTS AND CONTINGENCIES

		Contingent Liability from Prior Operation

		Prior to the merger with Hong Kong Merit Enterprise Limited on February 11, 2008, the Company has not been active since discontinuing its financial service operations by December 31,2007. Management believes that there are no valid outstanding liabilities from prior operations. If a creditor were to come forward and claim a liability, the Company has committed to contest such claim to the fullest extent of the law. No amount has been accrued in the financial statements for this contingent liability.

		The Company’s assets are located in PRC and revenues are derived from operations in PRC.

		In terms of industry regulations and policies, the economy of PRC has been transitioning from a planned economy to market oriented economy. Although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reforms, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in PRC are still owned by the Chinese government. For example, all lands are state owned and are leased to business entities or individuals through governmental granting of Land Use Rights. The Chinese government also exercises significant control over PRC’s economic growth through the allocation of resources and providing preferential treatment to particular industries or companies. Uncertainties may arise with changing of governmental policies and measures.

		The Company faces a number of risks and challenges not typically associated with companies in North America and Western Europe, since its assets exist solely in the PRC, and its revenues are derived from its operations therein. The PRC is a developing country with an early stage market economic system, overshadowed by the state. Its political and economic systems are very different from the more developed countries and are in a state of change. The PRC also faces many social, economic and political challenges that may produce major shocks and instabilities and even crises, in both its domestic arena and in its relationships with other countries, including the United States. Such shocks, instabilities and crises may in turn significantly and negatively affect the Company's performance.

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

LIQUIDITY AND CAPITAL RESOURCES AND RESULTS OF OPERATIONS AS OF MARCH 31, 2011 AND FOR THE THREE MONTHS THEN ENDED (UNAUDITED)

We experienced a net income of $15,692 for the three months ended March 31, 2011 as compared to a loss of $(54,172) for the same period of 2010. Adjustments to reconcile the net loss to cash provided by operating activities included $44,181 for minority interest for the three months ended March 31, 2011 as compared to $(18,160) for the same period of 2010. Depreciation remained relatively stable at $89,608 from $89,327for the same respective periods. Also, amortization increased to $12,404 from $2,454.

Changes in operating assets and liabilities included an increase in accounts receivable from 0 from the period March 31, 2010 to $(539,729). It also included an increase in others payable from $50,993 to 73,096 for the same period. Prepaid expenses decreased from $311,938 for the three months ended March 31, 2010 to $200,075 for the same three months of 2011. Inventories for the same periods declined from $(395,199) to $(290,375). Accounts payable decreased for the same periods from $170,689 to $84,634. Similarly, accrued expenses decreased from $38,079 to $61,268 for the respective period, as did other payables from $6,995 to $1,421 and deferred revenue from $63,531 to $(72,754). Taxes payable for March 31, 2010 were $(20,314) as compared to $35,213 for the same period of 2011. Overall, net cash provided by operating activities declined from $250,045 for the three months ended March 31, 2010 to $(323,400) for the same period of 2011, which was primarily attributed to the increase in the accounts receivable..

Purchase of fixed assets for the three months ended March 31, 2010 were $(28,820) to $(77,067) for the same period of 2011. Purchase of land use rights increased from 0 to $(1,953,410) as did advances to related parties from 0 $(303,540) for the same periods. The net cash used by investing activities were $(28,820) and $(2,334,017) for the three months ended March 31, 2010 and 2011 respectively, the increase was primarily attributed to the purchase of land use right and advances to related parties.

Net cash used by financing activities changed from $(576,551) for the three months ended March 31, 2010 to $1,927,992 for the same period of 2011. The change was attributable to from the proceeds from related parties of $1,953,410 in the three months ended March 31, 2011, which was primarily used to purchase of land use right. Repayments to related parties went from $(1,026,358) for the three months ended 2010 and (1,518) for the same period 2011. We did not take or payback Bank loans for the three months ended March 31, 2011, as compared to paying back of bank loan of (292,567) in the three months ended March 31, 2010,. The change in net cash provided by financing activities increased from $(576,551) to $1,927,992 for the three months ended March 31, 2011. Cash at the end of the period for the three months ended March 31, 2010 was $298,027 and $1,314,259 as of March 31, 2011.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2011

Revenue

Total revenues for the period ended March 31, 2011 were $711,496 as compared to $490,242 for the same period of 2010. These include sales of liquor, which were $427,679 for the period ended March 31, 2011 and $290,404 for the same period of 2010. The license fees in the three months ended March 31, 2011 were $283,817 and $199,838 for the same period of 2010.

