form10qsb.htm

1. CORPORATION REORGANZATION AND BUSINESS ACTIVITIES

Sino-American Development Corporation, (the "Company") was originally incorporated in Colorado in 1985 as Gemini Ventures, Inc. The name was changed in 1989 to Solomon Trading Company, Ltd., in 1994 to the Voyageur First, Inc., in 1995 to North American Resorts, Inc., in 2000 to Immulabs Corp. Effective March 28, 2003, as filed with the State of Colorado, the Company changed its name to Xerion EcoSolutions Group Inc. and was engaged in the business of developing gold extraction technology for the mining industry until it became inactive in 2004.

In October of 2005, the Company entered into a stock exchange agreement with Town House Land Limited (“Town House") whereby the Company issued stock equal to 98.75% in its ownership in exchange for 100% of the ownership interest in Town House.

This transaction was treated as a recapitalization of Town House for financial reporting purposes.

On May 31, 2006, the shareholders elected to reincorporate the Company from the state of Colorado to the state of Nevada and to change the name to SINO-American Development Corporation. The Company also approved an eight for one reverse stock split which reduced the number of shares outstanding from 227,321,840 to 28,415,230. The effect of this reverse stock split has been reflected retroactively for all periods included in these financial statements.

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On December 11, 2006, the Company entered into an agreement with twenty-two accredited investors (“the Buyers”) pursuant to which the company agreed to issue 12,505,000 shares of it’s common stock, in consideration for an aggregate of $12,505 in cash. Additionally on December 11,2006, the Buyers directly acquired (the “Stock Acquisition”) from the following stockholders all of their shares of our common stock: Mr. Fang Zhong, a current director and our President, Chief Executive Officer, Chief Financial Officer and Treasurer at the time of the Stock Acquisition; Ms Hu Min, a current director and our Secretary at the time of the Stock Acquisition; Mr. Fang Wei Jun, a current director of the Company;and Mr. Fang Zhong in his capacity as legal representative of Fang Hui. The Stock Purchase Agreement and the Stock Acquisition effectuated a change in control of the Company, and in connection therewith, Mr. Fang Zhong resigned as our President, Chief Executive Officer, Chief Financial Officer, and Treasurer, and Ms. Hu Min resigned as our Secretary both effective December 11, 2006. In their places, Mr. Silas Phillips was appointed as our President, Chief Executive Officer, Chief Financial Officer, and Treasurer, effective December 11, 2006.

The Stock Purchase Agreement also requires that, after the closing (the “Closing”) of the Stock Purchase and Stock Acquisition,, all current assets of the Company would be transferred to Town House, and all of the Company’s liabilities to be assumed by Town House. Thereafter, immediately after the closing of any future transaction whereby the Company acquires control and ownership of another company, the Company would transfer all of the shares of Town House held by the Company to a trust, the beneficiaries of which would be the stockholders of the Company immediately prior to Closing.

On December 5 2006, the Board of Directors and the majority holders of the Company’s stock jointly approved resolutions by written consent to amend the Articles of Incorporation to effectuate a one for seventeen reverse stock split which reduced the number of shares outstanding from 40,921,500 to 2,408,000. This stock split became effective on January 12, 2007. The effect of this reverse stock split has been reflected retroactively for all periods included in these financial statements.

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Effective from September 7 2007, Mr Silas Philips resigned as the Company’s Principal Executive Officer and Principal Financial and Accounting Officer. Mr. Dick Lee resigned as a member of the Board of Directors of the company. Mr Fang Zhong was appointed as the Company’s Principal Executive Officer and Principal Financial and Accounting Officer to fill the vacancies resulting from Mr. Phillip’s resignation.

Town House Land Limited (“Town House Land”) was incorporated in Hong Kong, as a private limited liability company on August 13, 2001 with an authorized capital of $64,103 (HK$500,000) divided into 500,000 ordinary shares of par value $0.12 (HK$1.00) each. Town House Land changed to its present name on August 13, 2003. On August 15, 2003, Town House Land acquired 97% of the outstanding registered capital of Wuhan Town House Land (“Wuhan Town House”). Terms of the transaction call for Town House Land to pay $1,602,564 in cash plus the contribution of an additional $5,857,488 in share capital in Town House Land as consideration for the acquisition of the 97% interest in Wuhan Town House's registered capital. For financial reporting purposes, Wuhan Town House was considered to be the acquiring entity and the additional cash consideration paid was treated as a distribution to members. Town House Land had no operations prior to this reverse acquisition and there was substantially no change in ownership from that of Wuhan Town House as a result of this transaction.

At June 30, 2007 Town House Land held 97% of the registered capital of Wuhan Town House, directly held 100% of the equity in Town House Land (Miami) Corporation (“Town House Miami”)and indirectly 97% of the equity in Town House Land (USA) Inc (“Town House USA”). Collectively hereinafter, Town House Land, Wuhan Town House, Town House Miami Corporation and Town House USA, Inc., are referred to as "the Company".

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Wuhan Town House (formerly: Wuhan Pacific Real Estate Development Company Limited) was registered as a formal third level property Company in Hubei Province, in the People's Republic of China as a limited liability company (in which investors' potential losses are limited to their capital contributions) on December 18, 1995 with a registered capital of $1,207,729 (RMB 10,000,000) and a defined period of existence of 14 years to December 18, 2009. To meet the qualifications of third level property company, the company must (1) have registered capital of RMB10,000,000, (2) have engineering and staff of not less that 12 people, (3) should have completed at least 50,000 square meters of accumulated development area, and (4) have a 100% passing rate in construction quality and 10% ranked as excellent.

Subsequent recapitalizations during 2000 increased Wuhan Town House's registered capital to $6,038,647 and changed is classification to a second level property company. To meet the qualifications of a second level property company, the company must (1) have registered capital of RMB 40,000,000, (2) have engineering and management staff of not less than 24 people, (3) should have completed 150,000 square meters of accumulated areas completed within three years, (4) 100% pass rate in construction quality with 10% ranked as excellent, and (5) at least three years experience in property development. On August 15, 2003, Wuhan Town House entered into a reverse merger agreement with Town House Land.

On October 10, 2003 Wuhan City Foreign Investment Bureau approved the registration of Wuhan Town House Land as a Sino Foreign Joint Investment Enterprise with a defined period of existence of 20 years to October 27, 2023.

Pursuant to the approval of Wuhan City Industrial and Commercial Administrative Bureau on February 20, 2004, Wuhan Pacific Real Estate Development Company Limited changed its name to Wuhan Town House Land Limited.

Town House USA was incorporated in California on March 4, 2004 and owns real estate which it is holding for development. Town House Land is a wholly owned subsidiary of Wuhan Town House.

Town House Miami was incorporated in Florida on November 18, 2004 and owns real estate which it is holding for development. Town House Miami is a wholly owned subsidiary of Wuhan Town House.

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The Company's principal activity is the development and sale of commercial and residential real estate. The Company's principal country of operations through June 30 2007 was the People's Republic of China ("PRC"), however, the Company held substantial real estate holdings in the United States as of that date which it plans to develop in the near future.

2.	GOING CONCERN AND MANAGEMENT’S PLANS

The Company had a working capital deficit of $11,675,918 as of June 30, 2007. The Company’s ability to continue as a going concern is dependent on the ability to renegotiate an extension of the bank debt maturities and to obtain a profitable level of operations. These issues raise doubts about the Company’s ability to continue as a going concern.

The financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in the normal course of business at amounts different from those reflected in these financial statements.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.	Basis of presentation and consolidation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.

The consolidated financial statements include the accounts of the Company, Town House, Wuhan Town House, Town House USA, and Town House Miami. All significant inter-company transactions and balances within the Company are eliminated on consolidation.

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b.	Cash and equivalents

The Company considers all highly liquid debt instruments purchased with maturity period of three months or less to be cash equivalents. The carrying amounts reported in the accompanying consolidated balance sheet for cash and cash equivalents approximate their fair value. The Company has restricted cash in accordance with the loan covenants. As of June 30, 2007 there were no restrictions on the Company’s cash balances.

c. Accounts receivable

The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. Accounts receivable in the balance sheet is stated net of such provision.

d. Properties held for sale

Properties held for sale are comprised of properties held for sale and repossessed properties held for resale and are stated at the lower of cost or net realizable value. Cost includes acquisition costs of land use rights, development expenditure, interest and any overhead costs incurred in bringing the developed properties to their present location and condition.

Net realizable value is determined by reference to management estimates based on prevailing market conditions.

