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 December 31, 2010

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

For the transition period from _______ to _________

CHINA WOOD, INC.

(Exact name of registrant as specified in its charter)

Nevada	000-52352	20-3336507
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of Incorporation)		Identification Number)

c/o Linyi Chan Tseng Wood Co., Ltd. Daizhuang Industrial Zone, Yitang Town Lanshan District, Linyi City, Shandong People’s Republic of China 276000
(Address of principal executive offices)


+86 5398566168
(Issuer’s Telephone Number)


(Former name or former address, if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer 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 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 o No o

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

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of February 22, 2011, there were 10,000,017 shares of our common stock issued and outstanding.

China Wood, Inc.

FORM 10-Q

December 31, 2010

TABLE OF CONTENTS

		Page
PART I— FINANCIAL INFORMATION

Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4T.	Controls and Procedures	31

PART II— OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3.	Defaults Upon Senior Securities	32

Item 4.	(Removed and Reserved)	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

SIGNATURES		33

PART I

ITEM 1. FINANCIAL STATEMENTS

CHINA WOOD, INC.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2010

(Stated in US dollars)

CHINA WOOD, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

	Page(s)

CONSOLIDATED BALANCE SHEETS	2-3

CONSOLIDATED STATEMENTS OF INCOME	4

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	5

CONSOLIDATED STATEMENTS OF CASH FLOWS	6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	7-23

-1-

CHINA WOOD, INC

CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2010

(Stated in US dollars)

	Notes		As of December 31, 2010		As of March 31, 2010
			(Unaudited)		(Audited)
ASSETS			$		$
Current assets
Cash and cash equivalents				3,487,870		5,195,664
Accounts receivable, net		3		17,048,968		8,340,879
Inventories		4		6,110,252		6,605,953
Advances to suppliers				14,936,009		5,670,022
Other receivables				-		3,500
Prepaid expenses				11,848		5,912

Total current assets				41,594,947		25,821,930

Plant and equipment, net		5		4,410,149		4,607,728

TOTAL ASSETS				46,005,096		30,429,658

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable				712,136		1,431,331
Accrued liabilities		6		270,237		171,279
Advance from customers				35,364		8,167
Other payables		7		156,703		62,341
Tax payable		8		5,806		5,549

Total current liabilities				1,180,246		1,678,667

TOTAL LIABILITIES				1,180,246		1,678,667

COMMITMENTS AND CONTINGENCIES		13

-2-

CHINA WOOD, INC

CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2010

(Stated in US dollars)

	Notes		As of December 31, 2010		As of March 31, 2010
			(Unaudited)		(Audited)
			$		$

STOCKHOLDERS’ EQUITY
Common stock		9		23,150		20,000
Preferred stock				1,336		-
Additional paid in capital				4,009,829		-
Statutory reserve		2(q)		127,572		127,572
Retained earnings				38,898,498		27,088,958
Accumulated other comprehensive income
- foreign currency translation adjustments				1,764,465		1,514,461

TOTAL STOCKHOLDERS’ EQUITY				44,824,850		28,750,991

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				46,005,097		30,429,658

See accompanying notes to consolidated financial statement

-3-

CHINA WOOD, INC

CONSOLIDATED STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED DECEMBER 31, 2010

(Stated in US dollars)

(Unaudited)

	Notes		Three months ended December 31, 2010			Three months ended December 31, 2009			Nine months ended December 31, 2010			Nine months ended December 31, 2009
				$			$			$			$

Net sales		10		14,352,314			10,468,665			42,341,516			31,854,050

Cost of sales				(10,488,679	)		(6,821,344	)		(29,155,306	)		(22,391,466	)

Gross profit				3,863,635			3,647,321			13,186,210			9,462,584

Selling and distributing costs				(420,778	)		(253,052	)		(1,188,962	)		(805,006	)

Administrative and other operating costs		11		(48,646	)		(61,907	)		(177,065	)		(142,062	)

Financial costs				(116	)		(1,582	)		(7,289	)		(3,203	)

Income from operations				3,394,095			3,330,780			11,812,894			8,512,313

Other income (expenses)				(589	)		(260	)		(760	)		903

Income before taxes				3,393,506			3,330,520			11,812,134			8,513,216

Income tax		12		(2,616	)		(2,080	)		(2,594	)		(10,728	)

Net income				3,390,890			3,328,440			11,809,540			8,502,488

Other comprehensive income
- Foreign currency translation adjustments				83,335			25,487			250,004			69,586

Total comprehensive income				3,474,225			3,353,927			12,059,544			8,572,074

See accompanying notes to consolidated financial statement

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CHINA WOOD, INC

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED DECEMBER 31, 2010

(Stated in US dollars)

	Common Stock		Preferred Stock		Additional paid-in capital		Statutory reserve		Other comprehensive income		Retained earnings			Total
					$		$		$		$				$
Balance, April 1, 2009		20,000		-		-		116,251		1,426,755		17,523,648			19,086,654
Net income		-		-		-		-		-		9,576,631			9,576,631
Transfer to statutory reserve		-		-		-		11,321		-		(11,321	)		-
Foreign currency translation adjustment		-		-		-		-		87,706		-			87,706

Balance, March 31, 2010		20,000		-		-		127,572		1,514,461		27,088,958			28,750,991