Operating Expenses

Expenses from operations totaled $271,468 and $219,832 for the three months ended March 31, 2011 and March 31, 2010, respectively. The losses from operations improved from ($7,039) for the three months March 31, 2010 to $125,577 for the three months ended March 31, 2011. Office expenses increased from $3,284 for the period ended March 31, 2010 to $15,842 for the same period of 2011. For the same periods respectively payroll increased from $51,255 to $78,288; employee benefits from $5,572 to $19,080; depreciation and amortization to $34,589 to $45,649; professional and consultancy fees from $35,034 to $25,104; loss on physical inventory count from 0 to $25,687; travel and entertainment from $45,848 to $11,029; and other general and administrative expenses from $1,723 to $33,872. Total general and administrative expenses declined from $184,388 for the three months ended March 31, 2010 to $263,827 for the same period 2011.

Selling Expenses

Total selling expenses improved from $35,444 for the three months ended March 31, 2010 to $7,641 for the same period of 2011. Advertising expenses increased from $34,960 to $5,907 for the respective periods. Travel and entertainment expense increased from $484 to $1,734 in the respective periods..

The changes in operating expenses, both selling expenses and general and administrative expenses arose form the company’s decision to change its distribution practices. The company has begun to move away from its emphasis on affiliates to a much broader network of third party resellers under distribution, licensing, or similar agreements.

We have historically funded our cash needs through a series of debt transactions, primarily with related parties. Our officers and directors and related parties have assured us that they will continue to provide capital infusions sufficient to fund operations over the next 12 months as needed, but they are under no legal obligation to do so. If our related parties are unable or unwilling to provide additional capital infusions we would likely require additional financing which would likely be on more unfavorable terms. If we are unable to attain additional capital there would likely be a material adverse affect on our operations and financial condition.

The related-parties include affiliates and individuals. Affiliates are companies which are directly or indirectly, beneficially and in the aggregate, majority-owned and controlled by directors, officers, and principal shareholders of the Company. Individuals include our officers, shareholders, and prior directors of subsidiaries.

Loans from related-parties are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. Accordingly, we have not paid any interest on these loans. Cash flows from due to related parties are classified as cash flows from financing activities, and cash flows from due from related parties are classified as cash flows from investing activities. Our liquidity is dependent upon the continuation of and expansion of our operations, receipt of revenues and additional infusions of capital provided by equity and debt financing. Management believes that the current program of sales through distributorship agreements will improve throughout 2011 and that margins overall will continue to improve thereby. Demand for our products is dependent on market acceptance of our liquor and conditions in the liquor and general beverage markets, and general economic conditions. All of our products are currently sold in the Peoples Republic of China and are heavily dependent on the economy, exchange rates, and consumption habits within the Peoples Republic of China. Many of these factors are cyclical and beyond the control of management.

CAPITAL RESOURCES

General

Access to short and long term sources of cash is important to the continuation of our research and development and commencement of our operations. Our ability to operate is limited by our financial capacity to obtain cash and additional lines of credit in the future.

Total assets for the periods ending December 31, 2010 and March 31, 2011 were $16,787,333 and $14,108,803, respectively. Total current assets decreased for the same periods from $8,545,212 to $5,871,949, for the same period, which mostly occurred because of a decrease in due from related parties from $2,577,187 at December 31, 2010 to $0 at March 31, 2011. The prepaid expenses also decreased from $625,696 as of December 31, 2010 to $429,005 at March 31, 2011. Meanwhile, accounts receivable increased from 0 at December 31, 2010 to $541,314 at March 31, 2011. Inventories increased slightly from $3,273,993 to $3,586,001 for the same respective periods. Other receivables declined from $74,210 to $1,370.

