UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2010

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

For the transition period from to

Commission File Number: 000-52716

China Tractor Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

98-0445019

(I.R.S. Employer Identification No.)

Kalun Industrial Park JiuTai Economic Development Zone ChangChun City, P.R.China	130507
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number (including area code): +86-431-82561001

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

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

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o		Smaller reporting company x
(Do not check if a smaller reporting company)

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

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

As of November 22, 2010, there were 18,340,539 shares of company common stock issued and outstanding.

China Tractor Holdings, Inc.

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements

Item 1.	Financial Statements (unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4(T).	Controls and Procedures	25

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Removed and Reserved	26
Item 5.	Other Information	26
Item 6.	Exhibits	27

SIGNATURES		28

CHINA TRACTOR HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2010			December 31, 2009
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	16,565		$	15,967
Other receivables, net of allowance for doubtful accounts		105,884			53,053
Taxes recoverable		59,624			57,952
Assets held for sale		-			4,729,298
Due from related parties		866,259			284,553
Total current assets		1,048,332			5,140,823

Property, plant and equipment, net		2,382			1,981
Intangible assets		4,269			484,610
Land use right		-			700,267
Long-term equity investments		-			392,189
Receivable from sale of discontinued operation		12,570,729			9,799,333

TOTAL ASSETS	$	13,625,712		$	16,519,203

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Short-term loans	$	-		$	731,294
Accounts payable		468,559			459,026
Advance from customers		12,202			11,954
Salary payable		13,663			26,745
Accrued expenses and other payables		455,136			380,408
Borrowing from third parties		2,192,680			1,316,328
Due to related parties		1,328,735			573,255

Total current liabilities		4,470,975			3,499,010

STOCKHOLDERS’ EQUITY
Comon shares, authorized, issued and outstanding; 18,340,539 shares as of September 30, 2010 and December 31, 2009, par value $0.001 per share		1,834			1,831
Additional paid-in capital		15,183,273			15,183,276
Accumulated other comprehensive income		2,732,696			2,540,091
Accumulated deficit		(9,061,938	)		(5,119,841	)

TOTAL CHINA TRACTOR HOLDINGS, INC. SHAREHOLDERS' EQUITY		8,855,865			12,605,357
Noncontrolling Interest		298,872			414,836
TOTAL STOCKHOLDERS’ EQUITY		9,154,737			13,020,193

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	13,625,712		$	16,519,203

See accompanying notes to the condensed consolidated financial statements.

CHINA TRACTOR HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME

	Nine Months Ended September 30						Three Months Ended September 30
	2010			2009			2010			2009

Net revenue	$	-		$	18,984		$	-		$	-
Cost of sales		(1,595	)		(16,933	)		(5	)		-

Gross profit (loss)		(1,595	)		2,051			(5	)		-
Operating expenses:
Selling, General and administrative expenses		(172,225	)		(232,621	)		(44,926	)		(80,155	)
Provision for impairment of assets		(441,793	)		(142,086	)		(1,182	)		(98,928	)

Loss from operations		(615,613	)		(372,656	)		(46,113	)		(179,083	)

Equity in earnings in investee		-			(32,938	)		-			-
Government grant income		-			2,923			-			2,923
Interest expense		(64,300	)		(1,930	)		(23,479	)		-
Other expenses		(7,809	)		(4,734	)		(7,706	)		-

Loss before income taxes		(687,722	)		(409,335	)		(77,298	)		(176,160	)

Loss from continuing operations		(687,722	)		(409,335	)		(77,298	)		(176,160	)
Discontinued operations, net of income taxes (including loss on disposal of $3,264,057 in year 2009)		(3,376,296	)		(933,349	)		(9,030	)		(1,434,294	)

Net loss		(4,064,018	)		(1,342,684	)		(86,328	)		(1,610,454	)

Less: Net loss attributable to noncontrolling interest		121,921			514,559			2,590			778,727

Net loss attributable to China Tractor Holdings, Inc.		(3,942,097	)		(828,125	)		(83,738	)		(831,727	)

Other comprehensive income		198,562			74,686			159,153			31,969

Comprehensive income/(loss)		(3,743,535	)		(753,439	)		75,415			(799,758	)

Comprehensive (loss) attributable to noncontrolling interest		(5,957	)		(79,679	)		(4,775	)		(989	)

Comprehensive income/(loss) attributable to China Tractor Holdings, Inc.	$	(3,749,492	)	$	(833,118	)	$	70,640		$	(800,747	)

Basic and diluted income/(loss) per commom share:
Basic	$	(0.22	)	$	(0.05	)	$	(0.01	)	$	(0.05	)
Diluted		(0.22	)		(0.05	)		(0.01	)		(0.05	)

Weighted average common shares outstanding:
Basic		18,340,539			18,340,539			18,340,539			18,340,539
Diluted		18,340,539			18,340,539			18,340,539			18,340,539

See accompanying notes to the condensed consolidated financial statements.

