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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
Amendment No. 1
 
x ANNUAL REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended August 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 ___________.

Commission file number 000-51755

CHINA RUNJI CEMENT INC.
(Exact name of registrant as specified in its charter)

Delaware
 
98-0533824
(State or Other Jurisdiction of Incorporation of Organization)
 
(I.R.S. Employer Identification No.)
     
Xian Zhong Town, Han Shan County
Chao Hu City, Anhui Province
People’s Republic of China  23181
 
86-565-4219871
(Address of principal executive offices) (ZIP Code)
 
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section12 (g) of the Act: Common Stock, $0.0001 par value

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o      No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes x

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 shorter period that the registrant as 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Yes x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated 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 Act).  Yes o      No x

Aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant as of February 26, 2010 (computed by reference to the closing price of $0.46 per share as of the last business day of the most recently completed second fiscal quarter): $3,818,719

Number of common shares outstanding at December 14, 2010: 78,832,064
 
 
 

 


   
Page(s)
PART I
   
     
   Item 1.
3
     
12
     
 17
     
   Item 2.
17
     
   Item 3.
18
     
PART II
   
     
   Item 5.
18
     
   Item 6.
19
     
   Item 7.
19
     
22
     
   Item 8.
24 - 40
     
   Item 9.
41
     
41
     
41
     
PART III
   
     
41
     
43
     
44
     
45
     
45
     
PART IV
   
     
46
     
 
47

 
PART I

Item 1.                      Business

Forward-looking Statements

This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable laws, including the securities laws of the United States, we do not intend to update any of the forward-looking statements so as to conform these statements to actual results.

As used in this annual report, the terms "we", "us", "our", “the Company”, and "China Runji" mean China Runji Cement Inc. and all of our subsidiaries, unless otherwise indicated.

All dollar amounts refer to US dollars unless otherwise indicated.

Overview

China Runji was incorporated as FitMedia Inc., a Delaware company, on August 30, 2004. FitMedia was a development stage company that planned to sell prenatal yoga DVDs through small retail stores and others and it also planned to sell its fitness DVDs through its Internet site www.fitmedia.net.  It completed its prenatal yoga DVD for sale and began marketing it in January 2007.

In October 2007, the management of FitMedia determined that it was in the best interests of the stockholders of FitMedia to agree to a share exchange with Anhui Province Runji Cement Co., Limited, a Chinese company that is engaged in the business of distributing cement across many provinces in mainland China.  As part of the share exchange and reverse merger, FitMedia ceased engaging in the health and fitness business.

On October 9, 2007,  FitMedia entered into a Share Exchange Agreement (the “Exchange Agreement”) by and among FitMedia, Timothy Crottey, the President and majority shareholder of FitMedia (“Crottey”), Shouren Zhao, a citizen and resident of the People’s Republic of China and owner of 100% of the share capital of Ren Ji Cement Investment Company Limited (“Zhao”); Ren Ji Cement Investment Company., Ltd., a British Virgin Islands corporation (“Renji Investment”) and owner of 100% of the share capital of Ren Ji Cement Company Limited; Ren Ji Cement Company Limited, a corporation organized and existing under the laws of the Hong Kong SAR of the People’s Republic of China (“HK Renji”) and owner of 100% of the share capital of Anhui Province Runji Cement Co., Ltd.; and Anhui Province Runji Cement Co., Ltd., a corporation organized under the laws of the People’s Republic of China (“Anhui Runji”).  For purposes of the Exchange Agreement, Zhao was referred to as the “Ren Shareholder,” and Renji Investment, HK Renji and Anhui Runji were referred to as the “Renji Subsidiaries.”  Upon closing of the share exchange transaction (the “Share Exchange”) contemplated under the Exchange Agreement on November 1, 2007, the Ren Shareholder transferred all of his share capital in Renji Investment to FitMedia in exchange for an aggregate of 55,000,000 shares of common stock of the FitMedia, thus causing the Renji Subsidiaries to become direct and indirect wholly-owned subsidiaries of FitMedia.

On October 9, 2007, FitMedia entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) by and among FitMedia, Crottey, and the Ren Shareholder, pursuant to which the Ren Shareholder, as Purchaser, at closing on November 1, 2007, acquired 18,500,000 shares (the “Stock Purchase”) of common stock of FitMedia from Crottey for $540,000.

In addition, pursuant to the terms and conditions of the Exchange Agreement:

§
Demand and piggy-back registration rights were granted to the Ren Shareholder with respect to shares of the Company’s restricted common stock to be acquired by him at closing in a Regulation S offering.
§
On the Closing Date, the current officers of FitMedia resigned from such positions and the persons chosen by Anhui Runji were appointed as the officers of FitMedia, notably Shouren Zhao, as Chairman, CEO and President and Yichun Jiang as CFO.
§
On the Closing Date, Crottey resigned from his position as a director effective upon the expiration of the ten day notice period required by Rule 14f-1, at which time additional persons designated by Anhui Runji were appointed as directors of FitMedia, notably Liming Bi and Xuanjun Yang.
§
On the Closing Date, FitMedia paid and satisfied all of its “liabilities” as such term is defined by U.S. GAAP as of the closing.
§
As of the Closing, the parties consummated the transactions contemplated by the Stock Purchase Agreement.
 

On January 8, 2008, FitMedia changed its name to China Runji Cement Inc. and increased its authorized common stock from 80,000,000 shares to 200,000,000 shares.

As a result of the closing of the Share Exchange, China Runji became the owner of a leading cement production and distribution company in mainland China through its ownership of Anhui Runji. Using cost effective production techniques, while building a strong brand image, Anhui Runji is a strong competitor in the central China cement market.

Anhui Runji is a producer and distributor of cement, primarily in An Hui Province of central China and neighboring locations, which was founded in December 2003. Its initial capital was 60,000,000 RMB and there were two founding shareholders who owned such capital in a ratio of 60% to 40%. Anhui Runji is located in Xianzong Town, Hanshan County, An Hui Province, where the factory occupies an area of 68.97 acres (418 mu), and its limestone open-pit mine comprises an area of 165 acres (1,000 mu) (1 mu equals 0.165 acre). The Anhui Runji factory, limestone open-pit mine and storing mine together comprise an area of approximately 50,000 square meters.

Description of Business

Anhui Province Runji Cement Co., Limited, a private company located in Anhui Province in China, was established in December 2003 with registered capital of 60 million RMB. The Company started production in October 2005 and specializes in cement production and sales. The main cement varieties produced are ordinary silicate cement P.O52.5, P.O42.5, P.O32.5 and P.C32.5. At present, the Company has one cement production line and one cement clinker production line. The production capacity of each line amounts to 2,500 tons per day and one million tons per year. On January 8, 2010, Anhui Province Runji Cement Co., Limited increased its registered capital to 85 million RMB.

The Company obtained its production license in 2005. Presently, the Company mainly focuses production on Runji Brand cement P.II52.5, P.O42.5, P.O32.5 P.C32.5 as well as cement clinker. P.II52.5 is a high grade, high strength cement that is made for Anhui and Jiangsu Provinces and the region north of the Changjiang River and is used in large infrastructure projects. The cement clinker is the semi-finished ingredient of cement, which is able to be processed into different categories of cement products.

The Company produces cement through the advanced dry production process, an energy efficient and environmentally friendly cement production technique.  Although the Chinese government has mandated the elimination of 250 million tons of outdated cement production capacity by 2010, only 60% of the total output in the region is currently produced by dry process. The Company has a rigorous quality control system and received ISO9001 quality system certification and international accreditation in March 2006.  In addition, our Company passed the national GB/T 19001-2000 standard authentication. The Company’s pollution control exceeds the national standard and received “green building material” certification in 2007.

The Company has an abundant supply of high quality raw materials. The Company has obtained a 30 year mining right for 87 million tons of limestone reserve, which can supply two cement clinker production lines with a daily output of 2,500 tons for 40 years.
 
The open-pit mine from which we extract limestone is owned by the Chinese government. We have a mining right certificate (Cert No. 3400000510011) issued by the Anhui Province Land & Resources Bureau to Anhui Province Runji Cement Co., Ltd to explore and exploit the mineral deposits for a period of 30 years from January 2005 to January 2035.  Prior to the expiration of our current mining rights certificate, we have the right to apply to the government for an extension of mining rights.
 
The name of the open-pit mine from which we extract limestone is Anhui Province Hanshan County Xianzong Yaotou Mountain limestone mine and it comprises an area of 176.41 acres.  Our mining claim is a national claim that allows us to extract up to 1.8 million tons annually during the 30-year mining rights period. For the mining rights to the mineral deposits located near our production plant we pay approximately RMB 25 million to the government annually.
 
According to a geological report issued by the Bureau of Geology and Mineral Exploration of Anhui Province, the limestone reserve is 87.59 million tons, consisting of measured reserves of 34.86 million tons and concluded reserves of 52.73 million tons.  These figures support that the limestone reserve is sufficient for more than 40 years if we extract our maximum allowance of 1.8 million tons annually. The limestone deposit in the reserve contains 53.78% calcium oxide (CaO) and traces of other minerals.
 
Presently, the Company is one of the largest cement producers and distributors in the north Changjiang region of Anhui, with a 10% market share within a 100 mile radius of its facility. The Company is the only producer of P.II52.5 cement (the highest quality cement) in the north Changjiang region of Anhui and Jiangsu Provinces, with 70% market share within a 100 miles radius of its facility. Annual production capacity of the Company is two million tons cement and cement clinker. The Company’s main market for cement is in Hefei (Anhui Province), with total sales of 750 thousand tons, representing 75% of our total annual cement production and an additional 25% is sold in Chaohu and its surrounding areas, Moreover, the Company’s main cement clinker market is in Chaohu with total sales of 800 thousand tons in the area, representing 80% of our total annual cement clinker production, and an additional 20% is sold in Hefei.
Our Operations

We extract the limestone from the open-pit mine using dynamite to explode the limestone from open pits. The resulting rock is then moved by heavy equipment loaders onto trucks that carry the rock to the crusher at our production facility, which is no more than 200-500 meters away from the limestone reserve. The crushed limestone is then placed in the kiln with other raw materials for further processing. The product of the kiln is cement clinker, which is then set aside for sale or further processed into cement mix.

We use rented excavators, drilling machines, and trucks for the limestone exploitation and access the limestone reserve by way of a road that we built.

The electric power utilized at the limestone reserve is produced by our waste heat generator and a water source in not required for an above ground open-pit mine such as the one we use.

In order to retain our mining rights, once an area of the limestone reserve is depleted, we have to remediate the area by planting some grass or trees over the surface to return it to a natural state.

The following images show our general location in China, the specific location of our factory and limestone reserve, a map of the area and towns surrounding our production plant.  The photos shown depict an overall view of our limestone reserve and our open-pit mine.
 
Image 2
Satellite photo from Google Earth showing Anhui Province’s location in the eastern part of China.
 
 
5

 
 
image 1
image 3
Satellite photo from Google Earth of factory and Limestone
open-pit mine within Anhui Province, China
Map of the area and towns surrounding our production plant
 
 
image 4
image 5
Overall view of our limestone reserve
View of our limestone open-pit mine
 
Organizational Structure

Our current organizational structure is summarized by the illustration below:
 
Image 6
 
Our Business Plan

§
We plan to raise adequate capital over the next five years for expansion and growth.
§
We invested over USD$50 million to build up one cement production line with daily production of 2,500 tons and one cement clinker production line with daily production of 2,500 tons. The newly invested cement clinker production line was put into production in October 2008.
§
We invested USD$10 million to establish a waste heat power generator system to convert waste heat into electricity, which was put into operation on October 25, 2009, in order to realize significant savings on electricity costs, to improve our margins and reduce reliance on outside power sources. From October 25, 2009 to August 31, 2010, the waste heat power generator system has generated electricity of 39.6 million kilowatt-hours and saved us USD$3.45 million in electricity costs.