Property, plant and equipment declined slightly from $4,424,062 at December 31, 2010 to $4,407,002 at March 31, 2011 due to normal depreciation. For the same respective periods net intangible assets remained essentially unchanged from $2,003,122 to $2,003,396 and long term investment from $1,814,937 to $1,826,456 due to the change of currency exchange rate.

Total liabilities decreased from December 31, 2010 to March 31, 2011 from $24,031,445 to $21,338,825. Total current liabilities increased slightly from $23,097,208 to $20,428,468. Land use right purchase payable was were the most significant change of current liabilities, decreasing from $1,946,792 at December 31, 2010 to $0 at March 31, 2011, as we paid off the purchase liability. The due to related parties decreased from 17,018,272 at December 31, 2010 to $16,161,963 as of March 31, 2011. Deferred revenue for the same periods decreased slightly from $1,587,115 to $1,524,221. There were also increase in accounts payable from $891,409 to $981,949; taxes payable from $502,574 to $541,080 and accrued expenses from $160,512 to $222,979,

Shareholder Equity

Shareholders equity at March 31, 2011 and December 31, 2010 were $(7,230,022) and $(7,244,112) respectively. Our accumulated deficit was $(17,314,061) and $(17,329,753). Common stock remained the same at $100,114 as did paid in capital at $10,671,262.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We do not employ derivative financial instruments and have no foreign exchange contracts. Our financial instruments are primarily cash and cash equivalents, but also include receivables, payables, long term debts, and short term notes. We do not try to manage risk of foreign exchange rates or engage in hedging activities.

Foreign Exchange Rates

All of our sales are in the Chinese currency, Renminbi (RMB) but our financial reporting is in U. S. dollars. We are therefore subject to the fluctuations in foreign exchange rates in our reporting requirements. While exchange rates between RMB and USD have been relatively stable, there can be no assurance that changes in foreign exchange rates will not have a material adverse impact on our financial reporting. The impact could express itself in reduced revenues and reduced or eliminated earnings, which could have a negative effect on the prices for our securities.

The balance sheet amounts with the exception of equity at March 31, 2011 were translated at 6.5701 RMB to $1.00 USD as compared to 6.6118 RMB at December 31, 2010. The equity accounts were stated at their historical rate.

Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in the statement of changes in owners’ equity and amounted to $(928,374,) and $(881,220) as of March 31, 2011 and December 31, 2010, respectively. The average translation rates applied to income statement accounts for the three months ended March 31, 2011 and 2010 were 6.5894 RMB and 6.83603 RMB, respectively.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and our Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining our disclosure controls and procedures. The controls and procedures established by us are designed to provide reasonable assurance 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.

To evaluate the effectiveness of our internal controls over financial reporting, we have adopted the framework prescribed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We believe that this framework will assist in the provision of reasonable assurance of the effectiveness and efficiency of operations, the reliability of financial reporting, and compliance with applicable laws and regulations. In adopting the COSO framework, we maintain a control environment, perform risk assessments, carry out control activities, emphasize quality information and effective communication, and perform monitoring. In the maintenance of a control environment, we are committed to integrity and ethical values as well as to competence. We strive to assign authority and responsibility in a manner that supports our internal controls, and we also maintain human resources policies and procedures designed to support our internal controls. Our risk assessments are designed to ensure the achievement of company-wide and process-level objectives as well as to identify and analyze risks while managing change. We believe that all of these components together form a foundation for sound internal control through directed leadership, shared values and a culture that emphasizes accountability for control.

As of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

The Certifying Officers have also concluded, based on our evaluation of our controls and procedures that as of March 31, 2011, our internal controls over financial reporting are effective and provide a reasonable assurance of achieving their objective.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements under all potential conditions. Therefore, effective internal control over financial reporting provides only reasonable, and not absolute, assurance that a restatement of our financial statements would be prevented or detected.

