Yuhe International (YUII) POS AM Prospectus update (post-effective amendment)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

POST-EFFECTIVE AMENDMENT NO. 1

TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

YUHE INTERNATIONAL, INC.

(Exact Name of Registrant as specified in its Charter)

NEVADA	5180	87-0569467
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification Number)

301 Hailong Street

Hanting District, Weifang, Shandong Province

The People’s Republic of China

86 536 736 3688

(Address, including zip code, and telephone number, including area code, of Registrant’s principal

executive offices)

CSC Service of Nevada, Inc

502 East John Street

Carson City NV 89706

800-927-9800

(Name, address including zip code, and telephone number, including area code, of Agent for Service)

Copies to:

Simon Luk, Esq.

Winston & Strawn LLP

11th Floor

Gloucester Tower

The Landmark

15 Queen’s Road Central

Hong Kong

852-2292-2000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

 If any securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x   

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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

Large Accelerated filer   o	Accelerated filer   o
Non-accelerated filer   o (Do not check if a smaller reporting company)	Smaller reporting company   x

CALCULATION OF REGISTRATION FEE

				Proposed Maximum			Proposed Maximum			Amount of
	Amount to be			Offering Price			Aggregate			Registration
Title of Securities to be Registered	Registered			Per Share			Offering Price			Fee
Common stock, $0.001 par value per share		4,730,251	(1)	$	6.13	(1)	$	28,996,439	(1)	$	1,618.00

(1)    Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the average of the bid and asked prices reported on the NASDAQ Over-the-Counter Bulletin Board on May 8, 2008.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

The information in this prospectus is not complete and may be changed. The Selling Security Holders may not sell these securities until after the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED APRIL ___, 2009

PROSPECTUS

 4,730,251 shares

YUHE INTERNATIONAL, INC.

Common Stock

This prospectus relates to the offer for sale of up to 4,730,251of the Company’s common stock by certain existing holders of the securities, referred to as “Selling Security Holders” throughout this document.  The Company will not receive any of the proceeds of this offering.

The common stock is traded in the over-the-counter market and prices are quoted on the Over-The-Counter Bulletin Board under the symbol “YUII.OB.” The most recent market trade occurred on March 31, 2009 at the price of $2.00 per share. There is a lack of any meaningful market value quotations for the Company’ shares.

Except under certain circumstances, the Selling Security Holders will sell the shares from time to time through independent brokerage firms in the over-the-counter market at market prices prevailing at the time of sale.

Investing in the Company’ stock involves substantial risks. See “Risk Factors” beginning on page 4.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus is April __, 2009

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY		2
RISK FACTORS		5
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS		15
USE OF PROCEEDS		15
DIVIDEND POLICY		15
MARKET FOR COMMON EQUITY		16
DILUTION		16
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION		16
BUSINESS		27
MANAGEMENT		40
EXECUTIVE COMPENSATION		43
TRANSACTIONS WITH RELATED PERSONS		47
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		52
SELLING SECURITY HOLDERS		52
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		55
DESCRIPTION OF CAPITAL STOCK		57
SHARES ELIGIBLE FOR FUTURE SALE		59
PLAN OF DISTRIBUTION		59
LEGAL MATTERS		61
EXPERTS		61
WHERE YOU CAN FIND ADDITIONAL INFORMATION		61

You should rely only on the information contained in this prospectus. The Company has not authorized anyone to provide you with different information. The Selling Security Holders are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

1

PROSPECTUS SUMMARY

This summary highlights information found elsewhere in this Prospectus. Accordingly, it does not contain all of the information which may be important to you. Prospective purchasers should read the following summary carefully in conjunction with the more detailed information appearing elsewhere in this Prospectus concerning the Company and the securities being offered, including the Company’s financial statements and related notes and the information under “Risk Factors.” As used herein, references to “we”, “our”, “us”, and the “Company” refer to Yuhe International, Inc. and its subsidiaries except in the "Management's Discussion And Analysis And Results of Operation" below where all historical financial information prior to March 12, 2008 refers to PRC Yuhe, which includes the accounts of Taihong.

Overview

The Company is a supplier of day-old chickens raised for meat production, or broilers, in the People’s Republic of China, which is also commonly referred to as the “PRC” or China. The Company’s day-old broilers are primarily sold, through third party distributors or directly, to broiler farms and integrated chicken companies, which are vertically-integrated companies that engage in the breeding, hatching, farming, slaughtering and food processing of broilers, for the purpose of raising them to market-weight broilers. The Company’s operations are conducted exclusively by its subsidiaries in China.

Company Information

The Company has an offshore holding structure commonly used by foreign investors with operations in China. Yuhe International, Inc. is a Nevada corporation which directly owns 100% of the securities of Bright Stand International Limited, or “Bright Stand”, an international business company incorporated in the British Virgin Islands. In turn, Bright Stand directly owns 100% of the securities of Weifang Yuhe Poultry Co. Ltd., or “PRC Yuhe”, a wholly foreign-owned enterprise established under the laws of the PRC, and directly owns 43.75% and indirectly owns, through PRC Yuhe, the remaining 56.25% of the securities of Weifang Taihong Feed Co. Ltd., or “Taihong,” a foreign invested enterprise established under the laws of the PRC.

As of December 31, 2008, Mr. Kunio Yamamoto, Pinnacle Fund, L.P., Pinnacle China Fund L.P., Black River Small Capitalization Fund Ltd., Black River Commodity Select Fund Ltd., Ardsley Partners Fund II, LP and Halter Financial Investments, L.P. were the Company’s significant shareholders: Mr. Yamamoto owned 48.7%, Pinnacle Fund, L.P. owned 7.72%, Pinnacle China Fund L.P. owned 7.72%, Black River Small Capitalization Fund Ltd. owned 8.24%, Black River Commodity Select Fund Ltd. owned 6.18%, Ardsley Partners Fund II, LP owned 7.2% and Halter Financial Investments, L.P. owned 6.1% of the total outstanding shares of the Company’s common stock.

The following chart depicts the Company’s organizational structure:

Through PRC Yuhe, the Company operates thirteen breeder farms and two hatcheries with an annual capacity of 1,150,000 sets of breeders and 100 hatchers. Through the Company’s ownership and control of Taihong, the Company operates two feed mills with an aggregate annual capacity of 52,000 metric tons  The Company’s current primary geographic markets are Shandong Province and the ten surrounding provinces and special municipalities, which are Jiangsu, Anhui, Henan, Hebei, Jilin, Liaoning, Heilongjiang, Tianjin, Beijing, and Shanghai.

The Company did not become engaged in the day-old broiler business until March 12, 2008. On that date, the Company entered into an Equity Transfer Agreement, the “Equity Transfer Agreement”, with Mr. Kunio Yamamoto, the sole shareholder of Bright Stand, to exchange all of the issued and outstanding shares of Bright Stand owned by him in exchange for the Company’s issuing to Mr. Yamamoto 8,626,318 unregistered shares of the Company’s common stock. As a result of the transaction, Mr. Yamamoto holds 8,626,318 shares, or 88.8 %, of the Company 9,714,312 shares of common stock then outstanding following the completion of all matters referred to above.

2

Upon the closing of the Equity Transfer Agreement, the Company gained operating control over PRC Yuhe and Taihong. PRC Yuhe has been owned by Bright Stand since January 31, 2008. Taihong has been owned by PRC Yuhe and Bright Stand since January 31, 2008. Since December 31, 2003, the Company had not engaged in any substantive business activities or operations prior to its acquisition of Bright Stand. PRC Yuhe first commenced its operations in 1996.

On March 12, 2008, the Company consummated with 25 accredited investors, the “Investors”, a private placement of 5,829,018 of the Company’s common stock for an aggregate purchase price of approximately $18,000,000. The Investors were (i) Pinnacle Fund, L.P, (ii) Pinnacle China Fund L.P, (iii) Black River Commodity Select Fund Ltd., (iv) Black River Small Capitalization Fund Ltd., (v) Marion Lynton, (vi) Ardsley Partners Fund II, LP, (vii) Ardsley Offshore Fund, Ltd, (viii) Ardsley Partners Institutional Fund, LP; (ix) Investment Hunter, LLC, (x) Guerrilla Partners LP, (xi) Hua-Mei 21 st Century Partners, LP, (xii) Ruoling Wang, (xiii) Guli Ping, (xiv) Wu Mijia, (xv) Dehua Qian, (xvi) Southwell Partners, L.P, (xvii) Westpark Capital, L.P, (xviii) Straus Partners, LP, (xix) Straus-GEPT Partners, LP, (xx) Atlas Allocation Fund, LP, (xxi) Chestnut Ridge Partners, LP, (xxii) Ancora Greater China Fund, LP, (xxiii) Kevin B Halter Jr, (xxiv) Octagon Capital Partners, and (xxv) Howard H. Lu. Mr. Yamamoto also sold 971,500 shares of common stock to the Investors in the same transaction. These securities were offered and sold in the private placement without registration under the Securities Act of 1933, the “Securities Act”, in reliance on an exemption from registration under Regulation D, Rule 506, Section 4(2) of the Securities Act.

Effective on April 4, 2008, the Company amended the Company’s articles of incorporation to (i) change its name from “First Growth Investors, Inc.” to “Yuhe International, Inc.”, and (ii) effect a 1-for-14.70596492 reverse stock split of its common stock. The Company’s Board of Directors and shareholders approved the name change and the reverse stock split pursuant to the Nevada Revised Statutes. The name change became effective with NASDAQ’s Over-the-Counter Bulletin Board at the opening of trading on April 7, 2008, under the new stock symbol of “YUII.OB”. All references to common stock in this filing are to post-split shares as if the reverse stock split was effective as of the beginning of the first period presented.

The Company’s principal executive office is located at 301 Hailong Street, Hanting District, Weifang, Shandong Province, The People’s Republic of China and the Company’s telephone number is 86 536 736 3688.

Industry and Competitive Factors

Other industry and competitive factors which the Company believes will be critical to achieving its growth strategy include:

o High Volume Producer. The Company is one of the larger focused producers of day-old broilers in China. The Company believes that this volume will provide it with an advantage in the market for day-old broilers as the Company believes that its primary end user base will continue to focus on suppliers that can deliver products in large-volumes with consistent high quality. Further, the Company enjoys economies of scale of production through large-scale production.

o Low Cost Producer. Because the Company enjoys economies of scale of production and focuses on producing day-old broilers, the Company is able to leverage its production volume into relatively lower cost products. The Company has higher gross margin because it focuses on the production of day-old broilers with high survival rate and takes less time to grow to market size.

o Long-Term Experience in the Industry. Through the Company’ subsidiaries, PRC Yuhe and Taihong, the Company has been involved in the day-old broiler business for over ten years, which has given the Company experience in product quality improvement and disease resistance.

o Recognized Products. The Company has been awarded by the Shandong Province Administration of Industry and Commerce as a “Well Known Brand” in 2006. The Company was also recognized as a leading agricultural company by eight national authorities in China in 2004.

Risks Affecting the Company

Outbreaks of poultry disease, such as avian influenza, or the perception that outbreaks may occur, can significantly restrict the Company’s ability to conduct its operations. The Company takes precautions to ensure that its flocks are healthy and that its production facilities operate in a sanitary and environmentally sound manner. While the Company has the ability and experience in product quality improvement as well as poultry disease resistance, events beyond its control, such as the outbreak of avian influenza in 2006, may restrict the Company’s ability to conduct its operations and sales. An outbreak of disease could result in governmental restrictions on the import and export of products from the Company’s customers, or require it to destroy one or more of its flocks. This could result in the cancellation of orders by the Company’s customers and create adverse publicity that may have a material adverse effect on its business, reputation and prospects. In 2006, the Company suffered an operating loss of $2,597,285 after the general decline in consumer demand for poultry products in late 2005 and early 2006 following the outbreak of avian influenza. The Company’s flocks have never been infected with the H5N1 virus.

3

Worldwide fears about avian diseases, such as avian influenza, have depressed, and may continue to adversely impact the Company’ sales. Avian influenza is a respiratory disease of birds. The milder forms occur occasionally around the world. Recently, there has been substantial publicity regarding a highly pathogenic strain of avian influenza, known as H5N1, which has affected Asia since 2002. It is widely believed that H5N1 is spread by migratory birds, such as ducks and geese. There have also been some cases where H5N1 is believed to have passed from birds to humans as humans came into contact with live birds that were infected with the disease. Although there are vaccines available for H5N1 and other forms of avian influenza, and the PRC Government mandates, and the Company vaccinates its breeding stock against avian influenza, there is no guarantee that the disease can be completely prevented as the virus continues to mutate.

The avian influenza outbreak did not spread over the Company’s farms; therefore, there was no direct loss from the death of day-old broilers and parent breeders. However, the terror from avian influenza arose throughout the PRC which caused the significant decrease in the price of day-old broilers and parent breeders. The Company’s average unit price of a day-old broiler decreased from $0.31, or RMB 2.54, in 2005 to $0.15, or RMB1.19, with the Company’s unit cost of $0.23, or RMB 1.81, during the disaster in 2006. The decrease in average unit price contributed $2.16 million, or RMB 17.3 million, to $0.89 million total gross loss in 2006. 

To generate cash flow for operation at the time, the Company sold 730,000 parent breeders. While the Company’s average unit cost of a parent breeder was $4.32, or RMB 34.51, the Company sold these parent breeders at unit price of $1.25, or RMB 9.965, contributed $2.26 million, or RMB 18 million, to the total loss in 2006. In addition to quantifiable loss in the sale of parent breeders as mentioned above, the sale of parent breeders led to a reduction in revenue that is difficult to quantify. These parent breeders had just grown up at the time and were ready to produce eggs that can be hatched into day-old broilers. By selling these parent breeders, the Company had less day-old broilers for sale, which contributed to a decrease in revenue. The Company suffered a total gross loss for the year ended December 31, 2006 of $0.89 million, or RMB 7.1 million. 

For the cash flow perspective, the Company suffered a great loss during the period of avian influenza which is reflected in its gross loss. In order to maintain adequate cash flow for operations during the influenza outbreak, the Company requested from its suppliers a longer repayment term which resulted in the increase of accounts payable in an amount of $3 million and reached $7.3 million at year-end. The Company typically maintains accounts payable at around $5 million level.

For future prospects, the Company shall work to maintain a neat and tidy condition for the broilers and breeders to minimize the risk of avian influenza outbreak in the farms. The Company expects to set up an emergency plan of recovery from avian influenza. However, it is difficult for the Company to predict the negative impact on the unit price if the avian influenza breaks out anywhere in the PRC again and therefore, it is difficult to estimate the negative impact of potential influenza outbreak in the future.

The Company does not typically have long-term purchase contracts with its customers and its customers have in the past and could at any time in the future, reduce or cease purchasing products from the Company, harming the Company’s operating results and business. The Company typically does not have long-term volume purchase contracts with its customers, and they are not obligated to purchase products from the Company. Accordingly, the Company’s customers could at any time reduce their purchases from the Company or cease purchasing the Company’s products altogether. In addition, any decline in demand for the Company’s products and any other negative development affecting its major customers or the poultry industry in general, would likely harm the Company’s results of operations. For example, if any of the Company’s customers experiences serious financial difficulties, it may lead to a decline in sales of the Company’s products to such customer and the Company’s operating results could be harmed through, among other things, decreased sales volumes and write-offs of accounts receivable related to sales to such customer.

The loss of the Company’s major distributors who subsequently sell the broilers to other end users could have a material adverse effect on the Company’s results of operations.   Approximately thirty three percent of the Company’ sales are to its top five distributors. Fifty percent of the Company’ sales volume is to distributors with whom the Company has five to ten years of sales relationship. The Company’s end users include large and small broiler raisers and large integrated chicken companies whose day-old broiler production is not sufficient for their own use. The Company sells to six of the top ten broiler production provinces. The Company’ sales in Shandong Province accounted for 90% of its total sales in 2008. Shandong Province is the number one broiler and chicken production region in China. If the Company’s existing distributors significantly reduce or cease their purchases from the Company with little or no advance notice, it could materially and adversely affect the Company' sales and results of operations.

Competition in the poultry industry with other poultry companies, especially companies with greater resources, may make the Company unable to compete successfully, which could adversely affect the Company’s business. The Chinese poultry industry is highly competitive. In general, competitive factors in the Chinese broiler, or chicken, industry include price, product quality, brand identification, breadth of product line and customer service. The Company’ success depends in part on its ability to manage costs and be efficient in the highly competitive poultry industry. Some of the Company’s competitors have greater financial and marketing resources. Because of this, the Company may not be able to successfully increase its market penetration or its overall share of the poultry market. Increased competition may result in price reductions, increased sales incentive offerings, lower gross margins, sales expenses, marketing programs and expenditures to expand channels to market. The Company’s competitors may offer products with better market acceptance, better price or better quality. The Company may be adversely affected if it is unable to maintain current product cost reductions, or achieve future product cost reductions. The Company competes against a number of other suppliers of day-old broilers. Although the Company attempts to develop and support high-quality products that the Company’s customers demand, products developed by competing suppliers could render the Company’s products noncompetitive. If the Company fails to address these competitive challenges, there could be a material adverse effect upon its business, consolidated results of operations and financial condition.

4

The Company’ stock is thinly traded and shareholders may not be able to liquidate their investment at all, or may only be able to liquidate the investment at a price less than the Company’s value. The Company’s common stock currently is thinly traded and the price of the Company’s common stock may not reflect the value of the Company. In the month of March 2009, the Company’s daily average trading volume was 3,865 shares. Consequently, investors may not be able to liquidate their investment at all, or if they are able to liquidate, it may only be at a price that does not reflect the value of the business. The most recent market trade occurred on March 31, 2009 at the price of $2.00 per share, while the price the Company sold its shares in the private placement on March 12, 2008 was $3.09 per share. There is a lack of any meaningful market value quotations for the Company’ shares. As the trading volume is thin and the price is volatile, the Company’ shareholders may not be able to sell their shares at a time or price they desire. Because the trading volume and price for the Company’ stock are low, many brokerage firms are not willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the Company’ stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of common stock like the Company’s as collateral for any loans.

RISK FACTORS

Investment in the Company’s common stock involves risks. You should carefully consider the risks the Company describes below before deciding to invest. The market price of the Company’s common stock could decline due to any of these risks, in which case you could lose all or part of your investment. In assessing these risks, you should also refer to the other information included in this prospectus, including the Company’s consolidated financial statements and the accompanying notes. You should pay particular attention to the fact that the Company is a holding company with substantial operations in China and is subject to legal and regulatory environments that in many respects differ from that of the United States.  The Company’s business, financial condition or results of operations could be affected materially and adversely by any of the risks discussed below and any others not foreseen. This discussion contains forward-looking statements.

Risks Related to the Company’s Business and Industry

Outbreaks of poultry disease, such as avian influenza, or the perception that outbreaks may occur, can significantly restrict the Company’s ability to conduct its operations.

PRC Yuhe takes precautions to ensure that its flocks are healthy and that its production facilities operate in a sanitary and environmentally sound manner. While PRC Yuhe has ability and experience in product quality improvement as well as poultry disease resistance, events beyond its control, such as the outbreak of avian influenza in 2006, may restrict its ability to conduct its operations and sales. An outbreak of disease could result in governmental restrictions on the import and export of products from PRC Yuhe's customers, or require it to destroy one or more of its flocks. This could result in the cancellation of orders by its customers and create adverse publicity that may have a material adverse effect on the Company’s business, reputation and prospects. In 2006, PRC Yuhe suffered an operating loss of $2,597,285 after the general decline in consumer demand for poultry products in late 2005 and early 2006 following the outbreak of avian influenza. PRC 

Yuhe's flocks have never been infected with the H5N1 virus.

Worldwide fears about avian diseases, such as avian influenza, have depressed, and may continue to adversely impact PRC Yuhe's sales. Avian influenza is a respiratory disease of birds. The milder forms occur occasionally around the world. Recently, there has been substantial publicity regarding a highly pathogenic strain of avian influenza, known as H5N1, which has affected Asia since 2002. It is widely believed that H5N1 is spread by migratory birds, such as ducks and geese. There have also been some cases where H5N1 is believed to have passed from birds to humans as humans came into contact with live birds that were infected with the disease. Although there are vaccines available for H5N1 and other forms of avian influenza, and the PRC Government mandates, and PRC Yuhe vaccinates its breeding stock against avian influenza, there is no guarantee that the disease can be completely prevented as the virus continues to mutate.