Balance, April 1, 2010		20,000		-		-		127,572		1,514,461		27,088,958			28,750,991
Net income		-				-		-		-		11,809,540			11,809,540
Increase in common stock		3,150													3,150
Issuance of Preferred Stock				1,336		-						-			1,336
Additional Paid-in Capital						4,009,829						-			4,009,829
Transfer to statutory reserve		-				-		-		-					-
Foreign currency translation adjustment		-				-		-		250,004		-			250,004

Balance, December 31, 2010		23,150		1,336		4,009,829		127,572		1,764,465		38,898,498			44,824,850

See accompanying notes to consolidated financial statement

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CHINA WOOD, INC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2010

(Stated in US dollars)

(Unaudited)

	Notes		Nine months ended December 31, 2010			Nine months ended December 31, 2009
Cash flows from operating activities			$			$
Net income				11,809,540			8,502,488
Depreciation		5		250,497			497,556
Decrease/(increase) in accounts receivable				(8,708,089	)		(714,098	)
Decrease/(increase) in inventories				495,701			(829,875	)
Decrease/(increase) in advances to suppliers				(9,265,987	)		(3,110,414	)
Decrease/(Increase) in other receivables				3,500			-
Decrease/(increase) in prepaid expenses				(5,937	)		1,638
(Decrease)/increase in accounts payable				(719,195	)		(410,110	)
(Decrease)/increase in advances from customer				27,198			14,096
(Decrease)/increase in accrued expenses				47,842			(4,458	)
(Decrease)/increase in other payable				145,478			-
(Decrease)/increase in tax payable				257			39,634
Net cash (used in)/provided by operating activities				(5,919,195	)		3,986,457

Cash flows from investing activities
Purchase of plant and equipment				(491	)		(56,676	)
Net cash used in investing activities				(491	)		(56,676	)

Cash flows from financing activities
Capital contributions from stockholders		1		4,012,445			-
Dividend paid				-			(2,200,188	)
Net cash used in financing activities				4,012,445			(2,200,188	)

Effect of foreign currency translation on cash and cash equivalents				199,447			(32,393	)

Net increase(decrease)in cash and cash equivalents				(1,707,794	)		1,697,200

Cash and cash equivalents - beginning of period				5,195,664			904,247
Cash and cash equivalents - end of period				3,487,870			2,601,447

See accompanying notes to consolidated financial statement

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CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

China Wood, Inc (formerly known as Timberjack Sporting Supplies, Inc.) (“the Company”) was incorporated in the state of Nevada on September 8, 2005.

The Company had a principal business objective of providing cost effective, high quality gun care products, accessories and related sporting equipment for the discriminating consumer, at substantial savings to the rugged outdoorsman, the general public and all levels of federal, state, county and local law enforcement.

During August 2008, the Company discontinued its prior business and amended its business plan.

As of June 30, 2010, the Company is a shell company as defined in Rule 12b-2 of the Exchange Act. The Company’s business is to pursue a business combination through acquisition, or merger with, an existing company. No assurances can be given that the Company will be successful in locating or negotiating with any target company.

Chine Victory Profit Limited (“Chine Victory”) was incorporated in the British Virgin Islands on 13 May, 2004, under the International Business Companies Act, British Virgin Islands. The Company is an investment holding company.

Chine Victory acquired 100% of shareholding in Simply Good Limited (“Simply Good”) on 28 December, 2004, a company which was incorporated in the British Virgin Islands, under the International Business Companies Act, British Virgin Islands. The principal activity of Simply Good is trading of wooden products.

Chine Victory owns 100% of shareholding in Moody International Limited (“Moody”), a BVI incorporated company, on 6 March, 2006. Moody was incorporated on 19 January, 2006 under the International Business Companies Act, British Virgin Islands. The beneficiary owner of Moody is Chine Victory whereas Li Zhi Kang appears as nominee shareholder in registers of members. The principal activity of Moody is investment holding.

As on 21 March, 2006, Linyi Chan Tseng Wood Company Limited (“Chan Tseng”), which was incorporated in PRC, 25.1% and 74.9% owned by Moody and Linyi Guangsha Wood Company Limited (“Guangsha”) respectively. Guangsha appears as one of the shareholder of Chan Tseng under the register of shareholders. Chine Victory has entrusted Guangsha to represent Chine Victory to invest into Chan Tseng, which the beneficiary interest of Chan Tseng belongs to Chine Victory. The rights and obligations as shareholder of Chan Tseng have been vested to Chine Victory. The principal activities of Chan Tseng is manufacturing and trading of plywood.

In accordance with a Share Exchange Agreement dated September 29, 2010 (the “Exchange Agreement”) by and among the Company, Paragon Capital LP, a Delaware limited partnership (the “Principal Shareholder”), Chine Victory and the shareholders of

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CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES(CONTINUED)

Chine Victory (the “Chine Victory Shareholders”). The closing of the transaction (the “Closing”) took place on September 30, 2010 (the “Closing Date”). On the Closing Date, pursuant to the terms of the Exchange Agreement, The Company acquired all of the outstanding shares of Chine Victory (the “Interests”) from the Chine Victory Shareholders in exchange for the issuance of 467,074.60209421 shares of Series M preferred stock, par value $0.001 (the “Series M Preferred Stock”) whereby each Series M Preferred Stock will be converted into 10,000 shares of our common stock (the “Conversion Shares”) automatically upon the effectiveness of the Reverse Split. After giving effect to the above described automatic conversion, the Conversion Shares shall constitute approximately 86.39% of our issued and outstanding common shares immediately after the closing of the Share Exchange. As a result of the Share Exchange, Chine Victory became a wholly-owned subsidiary of the Company.