Growth Strategy

The Company’s vision is to be the leading producer of cement and cement products in An Hui Province as well as surrounding provinces and cities. Management intends to grow the Company’s business by pursuing the following strategies:

§
Grow capacity and capabilities in line with market demand increases
§
Enhance leading-edge technology through continuous innovation, research and study
§
Continue to improve operational efficiencies
§
Build a strong market reputation to foster and capture future growth in China
 
Sales by Product Category

The Company distributes a number of products, including the types of cement listed below. The sales of these types of cement for the last three years in U.S. Dollars are as follows:
 
   
2008
   
2009
   
2010
 
P.II52.5
   
2,339,838
     
3,298,498
     
4,059,255
 
P.O42.5
   
30,232,786
     
25,071,088
     
16,501,387
 
P.O32.5
   
1,746,419
     
1,207,460
     
923,200
 
P.C32.5
   
3,186,918
     
1,554,558
     
668,252
 
Cement Clinker
   
2,959,771
     
24,506,290
     
27,911,895
 
 
The following table shows the annual tonnage produced and the average sales price in U.S. Dollars for our cement products for the last three years:
 
Annual Tonnage Produced and Average Cement Sales Price
 
   
As of August 31, 2008
   
As of August 31,2009
   
As of August 31,2010
 
   
Annual
Tonnage
Produced
   
Average
Sales
Price
   
Annual
Tonnage
Produced
   
Average
Sales
Price
   
Annual
Tonnage
Produced
   
Average
Sales
Price
 
PO 42.5 bulk
    861,708       35.78       740,983       33.31       547,075       30.32  
PO 42.5 pack
    2,649       41.49       7,616       43.16       2,810       35.45  
PO 32.5 bulk
    14,298       38.53       11,781       31.32       6,441       29.45  
PO 32.5 pack
    42,642       35.91       27,811       36.13       24,092       32.97  
PC 32.5 bulk
    10,167       27.14       10,928       32.40       2,908       28.30  
PC 32.5 pack
    73,170       32.08       40,565       34.20       19,800       29.59  
PII 52.5 bulk
    63,577       38.44       86,088       39.05       109,572       36.14  
Cement Clinker
    102,286       28.94       928,334       26.40       1,052,306       26.52  
Average
    146,312       34.88       231,763       30.18       220,625       28.45  
 
A brief explanation of each type of cement and its uses follows:

P.II52.5 – high strength and good adaptability. Mainly used on large projects where superior intensity is needed, such as large span bridges and beams.

P.O42.5 – high strength and hardens quickly. Mainly used in normal concrete projects, such as high-rise buildings, roadways, viaducts and airplane runways.

P.O32.5 – has low heat of hydration and good durability. Mainly used in commercial and industrial buildings and low intensity concrete projects.

P.C32.5 –has low heat of hydration and high mineral content. Mainly used in commercial and industrial buildings and low intensity concrete projects.

The Market for Cement

The World Market for Cement

Cement production is a global industry. Estimates indicate that global cement production is increasing approximately 3% every year. Worldwide cement production was approximately 2.9 billion tons in 2009, with China accounting for up to 55% of that total.
 
According to cement sales figures, China is currently the largest producer of cement with India and America being the second and third largest producers. Since the huge demand for cement in America cannot be totally met by cement produced domestically, the U.S. also imports cement from Canada, China, Thailand and other countries. This trend is expected to continue for the next few years.

The China Market for Cement

There are over 100 cement companies in China with annual production capacity of two million tons or more. China’s total cement production was 1.65 billion tons in 2009, and is expected to reach 1.8 billion in 2010.
 
According to an industry study done by The Freedonia Group, and in their “Cement in China 2012” report published in January 2009, demand for cement in China will rise 6% annually through 2012, driven by rising construction spending. Nonresidential building construction will stay the largest end use, while non-building construction grows the fastest. Contractors will remain the largest market while ready-mix concrete grows most rapidly.

China’s fixed asset investment increased 30.1% in 2009, and is expected to continue growing at 20%-25% annually in 2010 according to China’s “11th Five Year” plan (2006 – 2010). According to a 2009 Economic Review by the Consulate General of Switzerland Shanghai (the “Review”), since the end of 2008, the Chinese government has implemented a national stimulus package worth RMB 4 trillion (US$ 588 billion), a large proportion of which has been invested in the construction of infrastructure and boosting of domestic consumption.  The Review further states that banks lent out RMB 9.6 trillion in loans throughout 2009, which was almost 30% of the total GDP.  A considerable portion of bank loans went into property investment, transportation and infrastructural facilities with high demand for cement.

The National Development and Reform Commission NDRC required the elimination of 280 million tons of old technique cement production capacities (wet production technique) during the “11th Five Year” period. Accordingly, analysts anticipate a 25% - 35% cement price hike during the period of 2006 to 2010, driven by an aggressive increase in fixed asset investment and elimination of old capacities.  It is expected that industry consolidation will accelerate and market shares and industry profits will be further concentrated to strong companies.

Restrictions on cement production in developed countries caused a huge export demand in China, with increasing prices and profits in the international market.

The An Hui Province Market for Cement

Anhui is located in the Yangtze River Delta region, where the construction industry is the most developed and demand for cement is most concentrated. Anhui is rich in natural resources such as limestone mineral reserves and coal reserves, which are important in cement production. Also, the Changjiang River is located in Anhui Province, and its waters are very essential to the production of cement.

The Yangtze River Delta Region still plays an important role in the whole country. The entire GDP of this region accounts for 20% of the national sum, with only 2% of China’s land area and 11% of the Chinese population.
 
In 2010, infrastructure and manufacture investment contributed over 33% in Anhui’s GDP growth. Anhui Province benefited from the national stimulus package in infrastructure construction and presented a steady growth rate of 13%, surpassing the national average of 10.3%.
 
Anhui Province produced 40 million tons of cement and 98 million tons of cement clinker of in 2010, an increase of 5% and 3.9% over the previous year, respectively, and cement clinker produced by Anhui ranked first in cement clinker production in China in 2010. However, 85% of the cement businesses lag behind Anhui Runji in terms of output and quality. The businesses that use advanced techniques in cement production are in demand. By the end of July 2010, about 29 million tons of old capacity has been eliminated in Anhui, adding additional growth potential for dry production capacity.
 
Huge infrastructure spending in Anhui has boosted cement demand, e.g. Hefei Xinqiao International Airport – 4 billion RMB; 675 hectare of area, expected completion by 2012; major highway expansion - 3 billion RMB to expand 60 miles of highway from four lanes to six lanes, expected completion by 2010; Anhui plans to invest 83 billion RMB in transportation and infrastructure construction during the “11th Five Year” period (2006 - 2010).

Our Suppliers

We rely on third party suppliers of the raw materials to manufacture our products.  The main components of our products include electricity, coal, coal ash, iron powder, and limestone.  Our primary suppliers of each are:

Raw Material
 
Suppliers
Electricity
 
Anhui Electricity Hanshan Power-Supply Co., Ltd.
Coal
 
Wuhu New Energy Commercial & Trading Co., Ltd.
Coal
 
JiangsuYutai Trading Co., Ltd.
Coal ash
 
Caohu Huaxiang Building Material Co., Ltd.
Iron Powder
 
Anhui Hongde Trading Co., Ltd

We believe we are not dependent on any of these suppliers and will be able to replace them, if necessary, without material difficulties.
 
Competition

Our competition in An Hui Province uses antiquated technology and is not competitive with that of Anhui Runji.

Our Competitive Advantage

Limestone is the most basic ingredient in cement production. We have a large limestone reserve, which is of high grade. Our reserves are approximately 87 million tons of limestone, which can supply two cement production lines with daily output of 2,500 tons for 40 years. Our limestone reserve is located just 200-500 meters from the production site, significantly reducing transportation cost. All of this is adequate for our long term supply. In addition, the limestone contains over 53% calcium oxide, which enables production of superior quality, such as the high grade P.II 52.5 cement, which is superior to that of other companies.
 
Anhui Province has a very favorable climate for investment such as in the cement industry.  Local governments offer tax incentives on resource usage, which favors industries such as cement.

We have a favorable location that is less than 100 kilometers away from the provincial capitals of Hefei and Nanjing.  Other cities such as Wuhu, Ma’anshan, and Chaohu are between 20 – 70 kilometers away and also provide a good marketplace.  Our close proximity to the Changjiang River affords us low cost shipping to many locations.

Our main competitors within the Hefei market are Anhui Chaodong Cement Stock Co., Ltd, Anhui Chaohu Tiepeng Cement Factory and Lujiang Dajiang Cement Co., Ltd.  Additionally, there are 10 cement grinding companies with an annual production of over one million tons who compete with us.
 
We utilize the advanced modern dry cement production process, which enables high quality production, consumes less energy and is more environmental friendly compared with the traditional wet production process. The production equipment is partially imported from Germany. We also use Siemens DCS (Distributed Computer Control System) auto control system for measuring ingredients and controlling production flow. Our advanced cement techniques lead to low costs and consistent high quality. Our products have a 100% passing rate.

The cement industry is a polluting and heavy energy-consumption industry. The old cement production technique (wet production) consumes two times more energy, emits two times more waste gas and sulfur dioxide and releases three times more dust than the new cement dry production. We have installed highly efficient dust collectors, noise reducing equipment and waste water treatment equipment that complies with the most rigorous Chinese environmental regulations. We are able to constrain emission at 30mg per cubic meter, much lower than the national average of 50mg per cubic meter.

Competitive Advantages and Strategy

Cement

We believe that our product formulations, price points, lower costs, relationships, infrastructure, proven quality, and reputation represent substantial competitive advantages. We are currently able to maintain a substantially lower cost structure than competitors based in An Hui Province and neighboring locations of China.  Furthermore, we believe our competitive advantage in China is protected by significant knowledge of government regulations, business practices, and strong relationships. We are the only producer of PII52.5 cement (the highest quality cement) in the north Changjiang region of Anhui and Jiangsu Provinces, with a 70% market share within a 100 mile radius of its facility.

In comparison to Chinese competitors, we believe we possess superior technological expertise, products, marketing knowledge, and governmental relationships.

Intellectual Property

Our Company logo “Runji” was registered May 21, 2007 in Xianzong town, Hanshan County, Anhui Province.

Customers

For the twelve month period from September 1, 2009 through August 31, 2010, we achieved revenues of $50,063,989. That revenue was in part generated from the following representative customers:

Name of Customer
Products Sold 
 
Sales for the Period
by Customer
(USD$)
   
% of Sales
for the Period
 
Huainan Qiankun Resources Co., Ltd.
PO42.5, PII52.5
    9,260,188       18.50 %
Anhui Chaohu Qiangsheng Building Material Co., Ltd
PO42.5, PII52.5
    5,863,219       11.71 %
Chaohu Hengyuan Building Material Co., Ltd.
PO42.5, PII52.5
    4,747,875       9.48 %
Hefei Tianlu Concret Co., Ltd.
PO42.5, PII52.5
    3,506,867       7.01 %
Anhui Julong New Building Material Co., Ltd
PO42.5, PII52.5
    3,386,638       6.76 %

Our major construction project is the Heifei Binghu Century City commercial apartment project, which will use approximately 200,000 tons of our cement. Another important project is Anhui Economic Technological Development Area Jingdongfang factory project, which will use 15,000 tons of our cement.