CHINA TRACTOR HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

	2010			2009
Cash flows from operating activities:
Net loss	$	(4,064,018	)	$	(1,342,684	)
Adjustments to reconcile net loss to cash used for operating activities:
Loss from discontinued operations		3,376,296			-
Depreciation and amortization		22,749			629,599
Reserve for inventory obsolesce		-			819,837
Provision for doubtful receivables		-			47,274
Impairment of long-term assets		441,793			-
Investment income		-			158,119
Deferred tax assets		-			396,954
Changes in operating assets and liabilities:
Accounts receivable		-			(899,591	)
Inventories		-			(5,264,866	)
Advances to suppliers		-			(634,582	)
Other receivables		(50,831	)		30,306
Receivable from sale of discontinued operation		1,866			-
Accounts payable		-			1,101,346
Advance from customers		-			(129,703	)
Accrued expenses and other current liabilities		51,807			(9,345	)
Net cash used for operating activities		(220,338	)		(5,097,336	)

Cash flows from investing activities:
Receipts from the sale of fixed assets,intangible assets and other longterm assets		-			32,217
Purchase of property and equipment and other long-term assets		(45,016	)		(2,286,035	)
Net cash used for investing activities		(45,016	)		(2,253,818	)

Cash flows from financing activities:
Proceeds from short-term loan		-			6,649,607
Repayment on borrowing from related parties					10,133
Advance to related parties					(433,019	)
Collection on advance to related parties					16,076
Receipt from related parties		164,865
Proceeds from third party borrowings		834,271			(689,294	)
Repayments of short-term loan		(733,516	)		(73,073	)
Net cash provided by financing activities		265,620			5,480,430

Effect of exchange rate changes on cash		332			3,460

Net increase (decrease) in cash and cash equivalents		598			(1,867,264	)

Cash and cash equivalents, beginning balance		15,967			1,979,153

Cash and cash equivalents, ending balance	$	16,565		$	111,889

See accompanying notes to the condensed consolidated financial statements.

CHINA TRACTOR HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2010 AND 2009

NOTE 1 - ORGANIZATION AND PROPOSED BUSINESS OPERATIONS

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

Pursuant to the Share Exchange Agreement by and among Royaltech Corp. (“Royaltech”), a Delaware corporation, China Tractor, and the shareholders of Densen Machinery Investment Limited (“Densen Machinery”), the parent company of Changchun Densen, which was incorporated in April 2005 in Hong Kong, on September 9, 2008 (the “Closing Date”), Royaltech issued 16,720,354 shares of its common stock for all the issued and outstanding shares of China Tractor. The former shareholders of China Tractor acquired 91.3% of the issued and outstanding shares of Royaltech as of the Closing Date. This transaction resulted in a change in control of Royaltech to the former shareholders of China Tractor. Immediately after the closing of the Share Exchange and the Stock Purchase Agreements, Royaltech had 18,310,539 shares of Common Stock issued and outstanding. In connection with the change in control, Mr. Lau San became Chairman of the Board of Directors and Chief Executive Officer, Mr. Lau Jingdong became President, and Mr. Chen Guocheng became Chief Financial Officer of Royaltech. This transaction was accounted for as a recapitalization of China Tractor and not as a business combination. Accordingly, no pro forma information is presented. The historical financial statements are those of China Tractor.

The Share Exchange Agreement also states Royaltech’s existing shareholders assumed all the liabilities of Royaltech at the date of merger.

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

On December 1, 2009, we entered into a stock transfer agreement to transfer all shares owned in Chang Tuo to SOASACC. On March 15, 2010, we signed an stock transfer agreement with SOASACC, for approximately $12,570,729 (RMB84,200,000), including approximately $8,291,904 (RMB55,540,000) for the transfer of all shares we owned in Chang Tuo, approximately $3,329,302 (RMB22,300,000) for the transfer of the phase II plant and approximately $949,523 (RMB6,360,000) for the transfer of the trademark of “CT”. The agreement was approved by Changchun government on April 19, 2010 with a government document numbered Changfupifu [2010] No.1. We will dispose all shares we owned in Chang Tuo accordingly. Therefore, we report the results of operations of Chang Tuo as discontinued operations in accordance with ASC 205-20.