PRC Yuhe and Taihong do not typically have long-term purchase contracts with their customers and their customers have in the past and could at any time in the future, reduce or cease purchasing products from them, harming the Company’s operating results and business. PRC Yuhe and Taihong typically do not have long-term volume purchase contracts with their customers, and they are not obligated to purchase products from PRC Yuhe. Accordingly, their customers could at any time reduce their purchases from PRC Yuhe or cease purchasing their products altogether. In addition, any decline in demand for PRC Yuhe's products and any other negative development affecting its major customers or the poultry industry in general, would likely harm the Company’s results of operations. For example, if any of PRC Yuhe's customers experiences serious financial difficulties, it may lead to a decline in sales of PRC Yuhe's products to such customer and the Company’s operating results could be harmed through, among other things, decreased sales volumes and write-offs of accounts receivable related to sales to such customer.

5

The loss of PRC Yuhe's major distributors who subsequently sell the broilers to other end users could have a material adverse effect on the Company’s results of operations. Approximately thirty three percent of PRC Yuhe's sales are to its top five distributors. Fifty percent of PRC Yuhe's sales volume is to distributors with whom it has five to ten years of sales relationship. Their end users include large and small broiler raisers and large integrated chicken companies whose day-old broiler production is not sufficient for their own use. PRC Yuhe sells to six of the top ten broiler production provinces. Its sales in Shandong Province accounted for 90% of its total sales in 2008.  Shandong Province is the number one broiler and chicken production region in China. If PRC Yuhe's existing distributors significantly reduce or cease their purchases from it with little or no advance notice, it could materially and adversely affect the Company’ sales and results of operations.

Competition in the poultry industry with other poultry companies, especially companies with greater resources, may make the Company unable to compete successfully, which could adversely affect the Company’s business. The Chinese poultry industry is highly competitive. In general, competitive factors in the Chinese broiler, or chicken industry include price, product quality, brand identification, breadth of product line and customer service. PRC Yuhe's success depends in part on its ability to manage costs and be efficient in the highly competitive poultry industry. Some of PRC Yuhe's competitors have greater financial and marketing resources. Because of this, the Company may not be able to successfully increase PRC Yuhe's market penetration or PRC Yuhe's overall share of the poultry market.

Increased competition may result in price reductions, increased sales incentive offerings, lower gross margins, sales expenses, marketing programs and expenditures to expand channels to market. PRC Yuhe's competitors may offer products with better market acceptance, better price or better quality. The Company may be adversely affected if PRC Yuhe is unable to maintain current product cost reductions, or achieve future product cost reductions.

PRC Yuhe competes against a number of other suppliers of day-old broilers. Although it attempts to develop and support high-quality products that its customers demand, products developed by competing suppliers could render its products noncompetitive. If PRC Yuhe fails to address these competitive challenges, there could be a material adverse effect upon the Company’s business, consolidated results of operations and financial condition.

The Company conducts substantially all of its operations through the Company’ subsidiaries; and its performance will depend upon the performance of its subsidiaries.

The Company has no operations independent of those of Bright Stand International Limited, or Bright Stand, and its PRC subsidiaries, Weifang Yuhe Poultry Co., Ltd., “PRC Yuhe”, and Weifang Taihong Feed Co., Ltd., “Taihong”. As a result, the Company is dependent upon the performance of Bright Stand and its subsidiaries, and will be subject to the financial, business and other factors affecting such subsidiaries, as well as general economic and financial conditions. As substantially all of the Company’s operations are conducted through its subsidiaries, the Company is dependent on the cash flow of its subsidiaries to meet the Company’s obligations.

Because virtually all of the Company’s assets are held by its operating subsidiaries, the claims of the Company’ shareholders will be structurally subordinate to all existing and future liabilities and obligations, and trade payables of such subsidiaries. In the event of a bankruptcy, liquidation or reorganization of the Company, the Company’s assets and those of its subsidiaries will be available to satisfy the rights of the Company’ shareholders only after all of Bright Stand and its subsidiaries’ liabilities and obligations have been paid in full.

If demand for PRC Yuhe's products declines in the markets that it serves, its selling prices and overall sales will decrease. Even if the demand for its products increases, when such increase cannot outgrow the decrease of selling price, the Company’s overall sales revenues may decrease.

Demand for PRC Yuhe's products is affected by a number of factors, including the general demand for the products in the end markets that it serves and the price attractiveness. A vast majority of its sales are derived directly or indirectly from end users who are broiler raisers and large integrated chicken companies whose day-old broiler production is not sufficient for their own use. Any significant decrease in the demand for day-old broilers may result in a decrease in PRC Yuhe's revenue and earnings. A variety of factors, including economic, health, regulatory, political and social instability, could contribute to a slowdown in the demand for day-old broilers because demand for day-old broilers is highly correlated with general economic activities. As a result, even if the demand for PRC Yuhe's products increases, when the increase of demand cannot outgrow the decrease of selling price, the Company’s overall sales revenue may decrease.

Industry cyclicality can affect the Company’s earnings, especially due to fluctuations in commodity prices of feed ingredients and breeding stock.

Currently, all PRC Yuhe's raw materials are domestically procured. Profitability in the poultry industry is materially affected by the supply of parent breeding stocks and the commodity prices of feed ingredients, including corn, soybean cake, and other nutrition ingredients from numerous sources, mainly from wholesalers who collect the feed ingredients directly from farmers. As a result, the poultry industry is subject to wide fluctuations and cycles. These prices are determined by supply and demand factors. Prices for raw materials have been volatile in recent years. For instance, the unit price for corn increased RMB 1.25 per kilogram, $0.15, in 2005 to RMB 1.7 per kilogram, $0.25, in 2008, showing an increase of 36%; and the unit price for soybean increased from RMB 2.37 per kilogram, $0.28 in 2005 to RMB 4.07 per kilogram, $0.59, in 2008, an increase of 71.7%.  Typically PRC Yuhe does well when chicken prices are high and feed prices are low and the feed ingredients are in adequate supply. However, it is very difficult to predict when the feed price spiral cycles will occur.

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Various factors can affect the supply of corn and soybean meal, which are the primary ingredients of the feed PRC Yuhe uses for parent breeding stocks. In particular, weather patterns, the level of supply inventories and demand for feed ingredients, and the agricultural policies of the Chinese Government affect the supply of feed ingredients. Weather patterns often change agricultural conditions in an unpredictable manner. A sudden and significant change in weather patterns could affect supplies of feed ingredients, as well as both the industry’s and PRC Yuhe's ability to obtain feed ingredients, grow chickens or deliver products. Increases in the prices of feed ingredients will result in increases in raw material costs and operating costs.

The supply of parent breeding stocks is also cyclical. The Company purchases parent breeding stocks from multiple suppliers. The Company’s ability to maintain adequate breeding stock is dependent on its abilities to develop stable supplier relationships and to place large procurement orders. In addition, most primary breeder stock is imported and the import volume is closely controlled by the PRC Government.

The cessation of tax exemptions and deductions by the Chinese Government may affect the Company’s profitability.

PRC Yuhe is currently entitled to an exemption from Chinese enterprises income tax, or “EIT”, because it has been recognized as “a national leading agricultural enterprise”. In accordance with the relevant regulations regarding the tax exemption, PRC Yuhe is tax-exempt as long as it continues to be recognized as “the national leading agricultural enterprise”. On January 31, 2008, the Chinese operating subsidiaries PRC Yuhe and Taihong were acquired by Bright Stand.

On March 16, 2007, the National People’s Congress of China enacted a new tax law, or the New Tax Law, whereby both FIEs and domestic companies will be subject to a uniform income tax rate of 25%. On November 28 2007, the State Council of China promulgated the Implementation Rules of the New Tax Law, the “Implementation Rules”. Both the New Tax Law and the Implementation Rules have become effective on January 1, 2008. Both the New Tax Law and the Implementation Rules provide tax exemption treatment for enterprises engaged in agricultural industries, such as farming, foresting, fishing and animal husbandry. As an enterprise engaged in the farming industry, the Company is eligible for relevant exemption treatment and does not need to pay company income tax.  In 2008, the local tax authorities informed the Company that it is eligible for relevant preferential tax treatment. However, any decision by relevant tax authorities in the future that the Company is not eligible for tax exemption treatment may materially and adversely affect the Company’s profits, business and financial performance.

The Company’s conversion from an officially recognized leading domestic agricultural enterprise to a FIE and the enactment of the New Tax Law may affect its profits and financial performance in the future because of reduction in tax exemptions.

PRC Yuhe's business may be adversely affected due to its inaccuracy in sales forecasts.

PRC Yuhe procures raw materials and produces its day-old broiler based on its sales forecasts. If it does not accurately forecast demand for its products, it may end up with excess breeding stock. If it has excess breeding stock, it may have to lower prices in order to sell its inventory.

PRC Yuhe's products might contain undetected defects that are not discovered until after shipping.

Although PRC Yuhe has strict quality control over its products and it produces high-quality day-old broilers supported by its know-how in feed ingredient composition, immunization system and breeding techniques gained through over 10 years of business and continuous research and development, its products may contain undetected problems. Problems could result in a loss or delay in market acceptance of its products and thus harm the Company’s reputation and revenue.

PRC Yuhe has sustained losses in the past and cannot guarantee profitability in the future.

PRC Yuhe was profitable in 2005 and 2007 but sustained losses in 2006.  PRC Yuhe has a profit of $10.5 million in 2008.  There is no assurance that it will be profitable in the future. In addition, PRC Yuhe's business was impacted in 2006 due to the outbreak of avian influenza. A variety of factors may cause its operating results to decline and financial condition to worsen, including:

o Competitors offering comparable products at cheaper prices;

o Continuing downward pressure on the average selling prices of its products caused by intense competition in its industry and other reasons;

o Superior product innovations by competitors;

o Rising raw material costs;

o Changes to management and key personnel; and

o Increased operating expenses relating to research and development, sales and marketing efforts and general and administrative expenses as it seeks to grow the Company’s business.

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As a result of these and additional factors, PRC Yuhe could fail to achieve its revenue targets or experience higher than expected operating expenses, or both. As a result, the Company cannot assure you that the Company will be profitable in the future.

The Company’s limited operating history may not serve as an adequate basis to judge its future prospects and operating results.

The Company has a limited operating history with respect to its current business, which may not provide a sufficient basis on which to evaluate the Company’s business or future prospects. Although the Company’ sales have grown rapidly in recent years, it cannot assure you that it will maintain profitability or that it will not incur net losses in the future. The Company expects that its operating expenses will increase as it expands. Significant failure to realize anticipated sales growth could result in significant operating losses. The Company will continue to encounter risks and difficulties frequently experienced by companies at a similar stage of development, including its potential failure to:

o Implement the Company’s business model and strategy and adapt and modify them as needed;

o Maintain the Company’s current, and develop new, relationships with customers;

o Manage the Company’s expanding operations and product offerings, including the integration of any future acquisitions;

o Maintain adequate control of expenses;

o Attract, retain and motivate qualified personnel;

o Protect the Company’s reputation and enhance customer loyalty; and

o Anticipate and adapt to changing conditions in the poultry industry and other markets in which the Company operates as well as the impact of any changes in government regulation, mergers and acquisitions involving its competitors, technological developments and other significant competitive and market dynamics.

If the Company is not successful in addressing any or all of these risks, its business may be materially and adversely affected.

The Company may not be able to sustain its current growth rates, and even if the Company maintains them, it is susceptible to many challenges relating to its growth.

The Company has experienced fluctuation of growth in the scope and complexity of its business. The Company’ sales revenue increased by $12.54 million, or 56.79%, to $34.62 million for the year ended December 31, 2008 from $22.08 million for the year ended December 31, 2007.  Using the funds raised from sale of its common stock on March 12, 2008 to fund its expansion plans, the Company plans to grow its sales revenue for the year ending December 31, 2009 but it may not be able to grow its sales revenue as expected and any future growth in the Company’ sales revenue is not expected to be at a rate nearly as high as the revenue growth it experienced from 2007 to 2008. If the Company is unable to manage its growth effectively, it may not be able to take advantage of market opportunities, develop new products, enhance its technological capabilities, satisfy customer requirements, execute its business plan or respond to competitive pressures, for instance:

o Hire, train, integrate and manage additional qualified technicians and breeding farm directors and sales and marketing personnel;

o Implement additional, and improve existing, administrative, financial and operations systems, procedures and controls;

o Continue to enhance manufacturing and customer resource management systems;

o Continue to expand and upgrade the Company’s feed ingredient composition, poultry immunization system and breeding technology;

o Manage multiple relationships with distributors, suppliers and certain other third parties; and

o Manage the Company’s financial condition.

The Company’ success also depends largely on its ability to anticipate and respond to expected changes in future demand for the Company’s products, and its broilers’ performance and disease resistance ability. If the timing of the Company’s expansion does not match market demand, its business strategy may need to be revised. If the Company over-expands and demand for its products does not increase as it may have projected, its financial results will be materially and adversely affected. However, if the Company does not expand, and demand for its products increases sharply, its business could be seriously harmed because it may not be as cost-effective as its competitors due to its inability to take advantage of increased economies of scale. In addition, the Company may not be able to satisfy the needs of its current customers or attract new customers, and the Company may lose credibility and its relationships with customers may be negatively affected. Moreover, if the Company does not properly allocate its resources in line with future demand for its products, it may miss changing market opportunities and its business and financial results could be materially and adversely affected. The Company cannot assure you that it will be able to successfully manage its growth in the future.

The loss of key personnel or the failure to attract or retain specialized technical and management personnel could impair the Company’s ability to grow its business.

The Company relies heavily on the services of its key employees, including Gao Zhentao, the Company’s Chief Executive Officer, Han Chengxiang, the Company’s Chief Production Officer, and Hu Gang, the Company’s Chief Financial Officer. In addition, the Company’s engineers and other key technical personnel are significant assets and are the sources of PRC Yuhe's technological and product innovations. PRC Yuhe depends substantially on the leadership of a small number of farm directors and technicians who are devoted to research and development. Additionally, 85% of PRC Yuhe's products are sold through third party distributors. Most of them are exclusive distributors and the Company expects them to be PRC Yuhe's future main sales force. The loss of these distributors could have a material adverse effect on the Company’s business, results of operations and financial condition. The Company believes PRC Yuhe's future success will depend upon its ability to retain these key employees and sales distributors. The Company may not be successful in attracting and retaining sufficient numbers of technical personnel to support PRC Yuhe's anticipated growth. Despite the incentives it provides, the Company’s current employees may not continue to work for PRC Yuhe, and if additional personnel are required for PRC Yuhe's operations, the Company may not be able to obtain the services of additional personnel necessary for PRC Yuhe's growth. In addition, the Company does not maintain “key person” life insurance for any of PRC Yuhe's senior management or other key employees. The loss of the key employees or the inability to attract or retain qualified personnel, including technicians, could delay the development and introduction of, and have an adverse effect on PRC Yuhe's ability to sell, its products, as well as its overall growth.

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In addition, if any other members of PRC Yuhe's senior management or any of its other key personnel join a competitor or form a competing company, the Company may not be able to replace them easily and the Company may lose customers, business partners, key professionals and staff members.

The Company does not have any registered patents or other registered intellectual property on its production processes and the Company may not be able to maintain the confidentiality of its processes.

The Company has no patents or registered intellectual property covering its production processes and the Company relies on the confidentiality of its production processes in producing a competitive product. The confidentiality of the Company’s know-how may not be maintained and the Company may lose any meaningful competitive advantage which might arise through its proprietary processes. Due to the lack of such protection, unauthorized parties may attempt to copy or otherwise obtain and use the Company’s proprietary production technology. Monitoring unauthorized use of the Company’s production process is difficult, particularly in China. This may have a material adverse effect on the Company’s competitive advantage.

On the other hand, PRC Yuhe is the registered owner of two PRC trademarks, one consisting of the stylized Chinese characters “Yu He” and accompanying logo in live agricultural products, while the other consisting of the stylized Chinese characters of “Yu He” and accompanying English Characters “Y H”. PRC Yuhe and Taihong have no other intellectual property protection for their brand of day-old broiler, nor do they have any intellectual property protection covering their production processes. The registration period for both trademarks is ten years and will expire on April 6, 2010 and October 27, 2015. While trademark registration can be renewed in the PRC, it is not certain that such registration can be successfully renewed or what effective remedies the Company would have against competitors who use the name “Yuhe” for their chicken products in the PRC. The Company does not consider “Yu He” to be a consumer brand because it is not well recognized by customers who purchase chickens in retail food markets, although this brand is recognized by end users who raise broilers to market size for sale to customers, retail food markets and restaurants.

Because the Company is expanding capacity, it may be forced to make sales to customers whose creditworthiness is not known to the Company.  The Company may not be able to collect receivables which are incurred by these customers.

Although the Company currently sells its products on a cash payment basis, its ability to receive payment for its products depends on the continued creditworthiness of its customers. In order to pay its expansion costs, the Company may be required to make sales to customers who are less creditworthy than its historical customers. The Company’s customer base may change if its sales increase because of the Company’s added capacity. If the Company is not able to collect its receivables, its revenues and profitability will be negatively affected.

The Company does not have insurance coverage. Any material loss to the Company’s properties or assets will have a material adverse effect on its financial condition and operations.

The Company and its subsidiaries are not covered by any insurance. As a result, any material loss or damage to the Company’s properties or other assets, or personal injuries arising from its business operations would have a material adverse affect on the Company’s financial condition and operations.

The Company will incur increased costs as a result of being a public company.

As a public company, the Company incurs significant legal, accounting and other expenses that a private company does not incur. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission and stock exchanges have required changes in corporate governance practices of public companies. The Company expects that these new rules and regulations will increase its legal and financial compliance costs and will make some activities more time-consuming and costly. For example, as a result of becoming a public company, the Company needs to create additional board committees and adopt additional policies regarding internal controls and disclosure controls and procedures. The Company will incur additional costs associated with public company reporting requirements and compliance with the internal controls of Section 404 of the Sarbanes-Oxley Act of 2002. The Company also expects these new rules and regulations will make it more difficult and more expensive for it to obtain directors’ and officers’ liability insurance. As a result, the Company’s general and administrative expenses will likely increase and it may be more difficult for the Company to attract and retain qualified persons to serve on its board of directors or as executive officers. The Company is currently evaluating and monitoring developments with respect to these new rules, and the Company cannot predict or estimate the amount of additional costs it may incur or the timing of such costs.

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Increased water, energy and gas costs would increase PRC Yuhe's expenses and reduce PRC Yuhe's profitability.

PRC Yuhe requires a substantial amount, and as it expands its business it will require additional amounts, of water, electricity and natural gas to produce and process its broiler products. The prices of water, electricity and natural gas fluctuate significantly over time. One of the primary competitive factors in the Chinese broiler market is price, and it may not be able to pass on increased costs of production to its customers. As a result, increases in the cost of water, electricity or natural gas could substantially harm the Company’s business and results of operations.

Risks Related to Doing Business in China

Because the Company’s operations are all located outside of the United States and are subject to Chinese laws, any change of Chinese laws may adversely affect the Company’s business.

All of the Company’s operations are in China, which exposes the Company to risks, such as exchange controls and currency restrictions, currency fluctuations and devaluations, changes in local economic conditions, changes in Chinese laws and regulations and exposure to possible expropriation or other PRC Government’s actions. These factors may have a material adverse effect on the Company’s operations, results of operations and financial condition.

Because Chinese law governs almost all of the Company’s material agreements, the Company may not be able to enforce its legal rights in China or elsewhere, which could result in a significant loss of business, business opportunities, or capital. There is no assurance that the Company will be able to enforce any of its material agreements or that remedies will be available outside of China. The system of laws and the enforcement of existing laws in China may not be as certain in implementation and interpretation as in the United States. The Chinese judiciary is relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. The inability to enforce or obtain a remedy under any of the Company’s future agreements could result in a significant loss of business, business opportunities or capital.

Additionally, substantially all of the Company’s assets are located outside of the United States and most of the Company’s officers and directors reside outside of the United States. As a result, it may not be possible for United States investors to enforce their legal rights, to effect service of process upon the Company’s directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of the directors and officers under Federal securities laws. Moreover, the Company has been advised that China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States. Further, it is unclear if extradition treaties now in effect between the United States and China would permit effective enforcement of criminal penalties of the federal securities laws.

The Company may have difficulty establishing adequate management, legal and financial controls in China, which could impair its planning processes and make it difficult to provide accurate reports of the Company’s operating results.