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e.	Property and equipment

Property and equipment are recorded at cost and are being depreciated and amortized over the estimated useful lives of the related assets. Depreciation and amortization is computed on the straight-line basis over useful lives net of a 5% salvage value as follows:

Building and land use right	40 years
Equipment	5 years
Motor vehicles	5-8 years
Office furniture and fixtures	5 years
Equipment	5 years

Repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

Property and equipment are evaluated annually for any impairment in value. Where the recoverable amount of any property and equipment is determined to have declined below its carrying amount, the carrying amount is reduced to reflect the decline in value.

f.	Related companies

A related company is a company in which a director has beneficial interests in and in which the Company has significant influence.

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g.	Income recognition

Revenue from the sale of properties is recognized when the following four criteria are met: (1) a sale is consummated, (2) the buyers initial and continuing investments are adequate to demonstrate a commitment to pay for the property, (3) the seller's receivable is not subject to future subordination, and (4) the seller has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property.

Interest income is recognized when earned, taking into account the average principal amounts outstanding and the interest rates applicable.

h.	Cost of properties sold

The cost of goods sold includes the carrying amount of the properties being sold and the business taxes paid by the Company in connection with the sales.

i.	Advertising

Advertising costs are expensed as incurred.

j.	Foreign currencies

These financial statements have been prepared in U.S. dollars. The functional currencies for Town House and Wuhan Town House are the "Hong Kong dollar" and "Renminbi" or "Yuan", respectively. Nonmonetary assets and liabilities are translated at historical rates, monetary assets and liabilities are translated at the exchange rates in effect at the end of the year, and income statement accounts are translated at average exchange rates.

Taxation

Taxation on overseas profits has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the countries in which the Company operates.

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Provision for The People's Republic of China enterprise income tax is calculated at the prevailing rate based on the estimated assessable profits less available tax relief for losses brought forward.

Enterprise income tax

Under the Provisional Regulations of The People's Republic of China ("PRC")Concerning Income Tax on Enterprises promulgated by the State Council and which came into effect on January 1, 1994, income tax is payable by enterprises at a rate of 33% of their taxable income. Preferential tax treatment may, however, be granted pursuant to any law or regulations from time to time promulgated by the State Council. For the periods ended June 30, 2007 and 2006, the Company has been granted the privilege of computing the gross profit margins on real estate development sales at 15% of sales and computed the enterprise income tax at 33% on only 15% of sales.

Enterprise income tax ("EIT") is provided on the basis of the statutory profit for financial reporting purposes, adjusted for income and expense items, which are not assessable or deductible for income tax purposes.

l.	Retirement benefit costs

According to The People's Republic of China regulations on pension, the Company contributes to a defined contribution retirement plan organized by municipal government in the province in which the Company was registered and all qualified employees are eligible to participate in the plan. Contributions to the plan are calculated at 20% or 26% of the employees' salaries above a fixed threshold amount and the employees contribute 6% while the Company contributes the balance contribution of 14% or 20%. The Company has no other material obligation for the payment of retirement benefits beyond the annual contributions under this plan.

m.	Fair value of financial instruments

The carrying amounts of certain financial instruments, including cash, accounts receivable, other receivables, accounts payable, accrued expenses, and other payables approximate their fair values as of June 30, 2007 because of the relatively short-term maturity of these instruments.

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n.	Earnings per share

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. As of June 30, 2007 and 2006, there were no outstanding securities or other contracts to issue common stock, such as options, warrants or conversion rights, which would have a dilutive effect on earnings per share.

On May 31, 2006 the Company approved an eight for one reverse stock split which reduced the number of shares outstanding from 227,321,840 to 28,415,230. The effect of this reverse stock split has been reflected retroactively for all periods included in these financial statements.

On December 5, 2006, the Board of Directors and the majority holders of the Company’s stock jointly approved resolutions by written consent to amend the Articles of Incorporation to effectuate a one for seventeen reverse stock split which reduced the number of shares outstanding from 40,921,500 to 2,408,000. This stock split became effective on January 12, 2007. The effect of this reverse stock split has been reflected retroactively for all periods included in these

financial statements.

o. Use of estimates

The preparation of financial statements in accordance with generally accepted accounting principles require management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates related to allowance for uncollectible accounts receivable, depreciation, costs to complete construction in progress, taxes, and contingencies. Estimates may be adjusted as more current information becomes available, and any adjustment could be significant.

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p. Recent accounting pronouncements

In February 2006, the FASB issued Statement No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS No. 155”), which amends FASB Statements No. 133 and 140. This Statement permits fair value remeasurement for any hybrid financial instrument containing an embedded derivative that would otherwise require bifurcation, and broadens a Qualified Special Purpose Entity’s (“QSPE”) permitted holdings to include passive derivative financial instruments that pertain to other derivative financial instruments. This Statement is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring after the beginning of an entity’s first fiscal year beginning after September 15, 2006. Adoption of this Statement has no material impact on the Company’s financial position, results of operations, or cash flows.

In June 2006, the FASB issued Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the accounting and reporting for income taxes where interpretation of the law is uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 15, 2006. Adoption of FIN 48 has no material impact on the Company’s financial position, results of operations, or cash flows.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management is assessing the impact of the adoption of this Statement.

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In September 2006, the FASB issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”), an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires (a) recognition of the funded status (measured as the difference between the fair value of the plan assets and the benefit obligation) of a benefit plan as an asset or liability in the employer’s statement of financial position, (b) measurement of the funded status as of the employer’s fiscal year-end with limited exceptions, and (c) recognition of changes in the funded status in the year in which the changes occur through comprehensive income. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006. The requirement to measure the plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. This Statement has no current applicability to the Company’s financial statements.

In September 2006, the Securities Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB No. 108”). SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect as a cumulative effect adjustment to beginning of year retained earnings and disclose the nature and amount of each individual error being corrected in the cumulative adjustment. SAB No. 108 is effective beginning January 1, 2007 and the adoption of SAB No. 108 has no material impact on the Company’s financial position, results of operations, or cash flows.

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In February 2007, the FASB issued Statement No.159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). This statement permits companies to choose to measure many financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option had been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its consolidated financial statements.

4. CONCENTRATIONS OF BUSINESS AND CREDIT RISK

At June 30, 2007, the Company had $1,472,198 cash in banks located in the People's Republic of China ("PRC") and these balances are not covered by any type of protection similar to that provided by the FDIC on funds held in United States banks.

Substantially all of the Company's operations are in the PRC other than three significant real estate holdings in the United States.

The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and clients and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers and clients, historical trends, and other information. Accounts receivable totaling $Nil and $246,492 as of June 30, 2007 and 2006, respectively, were collateralized by real estate.

5. ACCOUNTS RECEIVABLE AND PREPAYMENTS

Accounts receivable consist of the followings:

Accounts receivable	$	338,765
Prepayment for operating purpose		133,403
Less: Provision for doubtful debts		(350,789	)

Accounts receivable and prepayments, net of provision for doubtful debts	$	121,379

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6. PROPERTIES HELD FOR RESALE

As of June 30, 2007, the Company had the following properties held for resale:

Diamond Mansion Phase I Residential	$	20,389
Diamond Mansion Phase 2		259,223
Gutian Apartments		297,425
Wuhan Town House Plaza		236,291
YiChang Town House Plaza		3,189,565
Total	$	4,002,893

During the quarter ended June 30, 2006 the Company revised its cost estimates to complete the YiChang Town House Plaza project. These upward revisions resulted in an increase in cost of sales during the second quarter to reflect both additional cost associated with sales made in the first quarter as well as costs incurred on sales during the second quarter. Management anticipates that it will be able to recover its costs in remaining unsold and uncompleted units on this project.

7. LAND HELD FOR DEVELOPMENT

As of June 30, 2007, the Company owned three tracts of land located in the United States which it was holding for development. The cost basis in this land at June 30, 2007 was $4,826,378. At June 30, 2007, substantially all of this land was pledged as collateral on various loans.

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8. PROPERTIES AND EQUIPMENT

Properties and equipment as of June 30, 2007, stated at cost less accumulated depreciation and amortization, consist of:

Buildings and land use right	$	2,716,849
Plant and machineries		32,220
Motor vehicles		610,996
Office equipment		198,468
Furniture and fixtures		61,926
		3,620,459
Less: Accumulated depreciation and amortization		(780,310	)
	$	2,840,149

9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following as of June 30,2007:

Accounts payable	$	6,663,062
Accrual expenses for operating purpose		150,321
Accrued welfare payable		145,201
Stamp duty payable		696,777
	$	7,655,361

10.	CUSTOMERS’ DEPOSITS

Customers’ deposits represent deposits from residential property buyers and which procedures for the transfer of ownership of the property purchased have not been completed as at the balance sheets date. The deposits from such property buyers for residential properties to be transferred in the subsequent years are carried forward as deferred revenue.

