U. S. Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2011
[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____ to _____

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

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

For the transition period from _____ to _____

Commission File No. 0-50441

CHINA DIGITAL ANIMATION DEVELOPMENT INC. (Name of Registrant in its Charter)
New York	84-1275578
(State of Other Jurisdiction of incorporation or organization)	(I.R.S.) Employer I.D. No.)
15 West 39th Street, Suite 14B, New York, NY 10018
(Address of Principal Executive Offices)

Issuer's Telephone Number: (212) 391-2688

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) ~~Yes___~~Yes ___ No ~~___~~_____

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

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

Large accelerated filer ~~___~~ Accelerated filer ~~___~~ Non-accelerated filer ~~___~~ Smaller reporting company [X]

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:

~~May~~November 2321, 2011

Common Voting Stock: 20,~~270~~ 290,000

CHINA DIGITAL ANIMATION DEVELOPMENT, INC.

QUARTERLY REPORT ON FORM 10Q

FOR THE FISCAL QUARTER ENDED ~~MARCH~~SEPTEMBER 3130, 2011

TABLE OF CONTENTS

		Page No
Part I	Financial Information
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheet (unaudited) – March 31, 2011 and December 31, 2010	2
	Condensed Consolidated Balance Sheet (Unaudited) – September 30, 2011 and June 30, 2011	2
	Condensed Consolidated Statements of Income and Other Comprehensive Income (Unaudited) - for the Three Months Ended March 31, 2011 and 2010	3
	Condensed Consolidated Statements of Income and Other Comprehensive Income (Unaudited) - for the Three Months Ended September 30, 2011 and 2010	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) – for the Three Months Ended March 31, 2011 and 2010	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) – for the Three Months Ended September 30, 2011 and 2010	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1521
Item 3	Quantitative and Qualitative Disclosures about Market Risk	1823
Item 4.	Controls and Procedures	1823
Part II	Other Information
Item 1.	Legal Proceedings	1824
Items 1A.	Risk Factors	1824
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1924
Item 3.	Defaults upon Senior Securities	1924
Item 4.	Reserved	1924
Item 5.	Other Information	1924
Item 6.	Exhibits	1925

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,		June 30,
	September 30,		June 30,
	2011		~~2010~~2011
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1012,~~746,682~~253	$	617,~~219,438~~903
Accounts receivable		~~727~~164,~~535~~655		~~976~~434,~~304~~749
Other receivables		122,~~836~~588		34,~~616~~108
Total current assets		11,487,053		7,199,358
Advance to suppliers		-		25,992
Property, plant and equipment, net		5,132,091		5,575,026
Short term investments		6,254,691		6,188,598
Land use right and other intangible assets, net		2,609,198		2,756,604
Deferred production costs		947,351		669,529
Total assets	$	19,228,342	$	15,530,988
Tax refund receivable		336,982		333,421
Prepaid expenses		-		43,900
Total current assets		7,718,520		7,718,200
Property, plant and equipment, net		1,242,552		1,274,527
Intangible assets, net		2,285,919		2,332,316
Total assets	$	11,246,991	$	11,325,043
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	-12,822	$	~~34,338~~-
Loan payable		~~335~~355,975		~~286~~345,~~000~~975
Accrued expenses and other payables		~~164~~79,~~074~~398		5791,~~040~~337
Taxes payable		397,513		410,339
Total current liabilities		448,195		437,312
Total current liabilities		897,562		787,717
Total liabilities		448,195		437,312
Total liabilities		897,562		787,717
Commitments and contingencies		-		-
Stockholders' Equity:
Stockholders' Equity
Common stock ($0.001 par value, 500,000,000 shares authorized, 20,270,000 shares issued and outstanding at March 31, 2011, 20,020,000 shares issued and outstanding at June 30, 2010)		20,270		20,020
Preferred stock ($0.001 par value, 5,000,000 shares authorized, no share issued and outstanding at September 30 and June 30, 2011)		-		-
Additional paid-in-capital		6,723,447		6,223,697
Common stock ($0.001 par value, 100,000,000 shares authorized, 20,290,000 and 20,270,000 shares issued and outstanding at September 30 and June 30, 2011, respectively)		20,290		20,270
Accumulated other comprehensive income		2,420,047		1,873,933
Additional paid-in-capital		6,769,227		6,723,447
Reserved Fund		1,156,476		705,738
Accumulated other comprehensive income		2,618,182		2,501,344
Retained earnings		8,010,540		5,919,883
Statutory reserved fund		1,156,476		1,156,476
Total stockholders’ equity		18,330,780		14,743,271
Retained earnings		234,621		486,194
Total liabilities and stockholders' equity	$	19,228,342	$	15,530,988
Total stockholders’ equity		10,798,796		10,887,731
Total liabilities and stockholders' equity	$	11,246,991	$	11,325,043

The accompanying notes are an integral part of these ~~unaudited~~ condensed consolidated financial statements.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

	Three months ended						Nine months ended
	For the three months ended
	March 31,						March 31,
	September 30,			September 30,
	2011			2010			~~2011~~		~~2010~~
Revenue	$	2,169,443		$	1,679,143		$	5,989,431	$	4,057,433
				(restated)
Cost of goods sold		661,193			642,352			1,587,651		1,850,195
Revenue	$	458,429		$	1,805,859
Gross profit		1,508,250			1,036,791			4,401,780		2,207,238
Cost of goods sold		510,512			1,819,181
Operating expenses
Gross loss		(52,083	)		(13,322	)
Selling, General and Administrative expenses		296,877			181,329			901,438		392,602
Operating expenses
Total operating expenses		296,877			181,329			901,438		392,602
Selling, General and Administrative expenses		203,182			537,876
Income from operations		1,211,373			855,462			3,500,342		1,814,636
Total operating expenses		203,182			537,876
Other income (expenses)
Loss from operations before other income (expenses)		(255,265	)		(551,198	)
Interest income		8,784			82,492			17,920		251,039
Other income (expenses)
Non-operating income		1,587			-			1,587		-
Interest income		497			2,015
Loss from disposal of property, plant and equipment		-			-			-		(26	)
Other income		3,195			-
Total other income		103,~~371~~692			822,~~492~~015			~~19,507~~		~~251,013~~
Income before income taxes		1,221,744			937,954			3,519,849		2,065,649
Loss from operations before income taxes		(251,573	)		(549,183	)
Less: Provision for income taxes		362,667			246,718			978,454		546,250
Provision for income taxes		-			276,171
Net income		859,077			691,236			2,541,395		1,519,399
Net loss		(251,573	)		(825,354	)
Other comprehensive income
Foreign currency translation gain		66116,~~608~~838			~~253~~117,394			~~546,114~~		~~52,717~~
Total comprehensive income	$	925,685		$	691,489		$	3,087,509	$	1,572,116
Total comprehensive loss	$	(134,735	)	$	(707,960	)
Basic and diluted earnings per share	$	0.04		$	0.03		$	0.13	$	0.07
Basic and diluted loss per share	$	(0.01	)	$	(0.04	)
Basic and diluted weighted average shares outstanding		20,~~270~~284,~~000~~783			20,~~510~~020,000			~~20,137,701~~		~~20,510,000~~

The accompanying notes are an integral part of these ~~unaudited condensed~~ condensed consolidated financial statements.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine months ended
	For the three months ended
	March 31,
	September 30,
	2011			2010
				(restated)
Cash flow from operating activities:
Net income	$	2,541,395		$	1,519,399
Net loss	$	(251,573	)	$	(825,354	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		~~618~~45,~~265~~460			~~452~~250,~~795~~010
Amortization		~~235~~71,~~272~~105			~~153~~94,~~282~~732
Foreign currency exchange gain		(1,343	)		-
Stock based compensation		45,800			-
Changes in operating assets and liabilities:
Accounts receivable		~~276~~270,~~663~~771			~~265~~238,~~610~~283
Prepaid expenses		-44,245			67119,~~535~~260
Advances to suppliers		-26,196			~~1,443,440~~-
Interest receivable		-			(82,745	)
Other receivables		1,559			(3,687	)
Other receivables		(7,978	)		(1,456	)
Deferred production costs		(269,912	)		-
Accounts payable		-12,786			281,~~271~~468,711
Accrued expenses and other payables		71(12,~~240~~140	)		1811,~~914~~365
Taxes payable		(28,008	)		39,555
Payroll payable		-			77
Net cash provided by operating activities		3,705,506			3,904,600
Income tax payable		-			(23,593	)
Cash flows from investing activities
Net cash (used in) provided by operating activities		(15,703	)		1,329,804
Purchase of property, plant and equipment		-			(2,240,436	)
Acquisition of intangible assets		-			(1,907,100	)
Additions to long term investment		-			(9,043	)
Net cash used in investing activities		-			(4,156,579	)
Cash flows from financing activities
Proceeds from borrowing		49,975			101,000
Proceeds from loans payable		10,000			-
Proceeds from sale of stock		500,000			-
Net cash provided by financing activities		10,000			-
Net cash provided by financing activities		549,975			101,000
Effect of exchange rate changes in cash		53			1,216
Effect of exchange rate changes in cash		271,763			50,070
Net (decrease) increase in cash and cash equivalents		(5,650	)		1,331,020
Net increase (decrease) in cash and cash equivalents		4,527,244			(100,909	)
Cash and cash equivalents, beginning of period		17,903			6,219,438
Cash and cash equivalents, beginning of period		6,219,438			2,282,786
Cash and cash equivalents, end of period	$	12,253		$	7,550,458
Cash and cash equivalents, end of period	$	10,746,682		$	2,181,877
Supplemental Disclosures:
Cash paid during the period for:
Income taxes	$	~~1,033,306~~-		$	~~515~~415,~~968~~224
Interest	$	-		$	-

The accompanying notes are an integral part of these ~~unaudited~~ condensed consolidated financial statements.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

On November 12, 2008 the Company acquired the outstanding capital stock of RDX Holdings Limited ("RDX"), a corporation organized under the laws of the British Virgin Islands. The acquisition was effected by a share exchange between Fu Qiang and Su Jianping, the shareholders of RDX, and the Company (the "Share Exchange"). In exchange for the capital stock of RDX, the Company issued 14,400,000 shares of its common stock to the Messrs. Fu and Su; the issued shares represented 72% of the outstanding shares of the Company.