China historically has not followed Western-style management and financial reporting concepts and practices, and its access to modern banking, computer and other control systems has been limited. The Company may have difficulty in hiring and retaining a sufficient number of qualified employees to work in China in these areas. As a result of these factors, the Company may experience difficulty in establishing management, legal, disclosure and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet requirements for publicly-traded companies in the United States, making it difficult for the Company’s management to forecast its needs and to present the results of operations accurately at all times.

The Company is aware of its obligations to establish and maintain adequate controls and procedures and that management has included its assessment in the 2008 10-K. In addition, the Company is interviewing outside accounting firms to assist the Company to test its internal controls over financial reporting and to prepare internal control reports as required by law. Mr. Hu Gang, the Company’s Chief Financial Officer, has experience in dealing with compliance with the Sarbanes-Oxley Act. While the Company is recruiting other accounting staff who are familiar with the Sarbanes-Oxley Act and competent to assist the Company in establishing and maintaining effective controls and to provide reports on internal control over financial reporting in future SEC filings, the Company may not be successful in recruiting such staff and satisfying the requirements of the Sarbanes-Oxley Act, in which case the Company’s financial statements may not be accurate and reliable.

The Company faces risks associated with currency exchange rate fluctuations; any adverse fluctuations may adversely affect its operating margins.

The vast majority of the Company’s revenue and expenses are in Chinese currency. Conducting business in currencies other than U.S. dollars subjects the Company to fluctuations in currency exchange rates that could have a negative impact on the Company’s reported operating results. Fluctuations in the value of the U.S. dollar relative to other currencies impact the Company’s revenue, cost of revenue and operating margins and result in foreign currency translation gains and losses. Historically, the Company has not engaged in exchange rate hedging activities. Although the Company may implement hedging strategies to mitigate this risk, these strategies may not eliminate the Company’s exposure to foreign exchange rate fluctuations and may involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the strategy and potential accounting implications.

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If relations between the United States and China worsen, the Company’s share price may decrease and the Company may have difficulty accessing U.S. capital markets.

At various times during recent years, the United States and China have had disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China could adversely affect the market price of the Company’s common stock and the Company’s ability to access U.S. capital markets.

The Chinese Government could change its policies toward private enterprises, which could adversely affect the Company’s business.

The Company’s business is subject to political and economic uncertainties in China and may be adversely affected by its political, economic and social developments. Over the past several years, the Chinese Government has pursued economic reform policies including the encouragement of private economic activity and greater economic decentralization. The Chinese Government may not continue to pursue these policies or may alter them to the Company’s detriment from time to time. Changes in policies, laws and regulations, or in their interpretation or the imposition of confiscatory taxation, restrictions on currency conversion, restrictions or prohibitions on dividend payments to shareholders, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on the Company’s business. Nationalization or expropriation could result in the total loss of the Company’s investment in China.

Economic, political and social conditions in China could affect the Company’s business.

All of the Company’s business, assets and operations are located in China. The economy of China differs from the economies of most developed countries in many respects, including government involvement, level of development, growth rate, control of foreign exchange, and allocation of resources. The economy of China has been transitioning from a planned economy to a more market-oriented economy. Although the Chinese Government has implemented measures recently emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the Chinese Government. In addition, the Chinese Government continues to play a significant role in regulating industry by imposing industrial policies. It also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Therefore, the Chinese Government’s involvement in the economy could adversely affect the Company’s business operations, results of operations and/or financial condition.

The Chinese Government may implement policies that could have an adverse effect on the Company’s business and results of operations.

The Chinese Government has implemented various measures from time to time to control the rate of economic growth. Some of these measures benefit the overall economy of China, but may have a negative effect on the Company.

Government control of currency conversion and future movements in exchange rates may adversely affect the Company’s operations and financial results.

The Company receives substantially all of its revenue in Renminbi, the currency of China. A portion of such revenues may be converted into other currencies to meet the Company’s foreign currency obligations. Foreign exchange transactions under the Company’s capital account, including principal payments in respect of foreign currency-denominated obligations, continue to be subject to significant foreign exchange controls and require the approval of the State Administration of Foreign Exchange in China. These limitations could affect the Company’s ability to obtain foreign exchange through debt or equity financing, or to obtain foreign exchange for capital expenditures.

The Chinese Government controls its foreign currency reserves through restrictions on imports and conversion of Renminbi into foreign currency. Although the exchange rate of the Renminbi to the U.S. dollar was stable from January 1, 1994 to July 2005, and the Chinese Government has stated its intention to maintain the stability of the value of Renminbi, the exchange rate of the Renminbi to the U.S. dollar is continuously revalued since 2005 and the exchange rates may further change. The Company’s financial condition and results of operations may also be affected by changes in the value of certain currencies, other than the Renminbi, in which the Company’s earnings and obligations are denominated.

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The Company’s business is regulated by the PRC farming authorities and it needs production permit and/or immunization certificate from the farming authorities to carry out its business. Any suspension, discontinuation or revocation of the Company’s current production permits and/or immunization certificate may materially and adversely impact the Company’s business.

The Farming Bureau of Shandong Province and its local counterpart in Weifang City are the primary governmental regulators and supervisors of both PRC Yuhe’s and Taihong’s current businesses. Under relevant laws and regulations, both PRC Yuhe and Taihong must obtain relevant production permits from the Farming Bureau of Shandong Province to carry out their respective businesses. In addition, PRC Yuhe, as a company engaging in the breeder business, must obtain an immunization certificate from the local Farming Bureau in Weifang City. PRC Yuhe’s breeder production permit from the Animal Husbandry Bureau of Shandong Province is valid from August 5, 2008 to August 4, 2011.  The immunization certificate from the local farming bureau in Weifang City was issued on November 10, 2005 and does not have an expiry date. Taihong’s feed production permit was issued on December 12, 2007 and is valid for a period of three years.

The Farming Bureau authorities have been strengthening their supervision over the breeder and feed businesses in the past years, and new PRC laws, rules and regulations may be introduced to impose additional requirements applicable for the application and obtaining of relevant production permits and/or immunization certificate. The Company cannot assure you its current production permits and immunization certificate can maintain their full effect in the future, although the Company will try its best to meet with any new requirement. Any suspension, discontinuation or revocation of the Company’s current production permits and/or immunization certificate may cause material and adverse impact on the Company’s business, financial performance and prospect.

Because the Company’s operations are located in China, information about the Company’s operations are not readily available from independent third-party sources.

Because PRC Yuhe and Taihong are based in China, shareholders may have greater difficulty in obtaining information about them on a timely basis than would shareholders of an entirely U.S.-based company. Their operations will continue to be conducted in China and shareholders may have difficulty in obtaining information about them from sources other than the subsidiaries themselves. Information available from newspapers, trade journals, or local, regional or national regulatory agencies such as issuance of construction permits and contract awards for development projects will not be readily available to shareholders. Shareholders will be dependent upon PRC Yuhe and Taihong’s management for reports of their progress, development, activities and expenditure of proceeds.

The Company may in the future be subject to claims and liabilities under environmental, health, safety and other laws and regulations, which could be significant.

The Company’s operations are subject to various laws and regulations, including those governing wastewater discharges and the use, storage, treatment and disposal of hazardous materials. The applicable requirements under these laws are subject to amendment, to the imposition of new or additional requirements and to changing interpretations by governmental agencies or courts. The PRC Government encourages a stringent policy on enforcement and compliance relating to environmental protection although it has no environmental regulation activities at the moment. For instance, the Company is allowed to use coal heaters at its breeder farm. However, this may be prohibited in the future. Regarding the treatment of sewage at breeder farms, there is no law regulating this issue at the moment. However, this may change in the future as well. Furthermore, business operations currently conducted by the Company or previously conducted by others at real property owned or operated by the Company, business operations of others at real property formerly owned or operated by the Company and the disposal of waste at third party sites expose the Company to the risk of claims under environmental, health and safety laws and regulations. The Company could incur material costs or liabilities in connection with claims related to any of the foregoing.

Recent PRC regulations relating to the establishment of offshore special purpose companies by PRC domestic residents, mergers with and acquisitions of PRC domestic companies by foreign investors, and relevant approval and registration requirement may subject the Company’s PRC resident beneficial owners to personal liability, limit the Company’s ability to inject capital into its PRC subsidiaries, limit the Company’ subsidiaries’ ability to increase their registered capital or distribute profits to the Company, or may otherwise adversely affect the Company.

The China State Administration of Foreign Exchange, “SAFE”, issued a public notice in October 2005 requiring PRC domestic residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies, referred to in the notice as an “offshore special purpose company.” PRC domestic residents who are shareholders of offshore special purpose companies and have completed round trip investments but did not make foreign exchange registrations for overseas investments before November 1, 2005 were retroactively required to register with the local SAFE branch before March 31, 2006. PRC resident shareholders are also required to amend their registrations with the local SAFE in certain circumstances.

Six Chinese ministries jointly promulgated the Rules on Mergers with and Acquisitions of PRC Domestic Companies by Foreign Investors, or “M&A Rules”, on August 8, 2006, which became effective on September 8, 2006. The M&A Rules subject the acquisition of domestic companies by offshore special purpose companies controlled by PRC residents, who at the same time are controlling shareholders of the domestic companies, to the approval of Ministry of Trade. There are also various stringent requirements applicable to foreign acquisition of domestic companies through special purpose companies under the M&A Rules.

The Company undertook a corporate restructuring in the PRC in January 2008 under which Bright Stand, a company owned by Japanese citizen Mr. Kunio Yamamoto, acquired the control of PRC Yuhe and Taihong from Mr. Gao Zhentao and Mr. Gao Zhenbo, both of whom are PRC domestic residents. After consultation with China legal counsel, the Company does not believe that any of Messrs. Gao Zhentao or Gao Zhenbo or the Company is subject to the SAFE registration requirement or requirements under the M&A Rules, however, the Company cannot provide any assurances that the Company or Messrs. Gao Zhentao and Gao Zhenbo, who are both PRC domestic residents, will not be required to make or obtain any applicable registrations or approvals required by these regulations in the future. The failure or inability of Messrs. Gao Zhentao and Gao Zhenbo to comply with the registration procedures set forth therein may subject the Company to fines and legal sanctions, restrict the Company’s cross-border investment activities, or limit the Company’s PRC subsidiaries’ ability to distribute dividends to Bright Stand or the Company or obtain foreign currency-denominated loans to the Company.

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As it is uncertain how the SAFE regulations and the M&A Rules will be interpreted or implemented, the Company cannot predict how these regulations will affect its business operations or future strategy, but they may have a material adverse effect on the Company and its business operations. For example, Messrs. Gao Zhentao and Gao Zhenbo may in the future acquire the Company’s equity interest, and there is no assurance that Chinese laws and regulations will not be implemented in such a way that in the future, if Messrs. Gao Zhentao and Gao Zhenbo buy some or all of the Company’s equity interest, Messrs. Gao Zhentao and Gao Zhenbo may not be deemed to have complied fully with SAFE regulations and the M&A Rules. The Company may be subject to more stringent review and approval process with respect to the Company’s foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect the Company’s results of operations and financial condition. In addition, if the Company decides to acquire a PRC domestic company, the Company cannot assure you that it or its owners, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the SAFE regulations. This may restrict the Company’s ability to implement its acquisition strategy and could adversely affect the Company’s business and prospects.

The Company has about $11 million in outstanding bank debt and $2 million in operating lease obligations.

The Company presently has, and expects to continue to have, an amount of indebtedness and certain contractual obligations. The Company’s indebtedness and contractual obligations could have important consequences to stockholders. For example, it could: increase the Company’s vulnerability to general adverse economic conditions; require the Company to dedicate a substantial portion of its cash flow from operations to payments on the Company’s indebtedness or contracts, thereby reducing the availability of its cash flow to fund working capital, capital expenditures, potential growth of the Company’s business and for other general corporate purposes; limit its flexibility in planning for, or reacting to, changes in the Company’s business and the industry in which the Company operates; place the Company at a competitive disadvantage compared to its competitors that have less debt or less contractual obligations; and limit the Company’s ability to borrow additional funds, and failure to comply with those covenants could result in an event of default and require immediate repayment of all indebtedness or payment under the relevant contracts. Any of these events could have a material adverse effect on the Company. The Company’s ability to make payments on its indebtedness and contracts and to refinance its indebtedness will depend on the Company’s ability to generate cash in the future, which is dependent on various factors. These factors include the commodity prices of feed ingredients and chicken and general economic, financial, competitive, legislative, regulatory and other factors that are beyond the Company’s control.

Risks Associated with this Offering and the Company’s Common Stock

The Company’ stock is thinly traded and shareholders may not be able to liquidate their investment at all, or may only be able to liquidate the investment at a price less than the Company’s value.

The Company’s common stock currently is very thinly traded and the price of the Company’s common stock may not reflect its value. In the month of March 2009, the Company’s average daily trading volume was 3,865 shares. Consequently, investors may not be able to liquidate their investment at all, or if they are able to liquidate, it may only be at a price that does not reflect the value of the business and is less than the price they paid for the shares. The most recent market trade occurred on March 31, 2009 at the price of $2.00 per share, while the price the Company sold its shares in the private placement on March 12, 2008 was $3.09 per share. There is a lack of any meaningful market value quotations for the Company’ shares. As the trading volume is very thin and the price is volatile, the Company’ shareholders may not be able to sell their shares at a time and price they desire and when they desire, if at all. Because the trading volume and price for the Company’ stock are low, many brokerage firms are not willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the Company’ stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of common stock like the Company’s as collateral for any loans.

Because the Company is subject to the Penny Stock Rules, sale of the Company’ stock by investors may be difficult.

The Company is subject to the “penny stock” rules of the Securities and Exchange Commission, or SEC. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document required by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.

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In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for the Company’s common stock. As long as the Company’s common stock is subject to the penny stock rules, the holders of such common stock may find it more difficult to sell their securities.

The Company’ stock prices could decrease if a substantial number of shares are sold under Rule 144.

A substantial majority of the Company’s outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended, or the 1933 Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the 1933 Act and as required under applicable state securities laws. Rule 144 provides in essence that a person who has held restricted securities for a period of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1.0% of the Company’s outstanding common stock or the average weekly trading volume of the common stock during the four weeks prior to the sale. There is no limit on the amount of restricted securities that may be sold by a non-affiliate after the restricted securities have been held by the owner for a period of one year or more. If a substantial number of shares of the Company’ stock are sold under Rule 144 or other exemption, it could cause the price of the Company’ stock to go down.

The conversion of outstanding derivative securities could cause your ownership in the Company to be diluted and may decrease the value of your investment.

Outstanding derivative securities and current and future obligations to issue the Company’ securities to various parties may dilute the value of your investment.  The Company has issued warrants to Roth Capital Partners, LLC and WLT Brothers Capital, Inc. to purchase 476,014 shares of common stock. The warrants have a strike price equal to $3.706, have a term of three years starting from March 12, 2008 and permit cashless or cash exercise at all times that they are exercisable. The warrants are exercisable at any time 6 months after their issuance. For the length of time these warrants are outstanding and exercisable, the warrant holder will have an opportunity to profit from a rise in the market price of the Company’s common stock without assuming the risks of ownership. This may have an adverse effect on the terms upon which the Company can obtain additional capital. It should be expected that the warrant holder would exercise the warrants at a time when the Company would be able to obtain equity capital on terms more favorable than the exercise prices provided by the warrants. October 27, 2008, the Company issued 178,848 new shares to Roth Capital Partners, LLC based on their cashless exercise of 333,198 warrants issued to it as compensation for their services as co-placement agent.  There are no preemptive rights in connection with the Company’s common stock.

The Company does not intend to pay dividends in the foreseeable future.

As a result, a return on an investment in shares of the Company’s common stock may be realized only through a sale of such shares if at all. The Company’s board of directors does not intend to pay any dividends in the foreseeable future. The Company does not plan on making any cash distributions in the manner of a dividend or otherwise. The Company’s board of directors presently intends to follow a policy of retaining all earnings, if any, for use in its business operations. The holders of the Company’s common stock are entitled to receive dividends when, as and if declared by the Company’s board of directors out of funds legally available therefor. To date, the Company has paid no dividends.

The Company has the right to issue additional common stock and preferred stock without the consent of shareholders. This would have the effect of diluting your ownership in the Company and could decrease the value of your stock.

As of December 31, 2008, the Company had 500 million shares of common stock authorized for issuance, among which only 15,722,180 shares of common stock were issued and outstanding. The Company has outstanding warrants to purchase 297,166 shares of common stock. October 27, 2008, the Company issued 178,848 new shares to Roth Capital Partners, LLC based on their cashless exercise of 333,198 warrants issued to it as compensation for their services as co-placement agent.  Approximately 484 million authorized shares of common stock are available for issuance for any purpose without shareholder approval that would dilute a shareholder’s percentage ownership of the Company.

In addition, the Company’s articles of incorporation authorize the issuance of shares of preferred stock, the rights, preferences, designations and limitations of which may be set by the board of directors. While no preferred stock is currently outstanding or subject to be issued, the articles of incorporation have authorized issuance of up to one million shares of preferred stock in the discretion of the board of directors. Such preferred stock may be issued upon filing of amended articles of incorporation and the payment of required fees; no further shareholder action is required. If issued, the rights, preferences, designations and limitations of such preferred stock would be set by the board of directors and could operate to the disadvantage of the outstanding common stock. Such terms could include, among others, preferences as to dividends and distributions on liquidation.

The Company’s major shareholders and their affiliates will control the outcome of matters requiring shareholder approval.

The Company’s major shareholders beneficially own approximately 93% of its outstanding shares of common stock. Consequently, these shareholders have the ability, when acting together, to control the election of the Company’s directors and the outcome of corporate actions requiring shareholder approval, such as a merger or a sale of the Company or a sale of all or substantially all of its assets. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to the Company’s other shareholders and be disadvantageous to the Company’ shareholders with interests different from those of the Company’s officers, directors and affiliates. These shareholders also have significant control over the Company’s business, policies and affairs. Additionally, this significant concentration of share ownership may adversely affect the trading price for the Company’s common stock because investors often perceive disadvantages in owning stock in companies with controlling shareholders.

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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Company’s future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined in the section of this prospectus entitled “Risk Factors.” These factors may cause the Company’s actual results to differ materially from any forward-looking statement as a result of a number of risks and uncertainties, including without limitation: (a) limited amount of resources devoted to expanding the Company’s business plan; and (b) the Company’s failure to implement the Company’s business plan within the time period the Company originally planned to accomplish.

Such statements are intended to be covered by the safe harbor created by such provisions. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, events, levels of activity, performance or achievements. The Company is under no duty to update any of the forward-looking statements after the date of this prospectus to conform such statements to actual results or to changes in the Company’s expectations.

USE OF PROCEEDS

Each of the Selling Security Holders will receive all of the net proceeds from the sale of shares by that shareholder. The Company will not receive any of the net proceeds from the sale of the shares. The Selling Security Holders will pay any underwriting discounts and commissions and expenses incurred by the Selling Security Holders for brokerage, accounting, tax or legal services or any other expenses incurred by the Selling Security Holders in offering or selling their shares. The Company will bear all other costs, fees and expenses incurred in effecting the registration of the shares covered by this prospectus, including without limitation blue sky registration and filing fees, and fees and expenses of the Company’s legal counsel and accountants.

DIVIDEND POLICY

Prior to the Company’s entering into the Equity Transfer Agreement, none of Bright Stand, PRC Yuhe or Taihong has declared any dividends.

The Company entered into a Stock Purchase Agreement, the “Stock Purchase Agreement”, with Halter Financial Investments, L.P., a Texas limited partnership, “Halter Financial”, dated as of November 6, 2007, pursuant to which it agreed to sell to Halter Financial 951,996 unregistered shares of its common stock for $425,000. The transaction closed on November 16, 2007. As a result of the transaction, Halter Financial holds 951,996 shares, or 87.5% of the Company’s 1,087,994 shares of common stock then outstanding following the completion of all matters referred to above. The Stock Purchase Agreement also required the Company’s Board of Directors to declare and pay a special cash dividend of  $3.088 per share to the Company’s shareholders on November 19, 2007. Halter Financial did not participate in such dividend. The dividend was payable to shareholders of record on November 15, 2007, which was prior to the date the shares were issued to Halter Financial under the Stock Purchase Agreement. The dividend payment date was November 19, 2007. The dividend was payable to the Company’s shareholders who held 135,999 shares of the Company’s common stock and resulted in a total dividend distribution of $420,000. The funds for the dividend came from the $425,000 proceeds received from the sale of common stock to Halter Financial.