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11. TRANSACTIONS WITH RELATED PARTIES

Amounts due from/(to) directors at June 30, 2007 are as follows:

Fang Zhong (Director)	$	1,371,061
Hu Min (Director)		45,420
Fang Wei Jun (Director)		(879	)
Fang Wei Feng (Director)		(45,776	)
	$	1,369,826

The amounts due are unsecured, interest free and have no fixed repayment terms. For financial reporting purposes, the net balance due from directors has been reflected as an offset against stockholders equity.

12. SHORT-TERM LOANS

The Company had the following short-term loans at June 30, 2007:

Town House Land (Miami) short-term bank loan,

secured by real estate property in the United

States, interest at 1% over prime, principal

due on July 30, 2007. Management is in the course

of negotiation for the loan to be extended. $800,000

Wuhan Town House short-term bank loan,

secured by YiChang Project land use rights,

interest at 115% of the national rate, principal

due based upon a percentage of sales through

December 20, 2006, extended to June 20, 2007.

Management is in the course of negotiation for

the loan to be further extended. 387,300

Town House Land (USA) short-term bank loan,

secured by real estate property in the United

States, interest at Far East Bank Prime Rate

Plus 1% paid periodically, principal due on

January 1, 2007. Management is in the course

of negotiation for the loan to be extended. 755,252

Town House Land (Miami) short-term loan from a

financial institution, secured by real property,

interest at Far East Bank Prime Rate plus 1%

paid periodically, principal due on July 30, 2007.

Management is in the course of negotiation for

the loan to be extended. 100,000

Indirect financing 1,099,146

$3,141,698

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13. EQUITY

On May 31, 2006, the shareholders elected to reincorporate the Company from the state of Colorado to the state of Nevada and to change the name to SINO-American Development Corporation. The Company also approved an 8 for one reverse stock split which reduced the number of shares outstanding from 227,321,840 to 28,415,230. The effect of this reverse stock split has been reflected retro actively for all periods included in these financial statements.

The Common Stock retained a par value of $.001 per share but the Authorized Capital was reduced from 300,000,000 shares to 150,000,000 shares. The preferred stock, of which there was none outstanding at September 30, 2006 was changed to a par value of $.001 per share from no par.

On December 11, 2006, the Company issued 12,505,000 shares of the Company’s common stock, at par value $0.001, in consideration for an aggregate of $12,505 in cash.

financial statements.

14. INCOME TAX

Provision for the People's Republic of China enterprise income tax ("EIT") is calculated at the prevailing rate based on the estimated assessable profits less available tax relief for losses carried forward.

For the peirods ended June 30, 2007 and 2006, the Company has been granted the privilege of computing the gross profit margins on real estate development sales at 15% of sales and computed the enterprise income tax at 33% on only 15% of sales.

EIT is provided on the basis of the statutory profit for financial reporting purposes, adjusted for income and expense items, which are not assessable or deductible for income tax purposes.

A reconciliation of EIT tax at the statutory rate to the Company's effective rate is as follows:

Three Months Ended March 31,

2007 2006

Computed tax at Federal statutory rate

of 34% $(508,671) $(1,630,949)

Difference primarily attributable to

EIT tax assessed on gross real estate

sales and adjustments to prior years

tax liabilities based on assessments

from the PRC taxing authorities 600,035 1,872,792

Provision for income taxes $ 91,364 $ 241,844

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15. IMPAIRMENT LOSS

During the quarter ended June 30, 2006, management determined that the unsold commercial properties located on floors one through five of the Diamond Mansion, Phase One should be converted to residential properties as the commercial space was not selling. This resulted in impairment in value of $2,289,176 on these properties as residential properties have a significantly lower retail value than commercial properties.

16. STOCK PURCHASE AGREEMENT

The Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) on December 11, 2006, with twenty-two accredited investors (collectively, the “Buyers”) pursuant to which we issued 12,505,000 shares of the Company’s common stock, par value $0.001, in consideration for an aggregate of $12,505 in cash (the “Stock Purchase”). Additionally on December 11, 2006, the Buyers directly acquired (the “Stock Acquisition”) from the following stockholders all of their shares of our common stock: Mr. Fang Zhong, a current director and our President, Chief Executive Officer, Chief Financial Officer, and Treasurer at the time of the Stock Acquisition; Ms. Hu Min, a current director and our Secretary at the time of the Stock Acquisition; Mr. Fang Wei Jun, a current director of the Company; and Mr. Fang Zhong in his capacity as legal representative of Fang Hui. The Stock Purchase Agreement and the Stock Acquisition effectuated a change in control of the Company, and in connection therewith, Mr.Fang Zhong resigned as our President, Chief Executive Officer, Chief Financial Officer, and Treasurer, and Ms. Hu Min resigned as our Secretary, both effective December 11, 2006. In their places, Mr. Silas Phillips was appointed as our President, Chief Executive Officer, Chief Financial Officer, and Treasurer, effective December 11, 2006.

The Stock Purchase Agreement also requires that, after the closing (the “Closing”) of the Stock Purchase and the Stock Acquisition , all current assets of the Company would be transferred to Town House, and all of the Company’s liabilities to be assumed by Town House. Thereafter, immediately after the closing of any future transaction whereby the Company acquires control and ownership of another company, the Company would transfer all of the shares of Town House held by the Company to a trust (the “Trust”), the beneficiaries of which would be the stockholders of the Company immediately prior to Closing.

17.	COMMITMENTS

As of March 31, 2007 the Company had contractual commitments of lease expenditures of $3,944.

During January of 2005, the Company and Fang Zhong entered into a three year commitment to advance up to RMB 30,000,000 ($3,699,137) to Wuhan Pacific Shopping Mall Limited. Fang Zhong has personally guaranteed the repayment of these advances. As of March 31, 2006, the Company had advanced a total of $3,278,774 to Wuhan Pacific Shopping Mall Limited, all of which was treated as a repayment/advance of funds to Fang Zhong.

In December 2006, the board of directors approved a scheme to spin-off its real estate business. The spin-off will be accomplished through a series of transactions whereas the assets and liabilities of the real estate business and holdings in China and the United States will be transferred to a private company, and shares of the private company’s common stock will be distributed to the stockholders of the Company (excluding the private placement shareholders who acquired shares in December 2006), on a pro rata basis. The spin-off has not been effectuated.

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Item 2. Management’s Discussion and Analysis or Plan of Operation.

The following management’s discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto and the other financial information appearing elsewhere in this item. In addition to historical information, the following discussion contains certain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to our future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as “may”, “will”, “could”, “expect”, “anticipate”, “intend”, “believe”, “estimate”, “plan”, “predict”, and similar terms or terminology, or the negative of such terms or other comparable terminology. Although we believe the expectations expressed in these forward-looking statements are based on reasonable assumptions within the bound of our knowledge of our business, our actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of this Quarterly Report on Form 10-QSB. We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future.

Our financial statements are prepared in US Dollars and in accordance with accounting principles generally accepted in the United States. See “Exchange Rates” below for information concerning the exchanges rates at which Renminbi were translated into US Dollars at various pertinent dates and for pertinent periods.

Overview

We are a real estate development company with our business operations primarily in Wuhan City, China. On October 31, 2005, the Company acquired Town House and, as a result, Town House’s operating subsidiary Wuhan Townhouse, by way of the exchange of 224,480,317 shares of the Company’s common stock for 100% of the issued and outstanding registered capital of Town House. We accounted for this share exchange transaction as a recapitalization and, as a result, our consolidated financial statements are in substance those of Town House. Please see Note 1 to our consolidated financial statements included in this report for further details of this stock exchange transaction. Having no substantive operation of its own, Town House, through its operating subsidiary, Wuhan Townhouse, develops commercial and residential properties primarily in Wuhan City, China.

Critical Accounting Policies

In preparing the consolidated financial statements in accordance with accounting principles generally accepted in the United States, we make estimates and assumptions about the effect of matters that are inherently uncertain and may change in subsequent periods. The resulting accounting estimates will, by definition, may vary from the related actual results. We consider the following to be the most critical accounting policies:

CONSOLIDATION POLICY - The consolidated financial statements include the accounts of the Company, Town House, Wuhan Town House, Town House USA, and Town House Miami. All significant inter-company transactions and balances within the Company are eliminated on consolidation.

CASH AND EQUIVALENTS - The Company considers all highly liquid debt instruments purchased with maturity period of three months or less to be cash equivalents. The carrying amounts reported in the accompanying consolidated balance sheet for cash and cash equivalents approximate their fair value. The Company has restricted cash in accordance with the loan covenants. As of June 30, 2007 there were no restrictions on the Company’s cash balances.

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ACCOUNTS RECEIVABLE - The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. Accounts receivable in the balance sheet is stated net of such provision.

PROPERTIES HELD FOR SALE - Properties held for sale are comprised of properties held for sale and repossessed properties held for resale and are stated at the lower of cost or net realizable value. Cost includes acquisition costs of land use rights, development expenditure, interest and any overhead costs incurred in bringing the developed properties to their present location and condition.