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

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of China Tractor, its 100%-owned subsidiary, Densen machinery, its 97%-owned subsidiary Changchun Densen and its 47.5%-owned subsidiary Chang Tuo for the nine months ended September 30, 2010 and 2009. All significant inter-company accounts and transactions were eliminated in consolidation.

Basis of Presentation

The consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), assuming the Company will continue as a going concern. Under that assumption, it is expected assets will be realized and liabilities will be satisfied in the normal course of business. On March 15, 2010, the Company signed a stock transfer agreement to transfer all shares owned by the Company in Chang Tuo to SOASACC, and the agreement was approved by Changchun government on April 19, 2010. As discussed in Note 15 to the financial statements, Chang Tuo was reported as discontinued operation as the Company lost its control over Chang Tuo during 2009. After the completion of the share transfer, the Company has no substantial business operations until it enters a new industry through merger or acquires other operational entities. As a result of the incident, the Company has experienced significant operating losses for the nine months ended September 30, 2010. The discontinued operation and the ensuing operating losses raise substantial doubt as to the Company’s ability to continue as a going concern. Management is attempting to evaluate other potential industries to enter.

Use of Estimates

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

Risks and Uncertainties

The Company is subject to substantial risks from, among other things, limited operating history, foreign currency exchange rates and the volatility of public markets.

Comprehensive Income

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

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

Foreign Currency Transactions

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

The balance sheet amounts with the exception of equity at September 30, 2010 were translated 6.6981 RMB to $1.00 compared to 6.8372 RMB to $1.00 at December 31, 2009 (audited). The equity accounts were stated at their historical exchange rate. The average translation rates applied to the income and cash flow statement amounts for the nine months ended September 30, 2010 and 2009 were 6.8164 RMB and 6.84251 RMB to $1.00 respectively. The average translation rates applied to the income and cash flow statement amounts for the three months ended September 30, 2010 and 2009 were 6.78032 RMB and 6.84110 RMB to $1.00, respectively.

Translations adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated statement of stockholders’ equity and were $2,732,696 and $2,540,091 as of September 30, 2010 and December 31, 2009 (audited), respectively.

Cash and Cash Equivalents

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

Accounts Receivable

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

Inventories

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

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

Property, Plant and Equipment

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

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

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

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

Capitalized Interest

Interest associated with major development and construction projects is capitalized and included in the cost of the project. When no debt is incurred specifically for a project, interest is capitalized on amounts expended on the project using weighted-average cost of the Company’s outstanding borrowings. Capitalization of interest ceases when the project is substantially complete or development activity is suspended for more than a brief period.

Land Use Rights

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

Other Intangible Assets

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

Long-Term Investment

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

Impairment of Long-Lived Assets

In accordance with ASC 360, “Property, Plant and Equipment”, previously SFAS No. 144, the Company reviews the carrying values of long-lived assets, including property, plant and equipment, land use right and other intangible assets, whenever facts and circumstances indicate the assets may be impaired. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is considered impaired, the impairment is measured by the amount by which the carrying amount the asset exceeds the fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs of disposal.

The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Credit losses and other-than-temporary impairments declines in fair value that are not expected to recover are expensed.

Revenue Recognition

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

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

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

Income Taxes

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

Earnings (loss) Per Share

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

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

Fair Value of Financial Instruments

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

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

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

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

The assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of September 30, 2010 are as follows:

The Company’s financial instruments include cash and cash equivalents, other receivables, and accounts payable. Cash and cash equivalents consist primarily of high rated money market funds at a variety of well-known institutions with original maturities of three months or less. Management estimates that the carrying amounts of the non related party financial instruments approximate their fair values due to their short-term nature.

Fair Value Measurements at Reporting Date Using Quoted Prices in

	Carrying value As of September 30		Active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	2010		(Level 1)		(Level 2)		(Level 3)

Cash and cash equivalents	$	16,565	$	16,565		-		-

Concentration of Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. As of September 30, 2010, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in the PRC, which management believes are of high credit quality. The Company generally does not require collateral for trade receivables and maintains an allowance for doubtful accounts of accounts receivables.

