Yuhe International 10Q 2008 Q3 Quarterly report

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIOD FROM JANUARY 1, 2008 TO JANUARY 31, 2008 – unaudited

Cash flows from operating activities
Net income	$	68,136
Adjustments to reconcile net income to net cash used in operating activities
Depreciation		121,213
Amortization		5,200
Minority interests		73,398
Change in assets and liabilities
Advances to suppliers		212,910
Prepaid expenses		64,556
Deposits paid		111,147
Inventories		(607,144	)
Deferred expenses		(41,232	)
Accounts payable		(768,683	)
Payroll and payroll related liabilities		(304,784	)
Accrued expenses		104,606
Advances from customers		15,465
Other tax payables		(9,266	)

Net cash used in operating activities	$	(954,478	)

Cash flows from investing activities
Deposits paid and acquisition of property, plant & equipment	$	(206,700	)
Decrease in other receivables		(238,310	)
Advances from related parties receivables		2,321,943
Net cash provided by investing activities	$	1,876,933

F-7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – unaudited (Continued)

FOR THE PERIOD FROM JANUARY 1, 2008 TO JANUARY 31, 2008

See accompanying notes to condensed consolidated financial statements

Cash flows from financing activities
Repayments of loan payables	$	(1,555,807	)
Proceeds from capital contributions		2,536,290
Repayment to related parties		(900,140	)

Net cash provided by financing activities	$	80,343

Effect of foreign currency translation on cash and cash equivalents		853

Increase in cash and cash equivalents		1,003,651

Cash and cash equivalents-beginning of period		47,455

Cash and cash equivalents-end of period	$	1,051,106
Supplementary cash flow information:
Interest paid in cash	$	180

F-8

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Weifang Yuhe Poultry Co., Ltd, “the Company”, was established in Weifang, Shandong of the People’s Republic of China, the PRC, as a limited company on March 8, 1996. The Company currently operates through itself and one subsidiary located in Mainland China: Weifang Taihong Feed Co., Ltd., “Taihong”.

1.	Organization and principal activities

Taihong was established in Weifang, Shandong of the People’s Republic of China, the PRC, as a limited company on May 26, 2003. Pursuant to a group reorganization on September 14, 2007, the Company became the holding company of Taihong.

The Company and its subsidiary (hereinafter, collectively referred to as “the Group”) are engaged in the business of chick and feed production.

2.	Summary of significant accounting policies

(a)

Method of Accounting

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The Company's functional currency is the Chinese Renminbi; however the accompanying consolidated financial statements have been translated and presented in United States Dollars ($).

(b)

Principles of consolidation

The consolidated financial statements are presented in US Dollars and include the accounts of the Company, Taihong, a subsidiary which the company has a 56.25% ownership. All significant inter-company balances and transactions are eliminated in consolidation.

The Company acquired its subsidiary on September 14, 2007 through a reorganization between entities under common control. Accordingly, the transaction was accounted for similar to a pooling of interests in accordance with SFAS 141 “Business Combination” Appendix D and is presented as if it had occurred at the beginning of the first period presented. The following table depicts the identity of the subsidiary:

Name of Company

Place & date of

Incorporation

Attributable Equity

Interest %

Registered

Capital

Weifang Taihong Feed Co., Ltd.

PRC/

May 26 2003

56.25

965,379

(RMB8,000,000

)

(c)

Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.

F-9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

2.	Summary of significant accounting policies (Continued)

(d)

Economic and political risks

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

(e)

Plant and equipment

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

Buildings	20 years
Machinery	10 years
Vehicle	5 years
Furniture and equipment	3 years

(f)

Intangible assets

Intangible assets represent land use rights in the PRC. Land use rights are carried at cost and amortized on a straight-line basis over the period of rights of 50 years commencing from the date of acquisition of equitable interest. According to the laws of the PRC, the government owns all of the land in the PRC. Companies or individual are authorized to possess and use the land only through land usage rights approved by the PRC government.

F-10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company accounts for its liability for product guaranteed in accordance with FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” Under FIN 45, the aggregate changes in the liability for accruals related to product warranties issued during the reporting period must be charged to expense as incurred.