Net realizable value is determined by reference to management estimates based on prevailing market conditions.

PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost and are being depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line basis for both financial and income tax reporting purposes over useful lives net of a 5% salvage value as follows:

Building and land rights 40 years

Equipment 5 years

Motor vehicles 5-8 years

Office furniture and fixtures 5 years

RELATED COMPANIES - A related company is a company in which a director has beneficial interests in and in which the Company has significant influence.

INCOME RECOGNITION - Revenue from the sale of properties is recognized when the following four criteria are met: (1) a sale is consummated, (2) the buyers initial and continuing investments are adequate to demonstrate a commitment to pay for the property, (3) the seller's receivable is not subject to future subordination, and (4) the seller has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property.

Interest income is recognized when earned, taking into account the average principal amounts outstanding and the interest rates applicable.

COST OF PROPERTIES SOLD - The cost of goods sold includes the carrying amount of the properties being sold and the business taxes paid by the Company in connection with the sales.

ADVERTISING - Advertising costs are expensed as incurred.

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FOREIGN CURRENCIES - These financial statements have been prepared in U.S. dollars. The functional currencies for Town House and Wuhan Pacific are the "Hong Kong dollar" and "Renminbi" or "Yuan", respectively. Nonmonetary assets and liabilities are translated at historical rates, monetary assets and liabilities are translated at the exchange rates in effect at the end of the year, and income statement accounts are translated at average exchange rates.

TAXATION - Taxation on overseas profits has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the countries in which the Company operates.

Provision for The People's Republic of China enterprise income tax is calculated at the prevailing rate based on the estimated assessable profits less available tax relief for losses brought forward.

Enterprise income tax

RETIREMENT BENEFIT COSTS - According to The People's Republic of China regulations on pension, the Company contributes to a defined contribution retirement plan organized by municipal government in the province in which the Company was registered and all qualified employees are eligible to participate in the plan. Contributions to the plan are calculated at 20% or 26% of the employees' salaries above a fixed threshold amount and the employees contribute 6% while the Company contributes the balance contribution of 14% or 20%. The Company has no other material obligation for the payment of retirement benefits beyond the annual contributions under this plan.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of certain financial instruments, including cash, accounts receivable, commercial notes receivable, other receivables, accounts payable, commercial notes payable, accrued expenses, and other payables approximate their fair values as of June 30, 2007 because of the relatively short-term maturity of these instruments.

EARNINGS PER SHARE - Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. As of June 30, 2007 and 2006, there were no outstanding securities or other contracts to issue common stock, such as options, warrants or conversion rights, which would have a dilutive effect on earnings per share. For presentation purposes, loss per share for 2007 and 2006 were computing assuming the reorganization occurred on January 1, 2004.

On December 5, 2006, the Company approved a one for seventeen reverse stock split which reduced the number of shares outstanding from 40,921,500 to 2,408,999. The effect of this reverse stock split has been reflected retroactively for all periods included in these financial statements.

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USE OF ESTIMATES - The preparation of financial statements in accordance with generally accepted accounting principles require management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates related to allowance for uncollectible accounts receivable, depreciation, costs to complete construction in progress, taxes, and contingencies. Estimates may be adjusted as more current information becomes available, and any adjustment could be significant.

Recent Accounting Pronouncements

In February 2006, the FASB issued Statement No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS No. 155”), which amends FASB Statements No. 133 and 140. This Statement permits fair value remeasurement for any hybrid financial instrument containing an embedded derivative that would otherwise require bifurcation, and broadens a Qualified Special Purpose Entity’s (“QSPE”) permitted holdings to include passive derivative financial instruments that pertain to other derivative financial instruments. This Statement is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring after the beginning of an entity’s first fiscal year beginning after September 15, 2006. This Statement has no current applicability to the Company’s financial statements. Management plans to adopt this Statement on January 1, 2007 and it is anticipated that the initial adoption of this Statement will not have a material impact on the Company’s financial position, results of operations, or cash flows.

In June 2006, the FASB issued Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the accounting and reporting for income taxes where interpretation of the law is uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 15, 2006. This Statement has no current applicability to the Company’s financial statements. Management plans to adopt this Statement on January 1, 2007 and it is anticipated that the initial adoption of FIN 48 will not have a material impact on the Company’s financial position, results of operations, or cash flows.

In September 2006, the Securities Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB No. 108”). SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect as a cumulative effect adjustment to beginning of year retained earnings and disclose the nature and amount of each individual error being corrected in the cumulative adjustment. SAB No. 108 will be effective beginning January 1, 2007 and it is anticipated that the initial adoption of SAB No. 108 will not have a material impact on the Company’s financial position, results of operations, or cash flows.

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Results of Operations – Three months ended June 30, 2007 as compared to three months ended June 30, 2006

REVENUES. All of our revenue is derived from the sale from our inventory of apartments from our completed development projects. During the three months ended June 30, 2007, we had revenue of $45,562, down from $597,923 for the same period in 2006, due to lower sales activities.

COST OF GOODS SOLD. Cost of properties sold decreased by 95.6% to $69,550 for the second quarter of 2007, compared to $1,587,484 during the same period in 2006. The decrease in cost of goods sold is due to a decrease in number of properties sold.

SELLING EXPENSES. Selling expenses decreased by $10,837, or 79.6%, to $2,784 for the quarter ended June 30, 2007, from $13,621 for the same quarter in 2006, primarily as a result of decreased sales activities during the three months ended.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses decreased by $491,779, or 96.4%, to $18,549 for the three months ended June 30, 2007, compared to $510,328 for the same period in 2006, primarily due from our operation in United States.

DEPRECIATION EXPENSE. Depreciation expense decreased by $491,779, or 96.4%, to $18,549 for the Three months ended June 30, 2007, from $510,328 for the same period of fiscal 2006, as we did not acquire additional properties during the 30-month period ended June 30, 2007.

INTEREST AND FINANCE COSTS. Interest and finance costs decreased by $1,043, or 1.4%, to $73,809 during the three months ended June 30, 2007, as compared to $74,852 during the same period in 2006. This decrease is primarily a result of a decrease in interest expense related to short term loans.

Results of Operations – Six months ended June 30, 2007 as compared to six months ended June 30, 2006

REVENUES. All of our revenue is derived from the sale from our inventory of apartments from our completed development projects. During the six months ended June 30, 2007, we had revenues of $1,845,735 as compared to revenues of $4,885,728 during the six months ended June 30, 2006, a decrease of approximately 62.2%. The unfavorable variance in sales revenue was mainly attributable to lower sales activities and a decrease in the average sales price per square meter during the first three months of 2007 when compared to the same period in 2006.

COST OF GOODS SOLD. Cost of properties sold decreased by $2,049,052, or 42.1%, to $2,817,482 for the six months ended June 30, 2007, compared to $4,866,534 during the same period in 2006 as our sales activities were reduced greatly.

SELLING EXPENSES. Selling expenses decreased by $121,909, or 70.2%, to $51,680 for the six-month period ended June 30, 2007, from $173,589 for the same period in 2006, primarily as a result of our reduced sales activities.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses decreased by $667,203, or 62.5%, to $401,078 for the six months ended June 30, 2007, compared to $1,068,281 for the same period in 2006, as we reduced our staffs in light of our reduced sales activities.

DEPRECIATION EXPENSES. Depreciation expense decreased by $8,877, or 8.8%, to $92,499 for the six months ended June 30, 2007, from $101,376 for the same period of fiscal 2006, as we did not acquire additional properties during six-month period ended June 30, 2007.

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INTEREST AND FINANCE COSTS. Interest and finance costs increased by $8,552, or 6.4%, to $141,287 during the six months ended June 30, 2007, as compared to $132,735 during the same period in 2006. This increase is primarily a result of an increase in interest expense related to short term loans.

We recorded the following impairment losses:

During the quarter ended June 30, 2006, management determined that the unsold commercial properties located on floors one through five of the Diamond Mansion, Phase One should be converted to residential properties as the commercial space was not selling. This resulted in impairment loss of $2,289,176 on these properties as residential properties have a significantly lower retail value than commercial properties.

Liquidity and Capital Resources

As of June 30, 2007, the Company had a working capital deficit of $11,675,918. The Company’s ability to continue as a going concern is dependent on the ability to renegotiate an extension of the bank debt maturities and to obtain a profitable level of operations. These issues raise doubts about the Company’s ability to continue as a going concern. Management is in the process of attempting to raise additional capital through debt and equity offerings.

Cash flows

OPERATING. We generated $174,775 in cash for operating activities during the six months ended June 30, 2007, as compared to $416,615 of cash flows provided by operating activities during the same period in 2006, a decrease by $241,840, or 58.0%. This decrease is primarily attributable to our reduced sales activities.