The Share Exchange Transaction constitutes a reverse acquisition where the originally shareholders of the legal acquiree –Chine Victory have become the controlling shareholder of the Company, therefore the transaction is accounted for as a recapitalization accounting for the share exchange transaction.

The Company has raised the gross proceed of private placement of 1,336,244 of Series A-Preferred stock of par value $0.001 at $4 each, less various expenses, including placement commission and professional fee of $1,332,530, with net proceeds of $4,012,445 as at September 30, 2010

Accounting of transaction:

Account for consolidated financial statement

a. The assets and liabilities of the legal acquiree or accounting acquirer - Chine Victory recognized and measured at their precombination carrying amounts as of September 30,2010.

b. The assets and liabilities of the legal acquirer or accounting acquiree) - Timberjack recognized and measured at their precombination carrying amounts as of September 30,2010.

c. The retained earnings and other equity balances of the legal acquiree or accounting acquirer- Chine Victory before the business combination as of September 30,2010.

2． SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Method of Accounting

The Company maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements, which are compiled on the accrual basis of accounting.

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CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

b) Basis of Presentation and Consolidation

The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

This basis of accounting differs in certain material respects from that used for the preparation of the books of account of the Company’s principal subsidiaries, which are prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises with limited liabilities established in the PRC (“PRC GAAP”), the accounting standards used in the places of their domicile. The accompanying consolidated financial statements reflect necessary adjustments not recorded in the books of account of the Company’s subsidiaries to present them in conformity with US GAAP.

c) Economic and Political Risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s 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 economy.

d) Use of estimates

In preparing of the financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year. These accounts and estimates include, but are not limited to, the valuation of accounts receivable, inventories, deferred income taxes and the estimation on useful lives of plant and machinery. Actual results could differ from those estimates.

e) Cash and Cash Equivalents

The Company considers all cash and other highly liquid investments with initial maturities of three months or less to be cash equivalents.

-9-

CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

f) Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts and sales returns.

The Company recognizes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectibility. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. An additional reserve for individual accounts is recorded when the Group becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. Bad debt expenses are included in the general and administrative expenses.

Outstanding account balances are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date, the Company has not charged off any balances as it has yet to exhaust all means of collection. The Company does not have any off-balance-sheet credit exposure to its customers, except for outstanding bills receivable discounted with banks that are subject to recourse for non-payment.

g) Inventories

Inventories consisting of raw materials and finished goods are stated at the lower of weighted average cost or market value. Finished goods are comprised of direct materials, direct labor and an appropriate proportion of overhead.

h)	Advances to Suppliers

Advances to suppliers represent the cash paid in advance for purchasing raw materials.

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CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Long-Lived Assets

The Company adopted Accounting Standard Codification No. 360-10-35, “Impairment and disposal of long-lived assets ” (“ASC 360-10-35”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360-10-35. ASC 360-10-35 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of March 31, 2010 and 2009, there were no significant impairments of its long-lived assets.

j) Plant and Equipment

Plant and equipment, other than construction in progress, are stated at cost less depreciation and amortization and accumulated impairment loss.

Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the plant and equipment are as follows:

Plant and machinery	10 years
Equipment & computers	5 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.

Management considers that we have no residual value for plant and equipment.

k) Construction in Progress

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 it is completed and ready for intended use.

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CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

l) Fair value of Financial Instruments

The Company follows ASC Section 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted ASC Section 820-10-35-37 to measure the fair value of its financial instruments. Subsection 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

The carrying values of the Group’s financial instruments, including cash and cash equivalents, restricted cash, accounts and other receivables, deposits, accounts and other payables approximate their fair values due to the short-term maturity of such instruments. The carrying amounts of borrowings approximate their fair values because the applicable interest rates approximate current market rates.

m) Foreign Currency Translation

The Company maintains its financial statements in the functional currency. The functional currency of the Company is the Renminbi (RMB). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

For financial reporting purposes, the financial statements of the Company which are prepared using the functional currency have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.

	31.12.2010	31.3.2010
Period end RMB : US$ exchange rate	6.6227	6.81612
Average yearly RMB : US$ exchange rate	6.7194	6.81968

RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

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CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

n) Revenue Recognition

Revenue from the sales of plywood is recognized on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and the title has passed.

For those merchandise and products being sold by Chen Tsang in PRC, net sales of products represent the invoiced value of goods, net of value added taxes (“VAT”), sales returns, trade discounts and allowances. The Company is subject to VAT which is levied on the majority of the products of Linyi at the rate of 17% on the invoiced value of sales. Output VAT is borne by customers in addition to the invoiced value of sales and input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales. Provision for sales returns are recorded as a reduction of revenue in the same period that revenue is recognized. The provision for sales returns, which is based on historical sales returns data, is the Company’s best estimate of the amounts of goods that will be returned from its customers.

For those merchandise being sold by Simply Good, one of the subsidiary of the Company which does not operate and sell products in PRC, sales revenue is recognized on the transfer of risk and rewards of the ownership to its customers.

o)	Cost of revenues

Cost of revenues consists primarily of material costs, employee compensation, depreciation and related expenses, which are directly attributable to the production of products. Write-down of inventory to lower of weighted average cost or market value is also recorded in cost of revenues.

p) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of income and comprehensive income in the period that includes the enactment date.