Summary of significant accounting policies (Continued)

(g)

Guarantee Expense

The Company guarantees a 98% survival rate of its product by delivering additional 2% of the product. The guarantee expires seven days after delivery. If the survival rate falls below 96%, the Company provides additional guarantee compensation to customers. Based on historical experience, the likelihood that survival rate falls below 96% is remote and therefore no accrued guarantee liability was recorded at period end. The Company records guarantee expense as incurred. There was no guarantee expense for the period from January 1, 2008 to January 31, 2008.

(h)

Accounting for the impairment of long-lived assets

The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is done by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets.

If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the reporting periods, there was no impairment loss.

(i)

Inventories

Inventories consisting of raw materials, work in progress and finished goods are stated at lower of cost or net realizable value. The cost of inventories is determined using weighted average cost method, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. Finished goods are comprised of direct materials, direct labor and an appropriate proportion of overhead. At each balance sheet date, inventories that are worth less than cost are written down to their net realizable value, and the difference is charged to the cost of revenues of that period.

(j)

Trade receivables

Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Management adopted an allowance policy which provides an allowance equivalent to 30% gross amount of accounts receivables due over 6 months and 60% of gross amount of accounts receivables due over 1 year. Full provision will be made for accounts receivables due over 2 years. Bad debts are written off as incurred. It is a common industry practice in the PRC that customers pay in advance before delivery of the products. As a result, the Company maintains a low level of trade receivables.

F-11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company maintains bank accounts only in the PRC. The Company does not maintain any bank accounts in the United States of America. Cash deposits in PRC banks are not insured by any government agency or entity.

2.	Summary of significant accounting policies (Continued)

(k)

Cash and cash equivalents

(l)

Revenue recognition

Revenue from sales of the Company's products is recognized when the significant risks and rewards of ownership have been transferred to the third-party distributor and larger producers at the time when the products are delivered to and accepted by them, the sales price is fixed or determinable as stated in the sales contract, and collection is reasonably assured.

(m)

Cost of revenues

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

(n)

Advertising

The Group expensed all advertising costs as incurred. There was no advertising expenses for the period from January 1, 2008 to January 31, 2008.

(o)

Retirement benefit plans

The employees of the Group are members of a state-managed retirement benefit plan operated by the government of the PRC. The Group is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to the statements of income as incurred. The retirement benefit expenses for the period from January 1, 2008 to January 31, 2008 were $5,843.

F-12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company accounts for income taxes using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.

2.	Summary of significant accounting policies (Continued)

(p)

Income tax

The Company is operating in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the corporation income tax rate is 25%. However, the Company is a poultry company, and in accordance with the relevant regulations regarding the favorable tax treatment for an outstanding poultry company, the Company is entitled to a tax free treatment until January 31, 2008.

The corporate income tax for the subsidiary, Weifang Taihong Feed Co., Ltd is 25%.

(q)

Shipping and handling fees

Shipping and handling fees are expensed when incurred. Shipping and handling charges included in the selling expenses for the period from January 1, 2008 to January 31, 2008 was $5,330.

(r)

Minority interests

Minority interests refer to the 43.75% investment by third parties in the equity of Taihong and are not held by the Company.

(s)

Foreign currency translation

The accompanying financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). The financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

January 31, 2008
Balance sheet			RMB 7.20180 to US$1.00
Statement of income and comprehensive income			RMB 7.25883 to US$1.00

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

F-13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all 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. The Company’s current component of comprehensive income is the foreign currency translation adjustment.

2.	Summary of significant accounting policies (Continued)

(t)

Comprehensive income

(u)

Fair value of financial instruments

SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” (“SFAS 107”) requires entities to disclose the fair values of financial instruments except when it is not practicable to do so. Under SFAS No. 107, it is not practicable to make this disclosure when the costs of formulating the estimated values exceed the benefit when considering how meaningful the information would be to financial statement users.

The fair values of all assets and liabilities do not differ materially from their carrying amounts. None of the financial instruments held are derivative financial instruments and none were acquired or held for trading purposes during the period for January 1, 2008 to January 31, 2008.

(v)	Recent accounting pronouncements

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R amends SFAS 141 and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. It is effective for fiscal years beginning on or after December 15, 2008 and will be applied prospectively. We are currently evaluating the impact of adopting SFAS No. 141R on our consolidated financial statements.

