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: June 30, 2010

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

For the transition period from _____________to _____________

Commission File No. 333-139940

CHINA SKYRISE DIGITAL SERVICE INC.
(Name of Small Business Issuer in Its Charter)

Nevada	98-0554885
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4/F, M-3rd Building
Hi-tech Industrial Park
Nanshan District, Shenzhen 518070
People’s Republic of China
(Address of principal executive offices)

(86) 755 26012511
(Registrant’s telephone number, including area code)

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 [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data 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).

Yes [ ] No [ ]

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

Large accelerated filer [ ]	Accelerated filer [ ]

Non-accelerated filer [ ]	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 [ ] No [X]

The number of shares outstanding of each of the issuer’s classes of common equity, as of August 13, 2010 is as follows:

Class of Securities	Shares Outstanding
Common Stock, $0.001 par value	21,110,550

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS.	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	24
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	36
ITEM 4.	CONTROLS AND PROCEDURES.	36

PART II	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS.	37
ITEM 1A.	RISK FACTORS.	37
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	37
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	37
ITEM 4.	(REMOVED AND RESERVED).	37
ITEM 5.	OTHER INFORMATION.	37
ITEM 6.	EXHIBITS.	37

PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CHINA SKYRISE DIGITAL SERVICE INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

Contents	Page(s)

Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009	4

Consolidated Statements of Income and Other Comprehensive Income for the three months and six months ended June 30, 2010 and 2009 (unaudited)	5

Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (unaudited)	6

Notes to the Consolidated Financial Statements (unaudited)	7

CHINA SKYRISE DIGITAL SERVICE INC.
(Incorporated in the State of Nevada, United States of America)
CONSOLIDATED BALANCE SHEETS

		June 30,		December 31,
		2010		2009
		(Unaudited)		(Audited)
ASSETS
Current assets
Cash and cash equivalents	$	427,519	$	409,718
Accounts receivable		3,326,616		3,089,672
Inventory		1,625,552		1,373,733
Deposits and prepaid expenses		960,304		558,068
Other receivables		308,249		536,013
Total current assets		6,648,240		5,967,204
Property, plant and equipment, net of accumulated depreciation		339,070		340,616
Other assets
Long term accounts receivable		98,677		-
Intangible assets, net of accumulated amortization		129,396		122,650
Goodwill		193,754		193,754
Total other assets		421,827		316,404

Total assets	$	7,409,137	$	6,624,224
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	935,629	$	1,005,679
Unearned revenue		289,950		81,009
Other payables and accrued expenses		553,685		541,767
Short term debt		390,345		440,100
Tax payable		6,499		73,160
		2,176,108		2,141,715
Commitments and contingencies		-		-
Stockholders' equity
Common stock: $0.001 par value
Authorized: 75,000,000 common shares
Issued and outstanding: 21,110,550 common shares		21,111		21,111
Additional paid-in capital		2,215,508		2,207,072
Statutory reserve		2,791		2,791
Retained earnings		2,951,489		2,218,197
Accumulated other comprehensive income		42,130		33,338
Total stockholders' equity		5,233,029		4,482,509
Total liabilities and stockholders' equity	$	7,409,137	$	6,624,224

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

		Three months			Three months			Six months			Six months
		ended			ended			ended			ended
		June 30,			June 30,			June 30,			June 30,
		2010			2009			2010			2009
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues	$	2,320,328		$	1,232,571		$	3,644,147		$	1,630,379
Cost of goods sold		1,541,330			728,164			2,247,741			942,195
Gross profit		778,998			504,407			1,396,406			688,184
Selling and marketing expenses		(146,884	)		(137,919	)		(238,586	)		(234,900	)
General and administrative expenses		(256,209	)		(171,987	)		(496,097	)		(336,803	)
Net income from operations		375,905			194,501			661,723			116,481
Other income (expenses)
Other income		34,961			332			36,284			2,695
Government grant		84,301			48,626			84,301			121,570
Interest expense		(13,246	)		(6,493	)		(13,252	)		(12,935	)
Total other income (expenses)		106,016			42,465			107,333			111,330
Income (loss) before provision for income taxes		481,921			236,966			769,056			227,811
Provision for income taxes		(35,764	)		-			(35,764	)		-
Net income (loss)		446,157			236,966			733,292			227,811
Other comprehensive income (loss)
Foreign currency translation gain /(loss)		12,098			22,645			8,792			(11,097	)
Total comprehensive income (loss)	$	458,255		$	259,611		$	742,084		$	216,714
Earnings per share
Basic	$	0.02		$	0.01		$	0.03		$	0.01
Diluted	$	0.02		$	0.01		$	0.03		$	0.01
Weighted average number of shares outstanding:
Basic		21,110,550			17,004,800			21,110,550			17,004,800
Diluted		21,110,550			17,004,800			21,110,550			17,004,800

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six months			Six months
		ended			ended
		June 30,			June 30,
		2010			2009
		(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income (loss) for the period	$	733,292		$	227,811
Adjustments to reconcile net income (loss) to net cash from operations:
Depreciation		151,563			26,905
Amortization of intangible assets		22,948			13,770
Changes in operating assets and liabilities
(Increase) decrease in inventory		(251,819	)		44,418
(Increase) decrease in deposits and prepaid expenses		(402,236	)		24,016
Increase in accounts receivable and long term accounts receivable		(335,621	)		(322,871	)
Decrease in other receivables		227,764			85,234
(Decrease) increase in tax payable		(66,661	)		16,906
Decrease in accounts payable		(70,050	)		(35,104	)
Increase in unearned revenue		208,941			6,380
Increase in other payables and accrued expenses		11,918			42,891
Net cash provided by operating activities		230,039			130,356
Cash flows from investing activities
Purchases of property, plant and equipment		(149,254	)		(28,886	)
Purchase of intangible assets		(29,289	)		(307	)
Net cash used in investing activities		(178,543	)		(29,193	)
Cash flows from financing activities
Repayment of short term debt		(49,755	)		(221,711	)
Net cash used in financing activities		(49,755	)		(221,711	)
Effects of exchange rate changes on cash		16,060			(10,825	)
Increase (decrease) in cash and cash equivalents		17,801			(131,373	)
Cash and cash equivalents, beginning of period		409,718			508,272
Cash and cash equivalents, end of period	$	427,519		$	376,899
Supplementary disclosures of cash flow information:
Cash paid for interest	$	13,252		$	12,935
Cash paid for taxes	$	35,764		$	-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. CORPORATE INFORMATION

China Skyrise Digital Service Inc. (the “Company”) (“CSD”) (formerly known as Getpokerrakeback.com) was incorporated on June 5, 2006 in the State of Nevada. The Company commenced business by developing and launching its website getpokerrakeback.com on which it offered “rake backs”, a poker loyalty program that rewards online poker players for playing online poker at a specific online poker room.

On September 25, 2009, the Company completed a reverse acquisition transaction through a share exchange with United Digital Home H.K. Group Company Limited (“UDH”) whereby the Company acquired 100% of the issued and outstanding capital stock of UDH, in exchange for 12,379,800 shares of the Company’s common stock, which shares constituted 72.8% of the Company’s issued and outstanding capital stock on a fully-diluted basis, as of and immediately after the consummation of the reverse acquisition. As a result of the acquisition of UDH, the Company now owns all of the issued and outstanding capital stock of UDH, which in turn owns Shenzhen Skyrise Technology Co., Ltd (“SST”) and Shenzhen Skyrise Digital Electronics Co., Ltd. (“SSD”). For accounting purposes, the share exchange transaction with UDH was treated as a reverse acquisition and recapitalization of CSD, with UDH as the acquirer and China Skyrise Digital Service Inc. as the acquired party. Upon completion of the exchange, UDH, SST and SSD became wholly owned subsidiaries of CSD.