INVESTING. We had used $78,039 in cash for investing activities for the six months ended June 30, 2007, compared to $139,254 used in investing activities for the same period in 2006.

FINANCING. The Company had no borrowing and repaid loan repayment of $262,185 during the six-month period ended June 30, 2007, as compared to net borrowing of $428,710 and loan repayment of $910,444 for the same period in 2006. Although we had no new projects, we continued to pay down our financing obligations. The Company made $296,561 in cash advances to directors and affiliated companies of during the six months ended June 30, 2007, as compared to $775,705 in repayment of cash advanced to directors and affiliated companies for the same period in 2006.

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Off-Balance Sheet Arrangements

As of June 30, 2007, we have not entered into any off-balance sheet arrangements with any individuals or entities.

Related Party Transactions

Amounts due from/(to) directors at June 30, 2007 are as follows:

Fang Zhong (Director) $ 1,371,061

Hu Min (Director) 45,420

Fang Wei Jun (Director) (879)

Fang Wei Feng (Director) (45,776)

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$ 1,369,826

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Exchange Rates

Wuhan Townhouse maintains its books and records in Renminbi (“RMB”), the lawful currency of the PRC. In general, for consolidation purposes, the Company translates Wuhan Townhouse’s assets and liabilities into US Dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of income is translated at average exchange rates during the reporting period. Adjustments resulting from the translation of Wuhan Townhouse’s financial statements are recorded as accumulated other comprehensive income.

Until July 21, 2005, RMB had been pegged to US$ at the rate of RMB8.30: US$1.00. On July 21, 2005, the PRC government reformed the exchange rate system into a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies. In addition, the exchange rate of RMB to US$ was adjusted to RMB8.11: US$1.00 as of July 21, 2005. The People’s Bank of China announces the closing price of a foreign currency such as US$ traded against RMB in the inter-bank foreign exchange market after the closing of the market on each working day, which will become the unified exchange rate for the trading against RMB on the following working day. The daily trading price of US$ against RMB in the inter-bank foreign exchange market is allowed to float within a band of ±0.3% around the unified exchange rate published by the People’s Bank of China. This quotation of exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the Bank of China or other institutions required submitting a payment application form together with invoices, shipping documents and signed contracts.

The exchange rates used to translate amounts in RMB into US Dollars for the purposes of preparing the consolidated financial statements or otherwise stated in this MD&A were as follows:

	June 30, 2007	December 31, 2006	June 30, 2006
Balance sheet items, except for the registered and paid-up capital, as of end of period/year	USD0.13150:RMB1	USD0.12825:RMB1	USD0.12521:RMB1

Amounts included in the statement of operations, statement of changes in stockholders’ equity and statement of cash flows for the period/ year ended	USD0.13150:RMB1	USD0.12825:RMB1	USD0.12521:RMB1

No representation is made that RMB amounts have been, or would be, converted into US$ at the above rates.

INFLATION

We believe that inflation has not had a material effect on our operations to date.

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RISK FACTORS

1. Investing in our common stock involves a high degree of risk. If any of the following risks actually materializes, our business, financial condition and results of operations would suffer. You should read the section entitled “Forward-Looking Statements” immediately following these risk factors for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this prospectus.

Change in political and economic conditions.

Since the Company's main country of business operations is China, Town House's business operations and financial position are subject, to a significant degree, to the economic, political and legal developments in China.

China's government started implementing its economic reform policy in 1978, which has enabled China economy to gradually transform from a "planned economy" to a "socialist market economy." In 1993, the concept of the socialist market economy was introduced into the Constitution of China, and the country has since accelerated development of a market economy. A noteworthy phenomenon in the recent development of China economy is that non-state owned enterprises such as private enterprises play an increasingly important role in China economy and the degree of direct control by China government over the economy is gradually declining.

China government has been taking macro-economic austerity measures to suppress inflation and curb the pace of economic growth since July 1993. These measures include raising interest rates, tightening credit supply, delaying implementation of certain reform policies on pricing, enhancing financial supervision as well as tightening control on the granting of approval for property and infrastructure projects. However, since 1998, there has been deflation in China economy and the current economic policies of China mainly focus on stimulating consumption and expansion of domestic demand.

While China government has not stopped its economic reform policy since 1978, any significant adverse changes in the social, political and economic conditions of China, may have fundamental changes in China economic reform

policies and thus the Company's operations and profits may be adversely affected.

Change in tax laws and regulations in China.

Various tax reform policies have been implemented in China in recent years. Interpretation of certain tax policies is still awaiting guidance from China government. Moreover, there can be no assurance that the existing tax laws and regulations will not be revised or amended in the future.

Changes in China's legal system.

China's legal system is based on statutory law. Unlike the common law system, statutory law is based on written statutes. Prior court decisions may be cited as persuasive authority but do not have binding effect. Since 1979, China government has been promulgating and amending the laws and regulations regarding economic matters, such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, China's legal system is still not as fully developed as those western countries with a common law legal system.

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Chinese real estate law.

Over the past five years, the majority of China's urban dwellers have changed their housing situation for apartments provided by their work units at a pittance to housing that they have had to buy and pay to maintain (through homeowner's associations that hire state supervised management companies). There are some estimates that 80% of urban Chinese now own their own home. But China has no legal concept of condominiums and no statute (yet) that defines the rights of these millions of homeowners.

In 1998, China created the basic building block of a market economy in real estate - a transferable ownership interest. This interest, called the "granted land use right" - is not 100% ownership as we know it in the West. The period of the interest is limited to a fixed term - varying from 40-70 years, depending upon the charter of the right - and the use to which the property must be put is specified as part of the grant. The granted land use right is transferable, mortgageable, leaseable, and usually can be subdivide. Further, it theoretically is renewable, but there will be a fee and since these land ownership rights are new there is no experience yet with renewals. Chinese anti-speculation rules provide that one cannot acquire or hold property just to "ride the market;" the property must be put to productive use within a set time of acquisition of the land use right - usually two years, or face penalties and ultimately forfeiture of the right.

For the development of a new commercial real estate project, the developer must first obtain granted land use rights. Land use rights can be granted through bidding, auction and listings. The developer then enters into a land use right grant contract with the relevant government authority. The granted land use right can be transferred, leased, or mortgaged. The transferor and transferee must enter into a land use right transfer contract and file the executed contract with the appropriate government bureau, which will then issue a new land use certificate in the name of the transferee. In May 2002, the Ministry of Land and Resources issued a regulation regarding the land use right transfer. Whereas in the past, private parties were able to transfer land use rights by mutual agreement, this practice was prohibited by the new regulation. Under the new scheme, any procurement of land for business purposes can only be effected through bidding, auction and listing on an authorized exchange floor.

The long term value of Chinese land rights are still quite uncertain, and their rights not the kind of secure investment that would lead a lender, as might happen in American, to rely primarily on the land value and look beyond the individual ability of a borrower to repay the debt. Chinese banks, for example, rarely make construction loans because in theory they cannot lend more than the value of the land that is their security at the time of the loan. The Chinese deal with this problem by signing "prelease" or "prepurchase" contracts whereby the end user pays all of the consideration before the building is commenced. Effectively, the users finance the seller's construction. Users borrow the money from the banks under arrangements which later will "morph" into mortgage loans when there is something to which the mortgage can attach. Usually the developer must deposit the purchase proceeds in the bank and the bank monitors the expenditures.

Before a presale method can be legally adopted, the developer of the project must have obtained (i) a land use right certificate, (ii) a planning permit for construction use of land, (iii) a planning permit for the construction project, (iv) a certificate of commencement of construction, and (v) a permit for presale of commercial housing.

Mortgages.

In 1993, the Central Government allowed state-owned banks to provide mortgage facilities to property buyers. In accordance with the banking regulations announced in 1998, loan repayment period was initially for a maximum of 20 years, and extent of the mortgage loan amount was for a maximum of 70 percent of the purchased property price. In 1999, banking regulations were amended to extend the loan repayment period to a maximum of 30 years and the extent of the mortgage loan amount was increased to a maximum of 80 percent of the purchased property price. As further incentives, state-owned banks were allowed to increase the mortgage loan facilities by an additional 15 percent of the approved banking facilities (maximum of 92 percent of the purchased property price). The provision of mortgage facilities to property buyers is considered to have created increasing demand for properties in the China.