Noncontrolling Interests

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

Statement of Cash Flows

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

Recent Accounting Pronouncements

On February 25, 2010, the FASB issued ASU 2010-09 Subsequent Events Topic 855 “Amendments to Certain Recognition and Disclosure Requirements,” effective immediately. The amendments in the ASU remove the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of US GAAP. The FASB believes these amendments remove potential conflicts with the SEC’s literature. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

On March 5, 2010, the FASB issued ASU No. 2010-11 Derivatives and Hedging Topic 815 “Scope Exception Related to Embedded Credit Derivatives.” This ASU clarifies the guidance within the derivative literature that exempts certain credit related features from analysis as potential embedded derivatives requiring separate accounting. The ASU specifies that an embedded credit derivative feature related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another is not subject to bifurcation from a host contract under ASC 815-15-25, Derivatives and Hedging — Embedded Derivatives — Recognition. All other embedded credit derivative features should be analyzed to determine whether their economic characteristics and risks are “clearly and closely related” to the economic characteristics and risks of the host contract and whether bifurcation is required. The ASU is effective for the Company on July 1, 2010. Early adoption is permitted. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-17 (ASU 2010-17), Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company did not expect the provisions of ASU 2010-17 to have a material effect on the financial position, results of operations or cash flows of the Company.

NOTE 3 INVENTORIES

Inventories, by major categories, as of September 30, 2010 and December 31, 2009, were as follows:

	September 30, 2010			December 31, 2009
				(Audited)

Raw materials	$	145,550		$	140,998
Low value consumables		470			461
Materials on consignment for further processing		752			737

		146,772			142,196
Less: Allowance for obsolete inventories		(146,772	)		(142,196	)

Inventories, net	$	-		$	-

NOTE 4 TAXES RECOVERABLE

As of September 30, 2010 and December 31, 2009, taxes recoverable comprised the following:

	September 30, 2010			December 31, 2009
				(Audited)

Input VAT	$	1,888,580		$	1,788,216
Output VAT		(1,843,930	)		(1,806,416	)
VAT Paid		15,399			14,811
Offset input VAT of FA		-			61,067
Other		(425	)		274

Total	$	59,624		$	57,952

Changchun Densen is subject to value-added tax at 13% and 17% for its tractor sales and raw materials sales, respectively.

NOTE 5 OTHER RECEIVABLES

As of September 30, 2010 and December 31, 2009, other receivables comprised the following:

	September 30, 2010		December 31, 2009
			(Audited)

Advance to employees for business purposes	$	11,279	$	3,372
Prepayment		49,816		5,803
Other		44,789		43,878

Total other receivables	$	105,884	$	53,053

NOTE 6 PROPERTY, PLANT AND EQUIPMENT

As of September 30, 2010 and December 31, 2009, property, plant and equipment consisted of the following:

	September 30, 2010			December 31, 2009
				(Audited)
Cost:
Office Furniture and Equipment	$	5,250		$	4,141
Accumulated depreciation		(2,868	)		(2,160	)

Total property, plant and equipment, net	$	2,382		$	1,981

Depreciation expense for the nine months ended September 30, 2010 and 2009 was $651 and $523,729, respectively.

Depreciation expense for the three months ended September 30, 2010 and 2009 was $233 and $169,003, respectively.

NOTE 7 RECEIVABLE FROM SALE OF DISCONTINUED OPERATIONS

The Company signed an agreement with SOASACC to transfer all shares owned by the Company in Chang Tuo and construction of phase II plant of the Company. For details refer to Note 1.

NOTE 8 LAND USE RIGHTS

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

	December 31, 2009
	(Audited)

Cost of land use right	$	712,382
Accumulated amortization		(12,115	)

Land use rights, net	$	700,267

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

Land use right was transferred to SOASACC according to the stock transfer agreement signed on March 15, 2010. Please refer to Note 1 for detail.

NOTE 9 OTHER INTANGIBLE ASSETS

As of September 30, 2010 and December 31, 2009, the Company’s intangible assets were summarized as follows:

	Useful Life	September 30, 2010			December 31, 2009
					(Audited)
Cost:
Trademark	10 years	$	-		$	539,695
Capitalized accounting software	10 years		7,018			6,875
Non-patent techniques	10 years		89,578			87,755

Total at cost:			96,596			634,325
Accumulated amortization			(43,059	)		(149,715	)

Total after amortization			53,537			484,610
Impairment loss for non-patent techniques			(49,268	)		-

Other intangible assets, net		$	4,269		$	484,610

Trademark was transferred to SOASACC according to the stock transfer agreement signed on March 15, 2010. Please refer to Note 1 for detail.

As of September 30, 2010, the Company recorded impairment loss of $49,268 for non-patent techniques, which were technical drawings, due to the discontinuance of the operations.