UDH is a private corporation incorporated on December 11, 2007 in Hong Kong. It was principally established to serve as an investment holding company and its operations are carried out in Hong Kong. On January 28, 2008, UDH acquired 100% of the equity interest in SST, a corporation incorporated under the laws of the People’s Republic of China (“PRC”), from SST’s shareholders, including Mr. Mingchun Zhou, the Company’s Chairman and Chief Executive Officer. SST was established on May 23, 2003 and its principal activity is the sale, installation and development of digital home security networks, peripherals and software. On April 23, 2008, SST established SSD, a corporation incorporated under the laws of the PRC. SSD’s principal activity is sale, installation and development of computing network and intelligence systems.

As a result of the reverse acquisition of UDH, the Company entered into a new business. Through its Chinese subsidiaries, the Company is now engaged in the sale, installation and development of computing network, intelligence system, digital home security networks, peripherals and software. On September 25, 2009, the Company changed its name to China Skyrise Digital Service Inc. to more accurately reflect its new business operations.

CSD, UDH, SST and SSD are hereafter referred to as (“the Company”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 FISCAL YEAR

The Company has adopted December 31 as its fiscal year end.

2.2 REPORTING ENTITIES

The accompanying consolidated financial statements include the following entities:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.2 REPORTING ENTITIES (CONTINUED)

	Place of	Registered		Date of	Percentage of	Principal
Name of subsidiaries	incorporation	capital	Paid - in capital	incorporation	interest	activity

United Digital Home H.K. Group Company Limited	Hong Kong	HK$10,000	HK$10,000	December 11, 2007	100% directly	Investment holding

Shenzhen Skyrise Technology Co ., Limited	People's Republic of China	RMB8,000,000	RMB8,000,000	May 27, 2003	100% directly	Digital home security system

Shenzhen Skyrise Digital Electronic Co ., Limited	People's Republic of China	RMB1,000,0000	RMB1,000,0000	April 23, 2008	100% directly	Computing network and intelligence system

2.3 BASIS OF CONSOLIDATION AND PRESENTATION

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). In the opinion of management, the accompanying balance sheets, and statements of income, and cash flows and include all adjustments, consisting only of normal recurring items, considered necessary to give a fair presentation of operating results for the periods presented. All material inter-company transactions and balances have been eliminated in consolidation.

For accounting purposes, the combination of the company and UDH was accounted for as a reverse merger with UDH as the acquirer and CSD as the acquired party and the acquisition of SST and SSD was accounted for under the acquisition method with UDH as the immediate parent corporation of both companies for legal purposes. Accordingly the Company’s financial statements have been prepared on a consolidated basis for the periods presented and the consolidated balance sheets, consolidated statements of income and other comprehensive income, stockholders’ equity and cash flows were presented as if the recapitalization had occurred at the beginning of the earliest period presented and the operations of the accounting acquired party from the date of stock exchange transaction.

Interim results are not necessarily indicative of results for a full year. The information included in the Form 10-Q should be read in conjunction with the information included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2009.

CSD, UDH, SST and SSD are hereafter referred to as (“the Company”).

2.4 USE OF ESTIMATES

The preparation of financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

2.5 ECONOMIC AND POLITICAL RISK

The Company’s business operations are conducted in the PRC and are subject to special considerations and risks not typically associated with companies in North America and Western Europe. China’s political, economic and legal environments may influence the Company’s business, financial condition and results of operations, including adverse effects by changes in governmental policies in laws and regulations, anti-inflationary measures, and rates and methods of taxation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.6 REVENUE RECOGNITION

Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured. These criteria are generally satisfied at the time of shipment when risk of loss and title passes to the customer.

The Company recognizes revenue when the goods are delivered and title has passed. Sales revenue represents the invoiced value of goods, net of a value-added tax (“VAT”). All of the Company’s products that are sold in the PRC are subject to a Chinese VAT at a rate of 17% of the gross sales price or at a rate approved by the Chinese local government. This VAT may be offset by the VAT paid by the Company on raw materials and other materials included in the cost of producing their finished product.

2.7 COST OF GOODS SOLD

Cost of goods sold consists primarily of direct material costs, direct labor costs, direct depreciation and related direct expenses attributable to the production of the products. Inbound shipping and handling costs and purchasing are included in direct material costs. Manufacturing overhead includes expenses such as indirect labor, depreciation as it relates to the cost of production, rent, utilities, receiving costs, and equipment maintenance and repairs.

2.8 SHIPPING AND HANDLING

Shipping and handling costs related to costs of goods sold are included in selling and marketing expenses, and general and administrative expenses totaled $6,323 and $4,696 for the three months ended June 30, 2010 and June 30, 2009, respectively. Shipping and handling costs amounted to $11,158 and $6,508 for the six months ended June 30, 2010 and June 30, 2009, respectively.

2.9 ADVERTISING

Advertising costs are included in selling and marketing expenses which totaled $587 and $Nil for the three months ended June 30, 2010 and June 30, 2009, respectively. Advertisement costs amounted to $3,024 and $1,388 for the six months ended June 30, 2010 and June 30, 2009, respectively.

2.10 RESEARCH AND DEVELOPMENT COSTS

Research and development costs are included in general and administrative expenses and include the cost to develop new products and are expensed when incurred and totaled $132,412 and $101,213 for the three months ended June 30, 2010 and June 30, 2009, respectively. Research and development costs amounted to $248,621 and $192,611 for the six months ended June 30, 2010 and June 30, 2009, respectively. The costs for development of new products and substantial enhancements to existing products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. The Company has determined that technological feasibility is established at the time a working model of products is completed. No costs have been capitalized to date.

2.11 GOVERNMENT GRANT

Government grants represent local authority grants to the company for software development. Grants are recognized when the local authority approve the grant.

2.12 FOREIGN CURRENCY TRANSLATION AND OTHER COMPREHENSIVE INCOME

The reporting currency of the Company is the United States Dollars ($). The functional currencies of the Company and its subsidiaries UDH, SST and SSDT, are the United States Dollars ($) and Chinese Renminbi (RMB) respectively.

For those entities whose functional currency is other than the US dollars, all assets and liabilities are translated into US dollars at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and items in the statements of income and of cash flows are translated at the average rate for the year. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported in the statement of cash flows will not necessarily agree with changes in the corresponding balances in the balance sheet. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated statement of stockholders’ 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.12 FOREIGN CURRENCY TRANSLATION AND OTHER COMPREHENSIVE INCOME (CONTINUED)

Accumulated other comprehensive income amounted to $42,130 as of June 30, 2010. The balance sheet amounts with the exception of equity at June 30, 2010 and June 30, 2009 were translated at RM6.79 to $1.00 and RMB6.84 to $1.00, respectively. The average translation rates applied to the statements of income and of cash flows for the six months ended June 30, 2010 and June 30, 2009 were RMB 6.84 to $1.00.