In accordance with market practice in the China, the Company is required to provide guarantees (during the development phase) to the banks in respect of mortgages offered to the property buyers until submission of the relevant real estate ownership certificates and certificates of other interests in the property unit by the relevant property buyers to the mortgagee bank. In the experience of the Company, such guarantee periods normally last for up to 6 months. If a property buyer defaults under the loan and the Company is required, during the guarantee period, to repay all debt owed by the defaulting property buyer to the mortgagee bank, the mortgagee bank will assign its rights under the loan and the mortgage to the Company and, subject to registration, the Company will have full recourse to the property. In line with industry practice, the Company does not conduct independent credit checks on the property buyers but relies instead on the credit checks conducted by the mortgagee banks. For financial reporting purposes, the sale of a property unit is not recognized until title has passed and the Company is released from its loan guarantee on the unit.

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Wholly-owned foreign enterprises.

A wholly foreign-owned enterprise ("WFOE") is an entity 100 percent owned by a foreign investor or investors. An apparent advantage of a WFOE is that it can enjoy exclusive management control of its business activities and have autonomy in its operation without too much external interference.

The original WFOE regulations only permitted WFOEs in certain limited sectors and required that the foreign party either provided advanced technology or that at least 50% of the production could be exported. These conditions were relaxed over time as more WFOEs were permitted in increasingly broader sectors of the economy. In accordance with the Wholly Foreign-owned Enterprise Law as amended in 2001 and the Industrial Catalogue Guiding Foreign Investments (2004) (the "2004 Catalogue"), the export requirement is no longer permitted and WFOEs are now much more common, except in certain "restricted" or "prohibited" sectors as provided in the 2004 Catalogue.

With respect to China's real estate industry, the market has been gradually opened to WFOEs since China's entry into the World Trade Organization. Pursuant to the 2004 Catalogue, WFOEs are permitted to engage in the development, construction and management of ordinary residential houses while they, with limited exceptions, are restricted to participate in the development of high standard real estate projects.

One of the most important issues covered in the project documentation is the business scope of the WOFE. Business scope is narrowly defined for all businesses in China and the WOFE can only conduct business within its approved business scope, which ultimately appears on the business license. Any amendments to the business scope require further application and approval. The Company's business scope, is defined to include general real estate development, sales, leasing and property management.

Changes in currency conversion policies in China.

Renminbi (Yuan) is not a freely exchangeable currency. Since 1998, the State Administration of Foreign Exchange of China has promulgated a series of circulars and rules in order to further enhance the verification of the truthfulness of foreign exchange payments under the current account items of a China enterprise and has imposed strict requirements in respect of borrowings and repayments of foreign exchange debts from and to foreign creditors under the capital account items and creation of foreign security in favor of foreign creditors.

This may cause complicated procedures in foreign exchange payments to foreign creditors under the current account items and thus will affect the restrictions on borrowing of international commercial loans, creation of foreign security and borrowing of Renminbi loans under guarantees in foreign currencies. (The majority of the income from the Town House entities is in Renminbi). Furthermore, the value of Renminbi (Yuan) may become subject to supply and demand, which could be largely affected by the international economic and political environment and any fluctuations in the exchange rate of Renminbi could have an adverse effect on the operational and financial condition of its subsidiaries in China.

Borrowing policies.

The Company borrows at competitive rates of interest. Borrowed funds will not be used for dividends to the shareholders.

The precise amount, if any, borrowed by the Company will depend in part upon the availability of financing, and prevailing interest rates and other loan costs. There is no assurance that such financing, if any, will be available to the Company in the amounts desired or on terms considered reasonable by the Board of Directors.

Loan agreements may require that the Company maintain certain reserves or compensating balances and may impose other obligations on the Company. Moreover, since a significant proportion of revenues may be reserved for repayment of debt, the use of financing may reduce the cash that might otherwise be available for dividends until the debt has been repaid and may reduce total cash flow for a significant period.

The Company may, under appropriate circumstances, attempt to cause Town House to borrow funds at fixed interest rates. However, the Company may borrow funds at rates that vary with a "prime" or "base" rate, particularly on an interim basis or when interest rates are believed to be trending downward. A rise in the indexed rate may increase borrowing costs and reduce the amount of its income and cash available for distribution. In past years, the prime rates charged by major banks have fluctuated significantly; as a result, the precise amount of interest that the Company might be charged cannot be predicted with any certainty.

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Expansion risks.

The Company anticipates that its proposed expansion of its real estate development activities will include the construction of new building projects. The Company's cost estimates and projected completion dates for construction of new building projects may change significantly as the projects progress. In addition, the Company's projects will entail significant construction risks, including shortages of materials or skilled labor, unforeseen environmental or engineering problems, weather interferences and unanticipated cost increases, any of which could have a material adverse effect on the projects and could delay their scheduled openings. A delay in scheduled openings will delay the Company's receipt of increased sale revenues.

New projects.

The projects of the Company to finance, develop, and expand its real estate processing facilities will be subject to the many risks inherent in the rapid expansion of a high growth business enterprise, including unanticipated design, construction, regulatory and operating problems, and the significant risks commonly associated with implementing a marketing strategy in changing and expanding markets. There can be no assurance that any of these projects will become operational within the estimated time frames and projected budgets at the time the Company enters into a particular agreement, or at all. In addition, the Company may develop projects as joint ventures in an effort to reduce its financial commitment to individual projects. There can be no assurance that the significant expenditures required to expand its real estate processing plants will ultimately result in the establishment of increased profitable operations.

When the Company's future expansion projects become operational, the Company will be required to add and train personnel, expand its management information systems and control expenses. If the Company does not successfully address the Company's increased management needs or the Company otherwise is unable to manage its growth effectively, the Company's operating results could be materially and adversely affected.

Uncertainty of market acceptance.

The Company is currently selling its developed properties principally in the City of Wuhan. Achieving market acceptance for the Company's properties, particularly in new markets, will require substantial marketing efforts and the expenditure of significant funds. There is substantial risk that any new markets may not accept or be as receptive to the Company's properties. Market acceptance of the Company's current and proposed properties will depend, in large part, upon the ability of the Company to inform potential customers that the distinctive characteristics of its properties make them superior to competitive properties and justify their pricing. There can be no assurance that the Company's current and proposed properties will be accepted by consumers or that any of the Company's current or proposed properties will be able to compete effectively against other properties. Lack of market acceptance of the Company's properties would have a material adverse effect on the Company.

Changing consumer preferences.

As is the case with other companies new real estate developments, the Company is subject to changing consumer preferences and location-related concerns.

Sales force.

The Company intends to hire additional sales personnel during 2007. There is no assurance that hiring these additional sales people will result in increased sales. The Company anticipates using independent sales agents to sell and distribute its real estate development projects. The Company cannot predict whether it will be able to obtain and maintain satisfactory sales arrangements and the failure to do so could have a material adverse effect on its business, operations and finances.

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Geographic concentration; fluctuations in regional economic conditions.

Nearly all of the Company's sales are concentrated in the central area of China. Accordingly, the Company is susceptible to fluctuations in its business caused by adverse economic conditions in this region. Difficult economic conditions in other geographic areas into which the Company may expand may also adversely affect its business, operations and finances.

Dependence on executives.

The Company is highly dependent on the services of Mr. Fang Zhong, and the loss of his services would have a material adverse impact on the operations of the Company. He has been primarily responsible for the development of the Company and the development and marketing of its real estate projects. The Company has not applied for key-man life insurance on the lives of its executives, but may do so in the future.

Competition.

The real estate business is highly competitive and, therefore, the Company faces substantial competition in connection with the marketing and sale of its projects. In general, real estate properties are price sensitive and affected by many factors beyond the control of the Company, including changes in consumer tastes, fluctuation commodity prices and changes in supply due to weather, production, and natural disaster. The Company's real estate properties face competition from other developers in its marketing areas. Most of the Company's competitors are well established, have greater financial, marketing, personnel and other resources, have been in business for longer periods of time that the Company, and have projects that have gained wide customer acceptance in the marketplace. The largest competitors of the Company are state-owned companies owned by the government of China. Large foreign real estate companies have also entered the real estate industry in China. The greater financial resource of such competitors will permit them to procure properties and to implement extensive marketing and promotional programs, both generally and indirect response to advertising claims by the Company.

Lack of property and general liability insurance.

The Company and its subsidiaries are self-insured, and they do not carry any property insurance, general liability insurance, or any other insurance that covers the risks of their business operations. As a result, any material loss or damage to its properties or other assets, or personal injuries arising from its business operations would have a material adverse affect on its financial condition and operations.

Government regulation.

The Company is subject to extensive regulation by China and by other province, county and local authorities in jurisdiction in which its properties are sold. The Company believes that it is currently in substantial compliance with all material governmental laws and regulations and maintains all material permits and licenses relating to its operations. Nevertheless, there can be no assurance that the Company will continue to be in substantial compliance with current laws and regulations, or whether the Company will be able to comply with any future laws and regulations. To the extent that new regulations are adopted, the Company will be required to conform its activities in order to comply with such regulations. Failure by the Company to comply with applicable laws and regulations could subject the Company to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material adverse effect on its business, operations and finances.