Other intangible assets are stated at cost less accumulated amortization. The amortization of other intangible assets for the nine months ended September 30, 2010 and 2009 was $22,098 and $48,260, respectively. The amortization of other intangible assets for the three months ended September 30, 2010 and 2009 was $3,868 and $15,980, respectively.

The estimated amortization expense for the next five years as of September 30, 2010 and thereafter is expected to be as follows by years:

2011	$	670
2012		670
2013		670
2014		670
2015		670
Thereafter		919

Total	$	4,269

NOTE 10 LONG-TERM EQUITY INVESTMENTS

As of September 30, 2010 and December 31, 2009, the Company’s investment consisted of:

			September 30, 2010			December 31, 2009
						(Audited)

Zhongji North Machinery Co., Ltd.	5	%	$	400,333		$	392,189
Less: Provision for long-term investment impairment				(400,333	)		-

Long-term investment, net			$	-		$	392,189

Zhongji North was established on November 22, 2007 and the total registered capital is RMB50,000,000.

Zhongji North’s principal activities are development, manufacturing, sale and foreign trading of agricultural machineries and other machineries, manufacturing and sale of parts and accessories of agricultural machineries and other machineries.

As of September 30, 2010, the Company wrote off its investment in Zhongji North Machinery Co., Ltd. due to impairment.

NOTE 11 SHORT-TERM LOANS

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

	2009
	(Audited)

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

Short-term loan was overdue from March 24, 2010. The Company repaid it on September 30, 2010.

NOTE 12 ACCRUED EXPENSES AND OTHER PAYABLES

As of September 30, 2010 and December 31, 2009, the accrued expenses and other liabilities of the Company were as follows:

	September 30, 2010		December 31, 2009
			(Audited)

Accrued expenses	$	100,000	$	195,756
Acquisition of assets		96,088		94,133
Warrant deposit		21,731		21,289
Other		237,317		69,230

Total accrued expenses and other payables	$	455,136	$	380,408

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

NOTE 13 BORROWINGS FROM THIRD PARTIES

As of September 30, 2010 and December 31, 2009, the borrowings from third parties were as follows:

	September 30, 2010		December 31, 2009
			(Audited)

Zheng Yin	$	149,296	$	146,258
Dandong Junsheng Investment Property Development Co., Ltd.		849,015
Shanghai Sibo Education Co., Ltd.		1,194,369		1,170,070

Total borrowing from third parties	$	2,192,680	$	1,316,328

The borrowing from third parties has no repayment term and bore no interest. Borrowed for operational use, they will be repaid before April 30, 2011.

NOTE 14 RELATED PARTY BALANCE AND TRANSCATIONS

Due from related parties

As of September 30, 2010 and December 31, 2009, due from related parties was summarized as follows:

	September 30, 2010		December 31, 2009
			(Audited)

Lau San		-	$	284,553
Mudanjiang Binjiang Garden City (MBGC)		866,259		-

Total due from related parties	$	66,259	$	284,553

Mr. Lau San, our Chief Executive Officer and director, borrowed money from the Company. These loans are interest-free, unsecured and repayable on demand.

The amount due from MBGC was a short term loan. Mudanjiang Binjiang Garden City was controlled by Mr.Lau San, our Chief Executive Officer and director. The borrowing bore no interest and had no formal repayment terms.

Due to related parties

As of September 30, 2010 and December 31, 2009, due to related parties was summarized as follows:

	September 30, 2010		December 31, 2009
			(Audited)

Changchun Junming Machinery Co., Ltd. (“CJMCL”)	$	-	$	149,105
Shenzhen Junsheng Property Management Co., Ltd. (“SJPMCL”)		14,930		14,626
Chang Tuo		895,776		-
Zhongji North Machinery Co., Ltd. (“Zhongji North”)		418,029		409,524

Total due to related parties	$	1,328,735	$	573,255

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

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

The Company borrowed money from Chang Tuo. The borrowings bear no interest and is due upon demand.

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

NOTE 15 DISCONTINUED OPERATIONS

On December 1, 2009, we entered into a stock transfer agreement to transfer all shares we owned in Chang Tuo to SOASACC. On March 15, 2010, we signed a stock transfer agreement with SOASACC, for approximately $12,570,729 (RMB84,200,000), including approximately $8,291,904 (RMB55,540,000) for the transfer of all shares the Company owned in Chang Tuo, approximately $3,329,302 (RMB22,300,000) for the transfer of the phase II plant and approximately $949,523 (RMB6,360,000) for the transfer of the trademark of “CT”. The agreement was approved by Changchun government on April 19, 2010 with a government document numbered Changfupifu [2010] No.1. We will dispose all shares owned in Chang Tuo accordingly. Therefore, we report the results of operations of Chang Tuo as discontinued operations in accordance with ASC 205-20.