Any future determination as to the declaration and payment of dividends on the Company’s common stock will be made at the discretion of the Company’s board of directors out of funds legally available for such purpose. The Company is under no contractual obligations or restrictions to declare or pay dividends on its common stock. In addition, the Company currently has no plans to pay such dividends. However, even if it wishes to pay dividends, because its cash flow is dependent on dividend distributions from its affiliated entities in China, the Company may be restricted from distributing dividends to its holders of common stock in the future if at the time it was unable to obtain sufficient dividend distributions from PRC Yuhe or Taihong. The board of directors currently intends to retain all earnings for use in the business for the foreseeable future.

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MARKET FOR COMMON EQUITY

Market Information

The Company’s common stock is quoted under the symbol, “YUII.OB” on the OTC Bulletin Board. Trading in the common stock in the over-the-counter market has been limited and sporadic and the quotations set forth below are not necessarily indicative of actual market conditions. The following sets forth high and low bid price quotations for each calendar quarter during the last two fiscal years that trading occurred or quotations were available. All prices prior to the quarter ended December 31, 2007 reflect activity in the Company’s common stock prior to the announcement of the Company’s agreement to enter into the Equity Transfer Agreement to acquire Bright Stand.”  Further, all prices reflect inter-dealer prices without retail mark-up, mark-down, or commission and may not necessarily reflect actual transactions. The following share prices are quoted on OTC Bulletin Board trading system.  

	High*		Low*
2007 – Quarter Ended:
March 31, 2007		2.90		1.05
June 30, 2007		1.95		0.55
September 30, 2007		0.61		0.60
December 31, 2007		1.40		0.60
2008 – Quarter Ended:
March 31, 2008		0.60		0.45
June 30, 2008		8.00		8.00
September 30, 2008		6.50		6.50
December 31, 2008		4.00		4.00
2009 – Quarter Ended:
March 31, 2009		2.00		2.00

*      Source: Yahoo Finance

The most recent market trade of the Company’s common stock occurred on March 31, 2009 at the price of $2.00 per share. There is a lack of any meaningful market value quotations for the Company’s shares.

Holders

As of December 31, 2008, there were 15,722,180 shares outstanding and approximately 46 holders of record of the Company’s common stock.

Securities Authorized for Issuance under Equity Compensation Plans

The Company has not reserved any securities for issuance under any equity compensation plan, as it currently has not adopted any equity compensation plan.

DILUTION

The Company is not selling any shares in this offering. All of the shares sold in this offering will be held by the Selling Security Holders at the time of the sale, so that no dilution will result from the sale of the shares.

MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION

  You should read the following description of the Company’s results of operations and financial condition in conjunction with the Company’s consolidated audited financial statements presented in this report. Unless otherwise specified, all dollar amounts are in U.S. dollars.

Overview

The Company is in the middle of the broiler chicken supply chain. The Company purchases baby parent breeding stocks from primary breeder farms, raises them for hatching eggs and sells live day-old broilers to the market. The Company’s business segment along the broiler supply chain has the highest margin along the supply chain. The Company produces high quality day-old broilers supported by its know-how in the areas of feed ingredient composition, immunizations system and breeding techniques, gained through over a decade of experience.

Unless otherwise noted, all dollar figures provided herein are translated into United States Dollars from Renminbi 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.

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Unless otherwise noted, all historical financial information prior to March 12, 2008 refers to PRC Yuhe, which includes the accounts of Taihong.

Results of Operations – Comparison of twelve months ended December 31, 2008 and 2007

The Company has consolidated the results of PRC Yuhe and Taihong into its Consolidated Financial Statements from February 1, 2008 to December 31, 2008. For comparative purposes, the Company has provided a pro forma Consolidated Statement of Operations for each of the twelve months ended December 31, 2008 and 2007 (please refer to F-61 – F-64) to provide comparable presentation to its reported results for the twelve months ended December 31, 2008 and 2007.  The Company believes that providing this pro forma financial statement as if it had consolidated PRC Yuhe and Taihong as of January 1, 2007 may assist investors in assessing performance between periods and in developing expectations of future performance.

	All amounts,						All amounts,						All amounts,						Increase/
	other than			As a			other than			As a			other than			As a			(Decrease)		Increase/
	percentage, in			percentage of			percentage, in			percentage of			percentage, in			percentage of			Dollar ($)		(Decrease)
	U.S. dollars			net revenues			U.S. dollars			net revenues			U.S. dollars			net revenues			U.S. dollars		Percentage
	For the year			For the year			For the year			For the year			For the year			For the year			For the year		For the year
	ended			ended			ended			ended			ended			ended			ended		ended
	December 31			December 31			December 31			December 31			December 31			December 31			December 31		December 31
	2008			2008			2008			2008			2007			2008			2008		2008
	(As reported)						(Pro forma)						(Pro forma)
Sales revenue		34,626,282			100.00	%		36,117,611			100.00	%		22,075,224			100.00	%		14,042,387		63.61	%
Costs of revenue		21,572,722			62.30	%		22,910,160			63.43	%		13,502,545			61.17	%		9,407,615		69.67	%
Gross profit		13,053,560			37.70	%		13,207,451			36.57	%		8,572,679			38.83	%		4,634,772		54.06	%
Selling expenses		425,460			1.23	%		454,457			1.26	%		312,927			1.42	%		141,530		45.23	%
General and administrative expenses		2,538,590			7.33	%		2,661,285			7.37	%		1,112,758			5.04	%		1,548,527		139.16	%
Operating income		10,089,510			29.14	%		10,091,709			27.94	%		7,146,994			32.38	%		2,944,715		41.20	%
Bad debts (recovery) expenses		(813,000	)		-2.35	%		(1,032,893	)		-2.86	%		231,569			1.05	%		(1,264,462		-546.04	%
Interest income		249,738			0.72	%		249,743			0.69	%		796			0.00	%		248,947		31274.75	%
Other income (expense)		75,210			0.22	%		80,814			0.22	%		(106,246	)		-0.48	%		187,060		-176.06	%
Interest expenses		702,573			2.03	%		788,740			2.18	%		924,915			4.19	%		(136,175		-14.72	%
Net income		10,524,885			30.40	%		10,666,419			29.53	%		5,885,060			26.66	%		4,781,359		81.25	%

 Net revenue (As reported). Sales revenue of $34.6 million represents sales of 73 million day-old broilers from the period February 1, 2008 to December 31, 2008.

Net revenue (Pro forma). Sales revenue increased by $14 million, or 63.6%, to $36.1 million for the twelve months ended December 31, 2008 from $22.1 million for the twelve months ended December 31, 2007. The increase was driven by the increase in sales volume of 32 million day-old broilers, or 73.4%, from 43.6 million birds for the twelve months ended December 31, 2007 to 75.6 million birds for the twelve months ended December 31, 2008.  The increase in sales volume was partially offset by a decrease in selling price. The selling price of day-old broilers decreased from 3.75 RMB per bird for the twelve months ended December 31, 2007 to approximately 2.93 RMB per bird, or 16.9%, for the twelve months ended December 31, 2008. The increase in sales volume was a result of expansion in production capacity as well as the increase of the parent breeders volume in the year 2008. The price decline was primarily the result of a sharp price decrease in June and July due to the Olympic Games.

Sales of retired breeder stocks increased $1.8 million, or 191%, from $1 million for the year ended December 31, 2007 to $2.8 million for the year ended December 31, 2008. There are two reasons for this sales growth, the first is the significant increase in the volume of parent breeders in year 2008. The second reason is the old age of certain breeder stock, whose productivity has decreased.

Sales of eggs increased $0.12 million, or 45%, from $0.28 million for the year ended December 31, 2007 to $0.4 million for the year ended December 31, 2008. This increase is in line with the growth of the day old broiler sales volume.

Since almost all the products of Taihong were supplied to its parent, PRC Yuhe, revenue contributed from Taihong’s external sales comprised only approximately 1 % of the Company’s total revenues for the twelve months ended December 31, 2008.

Cost of revenues (As reported). The Company’s cost of revenues amounted to approximately $21.6 million, or representing approximately 62% of its sales revenue from the period February 1, 2008 to December 31, 2008.

Cost of revenues (Pro forma). The Company’s cost of revenues increased by $9.4 million, or 70%, to $23 million for the twelve months ended December 31, 2008 from $13.5 million for the twelve months ended December 31, 2007. The main reason for the increase in the cost of revenues was the increase in sales volume. As a percentage of net revenues, the cost of revenues increased slightly by 2%, from 61% for the twelve months ended December 31, 2007, to 63% for the twelve months ended December 31, 2008. The increase in cost of revenues as a percentage of net revenues was mainly due to the decrease in the day old broiler selling price in year 2008, as the Company discussed above.

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Gross profit (As reported). Gross profit amounted to approximately $13.1 million from the period February 1, 2008 to December 31, 2008.  Gross profit as a percentage of net revenues was approximately 37.7% from the period February 1, 2008 to December 31, 2008.

Gross profit (Pro forma). The Company’s gross profit increased by $4.6 million to $13.2 million for the twelve months ended December 31, 2008 from $8.6 million for the twelve months ended December 31, 2007.  Gross profit as a percentage of net revenues was 36.6% for the twelve months ended December 31, 2008, as compared to 38.8% for the twelve months ended December 31, 2007. The decrease was mainly attributable to the decline in sales price of the Company’s day-old broilers, which was discussed above.

General and administrative expenses (As reported). The general and administrative expenses amounted to approximately $2.54 million from the period February 1, 2008 to December 31, 2008.

General and administrative expenses (Pro forma).  The general and administrative expenses increased $1.55 million, or 139%, to $2.66 million for the twelve months ended December 31, 2008 from $1.11 million for the twelve months ended December 31, 2007. The increase in general and administrative expenses was mainly due to the public company related expense incurred this fiscal year. The general and administrative expenses comprised mainly of human resources and related expenses of approximately $ 0 .4 million, representing 12% of total general and administrative expenses, facilities and utility expenses of $ 0 .5 million, representing 16% of total general and administrative expenses, travel expenses of $ 0 .5 million, representing 16% of total general and administrative expenses, and public company expense of $1.5 million, representing 52% of total general and administrative expenses.

 Bad Debts Recovery

During the year 2008, bad debts recovery was $813,000 (as reported) and $1,033,000 (pro forma).

In the twelve months of year 2008, $1 million of bad debts have been recovered, compared to the $0.2 million bad debts expense in year 2007. The main reason is, in year 2008, the Company has collected those advances to third parties which have been recognized as bad debts under general accepted accounting principles and the Company has determined that a lower allowance for bad debt is adequate as of December 31, 2008.

Selling Expenses (As reported). The Company’ selling expenses amounted to $425,000 from the period February 1, 2008 to December 31, 2008.

Selling Expenses (Pro forma).  The Company’ selling expenses increased by $142,000, or 45%, to $454,000 for the twelve months ended December 31, 2008 from $313,000 for the same period in 2007. It comprised mainly of human resources and related expenses of approximately $62,000, representing 13% of total selling expenses, packaging and transportation expenses of $305,000, representing 67% of total general and administrative expenses, and travel and office expenses of $60,000, representing 13% of total selling expense. The increase in selling expenses was primarily due to the increase in sales volume. As a percentage of net revenues, selling expenses decreased from 1.4% to 1.3% for the twelve months ended December 31, 2008 and 2007.

Interest expense (As reported). Interest expense amounted to approximately $703,000 from the period February 1, 2008 to December 31, 2008. Interest expense consisted primarily of interest on bank loans of approximately $1.1 million, less capitalized interest of $437,000. The Company expects to extend or roll over the loans as they come due in the near future, and the interest on bank loans will remain steady in the near future.  

Interest expense (Pro forma). Interest expense decreased $136,000 to $789,000 for the twelve months ended December 31, 2008 from $925,000 for the twelve months ended December 31, 2007. Interest expenses consisted primarily of interest on bank loans. Interest expense appears to decrease due to $437,000 of interest being capitalized in construction in progress.  If interest has not been capitalized, interest expense would increase by $300,000. The increase in interest expense is primarily due to the increase in interest rate on some of the bank loans as discussed under the Loan Facilities section.

Interest income (Pro forma). Interest income increased $249,000 to $250,000 for the twelve months ended December 31, 2008 from $800 for the twelve months ended December 31, 2007. Interest income mainly comes from interest from loans to the third parties.

Provision for Income Taxes.  

In December of 2007, the PRC government announced income tax exemption on poultry producers, effective as of January 1, 2008.

The corporate income tax rate for the Company’s subsidiary Taihong is 25%. There is no provision for income tax because Taihong has a net operating loss carry forward which resulted in a deferred tax asset of $60,204 as of December 31, 2008.  Taihong historically experiences net losses before income taxes, and management does not expect Taihong to generate net income before taxes in the future as its business is to supply feed to PRC Yuhe.  As such, a full valuation allowance of $60,204 is recorded against the deferred tax asset.

Net income (As reported). Net profit amounted to approximately $10.52 million from the period February 1, 2008 to December 31, 2008, as a result of the factors described above.

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Net income  (Pro forma). Net profit increased by $4.78 million to $10.67 million for the twelve months ended December 31, 2008 from $5.89 million for the twelve months ended December 31, 2007, as a result of the factors described above.

Liquidity and Capital Resources

For the period from February 1, 2008 to December 31, 2008

The Company expects that its strong positive working capital of $14.0 million as of December 31, 2008 will meet its foreseeable working capital needs for the next 12 months from the date of this filing.

In support of the Company’s long-term business plan, the Company arranged a private placement on March 12, 2008 of $18,000,000 with a net amount of $15,359,523 that it received up to December 31, 2008. The Company believes that these funds will be used for its foreseeable expansion in 2009.

General

As of December 31, 2008, the Company had cash and cash equivalents of approximately $13.4 million. The following table provides detailed information about the Company’s net cash flow for the twelve month period ended December 31, 2008.

	Twelve months ended December 31, 2008
Net cash used in operating activities		(1,761,854	)
Net cash (used in) investing activities		(13,928,211	)
Net cash provided by financing activities		27,911,982
Effect of foreign currency translation on cash and cash equivalents		140,120
Net cash inflow		12,362,037
Cash and cash equivalents at beginning of year		1,050,168
Cash and cash equivalents at end of year		13,412,205

  Operating Activities. Net cash used in operating activities was $1.8 million for the twelve months ended December 31, 2008. Net cash used in operating activities was primarily attributable to an increase in inventory of $5 million for ordinary course payment of inventory and the purchase of breeder stocks to replace retired breeder stocks. 

Investing Activities. Net cash used in investing activities for the twelve months ended December 31, 2008 was $13.9 million. Net cash used in investing activities was mainly due to the acquisition of 100% of the common stock of PRC Yuhe and 43.75% of the common stock of Taihong for approximately $10.57 million cash in January 2008.

The Company paid $12.69 million for capital expenditures; in which $2.48 million was for the acquisition of property, plant and equipment and $10.21 million for deposits paid for the acquisition of land and farm construction. The Company has capital commitment amounting $10.52 million, of which the Company has paid $10.21 million as deposits for land and farm construction. The Company is required to pay the remaining $0.31 million to complete the existing construction projects for the expansion of the farm and hatch houses.

Financing Activities. Net cash from financing activities totaled $27.9 million for the twelve months ended December 31, 2008. The significant cash flows provided by financing activities was primarily a result of the business combination which occurred during the period ended March 31, 2008. Bright Stand received a $12.15 million capital contribution from its shareholder to use for the acquisition of PRC Yuhe.  In addition, $15.35 million of net proceeds was raised in the sale of the Company's common stock during the period ended December 31, 2008; of which $12.21 million was received during the period ended March 31, 2008. $1.75 million was released from the escrow agent as a result of the Company’s appointment of a new CFO and independent directors and $1.39 million was a subscription received by the Company during the three months ended December 31, 2008. The Company also had net cash proceeds of $1.07 million from the receipt of receivables from and payments to related parties. Moreover, the Company had additional borrowings of $0.2 million during the twelve months ended December 31, 2008.

Loan Facilities

As of December 31, 2008, maturities of the Company’s bank loans are as follows:

	As at December 31, 2008
2009	$	1,356,832
2010		9,410,289
	$	10,767,121

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All amounts, other than percentages, are in U.S. dollars

Type	Contracting party	Valid period	Duration	Amount
Bank loan	Hanting Kaiyuan Rural Credit Cooperative	July 1, 2007 - Jan 10, 2009	18 months	$	1,065,040
Bank loan	Nansun Rural Credit	Nov 28,2008 – May 28, 2010	24 months		4,814,566
Bank loan	Nansun Rural Credit	May 17, 2007 - May 17, 2010	36 months		3,647,399
Bank loan	Nansun Rural Credit	Dec 10, 2007 - Dec 9, 2009	24 months		291,792
Bank loan	Shuangyang Rural Credit	Oct 16,2008 - Oct 13, 2010	24 months		948,324
Total				$	10,767,121

The Company has loan facilities from three institutions and the following are the material terms of such bank loans

Loan from Hanting Kaiyuan Rural Credit Cooperative:

On July 1, 2007, PRC Yuhe entered into a loan agreement with Hanting Kaiyuan Rural Credit Cooperative. Pursuant to the loan agreement, Hanting Kaiyuan Rural Credit Cooperative loaned PRC Yuhe $1,065,040 at an interest rate of 11.09% per annum. PRC Yuhe is obligated under such loan agreement to pay interest monthly and repay the loan on its maturity date, January 10, 2009. The Company renewed this loan and the new loan period is from January 8, 2009 to January 7, 2011. PRC Yuhe uses the loan to finance the purchase of raw materials. The loan is secured by the plant and equipment of PRC Yuhe with a net book of $1,229,020 as of December 31, 2008.

Loans from Nansun Rural Credit:

PRC Yuhe renewed four loan agreements with Nansun Rural Credit on November 28, 2008. The interest rate for the loan agreements is 13.82% per annum for the renewed bank loan contract, compared to the original rate of 9.21%, which enjoyed the support of government policy. The total amount of these four bank loans is $4,814,566.

The other four loans with an outstanding balance of $3,355,607 from Nansun Rural Credit also increased their interest rate from 10.51% to 12.1% due to the same reason. Nansun Rural Credit also provided four loans to Taihong at interest rates of 12.1% per annum.

The last bank loan from Nansun Rural Credit is the one engaged in October, 2007 with an outstanding balance of $291,792, with an interest rate remaining at 10.46% per annum.

The loans are used for financing of working capital. All loans are secured by the land use rights and buildings of PRC Yuhe and Taihong with a net book value of $11,585,153 as of December 31, 2008.

Loan from Shuangyang Rural Credit:

Taihong renewed the loan agreements with Shuangyang Rural Credit on October 16, 2008, amounting to $948,324. The interest rate for the loans is 9.83% per annum for the renewed bank loan contract, compared to the original rate of 10.51%. Taihong is obligated under such loan agreement to pay interest monthly and repay the loan on its maturity date, October 13, 2010. The loan is secured by the plant and equipment of Taihong with a net book value of $1,060,891 as of December 31, 2008.

Due to related companies

As of December 31, 2008, the Company has $210,633 due to Weifang Hexing Breeding Co., Ltd., a company for which Mr. Gao Zhentao also serves as a director.  The amounts due to this related company are unsecured, interest free and have no fixed repayment date.  These loans are used for working capital purposes.

Obligations Under Material Contracts

Below is a table setting forth the Company’s material contractual obligations as of December 31, 2008:

Payment due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations	$	10,767,121	$	1,356,832	$	9,410,289	$	-	$	-
Due to Related Companies	$	210,633	$	210,633		-		-		-
Operating Lease Obligations	$	2,291,993	$	89,901	$	179,802	$	179,802	$	1,842,488
Capital Lease Obligations		-		-		-		-		-
Purchase Obligations	$	305,551	$	305,551		-		-		-
Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under GAAP		-		-		-		-		-
Total	$	13,575,298	$	1,962,917	$	9,590,091	$	179,802	$	1,842,488

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  Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company’s management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. The Company considers its critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

l Inventory - Inventories consisting of raw materials, work in progress and finished goods are stated at the lower of cost and net realizable value. The cost of inventories is determined using the weighted average cost method, and includes expenditures 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.

l Trade receivable – Trade receivables are recognized and carried at the original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

l Note receivables – Note receivables are stated at the original principal amount less an allowance for any uncollectible amounts. Management provides for an allowance when collection of the full amount is no longer probable by establishing an allowance equivalent to 30% of gross amount of notes receivables due over 6 months and 60% of gross amount of notes receivables due over 1 year. Full provision will be made for notes receivables due over 2 years.

l 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
Vehicles	5 years
Furniture and equipment	3 years

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

l Valuation of long-lived assets - 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 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.

l 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 PRC, the government owns all of the land in PRC. Companies or individual are authorized to possess and use the land only through land usage rights approved by the PRC government.

l Guarantee Expense - The Company accounts for its liability for products 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.