Employees

Anhui Runji has a staff of approximately 324 employees in the following ten departments:  Manufacture Control Department, Raw Material Plant, Burning Plant, Ready Product Plant, Machine Repairing Plant, Electronic Department, Laboratory, Financial Department, Supply and Marketing Department, and the General Administrative Offices.  Included in the 324 employees are 33 senior managers, one general manager, three deputy general managers, one chief financial officer and 286 workers.  Anhui Runji believes it is in compliance with local prevailing wage, contractor licensing and insurance regulations, and has good relations with its employees.
 
Government Regulations
 
Our business is regulated in various ways as follows:
 
1.
Cement Industry Development Policy enacted by the National Development and Reform Commission on October 17, 2006.
 
2.
Notification regarding rate of tax refund enacted by the Ministry of Finance, National Development and Reform Commission, Department of Commerce, General Administration of Customs and State Administration of Taxation on September 14, 2006.
 
3.
National Resource Integration Management Methodology enacted by the National Development and Reform Commission, Ministry of Finance and State Administration of Taxation on September 7, 2006.
 
4.
Cement industry special legislation enacted by the National Development and Reform Commission on October 17, 2006.
 
5.
Several policy opinions for the cement industry unanimously enacted by the National Development and Reform Commission, Ministry of Finance, Ministry of Land and Resources, Ministry of Construction, Department of Commerce, People's Bank of China, General Administration of Quality Supervision, and National and State Environmental Protection Administration on April 13, 2006.
 
6.
Notification regarding energy-saving and pollution emission comprehensive working plan enacted by the China National Council in June 3, 2007.
 
7.
Anhui Province Bulk Cement “Eleventh-Five” Development Plan enacted by Anhui Provincial Government in July 9, 2007.
 
8.
Anhui Province Industrial Economy “Eleventh-Five” Development Plan enacted by Anhui Provincial Government in August 13, 2007.
 
9.
Standardization Implement Policy enacted by the National Development and Reform Commission on January 23, 2008.
 
10.
Anhui Province Bulk Cement and Premix Concrete Development Policy (Protocol) published by Anhui Provincial Government in October 27, 2008 and under asking for public comments.
 
11.
Document to Promote Corporate Merger and Restructuring issued by China’s State Council on September 6, 2010.
 
We have all permits and other authorizations necessary to operate our open-pit mine and our limestone reserve has never been denied an operating permit.  Our permits and authorizations are eligible for renewal upon application to the government.
 
 
Item 1A.                      Risk Factors

Investing in the Company’s common stock involves a high degree of risk. Prospective investors should carefully consider the risks described below, before purchasing shares of the Company’s common stock. There are numerous and varied risks, known and unknown, that may prevent the Company from achieving its goals. The risks described below are not the only ones the Company will face. If any of these risks actually occurs, the Company’s business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of the Company’s common stock could decline and investors in the Company’s common stock could lose all or part of their investment. The risks and uncertainties described below are not exclusive and are intended to reflect the material risks that are specific to the Company, material risks related to the Company’s industry and material risks related to companies that undertake a public offering or seek to maintain a class of securities that is registered or traded on any exchange or over-the-counter market.

The Company’s future revenues will be derived from the production and distribution of cement products and operating a cement business. There are numerous risks, known and unknown, that may prevent the Company from achieving its goals including, but not limited to, those described below. Additional unknown risks may also impair the Company’s financial performance and business operations. The Company’s business, financial condition and/or results of operations may be materially adversely affected by the nature and impact of these risks. In such case, the market value of the Company’s securities could be detrimentally affected, and investors may lose part or all of their investment. Please refer to the information contained under “Business” in this report for further details pertaining to the Company’s business and financial condition.

Risks Related To Our Company

Unanticipated problems in expanding the Company’s cement business may harm the Company’s business and viability.

The Company’s future cash flow depends on its ability to timely expand its cement business. If the Company’s operations are disrupted and/or the economic integrity of its distribution operation is threatened for unexpected reasons (including, but not limited to, technical difficulties, poor weather conditions, and business interruptions due to terrorism or otherwise), the Company’s business may experience a substantial setback.  Moreover, the occurrence of significant unforeseen conditions or events may require the Company to reexamine its business model. Any change to the Company’s business model may adversely affect its business.
 
If the Company does not obtain financing when needed, its business will fail.

As of August 31, 2010, the Company had cash and cash equivalents on hand in the amount of approximately $683,545. The Company anticipates that it will need approximately $30 million to implement its business plan and meet its capital expenditure needs over the next three years. The Company currently does not have any arrangements for additional financing and it may not be able to obtain financing when required. Obtaining additional financing would be subject to a number of factors, including the market prices for the Company’s products, production costs, availability of credit, prevailing interest rates and the market prices for the Company’s common stock.

The Company’s ability to operate at a profit is partially dependent on market prices of cement.  If cement prices drop too far, the Company will be unable to maintain profitability.

The Company’s results of operations and financial condition will be affected by the selling prices for cement. Prices are subject to and determined by market forces over which the Company has no control. The Company’s revenues will be heavily dependent on the market prices for cement in many markets in China.

The success of the Company’s business depends upon the continuing contributions of its Chief Executive Officer and other key personnel and its ability to attract other employees to expand the business, whereas the loss of key individuals or the Company’s inability to attract new employees could have a negative impact on the Company’s business.

The Company relies heavily on the services of Mr. Shouren Zhao, the President and Chief Executive Officer, and the services of Xiangfei Zeng, the Chief Financial Officer, as well as several other senior management personnel. Loss of the services of any of such individuals would adversely impact other Company’s operations. In addition, the Company believes that its technical personnel represent a significant asset and provide the Company with a competitive advantage over many of the Company’s competitors. The Company believes that its future success will depend upon its ability to retain these key employees and its ability to attract and retain other skilled financial, engineering, technical and managerial personnel. In addition, as a result of a failure to retain qualified personnel the Company may be unable to meet its responsibilities as a public reporting company under the rules and regulations of the SEC. None of the Company’s key personnel are party to any employment agreements. The Company does not currently maintain any “key man” life insurance with respect to any of such individuals.

We experienced low productivity and high production costs in the past when we were delayed in our production of cement, which caused us to experience low profitability.
 
Our past suggests that delays in producing cement can lead to low productivity and high production costs, which result in low profitability.  If we do not implement growth with an organized and optimal expansion plan, we could continue to experience low profitability.

We have been forced to cease production for periods of time in order to install, maintain and adjust equipment, which resulted in high production costs and low profitability.

In the past, we have had to cease production for periods of time in order to install, maintain and adjust equipment, which resulted in high production costs and low profitability.  In the future, we will be challenged to keep our equipment in working order so that we do not suffer a decrease in profitability.

Future sales of the Company’s equity securities will dilute existing stockholders.

To fully execute its long-term business plan, the Company may need to raise additional equity capital in the future.  Such additional equity capital, when and if it is raised, would result in dilution to the Company’s existing stockholders.

Risks Related to the Cement Business

The economics of the cement industry, which require deliveries within a limited geographic radius of the plant, make deliveries outside of a localized area difficult and unprofitable.

The economics of the cement industry requires delivery of cement within a narrow geographic radius of the plant for the delivered price of cement to be affordable.  Unless a company is willing to build additional plants closer to other markets, its potential to sell to projects within those markets and earn a profit is limited.  Expansion opportunities are costly and limited, as is growth of our business.
 
Price competition in the cement market in China is intense, particularly in the production of low standard grade cement, all of which makes it difficult for a producer of high standard grade cement such as our Company to compete on quality alone.

Low grade producers of cement in China compete fiercely on price grounds alone.  We are a high quality manufacturer of a variety of cements and we cannot always compete on price with the low quality manufacturer.  The tendency of low quality manufacturers to under price the competition makes it difficult for us to bid and win certain jobs.

We are reliant on sales to the construction industry, which is the largest consumer of our cement.  The construction industry has experienced swings in building patterns that are tied to the macroeconomic cycles in the Chinese economy.  We are at the mercy of these swings in the economy as well.

Cement is used in the construction industry, most notably in private and government building projects.  Such building projects depend on the state of the economy, which in recent years has fluctuated.  Our revenues fluctuate accordingly and it is difficult to manage our business profitably under these conditions.

We are subject to regulation in the environmental area because of the dust that is discharged in the production and use of cement. The National and State Environmental Protection Administration imposes regulation and charges on cement manufacturers, which is an expensive cost to our business.

Environmental regulation, primarily in the area of dust creation in the manufacture of cement imposes significant costs on our operations.  We also spend considerable funds on abatement of environmental issues and in research and development.  The regulatory authorities can be arbitrary in their decisions and make the manufacture of cement a more costly and uncertain business.

Risks Related to Doing Business in the PRC

The Company faces the risk that changes in the policies of the PRC government could have a significant impact upon the business the Company may be able to conduct in the PRC and the profitability of such business.

The PRC’s economy is in a transition from a planned economy to a market oriented economy subject to five-year and annual plans adopted by the government that set national economic development goals. Policies of the PRC government can have significant effects on the economic conditions of the PRC. The PRC government has confirmed that economic development will follow the model of a market economy. Under this direction, the Company believes that the PRC will continue to strengthen its economic and trading relationships with foreign countries and business development in the PRC will follow market forces. While the Company believes that this trend will continue, there can be no assurance that this will be the case. A change in policies by the PRC government could adversely affect the Company’s interests by, among other factors: changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization of private enterprises. Although the PRC government has been pursuing economic reform policies for more than two decades, there is no assurance that the government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC's political, economic and social life.
 
 
 
The PRC laws and regulations governing the Company’s current business operations are sometimes vague and uncertain. Any changes in such PRC laws and regulations may have a material and adverse effect on the Company’s business.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to the laws and regulations governing the Company’s business, or the enforcement and performance of the Company’s arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. The Company and any future subsidiaries are considered foreign persons or foreign funded enterprises under PRC laws, and as a result, the Company is required to comply with PRC laws and regulations. These laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. The Company cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on the Company’s businesses.

A slowdown or other adverse developments in the PRC economy may materially and adversely affect the Company’s customers, demand for the Company’s products and the Company’s business.

All of the Company’s operations are conducted in the PRC and all of its revenue is generated from sales in the PRC. Although the PRC economy has grown significantly in recent years, the Company cannot assure investors that such growth will continue. A slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in the PRC could materially reduce the demand for our products and materially and adversely affect the Company’s business.
 
Inflation in the PRC could negatively affect our profitability and growth.

While the PRC economy has experienced rapid growth, such growth has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for the Company’s products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect on profitability. In order to control inflation in the past, the PRC government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. Such an austere policy can lead to a slowing of economic growth. In October 2004, the People’s Bank of China, the PRC’s central bank, raised interest rates for the first time in nearly a decade and indicated in a statement that the measure was prompted by inflationary concerns in the Chinese economy. Repeated rises in interest rates by the central bank would likely slow economic activity in China which could, in turn, materially increase the Company’s costs and also reduce demand for the Company’s products.

Governmental control of currency conversion may affect the value of an investment in the Company.

The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. The Company receives all of its revenues in Renminbi, which is currently not a freely convertible currency. Shortages in the availability of foreign currency may restrict the Company’s ability to remit sufficient foreign currency to pay dividends, or otherwise satisfy foreign currency dominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies.

The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents the Company from obtaining sufficient foreign currency to satisfy its currency demands, the Company may not be able to pay certain of its expenses as they come due.

The fluctuation of the Renminbi may materially and adversely affect investments in the Company.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. As the Company relies principally on revenues earned in the PRC, any significant revaluation of the Renminbi may materially and adversely affect the Company’s cash flows, revenues and financial condition. For example, to the extent that the Company needs to convert U.S. dollars it receives from an offering of its securities into Renminbi for the Company’s operations, appreciation of the Renminbi against the U.S. dollar could have a material adverse effect on the Company’s business, financial condition and results of operations. Conversely, if the Company decides to convert its Renminbi into U.S. dollars for the purpose of making payments for dividends on its common stock or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of the Renminbi that the Company converts would be reduced. In addition, the depreciation of significant U.S. dollar denominated assets could result in a charge to the Company’s income statement and a reduction in the value of these assets.
 