NOTE 16 INCOME TAX

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

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

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the nine months ended September 30, 2010 and 2009:

	September 30, 2010			December 31, 2009

US statutory rates		(34.0	%)		(34.0	%)
Tax rate difference		9.0	%		9.0	%
Valuation allowance		(25.0	%)		(25.0	%)

Tax per financial statements		0.0	%		0.0	%

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three months ended September 30, 2010 and 2009:

	September 30, 2010			December 31, 2009

US statutory rates		(34.0	%)		(34.0	%)
Tax rate difference		9.0	%		9.0	%
Valuation allowance		(25.0	)		(25.0	%)

Tax per financial statements		0.0	%		0.0	%

NOTE 17 OPERATING RISK

(a) Exchange risk

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

(b) Political risk

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

The Company is exposed to interest rate risk arising from short-term variable rate borrowings from time to time. The Company’s future interest expense will fluctuate in line with any change in borrowing rates. The Company does not have any derivative financial instruments as of September 30, 2010 or December 31, 2009 (audited) and believes its exposure to interest rate risk is not material.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Note on Forward Looking Statements

This quarterly report on Form 10-Q includes and incorporates by reference “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 with respect to our financial condition, results of operations, plans, objectives, future performance and business, which are usually identified by the use of words such as “will,” “may,” “anticipates,” “believes,” “estimates,” “expects,” “projects,” “plans,” “predicts,” “continues,” “intends,” “should,” “would,” or similar expressions. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and include this statement to comply with these safe harbor provisions.

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

We cannot give any guarantee that these plans, intentions or expectations will be achieved. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those Risk Factors set forth in our annual report Form 10-K filed with the SEC on April 15, 2010. Listed below and discussed elsewhere in this yearly report are some important risks, uncertainties and contingencies that could cause our actual results, performances or achievements to be materially different from the forward-looking statements included in this yearly report.

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

History and Business Overview

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

On September 9, 2008, we entered into a share exchange agreement with Densen Equipment Ltd. (“DEL”), which resulted in a change of control.

As consideration for all the assets of DEL, the former shareholders of DEL received over 90% of the issued and outstanding shares of our common stock. The former officers and directors of DEL were appointed to serve as our officers and directors upon the closing of the share exchange. Following the share exchange, we changed our corporate name to China Tractor Holdings Inc. and our business was focused on the research, production, and sales of low-speed vehicles, tractors and construction machinery in the PRC, through our wholly owned subsidiary, Densen Machinery Investment Limited, incorporated in Hong Kong in April 2005 (“Densen Machinery”). For further details regarding the share exchange transaction with DEL, please see our Current Report on Form 8-K, filed with the SEC on September 15, 2008.

Our corporate structure is summarized in the chart below and the accompanying summary:

Changchun Densen Agricultural Machinery Equipment Co., Ltd. (“Changchun Densen”) was established by Densen Machinery on September 2005. Changchun Densen is licensed to engage in the research, development and production of low-speed vehicles, tractors and construction machinery.

Chang Tuo is a joint venture established by Changchun Densen and SOASACC in November 2007. As of September 30, 2010, the total registered capital of Chang Tuo was RMB200,000,000 (approximately $29.3 million) and Chang Tuo was engaged in the research, development, production, and sale of low-speed vehicles, tractors and construction machineries, and sales of agricultural machineries and accessories.

Densen Machinery received subsidies and tax incentives from the Chinese government as part of its plan to promote the development of agriculture in the northeast regions of China. The major markets for our products were located mainly in the provinces of Jilin, Liaoning, Heilongjiang and Shandong.

On December 1, 2009, we entered into a stock transfer agreement to transfer all shares owned in Chang Tuo to State-owned Assets Supervision and Administration Commission of Changchun (SOASACC). On March 15, 2010, we signed a stock transfer agreement with SOASACC for approximately $12,570,729 (RMB84,200,000), including approximately $8,291,904 (RMB55,540,000) for the transfer of all shares we owned in Chang Tuo, approximately $3,329,302 (RMB22,300,000) for the transfer of the phase II plant and approximately $949,523 (RMB6,360,000) for the transfer of the trademark of “CT”. The agreement was approved by Changchun government on April 19, 2010 with a government document numbered Changfupifu [2010] No.1. We will dispose all shares we owned in Chang Tuo accordingly. Therefore, we report the results of operations of Chang Tuo as discontinued operations in accordance with ASC 205-20.