2.13 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such costs include the cost of replacing parts that are eligible for capitalization when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalization. The assets’ residual values, useful lives and amortization methods are reviewed, and adjusted if appropriate, at each financial year-end.

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets.

Assets Classifications	Estimated useful life

Furniture, fixtures and office equipment	5 years
Plant and machinery	5 years
Motor vehicles	10 years

	June 30,		December 31,
	2010		2009
	$		$

Furniture, fixtures and office equipment	357,230		207,128
Plant and machinery	227,198		226,273
Motor vehicles	38,453		38,296
	622,881		471,697

Less: Accumulated depreciation	(283,811	)	(131,081	)
Net carrying amount	339,070		340,616

Depreciation expense was $130,533 and $13,554 for the three months ended June 30, 2010 and June 30, 2009 respectively. Depreciation expense was $151,563 and $26,905 for the six months ended June 30, 2010 and June 30, 2009 respectively.

Expenditures for maintenance and repairs are charged to expense as incurred, whereas major improvements are capitalized as additions to property, plant and equipment. The Company reviews its property, plant and equipment whenever events or changes in circumstances indicate that the carrying value of certain assets might not be recoverable. In these instances, the Company recognizes an impairment loss when it is probable that the estimated cash flows are less than the carrying value of the asset. To date, no such impairment losses have been recorded.

2.14 LONG –LIVED ASSETS

The Company reviews the carrying amount of its long-lived assets, including intangibles, for impairment, each reporting period in accordance with ASC Topic 360 “Property, Plant, and Equipment”. An asset is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is considered not recoverable, the asset is adjusted to its fair value. Fair value is generally determined based on discounted future cash flow. As of June 30, 2010 and December 31, 2009, the Company determined no impairment charges were necessary.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.15 CAPITALIZED INTERNAL USE SOFTWARE

The Company capitalizes certain costs incurred to purchase or create internal-use software in accordance with ASC Topic 350-40, “Internal Use Software”. To date, such costs have included external direct costs of materials and services incurred in the implementation of internal-use software and are included within computer hardware and software. Once the capitalization criteria have been met, such costs are classified as software and are amortized on a straight-line basis over five years once the software has been put into use. Subsequent additions, modifications, or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred.

2.16 INTANGIBLE ASSETS

The Company records identifiable intangible assets in other assets at cost less accumulated amortization and impairment. These assets consist primarily of software licenses. The Company amortizes them over the shorter of their stated or statutory duration or their estimated useful lives on a straight-line basis over five years.

	June 30,		December 31,
	2010		2009
	$		$
Patent	7,478		7,058
Software system	201,260		171,660
	208,738		178,718
Less: Accumulated amortization	(79,342	)	(56,068	)
Net carrying amount	129,396		122,650

Amortization expense was $12,194 and $6,891 for the three months ended June 30, 2010 and June 30, 2009, respectively. Amortization expense was $22,948 and $13,770 for the six months ended June 30, 2010 and June 30, 2009, respectively.

2.17 GOODWILL

Goodwill represents the fair value of the assets acquired in the acquisitions over the cost of the assets acquired. Goodwill is tested for impairment on an annual basis of the end of the company’s fiscal year, or when impairment indicators arise. The Company uses a fair-value-based approach to test for impairment. The Company indirectly acquired two separate companies, SST and SSD. SST is engaged in the sale, installation and development of digital home security networks, peripherals and software and SSD is engaged in the sale, installation and development of computing network and intelligence systems. As a result of these acquisitions, the Company recorded goodwill in the amount of $193,754. This goodwill represents the fair value of the assets acquired in these acquisitions over the cost of the assets acquired.

2.18 INVENTORY

Inventory consists primarily of raw materials, components, finished goods and low value consumable goods. Raw materials, components and low value consumable cost are stated at cost. Cost comprises direct materials and, where applicable direct labor costs and those overheads that have been incurred in bringing the inventory to their present location and condition. Finished goods are stated at the lower of cost (determined on weighted average method) or net realizable value.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.18 INVENTORY (CONTINUED)

	June 30,	December 31,
	2010	2009
	$	$
Raw materials	581,607	472,280
Consumable stores	127,166	126,647
Components	319,780	156,399
Finished goods-in-transits	237,321	166,336
Finished goods	359,678	452,071
	1,625,552	1,373,733

The Company provides for inventory losses based on obsolescence and levels in excess of forecasted demand. In these cases, inventory is reduced to estimated realizable value based on historical usage and expected demand. Inherent in the Company’s estimates of market value in determining inventory valuation are estimates related to economic trends, future demand for the Company’s products, and technical obsolescence of products. When products have been delivered, but the product revenue associated with the arrangement has been deferred as a result of not meeting the revenue recognition criteria. The Company includes the costs for the delivered items in inventory until recognition of the related revenue occurs.

2.19 ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company reduces gross trade accounts receivable by an allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company reviews its allowance for doubtful accounts on a regular basis and all past due balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Provisions for doubtful accounts for the three months ended June 30, 2010 and year ended December 31, 2009 are $nil. Bad debts written off for the three months ended June 30, 2010 and June 30, 2009 and for the six months ended June 30, 2010 and June 30, 2009 are $nil.

Aging of accounts receivable of the company is as follows:

	2010		2009
	$		$

within 1 year	3,326,616		2,988,032
over 1 year and within 2 years	5,407		101,063
over 2 years	93,270		577
	3,425,293		3,089,672
Less: reclassified as long term accounts receivable	(98,677	)	-
	3,326,616		3,089,672

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.20 DEPOSITS AND PREPAID EXPENSES

	June 30,	December 31,
	2010	2009
	$	$

Trade deposits	929,610	508,660
Prepaid expenses	30,694	49,408
	960,304	558,068

Trade deposits are the payments of deposits to suppliers for procurement of goods.

2.21 OTHER RECEIVABLES

	June 30,	December 31,
	2010	2009
	$	$

Project tender and other deposits	71,145	69,924
Rental and utility deposits	11,960	14,288
Loan due from employees	185,445	211,721
Due from employees	8,931	213,848
Samples loaned to customers	236	14,202
Temporary payments to third parties	30,532	12,030
	308,249	536,013

Project tender deposits are refundable on the completion of the entire tender process. Due from employees are the amounts advanced for handling business transactions on behalf of the Company and will be reconciled by the Company on the completion of the business transactions. Samples loaned to customers are physical samples advanced to customers for exhibition and promotion purposes. Temporary payments to third parties are deposits represents temporary deposits paid by the Company to suppliers and service providers in anticipation of their delivery of products and services of the Company. Such deposits are unsecured, interest free and have no fixed repayment terms.