 
On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. There remains significant international pressure on the PRC government to adopt a substantially more liberalized currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar. Further revaluations of the Renminbi against the U.S. dollar may also occur in the future.

Because the Company’s principal assets are located outside of the United States and all of the Company’s directors and officers reside outside of the United States, it may be difficult for investors to enforce their rights based on U.S. federal securities laws against the Company and the Company’s officers and directors in the U.S. or to enforce U.S. court judgment against the Company or them in the PRC.

All of the Company’s directors and officers reside outside of the United States. In addition, Anhui Runji is located in the PRC and substantially all of its assets are located outside of the United States; it may therefore be difficult or impossible for investors in the United States to enforce their legal rights based on the civil liability provisions of the U.S. federal securities laws against the Company in the courts of either the U.S. or the PRC and, even if civil judgments are obtained in U.S. courts, to enforce such judgments in PRC courts. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement against the Company or its officers and directors of criminal penalties, under the U.S. federal securities laws or otherwise.
 
Risks Relating to the Company’s Share Exchange with Anhui Runji

The Company’s Chairman and President, Shouren Zhao, beneficially owns 51.6% of the Company’s outstanding common stock, which gives him control over certain major decisions on which the Company’s stockholders may vote, which may discourage an acquisition of the Company.

As a result of the Share Exchange, most of management of the Company do not beneficially own any of the Company’s outstanding common stock at this point in time, and one of the Company’s officers and directors beneficially owns 51.6% of the Company’s outstanding shares. The interests of this director may differ from the interests of other stockholders. As a result, this officer and director will have the right and ability to control virtually all corporate actions requiring stockholder approval, irrespective of how the Company’s other stockholders may vote, including the following actions:

§
Electing or defeating the election of directors;
§
Amending or preventing amendment of the Company’s Certificate of Incorporation or By-laws;
§
Effecting or preventing a merger, sale of assets or other corporate transaction; and
§
Controlling the outcome of any other matter submitted to the stockholders for vote.

The Company’s stock ownership profile may discourage a potential acquirer from seeking to acquire shares of the Company’s common stock or otherwise attempting to obtain control of the Company, which in turn could reduce the Company’s stock price or prevent the Company’s stockholders from realizing a premium over the Company’s stock price.

As a result of the Share Exchange, Anhui Runji has become an indirect wholly-owned subsidiary of a company that is subject to the reporting requirements of U.S. federal securities laws, which can be expensive.

As a result of the Share Exchange, Anhui Runji has become an indirect wholly-owned subsidiary of a company that is a public reporting company and, accordingly, is subject to the information and reporting requirements of the Exchange Act and other federal securities laws, including compliance with the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC (including reporting of the Share Exchange) and furnishing audited reports to stockholders will cause the Company’s expenses to be higher than they would be if Anhui Runji had remained privately-held and did not consummate the Share Exchange.

In addition, it may be time consuming, difficult and costly for the Company to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. The Company may need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures. If the Company is unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, the Company may not be able to obtain the independent accountant certifications required by the Sarbanes-Oxley Act.
 

Public company compliance may make it more difficult to attract and retain officers and directors.

The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As a public entity, the Company expects these new rules and regulations to increase compliance costs and to make certain activities more time consuming and costly. As a public entity, the Company also expects that these new rules and regulations may make it more difficult and expensive for the Company to obtain director and officer liability insurance in the future and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for the Company to attract and retain qualified persons to serve as directors or as executive officers.

Because Anhui Runji became public by means of a share exchange, the Company may not be able to attract the attention of major brokerage firms.

There may be risks associated with Anhui Runji’s becoming public through a share exchange. Specifically, securities analysts of major brokerage firms may not provide coverage of the Company since there is no incentive to brokerage firms to recommend the purchase of the company’s common stock. No assurance can be given that brokerage firms will, in the future, want to conduct any secondary offerings on behalf of the company.

Risks Relating to the Common Stock

The Company’s stock price may be volatile.

The market price of the Company’s common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond the Company’s control, including the following:
 
§
Additions or departures of key personnel;
§
Limited “public float” following the Share Exchange, in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for the common stock;
§
Sales of the common stock
§
The Company’s ability to execute its business plan;
§
Operating results that fall below expectations;
§
Loss of any strategic relationship;
§
Industry developments;
§
Economic and other external factors; and
§
Period-to-period fluctuations in the Company’s financial results.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of the Company’s common stock.

There is currently no liquid trading market for the Company’s common stock and the Company cannot ensure that one will ever develop or be sustained.

There is currently no liquid trading market for the Company’s common stock. The Company cannot predict how liquid the market for the Company’s common stock might become. The Company’s common stock is currently approved for quotation on the OTC Bulletin Board trading under the symbol CRJI. The Company cannot ensure that it will be able to satisfy the initial listing standards on a higher exchange, or that its common stock will be accepted for listing on any such exchange. Should the Company fail to satisfy the initial listing standards of such exchanges, or its common stock be otherwise rejected for listing and remain on the OTC Bulletin Board or be suspended from the OTC Bulletin Board, the trading price of the Company’s common stock could suffer, the trading market for the Company’s common stock may be less liquid and the Company’s common stock price may be subject to increased volatility.

The Company’s common stock may be deemed a “penny stock”, which would make it more difficult for investors to sell their shares.

The Company’s common stock is subject to the “penny stock” rules adopted under section 15(g) of the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If the Company remains subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for the Company’s securities. If the Company’s securities are subject to the penny stock rules, investors will find it more difficult to dispose of the Company’s securities.
 

Furthermore, for companies whose securities are quoted on the OTC Bulletin Board, it is more difficult (1) to obtain accurate quotations, (2) to obtain coverage for significant news events because major wire services generally do not publish press releases about such companies, and (3) to obtain needed capital.

Offers or availability for sale of a substantial number of shares of the Company’s common stock may cause the price of the Company’s common stock to decline.

If the Company’s stockholders sell substantial amounts of common stock in the public market, or upon the expiration of any statutory holding period, under Rule 144, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of the Company’s common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult the Company’s ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that the Company deems reasonable or appropriate. Additional shares of common stock will be freely tradable upon the earlier of: (i) effectiveness of the registration statement the Company is required to file; and (ii) the date on which such shares may be sold without registration pursuant to Rule 144 under the Securities Act.

Provisions of the Company’s Certificate of Incorporation and Delaware law could deter a change of control, which could discourage or delay offers to acquire the Company.

Provisions of the Company’s Certificate of Incorporation and Delaware law may make it more difficult for someone to acquire control of the Company or for the Company’s stockholders to remove existing management, and might discourage a third party from offering to acquire the Company, even if a change in control or in management would be beneficial to stockholders. For example, the Company’s Certificate of Incorporation allows the Company to issue shares of preferred stock without any vote or further action by stockholders.
 
Volatility in the Company’s common stock price may subject the Company to securities litigation.

The market for the Company’s common stock is characterized by significant price volatility when compared to seasoned issuers, and the Company expects that its share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. The Company may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

The elimination of monetary liability against the Company’s directors, officers and employees under the Company’s Articles of Incorporation and Delaware  law, and the existence of indemnification rights to the Company’s directors, officers and employees may result in substantial expenditures by the Company and may discourage lawsuits against the Company’s directors, officers and employees.

The Company’s Certificate of Incorporation contains a provision that provides for indemnification of directors and officers against any and all expenses, including amounts paid upon judgments, counsel fees and amounts paid in settlement by any such person in any proceeding that they are made a party to by reason of being or having been directors or officers of the Company, except in relation to matters as to which any such director or officer shall be adjudged to be liable for his own negligence or misconduct in the performance of his duties.  Such indemnification shall be in addition to any other rights to which those indemnified may be entitled under any law, by law, agreement, vote of shareholder or otherwise.  The Company may also have contractual indemnification obligations under its employment agreements with its executive officers. The foregoing indemnification obligations could result in the Company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which the Company may be unable to recoup. These provisions and resultant costs may also discourage the Company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by the Company’s stockholders against the Company’s directors and officers even though such actions, if successful, might otherwise benefit the Company and its stockholders.

Item 1B.                   Unresolved Staff Comments

None.

Item 2.                      Properties

Our headquarters are located in Xian Zhong Town, Han Shan County, Anhui Province, with our plant and facilities occupying 51,989.87m2.  Our company holds a property ownership certificate for this parcel.
Item 3.                      Legal Proceedings

We know of no material, active or pending legal proceedings against us, our subsidiaries or our property, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholders are an adverse party or have a material interest adverse to us.

PART II
 
Item 5.                       Market for Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Market Information

There is a limited public market for our common shares. Our common shares are quoted for trading on the OTC Bulletin Board under the symbol “CRJI.” The market for our stock is highly volatile. We cannot assure you that there will be a market in the future for our common stock. OTC Bulletin Board securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board stocks are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

Our common shares became eligible for quotation on the OTC Bulletin Board on July 6, 2006, but no trades were made until November 2006.

The following table shows the high and low prices of our common shares on the OTC Bulletin Board. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:
 
Period
 
Hi
   
Low
 
             
Sep 1, 2008 – Nov 30, 2008
 
$
1.01
   
$
1.01
 
Dec 1, 2008 – Feb 28, 2009
 
$
1.00
   
$
1.00
 
Mar 1, 2009 – May 31, 2009
 
$
0.58
   
$
0.58
 
Jun 1, 2009 – Aug 31, 2009
 
$
0.58
   
$
0.58
 
             
Sep 1, 2009 – Nov 30, 2009
 
$
0.55
   
$
0.25
 
Dec 1, 2009 – Feb 28, 2010
 
$
0.51
   
$
0.24
 
Mar 1, 2010 – May 31, 2010
 
$
0.45
   
$
0.10
 
Jun 1, 2010 – Aug 31, 2010
 
$
0.24
   
$
0.04
 

From September 1 to December 13, 2010, the highest and lowest prices of our common shares on the OTC Bulletin Board were $0.30 per share and $0.04 per share. On December 13, 2010, the closing price of our common stock on the OTC Bulletin Board on the last day it traded before the filing of this Annual Report was $0.28 per share.

We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future.

Holders

As of December 14, 2010, there were 129 holders of record of our common stock.

Dividends

Holders of our common stock are entitled to dividends if declared by the Board of Directors out of funds legally available therefore. As of August 31, 2010, no cash dividends have been declared.

We do not intend to issue any cash or stock dividends in the near future. We intend to retain earnings, if any, to finance the development and expansion of our business. Our future dividend policy will be subject to the discretion of the Board of Directors and will be contingent upon future earnings, if any, our financial condition, capital requirements, general business conditions and other factors.

Equity Compensation Plans

As of August 31, 2010, we did not have any equity compensation plans.
 

Recent Sales of Unregistered Securities

We have not made any previously unreported sales of unregistered securities from September 1, 2009 to August 31, 2010.

Item 6.                      Selected Financial Data

Not applicable.

Item 7.                      Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including, "could" "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Annual Report.
 
Results of Operations

Fiscal Year Ended August 31, 2010 Compared to the Fiscal Year Ended August 31, 2009.
 
Revenues.  We generated revenues of $50,063,989 for the year ended August 31, 2010, a decrease of $5,573,905 or 10.0%, compared to $55,637,894 for the year ended August 31, 2009. The decrease in revenue is primarily attributable to the overall decrease in demand of our cement products due to fierce competition in our major market in Anhui Province, and cement sales has decreased from $31,131,604 to $ 22,152,094, a decrease of $8,979,511 or 28.8.
 