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 98%, the Company provides an 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. 

l Revenue recognition - Net revenue is recognized when the third-party distributors and broiler farms and integrated chicken companies take delivery and acceptance of products.  The Company treats both the distributors and broiler farms and integrated chicken companies as end customers.  The price is fixed or determinable as stated in the sales contract, and the collectability is reasonably assured.  Customers do not have a general right of return on products delivered.

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l Use of estimates- The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect 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 period. Actual results could differ from those estimates. The financial statements include some amounts that are based on management’s best estimates and judgments. These accounts and estimates include, but are not limited to, the valuation of accounts receivable, other receivables, inventories, deferred income taxes, and the estimation on useful lives of plant and equipment. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant.

l

Significant Estimates - Relating to Specific Financial Statement Accounts and Transactions Are Identified - The financial statements include some amounts that are based on management’s best estimates and judgments. The most significant estimates relate to allowance for uncollectible accounts receivable, inventory work in process valuation and obsolescence, depreciation, useful lives, taxes, and contingencies. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant.

l

Income tax – 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.

The Group is operating in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the corporate income tax rate is 25%. Weifang Yuhe Poultry Co., Ltd 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 income tax exemption effective as of January 1, 2008.

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

l 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 years ended December 31, 2008 or 2007.

l Statutory reserve – In accordance with the relevant laws and regulations of the PRC and the articles of associations of the Company’s PRC subsidiaries, PRC Yuhe and Taihong are required to allocate 10% of their net income reported in the PRC statutory accounts, after offsetting any prior years’ losses, to the statutory surplus reserve, on an annual basis.  When the balance of such reserve reaches 50% of the respective registered capital of the subsidiaries, any further allocation is optional.  The statutory surplus reserves can be used to offset prior years’ losses, if any, and may be converted into registered capital, provided that the remaining balances of the reserve after such conversion is not less than 25% of registered capital. The statutory surplus reserve is non-distributable.

  Effects of Inflation

Inflation and changing prices have not had a material effect on the Company’s business and the Company does not expect that inflation or changing prices will materially affect its business in the foreseeable future. However, the impact of inflation on PRC Yuhe and Taihong may not be readily recoverable in the prices of the Company’s products.

Off Balance Sheet Arrangements

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

Seasonality

The Company’s business has been subject to material seasonal variations in operations for the normal life cycle of 66 weeks of the breeder stock. Breeder stock produces eggs at their mature stage, around weeks 28 - 60 and therefore, the Company’s business will have seasonal variation on the early and aged stage of the breeder stock. In addition, the Company normally raises a new batch of breeder stock after the aged breeder stock retires and is sold. This impact of seasonality can be resolved when the Company expands its batches of breeder stocks.

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The Company has been subject to seasonal variations. Since the Company’s ultimate clients are mostly farmers and the second quarter is their busy season for reaping, farmers have little idle time to raise broilers during these months, so the demand for the Company’s day-old broilers generally decreases in May and June.

Another low season for the Company’s products is from the second half of December to the first half of January, during which the Company experiences reduced demand for its day-old broilers during the period from 30 to 60 days prior to the Chinese New Year holiday period. In addition, since most farmers are likely to rest during the Chinese New Year holiday, rather than work, February is traditionally a low season for the Company’s products.

Results of Operations – Comparison of year ended December 31 in 2007 and 2006

The following tables set forth key components of the Company’s results of operations for the periods indicated, both in dollars and as a percentage of the Company’s revenue. The financial information below pertains to the consolidated results of operations of PRC Yuhe, which include the accounts of Taihong:-

	All amounts, other than percentage, in U.S. dollars						As a percentage of net revenues
	For the year December 31						For the year December 31
	2007			2006			2007			2006
Sales revenue		22,075,224			14,595,716			100.00	%		100.00	%
Costs of goods sold		13,502,545			15,483,641			61.17	%		106.08	%
Gross profit/(loss)		8,572,679			(887,925	)		38.83	%		(6.08	)%
Selling expenses		312,927			430,122			1.42	%		2.95	%
General and administrative expenses		1,341,987			1,279,238			6.08	%		8.76	%
Operating (loss) income		6,917,765			(2,597,285	)		31.34	%		(17.79	)%
Interest income		796			9,553			0.00	%		0.07	%
Interest expenses		924,845			971,785			4.19	%		6.66	%
Investment losses		101,264			152,521			0.46	%		1.04	%
Profit (loss) on disposal of fixed assets		(5,180	)		172,314			(0.02	)%		1.18	%
Income taxes		-			-			0.00	%		0.00	%
Net income (loss) before minority interests		5,887,272			(3,539,724	)		26.67	%		(24.25	)%
Minority interests (earnings) loss		61,392			(68,387	)		0.28	%		(0.47	)%
Net income (loss)		5,948,664			(3,608,111	)		26.95	%		(24.72	)%

	All amounts, other than percentage, in U.S. dollars				Increase/ (Decrease) Dollar ($)			Increase/ (Decrease) Percentage
	For the year December 31
	2007		2006
Sales revenue	22,075,224		14,595,716			7,479,508			51.24	%
Costs of goods sold	13,502,545		15,483,641			(1,981,096	)		(12.79	)%
Gross profit/(loss)	8,572,679		(887,925	)		9,460,604			1065.47	%
Selling expenses	312,927		430,122			(117,195	)		(27.25	)%
General and administrative expenses	1,341,987		1,279,238			62,749			4.91	%
Operating (loss) income	6,917,765		(2,597,285	)		9,515,050			366.35	%
Interest income	796		9,553			(8,757	)		(91.67	)%
Interest expenses	924,845		971,785			(46,940	)		(4.83	)%
Investment losses	101,264		152,521			(51,257	)		(33.61	)%
Profit (loss) on disposal of fixed assets	(5,180	)	172,314			(177,494	)		(103.01	)%
Income taxes	-		-			-			-
Net income (loss) before minority interests	5,887,272		(3,539,724	)		9,426,996			266.32	%
Minority interests (earnings) loss	61,392		(68,387	)		129,779			189.77	%
Net income (loss)	5,948,664		(3,608,111	)		9,556,775			264.87	%

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Net revenue. Sales revenue increased by $7.48 million, or 51.24%, to $22.08 million for the year ended December 31, 2007 from $14.60 million for the year ended December 31, 2006. The increase was driven by the rise in average selling price of the Company’s day-old broilers, partially offset by the decrease in quantity of day-old-broilers sold. Sales volume, in terms of number of day-old broilers, decreased by 6.3 million, or 12.63%, from 49.88 million for year ended December 31, 2006 to 43.58 million birds for the year ended December 31, 2007. The decrease in sales volume was a result of shortage of supply due to the outbreak of avian flu in 2006 and affected the supply for part of 2007. At the same time, the average selling price of day-old broiler surged dramatically from approximately $0.259 per bird for the year months ended December 31, 2006 to $0.494 per bird for the year ended December 31, 2007, or an increase of 90.73%. The price growth was primarily the result of an increase in the general demand for high-grade day-old broilers in North China, which in turn was largely driven by the substantial economic growth that China continued to experience for the year ended December 31, 2007 and the consequent shortage of broilers in the market. The outbreak of avian flu in 2006 hit the poultry industry badly and the market started to rebound at the beginning of 2007, resulting in a huge demand for the Company’s day old broilers. Those third generation stock are imported and the import volume is closely controlled by the PRC government. The Company has not seen an increasing trend of the import volume.

In response to the recent increases in consumer demand, the Company increased its maximum parent breeder stock manufacturing capacity to approximately 0.72 million sets by December 2007. The Company anticipated that North China’s strong economic growth would continue in 2008 and believed that this growth would drive a strong demand for high-grade, day-old broilers. In response to this strong demand in the market, the Company hopes to increase its market share by increasing capacity in the next couple of years.

Sales of retired breeding stocks increased $0.02 million, or 1.79%, from $0.91 million for the year ended December 31, 2006 to $0.93 million for the year ended December 31, 2007. This dollar increase is primarily a result of appreciation in exchange rate of Renminbi to US dollars during 2007; the sales of retired breeding stocks in Renminbi decreased by 2.86%. The sales quantity of retired breeding stocks dropped 1.04 million kilograms, or 47.74% while the average unit price increased by 85.63%. The significant revenue from the sale of retired breeding stocks in 2006 was in response to the effects of an outbreak of avian influenza in China during 2006 and the Company does not expect such sales to generate a significant portion of its income in the future.

Since almost all the products of Taihong are supplied to its parent, PRC Yuhe, revenue contributed from Taihong’s external sales comprised only 2.30% and 8.51% of the Company’s total revenues for the years ended December 31, 2007 and 2006, respectively, and are expected to constitute less than 10% of the Company’s annual revenues for the foreseeable future.

“ Cost of revenues. The Company’s cost of revenues decreased by $1.98 million, or 12.79%, to $13.50 million for the year ended December 31, 2007 from $15.48 million for the year ended December 31, 2006. The decrease is attributable to a decrease of 10.9% in the number of breeder stock sold in 2007 compared to 2006. In addition, unit cost fell by 6%, from RMB 2.52 per breeder stock in 2006 to RMB 2.36 in 2007. Overall unit cost decreased despite increases in the feed price is due to insignificant impact of the 20% increase within certain components of feed cost, which accounted for 50% of total unit cost. The feed cost is composed of 62% of corn cost, 20% of soybean cost and 18% of other ingredients. The average unit cost of corn was RMB 1.64 in 2007 and RMB 1.35 in 2006, an increase of 21%. The average unit cost of soybean was RMB 2.84 in 2007 and RMB 2.37 in 2006, an increase of 20%. The other 50% of total unit cost comprised of cost of breeder stock and allocation of overhead cost. Overall decreases in these costs from 2006 to 2007 more than offset increases in feed cost per unit.

As a percentage of net revenues, the cost of revenues decreased by 44.91%, from 106.08% for the year ended December 31, 2006 to 61.17% for the year ended December 31, 2007. The decrease in cost of revenues as a percentage of net revenues was mainly due to an increase in average selling price while the unit cost remained fairly consistent. Since the third generation breeder stock is imported and the import volume is closely controlled by the PRC Government, the Company expects that the price of parent breeding stocks will increase slightly in the coming year, compared to the current price of breeding stocks. Since the breeding stocks account for only approximately 7% of cost per day old broiler, the slight increase in breeding stocks price has little effect on the cost of revenues in the near future.

Gross profit. The Company’s gross profit increased by $9.46 million to $8.57 million for the year ended December 31, 2007 from gross loss of $0.89 million for the year ended December 31, 2006. Gross profit as a percentage of net revenues was 38.83% for the year ended December 31, 2007, as compared to (6.08%) for the year ended December 31, 2006. The increase was mainly attributable to the rise in average selling price of the Company’s day-old broilers, as partially offset by relatively stable unit cost as discussed above and also due to reduction in selling price in 2006 as a result of the avian influenza outbreak as discussed below.

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The avian influenza outbreak did not spread over the Company’s farms; therefore, there was no direct loss from the death of day-old broilers and parent breeders. However, the terror from avian influenza arose throughout the PRC which caused the significant decrease in the price of day-old broilers and parent breeders. The Company’s average unit price of a day-old broiler decreased from $0.31, or RMB2.54, in 2005 to $0.15, or RMB1.19, with the Company’s unit cost of $0.23, or RMB1.81, during the disaster in 2006. The decrease in average unit price contributed $2.16 million, or RMB 17.3 million to the total loss in 2006, and $0.89 million, or RMB 7.1 million to the total gross loss for the year ended December 31, 2006.

To generate cash flow for operation at the time, the Company sold 730,000 parent breeders. While the Company’s average unit cost of a parent breeder was $4.32, or RMB 34.51, the Company sold these parent breeders at unit price of $1.25, or RMB 9.965, contributed $2.26 million, or RMB 18 million to the total loss in 2006. In addition to quantifiable loss in the sale of parent breeders as mentioned above, the sale of parent breeders led to a reduction in revenue that is difficult to quantify. These parent breeders had just grown up at the time and were ready to produce eggs that can be hatched into day-old broilers. By selling these parent breeders, the Company had less day-old broilers for sale, which contributed to a decrease in revenue. The Company suffered a total gross loss for the year ended December 31, 2006 of $0.89 million, or RMB 7.1 million. 

General and administrative expenses. The Company’s general and administrative expenses increased $0.06 million, or 4.91%, to $1.34 million for the year ended December 31, 2007 from $1.28 million for the year ended December 31, 2006. The increase in the amount of general and administrative expenses was mainly due to the appreciation in exchange rate of Renminbi to US dollars during the year 2007, while general and administrative expenses in Renminbi remain steady during the year. As a percentage of net revenues, administrative expenses decreased to 6.08% for the year ended December 31, 2007 as compared to 8.76% for the year ended December 31, 2006.

Selling Expenses. The Company’ selling expenses decreased by $0.12 million, or 27.25%, to $0.31 million for the year ended December 31, 2007 from $0.43 million for the same period in 2006. Selling expenses consist of packaging expenses, payroll and traveling expenses. The decrease in selling expenses was primarily due to the decreased sales volume and hence decreases in usage of packaging materials, more efficient controls of the Company’s payroll and traveling expenses for the staff in its marketing department for the year ended December 31, 2007.

Interest expenses. Interest expenses decreased $0.05 million to $0.92 million for the year ended December 31, 2007 from $0.97 million for the year 2006. Interest expenses consist primarily of interest on bank loans. As the Company continued to roll over the loans as they come due in the past two years, the interest on bank loans for the year ended December 31, 2007 is almost the same level as the one for the year 2006. The minor difference in interest expenses was mainly due to the appreciation in exchange rate of Renminbi to US dollars during the year 2007.

Interest income. Interest income decreased by approximately $8,800 to $800 for the year ended December 31, 2007 from $9,600 for the year ended December 31, 2006. The decrease was commensurable with the decrease in cash and cash equivalent of approximately $563,000 as of December 31, 2006 to approximately $47,000 as of December 31, 2007. Interest income consists mainly of interest on cash deposited with banks.

Investment losses. Investment losses decreased by approximately $51,000 from approximately $152,000 for the year ended December 31, 2006 to $101,000 for the year ended December 31, 2007. The decrease in investment losses resulted from a corresponding decrease in the share of losses in an affiliate company in PRC, Weifang Jiaweike Food Co., Ltd, which had been disposed during the year ended December 31, 2007.

Gain (loss) on disposal of fixed assets. Gain on disposal of fixed assets decreased by approximately $177,000 from approximately $172,000 for the year ended December 31, 2006 to a loss of $5,000 for the year ended December 31, 2007. The profit on disposal of fixed assets for the year ended December 31, 2006 related mainly to the disposal of the three henhouses for business operational reasons, which consists of building, land use rights and others, while there is no corresponding disposal for the year ended December 31, 2007.

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Provision for Income Taxes. PRC Yuhe was entitled to an exemption from Chinese enterprises income tax (EIT), due to the fact that PRC Yuhe has been recognized as “the national leading agricultural enterprise”. In accordance with the relevant regulations regarding the tax exemption, PRC Yuhe is tax-exempt as long as it is recognized as “the national leading agricultural enterprise”. As a result, PRC Yuhe incurred no income tax expense for the years ended December 31, 2007 and 2006.

In December of 2007, the PRC government announced the elimination of income taxes on poultry producers, effective as of January 1, 2008.

In accordance with the relevant tax laws and regulations of PRC, the Company’s other PRC subsidiary Taihong is subject to the enterprise income tax rate of 33%. Since Taihong has been operating at a loss, there was no tax expenses incurred for the year 2007 and 2006.

Net Income. Net income increased by $9.56 million, to $5.95 million for the year ended December 31, 2007 from net loss of $3.61 million for the year ended December 31, 2006, as a result of the factors described above.

26

BUSINESS

Overview

Through the Company’s operating subsidiaries, the Company is a supplier of day-old chickens raised for meat production, or broilers, in the People’s Republic of China, which is also commonly referred to as the “PRC” or “China”. The Company purchases parent breeding stock from breeder farms, raises them to produce hatching eggs, and hatches the eggs to day-old broilers. Currently, the Company operates thirteen breeder farms and two hatcheries with a total annual capacity of 1,150,000 sets of breeders and 100 hatchers through its wholly-owned subsidiary, Weifang Yuhe Poultry Co. Ltd., or “PRC Yuhe”. The Company’s day-old broilers are primarily purchased by broiler farms and integrated chicken companies for the purpose of raising them to market-weight broilers. The Company’s customers are located in the ten provinces and special municipalities centered around Shandong Province, which are Jiangsu, Anhui, Henan, Hebei, Jilin, Liaoning, Heilongjiang, Tianjin, Beijing, and Shanghai. In connection with the Company’s day-old broiler business, the Company also operates a feed stock company named Weifang Taihong Feed Co. Ltd., or “Taihong”, whose primary purpose is to supply feed stock to the Company’s breeders. The Company’s operations are conducted exclusively by its subsidiaries, PRC Yuhe and Taihong, in China.

The Company’s principal executive office is located at 301 Hailong Street, Hanting District, Weifang, Shandong Province, The People’s Republic of China. The Company’s Internet address is http://www.yuhepoultry.com.

Unless otherwise noted, all historical information prior to March 12, 2008 refers to PRC Yuhe and Taihong.

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History and Background

First Growth Investors, Inc.

First Growth Investors, Inc., or “First Growth”, was incorporated under the laws of the State of Nevada on September 9, 1997.

First Growth was formed to buy and sell vintage wines. While the initial purchase of wines was eventually resold at a profit, First Growth did not continue to be successful in this venture. This business was not successful, and operations were eventually discontinued with the final sale of inventory occurring in 2003. Since 2003 First Growth was not engaged in any substantive business activities or operations prior to the acquisition of Bright Stand described below.

The Company entered into a Stock Purchase Agreement, the “Stock Purchase Agreement”, with Halter Financial Investments, L.P., a Texas limited partnership, “Halter Financial”, dated as of November 6, 2007, pursuant to which it agreed to sell to Halter Financial 951,996 unregistered shares of its common stock for $425,000.

Halter Financial and the then serving members of the Board of Directors of First Growth entered into arm’s length negotiations regarding the acquisition of Halter Financial’s ownership interest. The amount paid was based on the business prospects of First Growth and the perceived value of a control position in similarly situated publicly-traded shell corporations. The transaction closed on November 16, 2007. As a result of the transaction, Halter Financial held 951,996 shares, or 87.5% of the Company’s 1,087,994 shares of common stock then outstanding following the completion. The 87.5% interest purchased by Halter Financial was fairly valued at $425,000. Halter Financial advised First Growth that its purchase price was based on the results of its research into the prices paid by other groups to acquire control positions in publicly-traded shell companies similarly situated as First Growth at the time Halter Financial acquired its position in First Growth. The Stock Purchase Agreement also required the Company’s Board of Directors to declare and pay a special cash dividend of $3.088 per share to the Company’s shareholders on November 19, 2007. Halter Financial did not participate in such dividend. The dividend was payable to shareholders of record on November 15, 2007, which was prior to the date the shares were issued to Halter Financial under the Stock Purchase Agreement. The dividend payment date was November 19, 2007. The dividend was payable to the Company’s shareholders who held 135,999 shares of the Company’s common stock and resulted in a total dividend distribution of $420,000. The funds for the dividend came from the $425,000 proceeds received from the sale of common stock to Halter Financial. Mr. Richard Crimmins was appointed as an officer and director of First Growth at the request of Halter Financial as a result of the change in control transaction whereby Halter Financial became First Growth’s principal shareholder. Richard Crimmins is neither an officer, director nor shareholder of Halter Financial. Prior to November 2007, neither Halter Financial nor its affiliates had a material relationship with any of First Growth’s shareholders. After Halter Financial became a 87.5% shareholder of First Growth pursuant to the Stock Purchase Agreement, there was a potential conflict of interest associated with an affiliate of Halter Financial, HFG International, Limited, advising Bright Stand about its purchase of a U.S. shell company, First Growth. Despite this potential conflict of interest, HFG International, Limited has informed the Company that its advice to Bright Stand was based on its research results into the prices paid by other groups to acquire control positions in publicly traded shell companies, which were similarly situated as First Growth at the time Bright Stand acquired First Growth.

Bright Stand International Co., Ltd.