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CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

q) Statutory reserves

Statutory reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and are to be used to expand production or operations.

Statutory reserves consist of the following as of

	As of December 31, 2010		As of March 31, 2010
	(Unaudited)		(Audited)
	$		$

Enterprise reserve fund		127,572		127,572

r) Comprehensive Income

The Company has applied ASC Section 220-10-45 of the FASB Accounting Standards Codification.Comprehensive income is defined to include all changes in equity except those resulting from net income or loss, investments by owners and distributions to owners. The Company’s only component of other comprehensive income is the foreign currency translation adjustments.

s) Retirement benefits

Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to the statements of income as incurred.

t) Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

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CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

u) Variable Interest Entities (“VIE”)

The Company conducts substantially all of the manufacturing of plywood through Chan Tseng. The Company has entrusted Guangsha to legally invest into the entity, which the beneficiary interest of Chan Tseng belongs to Chine Victory. The rights and obligations as shareholder of Chan Tseng have been vested to Chine Victory.

Pursuant to certain contractual arrangements, Chan Tseng has been granted the financial support to their operation.

In December 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46, revised December 2003, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (“FIN46R”). FIN46R is intended to achieve more consistent application of consolidation policies to variable interest entities to improve comparability between enterprises engaged in similar activities even if some of those activities are conducted through variable interest entities. The Company has determined that it is the primary beneficiary of the Chan Tseng, which are VIE, and has consolidated them in its Consolidated Financial Statements. As a group, as of June 30 2010, the Chan Tseng had total assets of $11.48 million (primarily recorded in property, plant and equipment, accounts receivable and inventory) and total liabilities of $1.15 million respectively (primarily recorded in accounts payable).

v) Segment reporting

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue of plywood (but not by geographic area) and operating results of the Company and, as such, the Company has determined that the Company has one operating segment as defined by ASC Section 280-10-50 of the FASB Accounting Standards Codification, “Segments reporting ”.

-15-

CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

3. ACCOUNTS RECEIVABLE, NET

Accounts receivable at December 31, 2010 and March 31,2010 consist of the following:

	As of December 31, 2010		As of March 31, 2010
	(Unaudited)		(Audited)
	$		$

Accounts receivable		17,048,968		8,340,879
Less: Allowance for doubtful accounts		-		-

		17,048,968		8,340,879

4. INVENTORIES

Inventories consist of the following as of

	As of December 31, 2010		As of March 31, 2010
	(Unaudited)		(Audited)
	$		$

Raw materials		5,367,524		3,739,448
Finished goods		742,728		2,866,505

		6,110,252		6,605,953

Inventories consisting of raw materials and finished goods are stated at the lower of weighted average cost or market value. Raw materials are comprised of the wood and all materials used in the manufacturing process. Finished goods are comprised of direct materials, direct labor and an appropriate proportion of overhead.

The Company has not comprised the work-in-progress due to the short process of the plywood manufacturing.

-16-

CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

5. PLANT AND EQUIPMENT, NET

Plant and equipment consist of the following:

	As of December 31, 2010			As of March 31, 2010
	(Unaudited)			(Audited)
At cost	$			$
Plant and machinery		6,225,855			6,225,855
Equipment & computers		97,795			97,307
Effect of foreign currency translation		1,046,118			993,275
		7,369,768			7,316,437
Less: Accumulated depreciation
Plant and machinery		3,027,968			2,538,780
Equipment & computers		40,979			28,122
Effect of foreign currency translation		(109,327	)		141,807
		2,959,620			2,708,709

Net value
Plant and machinery		3,197,887			3,687,075
Equipment & computers		56,816			69,185
Effect of foreign currency translation		1,155,446			851,468
		4,410,149			4,607,728

Depreciation expense for the Nine months ended December 31, 2010 were $250,497..

6. ACCRUED LIABILITIES

Accrued liabilities at December 31, 2010 and March 31, 2010 consist of the following:

	As of December 31, 2010		As of March 31, 2010
	(Unaudited)		(Audited)
	$		$
Electricity, water		22,524		12,342
Salaries		51,116		30,291
Rental expenses		196,597		119,386
Community insurance in PRC		-		9,260
		270,237		171,279

-17-

CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

7. OTHER PAYABLES

Other payables consist of the following;

	Note	As of December 31, 2010		As of March 31, 2010
		(Unaudited)		(Audited)
		$		$
Amount due to a director	(a)		156,703		62,341
			156,703		62,341

Note:

(a) The amounts due are unsecured, interest free, and have no fixed repayment terms.

8. TAX PAYABLE

Tax payable consist of the following

	As of December 31, 2010		As of March 31, 2010
	(Unaudited)		(Audited)
	$		$
Enterprise income tax in PRC		5,806		5,549

		5,806		5,549

9. COMMON STOCK

Company equity as at March 31, 2010 and September 31, 2010 are as follows:

	As of December 31, 2010		As of March 31, 2010
	(Unaudited)		(Audited)
	$		$

Authorized 980,000,000 shares,10,000,000 issued and outstanding Common stock par value at USD0.541 each		23,150		20,000

-18-

CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

10. BUSINESS SEGMENT

The Company operates in one segment and therefore does not provide additional disclosure relating to reporting segments.