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 requires that ownership interests in subsidiaries held by parties other than the parent, and the amount of consolidated net income, be clearly identified, labeled, and presented in the consolidated financial statements. It also requires once a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value. Sufficient disclosures are required to clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. It is effective for fiscal years beginning on or after December 15, 2008 and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements shall be applied prospectively. We are currently evaluating the impact of adopting SFAS No. 160 on our consolidated financial statements.

F-14

Other receivables are unsecured, interest free and have no fixed repayment date.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

3.	Inventories

Inventories consist of the following:

Raw materials	$	706,405
Work in progress		3,870,136
Finished goods		47,884
	$	4,624,425

4.	Other receivables, net

Other receivables, net consist of the following:

Loan receivables	$	3,234,413
Other receivables		230,459
Less: Allowances		(436,173	)

	$	3,001,699

Recovery of bad debts of other receivable for the period ended January 31 2008 included in other income $61,368.

Allowance is made when collection of the full amount is no longer probable. Management reviews and adjusts this allowance periodically based on historical experience, current economic climate as well as its evaluation of the collectibility of outstanding accounts. The Group evaluates the credit risks of its customers utilizing historical data and estimates of future performance.

F-15

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unlisted investments at January 31, 2008 are the 3% investments in Hanting Rural Credit Cooperative, “Hanting”. It is stated at cost because the Group does not have significant influence or control over this investment. The management of the Company has reviewed the investment in Hanting for any impairment and determined there is no indication that the carrying amount of Hanting may not be recoverable.

5.	Unlisted investments

6.	Plant and equipments, net

Plant and equipment consists of the following:

At cost
Buildings	$	9,849,070
Machinery		5,408,153
Motor vehicles		432,291
Furniture and equipment		276,570
	$	15,966,084
Less: accumulated depreciation		(5,063,219	)
Construction in progress		4,420,380
	$	15,323,245

Depreciation expenses included in the cost of sales during the period from January 1, 2008 to January 31, 2008 was $83,448, and included in the general and administrative expenses for the period ended January 31, 2008 was $37,765.

As of January 31, 2008, buildings and machinery of the Group were pledged as collateral under certain loan arrangements.

There was no interest capitalized for the construction in progress during the period from January 1, 2008 to January 31, 2008.

F-16

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

7.	Intangible assets, net

Intangible assets consist of the following:

Land use rights, at cost	$	3,117,798
Less: accumulated amortization		284,929
	$	2,832,869

As of January 31, 2008, land use rights of the Group were pledged as collateral under certain loan arrangements.

Amortization expense included in the cost of revenues during the period from January 1, 2008 to January 31, 2008 was $5,200.

8.	Due from related companies

Hefeng Green Agriculture Co., Ltd, “Hefeng Green” - Mr. Gao Zhentao, a director of the Company is also a director of Hefeng Green	$	72,263
Shandong Yuhe Food Group Co., Ltd, “Yuhe Group” - Mr. Gao Zhentao, a director of the Company is also a directorof Yuhe Group		3,653,930
Shandong Yuhe New Agriculture Academy of Sciences, “Shandong Yuhe” - Mr. Gao Zhentao, a director of the Company is also a director of Shandong Yuhe		49,251
Weifang Jiaweike Food Co., Ltd, “Weifang Jiaweike” - Mr. Gao Zhentao, a director of the Company is also a director of Weifang Jiaweike		25
	$	3,775,469

The amounts due from related companies are unsecured, interest free and have no fixed repayment date.

F-17

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

9.	Due from directors

Details of due from directors are as follows:

Mr. Tan Yi	$	79,491
Mr. Gao Zhenbo		78,091
Mr. Gao Zhentao		75,455
	$	233,037

The amounts due from directors are unsecured, interest free and have no fixed repayment date.

10.

Loan payable

Loans payable are loans from unrelated companies for temporary fund for operation purposes. They are unsecured, interest free and have no fixed repayment date.

11.

Due to related companies

Weifang Hexing Breeding Co., Ltd, "Weifang Hexing" - Mr. Gao Zhentao, a director of the Company is also a director of Weifang Hexing	$	301,965
Shandong Yuhe Food Group Co., Ltd, "Yuhe Group" - Mr. Gao Zhentao, a director of the Company is also a director Yuhe Group		18,948
	$	320,913

The amounts due to related companies are unsecured, interest free and have no fixed repayment date. These loans are used for working capital purposes.