We are current in the process of registering the transfer in China and expect the ownership in Chang Tuo will be transferred to SOASACC before the end of April 2011 We have reported Chang Tuo as discontinued operation in our financial statement for the period ended September 30, 2010.

After the completion of the transaction, the Company had no substantial business operations until it enters a new industry through merger or acquires other operational entities. As a result, the Company has experienced significant operating losses for the nine months ended September 30, 2010. The discontinued operation and ensuing operating losses raise substantial doubt as to the Company’s ability to continue as a going concern. Management is evaluating other potential industries to enter.

Critical Accounting Policies and Estimates

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

Income taxes

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

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

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

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

Asset Impairment

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

Results of Operations for the nine months ended September 30, 2010 and 2009

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE GAINS/LOSS

							Change
	2010			2009			Amount			%

Net revenue	$			$	18,984		$	(18,984	)		-100	%
Cost of sales		(1,595	)		(16,933	)		15,338			-91	%

Gross profit/(loss)		(1,595	)		2,051			(3,646	)		-178	%
Operating expenses:
Selling and general and administrative expenses		(172,225	)		(232,621	)		60,396			-26	%
Provision for impairment of assets		(441,793	)		(142,086	)		(299,707	)		211	%
(Loss) from operations		(615,613	)		(372,656	)		(242,957	)		65	%
Equity in earnings in investee		-			(32,938	)		32,938			-100	%
Government grant income		-			2,923			(2,923	)	100		%
Interest expense		(64,300	)		(1,930	)		(62,370	)	NM
Other (expense)		(7,809	)		(4,734	)		(3,075	)		65	%

(loss) before income taxes		(687,722	)		(409,335	)		(278,387	)		68	%
Discontinued operations, net of tax		(3,376,296	)		(933,349	)		(2,442,947	)	NM

Net (loss)		(4,064,018	)		(1,342,684	)		(2,721,334	)	NM
Net loss attributable to noncontrolling interest		121,921			514,559			(392,638	)		-76	%

Net (loss) attributable to China Tractor Holdings, Inc.		(3,942,097	)		(828,125	)		(3,113,972	)	NM
Other comprehensive income		198,562			74,686			123,876			166	%

Comprehensive (loss)		(3,743,535	)		(753,439	)		(2,990,096	)	NM
Comprehensive (income) attributable to noncontrolling interest		(5,957	)		(79,679	)		73,722			-93	%

Net (loss) attributable to stockholders	$	(3,749,492	)	$	(833,118	)	$	(2,916,374	)	NM

Revenue

There was no revenue for the nine months ended September 30, 2010, because there were no operating activities from January to September of 2010, compared to $18,984 for the comparable period of 2009.

Cost of sales

Cost of sales for the nine months ended September 30, 2010 decreased to $1,595 from $16,933 for the same period of 2009, a decrease of $15,338. The decrease was because there were no sales in the nine months ended September 30, 2010 and all cost of sales resulted from the impairment loss of raw materials.

Gross profit (loss)

The gross loss for the nine months ended September 30, 2010 was $1,595, a decrease of $3,646 compared to gross profit of $2,051 for the nine months ended September 30, 2009. The increase in profit loss was because there were no operating activities since January 2010. The cost of sales for the nine months ended September 30, 2010 was from impairment loss of inventory

Selling, general and administrative expenses

Selling, general and administrative expenses decreased to $172,225 in the nine months ended September 30, 2010 from $232,621 in the nine months ended September 30, 2009, a decrease of $60,396 or 26%.

Provision for impairment of assets

The provision for impairment of assets in the nine months ended September 30, 2010 was $441,793, an increase of $299,707 compared to $142,086 in the comparable period of 2009. The increase resulted from the provision for impairment of asset which includes intangible asset of $ 49,268 and long term investment of $400,333 for the nine months ended September 30, 2010.

Interest expense

The interest expense in the nine months ended September 30, 2010 was $64,300, an increase of $62,370 compared to $1,930 in the comparable period of 2009. The increase in interest expenses was because the interest of short loan of $730,557 was capitalized in the nine months ended September 30, 2009 and it was included in the interest expenses of nine months ended September 30, 2010.