Bright Stand International Co., Ltd., or “Bright Stand”, was incorporated on August 3, 2007 and it has a registered capital of $100. Bright Stand did not have any operating activities from August 3, 2007 (inception) to March 12, 2008. Kunio Yamamoto, a Japanese citizen, was the sole shareholder of Bright Stand through March 12, 2008.

Weifang Yuhe Poultry Co., Ltd.

PRC Yuhe is the wholly-owned subsidiary of Bright Stand. PRC Yuhe was founded in March 1996 by Gao Zhentao and Sun Haoguo, with each of them owning, respectively, 60% and 40% of its equity interest. From its formation through its acquisition by Bright Stand, PRC Yuhe was effectively controlled by Gao Zhentao, the Company’s chief executive officer. The principal business of PRC Yuhe is breeding poultry, hatchlings and selling chicks.

Weifang Taihong Feed Co., Ltd.

Taihong was founded in May 2003 by Shandong Yuhe Food Group Co., Ltd., or “Yuhe Group”, a PRC company based in Shandong Province, and Gao Zhenbo, the brother of the Company’s chief executive officer, Gao Zhentao, with Yuhe Group and Mr. Gao owning, respectively, 56.25% and 43.75% of its equity interest. Yuhe Group is an entity controlled by the Company’s chief executive officer, Gao Zhentao, and his brother, Gao Zhenbo. The principal business of Taihong is the production and sale of feed and feed additives, primarily to PRC Yuhe. On September 14, 2007 Yuhe Group transferred all of its interests in Taihong to PRC Yuhe in a reorganization of equity interest under common control. The 43.75% equity stake in Taihong owned by Gao Zhenbo was subsequently transferred to Bright Stand in the course of the corporate reorganization transactions described below.  

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Corporate Reorganization Transactions

HFG International, Limited, an affiliate of Halter Financial, was engaged by Bright Stand to provide consulting services related to Bright Stand’s efforts to complete a combination transaction with a US domiciled publicly-traded “shell corporation” and other post transaction matters. HFG International, Limited introduced Bright Stand to First Growth. There is no correlation between the decision of Bright Stand to engage HFG International, Limited to provide consulting services to Bright Stand and the decision of Halter Financial to acquire a control position in First Growth. After Halter Financial became a 87.5% shareholder of First Growth pursuant to a Stock Purchase Agreement, there was a potential conflict of interest associated with an affiliate of Halter Financial, HFG International, Limited, advising Bright Stand about its purchase of a U.S. shell company, First Growth. Despite this potential conflict of interest, HFG International, Limited has informed the Company that its advice to Bright Stand was based on its research results into the prices paid by other groups to acquire control positions in publicly traded shell companies, which were similarly situated as First Growth when Bright Stand acquired First Growth. After a diligence review by counsel for Bright Stand, the principal shareholder of Bright Stand elected to enter into the exchange transaction contemplated by the equity transfer agreement filed as Exhibit 10.2 to the Registration Statement on Form S-1/A filed on December 19, 2008.

Bright Stand entered into a share transfer agreement with all the existing shareholders of PRC Yuhe on October 18, 2007 to acquire all the equity of PRC Yuhe with cash consideration equal to the appraised fair market value of PRC Yuhe in the amount of RMB 81,450,000, or $11,306,522. The sellers of PRC Yuhe included Yuhe Group, Mr. Gao Zhentao and Mr. Gao Zhenbo. Bright Stand obtained the approval from the Shandong Province counterpart of the Ministry of Commerce for this transaction on November 9, 2007, and the acquisition closed on January 31, 2008. There is no longer any connection between the Company and Yuhe Group, except that Gao Zhentao, the Company’s chief executive officer and, his brother Gao Zhenbo, are shareholders and directors of Yuhe Group. Sun Haoguo does not have any relationship with Yuhe Group and two of three members of the Supervisory Board of PRC Yuhe, Zheng Chaoyang is an Administrative Department Officer of Yuhe Group and Zhang Lishun is an Administrative Department Officer of Yuhe Group.

Bright Stand entered into a share transfer agreement with Gao Zhenbo, a former shareholder of Taihong on October 18, 2007 to acquire 43.75% of the outstanding equity of Taihong for cash consideration equal to 43.75% of the net asset value of Taihong in the amount of RMB 2,244,000, or $312,530. The remaining 56.25% of Taihong is owned by PRC Yuhe. Bright Stand obtained the approval from the Shandong provincial counterpart of the Ministry of Commerce for this transaction on November 9, 2007, and the acquisition closed on January 31, 2008.

Effective March 12, 2008, the Company closed an Equity Transfer Agreement with Bright Stand and Kunio Yamamoto, a Japanese person, the sole former shareholder of Bright Stand. Pursuant to the terms of the Equity Transfer Agreement, the Company acquired all of the outstanding capital stock of Bright Stand from Mr. Yamamoto in exchange for 8,626,318 shares of the Company’s common stock. At the closing, Bright Stand became the Company’s wholly-owned subsidiary. Immediately following the date of the Equity Transfer Agreement, Mr. Yamamoto held 8,626,318 shares of the Company’s common stock. Neither Halter Financial nor Mr. Yamamoto had any role in identifying the accredited investors who purchased the Company’s unregistered securities on March 12, 2008.

There is no direct or indirect connection between Mr. Yamamoto and the former shareholders of PRC Yuhe and Taihong, including Mr. Gao Zhentao, Gao Zhenbo, and Mr. Sun Haoguo. The acquisitions of PRC Yuhe and Taihong by Bright Stand closed on January 31, 2008 after obtaining the relevant approval from the Shandong Province counterpart of the Ministry of Commerce. There is no direct or indirect connection between Mr. Yamamoto and the former shareholders of First Growth. Mr. Yamamoto does not currently have any roles with the Company, except as the Company’s shareholder. Mr. Gao Zhenbo and Mr. Sun Haoguo do not currently have any roles with the Company.

Equity Investment by Private Placement Investors

On March 12, 2008, the Company consummated with 25 accredited investors, the “Investors”, a private placement of 5,829,018 shares of its common stock for an aggregate purchase price of approximately $18,000,000. The Investors were (i) Pinnacle Fund, L.P, (ii) Pinnacle China Fund L.P, (iii) Black River Commodity Select Fund Ltd., (iv) Black River Small Capitalization Fund Ltd., (v) Marion Lynton, (vi) Ardsley Partners Fund II, LP, (vii) Ardsley Offshore Fund, Ltd, (viii) Ardsley Partners Institutional Fund, LP; (ix) Investment Hunter, LLC, (x) Guerrilla Partners LP, (xi) Hua-Mei 21st Century Partners, LP, (xii) Ruoling Wang, (xiii) Guli Ping, (xiv) Wu Mijia, (xv) Dehua Qian, (xvi) Southwell Partners, L.P, (xvii) Westpark Capital, L.P, (xviii) Straus Partners, LP, (xix) Straus-GEPT Partners, LP, (xx) Atlas Allocation Fund, LP, (xxi) Chestnut Ridge Partners, LP, (xxii) Ancora Greater China Fund, LP, (xxiii) Kevin B. Halter Jr, (xxiv) Octagon Capital Partners, and (xxv) Howard H. Lu.

The agreements the Company entered into with the Investors included a Securities Purchase Agreement, a Registration Rights Agreement, Make Good Escrow Agreements and various ancillary agreements and certificates, disclosure schedules and exhibits in connection therewith. The following is a summary of their material terms.

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Securities Purchase Agreement

Among other things, under the Securities Purchase Agreement, Mr. Yamamoto will  deliver a certain number of shares of the Company’s common stock owned by him to the investors pro-rata in accordance with their respective investment amount for no additional consideration if: (i) the Company’s after tax net income for the Company’s fiscal year ending on December 31, 2008 is less than $9,000,000 and fiscal year ending on December 31, 2009 is less than 95% of $13,000,000; and (ii) the Company’s earnings per share reported in the fiscal year ending on December 31, 2009 is less than $0.74 on a fully diluted basis, the “Low Performance Events”.  Mr. Yamamoto has placed an aggregate of 3,359,889 shares of common stock, “Make Good Shares”, into an escrow account pursuant to the terms of the Make Good Escrow Agreement by and among the Company, Mr. Yamamoto, the Investors and the escrow agent named therein. If the Company does not achieve the targets in 2008 and 2009, Make Good Shares will be conveyed to all private placement Investors and Halter Financial pro-rata in accordance with their respective investment amount for no additional consideration. If the foregoing Low Performance Events do not occur, the Make Good Shares will be transferred to Mr. Yamamoto.

Covenants: The Securities Purchase Agreement contains certain covenants on the Company’s part, including the following:

(a)  Board of Directors. Within 180 days following the closing, the Company is required to nominate a minimum of five members to its Board of Directors, a majority of which must be “independent,” as defined under the Nasdaq Marketplace Rules, and to take all actions and obtain all authorizations, consents and approvals as are required to be obtained in order to effect the election of those nominees.

(b)  Chief Financial Officer. Within 180 days following the closing, the Company is required to hire a chief financial officer, “CFO”, who is a certified public accountant, fluent in English and familiar with US GAAP and auditing procedures and compliance for US public companies.

(c)  Investor Relations Firm. Within 60 days following the closing, the Company is required to hire one of the following investor relations firms: CCG Elite, Hayden Communications or Integrated Corporate Relations.

In connection with the above three post-closing covenants, the Company has deposited an aggregate of $1,750,000, $750,000 as board holdback escrow amount, $750,000 as CFO holdback escrow amount, and $250,000 as investor relations firm holdback amount, from the gross proceeds of the private placement in the escrow account pursuant to the Holdback Escrow Agreement by and among the Company, the investors and the escrow agent named therein. If the Company fails to comply with any of the above covenants in a timely fashion, it will incur liquidated damages of 1% on a daily pro-rata basis for any portion of a month of the gross proceeds of the private placement, or 2% if it suffers a holdback event relating to Board of Directors or CFO in a 30-day period, to be subtracted from the holdback escrow fund, until its compliance with such covenants.

The Company filed a current report on form 8-K on June 13, 2008 with the SEC. Pursuant to the relevant escrow agreement, the above mentioned $1,750,000 was released to the Company on or about June 14, 2008.

Registration Rights Agreement

With respect to the 5,829,018 shares issued to the investors at closing on March 12, 2008, the Company is required to file a resale registration statement on Form S-1 or any other appropriate form (i) within 60 days following the closing for purposes of registering the resale of these shares, (ii) within 15 days with respect to any additional registration statement, (iii) within 15 days with respect to any additional registration statements required to be filed due to SEC Restrictions, (iv) within 30 days following the date on which it becomes eligible to utilize Form S-3 to register the resale of common stock, or (v) within 45 days following the date the Make Good Shares are delivered by Mr. Yamamoto to the investors. Among other things, the Company will be required to pay the investors liquidated damages if it fails to file a registration statement by the above filing deadlines or if it does not promptly respond to comments received from the SEC. The liquidated damages accrue at a rate of 0.5% per month of the aggregate investment proceeds received from the investors, capped at 5% of the total investment proceeds. The Company filed a Registration Statement on Form S-1 on May 12, 2008. On December 29, 2008, the Company’s Registration Statement was declared effective by the Securities and Exchange Commission, registering a total of 4,730,251 shares of the Company’s common stock for re-sale by certain selling shareholders, instead of 5,829,018 shares as contemplated by the registration rights agreement following the Company’s discussion with the Securities and Exchange Commission.

Lockup Agreement

The Company and Mr. Yamamoto entered into a lockup agreement, pursuant to which Mr. Yamamoto irrevocably agrees from and after the date of such agreement and through and including March 12, 2010, that he will not offer, pledge, encumber, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, or announce the offering of, any of his shares, including any securities convertible into, or exchangeable for, or representing the rights to receive, or engage in any short sales with respect to any security issued by the Company. The Lockup Agreement may not be waived or amended without the consent of a majority of the holders of a majority of the shares issued in the private placement.

Name Change to Yuhe International, Inc. and Reverse Stock Split

Effective on April 4, 2008, the Company amended its articles of incorporation to (i) change its name from “First Growth Investors, Inc.” to “Yuhe International, Inc.”, and (ii) effect a 1-for-14.70596492 reverse stock split of its common stock. The Company’s Board of Directors and shareholders approved the name change and the reverse stock split pursuant to the Nevada Revised Statutes. The number of authorized shares of common stock remains unchanged at 500 million. All references to common stock in this filing are to post-split shares as if the reverse stock split was effective as of the beginning of the first period presented.

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The change to the Company’s name and the reverse stock split were reflected in the Amended and Restated Articles of Incorporation filed on April 4, 2008 with the Secretary of State of Nevada, a copy of which is attached hereto as Exhibit 3.1. The name change became effective with NASDAQ’s Over-the-Counter Bulletin Board at the opening of trading on April 7, 2008, under the new stock symbol of “YUII.OB”.

Appointment of Investor Relations Firm

On April 20, 2008, the Company appointed CCG Elite Investor Relations as its investor relations firm, which was effective on May 1, 2008. .

Appointment of Chief Executive Director

On June 13, 2008, the Company entered into an employment contract with Mr. Gao Zhentao, the Company’s Chief Executive Officer, “CEO”. The employment agreement was effective as of March 12, 2008, the date Mr. Gao was appointed CEO, and has an initial term of three years.

Appointment of Chief Financial Officer

On June 13, 2008, Mr. Hu Gang was appointed the Chief Financial Officer, “CFO”, of the Company. The Company has entered into an employment agreement with Mr. Hu, effective as of June 13, 2008, his appointment date, and has an initial term of three years.

Appointment of Directors

On June 13, 2008, the Company appointed the following directors:-

 (i) Mr. Peter Li, aged 44, was appointed Independent Director, chair of the Audit Committee and member of the Compensation and Nominating Committees;

 (ii) Mr. Liu Yaojun, aged 32, was appointed Independent Director, chair of the Compensation Committee and member of the Nominating and Audit Committees;

 (iii) Mr. Greg Huett, aged 46, was appointed Independent Director , chair of the Nominating Committee and member of the Audit and Compensation Committees; and

 (iv) Mr. Han Chengxiang, aged 44, was appointed Director and member of the Nominating Committee.

The Company filed a current report on form 8-K on June 13, 2008 with the SEC. Pursuant to the Holdback Escrow Agreement, an aggregate of $1,750,000, $750,000 as board holdback escrow amount, $750,000 as CFO holdback escrow amount, and $250,000 as investor relations firm holdback amount, was released to the Company on or about June 14, 2008.

Corporate Structure

The Company has an offshore holding structure commonly used by foreign investors with operations in China. The Company is a Nevada corporation which owns 100% of the securities of Bright Stand, which in turn owns 100% of the securities of PRC Yuhe and Taihong.

As of December 31, 2008, Mr. Kunio Yamamoto, Pinnacle Fund, L.P., Pinnacle China Fund L.P., Black River Small Capitalization Fund Ltd., Black River Commodity Select Fund Ltd., Ardsley Partners Fund II, LP and Halter Financial Investments, L.P. were the Company’s significant shareholders: Mr. Yamamoto owned 48.7%, Pinnacle Fund, L.P. owned 7.72%, Pinnacle China Fund L.P. owned 7.72%, Black River Small Capitalization Fund Ltd. owned 8.24%, Black River Commodity Select Fund Ltd. owned 6.18%, Ardsley Partners Fund II, LP owned 7.2% and Halter Financial Investments, L.P. owned 6.1% of the total outstanding shares of the Company’s common stock.

The following chart depicts the Company’s organizational structure:

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The Company’s Business: Day-Old Broilers

The Company’s business is part of the commercial broiler supply chain, which is illustrated below.

 

The figure above illustrates the entire supply chain of broiler chickens. Day-old broilers are one-day-old broilers that are sold to broiler raisers. Day-old broilers sold by the Company’s wholly-owned subsidiary, PRC Yuhe, are the Company’s primary source of revenue.

The Company purchases parent breeding chickens from grandparent breeder farms and raises them to maturity. Once these parent breeding chickens have matured, they produce hatching eggs that the Company incubates and then sells the resulting day-old broiler chicks to its customers.

Under normal circumstances, female parent breeder chickens become productive from the 26 th week, and are no longer commercially productive after the 66th week. Typically a breeder is capable of producing approximately 167 eggs which will be hatched to 137 broilers over its production lifetime and the breeders are maintained by the Company for a period of 420 days. The Company sources its parent breeder chickens from licensed suppliers located in Beijing, and Shandong and Jiangsu provinces and these suppliers are required to have a vaccination certificate and a breeder production certificate for the sale of the breeders. The Company’s hatching eggs typically must be incubated for a period of 21 days.

The following figure shows the production timeline in the broiler business. At least 28 weeks usually pass from the Company’s receipt of a day-old parent breeder to the Company’s sale of the first day-old broilers.

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 The Company operates in two elements of the broiler supply chain: day-old broiler production and feed production. These activities are operated under two separate subsidiaries, PRC Yuhe and Taihong, respectively.

In 2008, PRC Yuhe generated 98.7% of the Company’s revenues. Taihong’s sale of feed to unaffiliated third parties generated 1.3%. Taihong is also the primary supplier of feed to PRC Yuhe. In addition to selling day-old broilers, the Company also sells related chicken products, non-productive parent breeders, and a small amount of feed for livestock and poultry. While the Company produces substantially all of its inventory of hatching eggs through its own parent breeders, it occasionally purchases additional hatching eggs from unaffiliated third parties to meet market requirements.

The Company provides a 98% guaranteed survival rate by delivering an additional 2% of its day-old broilers. For example, the Company delivers two additional day-old broilers to its customers for every order of 100 day-old broilers, the cost for these two additional broilers has already been included in the Company’s cost of sales and therefore no further liability needs to be accrued. Any loss of broiler chicken solely caused by customers is excluded from the guarantee. Guarantee expense for 2008 was $65,769. In 2007, the total guarantee expense that the Company had to pay its customers under this guarantee was less than $7,000.

The Company will provide additional compensation to its customers if the survival rate falls below 96% after taking into consideration the additional 2% broilers given out.

According to paragraph 8 of SFAS 5 “Accounting for Contingencies”, a loss contingency should be accrued for if it is probable that a liability had been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. The Company determined that a product liability need not be accrued for the reporting period because there is only a remote chance that the survival rate will fall below 96% based on historical experience. In 2007, only $7,000 was recorded as guarantee expense to customers; guarantee expense for 2008 was $65,769.

The Day-Old Broiler Industry in China; Competition

The market for day-old broilers in China is highly fragmented. Shandong Province has the highest number of day-old broilers in China. The Company’s market share was approximately 3% in China in 2008 and the Company sold 75,000,000 day-old broilers for the year 2008.

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Day-old broilers are very weak physically and need to be transported in closely controlled temperature conditions during delivery. Therefore, producers of broiler chicks usually only sell locally or to surrounding areas, which limits the Company’s current effective sales market and competition to northern China.

Shandong Minhe Animal Husbandry Co., Ltd., also located in Shandong Province, is one of the Company’s major competitors for sales of day-old broilers. They are slightly larger than the Company in terms of their annual day-old broiler production volume. Another regional competitor of the Company’s is Jilin Deda, which is located in Jilin Province in north-eastern China and is smaller than the Company in terms of annual day-old broiler production volume. However, Jilin Deda is an integrated chicken company, so it does not generally sell day-old broilers to unaffiliated third parties.

The Company competes against its competitors based on product quality and its after-sales services and extensive marketing network. The Company’s “Yuhe” brand has been named by the Shandong Province Administration of Industry and Commerce as a “Well Known Brand”. PRC Yuhe was certified as ISO 9001:2000 compliant for quality management systems.

The Company has sales representatives in every district of Shandong Province. Although the Company’s prices are relatively higher than prices of many of its competitors, the Company typically lowers its price by RMB 0.1 to 0.2 per day-old broiler in order to attract new customers. The Company is able to sell its products at a relatively higher price because its products have a good survival rate and require a shorter period to raise to market size. The Company’s experience and advance breeding technique contribute to the health and quality of parent breeders. The Company has a high gross margin because it focuses on the production of day-old broilers through maintaining the health and quality of its parent breeders, which involves only a small maintenance cost, to produce healthy day-old broilers that have a high survival rate and require a shorter period to raise to market size. The higher the number of day-old broilers is being produced, the lower the unit cost. As such, the Company is able to maintain itself as a relative low cost producer while charging relatively higher prices for its products.