Doing business in China.

Doing business in China involves various risks including internal and international political risks, evolving national economic policies as well as financial accounting standards, expropriation and the potential for a reversal in economic conditions. Since the late 1970s, the government of China has been reforming China's economic system. These reforms have resulted in significant economic growth and social progress. Although we believe that economic reform and the macroeconomic policies and measures adopted by the current China government will continue to have a positive effect on economic development in China and that we will continue to benefit from such policies and measures. These policies and measure may from time to time be modified or revised. Adverse changes in economic policies of the China government or in the laws and regulations, if any, could have a material adverse effect on the overall economic growth of China, and could adversely affect our business operations.

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China currency, "Renminbi", is not a freely convertible currency, which could limit our ability to obtain sufficient foreign currency to support our business operations in the future.

We rely on China government's foreign currency conversion policies, which may change at any time, in regard to our currency exchange needs. We receive substantially all of our revenues in Renminbi, which is not freely convertible into other foreign currencies. In China, the government has control over Renminbi reserves through, among other things, direct regulation of the conversion or Renminbi into other foreign currencies and restrictions on foreign imports. Although foreign currencies which are required for "current account" transactions can be bought freely at authorized China banks, the proper procedural requirements prescribed by China law must be met. At the same time, China companies are also required to sell their foreign exchange earnings to authorize China banks and the purchase of foreign currencies for capital account transactions still requires prior approval of the China government. This type of heavy regulation by the China government of foreign currency exchange restricts certain of our business operations and a change in any of these government policies, or any other, could further negatively impact our operations.

Fluctuations in the exchange rate between the China currency and the United States dollar could adversely affect our operating results.

The functional currency of our operations in China is "Renminbi". Results of our operations are translated at average exchange rates into United States dollars for purposes of reporting results. As a result, fluctuations in exchange rates may adversely affect our expenses and results of operations as well as the value of our assets and liabilities. Fluctuations may adversely affect the comparability of period-to-period results. Although we may use hedging techniques in the future (which we currently do not use), we may not be able to eliminate the effects of currency fluctuations. Thus, exchange rate fluctuations could have a material adverse impact on our operating results and stock prices.

Fluctuations in exchange rates of the Renminbi could adversely affect the value of stock ownership in the Company.

For over 10 years the official exchange rate for the conversion of Renminbi to US dollars was unofficially pegged at US$1 to RMB8.28. In July 2005, the People's Bank of China (PBOC), the country's central bank, began a new policy of calculating the Renminbi's value against the US dollar using a weighted average of the prices given by major banks. The highest and lowest offers are excluded from the calculation. As a result of this change the RBM has appreciated against the US dollar so that the exchange rate was US$1 to RMB8.11 at December 31, 2005, and is now approximately US$1 to RMB8.04. It should be expected that currency exchange fluctuations will occur in the future as a result of circumstances beyond the Company's control, such as the level of trade deficit or equalization between the US and the China, global economic conditions, global currency markets, and other factors. All of the Company's revenue is generated in the China in Renminbi, so that during periods that the US dollar is worth less in relation to the value of the Renminbi, the total revenue and results of operations of the Company reported in US dollars in the financial statements we publish in the US will be less. Consequently, fluctuations in exchange rates could adversely affect the US dollar value of our results of operations and the perceived value of the Company in the public market.

Uncertainty relating to the existing law and regulations in the China may restrict the level of legal protections to foreign investors.

The China currently adopts civil law system which relies heavily on written statutes, and decisions made by the courts are not binding precedents, but for guidance only. The legal system in the China cannot provide the investors with the same level of protection as in the US. The Company is governed by the law and regulations generally applicable to local enterprises. These laws and regulations were recently introduced and remain experimental in nature and subject to changes and refinements. Interpretation, implementation and enforcement of the existing law and regulations can be uncertain and unpredictable and therefore have restrictions on legal protections on both Hong

Kong and foreign investors.

The Company has traditionally been dependent on bank debt to finance its projects and is therefore subject to availability of such financing and fluctuations in interest rates.

The development of high quality housing requires substantial funds. The Company had internally funded its development projects from presale revenue and externally from bank loans. The Company cannot guarantee that sufficient capital can be generated to develop every one of the Company's projects by way of only presale revenue. In addition, the Company cannot guarantee its ability to continue to obtain bank loans and credit facilities and renewals of existing borrowings from financial institutions on maturity under favorable terms and conditions. Changes in interest rates on the Company's borrowings will also affect its financing costs and consequently its results of operations.

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Reliance on independent contractors in providing various services creates risks and the Company is exposed to various risks in relation to contractors’ performance.

The Company engages independent third party contractors, through open tenders, to provide various services including construction, piling and foundation, building and fitting-out works, interior decoration and installation of elevators. Although it is the Company's strategy and policy to select reputable independent third party contractors with positive track records in most cases and supervises the construction progress, there is no assurance that the services rendered by any of these independent third party contractors will always be satisfactory or match the targeted quality level required by the Company.

Additionally, the Company is exposed to the risk that a contractor may require additional capital in excess of the cost they tendered to complete a contractual property development and the Company may have to provide such additional capital. Furthermore, there is risk that contractors may experience financial or other difficulties which may affect their ability to carry out construction works, thus delaying the completion of the Company's property developments or resulting in additional costs for the Company. Any of these factors could adversely affect the Company's revenues and reputation.

In order for the China subsidiaries of the Company to pay dividends in the United States, a conversion of Renminbi into US dollar is required.

Under current China law, the conversion of Renminbi into foreign currency generally required government consent. Government authorities may impose restrictions that could have a negative impact in the future on the conversion process and upon the ability of the Company to meet its cash needs, and to pay dividends to its shareholders. However, the subsidiaries of the Company are presently classified as a wholly owned foreign enterprise ("WOFE") in China that have verifiable foreign investment in China, funding having been made through an official China banking channel. Because the subsidiaries of the Company qualify for treatment as a WOFE, the subsidiaries can declare dividends and their funds can be repatriated to the Company in the United States under current laws and regulations in China.

Mortgage interest rates may increase, cooling demand for the Company's properties.

Bank mortgages are becoming increasingly popular as a means of financing property purchases in China. Any increase in bank mortgage interest rates may significantly increase the cost of mortgage financing to property buyers, thus reducing the attractiveness of mortgages as a source of financing property purchases and, accordingly, adversely affecting the affordability of residential properties. The Chinese government may also increase the level down payment requirement or impose certain other conditions which would make mortgage financing unavailable or unattractive to the potential property buyers.

The practice of pre-selling developments may expose the Company to substantial liabilities.

The existing common practices by property developers to pre-sale properties (while still under construction) in China involves certain risks. For example, the Company may fail to complete a property development which may have been fully or partially pre-sold. In such circumstances, it could find itself liable to purchasers of pre-sold units for losses suffered by them. There can be no assurance that these losses would not exceed the purchase price paid in respect of the pre-sold units. In addition, if a pre-sold property development is not completed on time, the purchasers of pre-sold units may be entitled to compensation for late delivery. If the delay extends beyond a certain period, the purchasers may even be entitled to terminate the pre-sale agreement and claim for damages.

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The shares of the Company may have limited liquidity.

A substantial portion of the Company’s shares of common stock are subject to registration, and are closely held by certain institutional and insider investors. Consequently, the public float for the shares may be highly limited. As a result, should you wish to sell your shares into the open market you may encounter difficulty selling large blocks of your shares or obtaining a suitable price at which to sell your shares.

If we fail to maintain the adequacy of our internal controls, our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act of 2002 could be impaired, which could cause our stock price to decreasesubstantially.

We will need to continue to improve our financial and managerial controls, reporting systems and procedures, and documentation thereof. If our financial and managerial controls, reporting systems or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decrease substantially.

Our common shares are thinly traded and, you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate such shares.

The Company cannot predict the extent to which an active public market for its common stock will develop or be sustained. Our common shares have historically been sporadically or “thinly-traded” on the “Over-The-Counter Bulletin Board,” meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that SOAD is a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

The market price for SOAD’s common stock is particularly volatile given our status as a relatively small company with a small and thinly traded “float” and lack of current revenues that could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.

The market for SOAD’s common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in SOAD’s share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by its shareholders may disproportionately influence the price of those shares in either direction. The price for its shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, an investment in Speedhaul is a speculative or “risky” investment due to our lack of revenues or profits to date and uncertainty of future market acceptance for current and potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.

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Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and

misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

We do not anticipate paying any cash dividends.

We presently do not anticipate that we will pay any dividends on any of our capital stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our Board of Directors. We presently intend to retain all earnings, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.