The following table provides a breakdown of foreign sales by geographic area during the periods indicated:

	Three months ended December 31, 2010		Three months ended December 31, 2009		Nine months ended December 31, 2010		Nine months ended December 31, 2009
	$		$		$		$

PRC		12,210,178		10,414,156		36,021,887		31,688,191
Other		2,142,136		54,509		6,319,629		165,859
Net Sale		14,352,314		10,468,665		42,341,516		31,854,050

11. ADMINISTRATIVE AND OTHER OPERATING COSTS

Details of administrative and other operating costs are summarized as follows:

	Three months ended December 31, 2010		Three months ended December 31, 2009		Nine months ended December 31, 2010		Nine months ended December 31, 2009
		$		$		$		$
Depreciation		4,361		7,420		12,953		17,028
Entertainment		-		1,955		-		4,487
Insurance		3,068		1,991		8,914		4,569
Motor vehicle expenses		700		2,683		2,418		6,156
Office expenses		4,962		8,752		17,450		20,083
Travelling expenses		1,566		1,165		4,734		2,673
Staff salaries		6,755		18,972		31,638		43,537
Staff welfare		752		959		2,230		2,200
Legal&Professional fee		16,121		-		80,390		-
Others		10,361		18,010		16,338		41,329
		48,646		61,907		177,065		142,062

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CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

12. INCOME TAXES

BVI Tax

Simply Good Limited was incorporated in the BVI and, under the current laws of the BVI, is not subject to income taxes.

PRC Tax

Chan Tseng is operating in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the corporation income tax rate is 25%. However, also in accordance with the relevant taxation laws in the PRC, from the time that a company has its first profitable tax year, a foreign investment company is exempt from corporate income tax for its first two years and is then entitled to a 50% tax reduction for the succeeding three years.

For sales concluded by Simply Good, which is not being sales conducted in PRC and therefore no PRC income tax is applicable to these transactions which constitutes the vast majority of sales transaction of the Group

	Three months ended December 31, 2010		Three months ended December 31, 2009		Nine months ended December 31, 2010		Nine months ended December 31 2009
	$		$		$		$
Income before tax		3,393,506		3,330,520		11,812,134		8,513,216

Income tax		2,616		2,080		2,594		10,728

The deferred tax asset and liability has not been recognized because of the exemption fortaxation and no valuation allowance to be established for the period ended December 31, 2010 and December 31, 2009.

-20-

CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

13. COMMITMENTS AND CONTINGENCIES

As of July 2006, the Company leased factory premises under the operating leaseagreement expiring in 2014.

The future minimum lease payment under the above-mentioned leases as of December 31, 2010 is as follows:

Year	As of December 31, 2010
	$

2010 to 2014		227,286

As of December 31, 2010 the Company did not have any contingent liabilities.

14. RELATED PARTY TRANSACTION

During the fiscal period, one of the subsidiaries, Simply Good, obtained supply of plywood through the production by a variable interest entity, Chan Tseng, and Chan Tseng agreed to produce plywood to Simply Good at zero cost.

-21-

CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

15. RECENTLY ISSUED ACCOUNTING STANDARDS

In August 2010, the FASB issued Accounting Standards Update (“ASU”) No. No. 2010-22, which amends various SEC paragraphs based on external comments received and the issuance of SAB 112, which amends or rescinds portions of certain SAB topics. Based on the issuance of SAB 112, amend paragraph 270-10-S99-2 with no link to a transition paragraph, the following is the text of SAB Topic 6.G.2, Amendments to Form 10Q:

a. Form of condensed financial statements.

Rules 10-01(a)(2) and (3) of Regulation S-X provide that interim balance sheets and statements of income shall include only major captions (i.e., numbered captions) set forth in Regulation S-X, with the exception of inventories where data as to raw materials, work in process and finished goods shall be included, if applicable, either on the face of the balance sheet or in notes thereto. Where any major balance sheet caption is less than 10% of total assets and the amount in the caption has not increased or decreased by more than 25% since the end of the preceding fiscal year, the caption may be combined with others. When any major income statement caption is less than 15% of average net income attributable to the registrant for the most recent three fiscal years and the amount in the caption has not increased or decreased by more than 20% as compared to the corresponding interim period of the preceding fiscal year, the caption may be combined with others. Similarly, the statement of cash flows may be abbreviated, starting with a single figure of cash flows provided by operations and showing other changes individually only when they exceed 10% of the average of cash flows provided by operations for the most recent three years.

In April 2010, the FASB issued ASU No. 2010-17, “Revenue Recognition—Milestone Method”. The amendments in this Update provide guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. Determining whether a milestone is substantive is a matter of judgment made at the inception of the arrangement. A milestone should be considered substantive in its entirety. An individual milestone may not be bifurcated. An arrangement may include more than one milestone, and each milestone should be evaluated separately to determine whether the milestone is substantive. Accordingly, an arrangement may contain both substantive and non-substantive milestones. A vendor’s decision to use the milestone method of revenue recognition for transactions within the scope of the amendments in this Update is a policy election. Other proportional revenue recognition methods also may be applied as long as the application of those other methods does not result in the recognition of consideration in its entirety in the period the milestone is achieved.

-22-

CHINA WOOD,INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED DECEMBER 31, 2010

(Stated in US dollars)

15. RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)

In January 2010, the FASB issued ASU No. 2010-02, “CONSOLIDATION (TOPIC 810) ACCOUNTING AND REPORTING FOR DECREASES IN OWNERSHIP OF A SUBSIDIARY — A SCOPE CLARIFICATION”. This amendment affects entities that have previously adopted Topic 810-10 (formally SFAS 160). It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. The Group does not expect the provisions of ASU 2010-02 to have a material effect on the financial position, results of operations or cash flows of the Group.