RDX is engaged in the business of managing the assets and operations of Heilongjiang Hairong Science and Technology Development Co., aLtd. ~~joint~~(“Hairong”), ~~stock~~a ~~company~~corporation organized under the laws of The People's Republic of China. Hairong is primarily engaged in animation design and development. Hairong operates its business primarily in the PRC with its headquarters in Harbin city, Heilongjiang province.

On June 27, 2008, RDX Holdings entered into five agreements with Hairong and with the equity owners in Hairong. Collectively, the agreements provide RDX exclusive control over the business of Hairong, the right to all revenues obtained by Hairong, and responsibility for all of the expenses incurred by Hairong. The relationship is one that is generally identified as "entrusted management." As a result of entering into the aforementioned agreements, RDX is the primary beneficiary and deemed to control Hairong as a Variable Interest Entity.

The ~~carrying~~accounts ~~amount~~of ~~and~~Hairong ~~classification~~have been consolidated with the accounts of the Company because Hairong’s ~~assets~~is ~~and~~a ~~liabilities~~variable ~~included~~interest inentity with respect to RDX, which is a wholly-owned subsidiary of the ~~Condensed~~Company. RDX ~~Consolidated~~is ~~Balance~~party ~~Sheets~~to ~~are~~five asagreements ~~follows~~dated June 27, 2008 with the owners of the registered equity of Hairong and with Hairong. In summary, the five agreements contain the following terms:

	March 31,		June 30,
	2011		2010
	(unaudited)
Total current assets*	$	11,400,184	$	7,129,061
Total assets*		19,141,472		15,460,691
Total current liabilities**		795,538		461,096
Total liabilities**	$	795,538	$	461,096

l	Consulting Services Agreement and Operating Agreement. These two agreements provide that RDX will be fully responsible for the management of Hairong, both financial and operational. RDX has assumed responsibility for the debts incurred by Hairong and for any shortfall in its registered capital. In exchange for these services and undertakings, Hairong pays a fee to RDX equal to the net profits of Hairong. In addition, Hairong pledges all of its assets, including accounts receivable, to RDX. Meanwhile, Hairong's shareholders pledged the equity interests of Hairong to RDX to secure the payment of the Fee.

l	Proxy Agreement. In this agreement, the shareholders of Hairong granted an irrevocable proxy to the person designated by RDX to exercise the voting rights and other rights of shareholder.

l	Option Agreement. In this agreement, the shareholders of Hairong granted to RDX the right to purchase all of their equity interest in the registered capital of Hairong or the assets of Hairong. The option may be exercised whenever the transfer is permitted under the laws of the PRC. The purchase price shall be equal to the original paid-in price of the Purchased Equity Interest by the Transferor, unless the applicable PRC laws and regulations require appraisal of the equity interests or stipulate other restrictions on the purchase price of equity interests. The agreement also contains covenants designed to prevent any material change occurring in the legal or financial condition of Hairong without the consent of RDX.

l	Equity Pledge Agreement. In this agreement, Hairong shareholders agree to pledge all the equity interest in Hairong to RDX as security for the performance of the obligation under the Consulting Services Agreement and the payment of Consulting Services Fees under each agreement.

* RDX ~~Including~~may ~~intercompany~~terminate ~~accounts~~the agreements at will. Hairong may only terminate the agreements if (a) there is an unremedied breach by RDX, (b) the operations of ~~$300~~RDX are terminated,~~000~~ (c) Hairong loses its business license, or (d) circumstances arise that materially and $0adversely asaffect atthe ~~March~~performance 31or objectives of the Agreement. The Consulting Services Agreement, ~~2011~~under which all revenues are assigned from Hairong to RDX, and the Equity Pledge Agreement have no expiration date. The other three agreements terminate on June 3027, ~~2010~~2018 beunless ~~eliminated~~extended inby ~~consolidation~~the parties.

** Including intercompany accounts of $300,000 and $0 as at March 31, 2011 and June 30, 2010 be eliminated in consolidation.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.

In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments (consisting only or normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company for the periods presented. The results of operations for the three and nine months ended March 31, 2011 are not necessarily indicative of operating results expected for the full year or future interim periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report of Form 10-K for the year ended June 30, 2010, filed on September 28, 2010 (the “Annual Report”).

b. Principle of consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary RDX, and Hairong, which is deemed to be a variable interest entity of which RDX is the primary beneficiary as defined by ASC 810 “Consolidation of Variable Interest Entities.” All significant inter-company accounts and transactions have been eliminated in consolidation.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

21. ~~SUMMARY~~ ORGANIZATION OFAND ~~SIGNIFICANT~~DESCRIPTION ~~ACCOUNTING~~OF ~~POLICIES~~BUSINESS (~~CONTINUED~~Continued)

cIn sum, the agreements transfer to RDX all of the benefits and all of the risk arising from the operations of Hairong, as well as complete managerial authority over the operations of Hairong. RDX ~~Reclassification~~is the guarantor of all of the obligations of Hairong. By reason of the relationship described in these agreements, Hairong is a variable interest entity with respect to RDX because the following characteristics identified in ASC 810-10-15-14 are present:

~~$68,357~~- ~~and~~The ~~$202,731~~holders of ~~business~~the ~~tax~~equity ~~for~~investment in Hairong lack the ~~three~~direct ~~and~~or ~~nine~~indirect ~~months~~ability ~~ended~~to ~~March~~make ~~31,~~decisions ~~2010~~about ~~have~~the ~~been~~entity’s ~~reclassified~~activities ~~from~~that ~~selling~~have ~~expenses~~a tosignificant ~~cost~~effect on the success of ~~goods~~Hairong, ~~sold~~having toassigned ~~conform~~their tovoting ~~the~~rights ~~current~~and ~~period~~all ~~presentation~~managerial authority to RDX. ~~$136,318~~(ASC ~~and~~810-10-15-14(b)(1)). ~~$291,024~~- The holders of ~~depreciation~~the ~~and~~equity ~~amortization~~investment ~~expenses~~in ~~for~~Hairong lack the ~~three~~obligation ~~and~~to ~~nine~~absorb ~~months~~the ~~ended~~expected ~~March~~losses 31of Hairong, ~~2010~~having ~~have~~assigned ~~been~~to ~~reclassified~~RDX ~~from~~all ~~general~~revenue and ~~administrative~~responsibility ~~expenses~~for toall ~~cost~~payables. of(ASC ~~goods~~810-10-15-14(b)(2). ~~sold~~- toThe ~~conform~~holders toof the ~~current~~equity ~~period~~investment ~~presentation. $286,000~~in ofHairong ~~loan~~lack ~~payable~~the asright ofto ~~June~~receive ~~30,~~the ~~2010~~expected ~~has~~residual ~~been~~returns ~~reclassified~~of ~~from~~Hairong, ~~long~~having ~~term~~granted ~~liabilities~~ to ~~current~~RDX ~~liabilities. Such~~all ~~reclassifications~~revenue ~~had~~as nowell ~~impact~~as onan ~~previously~~option ~~reported~~to ~~total~~purchase ~~assets,~~the ~~liabilities,~~equity ~~stockholders’~~interests ~~equity~~at ora ~~net~~fixed ~~income~~price. (ASC 810-10-15-14(b)(3)).

dBecause the relationship between Hairong and RDX is entirely contractual, the Company’s interest in Hairong depends on the enforceability of those agreements under the laws of the PRC. We ~~Use~~are not aware of ~~estimates~~any judicial decision as to the enforceability of similar agreements under PRC law. However, as the owners of the registered equity of Hairong are close business associates of our management, we do not believe that there is a significant risk that Hairong will seek to terminate the relationship or otherwise breach the agreements. Accordingly, we believe that consolidation of the financial statements of Hairong with those of the Company is appropriate.

The carrying amount and classification of Hairong’s assets and liabilities included in the Consolidated Balance Sheets are as follows:

	September 30, 2011		June 30, 2011
	(unaudited)
Total current assets	$	7,718,046	$	7,702,677
Total assets		11,246,517		11,309,520
Total current liabilities*		322,759		322,120
Total liabilities*	$	322,759	$	322,120

* Including intercompany accounts of $300,000 and $0 as at September 30 and June 30, 2011 be eliminated in consolidation.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.

In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments (consisting only or normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company for the periods presented. The results of operations for the three months ended September 30, 2011 are not necessarily indicative of operating results expected for the full year or future interim periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report of Form 10-K for the year ended June 30, 2011, filed on October 13, 2011 (the “Annual Report”).

b. Principle of consolidation

The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary RDX, and Hairong, which is deemed to be a variable interest entity of which RDX is the primary beneficiary as defined by ASC 810 “Consolidation of Variable Interest Entities.” All significant inter-company accounts and transactions have been eliminated in consolidation.

c. Use of estimates

In preparing the financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant estimates, required by management, include the recoverability of long-lived assets, useful lives of property, plant and equipment and intangible assets, allowance for doubtful accounts and inventory obsolescence. Actual results could differ from those estimates.

d. Reclassification

Depreciation and amortization expenses of $70,724 and $67,116 for the three months ended September 30, 2010 have been reclassified from general and administrative expenses to cost of goods sold to conform to the current period presentation. Such reclassifications had no impact on previously reported total assets, liabilities, stockholders’ equity or net income.

e. Cash and cash equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains cash and cash equivalents with financial institutions in the PRC. The Company performs periodic evaluation of the relative credit standing of financial institutions that are considered in the Company’s investment strategy.

f. Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents and accounts and other receivables. As of ~~March~~September 3130, 2011, ~~major banks located in the PRC held~~ substantially all the Company’s cash and cash equivalents are deposited at major banks located in the PRC. The Company’s management believes they are all of high credit quality. With respect to accounts receivable, the management extends credit based on an evaluation of the customer’s financial condition and customer payment practices to minimize collection risk on accounts receivable.

~~g. Accounts receivable and allowance for doubtful accounts~~7

Accounts receivable are uncollateralized, non-interest bearing customer obligations typically due under terms requiring payment from the invoice date. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the oldest unpaid invoices. As of March 31, 2011 and June 30, 2010, the net accounts receivable were $727,535 and $976,304, respectively.

The carrying amount of accounts is reduced by allowance for doubtful accounts receivable, if any. The Company's policy is that for accounts amounts that are aged between 6 months and 12 months, the Company records a 3% allowance for doubtful accounts. If the receivable is aged over 12 months, the Company reserves 5% of the account as an allowance for doubtful accounts. In addition, the Company reviews balances in excess of payment terms. Based on this review, which includes customer credit worthiness and history, general economic conditions and changes in customer payment patterns, the Company estimates the portion, if any, of the balance that will not be collected and records that amount as an additional reserve. Management reviews its allowance for doubtful accounts on a semi-annual basis.