Breeder Supply

PRC Yuhe’s suppliers in 2008 and 2007 were as follows:   

		2008
Suppliers	Suppliers of	Amount		% of
		($ ,000)		Total
Ma Suping	Soybean		5,900.89	27.63	%
Shandong Yisheng Poultry Co., Ltd.	Chicken breeders		1,369.53	6.41	%
Wang Jianbo	Eggs		1,050.75	4.92	%
Mao Shenlin	Eggs		994.41	4.66	%
Ding Jian Sheng	Soybean and corn		892.81	4.18	%
Liu Dianbao	Eggs		720.30	3.37	%
Qi Xiaoyun	Soybean oil		681.95	3.19	%
Zhang Chun Mao	Coal		499.21	2.34	%
Shanghai Shi Guo Agriculture and Equipment Co., Ltd.	Equipment		492.44	2.31	%
Sun Wenpeng	Corn		483.87	2.27	%
Total			13,086.16	61.28	%

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		2007
Suppliers	Suppliers of	Amount		% of
		($ ,000)		Total
Dong Jiangbo	Soybean		775.02	5.54	%
Shandong Yisheng Poultry Co., Ltd.	Chicken breeders		668.16	4.84	%
Wen Lihua	Corn		554.75	4.02	%
Xin Yubin	Eggs		491.15	3.56	%
Mao Shenlin	Eggs		463.42	3.36	%
Jiangsu Aibayijia Co., Ltd.	Chicken breeders		385.35	2.79	%
Tang Xinmin	Corn		382.91	2.77	%
Yu Huazhi	Corn		328.91	2.38	%
Xu Zhentang	Soybean		269.17	1.95	%
Ma Suping	Soybean		267.50	1.94	%
Total			4,586.34	33.15	%

Operations

The main raw materials needed for the production of the Company’s day-old broilers are parent breeders, feed, and medicines and vaccines. PRC Yuhe purchases parent breeders from multiple suppliers. As a result of the massive slaughter of poultry in 2006 due to an outbreak of avian influenza, parent breeders are currently in short supply in China. However, the Company has historically been able to procure adequate stocks of parent breeders with a 5-8% discount from its principal suppliers as a result of its eight- to ten-year relationship with them and the Company’s large, stable orders. The Company purchases its parent breeders from its long-term suppliers in Shandong Province, Jingsu Province and Beijing.

Taihong sells breeder feed to PRC Yuhe at cost, and these supplies have historically accounted for all of PRC Yuhe’s feed requirements. The main raw materials for Taihong’s feed are corn, soybean meal and nutritional elements for feed production. Taihong purchases feed ingredients from numerous sources, but primarily from wholesalers who collect the feed ingredients directly from farmers. Taihong’s feed is produced in three separate phases. First, pre-mix feed is produced from micro-nutritional elements, such as vitamins and minerals. Second, concentrate feed is mixed by blending pre-mix feed and protein such as soybean meals. Finally, whole feed is produced by mixing concentrate feed, corn and soybean meal. Every raw material Taihong uses has more than three suppliers. Taihong is not a large purchaser in the market for these materials, so to strengthen its bargaining power, Taihong will sometimes cooperate with other purchasers to place joint orders. The Company believes that its sources of supply for these materials are adequate for its present needs and does not anticipate any difficulty in acquiring these materials in the immediate future.

The Company obtains its medicines from suppliers in Beijing and Shandong, and its vaccines locally in Harbin, Heilongjiang Province and from foreign companies in the United States and Israel. Every such material the Company uses has more than three suppliers.

The Company considers the health of its flocks to be its primary concern, and as such, the Company undertakes vaccination programs for its birds. Every breeder is vaccinated with at least ten types of vaccine, including those against avian flu. The Company’s birds are raised in enclosed buildings, not in the open where they would be more prone to exposure to potential disease carriers. The Company’s breeder farms are also distributed among various locations at least five kilometers from each other so as to minimize the risks of co-infection. None of the Company’s birds has been infected with the H5N1 virus, and no cases of H5N1 have been found in Shandong Province, where the Company’s farms are located. The Company is also one of the few companies in China to immunize its embryos using the Inovoject® system provided by Embrex, Inc. The Inovoject® system would enhance the quality of the day-old broilers and increase their viability. The system can also improve disease resistance and bird health at the time when they are placed on the breeder farm. The Company conducted a test internally and estimated that the survival rate would be 1-2 % lower without using the Inovoject system. PRC Yuhe was certified as ISO 9001:2000 compliant for quality management systems on May 8, 2003.

Customers and Distribution

Through PRC Yuhe, the Company’s customers are principally comprised of distributors and end users such as integrated chicken companies, broiler raising companies and individual broiler raisers. Approximately eighty-five percent of the Company’s total sales are made through third party distributors and fifty percent of the Company’s sales are to five largest distributors. Forty-five percent of the Company’s sales volume is to distributors with five to ten years of relationship with the Company.

The Company’s reference to “customers” includes both distributors and end users. However, under the section “Customers and Distribution” in this Report, the Company’s reference to “customers” includes the Company’s end users only as the Company is constantly considering increasing and funding its sales network into new geographic areas in an effort to expand its sales to end users.

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If any distributor resells the Company’s product, such distributor will make profits from the resale as well as be entitled to a year end bonus paid by the Company at the rate of RMB 0.05-0.1 per day-old broiler. The Company sets the price to third party distributors and end users according to the market price based on supply and demand and the competitiveness of the market. The Company sets the price according to its own policies and is not subject to any distributors’ control.

The Company is constantly considering increasing and funding its sales network into new geographic areas. The Company expects to purchase new facilities to generate sufficient production capacity and expand roughly at the same rate as it expects to increase its sales network.  The Company shall fund the cost of increasing its sales network internally as it recruits more sales representatives.  The Company considers that costs of acquiring new production facilities and its ability to raise capital for expansion at a particular time can affect its geographical expansion and sales. The Company also considers that shortage of labor would also affect its geographical expansion and sales. The impact of labor shortage can be immediate and longer-term. The Company is monitoring the availability of professionals and experienced workers to meet its production demand.

The Company anticipates that it will use a penetration pricing strategy when first entering a new geographic area. Historically, the Company’s penetration price has been RMB 0.1 to RMB 0.2 per bird lower than its list price, which was still higher than the prevailing market price in the market the Company was seeking to enter.

For the remaining feed produced by Taihong that is not sold to PRC Yuhe, Taihong retains sales agents in various key locations to sell the feed. Because Taihong’s excess feed production is not large, its feed is sold primarily in Shandong Province.

As a part of the Company’s after-sales service and customer relations initiative, the Company regularly visits its customers to educate them on broiler-raising techniques, conducts regular training courses and provides them with a 24-hour help line. The Company also provides guarantees to its customers that the survival rate of its day-old broilers will be not less than 98% within one week of their delivery.

The table below sets out the Company’s top ten major non-distributor customers. Sales to PRC Yuhe’s major end users in 2008 and 2007 were as follows:

	2008
Customers	Amount		% of
		($,000)	Total
Wei Yunchao		3,317.01		9.69	%
Wang Jianbo		2,984.97		8.72	%
Li Chuanwang		2,219.25		6.48	%
Jia Deliang		1,477.17		4.32	%
Tian Liqiu		1,313.55		3.84	%
Xing Changhan		908.50		2.65	%
Geng Naiwei		897.46		2.62	%
Yang Lunhao		882.87		2.58	%
Wang Tongjun		671.16		1.96	%
Zhang Songtang		617.64		1.80	%
Total		15,289.58		44.66	%

	2007
Customers	Amount		% of
	($ ,000)		Total
Wang Jianbo		3,217.25	15.07	%
Li Chuanwang		2,593.89	12.15	%
Wei Yunchao		2,470.88	11.57	%
Tian Liqiu		1,806.22	8.46	%
Yang Lunhao		1,324.87	6.21	%
Zhang Songtang		958.70	4.49	%
Wang Jiazhong		936.77	4.38	%
Jia Deliang		825.03	3.86	%
Geng Naiwei		754.30	3.53	%
Xing Changhan		707.95	3.32	%
Total		15,595.86	73.04	%

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 Employees

As of December 31, 2008, PRC Yuhe and Taihong had 1,230 full-time employees. Among these full-time employees, 120 employees, who are key technical and operational personnel, have directly signed employment contracts with the Company. The remaining employees who are unskilled workers have signed their employment contracts with Weifang Chuangfu Labor Co., Ltd., an outside labor contracting company that provides employees to meet the Company’s staffing needs. The Company compensates the employees of Weifang Chuangfu Labor Co., Ltd. directly for the services that these employees render to it and pays Weifang Chuangfu Labor Co., Ltd. a yearly service fee. Bright Stand has no employees.

R&D and Intellectual Property

PRC Yuhe and Taihong have not made any R&D expenditure in the last two fiscal years.

PRC Yuhe is the registered owner of two PRC trademarks consisting of the stylized Chinese characters “Yu He” and accompanying logo in live agricultural products. The registration period is ten years and the expiry dates for the two trademarks are October 27, 2015 and April 6, 2010, respectively. In the PRC, trademark registrations can be indefinitely renewed for ten-year periods. As the registrant of these two trademarks, PRC Yuhe has the exclusive legal right to use each trademark within the PRC on the goods for which it is registered. PRC Yuhe has the right to prevent others from using a confusingly similar mark on any good which is similar to any of those for which these two trademarks are registered. Through a license agreement with PRC Yuhe, Taihong has the license to use the same trademarks. PRC Yuhe and Taihong have no other patents, trademarks, other licenses, franchises, concessions or royalty agreements. The Company does not consider “Yu He” to be a consumer brand because it is not well recognized by customers who purchase chickens in retail food markets, although this brand is recognized by end users who raise broilers to market size for sale to customers, retail food markets and restaurants.

Environmental Laws

The Company’s breeders farms are located in rural areas where there are no specific requirements imposed on the Company by relevant environmental protection agencies. Fecal wastes are treated and converted by the Company to fertilizers and sold to farmers. PRC Yuhe and Taihong have never been penalized by any environmental protection agencies. The Company therefore does not incur any significant environmental law compliance costs.

Governmental Approvals

The production activities of PRC Yuhe and Taihong are primarily regulated by the Farming Bureau of Shandong Province. Under relevant laws and regulations, both PRC Yuhe and Taihong must obtain relevant production permits from the Farming Bureau of Shandong Province to carry out their respective businesses. In addition, PRC Yuhe, as a company engaging in the breeder business, must obtain an immunization certificate from the local Farming Bureau in Weifang City. PRC Yuhe’s breeder production permit from the Animal Husbandry Bureau of Shandong Province is valid from August 5, 2008 to August 4, 2011. The immunization certificate from the local farming bureau in Weifang City was issued on November 10, 2005 and does not have an expiry date. Taihong’s feed production permit was issued on December 12, 2007 and is valid for a period of three years.

Generally, the primary breeder stock is imported and the import volume is closely controlled by the PRC government. The Company has not seen an increasing trend of the import volume.

PRC Yuhe is currently entitled to an exemption from Chinese enterprises income tax, or “EIT”, because it has been recognized as “a national leading agricultural enterprise”. In accordance with the relevant regulations regarding the tax exemption, PRC Yuhe is tax-exempt as long as it continues to be recognized as “the national leading agricultural enterprise”. On January 31, 2008, the Chinese operating subsidiaries PRC Yuhe and Taihong were acquired by Bright Stand.

On March 16, 2007, the National People’s Congress of China enacted a new tax law, or “the New Tax Law”, whereby both FIEs and domestic companies will be subject to a uniform income tax rate of 25%. On November 28, 2007 , the State Council of China promulgated the Implementation Rules. Both the New Tax Law and the Implementation Rules have become effective on January 1, 2008 and provide tax exemption treatment for enterprises engaged in agricultural industries, such as farming, foresting, fishing and animal husbandry. As an enterprise engaged in the farming industry, the Company is eligible for relevant exemption treatment and does not need to pay company income tax. In 2008, the local tax authorities informed the Company that it is eligible for relevant preferential tax treatment. However, any decision by relevant tax authorities in the future that the Company is not eligible for tax exemption treatment may materially and adversely affect its profits, business and financial performance.

Seasonality

The Company’s operating results and operating cash flows historically have been subject to seasonal variations. Demand for the Company’s day-old broilers generally decreases in May and June. Since the Company’s ultimate clients are mostly farmers and the second quarter is their busy season for reaping, farmers have little idle time to raise broilers during these months.

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Another low season for the Company’s products is from the second half of December to the first half of January, which the Company believes is caused by a Chinese cultural taboo on animal slaughter during the Chinese New Year holiday, which occurs between late January and early February. Because it usually takes approximately 45 days for a day-old broiler to reach market weight, the Company experiences reduced demand for its day-old broilers during the period from 30 to 60 days prior to the Chinese New Year holiday period. In addition, since most farmers are likely to rest during the Chinese New Year holiday, rather than work, February would be another low season for the Company’s products.

Facilities

Except its breeder farms, PRC Yuhe owns buildings/fixtures and land use rights of all the lands used for its operations. Taihong leases all the land and buildings used for its operations from PRC Yuhe.

PRC Yuhe owns the land use rights to four parcels of land in Weifang, Shandong Province, totaling approximately 102,596 square meters. PRC Yuhe has obtained from the relevant governmental authorities the Land Use Right Certificates of these four parcels of land. PRC Yuhe has also obtained Building Ownership Certificates for all the buildings and fixtures erected on those aforementioned four parcels of land. The first parcel comprises 25,040 square meters and is the location of two hatcheries operated by PRC Yuhe. The second parcel of property comprises 31,450 square meters and is the location of the Company’s corporate headquarters and living quarters for the Company’s staff. The third parcel comprises 21,470 square meters which, together with all the buildings erected on it, has been leased to Taihong for its operation of the feed mill. The exclusive rights to use each of the foregoing three parcels of land are valid for a period of 50 years and will expire in 2052 and 2053. The fourth parcel of property comprises 24,636 square meters. The exclusive rights to use the fourth parcel of land are valid for a period of 50 years and will expire in 2057.

PRC Yuhe does not directly own land or land use rights for its thirteen breeder farms, but leases approximately 820,000 square meters of land to house these farms. PRC Yuhe has built on the leased land various buildings to house its breeder. These buildings are considered to be temporary structures.

Because PRC Yuhe does not own these lands, it did not apply for and was not granted with the Land Use Right Certificate and Building Ownership Certificate for the breeder farm lands it leased and the buildings it has erected on the leased land. However, PRC Yuhe has the right to use the breeder farm lands for terms as specified in the Lease Agreement, which typically last about twenty to forty years. During the term of relevant Lease Agreement, all the buildings and fixtures erected by PRC Yuhe on the leased breeder farm lands are protected by PRC law and PRC Yuhe can freely dispose of them.

As of December 31, 2008, both PRC Yuhe and Taihong are not covered by any insurance. It is the Company’s understanding that other large agricultural factory entities in China in the same industry are not covered by insurance as well. The Company would like to insure both day-old broilers and parent breeders, which are its main asset; however, such insurance policies are not available in China.

As of December 31, 2008, the Group had capital commitment amounting to $10,519,644 in relation to the construction cost, land acquisition and farm acquisition for PRC Yuhe and the Group paid deposits of $10,214,093 related to these commitments and recorded under Deposits paid for acquisition of long term assets.   Further details are set out in the financial statements.

The following is a summary of some of the Company’s investment in acquisition of land and farm construction of $8.2 million, including in the capital commitment of approximately $10.5 million mentioned above as of December 31, 2008.

Land for Hatchery Farm No. 3

On June 10, 2008, PRC Yuhe entered into an agreement with Shandong Meiweite Food Ltd. and purchased land use rights for 45 years to an area covering 26,666 square meters. According to the agreement, the total consideration for the sale and purchase is RMB 10 million, or approximately $1.5 million, and a sum of RMB 9 million, or approximately $1.3 million, has been paid according to the terms of such agreement. PRC Yuhe will manage and utilize the land to build a new hatchery, bringing the total number of hatchery farm to three by the end of 2009.

Purchase of Breeding Farms Nos. 3 & 4

On June 7, 2008, PRC Yuhe entered into an agreement with Shandong Anrui Poultry Feed Ltd., and purchased land and the building on it for a total consideration of RMB 17 million, or approximately $2.5 million, and a sum of RMB 16 million, or approximately $2.4 million, has been paid according to the terms of such agreement. PRC Yuhe will utilize this facility as one of its breeding farms without the need to pay for lease payments after such agreement was signed. PRC Yuhe will have avoided annual lease payments by $500,000. The capacity of this breeding farm is 100,000 sets of parent broilers.

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Construction of Breeding Farm No. 1

On August 15, 2008, PRC Yuhe completed construction work and facilities to set up the southern farm of breeding farm No 1. On August 30, 2008, PRC Yuhe purchased 100,000 sets of parent breeders and began to feed. By the end of September 2008, PRC Yuhe has spent RMB 29 million, or approximately $4.5 million, to build breeding farm No 1. The breeding farm can be split into the southern and the northern regions. PRC Yuhe looks forward to completing the northern farm construction work and facilities by July 2009; and beginning to breed parent broilers in the northern region by the end of 2009. The residual scheduled payment is RMB 6 million, or $0.9 million, for the building and facilities; and RMB 4.9 million, or approximately $0.75 million, in machineries. The capacity of the northern factory is 140,000 sets of parent broilers.

Construction of Breeding Farm Nos. 2, 3, 5, 6, 7

On December 6, 2008, PRC Yuhe entered into a construction agreement with a contractor to build and renovate five of its breeding farms for a total consideration of RMB 2.6 million, approximately equivalent to $379,000. The construction period is estimated to be from February 2009 to April 2009.

Construction of Steel Structural Surface for Hatchery Farm No. 3

On December 10, 2008, PRC Yuhe entered into a construction agreement with a contractor to build the steel structure for its hatchery farm No. 3 for a total consideration of RMB 3.9 million, approximately equivalent to $564,000. The construction period is estimated to be from February 2009 to March 2009.

Equipment Leasing and Rental Arrangement

On November 11, 2008, PRC Yuhe entered into equipment leasing agreement and property rental agreement, collectively, the “Agreements”, with Shandong Nongbiao Purina Feed Co., Ltd., “Shandong Nongbiao Purina”. Shandong Nongbiao Purina will construct a feed production facility on a property leased from PRC Yuhe and become the exclusive feed supplier for PRC Yuhe. Pursuant to the terms and conditions of the Agreements, Shandong Nongbiao Purina will lease certain equipment for feed production from, and install them at the premises owned by, PRC Yuhe. The lease term for both the equipment leasing agreement and property rental agreement is 10 years. After completion of the feed production facility, the lease term will commence on the date production begins.  Shandong Nongbiao Purina shall pay to PRC Yuhe an annual rental payment for the leased land, premises and facilities of RMB 1,500,000, approximately equivalent to $219,000. The rent payable by Shandong Nongbiao Purina under the rental agreement will be offset against the prepaid equipment rental costs of RMB 10,000,000, approximately equivalent to $1,459,000.

In connection with the execution of the Agreements, Shandong Yuhe Food Group Co., Ltd., “Yuhe Group”, a PRC company based in Shandong Province, would be the guarantor of PRC Yuhe for RMB 4,500,000, approximately equivalent to $657,000, for the first five years and for RMB 3,000,000, approximately equivalent to $438,000, for the next five years. No guarantee fee is required according to the above Agreements.

Legal Proceedings

In May 2008, Li Yu filed a claim against PRC Yuhe, Taihong and Yuhe Group claiming RMB 2,400,000, or approximately $360,000, arising from an alleged RMB 10,000,000, or approximately $1,500,000, loan agreement dated October 31, 2007 entered into among Li Yu, as the lender, PRC Yuhe, Taihong, Yuhe Group and Gao Zhentao.  However, due to Li Yu’s failure to transfer the loan amount to the borrowers timely, PRC Yuhe and Taihong could not utilize the loan amount. As a result of the late remittance of funds, Yuhe Group has agreed to borrow and take over the RMB 10,000,000, or approximately $1,500,000, loan from PRC Yuhe and Taihong pursuant to a Capital Transfer Agreement dated November 28, 2007 by and among PRC Yuhe, Taihong and Yuhe Group. Yuhe Group has already repaid RMB 9,200,000, or approximately $1,380,000, to Li Yu.

With respect to the claim filed by Li Yu, while it appears that RMB 800,000, or approximately $120,000, remains unpaid under the loan agreement, Li Yu has claimed RMB 2,400,000, or approximately $360,000, without explaining his basis. In addition to litigating over venue, the borrowers claimed that the loan agreement was forged and counterclaimed losses due to Li Yu's failure to transfer the loan amount to the borrowers timely.