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

Changes in Internal Control Over Financial Reporting

There were no changes in the our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 4(T). CONTROLS AND PROCEDURES

(a) Conclusions regarding disclosure controls and procedures. Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management is responsible for establishing and maintaining adequate internal control over financial reporting.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Exchange Act as of December 31, 2009, and, based on their evaluation, as of the end of such period, the our disclosure controls and procedures were effective as of the end of the period covered by the Annual Report,

(b) Management’s Report On Internal Control Over Financial Reporting. It is management’s responsibilities to establish and maintain adequate internal controls over the Company’s financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers and effected by the issuer’s 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 the assets of the issuer; and

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

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

As of the end of the period covered by the Annual Report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal control over financial reporting.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, internal controls over financial reporting were effective as of the end of the period covered by the Report.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

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

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

PART II

ITEM 1. LEGAL PROCEEDINGS.

We are not presently involved in any litigation that is material to our business. We are not aware of any pending or threatened legal proceedings. In addition, none of our officers, directors, promoters or control persons has filed or been involved for the past five years:

in any bankruptcy petition

in any conviction of a criminal proceeding or involved in a pending criminal proceeding (excluding traffic violations and minor offenses)

is subject to any order, judgment or decree enjoining, barring suspending or otherwise limiting their involvement in any type of business, securities, or banking activities,

or has been found to have violated a federal or state securities or commodities law.

There have been no securities trading suspensions by any regulator, and there is no pending or threatened litigation for which the adverse effect, assuming an unfavorable outcome, would exceed $25,000.

The Company’s prior CEO, Howard Wayland, Jr., filed for protection from creditors under Chapter 7 of the United States Bankruptcy Code in Houston, TX. Mr. Wayland resigned as CEO in 2008 and resigned as a director prior to filing the petition. Mr. Wayland discharged, among other things, various guarantees he had made in connection with the prior operations of the Company.

We may be subject to, from time to time, various legal proceedings relating to claims arising out of our operations in the ordinary course of our business. We are not currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on the business, financial condition, or results of operations of the Company.

ITEM 1A. RISK FACTORS.

In addition to the other information set forth in this report, you should carefully consider the following factors, which could materially affect our business, financial condition or future results. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deems to be immaterial also may materially adversely affect our business, financial condition or results of operations.

OUR AUDITORS HAVE NOTED THERE IS CERTAIN DOUBT ABOUT OUR ABILITY TO OPERATE AS A GOING CONCERN

As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $17,314,061 at March 31, 2011 that includes losses of $(102,071) and $(515,951) for the year ended December 31, 2010 and 2009, respectively. In addition, the Company has a working capital defiency of $14,556,519 a shareholders' deficiency of $7,230,022 at March 31, 2011. These factors raise certain doubt about its ability to continue as a going concern.

Management has taken steps to revise the Company's operating and financial requirements. The Company is actively pursuing additional funding and a potential merger or acquisition candidate and strategic partners, which would enhance owners' investment. However, there can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing stockholders.

The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

WE MAY INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.

We expect to incur significant costs associated with our public company reporting requirements, costs associated with applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC. We expect all of these applicable rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. While we have no experience as a public company, we estimate that these additional costs will total approximately $60,000 per year. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

RISKS RELATING TO OUR SECURITIES

WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK AND YOU MAY NEVER RECEIVE DIVIDENDS. THERE IS A RISK THAT AN INVESTOR IN OUR COMPANY WILL NEVER SEE A RETURN ON INVESTMENT AND THE STOCK MAY BECOME WORTHLESS.

We have never paid dividends on our common stock. We intend to retain earnings, if any, to finance the development and expansion of our business. Future dividend policy will be at the discretion of the Board of Directors and will be contingent upon future earnings, if any, our financial condition, capital requirements, general business conditions and other factors. Future dividends may also be affected by covenants contained in loan or other financing documents, which may be executed by us in the future. Therefore, there can be no assurance that cash dividends of any kind will ever be paid. If you are counting on a return on your investment in the common stock, the shares are a risky investment.