Gross Profit.  We achieved a gross profit of $3,257,884 for the year ended August 31, 2010, a decrease of $540,844 or 14.2%, compared to $3,798,728 for the year ended August 31, 2009. The decrease in gross profit is primarily due to   a decline in cement prices partially offset by a decrease in the unit cost. The unit price of cement decreased by approximately $1.80 per ton in 2010 compared year over year, while the avergage unit cost of sales decreased by approximately $1 per ton in the same corresponding period. Secondly, cement sales volume has decreased from 914,993 tons in 2009 to 707,232 tons in 2010, a decrease of 207,761 tons or 22.7.
 
Selling Expenses.  We incurred selling expenses of $254,150 for the year ended August 31, 2010, a decrease of $108,839 or 30.0%, compared to $362,989 for the year ended August 31, 2009. The decrease in selling expenses is mainly attributable to a reduction in sales service fee of $83,077.

General and Administrative Expenses.  We incurred general and administrative expenses of $2,843,077 for the year ended August 31, 2010, an increase of $803,985 or 39.4%, compared to $2,039,092 for the year ended August 31, 2009. Among the increased general and administrative expenses were the bad debt expenses of $192,913, sewage charges of $166,084 and other miscellaneous expenses of $215,767.
 
Interest Expenses. The interest expense was $997,680 for the year ended August 31, 2010, an increase of $579,397 or 138.5%, compared to $418,283 for the year ended August 31, 2009. The reason for the increase is due to the increased interest rate on the short term loans and longer borrowing period and increased bank loan compared with last year.
 
Income from Operations.  As a result of the foregoing, our income from operations decreased by $1,227,241 to $(20,995), 101.74% of total revenues, for the year ended August 31, 2010, as compared to $1,206,246, for the year ended August 31, 2009.
 
Government Subsidy.  We had government subsidy granted from Hanshan government of $1,574,765 for the year ended August 31, 2010, a decrease of $1,703,101 or 51.96% compared to $3,277,866 for the year ended August 31, 2008.
 
Net Income.  Net income for the 2010 fiscal year was $416,997, compared to net income of $2,908,459 for the 2009 fiscal year.  The decrease is attributable to the decreased gross profit and increased expenses discussed above.
 
Liquidity and Capital Resources
 
Operating activities
  
For the year ended August 31, 2010, net cash provided by operating activities was $9,139,028. This was primarily attributable to our net income of $416,997, adjusted by non-cash items of amortization $548,480, depreciation of $5,107,531 and allowance for doubtful account of $193,339, and the changes in operating assets and liabilities including the increase in accounts receivable by $1,700,381, a decrease in advance to suppliers by $5,522,327, increase in inventories by $190,398, increase in other receivables by $563,160, increase in other current assets by $19,493, decrease in accounts payables and accrued liabilities by $853,048, and $870,411 decrease in tax payable in this period.
 
The large increase in advances to suppliers of $5,522,327, a decrease of 417.87% over the advances to suppliers balance at August 31, 2009, are mainly due to the completion of waste heat power generation project. The reason for the increase in the depreciation expense of $5,107,531, a 19.70% increase compared with $4,266,895 the same period of 2009, is waste heat power generation projects to increase fixed assets.  The reason for the increase in the accounts receivable of $1,700,381, a 21.92% increase over the accounts receivable balance of $7,758,060 at August 31, 2009, is due to fierce competition so that the Company has extended receivable period to maintain long-term relations with clients. But the Company has strict management on accounts receivables.
 
Investing activities
 
For the years ended August 31, 2010 and 2009, net cash used in investing activities was $(2,440,100) and $(4,947,511), respectively. The $(1,920,100) cash used in 2010 is primarily for building, equipment and machinery. The increase is mainly on expenditure in buildings of second production line project, and equipment and machinery of waste heat generator project.
 
Financing activities
 
For the years ended August 31, 2010 and 2009, net cash used in investing activities was $(6,263,533) and net cash provided by investing activities was $2,669,980 respectively. Short term loan proceeds increased from $13,301,616 in 2009 to $14,059,672 in 2010 due to increased bank loan. Short term loan (repayment) in 2009 and 2010 decreased from $(438,520) to $(13,327,397), respectively. The reduction is due to repayment of ¥3,000,000 last year. Repayments of due to related parties decreased from $(10,984,576) in 2009 to $(6,261,252) in 2010, and the deduction of $(734,556) is used for payment for renting equipment.
 
DUE TO RELATED PARTIES (Short Term)
 
(a)           Names and relationship of related parties
 
 
Existing relationships with the Company
   
Nanjin Hongren
A company controlled by shareholder
   
Nanjin Runji
A company controlled by shareholder
   
Yang, Xuanjun
Shareholder of the Company
   
Zhao, Shouren
Shareholder, president & CEO of the Company
(b)           Due to Related Parties (Short Term) consists of the following:

   
Year Ended
31-Aug-10
   
Year Ended
31-Aug-09
 
             
Due to related party – Nanjin Hongren
 
$
5,622,218
     
8,279,088
 
Due to related party – Nanjin Runji
   
4,424,912
     
7,135,035
 
Due to related party – Zhao, Shouren
   
59,611
     
611,899
 
Due to related party – Yang, Xuanjun
   
515,677
     
788,052
 
Miscellaneous
   
3,282
     
2,450
 
   
$
10,625,700
     
16,816,524
 
 
The details for the Company’s bank loans are as follows:

 
Borrowing bank
 
Amount
 
Starting
date
 
Maturity
date
 
Interest rate
(monthly)
                   
*
Xianzhong Credit Bank
 
$
880,670
 
2009-11-17
 
2010-11-16
 
0.8835%
**
PuFa Bank WenHu Business Branch
   
4,256,568
 
2010-05-05
 
2011-04-27
 
0.5310%
***
ICBC Hanshan
   
2,953,564
 
2010-03-15
 
2011-03-15
 
0.6058%
****
Huishang Bank Sales Department
   
5,284,015
 
2010-07-22
 
2011-07-21
 
0.5310%
 
Runfeng Company
   
737,661
 
2010-05-26
 
2011-05-25
 
0.8835%
 
*  
The loan from the Xianzhong Credit Bank was pledged in collateral of machine equipment in value of RMB 25,173,720 or $3,694,954.

** 
The loan from the Wenhu branch of PuFa Bank was pledged in collateral of the Company’s building and land user right.

***
The loan from the Hanshan branch of ICBC Bank is securitized by an accounts receivable balance of $2,539,569 at August 31, 2010.

****
The loan from the sales department of Huishang Bank was guaranteed by Anhui Province Credit Guarantee (Group) Co., Ltd.
 
Off-Balance Sheet Arrangements
 
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to our stockholders.
 
Inflation
 
The effect of inflation on our revenue and operating results has not been significant.
 
Critical Accounting Policies
 
Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 2 of the notes to our financial statements. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.
 
Impairment of Long-Lived Assets
 
The Company evaluates potential impairment of long-lived assets, in accordance with accounting principles generally accepted in the United States of America, which requires the Company to (a) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value of the asset. The Company believes that long-lived assets in the accompanying balance sheets are appropriately valued at August 31, 2010.
 
 
Foreign Currency Translation

The functional currency of the Company is the Renminbi (“RMB”), the PRC’s currency. The Company maintains its financial statements using the functional currency. 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 exchange 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 (loss) for the respective periods.

For financial reporting purposes, the financial statements of the Company, which are prepared using the RMB, are translated into the Company’s reporting currency, United States Dollars. Balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using the average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in stockholder’s equity.

Fair Value of Financial Instruments

The Company's financial instruments include cash equivalents, accounts receivable, other receivables, accounts payable, accrued expenses, value-added taxes, short-term and long-term bank loans, and loans payable to related parties. The carrying amounts of financial instruments other than long-term obligations approximate fair value due to their short maturities. Long-term obligations approximate fair value based upon rates currently available for similar instruments.

Item 7A.                      Quantitative and Qualitative Disclosures about Market Risk

Credit Risk

The Company is exposed to credit risk from its cash in bank, fixed deposits, bills and accounts receivable. The credit risk on cash in bank and fixed deposits is limited because the counterparties are recognized financial institutions. Bills and accounts receivable are subjected to credit evaluations.

Foreign Exchange Risk

The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions. Since July 2005, the Renminbi has no longer been pegged to the U.S. Dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the Renminbi may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future, PRC authorities may lift restrictions on fluctuations in the Renminbi exchange rate and lessen intervention in the foreign exchange market.

Because all of our earnings and cash assets are denominated in Renminbi, but our reporting currency is the U.S. dollar, fluctuations in the exchange rate between the U.S. dollar and the Renminbi will affect our balance sheet and our earnings per share in U.S. dollars. In addition, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue in the future that will be exchanged into U.S. dollars and earnings from, and the value of, any U.S. dollar-denominated investments we make in the future.

Most of our transactions are settled in Renminbi and U.S. dollars. In the opinion of the directors, we are not exposed to significant foreign currency risk.

Inflation

Inflationary factors, such as increases in the cost of raw materials and overhead costs, could impair our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of sales revenue if the selling prices of our products do not increase with these increased costs.
 
 
Company’s Operations are All in China
 
All of our operations are conducted in China and are subject to various political, economic, and other risks and uncertainties inherent in conducting business in China. Among other risks, the Company’s operations are subject to the risks of: restrictions on transfer of funds; quotas; domestic tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations. Additional information regarding such risks can be found under the heading “Risk Factors” located in Item 1A on page 12 of this Form 10-K/A.
 
 
 
 
 
 
Item 8.                         Financial Statements and Supplementary Data
 
CHINA RUNJI CEMENT INC.

TABLE OF CONTENTS
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED AUGUST 31, 2010
 
 
Page(s)
   
Report of Independent Registered Public Accounting Firm
25
   
Consolidated Balance Sheets as of August 31, 2010 and 2009
26
   
Consolidated Statements of Operations and Comprehensive Income for the Years Ended August 31, 2010 and 2009
27
   
Consolidated Statements of Cash Flows for the Years Ended August 31, 2010 and 2009
28
   
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended August 31, 2010 and 2009
29
   
Notes to the Consolidated Financial Statements
30- 40

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To The Board of Directors and Stockholders
China Runji Cement Inc.
Xian Zhong Town, Han Shan County
Chao Hu City, People’s Republic of China

 
 
We have audited the accompanying consolidated balance sheets of China Runji Cement Inc. (the “Company”) as of August 31, 2010 and 2009 and the related consolidated statements of operations and comprehensive income, cash flows and changes in stockholders’ equity for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
 
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion. 
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of China Runji Cement Inc. as of August 31, 2010 and 2009 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
December 14, 2010
 
 
China Runji Cement Inc.
Consolidated Balance Sheets
As of August 31, 2010 and 2009
 
   
August 31,
   
August 31,
 
   
2010
   
2009
 
ASSETS
           
Current assets
           
   Cash and cash equivalents
    683,545       752,952  
   Accounts receivable, net of allowance for doubful account of $193,339 and zero
   as of 08/31/2010 and 08/31/2009, respectively
    9,364,751       7,758,060  
   Accounts receivable from related party
    212,374       120,615  
   Advances to suppliers
    826,994       6,323,149  
   Inventory
    2,090,248       1,892,019  
   Other receivables
    1,678,279       1,110,522  
   Other current assets
    294,420       225,419  
Total current assets
    15,150,611       18,182,736  
                 
Advance for construction in progress projects
    467,225       2,550,200  
Property, plant and equipment, net
    54,801,428       51,921,848  
Intangible assets & deferred charges
    4,357,468       4,416,306  
                 
    Total assets
    74,776,732       77,071,090  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current liabilities
               
   Accounts payable and accrued liabilities
    23,805,922       19,612,349  
   Short-term loans
    14,094,478       13,301,615  
   Long-term loan-current portion
    236,148       733,143  
   Due to related parties
    10,625,700       16,816,524  
   Taxes payable and other
    970,841       1,833,662  
Total current liabilities
    49,733,089       52,297,293  
                 
Long-term loan- non-current portion
    -       235,174  
Total liabilities
    49,733,089       52,532,467  
                 
Stockholders' equity
               
   Preferred stock: 20,000,000 shares authorized,
   $0.0001 par value, no shares issued and outstanding
    -       -  
   Common stock: 200,000,000 shares authorized,
   $0.0001 par value, 78,832,064 shares issued and outstanding
    7,883       7,883  
   Additional paid in capital
    15,984,109       12,327,962  
   Accumulated other comprehensive income
    2,623,937       2,535,914  
   Retained earnings
    6,427,714       9,666,864  
Total stockholders' squity
    25,043,643       24,538,623  
                 
Total liabilities and stockholders' equity
    74,776,732       77,071,090  

See accompanying notes to the Consolidated Financial Statements.
 