There was no allowance made for doubtful accounts as of March 31, 2011 and June 30, 2010.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (~~CONTINUED~~Continued)

hg. Accounts ~~Construction~~receivable inand ~~progress~~allowance for doubtful accounts

~~Construction~~Accounts inreceivable ~~progress~~are ~~represents~~uncollateralized, ~~direct~~non-interest ~~costs~~bearing ofcustomer ~~construction~~obligations ortypically ~~acquisition~~due ~~and~~under ~~design~~terms ~~fees~~requiring ~~incurred.~~payment ~~Capitalization~~from ofthe ~~these~~invoice ~~costs~~date. Payments ~~ceases~~of ~~and~~accounts ~~the~~receivable ~~construction~~are inallocated ~~progress is transferred~~ to ~~plant~~the ~~and~~specific ~~equipment~~invoices ~~when~~identified ~~substantially~~on ~~all~~ the ~~activities~~customer’s ~~necessary~~remittance toadvice ~~prepare~~or, ~~the~~if ~~assets~~unspecified, ~~for~~are ~~their~~applied ~~intended~~to ~~use~~the ~~are~~oldest ~~completed~~unpaid invoices.

The carrying amount of accounts is reduced by allowance for doubtful accounts receivable, if any. The Company's policy is that for amounts that are aged between 6 months and 12 months, the Company records a 3% allowance for doubtful accounts. If the receivable is aged over 12 months, the Company reserves 5% of the account as an allowance for doubtful accounts. In addition, the Company reviews balances in excess of payment terms. Based on this review, which includes customer credit worthiness and history, general economic conditions and changes in customer payment patterns, the Company estimates the portion, if any, of the balance that will not be collected and records that amount as an additional reserve.

There was no allowance made for doubtful accounts as of September 30 and June 30, 2011.

h. Short-term Investments and Deferred Production Costs

In June 2011, we entered into three collaborative arrangements for total of RMB 77,210,000 (approximately $12.1 million) investment in television programs production. As of September 30, 2011, we have paid RMB 46,058,500 (approximately $7.2 million). The production for all three arrangements ends within one year.

The Company’s accounting policy is to evaluate the income statement classification for amounts due from or owed to other participants of the collaborative arrangements based on the nature of each activity. For arrangements where the Company is responsible for the initial investment and entitle to a fixed return on investment and the other participants manage the day-to-day production and distribution activities as well as bear any additional cost overrun, the Company determines that it is not the principal in the transaction and therefore records the fixed return on investment as investment income. The initial investment is recorded as short-term investment. For two of the arrangements, the Company will recoup its investment cost plus 20% of return on investment before the other participant at the end of the contract period.

For arrangements where we jointly participate in production and distribution, as well as sharing the profit and loss in the arrangements, the Company records its pro-rata share of the distribution revenue as gross revenue and associated production and distribution costs in cost of revenue. The initial investment in the production of the TV program is recorded as deferred production costs on the consolidated balance sheets.

i. Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized. Depreciation and amortization are provided using the straight-line method over the following estimated useful lives:

Buildings and improvements	40 years
Machinery, equipment and automobiles	5-10 years

j. Intangible ~~Land use right and other intangible~~ assets

~~According~~Intangible toassets ~~the~~include ~~law~~purchased ofsoftware ~~China, the government owns all the land in China. Companies or individuals are authorized to possess~~ and ~~use the land only through land use rights granted by the Chinese government. Land use rights~~ are being amortized using the straight-line method over ~~the~~useful ~~lease~~life ~~term~~ of 5010 years.

~~k. Income taxes~~8

The Company accounted for income tax under the provisions of FASB ASC 740 "Accounting for Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, whenever necessary, against net deferred tax assets when it is more likely than not that some portion or the entire deferred tax asset will not be realized. There are no deferred tax amounts at March 31, 2011 and June 30, 2010.

l. Revenue recognition

The Company’s revenue recognition policies are in compliance with FASB ASC 605, “Revenue Recognition.” Sales revenue is recognized when the services are provided and the contracts are performed. The Company considers revenue realized or realizable and earned when (1) it has persuasive evidence of an arrangement, (2) delivery has occurred, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.

Animation Design and Development

Revenue is recognized when the outcome of a contract can be estimated reliably and the stage of completion at the balance sheet date can be measured reliably. Revenue is recognized on the percentage of completion method, measured by reference to the value of work carried out during the period. When the outcome of a contract cannot be estimated reliably, revenue is recognized only to the extent of contract costs incurred that it is probable will be recoverable.

When the outcome of a contract can be estimated reliably and the stage of contract completion at the balance sheet date can be measured reliably, contract costs are charged to the income statement by reference to the stage of completion of the contract activity at the balance sheet date on the same basis as revenue from the contract is recognized. The normal period of a contract is approximately one to six months.

Membership fees

The Company recognized revenue according to the period of membership by customers, members who paid the membership fees are granted with access rights to a website in a period of one year. The website no longer operates in the calendar year of 2010, and thus there is no membership fee income for the three and nine months ended March 31, 2011.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (~~CONTINUED~~Continued)

k. Income taxes

l. Revenue recognition

Our animation design and development contracts are unit-price contracts which set forth a price per minute of labor, an estimate of total labor, and the resulting sales price. Revenue is recognized when the outcome of a contract can be estimated reliably and the stage of completion at the balance sheet date can be measured reliably. Revenue is recognized on the percentage of completion method, measured on units of delivery basis by reference to the contractual unit price (RMB per minute) of work carried out during the period. When the outcome of a contract cannot be estimated reliably, revenue is recognized only when the contract is completed or substantially completed, and pending completion billings are accumulated on our balance sheets.

Cost of goods sold with reference to animation design and development includes direct labor costs and costs associated with any outsourcing of services. Since our animation design department is dedicated to that business, department overhead, including depreciation and amortization of assets, is also recorded as cost of goods sold. When the outcome of a contract can be estimated reliably and the stage of contract completion at the balance sheet date can be measured reliably, costs are charged to the income statement by reference to the stage of completion of the contract activity at the balance sheet date on the same basis as revenue from the contract is recognized. When the outcome of a contract cannot be estimated reliably, costs are recognized only when the contract is completed or substantially completed, and pending completion costs are accumulated on our balance sheet, except that provision is made for expected losses. The normal period of a contract is approximately one to six months.

m. Fair value measurements and fair value of financial instruments

The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

m. Fair value measurements and fair value of financial instruments (continued)

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Inputs that are generally unobservable and typically reflect ~~managements~~management’s estimates of assumptions that market participants would use in pricing the asset or liability.

The Company’s financial instruments include cash and cash equivalents, accounts receivable, advances to suppliers, other receivables, accounts payable, accrued expenses, taxes payable and other loans payable. Management has estimated that the carrying amounts approximate their fair value due to the short-term nature.

n. Foreign currency translation

The Company’s functional currency is the Renminbi (“RMB”). Foreign currency transactions are translated at the applicable rates of exchange in effect at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. Revenues and expenses are translated at the average exchange rates in effect during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity as "Accumulated Other Comprehensive Income". Gains and losses resulting from foreign currency translations are included in Accumulated Other Comprehensive Income.

RMB is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People’s Bank of China (the “PBOC”) or other institutions authorized to buy and sell foreign exchange. The exchange rates adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC, which are determined largely by supply and demand. Translation of amounts from RMB into US dollar has been made at the following exchange rates for the respective years:

~~March~~September 3130, 2011

Balance sheet	RMB 6.~~5701~~3952 to US $1.00
Statement of income and other comprehensive income	RMB 6.~~6796~~4132 to US $1.00

~~March~~June 3130, ~~2010~~2011

Balance sheet	RMB 6.~~8361~~4635 to US $1.00
Statement of income and other comprehensive income	RMB 6.~~8377~~6278 to US $1.00

~~June~~September 30, 2010

Balance sheet	RMB 6.~~7889~~68 to US $1.00
Statement of income and other comprehensive income	RMB 6.~~8180~~7613 to US $1.00

810

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o. Statement of cash flows

FASB issued ASC 230, “Statement of Cash Flows,” cash flows from the Company’s operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

p. Earnings (Loss) per share

Basic earnings (loss) per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period.

Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There are no common stock equivalents available in the computation of earnings (loss) per share for the three ~~and nine~~ months ended ~~March~~September 3130, 2011 and 2010.

q. Reserve Fund

Before June 20, 2006, Hairong was required to transfer 15% of its profit after taxation, as determined in accordance with Chinese accounting standards and regulations, to the surplus reserve fund. Subject to certain restrictions set out in the Chinese Companies Law, the surplus reserve fund may be distributed to stockholders in the form of share bonus issues and/or cash dividends. ~~After June 30, 2006, such reserve is no longer mandatory under the Chinese Law but the Company still makes reserve fund contributions for its future development.~~

r. Comprehensive Income

Comprehensive income is defined to include changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation gain, net of tax.

s. Recently ~~New~~Adopted ~~accounting~~Accounting ~~pronouncements~~Pronouncements

In ~~December~~January 2010, ~~the Financial Accounting Standards Board (~~FASB) issued ~~amended~~ASU ~~guidance to clarify the acquisition date that should be used for reporting pro-forma financial information for business combinations~~No. ~~If comparative financial statements are presented~~2010-06, ~~the~~Fair ~~pro-forma~~Value ~~revenue~~Measurements and ~~earnings~~Disclosures of(Topic ~~the~~820): ~~combined~~Improving ~~entity~~Disclosures ~~for~~about ~~the~~Fair ~~comparable~~Value ~~prior~~Measurements. ~~reporting~~This ~~period~~update ~~should~~provides beamendments ~~reported~~to asASC ~~though~~Topic ~~the~~820 ~~acquisition date for all business combinations~~ that ~~occurred~~provide ~~during~~disclosures ~~the~~about ~~current~~purchases, ~~year~~sales, ~~had~~issuances, ~~been~~and ~~completed~~settlements asin of the ~~beginning~~roll forward of ~~the~~activity ~~comparable~~in ~~prior~~Level ~~annual~~3 ~~reporting~~fair ~~period~~value measurements. ~~The~~Those ~~amendments~~disclosures inare ~~this guidance became~~ effective ~~prospectively~~ for ~~business~~fiscal ~~combinations~~years ~~for~~beginning ~~which~~after ~~the~~December ~~acquisition~~15, ~~date~~2010, isand onfor orinterim ~~after~~periods ~~January~~within 1,those ~~2011~~fiscal years. ~~This~~The ~~amended~~adoption ~~guidance~~of this update did not have ana material impact into the ~~consolidated~~Company’s financial results as they relate only to additional disclosures.