In April 2009, the FASB issued FSP 157-4, DETERMINING FAIR VALUE WHEN THE VOLUME AND LEVEL OF ACTIVITY FOR THE ASSET OR LIABILITY HAVE SIGNIFICANTLY DECREASED AND IDENTIFYING TRANSACTIONS THAT ARE NOT ORDERLY (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP 157-4 does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, FSP 157-4 requires comparative disclosures only for periods ending after initial adoption. The adoption of the provisions of FSP 157-4 is not anticipated to materially impact on the Group’s results of operations or the fair values of its assets and liabilities.

In August 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “MEASURING LIABILITIES AT FAIR VALUE”, which is codified as ASC 820, “FAIR VALUE MEASUREMENTS AND DISCLOSURES”. This Update provides amendments to ASC 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 a valuation technique that uses the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets, or that is consistent with the principles of ASC 820. 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 transfer of the liability.

The amendments in this Update also clarify that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the assets are required are Level 1 fair value measurements. ASC 820 is effective for the first reporting period (including interim periods) beginning after August 28, 2009. The adoption of this Update did not have a significant impact to the Group’s financial statements.

The Group has considered the above updated development in accounting standards and has taken into account such effect in the preparation of the financial statements whenever applicable.

-23-

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

The following discussion and analysis of the results of operations and financial condition for the three and nine months period ended December 31, 2010, should be read in conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in this Form 10-Q. References in this section to “we,” “us,” “our,” or the “Company” are to the consolidated business of China Wood, Inc. and its subsidiaries.

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections on the Form 8-K that filed on October 1, 2010. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Overview

On September 30, 2010, we completed the acquisition of Chine Victory, engaged in the production of radiata pine plywood and eucalyptus plywood products in China, by means of a share exchange. As a result of the share exchange, Chine Victory became a wholly-owned subsidiary of China Wood, Inc. Simultaneously with the acquisition, we completed a $5,344,975 private placement of securities to accredited investors at $4.00 per unit, with each “Unit” consisting of one share of Series A Convertible Preferred Stock, and a warrant to purchase 0.5 shares of common stock with an exercise price of $4.80 per share, pursuant to the terms of a securities purchase agreement.

As a result of the Share Exchange, we changed our fiscal year to March 31.

We are a holding company and, through our subsidiaries, primarily engage in the production of radiata pine plywood and eucalyptus plywood products in China. We are one of the large plywood producers in China. In addition to being a plywood producer, we are a large producer of veneer, which can be described as thin layers of superior wood glued to a base of inferior wood. Our products are produced from pine and eucalyptus woods. Most of our revenue is generated through sales to builders and producers of hardwood flooring and furniture.

Approximately 37.09% of our plywood products are sold locally, while the remaining 62.91% is exported to 16 countries worldwide. Our largest foreign markets are Australia, Singapore, South Korea, Norway, the United States and New Zealand which account for 12.15%, 10.33%, 6.68%, 6.4%, 5.07% and 4.79% of sales, respectively. The balance of 17.9% is divided among other Asian countries, the European Union and the United Kingdom.

Recently development

On November 16, 2010, we effectuate a 540.61745923707:1 reverse stock split (pro-rata reduction of outstanding shares) of our issued and outstanding shares of common stock. In addition, we changed our name from “Timberjack Sporting Supplies, Inc.” to “China Wood, Inc.” on November 16, 2010.

We are actively looking for suitable Eucalyptus forest tracts from the market. On the other hand, more machines will be placed in the existing production facilities. In the coming 12 months, we will also looking to further expand our production capacity in Linyi Shandong by leasing more factory facilities in the nearby area.

-24-

Results of Operations

Results of Operations for the Three Months Ended December 31, 2010 as compared to the Three Months Ended December 31, 2009:

	For The Three Months Ended December 31,
		2010			2009			Change			%

Net sales		$	14,352,314		$	10,468,665			3,883,649			37	%

Cost of sales			(10,488,679	)		(6,821,344	)		(3,667,335	)		54	%

Gross Profit			3,863,635			3,647,321			216,314			6	%

Selling and distributing costs			(420,778	)		(253,052	)		(167,726	)		66	%

Administrative and other operating costs			(48,646	)		(61,907	)		13,261			-21	%

Financial costs			(116)	)		(1,582	)		1,466			-93	%

Income from operations			3,394,095			3,330,780			63,315			2	%

Other income, net			(589	)		(260	)		(329	)		127	%

Income before taxes			3,393,506			3,330,520			62,986			2	%

Income tax			(2,616	)		(2,080	)		(536	)		26	%

Net income		$	3,390,890		$	3,328,440			62,450			2	%

Other comprehensive income - Foreign currency translation adjustments			83,335			25,487			57,848			227	%

Total comprehensive income		$	3,474,225		$	3,353,927			120,298			4	%

-25-

Net Sales

Our net sales for the three months ended December 31, 2010 was $14.4 million, an increase of $3.9 million or 37% from $10.5 million for the three months ended December 31, 2009. The increase was primarily attributable to the catching up of the foreign markets as well as the continuous strong demand for the plywood products used in manufacturing wooden floors from local market in China.

The following table provides a breakdown of foreign sales by geographic area during the three months ended December 31.