Bright Stand is the legal and accounting acquirer of the Group. Bright Stand becomes the sole shareholder of the company after January 31, 2008 business combination.

F-18

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

12.

Registered capital

As of January 31, 2008, capital contributions paid-up amounted to $3,019,003 (RMB 22,224,004).

Prior to the effective closing date of the acquisition transaction as discussed in Note 19, Bright Stand International Limited contributed $2,536,290 additional capital to the Company for working capital purposes.

13.

Long-term liabilities

The long-term liabilities are denominated in Chinese Renminbi and are presented in US dollars as follows:

Loans from Nansun Rural Credit, interest rate at 9.22% to 10.51% per annum, due from Nov 28, 08 to May 17, 10	$	8,350,383

Loans from Shuangyang Rural Credit, interest rate at 9.33% per annum, due on Oct 12, 08		904,625

Loans from Hanting Kaiyuan Rural Credit Cooperative, interest rate at 9.22% to 13.31% per annum, due from Nov 28, 08 to Jan 10, 09		1,015,963

Loans from Hanting Rural Credit Cooperative, interest rate at 8.19% per annum, due from Nov 8, 09		278,345

		10,549,316
Less: current portion of long-term liabilities		(4,383,951	)
		6,165,365

Future maturities of long-term loans as at January 31, 2008 are as follows:

Remainder of 2008	$	4,383,951
2009		2,686,040
2010		3,479,326
	$	10,549,317

F-19

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company is operating in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the corporation income tax rate is 25%. However, the Company is an agricultural company, and in accordance with the relevant regulations regarding the tax exemption, the Company is tax-exempt as long as it is registered as an agricultural entity.

14.

Income tax

Taihong is operating in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the corporation income tax rate is 25%.

The Group uses the asset and liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. There are no material timing differences and therefore no deferred tax asset or liability at January 31, 2008

The provision for income taxes consists of the following:

Current tax
PRC	$	-
Deferral tax provision		-
	$	-

All of the Group’s income (loss) before income taxes is from PRC sources. Actual income tax expenses reported in the consolidated statements of income and comprehensive income differ from the amounts computed by applying the PRC statutory income tax rate of 25% to income (loss) before income taxes during the period from January 1, 2008 to January 31, 2008 for the following reasons:

Income before income taxes	$	141,534

Computed “expected” income tax expense at 25%	$	35,384
Tax effect on net taxable temporary differences		(41,942	)
Effect of cumulative tax losses and tax holiday		6,558

	$	-

F-20

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following material transactions with related parties during the years were in the opinion of the directors, carried out in the ordinary course of business and on normal commercial terms:

15.

Related parties transactions

Sales of goods to a related company

695,851

Sales to Weifang Hexing Breeding Co., Ltd, a related company, during the period from January 1, 2008 to January 31, 2008.

During 2008, Weifang Jiaweike Food Co., Ltd. was disposed of to the Weifang Hexing Breeding Co., Ltd, a related company where Mr. Gao Zhentao, a director of the Company is also the director. (note 5)

16.

Significant concentrations and risk

(a) Customer Concentrations

The Group has the following concentrations of business with each customer constituting greater than 10% of the Company’s gross sales:

Wang Jianbo	24.89	%
Wei Yunchao	22.10	%
Li Yubo	18.03	%

The Group has not experienced any significant difficulty in collecting its accounts receivable in the past and is not aware of any financial difficulties being experienced by its major customers.

The Group has the following concentrations of business with each supplier constituting greater than 10% of the Company’s gross purchases:

Ma Suping			15.94	%
Lu Xingzhong			10.20	%

(b) Credit Risk

Financial instruments that potentially subject the Group to significant concentration of credit risk consist primarily of cash and cash equivalents. As of January 31, 2008, substantially all of the Group’s cash and cash equivalents were held by major financial institutions located in the PRC, which management believes are of high credit quality.

F-21

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

All of the Group’s products are produced in China. The Group’s operations are subject to various political, economic, and other risks and uncertainties inherent in China. Among other risks, the Group’s operations are subject to the risks of transfer of funds; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.

16.

Significant concentrations and risk (Continued)

17.