In December 2010, ~~the~~ FASB issued ~~amendments~~ASU toNo. ~~the~~2010-29, ~~guidance~~Business onCombinations ~~goodwill~~(Topic ~~impairment~~805): ~~testing~~Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments ~~modify~~in ~~Step~~this 1Update ofspecify ~~the~~that ~~goodwill~~if ~~impairment~~a ~~test~~public ~~for~~entity ~~reporting~~presents ~~units~~comparative ~~with~~financial ~~zero~~statements, orthe ~~negative~~entity ~~carrying~~should ~~amounts.~~disclose ~~For~~revenue ~~those~~and ~~reporting~~earnings ~~units,~~of anthe combined entity isas ~~required~~though tothe ~~perform~~business ~~Step~~combination(s) 2that occurred during the current year had occurred as of the ~~goodwill~~beginning ~~impairment~~of ~~test~~the ifcomparable itprior isannual ~~more~~reporting ~~likely~~period ~~than~~only. ~~not~~The ~~that~~amendments also expand the supplemental pro forma disclosures to include a ~~goodwill~~description ~~impairment~~of ~~exists.~~the Innature ~~making~~and ~~that~~amount ~~determination~~of material, annonrecurring ~~entity~~pro ~~should~~forma ~~consider~~adjustments ~~whether~~directly ~~there~~attributable ~~are~~to ~~any~~the ~~adverse~~business combination ~~qualitative~~included ~~factors~~in ~~indicating~~the ~~that~~reported ~~impairment~~pro ~~may~~forma ~~exist~~revenue and earnings. The amendments ~~were~~in this Update are effective ~~January~~prospectively 1,for ~~2011~~business ~~and~~combinations for which the ~~Company~~acquisition ~~does~~date ~~not~~is ~~expect~~on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The adoption of ~~these~~this ~~amendments~~amendment todid not have a material impact into the ~~Consolidated~~Company’s ~~Financial~~financial ~~Statements~~position.

911

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

~~In January 2010, the FASB issued additional disclosure requirements for fair value measurements which the company included in its interim and annual financial statements in 2010~~t. Recently ~~Certain~~Issued ~~disclosure~~Accounting ~~requirements~~Pronouncements ~~relating~~Not toyet fair value measurements using significant unobservable inputs (Level 3) were deferred until January 1, 2011. These new requirements did not have an impact in the consolidated financial results as they relate only to additional disclosures.Adopted

~~3. PROPERTY~~In May 2011, ~~PLANT~~the ~~AND~~FASB ~~EQUIPMENT~~issued ASU No. 2011-04, ~~NET~~Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The amendments change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about the fair value measurements. The amendments include the following:

l	Those that clarify the Board’s intent about the application of existing fair value measurement and disclosure requirements.

l	Those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.

The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. Nonpublic entities may apply the amendments in this Update early, but no earlier than for interim periods beginning after December 15, 2011.

The Company is currently evaluating the impact, and do not expect the adoption of this amendment have a material impact on the Company’s financial position and results of operations.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under the amendments, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The presentation option under current GAAP to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity has been eliminated.

The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted because compliance with amendments is already permitted. The Company already complies with this presentation.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The objective of this Update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis of determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The Company intends to adopt the amendments in this Update effective July 1, 2012.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. GOING CONCERN

The Company has incurred significant continuing losses during the three months ended September 30, 2011 and the year ended June 30, 2011 and has relied on the Company’s registered capital to fund operations. As of September 30, 2011, we had cash and equivalents on hand of $12,253. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. As of September 30, 2011, our working capital of $7.3 million is mostly attributable to the three TV series production collaborative arrangements, which are recorded in short term investments and deferred production costs totaling $7.2 million. In addition, as of September 30, 2011, we have contractual commitment to invest an additional $4.9 million in these arrangements. There is a possibility that we might not be able to recoup our investment cost or the return on investments on these collaborative arrangements may not materialize. As of September 30, 2011, the Company had limited cash resources, and management has not yet determined how the company will fund these obligations.

4. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following:

	March 31,			June 30,
	September 30, 2011			June 30, 2011
	2011			2010
Buildings and Improvements	$	1,760,254		$	1,741,653
	(unaudted)
Office Furniture and Equipment		223,571			221,208
Buildings and Improvements	$	3,358,728		$	3,250,495
Vehicles		129,647			128,277
Office Furniture and Equipment		1,471,202			1,423,794
		2,113,472			2,091,138
Vehicles		361,422			349,775
Less: Accumulated depreciation		(870,920	)		(816,611	)
		5,191,352			5,024,064
Property, plant and equipment, net	$	1,242,552		$	1,274,527
Less: Accumulated depreciation		(1,447,182	)		(921,034	)
		3,744,170			4,103,030
Construction in progress		1,387,921			1,471,996
Property, plant and equipment, net	$	5,132,091		$	5,575,026

Depreciation expense for the three months ended ~~March~~September 3130, 2011 and 2010 were $~~173~~45,~~439~~460 and $~~270~~250,~~308~~010, respectively.

~~Depreciation~~5. INTANGIBLE ~~expense for the nine months ended March 31~~ASSETS, ~~2011 and 2010 were $618,265 and $452,795, respectively.~~NET

~~4. LAND~~Intangible ~~USE~~assets ~~RIGHT~~consist ~~AND~~of ~~OTHER~~the ~~INTANGIBLE ASSETS, NET~~following:

Land use right and other intangible assets consist of the following:

September 30, 2011	At Cost		Accumulated Amortization		Net
Animation Software	$	2,838,385	$	560,652	$	2,277,733
Other Software		13,817		5,631		8,186
	$	2,852,202	$	566,283	$	2,285,919
June 30, 2011	At Cost		Accumulated Amortization		Net
Animation Software	$	2,808,391	$	484,516	$	2,323,875
Other Software		13,671		5,230		8,441
	$	2,822,062	$	489,746	$	2,332,316

	March 31,			June 30,
	2011			2010
	(unaudited)
Cost of land use right	$	353,488		$	342,098
Cost of other intangible assets		2,776,274			2,686,810
		3,129,762			3,028,908
Less: Accumulated amortization		(520,564	)		(272,304	)
Land use right and other intangible assets, net	$	2,609,198		$	2,756,604

Amortization expense for the three month ended March 31, 2011 and 2010 were $70,873 and $93,899, respectively.

Amortization expense for the nine month ended March 31, 2011 and 2010 were $235,272 and $153,282, respectively.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

45. ~~LAND USE RIGHT AND OTHER~~ INTANGIBLE ASSETS, NET (Continued)

Total amortization expenses related to intangible assets for the three months ended September 30, 2011 and 2010 were $71,105 and $94,732, respectively.

The following schedule sets forth the estimated amortization expense for the periods presented:

Remainder of the year ending June 30, 2011	$	71,438
For the year ending June 30,
For the year ending June 30, 2012		285,754
2012		213,915
For the year ending June 30, 2013		285,754
2013		285,220
For the year ending June 30, 2014		285,754
2014		285,220
For the year ending June 30, 2015		285,754
2015		285,220
2016		285,220
Thereafter		931,124
		2,285,919

56. LOAN PAYABLE

The loan payable consists of two shareholders’ loans from Fu Qiang and Fu Zhiguo, which amounted to $95,975 and $240,000, respectively. The loan payable is interest free and the Company intends to repay this note when repayment is demanded. The carrying amount of the loan payable approximates their fair values.

	September 30,		June 30,
	2011		2011
Loan payable to shareholder, Fu Zhiguo	$	270,000	$	260,000
Loan payable to former shareholder, Fu Qiang		85,975		85,975
	$	355,975	$	345,975

6The loan payable is interest free and the Company intends to repay this note when repayment is demanded. ~~INCOME~~The ~~TAXES~~carrying amount of the loan payable approximates their fair values.

Since January 1, 2008, when a new Chinese Tax Law was enacted, Hairong has been subject to income tax at statutory rate of 25 % on income reported in the statutory financial statements after appropriate tax adjustments7. INCOME TAXES

~~The~~Hairong ~~Company’s~~is ~~provisions~~subject ~~for~~to income ~~taxes~~tax ~~for~~at the ~~three~~PRC ~~and~~statutory ~~nine~~rate ~~months~~of ~~ended~~25% ~~March~~on ~~31,~~income ~~2011~~reported ~~and~~in ~~2010~~the asstatutory ~~follows:~~financial statements after appropriate tax adjustments.

	Three months ended				Nine months ended
	March 31,				March 31,
	2011		2010		2011		2010
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Current – PRC and US	$	362,667	$	246,718	$	978,454	$	546,250
Deferred – PRC and US		-		-		-		-
Total	$	362,667	$	246,718	$	978,454	$	546,250

The Company’s provisions for income taxes for the three months ended September 30, 2011 and 2010 as follows:

The following is the reconciliation of income taxes at the calculated statutory rates:

	For the three months ended
	September 30,
	2011		2010
			(restated)
Current – PRC and US	$	-	$	276,171
Deferred – PRC and US		-		-
Total provision for income taxes	$	-	$	276,171

	Three months ended					Nine months ended
	March 31,					March 31,
	2011			2010		2011			2010
	(unaudited)			(unaudited)		(unaudited)			(unaudited)
Income tax calculated at statutory rates	$	305,436		$	234,488	$	879,962		$	516,412
Tax effect of parent		59,394			12,230		100,654			29,838
Other timing difference		(2,162	)		-		(2,162	)		-
Provision for income taxes	$	362,667		$	246,718	$	978,454		$	546,250

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

7. INCOME TAXES (Continued)

Deferred taxes are comprised of the following:

	March 31,			June 30,
	September 30,			June 30,
	2011			~~2010~~2011
	(unaudited)
Net of operating loss carryforward	$	1,519,366		$	1,419,182
Net of operating loss carryforward	$	175,152		$	87,150
Less: Valuation allowance		(1,519,366	)		(1,419,182	)
Less: Valuation allowance		(175,152	)		(87,150	)
Total deferred income tax assets	$	-		$	-

11The Company was incorporated in United States of America and is subject to United States of America tax law. No provisions for income taxes have been provided for the U.S. parent company as it has a taxable loss for the three months ended September 30, 2011. No tax benefit has been realized since a valuation allowance has offset the deferred tax asset. As of September 30, 2011, the Company had a net operating loss from continuing operations for United States federal income tax purposes of $670,764 which are available to carry back five years or offset future taxable income, if any, through 2030. The valuation allowance for deferred tax assets as of September 30, 2011 and June 30, 2011 was $228,060 and $203,887, respectively. The change in total allowance for the three months ended September 30, 2011 was an increase of $24,173.