THERE IS CURRENTLY NO SUBSTANTIAL MARKET FOR OUR COMMON STOCK AND NO ASSURANCE THAT ONE WILL DEVELOP.

There is currently on an extremely limited trading market for our shares of Common Stock, under the symbol “CDKG.” We have provided no public information and our symbol contains a “skull and crossbones” insignia on the pink sheets until this filing. We currently have a “stop sign” insignia. We are filing this information partly to provide such information to the public although there can be no assurance that a more substantial market will ever develop or be maintained. Any market price for shares of our Common Stock is likely to be very volatile, and numerous factors beyond our control may have a significant adverse effect. In addition, the stock markets generally have experienced, and continue to experience, extreme price and volume fluctuations which have affected the market price of many small capital companies and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions, may also adversely affect the market price of our Common Stock. Further, there is no correlation between the present limited market price of our Common Stock and our revenues, book value, assets or other established criteria of value. The present limited quotations of our Common Stock should not be considered indicative of the actual value of the Company or our Common Stock.

Future sales of our common stock could put downward selling pressure on our shares, and adversely affect the stock price. There is a risk that this downward pressure may make it impossible for an investor to sell his shares at any reasonable price.

Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could put downward selling pressure on our shares, and adversely affect the market price of our common stock. Such sales could be made pursuant to Rule 144 under the Securities Act of 1933, as amended, as shares become eligible for sale under the Rule.

BECAUSE OUR SHARES ARE DEEMED HIGH RISK “PENNY STOCKS,” YOU MAY HAVE DIFFICULTY SELLING THEM IN THE SECONDARY TRADING MARKET.

The Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a market price (as therein defined) less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Additionally, if the equity security is not registered or authorized on a national securities exchange, the equity security also constitutes a "penny stock." As our common stock falls within the definition of penny stock, these regulations require the delivery, prior to any transaction involving our common stock, of a risk disclosure schedule explaining the penny stock market and the risks associated with it. These regulations generally require broker-dealers who sell penny stocks to persons other than established customers and accredited investors to deliver a disclosure schedule explaining the penny stock market and the risks associated with that market. Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. These regulations also impose various sales practice requirements on broker-dealers. In addition, monthly statements are required to be sent disclosing recent price information for the penny stocks. The ability of broker/dealers to sell our common stock and the ability of shareholders to sell our common stock in the secondary market is limited. As a result, the market liquidity for our common stock is severely and adversely affected. We can provide no assurance that trading in our common stock will not be subject to these or other regulations in the future, which would negatively affect the market for our common stock.

IF A MARKET DEVELOPS FOR OUR SECURITIES THE COULD BE VOLATILE AND MAY NOT APPRECIATE IN VALUE.

If a market should develop for our securities, of which we have no assurance, the market price is likely to fluctuate significantly. Fluctuations could be rapid and severe and may provide investors little opportunity to react. Factors such as changes in results from our operations, and a variety of other factors, many of which are beyond the control of the Company, could cause the market price of our common stock to fluctuate substantially. Also, stock markets in penny stock shares tend to have extreme price and volume volatility. The market prices of shares of many smaller public companies securities are subject to volatility for reasons that frequently unrelated to the actual operating performance, earnings or other recognized measurements of value. This volatility may cause declines including very sudden and sharp declines in the market price of our common stock. We cannot assure investors that the stock price will appreciate in value, that a market will be available to resell your securities or that the shares will retain any value at all.

RISKS RELATING TO DOING BUSINESS IN THE PEOPLE'S REPUBLIC OF CHINA

WE ARE SUBJECT TO THE POLITICAL AND ECONOMIC POLICIES OF THE PEOPLES REPUBLIC OF CHINA, AND GOVERNMENT REGULATION COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR INTENDED BUSINESS.

All of our assets and operations are in the PRC. As a result our operating results and financial performance as well as the value of our securities could be affected by any changes in economic, political and social conditions in China.

The Chinese government adopted an “open door” policy to transition from a planned economy to a market driven economy in 1978. Since then the economy of the PRC has undergone rapid modernization although the Chinese government still exerts a dominant force in the nation’s economy. There has historically been a substantial market in liquor consumption in China.