Business and geographical segments

The Company’s operations are classified into two principal reportable segments that provide different products or services. Weifang is engaged in the business of chick while Taihong is engaged in the business of feed production, in which most of the product were used internally. Separate management of each segment is required because each business unit is subject to different production and technology strategies.

Reportable Segments

	Production of chick			Production of feeds			Total

External revenue		1,443,425			47,904			1,491,329
Intersegment revenue					737,602			737,602
Interest income		5			-			5
Interest expense		(34,819	)		(51,348	)		(86,167	)
Depreciation and amortization		116,071			10,342			126,413
Net profit (loss) after tax		(26,232	)		167,766			141,534

Assets
Expenditures for long-lived assets		206,176			524			206,700

Note: Intersegment revenue of $737,602 was eliminated in consolidation.

F-22

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Operating Leases - In the normal course of business, the Company leases the land for hen house under operating lease agreements. The Company rents land, primarily for the feeding of the chickens. The operating lease agreements generally contain renewal options that may be exercised at the Company's discretion after the completion of the base rental terms. The Company was obligated under operating leases requiring minimum rentals as follows:

18.

Commitments and contingencies

Up to January 31,

2008	$	134,319
2009		146,530
2010		135,049
2011		77,648
2012		77,648
Thereafter		1,444,031
Total minimum lease payments	$	2,015,225

During the period for January 1, 2008 to January 31, 2008, rent expenses amounted to $22,432 was recorded as cost of sales.

19.

Subsequent Events

In January 31, 2008, Bright Stand International Limited, Bright Stand, a company incorporated in the British Virgin Islands, acquired 100% equity ownership of the Company and 43.75% equity ownership of Taihong for cash consideration equal to the appraised fair market value of the Company in the amount of $11,306,522, or RMB 81,450,000, and $312,530, or RMB 2,244,000. As a result, the Company and Taihong became wholly-owned subsidiaries of Bright Stand.

F-23

(Formerly known as First Growth Investors Inc.)

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

F-24

(Formerly known as First Growth Investors Inc.)

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

Index to condensed consolidated financial statements

		Page
Condensed Consolidated Balance Sheets - unaudited		F-26
Condensed Consolidated Statements of Income and Comprehensive Income- unaudited		F-27
Condensed Consolidated Statements of Changes in Stockholders’ Equity - unaudited		F-28
Condensed Consolidated Statements of Cash Flows - unaudited		F-29 to F-30
Notes to unaudited Condensed Consolidated Financial Statements		F-31 to F-55

F-25

(Formerly known as First Growth Investors Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements

	September 30, 2008		December 31, 2007
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	6,419,671	$	1,050,168
Accounts receivables		903		-
Inventories		9,002,360		-
Advances to suppliers		1,577,812		-

Total current assets		17,000,746		1,050,168

Plant and equipment, net		16,947,288		-
Deposits paid for acquisition of long term assets		10,311,734		-
Note receivables, net		25,140		-
Other receivables, net		854,004		-
Unlisted investments		299,388		-
Intangible assets, net		2,925,721		-
Due from related companies		3,899,142		1,000,000
Due from a shareholder		15,000		-
Deferred expenses		621,070		-

Total assets	$	52,899,233	$	2,050,168

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	4,682,087	$	-
Current portion of long term loans		6,827,034		-
Other payable		1,289,929		-
Payroll and payroll related liabilities		823,165		-
Accrued expenses		753,673		70
Advances from customers		39,412		-
Other tax payables		141,522		-
Loan from director		291,754		-
Other long term liabilities		143,573		-
Due to related companies		228,788		2,210

Total current liabilities		15,220,937		2,280

Non-current liabilities
Long-term loans		3,938,673		-

Total liabilities		19,159,610		2,280

Stockholders' Equity
Preferred stock, $.001 par value, 1,000,000 shares authorized, no shares issued and outstanding		-		-
Common stock at $.001 par value; authorized 500,000,000 shares authorized, 15,543,330 and 8,626,318 equivalent shares issued and outstanding		15,543		8,626
Additional paid-in capital		29,760,489		2,041,474
Retained earnings		2,821,237		(2,212	)
Accumulated other comprehensive income		1,142,354		-

Total stockholders’ equity		33,739,623		2,047,888

Total liabilities and stockholders’ equity	$	52,899,233	$	2,050,168

F-26

(Formerly known as First Growth Investors Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME- (UNAUDITED)