Hairong incurred net operating loss from continuing operations for PRC income tax purpose of $5,165,224 as of September 30, 2011, which are available to carry forward to offset future taxable income, if any, through 2016. The valuation allowance for deferred tax assets as of September 30, 2011 and 2010 was $1,291,306 and $0, respectively. The change in total allowance for the three months ended September 30, 2011 was an increase of $76,011.

The Company did not recognize any interest or penalties related to unrecognized tax benefits for the three months ended September 30, 2011 and 2010. The Company had no uncertain positions that would necessitate recording of tax related liability. The Company is subject to examination by the respective tax authorities.

8. STOCKHOLDERS’ EQUITY

In May 2011, Fu Qiang, the Company’s former Chairman and Chief Executive Officer, entered into a Resignation and Stock Transfer Agreement with Ieong Waifong and the Company. Pursuant to the Agreement, Fu Qiang transferred to Ieong Waifong five million shares of the Company’s common stock, representing 24.7% of the outstanding shares. Fu Qiang transferred the shares to Ieong Waifong without compensation. However, in the same Agreement Ieong Waifang granted to the Company an option to purchase the shares for a price of $.001 per share. The Company may exercise the option at any time prior to December 31, 2020. Ieong Waifong is not an employee or agent of the Company, nor does he have any other relationship with the Company other than ownership of the shares transferred to him by Fu Qiang.

The option can be settled only in shares and there are no circumstances under which any other settlement arrangement would arise. Accordingly, pursuant to ASC 815-15-25-20, the “purchased call option that enables the issuer of an equity instrument (such as common stock) to reacquire the equity instrument would not be considered to be a derivative instrument by the issuer of the equity instrument.”

On July 25, 2011, the Company issued 20,000 shares of common stock to two independent directors for their past and future services as independent directors. Fair value of the common stock issued totaled $58,400. As of and for the three months ended September 30, 2011, the Company recognized $45,800 as stock based compensation expense. The remaining $12,600 will be recognized as stock based compensation expense ratably over the reminder service period through April 2012.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~INCOME~~9. SEGMENT ~~TAXES (Continued)~~INFORMATION

~~The~~FASB ~~Company~~ASC ~~was~~280, ~~incorporated~~Disclosures inabout ~~United~~Segments ~~States~~ of ~~America~~an Enterprise and isRelated ~~subject~~Information, toestablishes ~~United~~standards ~~States~~for ofreporting ~~America~~information ~~tax~~about ~~law~~operating segments. NoThis ~~provisions~~standard ~~for~~requires segmentation based on our internal organization and reporting of revenue and operating income ~~taxes~~based ~~have~~upon ~~been~~internal ~~made~~accounting asmethods. ~~the~~Our ~~Company~~financial ~~has~~reporting asystems ~~taxable~~present ~~loss~~various data for management to operate the ~~three~~business, including internal profit and ~~nine~~loss ~~months~~statements ~~ended~~prepared ~~March~~on ~~31,~~a ~~2011~~basis not consistent with U.S. NoGAAP. ~~tax~~The ~~benefit~~segments ~~has~~are ~~been~~designed ~~realized~~to ~~since~~allocate resources internally and provide a ~~valuation~~framework ~~allowance~~to ~~has~~determine ~~offset~~management ~~the~~responsibility. ~~deferred~~Amounts ~~tax~~for ~~asset~~prior periods have been recast to conform to the current management view. AsOperating segments are defined as components of ~~March~~an ~~31,~~enterprise ~~2011,~~about ~~the~~which ~~Company~~separate ~~had~~financial ainformation ~~net~~is ~~operating~~available ~~loss~~that ~~from~~is ~~continuing~~evaluated ~~operations~~regularly ~~for~~by ~~United~~the ~~States~~chief ~~federal~~operating ~~income~~decision ~~tax~~maker, ~~purposes~~or ofdecision ~~$515~~making group,~~153~~ ~~which~~in ~~are~~deciding ~~available~~how to ~~carry~~allocate ~~back~~resources ~~five~~and ~~years~~in orassessing ~~offset~~performance. ~~future~~Our ~~taxable~~chief ~~income,~~operating ifdecision ~~any,~~maker ~~through~~is ~~2030~~our Chief Executive Officer.

7The Company has two segments, Animation Design and Development and TV Programs Production. ~~STOCKHOLDERS’~~ The ~~EQUITY~~TV Programs Production segment was started in June 2011 when the Company entered into a collaborative arrangement to produce and distribute TV program, as discussed in Note 2h. As of September 30 and June 30, 2011, the TV Programs Production segment was in production stage and has not begun to generate revenue.

In November 2010 the Company sold 250,000 shares of common stock for $500,000 in a private placement to three investors. As of March 31, 2011 and June 30, 2010, 500,000,000 shares have been authorized. 20,270,000 shares and 20,020,000 shares are outstanding at March 31, 2011 and June 30, 2010, respectively.

8. SEGMENT INFORMATION

Segment revenue was as follows:

	Three months ended				~~Nine months ended~~
	March 31,				March 31,
	September 30,
	2011		2010		~~2011~~		~~2010~~
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Revenue:			(restated)
Revenue:
Animation Design and Development	$	458,429	$	1,805,859
Membership Fees	$	-	$	-	$	-	$	244,162
Consolidated revenue	$	458,429	$	1,805,859
Animation Design and Development		2,169,443		1,209,863		5,989,431		3,104,332
Other		-		469,280		-		708,939
Consolidated revenue	$	2,169,443	$	1,679,143	$	5,989,431	$	4,057,433

Segment profit was as follows:

	Three months ended					~~Nine months ended~~
	March 31,					March 31,
	September 30,
	2011		2010			~~2011~~		~~2010~~
	(unaudited)		(unaudited)			(unaudited)		(unaudited)
Segment profit:			(restated)
Segment profit:
Animation Design and Development	$	(180,478)	$	(484,432)
Membership Fees	$	-	$	(5,008	)	$	-	$	183,958
Consolidated segment profit	$	(180,478)	$	(484,432)
Animation Design and Development		1,315,529		444,647			3,778,678		1,348,759
Other		-		250,633			-		285,251
Consolidated segment profit	$	1,315,529	$	690,272		$	3,778,678	$	1,817,968

Segment assets were as follows:

	March 31,		June 30,
	September 30		June 30,
	2011		~~2010~~2011
	(unaudited)
Assets:
Animation Design and Development	$	194,~~141~~044,~~470~~476	$	154,~~460~~451,~~691~~394
Corporate		86,872		70,297
TV Programs Production		947,351		669,529
Consolidated assets	$	19,228,342	$	15,530,988
Corporate		6,255,164		6,204,120
Consolidated assets	$	11,246,991	$	11,325,043

1216

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

89. SEGMENT INFORMATION (~~CONTINUED~~Continued)

~~FASB~~A ~~ASC~~reconciliation ~~280, Disclosures about Segments~~ of an Enterprise and Related Information, establishes standards for reporting information about operating segments. This standard requires segmentation based on our internal organization and reporting of revenue and operating income based upon internal accounting methods. Our financial reporting systems present various data for management to operate the ~~business,~~Company’s ~~including~~segment ~~internal~~ profit ~~and loss statements prepared on a basis not consistent with U.S. GAAP. The segments are designed~~ to ~~allocate~~the ~~resources~~consolidated ~~internally~~income ~~and~~before ~~provide~~taxes ~~a framework to determine management responsibility. Amounts~~ for ~~prior periods have been recast to conform to~~ the ~~current~~three ~~management~~months ~~view.~~ended ~~Operating~~September ~~segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker~~30, or2011 ~~decision~~and ~~making group~~2010, ~~in deciding how to allocate resources and in assessing performance. Our chief operating decision maker~~ is ~~our~~as ~~Chief Executive Officer.~~follows:

A reconciliation of the Company’s segment profit to the condensed consolidated income before taxes for the three and nine months ended March 31, 2011 and 2010, is as follows:

	For the three months ended
	September 30,
	2011		2010
			(restated)
Segment (loss)	$	(180,478)	$	(484,432)
Other corporate (expenses) income		(71,095)		(64,751)
Total (loss) income before taxes	$	(251,573)	$	(549,183)

	Three months ended					Nine months ended
	March 31,					March 31,
	2011			2010		2011			2010
	(unaudited)			(unaudited)		(unaudited)			(unaudited)
Segment profit	$	1,315,529		$	690,272	$	3,778,678		$	1,817,968
Other corporate expenses		(93,785	)		247,682		(258,829	)		247,681
Total income before taxes	$	1,221,744		$	937,954	$	3,519,849		$	2,065,649

10. RISKS AND UNCERTAINTIES

9. RISKS AND UNCERTAINTIES

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy.

The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents. As of ~~March~~September 3130, 2011 and June 30, ~~2010~~2011, substantially all of the Company’s cash and cash equivalents were held by major banks located in the PRC of which the Company’s management believes are of high credit quality. With respect to accounts receivable, the Company extends credit based on an evaluation of the customer’s financial condition and customer payment practices to minimize collection risk on account receivable.

The Company ~~did~~has ~~not~~the ~~have~~following ~~any~~concentrations of business with suppliers constituting 10% or greater of net purchases ~~for the three and nine months ended March 31, 2011 and 2010.~~:

The Company has the following concentrations of business with customers constituting 10% or greater of the Company’s sales value:

	For the three months ended
	September 30,
	2011			2010
				(restated)
Beijing Chenyang Animation Technologies Company		93	%		52.01	%
Beijing Star Animation Studio		*			47.99	%

13* Constitute less than 10% of the Company's purchases value.