The Chinese government operates the economy in many industries through various five-year plans and even annual plans. A large degree of uncertainty is associated with potential changes in these plans. Since the economic reforms have no precedent, there can be no assurance that future changes will not create materially adverse conditions on our business.

Due to the limited effectiveness of judicial review, public opinion and popular voting there are few avenues available if the governmental action has a negative effect. Any adverse changes in the economic conditions, in government policies, or in laws and regulations in China could have a material adverse effect on the overall economic growth, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our business.

THERE ARE RISKS INHERENT IN DOING BUSINESS IN CHINA OVER WHICH WE HAVE NO CONTROL.

The political and economic systems of the PRC are very different from the United States and more developed countries. China remains volatile in its social, economic and political issues which could lead to revocation or adjustment of reforms. There are also issues between China and the United States that could result in disputes or instabilities. Both domestically and internationally the role of China and its government remain in flux and could suffer shocks, or setbacks that may adversely affect our business.

THE CHINESE LEGAL SYSTEM IS MUCH DIFFERENT FROM THAT OF THE UNITED STATES WITH CONSIDERABLY LESS PROTECTION FOR INVESTORS, AND IT MAY BE EXTREMELY DIFFICULT FOR INVESTORS TO SEEK LEGAL REDRESS IN CHINA AGAINST US OR OUR OFFICERS AND DIRECTORS, INCLUDING CLAIMS THAT ARE BASED UPON U.S. SECURITIES LAWS.

All of our current operations are conducted in China. All of our current directors and officers are nationals or residents of China. It may be difficult for shareholders to serve us with service of process in legal actions. All of the assets of these persons are located outside the United States in China. The PRC legal system is a civil law system. Unlike the common law system, the civil law system is based on written statutes in which decided legal cases have little value as precedents. As a result there is no established body of law that has precedential value as is the case in most western legal systems. Differences in interpretations and rulings can occur with little or no opportunity for redress or appeal.

As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon our officers and directors. Even if service of process was successful, considerable uncertainty exists as to whether Chinese courts would enforce U. S. laws or judgments obtained in the United States. Federal and state securities laws in the U. S. confer substantial rights to investors and shareholders that have no equivalent in China. Therefore a claim against us or our officers and/or directors or even a final judgment in the U. S. based on U. S. may not be heard or enforced by the Chinese courts.

In 1979, the PRC began to adopt a complex and comprehensive system legal system and has approved many laws regulating economic and business practices in the PRC including foreign investment. Currently many of the approvals required for our business can be obtained at a local or provincial level. We believe that it is generally easier and faster to obtain provincial approval than central government approval. Changes to existing laws that repeal or alter the local regulatory authority and replacements by national laws could negatively affect our business and the value of our securities.

NEW CHINESE LAWS MAY RESTRICT OUR ABILITY TO CONTINUE TO MAKE ACQUISITIONS OF BUSINESSES IN CHINA.

New regulations on the acquisition of businesses commonly referred to as “SAFE” regulations (State Administration of Foreign Exchange) were jointly adopted on August 8, 2006 by six Chinese regulatory agencies with jurisdictional authority. Known as the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors the new Rule requires creation of offshore Special Purpose Ventures, or SPVs, for overseas listing purposes. Acquisitions of domestic Chinese companies require approval prior to listing securities on foreign exchanges.

We obtained the approvals that we believe are required in making the acquisitions that formed the present company. Nonetheless, our growth has largely been by acquisition and we intend to continue to make acquisitions of Chinese businesses. Since the “SAFE” rules are very recent there are many ambiguities and uncertainties as to interpretation and requirements. These uncertainties and any changes or revisions to the regulations could limit or eliminate our ability to make new acquisitions of Chinese businesses in the future.

WE MAY BE AFFECTED BY RECENT CHANGES TO CHINA’S FOREIGN INVESTMENT POLICY, WHICH WILL CHANGE THE INCOME TAX RATE FOR FOREIGN ENTERPRISES.