See accompanying notes to condensed consolidated financial statements

	For The Nine Months Ended					For The Three Months Ended
	September 30					September 30
	2008			2007		2008			2007

Net revenues	$	16,318,263		$	-	$	9,609,781		$	-

Cost of revenue		(11,732,602	)		-		(7,089,355	)		-

Gross profit		4,585,661			-		2,520,426			-

Operating Expenses
Selling expenses		(280,489	)		-		(135,658	)		-
General and administrative expenses		(1,500,458	)		-		(781,247	)		-
Bad debts recovery		641,103			-		554,188			-
Total operating expenses		(1,139,844	)		-		(362,717	)		-

Income from operations		3,445,817			-		2,157,709			-

Non-operating income (expenses)
Interest income		4,518			-		63			-
Other income		98,962			-		93,062			-
Gain on disposal of fixed assets		87,588			-		-			-
Investment income		6,074			-		-			-
Interest expenses		(763,168	)		-		(320,048	)		-
Other expenses		(56,342	)		-		-			-

Total other expenses		(622,368	)		-		(226,923	)		-

Net income before income taxes		2,823,449			-		1,930,786			-
Income taxes		-			-		-			-

Net income	$	2,823,449		$	-	$	1,930,786		$	-

Other comprehensive income
Foreign currency translation		1,142,354			-		73,604			-

Comprehensive income	$	3,965,803		$	-	$	2,004,390		$	-

Earnings per share
Basic	$	0.21		$	-	$	0.12		$	-
Diluted	$	0.20		$	-	$	0.12		$	-

Weighted average shares outstanding
Basic		13,750,966			-		15,543,330			-
Diluted		13,985,255			-		15,989,256			-

F-27

(Formerly known as First Growth Investors Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY – (UNAUDITED)

See accompanying notes to condensed consolidated financial statements

	Common stock
									Accumulated other		Total
	Shares				Additional paid-		Retained		comprehensive		Shareholders’
	outstanding		Amount		in capital		Earnings		income		Equity
Balance at December 31, 2007		8,626,318	$	8,626	$	2,041,474	$	-2,212	$		$	2,047,888
Additional capital contribution						12,149,750						12,149,750
Recapitalization		1,087,994		1,088		-2,082						-994
Share issued in placement agent at $3.088 per share		5,829,018		5,829		17,994,171						18,000,000
Cost of raising capital						-2,640,477						-2,640,477
Warrants issued in connection with private placement						2,398,975						2,398,975
Cost of raising capital - issuance of warrants						-2,398,975						-2,398,975
Stock based compensation						217,653						217,653
Net income for the period								2,823,449				2,823,449
Foreign currency translation difference										1,142,354		1,142,354
Balance at September 30, 2008		15,543,330	$	15,543	$	29,760,489	$	2,821,237	$	1,142,354	$	33,739,623

F-28

(Formerly known as First Growth Investors Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)

	For The Nine Months Ended
	September 30
	2008			2007
Cash flows from operating activities
Net income	$	2,823,449		$	-
Adjustments to reconcile net income to net cash used in operating activities:
Stock based compensation		217,653			-
Depreciation		996,126			-
Amortization		42,853			-
Bad debts recovery		(641,103	)		-
Gain on disposal of fixed assets		(87,588	)		-
Income from unlisted investment		(6,074	)		-
Changes in operating assets and liabilities:
Accounts receivable		(25	)		-
Advances to suppliers		(1,067,073	)		-
Inventories		(4,011,259	)		-
Deferred expenses		(17,183	)		-
Accounts payable		(331,343	)		-
Other payable		(386,548	)		-
Payroll and payroll related liabilities		52,590			-
Accrued expenses		(433,797	)		-
Advances from customers		(178,218	)		-
Other tax payables		9,386			-


Net cash used in operating activities		(3,018,154	)		-

Cash flows from investing activities
Deposit paid and acquisition of property, plant and equipment		(11,053,497	)		-
Proceeds from disposal of fixed assets		118,216			-
Acquisition of subsidiaries		(10,567,946	)		-
Proceeds from notes receivables		4,329,857			-
Advance to notes receivable		(3,432,603	)		-
Proceeds from related parties receivables		67,216			-
Net cash used in investing activities		(20,538,757	)		-

F-29

(Formerly known as First Growth Investors Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)