The amount of the Company’s accounts payable for the supplier is nil as of September 30, 2011.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

910. RISKS AND UNCERTAINTIES (Continued)

	Three months ended		Nine months ended
	March 31,		March 31,
	2011	2010	2011	2010
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Beijing Wanfang Xingxing Digital Tech.	*	*	11.37%	10.36%
Harbin Sinwen Animation Co., Ltd.	*	*	13.61%	*
Benxi Yige Amination Design Ltd.	*	21.08%	*	34.31%
Jilin Guojia Industry and Trade Co., Ltd.	*	27.88%	*	17.46%
Shenzhen Global Digital Tech Co., Ltd.	39.80%	24.22%	37.19%	10.04%
Shanghai Amination Making Co., Ltd.	40.09%	26.57%	36.82%	11.01%

The Company has the following concentrations of business with customers constituting 10% or greater of the Company’s sales value:

	For the three months ended
	September 30,
	2011			2010
Beijing Wanfang Xingxing Digital Tech.		80.00	%		10.65	%
Harbin Sinwen Animation Co., Ltd.		*			17.20	%
Shenzhen Global Digital Tech Co., Ltd.		10.00	%		41.36	%
Shanghai Animation Production Co., Ltd.		10.00	%		30.79	%

* Constitute less than 10% of the Company's sales value.

The Company has not experienced any significant difficulty in collecting its accounts receivable in the past and is not aware of any financial difficulties of its major customers. The Company’s ~~has~~accounts ~~the~~receivable ~~following~~value ~~concentrations~~for ofthe ~~business with~~ customers constituting 10% or greater of the Company’s ~~accounts~~sales ~~receivable~~ value as of ~~March~~September 3130, 2011:

	Amount		Percentage
	(unaudited)		(unaudited)
Beijing Wanfang Xingxing Digital Tech.	$	164,655		100	%
Shenzhen Global Digital Tech Co., Ltd.	$	292,232		40.16	%
Shanghai Amination Making Co., Ltd.		313,540		43.10	%
Beijing Wanfang Xingxing Digital Tech.		121,763		16.74	%
	$	727,535		100.00	%

1411. EARNINGS PER SHARE

Basic earnings per share are computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the year using the if-converted method for the convertible notes and preferred stock and the treasury stock method for warrants and options. The following table sets forth the computation of basic and diluted net loss per share:

	For The Three Months Ended
	September 30,
	2011			2010
				(restated)
Net loss	$	(251,573	)	$	(825,354	)

Basic weighted-average common shares outstanding		20,284,783			20,020,000
Dilutive effect of options, warrants, and contingently issuable shares		-			-
Diluted weighted-average common shares outstanding		20,284,783			20,020,000

Loss per share:
Basic and diluted	$	(0.01	)	$	(0.04	)

For the three months ended September 30 2011 and 2010, no options, warrants, and contingently issuable shares were included in the calculation of the Company’s diluted loss per share because the Company did not have these financial instruments.

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

12. COMMITMENTS AND CONTINGENCIES

Collaborative Arrangements

As discussed in Note 2h, in June 2011, the Company entered into three collaborative arrangements to invest in and participate in television programs production. Total commitment in the three arrangements is RMB 77,210,000 (approximately $12.1 million). As of September 30, 2011, the Company has paid RMB 46,058,500 (approximately $7.2 million), the remaining RMB 31,151,500 (approximately $4.9 million investment will be paid at various time period within one year.

13. RESTATEMENT

The financial statements of the Company for the three months ended September 30, 2010 that are included in this Report have been restated to effectuate changes from the statements filed in the Company’s Annual Report on Form 10-Q for the three months ended September 30, 2010. The restatements were:

l	To adjust prepaid rent of $637,161 incorrectly recorded as leasehold improvements, resulted in reclassification from property, plant and equipment to prepaid expenses and $125,900 was amortized as rent expense. The related accumulated depreciation totaling $41,615 was reversed.

l	To record the previously omitted cost of goods sold totaled $1,444,689 incurred and payable during the three months ended September 30, 2010.

The effect of the restatement on specific line items in our Statement of Operations for the three months ended September 30, 2010 was:

Statements of Operations	As Reported		As Restated

Cost of Goods Sold	$	236,653	$	1,819,181
Gross (Loss) Profit		1,569,206		(13,322	)

Selling, General and Administrative expenses		531,288		537,876

(Loss) Income from Operations before Other Income (Expenses)		1,037,918		(551,198	)

(Loss) Income from Operations before Income Taxes		1,039,933		(549,183	)

Net (Loss) Income		763,762		(825,354	)

Foreign Currency Translation Gain		254,476		117,394

Total Comprehensive (Loss) Income		1,018,238		(707,960	)

(Loss) Earnings Per Common Share
- Basic and Diluted	$	0.05	$	(0.04	)

CHINA DIGITAL ANIMATION DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

13. RESTATEMENT (Continued)

The effect of the restatement on specific line items in our Consolidated Statement of Cash Flows for the three months ended September 30, 2010 was:

Statements of Cash Flows	As Reported			As Restated

Net (Loss) Income	$	763,762		$	(825,354	)

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		326,214			344,742

Changes in operating assets and liabilities:
Prepaid expenses		-			119,260
Accounts payable		6,441			1,468,711
Income tax payable		(134,132	)		(23,593	)
Net cash provided by operating activities		1,208,323			1,329,804

Effect of exchange rate changes in cash		122,697			1,216

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS

Forward-Looking Statements: No Assurances Intended

In addition to historical information, this Quarterly Report contains forward-looking statements, which are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or similar expressions. These forward-looking statements represent Management’s belief as to the future of China Digital Animation Development, Inc. Whether those beliefs become reality will depend on many factors that are not under Management’s control. Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in Item 1A - “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, ~~2010~~2011. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Outline of Our Business

China Digital Animation Development Inc. (“China Digital”), through its operating company, Heilongjiang Hairong Science and Technology Development Co., Ltd., a joint stock company organized under the laws of The People’s Republic of China (“Hairong”), ~~engages~~has, for the past three years, engaged primarily in the business of digital animation production.

~~The~~Recently ~~government~~we ofre-assessed our position in the animation development marketplace. Our perception was that the animation industry in China ishas ~~actively~~grown ~~supporting~~to a point at which we will soon be no longer able to compete effectively. In recent years, however, due to the emphasis that the Chinese government has placed on the development of the animation industry, the market has become thick with competition. Despite the funds and efforts that we devoted to marketing, in ~~China~~fiscal 2011 we found it impossible to secure the quantity of contracts that we required at bid prices that would yield profits to us. ~~Among~~Moreover, due to constant and rapid improvements in the ~~stimuli~~equipment and ~~provided~~software used in our industry, to remain competitive would require us to devote continual capital expenditures for upgrades and additions to our animation production facilities. Management’s decision, therefore, was to re-orient our business model from one based on utilization of a state-of-the-art in-house capacity, to one in which we utilize our long-standing customer contacts and project management skills to obtain and manage project contracts while outsourcing most of the actual development work. With this new business model, we will be able to more selectively choose the projects we work on, as we will no longer have the need to make constant use of an extended staff and expensive facilities. To reorient our business model in this manner, during fiscal year 2011 we liquidated a large portion of our animation development property and equipment, and reduced our animation development staff to a modest crew. As a result, in the ~~industry:~~first quarter of fiscal year 2012, we had much lower selling, general and administrative expenses than in the first quarter of the prior fiscal year.

·With ~~Heilongjiang~~our ~~Province~~existing ~~has~~cash ~~developed~~resources anand ~~Animation Development Area, in which participants in~~ the ~~industry~~proceeds ~~are~~obtained ~~provided~~from ~~subsidized~~liquidating ~~property.~~some ~~We are currently the beneficiaries~~ of ~~2,000~~our ~~square~~animation ~~meters~~development inproperty ~~the~~and ~~Animation Development Area~~equipment, ~~which~~ we ~~occupy~~have ~~rent-free~~invested ~~until~~in ~~December~~three ~~2011.~~media projects:

· ~~The~~On ~~local~~June ~~government~~15, ~~provides~~2011 ~~subsidies~~we agreed to invest 19,710,000 RMB ($3,092,000) in production of a made-for-television movie titled “Yuan Da Qian Cheng.” We were at the same time engaged to provide animation ~~productions~~production ~~broadcast~~services infor ~~China~~the movie. · On June 20, ~~from~~2011 ~~RMB300~~we ~~per~~agreed ~~minute~~to ~~for~~invest ~~broadcasts~~19,000,000 onRMB ~~provincial~~($2,980,000) in production of a made-for-television ~~stations~~movie uptitled “Xu’s Legal Marriage.” · On June 23, 2011 we agreed to ~~RMB50~~invest ~~million~~38,500,000 ~~for~~RMB ~~productions~~($6,040,000) in ~~prime~~production ~~time~~of ona ~~China~~general ~~Central~~circulation ~~Television~~movie ortitled ~~overseas~~“Xiao ~~mainstream~~Naao ~~media~~Tian Gong.”

~~· Animation companies receive reductions in value-added tax, income tax, sales tax, and import duties.~~21

~~With~~To ~~this support~~date, we have ~~rapidly~~paid ~~developed~~46,058,500 ~~our~~RMB ~~animation~~(approximately ~~development~~$7.2 ~~business~~million) inon ~~the~~account ~~past~~of ~~two~~these ~~years~~investments. ~~Currently,~~The ~~our~~production ~~team~~ of 30all ~~animation~~three ~~technicians~~is ~~offers~~scheduled ~~digital~~to ~~animation~~be ~~services~~completed towithin ~~the~~one ~~movie,~~year. At ~~television~~that ~~and~~time, ~~Internet~~on ~~industries,~~the ~~specializing~~two projects in ~~high~~which ~~end~~we ~~special~~are ~~effects~~non-participating investors, ~~including~~we ~~3-D~~are ~~animation~~entitled to recoup our investment plus a 20% profit from the income earned by the properties before other participants share in income. WeIn ~~also~~the ~~offer~~“Yuan ~~non-media~~Da ~~businesses~~Qian ~~animated~~Cheng” ~~products~~project, for ~~advertising,~~which ~~branding~~we are providing both cash and ~~education~~development ~~purposes~~services, we are entitled to a share in the profits from distribution.

The animation industry is growing rapidly in China. Because we have developed a state-of-the-art facility with personnel recognized in the industry, we expect to participate in that growth in a leadership position. For that reason, we expect that animation development will be the primary source of our revenues for the foreseeable future.

To supplement our animation development business, we previously organized a department dedicated to producing cultural events. The department produced the Great Wall Ice Tour, a travelling multimedia entertainment facility constructed of snow and ice. Recently, however, we determined that our focus should be exclusively on animation. Accordingly, we have terminated our cultural event production activities.