	2010		2009
PRC	$	12,210,178	$	10,414,156
Other	$	2,142,136	$	54,509
Total Net Sales	$	14,352,314	$	10,468,665

Cost of Sales

Cost of sales mainly consists of cost of raw materials (timber), utilities, and packaging costs. Cost of sales was $10.5 million for the three months ended December 31, 2010, compared to $6.8 million for the three months ended December 31, 2009, an increase of $3.7 million or 54%. Cost of sales measured by percentage of net sales was 73% for year 2010, compared to 65% for the prior year. The increase in the amount of cost of sales was substantially consistent with the increase in net sales revenue and also the increase in the raw material and labor cost.

Gross Profit

As a percentage of net revenue, gross margin was 27% for the three months ended December 31, 2010 as compared to 35% for the prior year. The decrease in gross profit is due to the increase in cost regarding the wooden floor base and the using of a relatively higher cost raw material and the increase in the labor cost.

Selling and Distributing Costs

Total selling and distributing expenses increased by $0.17 million or 66% from $0.25 million for the three months ended December 31, 2009 to 0.42 million for the three months ended December 31, 2010. As a percentage of net revenue, our selling expense was 2.9% for the three months ended December 31, 2010, which was slightly higher as compared to 2.4% for the prior year. The increase of selling and distributing costs is consistent with the increase of sale.

Administrative and Other Operating Costs

The following table breaks down our Administrative and other operating costs:

	For The Three Months Ended December 31,
	2010		2009		Change		%
Depreciation	$	4,361	$	7,420	$	(3,059)		-41	%
Entertainment		-		1,955		(1,955)		-100	%
Insurance		3,068		1,991		1,077		54	%
Motor vehicle expenses		700		2,683		(1,983)		-74	%
Office expenses		4,962		8,752		(3,790)		-43	%
Travelling expenses		1,566		1,165		401		34	%
Staff salaries		6,755		18,972		(12,217)		-64	%
Staff welfare		752		959		(207)		-22	%
Legal & Professional fee		16,121		-		16,121		-	%
Others		10,361		18,010		(7,649)		-42	%
Total	$	48,646	$	61,907		(13,261)		-21	%

-26-

General and administrative expenses primarily consist of depreciation, entertainment, insurance, motor vehicle expenses, office expenses, travelling expenses, payroll, welfare and expenses for other general corporate activities. The amount decreased by $13,261 or 21% from $61,907 for the three months ended December 31, 2009 to $48,646 for the three months ended December 31, 2010.

Net Income

Net income for the three months ended December 31, 2010 was $3.4 million or 24% of net revenue, compared to $3.3million or 32% of net revenue for the three months ended December 31, 2009, a slight increase of $0.06 million or 2%. The increase was primarily due to increase in net revenue from three months 2009 to 2010, partially offset by increases in cost of goods sold and operating expenses as discussed above.

Results of Operations for the Nine Months December 31, 2010 as compared to the Nine Months Ended December 31, 2009:

	For The Nine Months Ended December 31,
		2010			2009			Change			%

Net sales		$	42,341,516		$	31,854,050			10,487,466			33	%

Cost of sales			(29,155,306	)		(22,391,466	)		(6,763,840	)		30	%

Gross Profit			13,186,210			9,462,584			3,723,626			39	%

Selling and distributing costs			(1,188,962	)		(805,006	)		(383,956	)		48	%

Administrative and other operating costs			(177,065	)		(142,062	)		(35,003	)		25	%

Financial costs			(7,289	)		(3,203	)		(4,086	)		128	%

Income from operations			11,812,894			8,512,313			3,300,581			39	%

Other income (expense)			(760	)		903			(1,663	)		N/A

Income before taxes			11,812,134			8,513,216			3,298,918			39	%

Income tax			(2,594	)		(10,728	)		8,134			-76	%

Net income		$	11,809,540		$	8,502,488			3,307,052			39	%

Other comprehensive income - Foreign currency translation adjustments		$	250,004		$	69,586			180,418			259	%

Total comprehensive income			12,059,544			8,572,074			3,487,470			41	%

-27-

Net Sales

Our net sales for the nine months ended December 31, 2010 was $42.3 million, an increase of $10.5 million or 33% from $31.8 million for the nine months December 31, 2009. The increase was primarily attributable to the catching up of the foreign markets as well as the continuous strong demand for the plywood products used in manufacturing wooden floors from local market in China.

The following table provides a breakdown of foreign sales by geographic area during the nine months ended December 31.

	2010		2009
PRC	$	36,021,887	$	31,688,191
Other	$	6,319,629	$	165,859
Total Net Sales	$	42,341,516	$	31,854,050

Cost of Sales

Cost of sales mainly consists of cost of raw materials (timber), utilities, and packaging costs. Cost of sales was $29.2 million for the nine months ended December 31, 2010, compared to $22.4 million for the nine months ended December 31, 2009, an increase of $6.8 million or 30%. Cost of sales measured by percentage of net sales was 68.9% for year 2010, compared to 70.3% for the prior year. The increase in the amount of cost of sales was substantially consistent with the increase in net sales revenue.

Gross Profit

As a percentage of net revenue, gross margin was 31.1% for the nine months ended December 31, 2010 as compared to 29.7% for the prior year. The increase in gross profit is generated from the increase in sales regarding the wooden floor base and the using of a relatively lower cost raw material.