2.22 TAX PAYABLE

	June 30,		December 31,
	2010		2009
	$		$

VAT	3,546		70,455
City maintenance and construction tax	201		879
Individual income tax	3,305		1,826
Enterprise income tax	(553	)	-
Tax payable	6,499		73,160

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.23 OTHER PAYABLES AND ACCRUED EXPENSES

	June 30,	December 31,
	2010	2009
	$	$

Wages and professional fees accruals	17,641	16,962
Due to employees	11,856	14,421
Due to related party	434,930	447,554
Security deposits for samples loaned to customers	30,502	27,654
Sundries	26,199	13,171
Levies payable	117	-
Temporary receipts from third parties	32,440	22,005
	553,685	541,767

Wages and professional fees accruals are amounts due to employees and professional firms. Due to related party represented the amount due to Mr. Mingchun Zhou, Chief Executive Officer of the Company. SST has borrowed funds from Mr. Mingchun Zhou at intervals commencing in fiscal year 2008. Until July 10, 2009, these loans were unsecured, interest free and had no fixed repayment term. On July 10, 2009, the Company entered into a Repayment Agreement with Mr. Zhou, pursuant to which the Company acknowledged and memorialized its obligation to repay an outstanding balance of RMB 1,937,000 (approximately, $284,158) to Mr. Zhou. According to the agreement, the loan remains unsecured, and is interest free, but the Company is obligated to repay the loan on or before July 10, 2011, the second anniversary of execution date. Security deposits for samples loaned to customers received are deposits paid by customers in order to safeguard that samples will be returned to the Company. Temporary receipts from third parties represent temporary deposits provided to the Company in anticipation of the Company’s delivery of products and services to third parties in the future. This is a usual and customary way to show a good faith intent to conduct business with the Company in the future. Such deposits are unsecured advances, interest free and without a fixed term of repayment.

2.24 FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

2.25 STOCK COMPENSATION

The Company adopts both ASC Topic 718, “Compensation - Stock Compensation” and ASC Topic 505-50, “Equity-Based Payments to Non-Employees” using the fair value method. Under ASC Topic 718 and ASC Topic 505-50, stock compensation expenses is measured at the grant date on the value of the option or restricted stock and is recognized as expenses, less expected forfeitures, over the requisite service period, which is generally the vesting period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.26 RETIREMENT BENEFIT COSTS

PRC state managed retirement benefit programs are defined contribution scheme and the payments to the scheme are charged as expenses when employees have rendered service entitling them to the contribution.

2.27 INCOME TAXES

The Company adopted ASC Topic 740, “Income Taxes” that requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consist of taxes currently due plus deferred taxes. Since the Company had no operations within the United States there is no provision for US income taxes and there are no deferred tax amounts as of June 30, 2010 and December 31, 2009.

The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probably that taxable profit will be available against which deductible temporary differences can be utilized.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no affect on the Company’s financial statements.

2.28 PRODUCT WARRANTIES

Substantially all of the Company’s products are covered by a standard warranty of 2 years for products. In the event of a failure of products covered by this warranty, the Company must repair or replace the software or products or, if those remedies are insufficient, and at the discretion of the Company, provide a refund. The sales contracts encompass its warranty obligations. Occurrence of the failure of products within warranty period is few and insignificant; therefore, the Company provides nil% of sales income for product warranties for the three months ended June 30, 2010 and June 30, 2009. The product warranty reserve was $nil at June 30, 2010 and December 31, 2009.

2.29 RELATED PARTIES

Parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party, or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significance. Related parties may be individuals (being members of key management personnel, significant shareholders and/or their close family members) or other entities which are under the significant influence of related parties of the company where those parties are individuals, and post-employment benefit plans which are for the benefits of employees of the Company or of any entity that is a related party of the Company.

2.30 CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.30 CASH AND CASH EQUIVALENTS (CONTINUED)

2.31 Concentrations of credit risk

The Company’s operations are carried out in the PRC. Accordingly, its business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC's economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Cash includes cash on hand and demand deposits in accounts maintained with state owned banks within the People’s Republic of China. Total cash (not including restricted cash balances) in these banks on June 30, 2010 and December 31, 2009 amounted to $414,294 and $409,718, respectively, of which no deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

The Company had 5 major customers whose revenue individually represented of the Company’s total revenue as follows:

	Three months	Three months	Six months	Six months
	ended	ended	ended	ended
	June 30,	June 30,	June 30,	June 30,
	2010	2009	2010	2009
Customer A	44.45%	6.49%	39.05%	-
Customer B	-	-	12.38%	-
Customer C	14.50%	-	9.24%	-
Customer D	11.23%	-	8.28%	-
Customer E	8.22%	-	5.23%	-
Customer F	4.05%	-	-	-
Customer G	-	10.80%	-	13.11%
Customer H	-	16.21%	-	12.26%
Customer I	-	10.52%	-	9.30%
Customer J	-	-	-	7.51%
Customer K	-	8.20%	-	6.20%
	82.45%	52.22%	74.18%	48.38%

The company had 5 major customers whose accounts receivable balance individually represented of the Company’s total accounts receivable as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.31 Concentrations of credit risk (continued)

	June 30,	December 31,
	2010	2009

Customer A	9.61%	13.35%
Customer B	9.01%	-
Customer C	8.20%	9.13%
Customer D	8.19%	9.90%
Customer E	7.79%	8.76%
Customer F	-	9.11%
	42.80%	50.25%

3. WEIGHTED AVERAGE NUMBER OF SHARES

In September 2009, the Company entered into share exchange transaction which has been accounted for as a reverse merger since there has been a change of control. The Company computes the weighted-average number of common shares outstanding in accordance with ASC Topic 805 “Business Combination” which states that in calculating the weighted average shares when a reverse merger takes place in the middle of the year, the number of common shares outstanding from the beginning of that period to the acquisition date shall be computed on the basis of the weighted-average number of common shares of the legal acquiree (the accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement. The number of common shares outstanding from the acquisition date to the end of that period shall be the actual number of common shares of the legal acquirer (the accounting acquiree) outstanding during that period.

4. EARNINGS PER COMMON SHARE

The Company reports earnings per share in accordance with the provisions of ASC Topic 260 “Earning per Share” 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 (using the treasury stock method) that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

For the three months ended June 30, 2010 and June 30, 2009, basic and diluted earnings per share amount to $0.02 and $0.01, respectively. For the six months ended June 30, 2010 and June 30, 2009, basic and diluted earnings per share amount to $0.03 and $0.01, respectively.

5. ACCUMULATED OTHER COMPREHENSIVE INCOME

ASC Topic 220 “Comprehensive Income” establishes standards for reporting and displaying comprehensive income and its components in financial statements. Comprehensive income is defined as the change in stockholders’ equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The comprehensive income for all periods presented includes both the reported net income and net change in cumulative translation adjustments.

6. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2009, the FASB approved the “FASB Accounting Standards Codification” (the “Codification”) as the single source of authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. The Codification is effective for interim and annual periods ending after September 15, 2009.

In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-04 “Accounting for Redeemable Equity Instruments - Amendment to Section 480-10-S99” which represents an update to section 480-10-S99, distinguishing liabilities from equity, per EITF Topic D-98, Classification and Measurement of Redeemable Securities . The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

6. RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-05 “Fair Value Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair Value”, which provides amendments to subtopic 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. This update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1. A valuation technique that uses: a. The quoted price of the identical liability when traded as an asset b. Quoted prices for similar liabilities or similar liabilities when traded as assets. 2. Another valuation technique that is consistent with the principles of topic 820; two examples would be an income approach, such as a present value technique, or a market approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. The amendments in this update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. The amendments in this update also clarify that both a quoted price in an active market for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows

In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-08 “Earnings Per Share – Amendments to Section 260-10-S99”, which represents technical corrections to topic 260-10-S99, Earnings per share, based on EITF Topic D-53, Computation of Earnings Per Share for a Period that includes a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stock and EITF Topic D-42, The Effect of the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock . The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.