 
China Runji Cement Inc.
Consolidated Statements of Operations and Comprehensive Income
For the years ended August 31, 2010 and 2009

   
August 31,
   
August 31,
 
   
2010
   
2009
 
             
Revenue
  $ 50,063,989     $ 55,637,894  
Cost of goods sold
    46,806,105       51,839,166  
Gross profit
    3,257,884       3,798,728  
                 
Operating costs and expenses:
               
             Selling expenses
    254,150       362,989  
             General & administrative expenses
    2,843,077       2,039,092  
             Depreciation on office equipment
    181,652       190,401  
Total operating  expenses
    3,278,879       2,592,482  
                 
Income (loss) from operations
    (20,995 )     1,206,246  
                 
Other income (expenses)
               
      Interest expense
    (997,680 )     (418,283 )
      Government subsidies/grants and other income
    1,574,765       3,277,866  
                 
Income before income taxes
    556,090       4,065,829  
                 
      Income taxes expense
    139,093       1,157,370  
                 
Net income
  $ 416,997     $ 2,908,459  
                 
Other comprehensive income (loss)
               
      Foreign currency translation adjustment
    88,023       (59,876 )
Comprehensive income
  $ 505,020     $ 2,848,583  
                 
Earnings per share - basic and diluted
  $ 0.01     $ 0.04  
                 
Weighted average shares outstanding - basic and diluted
    78,832,064       78,832,064  
 
 
See accompanying notes to the Consolidated Financial Statements.
 
 
China Runji Cement Inc.
Consolidated Statements of Cash Flows
For the years ended August 31, 2010 and 2009

   
August 31,
   
August 31,
 
   
2010
   
2009
 
Operating activities
           
   Net income
  $ 416,997     $ 2,908,459  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
               
   Amortization
    548,480       273,412  
   Depreciation expense
    5,107,531       4,266,895  
   Allowance for doubful account
    193,339       -  
                 
Changes in operating assets and liabilities:
               
   Accounts receivable
    (1,700,381 )     (4,772,788 )
   Advances to suppliers
    5,522,327       (4,753,727 )
   Inventory
    (190,398 )     1,260,054  
   Changes in other receivables
    (563,160 )     472,002  
   Other current assets
    (19,493 )     -  
   Accounts payable and accrued liabilities
    853,048       3,652,488  
   Tax payable
    (870,411 )     (533,968 )
Net cash provided by operating activities
    9,139,028       2,772,827  
                 
Investing activities
               
   Changes in due from related parties
    -       53,510  
   Cash paid for intangible assets and deferred expenses
    (520,000 )     -  
   Cash paid for property, plant and equipment additions
    (1,920,100 )     (5,001,021 )
Net cash used in investing activities
    (2,440,100 )     (4,947,511 )
                 
Financing activities
               
   Short term loan proceeds
    14,059,672       13,301,616  
   Short term loan (repayment)
    (13,327,397 )     (438,520 )
   Debt issue cost
            (176,857 )
   (Repayments) of due to related parties
    (6,261,252 )     (10,984,576 )
   Proceeds from sale-leaseback financing
    -       1,491,186  
   Principle payment of the sale-leaseback financing
    (734,556 )     (522,869 )
Net cash (used in) provided by financing activities
    (6,263,533 )     2,669,980  
                 
Effect of exchange rate changes on cash and cash equivalents
    (504,856 )     (157,375 )
                 
Increase (decrease) in cash and cash equivalents
    (69,407 )     337,921  
Cash and cash equivalents, beginning of year
    752,952       415,031  
Cash and cash equivalents, end of year
  $ 683,545     $ 752,952  
                 
Supplemental disclosures
               
   Interest paid
  $ 711,624     $ 317,708  
   Income taxes paid
  $ 600,945     $ 1,445,088  
                 
Non-cash investing activity:
               
Construction in progress transferred to fixed assets
  $ 11,190,582     $ 8,303,741  
Advance transfer to CIP
  $ 7,436,547     $ -  
Retained earning transferred to paid in capital
  $ 3,656,147     $ -  
Accounts payable related to the fixed assets purchase   $ 3,259,346     $ -  
 
 
See accompanying notes to the Consolidated Financial Statements.
 
 
China Runji Cement Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended August 31, 2010 and 2009
 
               
Additional
   
Accumulated Other
             
   
Common Stock
   
Paid In
   
Comprehensive
   
Retained
       
   
Shares
   
Amount
   
Capital
   
Income
   
Earnings
   
Total
 
   
Par ($ 0.0001)
                         
                                     
Balances, August 31, 2008
    78,832,064     $ 7,883     $ 12,327,962     $ 2,595,790     $ 6,758,405     $ 21,690,040  
          Currency translation
    -       -       -       (59,876 )     -       (59,876 )
          Net income
    -       -       -       -       2,908,459       2,908,459  
Balances, August 31, 2009
    78,832,064     $ 7,883     $ 12,327,962     $ 2,535,914     $ 9,666,864     $ 24,538,623  
          Distribution
    -       -       3,656,147               (3,656,147 )     -  
          Currency translation
    -       -       -       88,023               88,023  
          Net income
    -       -       -       -       416,997       416,997  
Balances, August 31, 2010
    78,832,064     $ 7,883     $ 15,984,109     $ 2,623,937     $ 6,427,714     $ 25,043,643  
 
 
The accompanying notes are an integral part of these financial statements.
 
 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

The Company was incorporated as FitMedia Inc., a Delaware corporation, on August 30, 2004.

On November 1, 2007, the Company closed a reverse merger with Anhui Province Runji Cement Co., Limited (“Anhui Runji”). Anhui Runji is the accounting acquirer and the transaction is accounted for as a recapitalization. The historical financial statements of Anhui Runji survived the merger and are presented herein.

Anhui Runji, a producer and distributor of cement located in Anhui Province in China, was established in December 2003 with registered capital of RMB 60 million yuan. Anhui Runji started production in October 2005 and specializes in cement production and sales. The main cement varieties produced are ordinary silicate cement PO52.5, PO42.5, PO32.5 and PC32.5. Following the commencement of the second cement clinker production line in October 2008, Anhui Runji currently has one production line of cement and one of cement clinker; each is designed to produce 2,500 tons per day.

Anhui Runji obtained its production license in 2005. Presently, Anhui Runji mainly focuses production on Runji Brand PII52.5, PO42.5, PO32.5 and PC32.5 cements. PII52.5 is a high grade, high strength cement that is made in Anhui and Jiangsu Provinces and the region of north of the Changjiang River and is used in large infrastructural projects. Anhui Runji has a rigorous quality control system and received ISO9001 quality system certification and international accreditation in March 2006. In addition Anhui Runji passed the national GB/T 19001-2000 standard authentication.

Presently, Anhui Runji’s main market is in Hefei city and Pukou area of Nanjing. To reflect its business and business plan, the Company changed its name from “FitMedia Inc.” to “China Runji Cement Inc.”
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
 
These accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Ren Ji Cement Investment Co., Ltd (a BVI corporation), Ren Ji Cement Company Limited (a Hong Kong corporation) and Anhui Province Runji Cement Co., Ltd. (a PRC corporation), and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates
 
In preparing these financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the year reported. Actual results may differ from these estimates.

Reclassifications
 
Certain prior year amounts have been reclassified to conform to the 2010 presentation.

New Accounting Pronouncements

In October 2009, the FASB issued Accounting Standards Update, 2009-13, Revenue Recognition (Topic 605) “Multiple Deliverable Revenue Arrangements - A Consensus of the FASB Emerging Issues Task Force.”  This update provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting.  This update establishes a selling price hierarchy for determining the selling price of a deliverable.  The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available.  The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted.   Management is in the process of evaluating the impact of adopting this standard on the Company’s financial statements.
 
 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
The Company does not believe that there are any new pronouncements that have been recently issued that might have a material impact on its consolidated financial statements other than the one that was disclosed
 
Cash and Cash Equivalents
 
Cash and cash equivalents include cash on hand, demand deposits with banks and liquid investments with an original maturity of three months or less. Cash deposits with banks are held in financial institutions in China, which has no federally insured deposit protection. Accordingly, the Company has a concentration of credit risk related to these uninsured deposits.

Accounts Receivable
 
Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management judgment and estimates are made in connection with establishing the allowance for doubtful accounts. Specifically, the Company analyzes the aging of accounts receivable balances, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms. Significant changes in customer concentration or payment terms, deterioration of customer credit-worthiness or weakening in economic trends could have a significant impact on the collectability of receivables and the Company’s operating results. The allowance of doubtful account is accrued based on the AR identified uncollectible.  The allowances for doubtful accounts are $193,339 and zero as of August 31, 2010 and August 31, 2010 respectively.

Inventories

Inventories, which are primarily comprised of raw materials, packaging materials, semi-finished goods, and finished goods, are stated at the lower of cost or market, using the moving average (“MA”) method. Cost being determined on the basis of a moving average. The Company evaluates the need for reserves associated with obsolete, slow-moving and non-salable inventory by reviewing net realizable values on a periodic basis.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method, with an estimated 5% salvage value of original cost, over the estimated useful lives of the assets as follows:
 
Building
20 years
manufacturing machinery & equipment
8 years
electronic equipment & automobiles
5 years
office equipment
5 years

Expenditures for repairs and maintenance, which do not improve or extend the expected useful lives of the assets, are expensed as incurred while major replacements and improvements are capitalized.

When property or equipment is retired or disposed of, the cost and accumulated depreciation are removed from the accounts, with any resulting gains or losses being included in net income or loss in the year of disposition.

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 property and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed.

Impairment of Long-Lived Assets
 
The Company evaluates potential impairment of long-lived assets, in accordance with accounting principles generally accepted in the United States of America, which requires the Company to (a) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value of the asset. The Company believes that long-lived assets in the accompanying balance sheets are appropriately valued at August 31, 2010.
 
Intangible Assets
 
The Company’s intangible assets are stated at cost less accumulated amortization and are mainly comprised of limestone and sandstone mining rights. Mining rights are related to mines the Company occupies in Anhui Province, PRC and are being amortized on a straight-line basis over a period of 30 years.
 
 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
Government Subsidies
 
A government subsidy is recognized only when there is reasonable assurance that the enterprise will comply with any conditions attached to the grant and the grant will be received.  The Company is entitled to receive treasury subsidy of local government in accordance with the “Regulations of facilitating investment in industrial enterprises” (Article 17 of Han Order [2002]) which is promulgated on October 28, 2002 by the Communist Party Commission of Han Shan County, Anhui Province and Han Shan County Government of Anhui Province. According to this regulation, the first three years of tax payable by the Company to the local government after it commenced production will be returned to the Company. The Company received $1,604,340 and $3,249,975 government subsidies during 2010 and 2009 respectively.
 