Selling and Distributing Costs

Total selling and distributing expenses increased by $0.38 million or 48% from $0.81 million for the nine months ended December 31, 2009 to 1.19 million for the nine months ended December 31, 2010. As a percentage of net revenue, our selling expense was 2.8% for the nine months ended December 31, 2010, which was slightly higher as compared to 2.5% for the prior year. The increase of selling and distributing costs is consistent with the increase of sale.

Administrative and Other Operating Costs

The following table breaks down our Administrative and other operating costs:

	For The Nine Months Ended December 31,
	2010		2009		Change		%
Depreciation	$	12,953	$	17,028	$	(4,075)		-24	%
Entertainment		-		4,487		(4,487)		-100	%
Insurance		8,914		4,569		4,345		95	%
Motor vehicle expenses		2,418		6,156		(3,738)		-61	%
Office expenses		17,450		20,083		(2,633)		-13	%
Travelling expenses		4,734		2,673		2,061		77	%
Staff salaries		31,638		43,537		(11,899)		-27
Staff welfare		2,230		2,200		30		1	%
Legal&Professional fee		80,390		-		80,390		N/A
Others		16,338		41,329		(24,991)		-60	%
Total	$	177,065	$	142,062		35,003		25	%

General and administrative expenses primarily consist of depreciation, entertainment, insurance, motor vehicle expenses, office expenses, travelling expenses, payroll, welfare and expenses for other general corporate activities. The amount increased by $35,003 or 25% from $142,062 for the nine months ended December 31, 2009 to $177,065 for the nine months ended December 31, 2010.

Net Income

Net income for the nine months ended December 31, 2010 was $11.8 million or 27.9% of net revenue, compared to $8.5 million or 26.7% of net revenue for the nine months ended December 31, 2009, an increase of $3.3million or 39%. The increase was primarily due to increase in net revenue from nine months 2009 to 2010, partially offset by increases in cost of goods sold and operating expenses as discussed above.

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Liquidity and Capital Resources

The following summarizes the key component of our cash flows for the nine months ended December 31:

	2010			2009
Net cash provided by (used in) operating activities	$	(5,919,195	)	$	3,986,457
Net cash used in investing activities		(491	)		(56,676	)
Net cash provided by financing activities		4,012,445			(2,200,188	)
Effect of foreign currency translation on cash and cash equivalents		199,447			(32,393	)
Net (decrease)/increase in cash and cash equivalents	$	(1,707,794	)	$	1,697,200

For the nine months ended December 31, 2010, net cash used in operating activities totaled $5.9 million. Compared with 2009, the cash flow decreased by approximately $8.9 million. This mainly resulted from increase in accounts receivable and advances to supplier by $14.1 million and partially offset by a substantial increase in net income of $3.3 million to $11.8 million in 2010 from $8.5 million in 2009 and decrease in the inventories by 1.33 million.

For the nine months ended December 31, 2010, net cash provided by financing activities generated from the completion of a $5,344,975 private placement of our securities to accredited investors at $4.00 per Unit, with each “Unit” consisting of one share of Series A Convertible Preferred Stock and one warrant to purchase 0.5 shares of common stock with an exercise price of $4.80 per share less various expenses, including placement commission and professional fee.

We believe that our current levels of cash, cash flows from operations, and bank/related party borrowings, will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, we may need additional cash resources in the future if we experience changed business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If we ever determine that our cash requirements exceed our amounts of cash and cash equivalents on hand, we may seek to issue debt or equity securities or obtain a credit facility. Any future issuance of equity securities could cause dilution for our shareholders. Any incurrence of indebtedness could increase our debt service obligations and cause us to be subject to restrictive operating and financial covenants. It is possible that, when we need additional cash resources, financing will only be available to us in amounts or on terms that would not be acceptable to us, if at all.

Future Goals

In the next 12 months, we will continue to acquire more forest tracts, targeting three or four years old Eucalyptus trees in the Northern Quandong area. The stability of the raw material supply and the price of the materials are the major factors in our business.

As more and more manufacturers tend to produce high margin products, we expect the demand for Eucalyptus will be intense in the coming months.

On the other hand we are increasing our machines and production capacity in our existing factory. More machines will be purchase in the Q4 of this financial year as well as the Q1 of 2011-2012 financial year.

We are also looking to acquire existing manufacturers in the nearby area in order to further expand our production capacity.

Recently Issued Accounting Standards

a. Form of condensed financial statements.

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The Company has considered the above updated development in accounting standards and has taken into account such effect in the preparation of the financial statements whenever applicable.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

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ITEM 4T. CONTROLS AND PROCEDURES.

a) Evaluation of Disclosure Controls. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

ITEM 1A. RISK FACTORS

Not applicable because we are a smaller reporting company.

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

Except as previously disclosed in the Company’s SEC filings, there were no unregistered sales of equity securities and use of proceeds during the period ended December 31, 2010.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4. (REMOVED AND RESERVED)

ITEM 5. OTHER INFORMATION

There is no other Information required to be disclosed under this Item which was not previously disclosed.

ITEM 6. EXHIBITS

Exhibit No.		Description

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

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

	CHINA WOOD, INC.

Dated: February 22, 2011		By:	/s/ Zhikang Li
			Zhikang Li
			Chief Executive Officer and Director

Dated: February 22, 2011		By:	/s/Hang Sang (Randolph) Lau
			Hang Sang (Randolph) Lau
			Chief Financial Officer

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China Wood, Inc. 10-Q