In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-09 “Accounting for Investments -Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees”. This update represents a correction to Section 323-10-S99-4, Accounting by an Investor for Stock-Based Compensation Granted to Employees of an Equity Method Investee. Additionally, it adds observer comment Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees to the Codification. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-12 “Fair Value Measurements and Disclosures Topic 820 – Investment in Certain Entities That Calculate Net Assets Value Per Share (or Its Equivalent)” , which provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). The amendments in this update permit, as a practical expedient, a reporting entity to measure the fair value of an investment that is within the scope of the amendments in this update on the basis of the net asset value per share of the investment (or its equivalent) if the net asset value of the investment (or its equivalent) is calculated in a manner consistent with the measurement principles of Topic 946 as of the reporting entity’s measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with Topic 820. The amendments in this update also require disclosures by major category of investment about the attributes of investments within the scope of the amendments in this update, such as the nature of any restrictions on the investor’s ability to redeem its investments a the measurement date, any unfunded commitments (for example, a contractual commitment by the investor to invest a specified amount of additional capital at a future date to fund investments that will be make by the investee), and the investment strategies of the investees. The major category of investment is required to be determined on the basis of the nature and risks of the investment in a manner consistent with the guidance for major security types in U.S. GAAP on investments in debt and equity securities in paragraph 320-10-50-1B. The disclosures are required for all investments within the scope of the amendments in this update regardless of whether the fair value of the investment is measured using the practical expedient. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

In October 2009, the Financial Accounting Standards Board issued an Accounting Standards Update (“ASU”) regarding accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing. This ASU requires that at the date of issuance of the shares in a share-lending arrangement entered into in contemplation of a convertible debt offering or other financing, the shares issued shall be measured at fair value and be recognized as an issuance cost, with an offset to additional paid-in capital. Further, loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs, at which time the loaned shares would be included in the basic and diluted earnings-per-share calculation. This ASU is effective for fiscal years beginning on or after December 15, 2009, and interim periods within those fiscal years for arrangements outstanding as of the beginning of those fiscal years. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7. INCOME TAXES

No Hong Kong corporate income tax has been provided in the financial statements, as UDH did not have any assessable profits for the three months ended June 30, 2010 and June 30, 2009 and for the six months ended June 30, 2010 and June 30, 2009.

The Company’s subsidiaries are governed by the income tax law of the PRC concerning foreign investment enterprises and foreign enterprises and various local income tax laws. Beginning January 1, 2008, the new enterprise income tax law (“New EIT Law”) replaced the prior tax laws for domestic enterprises and foreign invested enterprises (“FIEs”). The new standard enterprise income tax (“EIT”) rate of 25% replaced the 33% rate applicable to both domestic enterprises and FIEs. Prior to 2008, under the existing Chinese income tax laws, FIEs generally were subject to an income tax at an effective rate of 33% (30% state income taxes plus 3% local income taxes) on income as reported in their statutory financial statements after appropriate tax adjustments unless the enterprise is located in specially designated regions for which more favorable effective tax rates apply.

Despite these changes, the New EIT Law gives the FIEs established before March 16, 2007 (“Old FIEs”) a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatments. During this five-year grandfather period, the Old FIEs which enjoyed tax rates lower than 25% under the original EIT law will be subject to gradually increased EIT rates over a 5-year period until their tax rate reaches 25%. In addition, the Old FIEs that are eligible for other preferential tax treatments by the PRC government under the original EIT law are allowed to continue enjoying their preference until these preferential treatment periods expire.

Under the old EIT law, SST was entitled to certain tax exemptions and reductions available to software companies. Under these “tax holidays,” SST is entitled to exemption from EIT for 3 years and reduced tax rates for 2 years after that, effective as of 2007. Therefore, SST incurred no income tax expenses during fiscal years 2007, 2008 and 2009. SSD is subject to the New EIT Law and is not entitled to certain tax exemptions and reductions available to software companies. Provision for income tax is made at 25% on monthly reported profits. No deferred tax has been provided in the financial statements as there are no material temporary differences.

In addition, the New EIT Law and its implementing rules generally provide that a 10% withholding tax applies to China-sourced income derived by non-resident enterprises for PRC enterprise income tax purposes unless the jurisdiction of incorporation of such enterprises’ shareholder has a tax treaty with China that provides for a different withholding arrangement. SST is considered an FIE and is directly held by UDH, a Hong Kong company. According to a 2006 tax treaty between the Mainland and Hong Kong, dividends payable by an FIE in China to the company in Hong Kong who directly holds at least 25% of the equity interests in the FIE will be subject to a no more than 5% withholding tax.

The following table reconciles the U.S statutory rates to the company’s effective tax rate for the six months ended June 30, 2010:

U.S. statutory rate	34%
Foreign income not recognized in USA	(34%	)
China Enterprise income tax rate	25%
Hong Kong profits tax rate	16.5%
Offshore subsidiary income not recognized	(16.5%	)
Total provision for income taxes	25%

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7. INCOME TAXES (CONTINUED)

Provision for income taxes is as follows:

	Three months		Three months	Six months		Six months
	ended		ended	ended		ended
	June 30,		June 30,	June 30,		June 30,
	2010		2009	2010		2009
	$		$	$		$
Income tax
CSD	-		-	-		-
UDH	-		-	-		-
SST- China EIT	36,315		-	36,315		-
SSE- China EIT	(551	)	-	(551	)	-
Deferred tax	-		-	-		-
	35,764		-	35,764		-

8. SHORT TERM DEBT

There are no provisions in the Company’s bank borrowings that would accelerate repayment of debt as a result of a change in credit ratings or a material adverse change in the Company’s business. Under certain agreements, the Company has the option to retire debt prior to maturity, either at par or at a premium over par.

9. COMMON STOCK

The Company has authorized 75,000,000 common shares with a par value of $0.001 per share. No preferred shares have been authorized or issued.

On September 25, 2009, the Company issued 12,379,800 shares of common stock to the shareholders of UDH. The total consideration for the 12,379,800 shares was 10,000 shares of UDH, which is all the issued and outstanding capital stock of UDH.

As a result of the reverse merger, the equity account of the Company, prior to the share exchange date, has been retroactively restated so that the ending outstanding share balance as of the share exchange date is equal to the number of post share-exchange shares.

On September 25, 2009, the Company issued 4,105,750 shares of common stock to certain individuals for services to be rendered to the Company in connection with the reverse acquisition of UDH. These services per agreement with the Company are to be provided over 5 year period and were valued at $41,057 or $0.01 per share. Stock based compensation expenses will be recognized pro-rata over the life of the agreement.

As of June 30, 2010, and December 31, 2009, the Company has outstanding 21,110,550 issued common shares with a par value of $0.001 per share.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

10. STOCK OPTIONS

The Company has not granted any stock options and has not recorded any stock-based compensation as of June 30, 2010. The Company does not have a formal stock option plan, however, options may be granted with terms and conditions at the discretion of the Company’s board of directors.