On January 1, 2008 a new Enterprise Income Tax Law will take effect. The new law revises income tax policy and sets a unified income tax rate for domestic and foreign companies at 25 percent. It also abolishes favorable treatment for foreign invested enterprises. When the new law takes effect, foreign invested enterprises will no longer receive favorable tax treatment. Any earnings we may obtain may be adversely affected by the new law.

CHINA CONTROLS THE CURRENCY CONVERSION AND EXCHANGE RATE OF ITS CURRENCY, WHICH COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.

The Chinese government imposes control over the conversion of the Chinese currency, the Renminbi, into foreign currencies, although recent pronouncements indicate that this policy may be relaxed. Under the current system, the People's Bank of China publishes a daily exchange rate based on the prior day's activity which controls the inter-bank foreign exchange market. Financial institutions are permitted a narrow range above or below the exchange rate based on then current market conditions. Since 1997, the State Council has prohibited restrictions on certain international payments or transfers for current account items. The regulations also permit conversion for distributions of dividends to foreign investors. Investment in securities, direct investment, and loans, and security investment, are still subject to certain restrictions.

For more than a decade the exchange rate for the Renminbi (“RMB”) was pegged against the United States dollar leaving the exchange rates relatively stable at roughly 8 RMB for 1 US Dollar. The Chinese government announced in 2005 that it would begin pegging the Renminbi exchange rate against a basket of currencies, instead of relying solely on the U.S. dollar. This has recently caused the dollar to depreciate as against the RMB. As of December 31, 2009, the rate was 6.837 RMB for 1 US Dollar. Since all of our expected operations are in China, significant fluctuations in the exchange rate may materially and adversely affect our revenues, cash flow and overall financial condition.

CHINESE LAW REQUIRES APPROVAL BY CHINESE GOVERNMENT AGENCIES AND COULD LIMIT OR PROHIBIT THE PAYMENT OF DIVIDENDS FROM ANY PROCEEDS OBTAINED FROM LIQUIDATION OF OUR ASSETS.

All of our assets are located inside the Peoples Republic of China. Chinese law governs the distributions that can be made in the event of liquidation of assets of foreign invested enterprises. While dividend distribution is allowed it is subject to governmental approval. Liquidation proceeds would also be subject to foreign exchange control. We are unable to predict the outcome in the event of liquidation insofar as it affects dividend payment to non- Chinese nationals.

CHINA HAS BEEN THE LOCALE FOR THE OUTBREAK OF VARIOUS DISEASES AND A PANDEMIC CAUSED BY DISEASES SUCH AS SARS, THE AVIAN FLU, OR SIMILAR DISEASES COULD HAVE A MATERIALLY ADVERSE EFFECT ON OUR WORKERS AND EVEN THE CHINESE ECONOMY IN GENERAL, WHICH MAY ADVERSELY AFFECT BUSINESS.

The World Health Organization reported in 2004 that large scale outbreaks of avian flu throughout most of Asia, including China, had nearly caused a pandemic that would have resulted in high mortality rates and which could cause wholesale civil and societal disruption. There have also been several potential outbreaks of similar pathogens in China with the potential to cause large scale disruptions, such as SARS, pneumonia and influenza. Any future outbreak which infiltrates the areas of our operations would likely have an adverse effect on our ability to conduct normal business operations.

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

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

None.

Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers

None.

Transfer Agent

Our transfer agent is Island Stock Transfer, 100 Second Avenue South, Suite 705S, St. Petersburg, FL 33701. The telephone number is (727) 289-0010.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION.

ITEM 6. EXHIBITS.

14.1 Code of Ethics *

31.1. Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer

31.2. Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer

32.1. Section 1350 Certifications of Chief Executive Officer

32.2. Section 1350 Certifications of Chief Financial Officer

*Previously Filed

(b) Reports on Form 8-K

None.

SIGNATURES

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

CHINA DU KANG CO., LTD.

May 23, 2011

/s/ Wang Yong Sheng, President

Wang Yong Sheng

President

Attached files

CHINA DU KANG CO. LTD. Reports

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