Results of Operations

~~Revenue:~~All of our revenue in the three month periods ended September 30, 2011 and 2010 was earned by our animation developers. Our investments in media projects will not produce revenue until calendar year 2012. The 75% reduction in our revenue from the first quarter of fiscal 2011 to the first quarter of fiscal 2012, however, reflects our decision to significantly reduce our involvement in the animation development industry. In each period the costs of outsourcing most of the production, combined with allocation of our remaining development overhead, led to a gross loss, $52,083 in the three months ended September 30, 2011, $13,322 in the three months ended September 30, 2010.

~~Our~~During ~~revenue during~~ the ~~three~~first ~~and~~quarter ~~nine~~of ~~month~~fiscal ~~periods~~2011, ~~ended~~before ~~March~~we ~~31,~~liquidated ~~2011~~a ~~arose~~large ~~entirely~~portion ~~from~~of our animation development~~. During~~ ~~the~~operation, ~~three~~we ~~and~~needed ~~nine~~to ~~months~~keep ~~ended~~our ~~March~~facilities ~~31,~~occupied ~~2010,~~and ~~approximately 27% of~~ our ~~revenue~~large ~~arose~~staff ~~from~~of ~~subscriptions~~animation todevelopers ~~the~~busy, ~~financial~~which ~~website~~necessitated that we ~~operated~~obtain ina ~~that~~steady ~~period~~flow ~~and~~of ~~from the Great Wall Ice Tour~~contracts. ~~Despite~~Toward ~~the~~that ~~termination of all business other than animation development~~end, ~~our~~we ~~revenue~~devoted ~~grew~~a bylarge ~~29%~~allocation ~~during~~of ~~the~~resources ~~three~~to ~~months ended March 31~~marketing. Currently, ~~2011,~~with ~~compared~~our toreduced ~~the~~facilities ~~three~~and ~~months~~reduced ~~ended March 31~~staff, ~~2010,~~we ~~while~~can ~~our~~rely ~~revenue~~primarily ~~grew~~on byour ~~48%~~business ~~during~~contacts ~~the~~for ~~nine~~marketing. The ~~months~~change ~~ended~~is ~~March~~reflected ~~31,~~in ~~2011, compared to~~ the ~~nine~~reduction ~~months~~of ~~ended March 31~~selling, ~~2010. The~~general ~~growth~~and isadministrative ~~even~~expenses ~~more~~from ~~pronounced~~$537,876 in the ~~animation~~first ~~development~~quarter ~~segment,~~of infiscal ~~which~~2011 ~~revenue grew by 79% quarter-~~to~~-quarter~~ ~~and~~$203,182 ~~93%~~in ~~comparing~~the ~~nine~~first ~~months~~quarter toof ~~nine~~fiscal ~~months~~2012. .

15After adding our operating expenses to our gross loss, we realized a net loss of $251,573 for the three months ended September 30, 2011, or $.01 per share. During the three months ended September 30, 2010 we realized a net loss of $825,354, or $.04 per share.

~~Gross~~For ~~margin:~~the coming year, the greater portion of our assets will be invested in film and television program production. The value of broadcasting rights and license of films and TV programs has increased, and the sales from distribution of copies of films and TV series over the internet have also jumped in the past few years. In June 2011, we entered into three collaborative arrangements requiring us to invest a total of RMB 77,210,000 (approximately $12.19 million) in television program production. As of September 30, 2011, we have paid RMB 46,058,500 (approximately $7.2 million). The production for all three arrangements ends within one year, at which time the Company will obtain back its investment cost plus 20% of return on investment for two of the arrangements. For one of the arrangements, the Company is entitled to its pro-rata share of the profits from distribution of the TV series. Our current plan is to re-dedicate the proceeds of the investments to our animation development business. Management will spend the interim period, however, reviewing the Company’s prospects in that industry and determining the appropriate future course for our business.

Our ~~exclusive~~business ~~focus~~operates onin ~~animation~~Chinese ~~development~~Renminbi, ~~has~~but ~~had~~we areport ~~beneficial effect on~~ our ~~gross~~results ~~margin. Because~~in our ~~current~~SEC ~~operations~~filings ~~are~~in ~~focused~~U.S. ~~on service industries, we record a low cost of goods sold~~Dollars. WeThe ~~currently~~conversion ~~have a staff~~ of ~~over~~our ~~130~~accounts ~~employees~~from ~~dedicated~~RMB to ~~the~~Dollars ~~animation~~results ~~development~~in ~~business~~translation adjustments, ~~and~~which ~~their salaries~~ are ~~accounted~~reported ~~for~~ as ~~cost~~a ofmiddle ~~goods~~step ~~sold. In~~between ~~addition,~~net ~~the~~income ~~business tax~~ and acomprehensive ~~portion~~income. The ofnet ~~our~~income ~~depreciation~~is ~~and~~added ~~amortization~~to ~~expense~~the isretained ~~also~~earnings ~~accounted~~on ~~for~~our asbalance ~~cost~~sheet; ofwhile ~~goods~~the ~~sold. Nevertheless,~~translation ~~during~~adjustment ~~the~~is ~~three~~added ~~months~~to ~~ended~~a ~~March~~line ~~31,~~item ~~2011,~~on our ~~operations~~statement ~~yielded~~of astockholders ~~gross~~equity ~~margin~~labeled of“accumulated ~~70%,~~other ancomprehensive ~~improvement~~income,” ~~over~~since ~~the~~it ~~62%~~is ~~gross~~more ~~margin~~reflective ~~achieved~~of changes in the ~~three~~relative ~~months~~values ~~ended~~of ~~March 31, 2010~~U. ~~During~~S. ~~the~~and ~~nine~~Chinese ~~months~~currencies ~~ended~~than ~~March 31, 2011, our operations yielded a gross margin~~ of ~~73%, an improvement over~~ the ~~54%~~success ~~gross~~of ~~margin~~our ~~achieved~~business. During in the ~~nine~~three months ended ~~March 31~~September 30, 2011~~. Our~~, ~~gross~~the ~~margin~~unrealized ~~will~~gain ~~vary from one period to another, depending~~ on ~~our~~foreign ~~success~~currency intranslations ~~pricing~~added ~~the animation contracts we perform. In general~~$116,838 ~~however,~~to ~~we expect~~ our ~~gross~~accumulated ~~margin~~other ~~ratio~~comprehensive ~~to remain high~~income.

Operating income:

Our operating expenses increased by 64% from the three months ended March 31, 2010 to the three months ended March 31, 2011, and by 130% from the nine months ended March 31, 2010 to the nine months ended March 31, 2011. General and administrative expenses are accounted for as operating expenses. Within the past year we have put in service significant equipment as well as a leasehold improvement in April 2010, all of which we must now depreciate. General and administrative costs for the nine months ended March 31, 2011 have increased as a result of the increased depreciation. General and administrative costs for the three months ended March 31, 2011 also increased as a result of the increased salary and office general expenses. We expect general and administrative costs to stabilize, as we do not have any immediate plans to upgrade our equipment.

Pre-tax income:

In April 2009 we determined that our cash assets exceeded our immediate needs. Therefore we invested $2.1 million of our cash with an investment management company that contracted to provide us a 15% annual return. Primarily as a result of this investment, we accrued interest income of $82,492 and $251,039 in the three and nine months ended March 31, 2010, respectively. In April 2010 the investment management company returned the principal of our investment. Therefore, in the three and nine months ended March 31, 2011, when our cash was deposited in bank accounts only, our interest income was only $8,784 and $17,920, respectively.

After taking into account interest income and miscellaneous minor items of other income and expense, our income before income taxes was $1,221,744 for the three months ended March 31, 2011, an improvement of 30% over pre-tax income in the third quarter of fiscal 2010. Income before tax of $3,519,849 for the nine months ended March 31, 2011 represented an improvement of 70% over first nine months of fiscal 2010. The quarterly improvement lagged the nine month improvement primarily due to the uncommonly low level of selling, general and administrative expenses recorded in the third quarter of fiscal 2010.

Net income:

We pay tax on our income in China at the national rate of 25%. In our accrual for income taxes, however, certain expenses are not deductable, such as the expenses of our New York office. Therefore our income tax accrual for the four periods reported in our Statements of Income ranged from 26% to 29%.

Our bottom line operating result for the three and nine months ended March 31, 2011 was net after-tax income of $859,077 and $2,541,395, respectively, a 24% and 67% improvement over net income in the three and nine months ended March 31, 2010, respectively. We expect the improvement in our operating results to continue in the foreseeable future, since our animation business is producing more and more profitable revenue.

Accumulated other comprehensive income:

Our business operates entirely in Chinese Renminbi, but we report our results in our SEC filings in U.S. Dollars. The conversion of our accounts from RMB to US dollars results in translation adjustments. While our net income is included in the retained earnings on our balance sheet; the translation adjustments are included in a line item on our balance sheet labeled “accumulated other comprehensive income,” since it is more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business. During the three and nine months ended March 31, 2011, the effect of converting our financial results from RMB to U.S. Dollars was to increase our accumulated other comprehensive income by $66,608 and $546,114, respectively. During the three and nine months ended March 31, 2010, the effect of converting our financial results from RMB to U.S. Dollars was to increase our accumulated other comprehensive income by only $253 and $52,717, respectively.

Liquidity and Capital Resources

To date, our operations have been funded primarily by capital contributions from Hairong’s management and employees. Approximately 54% of the capital contribution has been made by members of management and their business associates. The ~~following~~remaining ~~table~~46% ~~sets~~was ~~forth~~contributed by the employees, acting through a ~~summary~~trustee. The ofCompany ~~our~~expects ~~cash~~that ~~flows~~in the future it will issue equity to the employees to compensate them for their financial contributions to the ~~years~~growth ~~indicated:~~of Hairong, and to incentivize them for future loyalty to Hairong.