On September 25, 2009, Mr. Lai, the owner of approximately 65.75% of the Company’s issued and outstanding common stock, entered into an option agreement with Mr. Mingchun Zhou, our Chairman and Chief Executive Officer and an original shareholder of SST, pursuant to which Mr. Zhou was granted an option to purchase all shares of the Company’s common stock currently owned or later acquired by Mr. Lai. Mr. Zhou may exercise this option, in whole but not in part, during the period commencing on the 365th day following of the date of the option agreement and ending on the second anniversary of the date thereof. Other than the foregoing, we do not currently have any arrangements which if consummated may result in a change of control of our Company.

11. STOCK BASED COMPENSATION

On September 25, 2009, the Company issued 4,105,750 shares of common stock to certain individuals who provided services for the benefit of the Company and/or its subsidiaries in connection with reverse acquisition of UDH. The fair value of the common stock issued is determined using the fair value of the Company’s common stock on the grant date at $0.01 per share. The Company calculated a stock based compensation of $41,058 and recognized $2,053, $Nil, for the three months ended June 30, 2010 and June 30, 2009, respectively; and recognized $4,106 and $nil for the six months ended June 30, 2010 and June 30, 2009 respectively. As of June 30, 2010 and December 31, 2009, the deferred compensation balances were $28,740 and $32,846 respectively, with an amortization period of four years beginning on 1 January 2010.

12. COMMITMENTS AND CONTINGENCIES

The future minimum lease payments as of June 30, 2010, are as follows:

	June 30,	December 31,
	2010	2009
	$	$

Year ended December 31,2010	72,666	124,666
Year ended December 31,2011	63,542	58,225
Thereafter	-	-
	136,208	182,891

From time to time and in the ordinary course of business, the Company may be subject to various claims, damages and litigation. As of June 30, 2010 and December 31, 2009 the Company did not have any pending claims, charges, or litigation that it expects would have material adverse effects on its consolidated balance sheets, consolidated statements of income and other comprehensive income or cash flows.

13. PRODUCT LINE INFORMATION

The Company sells software and hardware. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. The Company considers itself to be operating within one reportable segment. The Company does not have long-lived assets located in foreign countries. The Company’s net revenue from external customers by main product lines is as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

13. PRODUCT LINE INFORMATION (CONTINUED)

	Three months	Three months	Six months	Six months
	ended	ended	ended	ended
	June 30,	June 30,	June 30,	June 30,
	2010	2009	2010	2009
	$	$	$	$
Local sales
Hardware
- system	325,074	507,324	774,935	769,320
- chips	1,300,288	268,116	1,741,375	273,610
	1,625,362	775,440	2,516,310	1,042,930
Software	523,475	305,449	955,823	435,767
	2,148,837	1,080,889	3,472,133	1,478,697
Export sales
- Hardware	171,491	151,682	172,014	151,682
	2,320,328	1,232,571	3,644,147	1,630,379

14. RELATED PARTIES TRANSACTIONS

For the three months ended June 30, 2010 and June 30, 2009 and six months ended June 30, 2010 and June 30, 2009 , there was cash and non-cash compensation of $5,735 , $5,735, $11,470 and $11,470 respectively awarded to, earned by, or paid to any of our executive officers or directors. In addition to the transactions and balances as disclosed elsewhere in these consolidated financial statements, during the period, the company had the following significant related party transactions:

Name of related party	Nature of transactions

Mr. Mingchun Zhou	Included in other payables, due to Mr. Mingchun Zhou is $434,930 and $447,554 as of June 30, 2010 and December 31, 2009, respectively. SST has borrowed funds from Mr. Mingchun Zhou at intervals commencing in fiscal year 2008. Until July 10, 2009, these loans were unsecured, interest free and had no fixed repayment term. On July 10, 2009, the Company entered into a Repayment Agreement with Mr. Zhou, pursuant to which the Company acknowledged and memorialized its obligation to repay an outstanding balance of RMB 1,937,000 (approximately, $284,158) to Mr. Zhou. According to the agreement, the loan remains unsecured, and is interest free, but the Company is obligated to repay the loan on or before July 10, 2011, the second anniversary of execution date.
Mr. Kin Keung Lai	On September 25, 2009, the company entered into a side letter regarding share allocation and distribution with the shareholders of UDH, Asia Regal and Mr. Kin Keung Lai, and certain service providers of the Company, pursuant to which Asia Regal agreed to transfer to Mr. Lai 485,576 of the shares issuable to Asia Regal in connection with the reverse acquisition of UDH.
Ms. Hai Yan Huang	During the year ended December 31, 2009, our sole director and officer, Ms. Hai Yan Huang, made a capital contribution to the Company in the amount of $59,841.
Mr. Steven Goertz	During the year ended December 31, 2009, the company entered into and closed the Stock Purchase Agreement with Flourishing Wisdom and Mr. Steven Goertz, our Chairman, Chief Executive Officer and controlling stockholder at such time. Pursuant to the Stock Purchase Agreement, Flourishing Wisdom purchased 2,500,000 shares of our common stock, representing 54% of our issued and outstanding common stock as of the closing, from Mr. Goertz for $555,000, or $0.22, per share. As a result of the transaction, Flourishing Wisdom became our controlling stockholder.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

15. SUBSEQUENT EVENTS

As required by ASC Topic 855 “Subsequent Events”, the Company has evaluated subsequent events that have occurred through August 15, 2010, the date the consolidated financial statements were available to be issued.

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

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A, “Risk Factors” of our Annual Report filed on Form 10-K for the fiscal year ended December 31, 2009, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Use of Certain Defined Terms

Except as otherwise indicated by the context, references in this report to:

“Exchange Act” are to the Securities Exchange Act of 1934, as amended;
“Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;
“PRC” and “China” are to People’s Republic of China;
“SEC” are to the United States Securities and Exchange Commission;
“Securities Act” are to Securities Act of 1933, as amended;
“Skyrise Technology” are to Shenzhen Skyrise Technology Co., Ltd., a PRC limited company;
“Skyrise Digital” are to Shenzhen Skyrise Digital Electronics Co., Ltd., a PRC limited company;
“United Digital” are to United Digital Home H.K. Group Company Limited, a Hong Kong limited company;
“U.S. dollar,” “$” and “US$” are to United States dollars; and
“We,” “us,” “our,” or “the Company” are to combined business of China Skyrise Digital Service Inc., a Nevada corporation, and/or its consolidated subsidiaries, as the case may be.
Throughout this report, we have converted RMB to USD as follows:

June 30, 2010
Balance sheet	RMB 6.79 to $1.00
Statement of income and comprehensive income	RMB 6.84 to $1.00

December 31, 2009
Balance sheet	RMB 6.84 to $1.00
June 30, 2009
Statement of income and comprehensive income	RMB 6.84 to $1.00

Overview of Our Business

We are primarily engaged, through our direct and indirect Chinese subsidiaries, in the development, sale, installation and maintenance of digital residential safety and video surveillance products, and in the development and integration of related software in China. Our customers are primarily urban and suburban residential communities and real estate development companies in China, but we plan to expand our customer base to the commercial sector to include commercial entities, such as airports, hotels, banks, supermarkets and entertainment venues.

A majority of our revenues are derived from the provision of digital residential safety and video surveillance packaged solutions, including the development, installation and after-sale service maintenance of safety and surveillance systems. Because the majority of our revenues are project based, they are generally non-recurring. Our revenues are not concentrated within any one customer or group of related customers. Maintenance services in our packaged solutions are included for the first two years following installation. Our customers may separately purchase maintenance services after the first two years.