Other (expenses)

Other expenses were increased to $7,809 for the nine months ended September 30, 2010 compared to $4,734 for the nine months ended September 30, 2009, an increase of $3,075. The increase in other expenses was due to the increase in loan guarantee fees in the nine months ended September 30, 2010.

Other comprehensive income

Other comprehensive income in the nine months ended September 30, 2010 was $198,562 compared to $74,686 in the comparable period of 2009. It represents foreign currency translation income resulted from appreciation of RMB against US dollar.

Net (loss)

Net loss in the nine months ended September 30, 2010 was $4,064,018; compared to net loss of $1,342,684 in the nine months ended September 30, 2009, an increase in net loss of $2,721,334, which resulted from discontinuance of the operations of Chang Tuo.

Liquidity and Capital Resources

We generally finance our operations from short-term loans from domestic banks. As of September 30, 2010, we had cash and cash equivalents of $16,565 which represented an increase of $598 from $15,967 as December 31, 2009.

Operating Activities

The net cash used in operating activities in the nine months ended September 30, 2010 was $220,338 compared to $5,097,337 in the nine months ended September 30, 2009. The difference of $4,876,999 mainly resulted from the lack of operating activities during January to September 2010. There was no advance to supplier in the nine months ended September 30, 2010, compared to $634,582 in the comparable period of 2009.

Investing Activities

Net cash used for investing activities was $45,016 in the nine months ended September 30, 2010. Net cash used for investing activities was $2,253,818 in the nine months ended September 30, 2009. The decrease of $2,208,802 mainly because we purchased less property and equipment and other long term assets in the nine months ended September 30, 2010.

Financing Activities

Net cash provided by financing activities was $265,620 in the nine months ended September 30, 2010 which include loans from related parties of $164,865, loans from third parties of $834,271 and repayments of short-term loans of $733,516. Net cash provided by financing activities was $5,480,430 in the nine months ended September, 2009, due to a net inflow from short-term loans of $6,649,907

Inflation

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

Trends and uncertainties

The consolidated financial statements of the Company were prepared in accordance with US GAAP assuming the Company will continue as a going concern. Under that assumption, it is expected that assets will be realized and liabilities will be satisfied in the normal course of business. On December 1, 2009, we entered into a stock transfer agreement to transfer all shares we owned in Chang Tuo to SOASACC. On March 15, 2010, we signed stock transfer agreement with SOASACC, for approximately $12,570,729 (RMB84,200,000), including approximately $8,291,904 (RMB55,540,000) for the transfer of all shares we owned in Chang Tuo, approximately $3,329,302 (RMB22,300,000) for the transfer of the phase II plant and approximately $949,523 (RMB6,360,000) for the transfer of the trademark of “CT”. The agreement was approved by Changchun government on April 19, 2010 with a government document numbered Changfupifu [2010] No.1.

After the completion of the transaction,the Company will have no substantial business operations until it enters a new industry through merger or acquisition of other operating entities. As a result, we have experienced significant operating losses for the nine months ended September 30, 2010. The discontinued operation and the ensuing operating losses raise substantial doubt as to the Company’s ability to continue as a going concern. Management is attempting to evaluate other potential industries to enter.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors during the nine months and three months ended September 30,2010 and 2009.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer (“the Certifying Officers”), conducted evaluations of the Company’s disclosure controls and procedures. As defined under Sections 13a–15(e) and 15d–15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, included the Certifying Officers, to allow timely decisions regarding required disclosures.

Based on this evaluation, the Certifying Officers have concluded that the Company’s disclosure controls and procedures were not effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company’s disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder.

The Company’s disclosure controls and procedures were not effective due to insufficient human resources. The Company currently does not have any full-time employees with sufficient knowledge of U.S. GAAP and disclosure control procedure, and relies exclusively on outside consultants. Further, the Company requires additional personnel and protocols to ensure that material information is recorded, processed, summarized by the Company and by its outside consultants in a timely matter and meet financial reporting requirements.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the Company’s third fiscal quarter of 2010 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Removed and Reserved

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits

Exhibit Number	Description of Exhibit
31.1*	Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
31.2*	Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
32.1*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).

_________________

* Filed herewith

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	China Tractor Holdings, Inc.

November 22, 2010	By:	/s/ Lau, San
		Lau, San Chief Executive Officer (Principal Executive Officer)


November 22, 2010	By:	/s/ Chen, Guocheng
		Chen, Guocheng Chief Financial Officer (Principal Accounting Officer)

China Tractor Holdings, Inc. 10-Q