Revenue Recognition
 
The Company recognizes revenue when the significant risks and rewards of ownership have been transferred pursuant to PRC law, including such factors as when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, sales and value-added tax laws have been complied with, and collectability is reasonably assured. The Company generally recognizes revenue when its products are shipped.

Comprehensive Income
 
The Company reports and displays comprehensive income, its components, and accumulated balances in a full-set of general-purpose financial statements. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments.
 
Concentration of Credit Risk
 
Financial instruments which potentially expose the Company to concentrations of credit risk, consist of cash and accounts receivable as of August 31, 2010 and 2009. The Company performs ongoing evaluations of its cash position and credit evaluations to ensure collections and minimize losses.

A portion of the Company’s cash at August 31, 2010 and 2009 is maintained at various financial institutions in the PRC which do not provide insurance for amounts on deposit. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.

For the years ended August 31, 2010 and 2009, the Company’s sales were mainly made to customers located in the PRC. In addition, total accounts receivables as of August 31, 2010 and 2009 also arose from customers located in the PRC.

A significant percentage of the Company’s business is generated from a small number of customers. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.

The Company operates principally in the PRC and grants credit to its customers in this geographic region. Although the PRC is economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Company’s operations.

Income Taxes
 
The Company accounts for income taxes in accordance with accounting principles generally accepted in the United States of America, which  requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
 
Foreign Currency Translation
 
The functional currency of the Company is the Renminbi (“RMB”), the PRC’s currency. The Company maintains its financial statements using the functional currency. 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 exchange 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 (loss) for the respective periods.
 
 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
The financial statements of the Company are translated into United States dollars in accordance with accounting principles generally accepted in the United States of America using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for the equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.
 
Related Parties
 
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
 
Earnings Per Share
 
Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

Fair Value of Financial Instruments
 
The Company's financial instruments include cash equivalents, accounts receivable, other receivables, accounts payable, accrued expenses, value-added taxes, short-term and long-term bank loans, and loans payable to related parties. The carrying amounts of financial instruments other than long-term obligations approximate fair value due to their short maturities. Long-term obligations approximate fair value based upon rates currently available for similar instruments.
 
NOTE 3 – CORRECTIONS OF IMMATERIAL ERROR 
 
Subsequent to the issuance of our consolidated financial statements for the fiscal year ended August 31, 2009, In connection with our determination of the government subsidy as non-taxable income, we received communication from local tax authority that the government subsidies and tax refunds should be subject to the PRC’s income tax and recorded as taxable income. As a result, the income tax expense and income tax payable at August 31, 2009 were understated.  Accordingly, as described below, certain previously reported amounts included in our consolidated financial statements have been corrected to reflect the correction of this error. In addition, we also identified errors in accruals for property taxes and the timely transfer of construction-in-progress that were completed to fix assets. We believe the effects of these errors are not material to our previously issued consolidated financial statements. Our conclusion that the errors were not material included an evaluation of both quantitative and qualitative factors as well as the guidance provided by SEC Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.
 
 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009
 
NOTE 3 – CORRECTIONS OF IMMATERIAL ERROR (CONTINUED)
 
   
As previously reported
   
Adjustment
   
As adjusted
 
Balance sheet as of August 31, 2009
                 
Advance for construction in progress
    2,743,828       (193,628 )     2,550,200  
Property, plant and equipment, net
    51,766,946       154,902       51,921,848  
Total Assets
    77,109,816       (38,726     77,071,090  
Accounts payable and accrued liabilities
    19,477,476       134,873       19,612,349  
Taxes payable and other
    739,405       1,094,257       1,833,662  
Current liabilities
    51,068,163       1,229,130       52,297,293  
Total liabilities
    51,303,337       1,229,130       52,532,467  
Retained earnings
    10,934,720       (1,267,856 )     9,666,864  
Total stockholder's equity
    25,806,479       (1,267,856     24,538,623  
                         
Statement of operations for the fiscal year ended August 31, 2009
                 
G&A expenses
    1,904,219       134,873       2,039,092  
Depreciation of property, plant and equipment
    151,675       38,726       190,401  
Total operating expenses
    2,418,883       173,599       2,592,482  
Income before income taxes
    4,239,428       (173,599 )     4,065,829  
Income tax expense
    388,276       769,094       1,157,370  
Net income
    3,851,152       (942,693 )     2,908,459  
Comprehensive income
    3,791,276       (942,693 )     2,848,583  
Earnings per share, basic and diluted
    0.05       (0.01 )     0.04  
                         
Statement of cash flow for the fiscal year ended August 31, 2009
                 
Net income
    3,851,152       (942,693 )     2,908,459  
Depreciation expense
    4,228,169       38,726       4,266,895  
Changes in operating assets and liabilities:
                       
Accounts payable and accrued liabilities
    3,517,615       134,873       3,652,488  
Variance in tax payable
    (1,303,062 )     769,094       (533,968
                         
Balance sheet as of August 31, 2008
                       
Taxes payable and other
    2,374,042       325,163       2,699,205  
Current liabilities
    46,246,843       325,163       46,572,006  
Total liabilities
    46,246,843       325,163       46,572,006  
Retained earnings
    7,083,568       (325,163 )     6,758,405  
Stockholder's equity
    22,015,203       (325,163 )     21,690,040  
                         
Statement of operations for the fiscal year ended August 31, 2008
                 
Income tax expense
    2,216,504       325,163       2,541,667  
Net income
    6,962,683       (325,163 )     6,637,520  
Comprehensive income
    8,766,859       (325,163 )     8,441,696  
Earnings per share, basic and diluted
    0.09       -       0.09  
                         
Statement of cash flow for the fiscal year ended August 31, 2008
                 
Net income
    6,962,683       (325,163 )     6,637,520  
Changes in operating assets and liabilities:
                       
Variance in tax payable
    560,420       325,163       885,583  
 
 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009
 
NOTE 4 – ACCOUNTS RECEIVABLE
 
 
Year Ended
   
Year Ended
 
 
31-Aug-10
   
31-Aug-09
 
             
Notes receivable
  $ 138,118     $ 199,148  
Accounts receivable –trade
  $ 9,419,972     $ 7,558,912  
Accounts receivable from related party
    212,374       120,615  
Allowance for doubtful accounts
    (193,339 )     -  
    $ 9,577,125     $ 7,878,675  
 
The related party sales were $212,374 and $120,615 for the year ended August 31, 2010 and 2009. The related party is an entity controlled by the President and CEO of the Company.

The accounts receivable amount of $2,539,569 and $2,923,464 at August 31, 2010 and 2009 respectively, is used as a securitization for the ICBC Hanshan bank loan at August 31, 2010.
 
NOTE 5 – INVENTORY

Inventory consists of the following:
 
   
Year Ended
31-Aug-10
   
Year Ended
31-Aug-09
 
             
Raw materials
  $ 741,645     $ 702,529  
Packaging materials
    27,258       25,138  
Semi-finished goods
    599,178       292,376  
Finished goods
    722,167       871,976  
    $ 2,090,248     $ 1,892,019  
 
NOTE 6 – ADVANCES TO SUPPLIERS

Advances to suppliers consist of the following:

   
Year Ended
31-Aug-10
   
Year Ended
31-Aug-09
 
Advances to suppliers
 
$
826,994
   
$
6,323,149
 
Advance for construction in progress projects
   
467,225
     
2,743,828
 
Advances 
 
$
1,294,219
   
$
9,066,977
 
 
Advances to suppliers represent amounts prepaid for raw materials. Advances for construction in progress projects represents amounts prepaid for Construction in Progress. The advances are applied against amounts due to the supplier as the materials are received.

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:
   
Year Ended
   
Year Ended
 
   
31-Aug-10
   
31-Aug-09
 
             
Building
  $ 32,320,411     $ 28,617,028  
Equipment & machinery
    39,325,188       31,245,848  
Automobiles
    319,917       292,828  
Other equipment
    31,092       30,964  
Computer equipment
    32,977       32,841  
Construction in progress
    32,114       3,793,839  
Total property, plant and equipment (gross)
    72,061,699       64,013,348  
Accumulated depreciation
    (17,260,271 )     (12,091,500 )
Total property, plant and equipment (net)
    54,801,428       51,921,848  
 
 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009
 
NOTE 8 – INTANGIBLE ASSETS & DEFERRED CHARGES

Intangibles and deferred charges include the following:
 
   
Year Ended
   
Year Ended
   
   
31-Aug-10
   
31-Aug-09
  Terms
Mineral exploration right-Shihuishi
  $ 3,316,634     $ 3,428,391   30 years
Mineral exploration right-Shayan
    196,562       224,399   10 years
Land acquisition compensation (compensating fee for mine and forest)
    473,066       535,359   10 years
Planting fee in working place
    221,363       47,953   3 years
Compensating fee for stone materials in Baxiong Village
    14,531       16,444   10 years
Compensating fee for limekiln and drought land in Baxiong Village
    12,637       14,301   10 years
Compensating fee for sandstone land in Qiaomai Village
    100,839       90,433   10 years
Debt issue cost
    21,836       59,026   2 years
Total intangible assets & deferred charges   $ 4,357,468     $ 4,416,306    
 
The total amortization expenses related to the intangibles and deferred charges are $548,480 and $273,412 for the years ended August 31, 2010 and 2009, respectively.

NOTE 9 – BANK LOANS

Short term loans consist of:

   
Year Ended
31-Aug-10
   
Year Ended
31-Aug-09
 
             
Xian Zong Credit Bank
  $ 880,670     $ 438,519  
PuFa Bank WenHu Business Branch
    4,256,568       4,239,022  
ICBC Hanshan
    2,953,564       2,923,464  
Huishang Bank Sales Department
    5,284,015       5,262,235  
Runfeng Company
    737,661       438,375  
    $ 14,094,478     $ 13,301,615  

The details for the Company’s bank loans are as follows:

 
Borrowing bank
 
Amount
 
Starting
date
 
Maturity
date
 
Interest rate
(monthly)
                   
*
Xianzhong Credit Bank
 
$
880,670
 
2009-11-17
 
2010-11-16
 
0.8835%
**
PuFa Bank WenHu Business Branch
   
4,256,568
 
2010-05-05
 
2011-04-27
 
0.5310%
***
ICBC Hanshan
   
2,953,564
 
2010-03-15
 
2011-03-15
 
0.6058%
****
Huishang Bank Sales Department
   
5,284,015
 
2010-07-22
 
2011-07-21
 
0.5310%
 
Runfeng Company
   
737,661
 
2010-05-26
 
2011-05-25
 
0.8835%
 
*  
The loan from the Xianzhong Credit Bank was pledged in collateral of machine equipment in value of RMB 25,173,720 or $3,694,954.
** 
The loan from the Wenhu branch of PuFa Bank was pledged in collateral of the Company’s building and land user right.
***
The loan from the Hanshan branch of ICBC Bank is securitized by an accounts receivable balance of $2,539,569 at August 31, 2010.
****
The loan from the sales department of Huishang Bank was guaranteed by Anhui Province Credit Guarantee (Group) Co., Ltd.
 
 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009
 
NOTE 10 – DUE TO RELATED PARTIES (Short Term)

(a)           Names and relationship of related parties

 
Existing relationships with the Company
   
Nanjin Hongren
A company controlled by shareholder
   
Nanjin Runji
A company controlled by shareholder
   
Yang, Xuanjun
Shareholder of the Company
   
Zhao, Shouren
Shareholder, president & CEO of the Company

(b)           Due to Related Parties (Short Term) consists of the following:

   
Year Ended
31-Aug-10
   
Year Ended
31-Aug-09
 
             
Due to related party – Nanjin Hongren
 
$
5,622,218
     
8,279,088
 
Due to related party – Nanjin Runji
   
4,424,912
     
7,135,035
 
Due to related party – Zhao, Shouren
   
59,611
     
611,899
 
Due to related party – Yang, Xuanjun
   
515,677
     
788,052
 
Miscellaneous
   
3,282
     
2,450
 
   
$
10,625,700
     
16,816,524
 

As of August 31, 2010 and 2009, the outstanding debt owed to Shouren Zhao totaled $59,611 and $611,899, respectively, loaned to the Company on a short-term basis in order to finance its operations.  The terms of the loan are non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. The loans from related parties are to meet the Company’s need in operation.