Our sales network is focused in the populated areas of Guangdong Province, in southern China, but we plan to expand our sales network to other populated areas. Our company headquarters is located in southern China, in the Shenzhen Special Economic Zone and we have more than 10 branch offices and distribution points. Our customers are spread across China, but are primarily located in the coastal metropolitan regions including Beijing, Shanghai, and Guangzhou/Shenzhen.

Second Quarter of 2010 Financial Performance Highlights

The following are some financial highlights for the three months ended June 30, 2010:

Net Sales: Net sales increased $1,087,757, or 88.3%, to $2,320,328 for the three months ended June 30, 2010, from $1,232,571 for the same period in 2009.
Gross Margin: Gross margin was 33.6% for the three months ended June 30, 2010, as compared to 40.9% for the same period in 2009.
Net Income: Net income increased $209,191, or76.5%, to $458,255 for the three months ended June 30, 2010, from $236,966 for the same period in 2009.
Fully Diluted Earnings per Share: Fully diluted earnings per share was $0.02 for the three months ended June 30, 2010, as compared to $0.01 for the same period in 2009.

Results of Operations

The following tables set forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of sales revenue and key components of our revenue during three month and six month periods ended June 30, 2010 and 2009.

For the Three-Month Periods Ended June 30, 2010 and 2009 (Unaudited)

The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales.

		Three Months Ended				Three Months Ended
		June 30, 2010				June 30, 2009
				% of				% of
		Amount		Net Sales		Amount		Net Sales
Net sales	$	2,320,328		100%		1,232.571		100%

Cost of sales		1,541,330		66.4%		728,164		59.1%

Gross profit		778,998		33.6%		504,407		40.9%

Operating expenses
Selling & Marketing expenses		(146,884	)	(6.3%	)	(137,919	)	(11.2%	)
General and administrative expenses		(256,209	)	(11%	)	(171,987	)	(14%	)

Total operating expenses		(403,093	)	(17.4%	)	(309,906	)	(25.1	)

Income from operations		375,905		16.2%		194,501		15.8%
Interest expense		(13,246	)	(0.6%	)	(6,493	)	(0.5%	)
Other income		119,262		5.1%		48,958		4%

Income before income taxes		481,921		20.8%		236,966		19.2%

Income taxes		(35,764	)	(1.5%	)	-		-

Net income	$	446,157		19.2%		236,966		19.2%

Net Sales. Our sales revenue increased to $2,320,328 in the three months ended June 30, 2010 from $1,232,571 in the same period last year, representing an 88.3% growth year-over-year. The growth was mainly due to the market recovery from 2009 financial crisis and our escalated marketing and sales efforts.

Sales to newly acquired customers accounted for 40% of total sales and 97% of our sales growth, while sales to existing customers accounted for 60% of total sales, and only 3% of our sales growth.

Cost of Sales. Our cost of sales increased $813,166 or 111.7%, to $1,541,330 in the three months ended June 30, 2010 from $728,164 in the same period in 2009. The cost of goods sold per sales ratio increased to 66.4% in 2010 from 59.1% in 2009 and it was mainly impacted by the increased cost of raw materials.

Gross Profit and Gross Margin. Our gross profit increased $274,591, or 54.4%, to $778,998, in the three months ended June 30, 2010, from $504,407 in the same period in 2009. Gross profit as a percentage of net revenue was 33.6% and 40.9% for the three months ended June 30, 2010 and 2009, respectively.

Selling and Marketing Expenses. Our selling and marketing expenses in the three months ended June 30, 2010 increased to $146,884 from $137,919 in the same 2009 period.

General and Administrative Expenses. Our administrative expenses increased $84,222, or 49%, to $256,209 in the three months ended June 30, 2010, from $171,987 in the same period in 2009.

Interest Expense. Interest expense increased $6,753, or 104%%, to $13,246 in the three months ended June 30, 2010, from $6,493 in the same period in 2009, primarily due to the renewal of the Company's 12-month short term debt that started on November 10 2009.

Other Income. Other income was $119,262 in the three months ended June 30, 2010, a $70,304, or 143.6% increase from the same period in 2009. Included in other incomes of the three months ended June 30, 2010, $84,301 was government grant.

Income Before Income Taxes. Our income before income taxes increased, to $481,921 in the three months ended June 30, 2010 from $236,966 in the same period last year.

Income Taxes. Our income tax increase to $35,764 in the three months ended June 30, 2010 from $0 in the same period last year. As a Hi-Tech Company, we enjoy China preferential tax policy of two years’ exemption and three years’ half. We are now in the period of three years’ half, whereas last year we were in the period of two years’ exemption.

Net Income. In the three months ended June 30, 2010, we generated a net income of $446,157, an increase of $209,191, from $236,966 in the same period in 2009, as a result of the factors described above.

For the Six-Month Periods Ended June 30, 2010 and 2009 (Unaudited)

The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales.

		Six Months Ended				Six Months Ended
		June 30, 2010				June 30, 2009
				% of				% of
		Amount		Net Sales		Amount		Net Sales
Net sales	$	3,644,147		100%		1,630,379		100%

Cost of sales		2,247,741		61.7%		942,195		57.8%

Gross profit		1,396,406		38.3%		688,184		42.2%

Operating expenses
Selling & Marketing expenses		(238,586	)	(6.5%	)	(234,900	)	(14.4%	)
General and administrative expenses		(496,097	)	(13.6%	)	(336,803	)	(20.7%	)

Total operating expenses		(734,683	)	(20.2%	)	(571,703	)	(35.1%	)

Income from operations		661,723		18.2%		116,481		7.1%
Interest expense		(13,252	)	(0.4%	)	(12,935	)	(0.8%	)
Other income		120,585		3.3%		124,265		7.6%

Income before income taxes		769,056		21.1%		227,811		13.9%

Income taxes		(35,764	)	(1%	)	-		-

Net income	$	733,292		20.1%		227,811		13.9%

Net Sales. Our sales revenue increased to $3,644,147 in the six months ended June 30, 2010 from $1,630,379 in the same period last year, representing a 123.5% growth year-over-year. The growth was mainly due to the market recovery from 2009 financial crisis and our escalated marketing and sales efforts.

Sales to newly acquired customers accounted for 38% of total sales and 95% of our sales growth, while sales to existing customers accounted for 62% of total sales, and only 5% of our sales growth.

Cost of Sales. Our cost of sales increased $1,305,546 or 138.6%, to $2,247,741 in the six months ended June 30, 2010 from $924,195 in the same period in 2009. The cost of goods sold per sales ratio remains almost flat, at 57.8% and 61.7% in 2009 and 2010, respectively.

Gross Profit and Gross Margin. Our gross profit increased 708,222, or 102.9%, to $1,396,406, in the six months ended June 30, 2010, from $688,184 in the same period in 2009. Gross profit as a percentage of net revenue was 38.3% and 42.2% for the six months ended June 30, 2010 and 2009, respectively.

Selling and Marketing Expenses. Our selling and marketing expenses in the six months ended June 30, 2010 were $238,586, remaining almost flat from $234,900 in the same 2009 period.

General and Administrative Expenses. Our administrative expenses increased $159,294, or 47.3%, to $496,097 in the six months ended June 30, 2010, from $336,803 in the same period in 2009.