	For the nine months ended March 31,
	2011		2010
Net cash provided by operating activities	$	3,705,506	$	3,904,600
Net cash used in investing activities	$	-	$	(4,156,579	)
Net cash provided by financing activities	$	549,975	$	101,000
Effect of exchange rate changes in cash	$	271,763	$	50,070
Net increase (decrease) in cash	$	4,527,244	$	(100,909	)
Cash, beginning of period	$	6,219,438	$	2,282,786
Cash, end of period	$	10,746,682	$	2,181,877

~~Until~~In ~~November~~addition, ~~2010~~the operations of our New York office, ~~when~~including wethe ~~completed~~legal and accounting expenses attendant to our status as a public company, had, until June 2011, been funded by a $500,000 private placement of common stock ~~for~~in ~~the~~November ~~purpose~~2010 ofand ~~funding~~in ~~the~~part ~~operations~~by ofloans ~~our~~from ~~New~~Fu ~~York office~~Qiang, ~~our~~who ~~business~~was ~~had~~our ~~been~~Chief ~~entirely~~Executive ~~self-financed. Our~~Officer ~~operations~~until ~~were~~early ~~initially~~in ~~funded~~June by2011, ~~capital~~and ~~contributions~~Fu ~~from~~Zhiguo, ~~Hairong’s~~who ~~management~~is ~~and~~a ~~employees~~shareholder. ~~Approximately~~These ~~54%~~loans ofwere ~~the~~payable ~~capital~~on ~~contribution~~demand ~~was~~and ~~made~~do bynot ~~members~~bear ofinterest. The ~~management~~Messrs. ~~and~~Fu ~~their~~made ~~business~~the ~~associates. The~~loans ~~remaining~~to ~~46%~~cover ~~was~~the ~~contributed~~costs byof the ~~employees,~~New ~~acting~~York ~~through~~office abecause ~~trustee. The~~the ~~Company~~process ~~expects~~of ~~that~~obtaining inapproval from the ~~future~~Chinese itgovernment ~~will~~for ~~issue~~transfer ~~equity~~of funds from China to the ~~employees~~U.S. towould ~~compensate~~be ~~them~~burdensome ~~for~~and ~~their~~delay ~~financial~~our ~~contributions~~ability to ~~the~~pay ~~growth~~our ofU.S. expenses. We ~~Hairong,~~will ~~and~~continue to ~~incentivize~~rely ~~them~~on ~~for~~loans ~~future~~from ~~loyalty~~affiliates to ~~Hairong. Since~~pay ~~2008,~~our ~~however,~~U.S. ~~our~~expenses ~~operations~~until ~~have~~we ~~been~~can ~~self-funding,~~fund asthose weexpenses ~~have~~from ~~been~~Dollars ~~cash~~obtained ~~flow~~by ~~positive~~a financing in ~~all~~the ~~periods~~U.S. or after government approval of a conversion of a portion of our Renminbi balances into Dollars.

This program of internal financing has left us with a balance sheet that, at ~~March~~September 3130, 2011, included no debt, either short-term or long-term, other than athe $~~335~~355,975 ~~loan~~in loans payable to ~~two~~either ofFu ~~our~~Qiang ~~shareholders~~or Fu Zhiguo. It also left us with working capital of $107,~~589~~270,~~491~~325 at ~~March~~September 3130, 2011, ana ~~improvement~~decrease of $410,~~177,850~~563 during the ~~nine~~three months ~~period~~then ended ~~December 31, 2010~~. Included in our working capital at ~~March~~September 3130, 2011 was $106,~~746~~254,~~682~~691 in ~~cash. Since~~short-term ~~our~~investments, ~~operations~~specifically ~~have~~investments ~~been~~in ~~cash~~two ~~positive~~media ~~during~~production ~~each~~projects, ofand ~~the~~$947,351 ~~past~~in ~~three~~deferred ~~years,~~production ascosts ~~well~~that asrepresent ~~during~~our ~~the nine~~cash ~~months~~contribution ~~ended~~to ~~March~~a ~~31,~~media ~~2011~~project in which we are both participating and ~~2010,~~investing. weThese ~~believe~~investments represent ~~that~~our efforts to achieve a reasonable return on our cash resources, ~~are~~better ~~adequate~~at toleast ~~fund~~than ~~our~~the ~~operations~~0.4% ~~for~~interest ~~the~~offered ~~foreseeable~~by China’s banks, while we determine the future direction of our Company.

~~Net~~Despite ~~cash provided by operating activities during~~ the ~~first~~loss ~~nine months~~ of ~~fiscal 2011 was~~ $3251,~~705,506,~~573 ~~compared~~that towe ~~net~~incurred ~~cash~~in ~~provided~~the bythree ~~operations~~months ofended $3September 30,~~904~~ 2011,~~600~~ ~~for~~our ~~the~~operations ~~nine~~used ~~months~~only ~~ended March 31~~$15,702 ~~2010~~in cash. The ~~decrease~~disparity ofoccurred ~~$199,094~~primarily ~~was~~because ~~primarily~~we ~~due~~reduced toour ~~the~~accounts ~~fact~~receivable ~~that~~by in$270,094 ~~the~~as ~~nine~~our ~~months~~level ~~ended~~of ~~March~~operations 31fell, ~~2010~~and we ~~utilized~~used $143,~~443,440~~900 in ~~supplies~~prepaid credits that we had ~~paid~~funded ~~for~~ in ~~the~~ prior ~~fiscal~~years, ~~year~~both of which events reduced our cash usage.

~~Net~~Going ~~cash~~forward, ~~provided~~we byhave ~~financing~~a ~~activities~~contractual ~~amounted~~obligation to ~~$549,975~~provide ~~for~~an ~~the~~additional ~~nine months ended March~~ 31,151,500 ~~2011.~~ RMB ($~~500~~4,871,000) ~~was~~to ~~obtained~~fund by the ~~private~~three ~~placement~~media ofproduction ~~250,000~~projects ~~shares of common stock to three investors~~ in ~~November~~which ~~2010. The~~we ~~remainder~~have ~~was borrowed from our principal shareholders~~invested. InWe ~~contrast,~~have ~~our~~not ~~financing~~yet ~~activities~~determined ~~during~~how ~~the~~we ~~nine~~will ~~months~~fund ~~ended~~those ~~March 31, 2010 consisted of borrowing $101,000 from our principal shareholders~~obligations.

During the nine months ended March 31, 2010 we invested $4,156,579 in the development of our animation capacity, outfitting our facilities and acquiring advanced software. We currently occupy a state-of-the-art facility for animation development and training, and do not expect to require an upgrade in the immediate future. As a result, we have devoted no cash to investing activities during the nine months ended March 31, 2011.

Currently we have property, plant and equipment with a book value of $5,132,091 on which there is no lien. This provides us the ability to obtain secured debt financing, if we decided to preserve our working capital. Based on this experience, we anticipate that our capital resources will be adequate to fund our operations for the foreseeable future.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of ~~March~~September 3130, 2011 (the “Evaluation Date”). Pursuant to Rule13a-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, “disclosure controls and procedures” means controls and other procedures that are designed to insure that information required to be disclosed by the Company in the reports that it files with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time limits specified in the Commission’s rules. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to insure that information the Company is required to disclose in the reports it files with the Commission is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. ~~Based~~That evaluation revealed that management of the Company on ~~their~~a ~~evaluation~~number of occasions failed to apply appropriate accounting principles when preparing the Company’s financial statements, ~~our~~which ~~Chief~~resulted ~~Executive~~in ~~Officer~~the ~~and~~restatement ~~Chief~~described ~~Financial~~in ~~Officer~~Note ~~concluded~~12 ~~that~~to the financial statements as well as errors in the presentation of the Company’s ~~system~~financial results for the interim quarters of fiscal ~~disclosure~~2011. Accordingly, ~~controls~~based on their evaluation, the Company’s Chief Executive Officer and ~~procedures~~Chief ~~was~~Financial ~~effective~~Officer have concluded that, as of ~~March~~the 31Evaluation Date, ~~2011~~the ~~for~~Company’s ~~the~~disclosure ~~purposes~~controls ~~described~~and inprocedures ~~this~~were ~~paragraph~~not effective.

Changes in Internal Controls. There was no change in internal controls over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in connection with the evaluation described in the preceding paragraph that occurred during the Company’s third fiscal quarter that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.23

Changes in Internal Controls. There was no change in internal controls over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in connection with the evaluation described in the preceding paragraph that occurred during the Company’s first fiscal quarter that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings
None.
Item 1A	Risk Factors
	There have been no material changes from the risk factors included in the Annual Report on Form 10-K for the year ended June 30, 2010.

Item 1. Legal Proceedings

Item 2.	Unregistered Sale of Securities and Use of Proceeds
	(a) Unregistered sales of equity securities
	None.
	(c) Purchases of equity securities
	The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Exchange Act during the 3rd quarter of fiscal 2011.
Item 3.	Defaults Upon Senior Securities.
	None.
Item 4.	Reserved.
Item 5.	Other Information.
	None.
Item 6.	Exhibits
31.1	Rule 13a-14(a) Certification – CEO
31.2	Rule 13a-14(a) Certification – CFO
32	Rule 13a-14(b) Certification

None.

Item 1A Risk Factors

There have been no material changes from the risk factors included in the Annual Report on Form 10-K for the year ended June 30, 2011.

Item 2. Unregistered Sale of Securities and Use of Proceeds

(a) Unregistered sales of equity securities

. In July 2011 the Company issued a total of 20,000 shares of common stock to two of the members of its board of directors. The shares were granted in consideration of services, and were valued at the market value on the date when the obligation to issue the shares accrued. The issuance of the shares was exempt from registration pursuant to Section 4(2) of the Securities Act, as the issuance did not involve a public offering of securities.

The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Exchange Act during the 1st quarter of fiscal 2012.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Reserved.

Item 5. Other Information.

None.

Item 6.	Exhibits

31.1	Rule 13a-14(a) Certification – CEO

31.2	Rule 13a-14(a) Certification – CFO

32	Rule 13a-14(b) Certification

101.ins	XBRL Instance

101.xsd	XBRL Schema

101.cal	XBRL Calculation

101.def	XBRL Definition

101.lab	XBRL Label

101.pre	XBRL Presentation

SIGNATURES

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

	CHINA DIGITAL ANIMATION DEVELOPMENT INC.
Date: May 23, 2011	By: /s/ Fu Qiang
	Fu Qiang, Chief Executive Officer
	By: /s/ Hu Yumei
	Hu Yumei, Chief Financial Officer, Chief Accounting Officer

CHINA DIGITAL ANIMATION DEVELOPMENT INC.

Date: November 21, 2011	By: /s/ Sheng Zhai
	Sheng Zhai, Chief Executive Officer

	By: /s/ Hu Yumei
	Hu Yumei, Chief Financial Officer, Chief Accounting Officer

Filing Compare · China Digital Animation Development, Inc.