Fluctuations in exchange rates of the Renminbi could adversely affect the value of stock ownership in the Company.

For over 10 years the official exchange rate for the conversion of Renminbi to US dollars was unofficially pegged at US$1 to RMB8.28. In July 2005, the People's Bank of China (PBOC), the country's central bank, began a new policy of calculating the Renminbi's value against the US dollar using a weighted average of the prices given by major banks. The highest and lowest offers are excluded from the calculation. As a result of this change the RBM has appreciated against the US dollar so that the exchange rate was US$1 to RMB8.11 at December 31, 2005, and is now approximately US$1 to RMB7.67. It should be expected that currency exchange fluctuations will occur in the future as a result of circumstances beyond the Company's control, such as the level of trade deficit or equalization between the US and the China, global economic conditions, global currency markets, and other factors. All of the Company's revenue is generated in the China in Renminbi, so that during periods that the US dollar is worth less in relation to the value of the Renminbi, the total revenue and results of operations of the Company reported in US dollars in the financial statements we publish in the US will be less. Consequently, fluctuations in exchange rates could adversely affect the US dollar value of our results of operations and the perceived value of the Company in the public market.

The application of the "penny stock" rules could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

As long as the trading price of our common shares is below $5 per share, the open-market trading of our common shares will be subject to the "penny stock" rules. The "penny stock" rules impose additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of securities and have received the purchaser's written consent to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability or decrease the willingness of broker-dealers to sell our common shares, and may result in decreased liquidity for our common shares and increased transaction costs for sales and purchases of our common shares as compared to other securities.

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We may be unable to achieve some or all of the benefits that we expect to achieve through the Spin-Off.

The full strategic and financial benefits expected to result from the Spin-Off may be delayed or may never occur at all. For instance, there can be no assurance that investors will regard the new corporate structure as more clear and simple than the current corporate structure.

Item 3. Controls And Procedures

(a) Evaluation of disclosure controls and procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the applicable period to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

(b) Changes in internal controls over financial reporting. There was no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Nevada		20-5065416
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification Number)

1427 West Valley Boulevard, Suite 101 Alhambra, California		91803
(Address of principal executive offices)		(Zip code)

		Page

PART I	FINANCIAL INFORMATION	4

Item 1.	Financial Statements
	Consolidated Balance Sheet	4
	Consolidated Statements of Income	5
	Consolidated Statements of Operations and Other Comprehensive Income	6
	Notes to Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis or Plan of Operation	7
Item 3.	Controls and Procedures	25
PART II	OTHER INFORMATION	42

Item 1.	Legal Proceedings	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Submission of Matters to a Vote of Security Holders	42
Item 5.	Other Information	42
Item 6.	Exhibits	42

Signatures		44

Sino-American Development Corporation and Subsidiaries
Consolidated Balance Sheet
As of June 30, 2007
Unaudited
(Amounts expressed in U.S. Dollars)

ASSETS

Current assets
Cash and cash equivalents (note 3(b))	$	1,519,553
Accounts receivable and prepayments,
net of allowance of $350,789 (notes 3 (c) and 5)		121,379
Prepaid expenses		167,369
Properties held for resale (note 6)		4,002,893

Total current assets		5,811,194

Land held for development (note 7)		4,826,378
Property and equipment,net of accumulated
depreciation and amortization (note 8)		2,840,149

Total assets	$	13,477,721

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Accounts payable and accrued expenses (note 9)	$	7,655,361
Customers' deposits (note 10)		2,753,777
Income and other taxes payable (note 3 (k))		3,936,276
Short-term loans (note 12)		3,141,698

Total current liabilities		17,487,112

Minority interest		406,181

Commitments and Contingencies (note 17)

Shareholders' Equity
Share capital
Authorized: 150,000,000 common stock of par
value $0.001 and 50,000,000 preferred stock
of par values 0.001
Issued and outstanding: 2,408,000 common stocks
of par values 0.001	$	2,408
Additional paid-in capital		5,944,470
Accumulated deficits		(8,631,949	)
Accumulated other comprehensive loss		(360,675	)

Total shareholders' (deficit) before advances offset		(3,045,746	)

Advances to directors (note 11)		(1,369,826	)
Total stockholders'(deficit), net of advances offet		(4,415,572	)


Total liabilities and shareholders' equity	$	13,477,721
See accompanying summary of accounting policies and notes to the consolidated financial statements

Sino-American Development Corporation and Subsidiaries
Consolidated Statements of Operations and Other Comprehensive Income
For the Three Months and Six Months Ended June 30, 2007 and 2006
Unadited
(Amount expressed in U.S. Dollars)

	Three months ended June 30,						Six months ended June 30,

	2007			2006			2007			2006

Sales revenue	$	45,562		$	597,923		$	1,845,735		$	4,885,728

Cost of properties sold		(69,550	)		(1,587,484	)		(2,817,482	)		(4,866,534	)

Gross (loss) profit		(23,988	)		(989,561	)		(971,747	)		19,194

Selling expenses		(2,784	)		(13,621	)		(51,680	)		(173,589	)

Depreciation expenses		(56,883	)		(62,482	)		(92,499	)		(101,376	)

General and administrative expenses		(18,549	)		(510,328	)		(401,078	)		(1,068,281	)

Impairment losses		-			(2,289,176	)		-			(3,246,031	)

(Loss) from operations		(102,204	)		(3,865,168	)		(1,517,004	)		(4,570,083	)

Other income (expenses)
Other revenues		958			4,464			38,896			6,575
Interest and finance costs		(73,809	)		(74,852	)		(141,287	)		(132,735	)

Total other (expenses)		(72,851	)		(70,388	)		(102,391	)		(126,160	)

(Loss) before provision for income
taxes and minority interest		(175,055	)		(3,935,556	)		(1,619,395	)		(4,696,243	)

Provision for income taxes (notes 3(k) and 14)		(2,255	)		(29,598	)		(91,364	)		(241,844	)

Net (loss) income before minority interest		(177,310	)		(3,965,154	)		(1,710,759	)		(4,938,087	)

Less minority interest		5,320			114,068			51,323			141,177

Net (loss) income		(171,990	)		(3,851,086	)		(1,659,436	)		(4,796,910	)

Other comprehensive income
Foreign currency translation adjustment		(74,113	)		316,188			(64,851	)		320,002

Comprehensive loss	$	(246,103	)	$	(3,534,898	)	$	(1,724,287	)	$	(4,476,908	)

Weight average number of shares
- Basic and diluted		2,408,000			1,671,484			2,408,000			1,671,484

(Loss) per share
- Basic and diluted	$	(0.07	)	$	(2.30	)	$	(0.69	)	$	(2.87)

Comprehensive (Loss) per share
- Basic and diluted	$	(0.07	)	$	(2.30	)	$	(0.69	)	$	(2.87)
See accompanying summary of accounting policies and notes to the consolidated financial statements

Sino-American Development Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2007 and 2006
Unaudtied
(Amounts expressed in U.S. Dollars)

	Six months ended June 30,
	2007			2006
Cash flows from operating activities:
Net (loss)	$	(1,659,436	)	$	(4,796,910	)
Adjustments to reconcile net loss to cash
provided by operating activities:
Minority Interest		(51,323	)		(141,177	)
Depreciation and amortization		92,499			101,376
Impairment of properties		-			3,246,031
(Increase) decrease in assets:
Account receivable and prepayments, net		1,704			278,239
Properties held for resale		1,586,005			(8,330,457	)
Advances to suppliers		-			196,637
Construction-in progress		-			9,888,409
Prepaid expenses		(14,808	)		-
Increase (decrease) in liabilities:
Account payable and accrued expenses		151,699			(459,475	)
Customers' deposits		(222,896	)		109,339
Income and other taxes payable		291,331			324,603

Net cash provided by operating activities		174,775			416,615

Cash flows from investing activities:
Net purchase of property, plant and equipment		(78,039	)		(139,254	)
Net cash (used in) investing activities		(78,039	)		(139,254	)

Cash flows from financing activities:
Loan proceeds		-			428,710
Principal loans repayments		(262,185	)		(910,444	)
Advances to directors and affiliated companies		296,561			(775,705	)
Net cash provided (used in) by financing activities		34,376			(1,257,439	)

Foreign currency translation adjustment		(138,297	)		320,002

Net (decrease) in cash and cash equivalents		(7,185	)		(660,076	)

Cash and cash equivalents, beginning of period		1,526,738			2,858,344

Cash and cash equivalents, end of period	$	1,519,553		$	2,198,268
See accompanying summary of accounting policies and notes to the consolidated financial statements


	SINO-AMERICAN DEVELOPMENT CORPORATION (Registrant)

Date: September 27, 2007	By:	/s/ Fang Zhong
		Fang Zhong Chief Executive Officer, Cheif Financial Officer