Interest Expense. Our interest expenses in the six months ended June 30, 2010 were $13,252, remaining almost flat from $12,935 in the same 2009 period.

Other Income. Other income was $120,585 in the six months ended June 30, 2010, a $3,680, or 3%, decrease from the same period in 2009.

Income Before Income Taxes. Our income before income taxes increased, to $769,056 in the six months ended June 30, 2010 from $227,811 in the same period last year.

Income Taxes. Our income tax increased to $35,764 in the six months ended June 30, 2010 from $0 in the same period last year. As a Hi-Tech Company, we enjoy China preferential tax policy of two years’ exemption and three years’ half. We are now in the period of three years’ half, whereas last year we were in the period of two years’ exemption.

Net Income. In the six months ended June 30, 2010, we generated a net income of $733,292, an increase of $505,481, from $227,811 in the same period in 2009, as a result of the factors described above.

Liquidity and Capital Resources

As of June 30, 2010, we had cash and cash equivalents of $427,519, primarily consisting of cash on hand and demand deposits. The following table provides detailed information about our net cash flow for all financial statement periods presented in this report. To date, we have financed our operations primarily through cash flows from operations, augmented by short-term bank borrowings and equity contributions by our stockholders.

Cash Flow
(all amounts in U.S. dollars)

		Six Months Ended June 30,
		2010			2009
Net cash provided by (used in) operating activities	$	230,039		$	130,356
Net cash provided by (used in) investing activities		(178,543	)		(29,193	)
Net cash provided by (used in) financing activities		(49,755	)		(221,711	)
Effects of Exchange Rate Change in Cash		16,060			(10,825	)
Net Increase in Cash and Cash Equivalents		17,801			(131,373	)
Cash and Cash Equivalents, Beginning		409,718			508,272
Cash and Cash Equivalent, End	$	427,519		$	376,899

Operating activities

Net cash provided by operating activities was $230,039 for the six months ended June 30, 2010, as compared to $130,356 net cash provided by operating activities for the same period in 2009, reflecting company’s escalated efforts in managing account receivable.

Investing activities

Net cash used in investing activities for the six months ended June 30, 2010 was $178,542, as compared to $29,193 net cash used in investing activities for the same period in 2009. This increase was mainly due to company’s investment in equipments for R&D and manufacture.

Financing activities

Net cash used in financing activities for the six months ended June 30, 2010 was $49,755, as compared to $221,711 for the same period in 2009. Both of them were repayments for short term debt.

As of June 30, 2010, the amount, maturity date and term of our bank loan was as follows:

Bank	Amount	Maturity Date	Duration
PingAn Bank, Shenzhen	RMB2,650000 (approximately $390,345)	November 10, 2010	12 months
Total	RMB2,650,000 (approximately $390,345)

We believe that our cash on hand and cash flow from operations will meet our present cash needs for the next 12 months. We may, however, in the future, require additional cash resources due to changed business conditions, implementation of our strategy to ramp up our marketing efforts and increase brand awareness, or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

Obligations under Material Contracts

We have borrowed funds from Mr. Mingchun Zhou, our Chief Executive Officer, at three months intervals commencing in 2009. Until July 10, 2009, these loans were unsecured, interest free and had no fixed repayment term. On July 10, 2009, we entered into a repayment agreement with Mr. Zhou, pursuant to which we acknowledged and memorialized our obligation to repay an outstanding balance of RMB 1,937,000 (approximately, $284,158) to Mr. Zhou. According to the agreement, the loan remains unsecured, and is interest free, but we are obligated to repay the loan on or before July 10, 2011, the second anniversary of execution date. We intend to repay this loan within the year.

Inflation

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor the price change in travel industry and continually maintain effective cost control in operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

Seasonality

Our operating results and operating cash flows historically have been subject to seasonal variations. Our revenues are usually higher in the second half of the year than in the first half of the year and the first quarter is usually the slowest quarter because fewer projects are undertaken during and around the Chinese spring festival.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:

Basic of consolidation and presentation

For accounting purposes, the combination of the company and United Digital was accounted for as a reverse merger with United Digital as the acquirer and CSD as the acquired party and the acquisition of Skyrise Technology and Skyrise Digital was accounted for under the acquisition method with United Digital as the immediate parent corporation of both companies for legal purposes. Accordingly the Company's financial statements have been prepared on a consolidated basis for the periods presented and the consolidated balance sheets, consolidated statements of income and other comprehensive income, stockholders' equity and cash flows were presented as if the recapitalization had occurred at the beginning of the earliest period presented and the operations of the accounting acquired party from the date of stock exchange transaction.

Interim results are not necessarily indicative of results for a full year. The information included in the Form 10-Q should be read in conjunction with the information included in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2009.

Use of estimates

Economic and political risk

Revenue recognition

Cost of goods sold

Shipping and handing

Advertising

Advertising costs are included in selling and marketing expenses which totaled $587 and $nil for the three months ended June 30, 2010 and June 30, 2009, respectively. Advertisement costs amounted to $3,024 and $1,388 for the six months ended June 30, 2010 and June 30, 2009, respectively.

Research and development costs

Government grant

Government grants represent local authority grants to the company for software development. Grants are recognized when the local authority approve the grant.

Foreign currency translation and other comprehensive income

The reporting currency of the Company is the United States Dollars ($). The functional currencies of the Company and its subsidiaries United Digital, Skyrise Technology and Skyrise Digital, are the United States Dollars ($) and Chinese Renminbi (RMB) respectively.

Property, plant and equipment

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets.

Assets Classifications	Estimated useful life
Furniture, fixtures and office equipment	5 years
Plant and machinery	5 years
Motor vehicles	10 years

Long-lived assets

Capitalized internal-use software

Intangible assets

Goodwill

Inventory

Allowance for doubtful accounts

Fair value of financial instruments

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

Stock-based compensation

Retirement benefit costs

Income taxes

Product warranties

Related parties

Cash and cash equivalents

Concentration of credit risk

Cash includes cash on hand and demand deposits in accounts maintained with state owned banks within the People’s Republic of China. Total cash (not including restricted cash balances) in these banks on June 30, 2010 and December 31, 2009 amounted to $415,989 and $409,718, respectively, of which no deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

Recent Accounting Pronouncements

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEMS 4 AND 4A(T). CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2010. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2010, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were effective pursuant to Rule 13a-15(e).

Changes in Internal Controls over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

There were no changes in our internal controls over financial reporting during the second quarter of fiscal 2010 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

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

ITEM 1A. RISK FACTORS.

Not applicable.

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

We have not sold any equity securities during the quarter ended June 30, 2010 which sale was not previously disclosed in a current report on Form 8-K filed during that period.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION.

We have no information to include that was required to be but was not disclosed in a report on Form 8-K during the period covered by this Form 10-Q. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

ITEM 6. EXHIBITS.

The following exhibits are filed as part of this report or incorporated by reference:

Exhibit Number		Description

31.1		Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	China Skyrise Digital Service Inc.

Dated: August 16, 2010	/s/ Mingchun Zhou
	Mingchun Zhou
	Chairman and Chief Executive Officer
	(Principal Executive Officer)


Dated: August 16, 2010	/s/ Dongmei Wu
	Dongmei Wu
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

EXHIBIT INDEX

Exhibit Number		Description

31.1		Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

December 31,

Cash and bank balances

China Skyrise Digital Service Inc. 10-Q