As of August 31, 2010 and 2009, the outstanding debt owed to Xuanjun Yang, a director, totaled $515,677 and $788,052, respectively, loaned to the Company on a short-term basis in order to finance its operations.  The terms of the loan are non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. The loans from related parties are to meet the Company’s need in operation.

As of August 31, 2010 and 2009, the outstanding debt owed to Nanjin Hongren, a related company, owned by Zhao and Yang, totalled $5,622,218 and $8,279,088, respectively, loaned to the Company on a short-term basis in order to finance its operations.  The terms of the loans are non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. The loans from related parties are to meet the Company’s need in operation.

As of August 31, 2010 and 2009, the outstanding debt owed to Nanjin Runji, a related company, owned by Zhao and Yang, totalled $4,424,912 and $7,135,035, respectively, loaned to the Company on a short-term basis in order to finance its operations.  The terms of the loans are non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. The loans from related parties are to meet the Company’s need in operation.

The above amounts due to related parties represent loans payable, are short-term loans that are unsecured and non-interest bearing, and the loans usage will depend on the Company’s business operations.
 
 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009
 
NOTE 11 – LONG TERM LOAN

On April 3, 2009, the company signed a two year sale lease-back contract with Anhui Yuanzhong leasing company. On February 8, 2010, Yuanzhong leasing company signed the contract with Guodi Finance Anhui Branch to transfer the remaining lease to Guodi Finance Anhui Branch. All the contract terms remain the same as before the transfer took place.

The details for the Company’s long-term loan are as follows:
 
 
Year Ended
   
Year Ended
 
 
31-Aug-10
   
31-Aug-09
 
             
Long-term loan  – Guodi Financing Anhui Branch (current portion)
  $ 236,148     $ -  
Long-term loan  – Anhui Yuanzhong (current portion)
    -       733,143  
Long-term loan – Anhui Yuanzhong (Non-current portion)
    -       235,174  
    $ 236,148     $ 968,317  

NOTE 12 – COMMITMENTS AND CONTINGECIES
 
According to the prevailing laws and regulations of the PRC, the Company is required to cover its employees with medical, retirement and unemployment insurance programs. Management believes that due to the transient nature of its employees, the Company does not need to provide all employees with such social insurances, and has paid the social insurances for the Company’s employees who have completed three months’ continuous employment with the Company.

In the event that any current or former employee files a complaint with the PRC government, the Company may be subject to making up the social insurances as well as administrative fines. As the Company believes that these fines would not be material, no provision has been made in this regard.
 
The Company does not have any operating leases and other long term commitments.

Tax Issues

The tax authority of the PRC government conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises have completed their relevant tax filings, hence the Company’s tax filings may not be finalized. It is therefore uncertain as to whether the PRC tax authority may take different views about the Company’s tax filings which may lead to additional tax liabilities.

NOTE 13 – INCOME TAXES

The Company’s Enterprise Income Tax (“EIT”) rate of 25%,
   
Year Ended
31-Aug-10
   
Year Ended
31-Aug-09
 
             
Income before income taxes
  $ 556,090     $ 4,065,829  
Permanent differences:
    282       563,651  
 
               
Income Taxes (at 25% tax rate)
  $ 139,093     $ 1,157,370  

 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009
 
NOTE 13 – INCOME TAXES (CONTINUED)
 
A reconciliation between the income tax computed at the U.S. statutory rate and the Group’s provision for income tax is as follows:
 
   
Year ended
 
   
August 31,
   
August 31,
 
   
2010
   
2009
 
U.S. statutory rate
    34.00 %     34.00 %
Foreign income not recognized in the U.S.
    (34.00 )%     (34.00 )%
PRC preferential enterprise income tax rate
    25.00 %     25.00 %
                 
Others permanent differences
    0.00 %     3.47 %
                 
Provision for income tax
    25.00 %     28.47 %
 
There are no significant temporary differences between book and tax income. The tax authority of the PRC government conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises have completed their relevant tax filings, hence the Company’s tax filings may not be finalized. It is therefore uncertain as to whether the PRC tax authority may take different views about the Company’s tax filings, which may lead to additional tax liabilities.

The Company’s corporate income tax liability is $651,263 and $1,094,257 as of August 31, 2010 and 2009.
 
 
CHINA RUNJI CEMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009
 
NOTE 14 - OPERATING RISK

Country Risk

The Company has significant investments in the PRC. The operating results of the Company may be adversely affected by changes in the political and social conditions in the PRC and by changes in Chinese government policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. There can be no assurance; however, those changes in political and other conditions will not result in any adverse impact.

Source of Supply

The Company purchases components for its products from a number of suppliers. However, on occasion, a customer’s specifications may require us to purchase components from a specific supplier. The Company does not have any long term contracts with any of its suppliers, and the Company believes that alternative suppliers are available. Although the Company has not been subject to shortages for any of its components, since it does not have long-term contracts, the Company may be subject to cutbacks and price increases which it may not be able to pass on to its customers in the event that the demand for components generally exceeds the capacity of its suppliers.
 
 
Item 9.                        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.                      Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of August 31, 2010. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  Based on the evaluation performed, our management has concluded that internal control over financial reporting was not effective as of August 31, 2010 due to a material weakness identified by management during its annual assessment process in the fourth quarter of fiscal year 2010. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
 
The material weakness relates to the lack of personnel with the appropriate knowledge of generally accepted accounting principles (GAAP) and SEC reporting experience, coupled with a lack of segregation of duties and minimal staffing. Management believes the material weakness existed during the fiscal year 2010 year end closing period.  To remedy this material weakness, management is actively searching for competent candidates and working with outside consultants in the financial reporting process. Management anticipates remediating this material weakness during fiscal year 2011.
 
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this annual report

Changes in Internal Control Over Financial Reporting

During the fourth calendar quarter of 2010, we implemented the following measures to improve our internal control over financial reporting:
 
(1)   Engaged outside consultants to assist in our assessment of the effectiveness of the company’s internal control over financial reporting; and

(2)   Developed and instituted new internal control procedures to strengthen our month-end close and financial reporting processes.

We believe these measures have strengthened our internal control over financial reporting and disclosure controls and procedures.

Our senior executives and our Board of Directors are committed to achieving and maintaining a strong control environment, high ethical standards, and financial reporting integrity. This commitment has been and will continue to be communicated to and reinforced with our employees and to external stakeholders.

In addition, under the direction of the Board of Directors, management will continue to review and make changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting and our disclosure controls and procedures.
 
There was no change in our internal control over financial reporting that occurred during the fourth fiscal quarter of 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
Item 9B.                      Other Information

None.
 
PART III

Item 10.                       Directors, Executive Officers and Corporate Governance

The following table sets forth the name, age, and position of our executive officers and directors of as of August 31, 2010.

Name
 
Age
 
Position
Shouren Zhao
  53  
Chairman, Chief Executive Officer and President
Xiangfei Zeng
  40  
Chief Financial Officer
Xuanjun Yang
  53  
Director
Liming Bi
  43  
Director
 
 
The directors will serve as directors until our next annual shareholder meeting or until a successor is elected who accepts the position. Officers hold their positions at the will of the Board of Directors, absent any employment agreement. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of our affairs.

Biographies

Shouren Zhao,Chairman, Chief Executive Officer and President – 53

Mr. Zhao has over 25 years working experience in construction management. In 2003, he established a joint venture known as Nanjing Hongren Real Estate Co., Ltd. Also in 2003, he established the joint venture known as Anhui Runji. From 1997-2002, he established, capitalized and managed Shanghai Jiangxin Co., Ltd, Zhejiang Hengtong Textile Co., Ltd, Jiangxi Hengtong Real Estate Co., Ltd. He established Tongshi Dajiangnan Cement Factory in Hainan in 1992 with an annual production of 200 thousand tons.  He began to work in Zhejiang Zhuji Architecture and Construction Co., Ltd. in 1980, and was appointed as the Vice General Manager of the Company and the Officer in Shanghai Representative Office in 1987. Mr. Zhao received an award as Hainan Province’s “Entrepreneur of the Year,” as Shaoxing’s “Model Worker.” Mr. Zhao acquired his college degree at Zhejiang Architecture Material College in 1979.
 
Xiangfei Zeng, Chief Financial Officer – 40
 
Ms. Xiangfei Zeng has over 15 years' experience in corporate finance, financial control and accounting management. Before joining the Company, Ms. Zeng was the financial controller of China World Trade Corporation (CWTD.OB) beginning in November 2004. From 2002 to 2004, Ms. Zeng was the CFO of Fenet Software Co., Ltd. From 1999 to 2002, she was the financial analysis manager in the China center of Zhuhai Oplink Communication Inc. (NASDAQ: OPLK).  From 1993 to 1999, she was the accountant and financial manager in Shenzhen Techo Telecom Co., Ltd. (Shenzhen Stock Exchange: 000555). Ms. Zeng is a China certified senior accountant and familiar with both China GAAP and US GAAP. She acquired a Bachelor's Degree in Economics at Sun Yat-Sen University in 1993.
 
Xuanjun Yang, Director – 53
 
Mr. Yang has over 30 years working experience in the construction industry.  From 2003 to date, he has been a shareholder of Nanjing Hongren Real Estate Company and Anhui Runji. From 1997 – 2003, he was a shareholder of Jiangxi Hengtong Real Estate Company and Nanjing Jinbo Real Estate company. From 1980-1993, he was a team leader on a major construction project.  From 1973 – 1980, he performed construction work for Zhejiang Zhuji Wuxie Handicraft Industry Community. Mr. Yang has a degree in engineering.
 
Liming Bi, Director – 43
 
Mr. Bi has over 20 years working experience in the cement industry. Since 2003, Mr. Bi joined Anhui Province Runji Cement Co., Ltd. and was appointed as Vice General Manager in charge of production. From 2002 to 2003, Mr. Bi held the position of Technology Manager in Zhejiang Zhaoshan Cement Plant. From 1993 to 2002, Mr. Bi joined Hainan Tongshen Dajiangnan Cement Plant with responsibilities for production and laboratory. From 1989 to 1992, Mr. Bi worked in Zhejiang Zhuji Cement Plant and was appointed as Director of Laboratory and Director of Raw Material Workshop subsequently. Mr. Bi acquired his bachelor of science degree at Shanghai University of Science & Technology in 1989.
 
Meetings of Our Board of Directors

China Runji’s Board of Directors held no meetings during the year ended August 31, 2010.

Anhui Runji’s Board of Directors held no meetings during the year ended August 31, 2010.

Audit Committee

The functions of the Audit Committee are currently carried out by our Board of Directors. Our Board of Directors has determined that we do not have a financial expert on our Board of Directors carrying out the duties of the Audit Committee. The Board of Directors has determined that the cost of hiring a financial expert to act as a director of the Company and to be a member of the Audit Committee or otherwise perform Audit Committee functions outweighs the benefits of having a financial expert on the Audit Committee.

Significant Employees

Other than the directors and officer described above, we do not expect any other individuals to make a significant contribution to our business.

Family Relationships

There are no family relationships among our officers or directors. However, Ting Zhao, Executive Director of Anhui Runji is the son of Shouren Zhao, Chairman, CEO and President of China Runji.
 
 
No Legal Proceedings

None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past five years:

Ÿ
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
   
Ÿ
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
   
Ÿ
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or