On December 8, 2008, Li Yu applied to the Court withdrawing his claim against PRC Yuhe, Taihong and Yuhe Group.  The Court handed down the judgment on the same date allowing Li Yu’s application for withdrawal and ordering Li Yu to pay the costs of his application.

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MANAGEMENT

Executive Officers, Director and Key Employees

The following table sets forth information about the Company’s executive officers, directors and key employees as of December 31, 2008. Unless expressly disclosed, all officers above are employed full time by us:-

Name	Age	Position
Executive Officers
Gao Zhentao**	47	Chief Executive Officer and Chairman of the Board of Directors
Han Chengxiang	44	Chief Production Officer
Hu Gang	33	Chief Financial Officer
Directors
Peter Li	44	Director *
Liu Yaojun	32	Director *
Greg Huett	46	Director *
Han Chengxiang	47	Director
Key Employees
Tan Yi	52	Marketing Director of PRC Yuhe
Ding Wengui	45	Chief Technology Officer of PRC Yuhe

* Not full time

**Other than spending approximately 4 hours per week, or approximately 10% of his professional time, as executive director of Yuhe Group, Mr. Gao Zhentao is employed full time by the Company as the Chief Executive Officer and Chairman.

Executive Officers

Gao Zhentao. Mr. Gao has been the Company’s Chief Executive Officer and Chairman of its Board of Directors since March 12, 2008. Prior to joining us, Mr. Gao served as the Chief Executive Officer and Chairman of the Board of Directors of PRC Yuhe from 1996 to 2008. He was one of the co-founders of PRC Yuhe and Taihong. Mr. Gao is a member of the Agricultural Work Committee of the Weifang City People’s Congress and a member of the Standing Committee of the Hanting District People’s Congress. Mr. Gao has also served as the vice-chairman of the Shandong Province Farming Association since 2006, and as vice-chairman of the Poultry Subcommittee of the National Farming Association of China since 2007. Mr. Gao is the controlling shareholder, legal representative and executive director of Shandong Yuhe Food Group Co., Ltd., “Yuhe Group,” and holds 80% of Yuhe Group’s shares.

Yuhe Group is a large-scale private enterprise, which engages in the business of raising commercial chickens and slaughtering broilers. All of Yuhe Group’s production facilities are introduced from countries such as Germany, South Korea, USA, Japan, and Holland. Yuhe Group implements standards for production of foods exported to Japan and the European Union. In addition, Yuhe Group adopts the Hazard Analysis and Critical Control Point, “HACCP”, system in its design and production. Yuhe Group’s raw materials are provided by rural broiler raisers. The Company believes these chickens are to be safe and carry no drug residues. In the same industry, Yuhe Group was the first enterprise that passed ISO9001, ISO14001 and HACCP. Yuhe Group is not a customer of PRC Yuhe.

Mr. Gao’s employment agreement was effective as of March 12, 2008, the date Mr. Gao was appointed CEO, and has an initial term of three years, “Mr. Gao’s Initial Term”. Following Mr. Gao’s Initial Term, the agreement may be extended on an annual basis by agreement of the parties. As the principal executive officer, Mr. Gao is responsible for the Company’s overall management. Mr. Gao will receive an annual base salary of RMB1,200,000, approximately equivalent to US$175,387, which will be reviewed on an annual basis by the compensation committee of the Company’s board of directors, plus an annual discretionary bonus, as determined by the compensation committee of the Company’s board of directors, and separation benefits . During Mr. Gao’s employment, he will be entitled to insurance and other benefits including, among others, medical and disability coverage and life insurance as are afforded to other of the Company’s senior executives. By entering into the employment agreement, Mr. Gao agreed to a 12-month non-competition clause post termination.

Han Chengxiang has been the Company’s Chief Production Officer since March 12, 2008. Prior to joining us, Mr. Han served as the Chief Production Officer of PRC Yuhe from 1998 to 2008. Prior to joining PRC Yuhe in 1998, Mr. Han served as the vice factory manager and then the factory manager of Weifang Zhonglianghuawei Food Co., Ltd. from 1996 to 1998. Prior to that, Mr. Han served as the chief production officer and then the vice factory manager of Weifang Broiler Group Co., Ltd. from 1990 to 1996.  Mr. Han Chengxiang was appointed Director of the Company and member of the Nominating Committee of the Company on June 13, 2008. Pursuant to an employment agreement entered into by the Company with Mr. Han, dated June 13, 2008. Mr. Han is receiving an annual salary of $17,142 and is entitled to PRC statutory holidays, and leave for maternity, marriage and mourning with pay in accordance with relevant government laws and regulations.

Hu Gang has been the Company’s Chief Financial Officer since June 13, 2008. Prior to joining us, Mr. Hu was the Chief Financial Officer of Sino-Gas International Holding Inc from October 2007 to March 2008. Prior to that, between August 2004 and October 2007, Mr. Hu served as the Finance Director of FedExKinkos’ Greater China operations. Between August 2002 and July 2004, Mr. Hu served as the accounting supervisor and group leader of DuPont China Holding Ltd. Mr. Hu graduated from Shanghai Finance and Economics University, PRC, with a BA in International Accounting.

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The Company entered into an employment agreement with Mr. Hu, effective as of June 13, 2008, his appointment date, which has an initial term of three years, “Mr. Hu’s Initial Term”. Following Mr. Hu’s Initial Term, the agreement may be extended on an annual basis by agreement of the parties. As the principal financial officer, Mr. Hu is responsible for the Company’s financial management. Mr. Hu will receive an annual base salary of RMB1,000,000, approximately equivalent to US$146,156, during the first year, RMB 1,500,000, approximately equivalent to US$219,234, during the second year, and RMB 1,800,000, approximately equivalent to US$263,081, during the third year, of Mr. Hu’s Initial Term. In addition, the agreement provides for an annual discretionary bonus, as determined by the compensation committee of the Company’s board of directors, stock options and separation benefits. By entering into the employment agreement, Mr. Hu agreed to a 12-month non-competition clause post termination.

Directors

On June 13, 2008, Mr. Peter Li was appointed independent director of the Company, chair of the Audit Committee and member of the Compensation and Nominating Committees of the Company. Mr. Li is currently the chief financial officer of HLS Systems International (NASDAQ: HOLI), a leading automation solution provider to industrial, rail, and nuclear sectors in China since February 1, 2009.  Peter is an independent director and audit committee chairman for China Valves Technology, Inc. (CVVT.OB), an OTCBB listed company of manufacturing metal valves in China since November 2008. Peter is director of CS China Acquisition Corp. (CSACF.OB), an OTCBB listed company engaging in seeking business combination with a Chinese operating company since August 2008. Peter was senior advisor for Yucheng Technologies (NASDAQ: YTEC) between February 2008 and February 2009, a leading IT service provider to banking industry in China. Peter was CFO for Yucheng Technologies between October 2004 and February 2008. Prior to his tenure at Yucheng, Peter worked in corporate financial management with various companies, including the role of Internal Controller at Lenovo. Peter graduated from Beijing Foreign Studies University with a B.A. and received a Mater of Education from University of Toronto. Peter is a Certified General Accountant in Ontario, Canada.

On June 13, 2008, Mr. Liu Yaojun was appointed Independent Director of the Company, chair of the Compensation Committee and member of the Nominating and Audit Committees of the Company. Mr. Liu is currently a partner at Global Law Office, a law firm based in Beijing, the PRC. Prior to that, between 2003 and 2006, Mr. Liu served as an attorney at Jingtian Gongcheng Law Firm, a law firm based in Beijing, the PRC.

On June 13, 2008, Mr. Greg Huett was appointed Independent Director of the Company, chair of the Nominating Committee and member of the Audit and Compensation Committees of the Company. Mr. Huett is currently the Chief Executive Officer of Great Creations LLC, a consumer packaged goods company. Prior to that, from 1981 to 2007 Mr. Huett worked at Tyson Foods, where he last served as the Group Vice President of Tyson’s International division.

On June 13, 2008, Mr. Han Chengxiang was appointed Director of the Company and member of the Nominating Committee of the Company. Mr. Han is currently the Chief Production Officer of the Company. Prior to joining the Company, Mr. Han served as the Chief Production Officer of PRC Yuhe from 1998 to 2008.

Key Employees

Tan Yi has served as Marketing Director of PRC Yuhe since 1995. Prior to joining PRC Yuhe in 1995, Mr. Tan served in various marketing roles with a gas company located in Harbin Province from 1990 to 1994.

Ding Wengui has been the chief technology officer of the Company’s subsidiary PRC Yuhe since 2006. Prior to this he served as the general manager of PRC Yuhe’s production division. Prior to joining PRC Yuhe in 2005, Mr. Ding worked at Qingdao Zhengda Co., Ltd., a broiler chicken company located in Shandong Province from 1993 to 2005, where he ultimately served as the vice general manager of its production division. Prior to joining Qingdao Zhengda Co., Ltd. in 1993, Mr. Ding worked at Heilongjiang Tieli Agricultural Co., Ltd., a company located in Heilongjiang Province from 1983 to 1993. Mr. Ding holds a degree in agriculture from the Heilongjiang Bayi Agricultural University.

Involvement in Certain Legal Proceedings  

To the Company’s knowledge, during the past five years, none of the Company’s directors or executive officers was involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offenses; (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his/her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission, or SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed,  suspended or vacated.

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Board Composition and Committees

The Company’s board of directors currently consists of five members: Gao Zhentao, Han Chengxiang, Peter Li, Liu Yaojun and Greg Huett.

The Company’s board of directors has appointed a compensation committee on June 13, 2008. The Company’s compensation committee comprises three members and is responsible for the administration of all salary, bonus and incentive compensation plans for the Company’s officers and key employees. The compensation committee will also determine the discretionary annual bonus to be paid to Mr. Gao if the Company exceeds the after tax net income target of $9 million, by providing Mr. Gao with a cash bonus amount equivalent to 0.5 to 1.5% of the amount by which the Company’s after tax net income exceeds $9 million. The factors that the compensation committee will consider in determining Mr. Gao’s bonus will be revenue increase as well as the survival rate, productivity and hatching rate of the broilers. The members of the Company’s compensation committee are Liu Yaojun, Peter Li and Greg Huett.

The Company’s board of directors appointed an audit committee on June 13, 2008. The Company’s audit committee members are Peter Li, Liu Yaojun, and Greg Huett. Mr. Li qualifies as an “audit committee financial expert” as defined in Item 401(h) of Regulation S-K, and is “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.

The Company’s board of directors appointed a nominating committee on June 13, 2008. The Company’s nominating committee members are Greg Huett, Liu Yaojun, Peter Li and Han Chengxiang.

Supervisory Board and Shareholder’s Congress

As required by PRC Company Law (2005), each of PRC Yuhe and Taihong, as PRC companies, must establish a "Supervisory Board" and a "Shareholder Congress" as its internal corporate organs.

(i) Shareholder Congress.

Shareholder Congress comprises all the shareholder(s) of a PRC company and is the organ with the highest authority. Its authority is higher than that of both the Board of Directors and the Supervisory Board.

As stipulated by PRC Company Law (2005), the Shareholder Congress has, among others, the following powers or functions:

1.    to elect and replace directors and supervisors of the company;

2.    to pass resolutions on matters such as the merger, division, dissolution, liquidation or change of the corporate form of the company; and

3.    to amend the articles of association of the company.

The Shareholder Congress of PRC Yuhe consists of Bright Stand, and the Shareholder Congress of Taihong consists of Bright Stand and PRC Yuhe.

(ii) Supervisory Board.

All the members of the Supervisory Board serve for a term of three years. At the Shareholder Congress, the shareholders of PRC Yuhe were obligated to approve the appointment of one Supervisory Board member who was elected by the workers of PRC Yuhe as required by current Chinese laws and regulations and also appointed two other members. There are no other nominations or arrangements for nomination of Supervisory Board member. The current members of the Supervisory Board of PRC Yuhe are Zhang Jinhua, Zheng Chaoyang and Zhang Lishun, and their business background and relationships with Yuhe are as follows :-

(a)   Zhang Jinhua

Mr. Zhang graduated from Shandong Light Industrial University with a professional degree in economics and business administration in July 1999. Mr. Zhang has been the Chairman of the Supervisory Board of PRC Yuhe since November 2007 and secretary to the Company’s board of directors since March 2008. Mr. Zhang is receiving a monthly salary of RMB 8,000, or approximately $1,169, for his services as secretary to the Company's board of directors. Mr. Zhang does not receive any salary for being a member of the Supervisory Board.

Prior to joining the Company, Mr. Zhang was a factory supervisor and branch factory general manager of Shandong Lorain Foodstuff (Group) Co., Ltd. from March 2003 to June 2007 and was a Development Planning Department manager of Yuhe Group from July 2007 to March 2008. Mr. Zhang was receiving a monthly salary of RMB 1,800, or approximately $263, for his services as a Development Planning Department manager.

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(b)   Zheng Chaoyang

Mr. Zheng is currently an Administrative Department officer of Yuhe Group and has held those positions since July 1997. Prior to joining Yuhe Group in July 1997, Mr. Zheng was a sole proprietor engaging in the retail business from 1985 to 1997. Mr. Zheng is receiving a monthly salary of RMB 1,700, or approximately $248, for his services as an Administrative Department Officer. Mr. Zheng does not receive any salary for being a member of the Supervisory Board.

(c)   Zhang Lishun

Mr. Zhang is a university graduate and a senior political worker. Mr. Zhang is currently an Administrative Department officer of Yuhe Group and has held these positions since February 2004. Prior to joining Yuhe Group in February 2004, Mr. Zhang was the chief officer at the security section of Shandong Hailong Holdings Limited from July 1985 to February 2004. Mr. Zhang is receiving a monthly salary of RMB 1,500, or approximately $219, for his services as an Administrative Department Officer. Mr. Zhang does not receive any salary for being a member of the Supervisory Board.

The Supervisory Board has, among others, the following powers:

1.   to examine the company's financial affairs;

2.   to propose the convening of extraordinary shareholders’ meetings; and

3.   to institute proceedings against the directors and senior management personnel on behalf of the company.

Code of Ethics 

The Board of Directors has adopted a Code of Ethics which is applicable to all officers, directors and employees.  The Code of Ethics is filed as Exhibit 14.1 to this Report on Form 10-K.  The Code of Ethics will also be posted on the corporate governance page of the Company’s website at http: //www.yuhepoultry.com

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table presents compensation information for the Company’s fiscal years ended December 31, 2007 and 2008 paid to or accrued for the Company’s chief executive officer, the Company’s two former presidents, the Company’s chief financial officer and the Company’s three other most highly compensated officers or former officers. The Company refers to these executive officers as its “named executive officers.”

			Annual Compensation
Name and Principal Position	Year		Base Salary	Bonus		All Other Compensation	Total
Gao Zhentao (1) Chief Executive Officer		2008 2007	105,110 34,286		0 0	0 0		105,110 34,286
Han Chengxiang Chief Production Officer		2008 2007	17,518 4,616		0 0	0 0		17,518 4,616
Hu Gang Chief Financial Officer		2008	72,993		0	0		72,993
Jiang Yingjun Former Chief Financial Officer and current Chief Accounting Officer (2)		2008 2007	12,262 2,311		0 0	0 0		12,262 2,311
Richard Crimmins (3) Former President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Secretary-Treasurer		2007	0		0	0		0
Pam Jowett (4) Former President		2007	0		0	0		0

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(1) Gao Zhentao receives an annual salary in the sum of $8,000 from the Yuhe Group.

(2) Mr. Jiang served as the Chief Financial Officer of First Growth, later Yuhe International, Inc., from March 12, 2008 to June 13, 2008. He is now the Company’s Chief Accounting Officer.

(3) Mr. Crimmins served as the President of First Growth from November 16, 2007 through March 12, 2008.

(4) Ms. Jowett served as the President of First Growth from September 1997 through November 16, 2007.

(i) Mr. Gao Zhentao

The Company entered into an employment contract with Gao Zhentao, its Chief Executive Officer, “CEO”, on June 13, 2008. The employment agreement was effective as of March 12, 2008, the date Mr. Gao was appointed CEO, and has an initial term of three years, “Mr. Gao’s Initial Term”. Following Mr. Gao’s Initial Term, the agreement may be extended on an annual basis by agreement of the parties. As the principal executive officer, Mr. Gao is responsible for the Company’s overall management. Mr. Gao will receive an annual base salary of RMB 1,200,000, or approximately $175,387, which will be reviewed on an annual basis by the compensation committee of the Company’s board of directors, plus an annual discretionary bonus, as determined by said compensation committee, and separation benefits . During Mr. Gao’s employment, he will be entitled to insurance and other benefits including, among others, medical and disability coverage and life insurance as are afforded to other of the Company’s senior executives. By entering into the employment agreement, Mr. Gao agreed to a 12-month non-competition clause post termination.

(ii)Mr. Han Chengxiang

Mr. Han Chengxiang was appointed Director and member of the Nominating Committee on June 13, 2008. Mr. Han is currently the Company’s Chief Production Officer. Prior to joining us, Mr. Han served as the chief production officer of PRC Yuhe from 1998 to 2008. Pursuant to an employment agreement entered into by the Company with Mr. Han, dated June 13, 2008, Mr. Han is receiving an annual salary of $17,142 and is entitled to PRC statutory holidays, and leave for maternity, marriage and mourning with pay in accordance with relevant government laws and regulations.

(iii) Mr. Hu Gang

On June 13, 2008, Mr. Hu Gang was appointed the Company’s Chief Financial Officer, “CFO”. The Company entered into an employment agreement with Mr. Hu, effective as of June 13, 2008, his appointment date, which has an initial term of three years, “Mr. Hu’s Initial Term”. Following Mr. Hu’s Initial Term, the agreement may be extended on an annual basis by agreement of the parties. As the principal financial officer, Mr. Hu is responsible for the Company’s financial management. Mr. Hu will receive an annual base salary of RMB 1,000,000, or approximately $146,156, during the first year, RMB 1,500,000, or approximately $219,234, during the second year, and RMB 1,800,000, or approximately $263,081, during the third year, of Mr. Hu’s Initial Term. In addition, the agreement provides for an annual discretionary bonus, as determined by the compensation committee of the Company’s board of directors, stock options and separation benefits. By entering into the employment agreement, Mr. Hu agreed to a 12-month non-competition clause post termination.

(iv) Mr. Jiang Yingjun

Mr. Jiang was appointed the Company’s Chief Accounting Officer and he is receiving an annual salary of $12,000 pursuant to an employment agreement entered into by the Company with Mr. Jiang, dated June 13, 2008. In addition, Mr. Jiang is eligible for an annual discretionary bonus, as determined by the compensation committee of the Company’s board of directors. Mr. Jiang is entitled to PRC statutory holidays, and leave for maternity, marriage and mourning with pay in accordance with relevant government laws and regulations.

(v)   Mr. Tan Yi

Mr. Tan was appointed as a Marketing Director in the Sales Department of PRC Yuhe. Pursuant to an employment agreement entered into by PRC Yuhe with Mr. Tan, dated March 10, 2006, Mr. Tan is receiving a monthly salary of RMB 10,000, or approximately $1,462. Mr. Tan is entitled to PRC statutory holidays and leave for maternity, marriage and mourning with pay in accordance with relevant government laws and regulations.

 (vi) Ding Wengui

Mr. Ding was appointed as a Chief Technology Officer of PRC Yuhe. Pursuant to an employment agreement entered into by PRC Yuhe with Mr. Ding, dated July 11, 2005, Mr. Ding is receiving a monthly salary of RMB 8,000, or approximately $1,169. Mr. Ding is entitled to PRC statutory holidays and leave for maternity, marriage and mourning with pay in accordance with relevant government laws and regulations.

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(vii) Zhao Beijing

Mr. Zhao was employed as a Production Manager of PRC Yuhe. Pursuant to an employment agreement entered into by PRC Yuhe with Mr. Zhao, dated July 10, 2001, Mr. Zhao is receiving a monthly salary of RMB 8,000, or approximately $1,169. Mr. Zhao is entitled to PRC statutory holidays and leave for maternity, marriage and mourning with pay in accordance with relevant government laws and regulations.

 (viii) Wang Jianbo

Mr. Wang was employed as a Sales Manager of Taihong. Pursuant to an employment agreement entered into by Taihong with Mr. Wang, dated December 25, 2000, Mr. Wang is receiving a monthly salary of RMB 6,000, or approximately $877. Mr. Wang is entitled to PRC statutory holidays and leave for maternity, marriage and mourning with pay in accordance with relevant government laws and regulations.

(ix) Gao Aiping

Ms. Gao was employed as a Technician of Taihong. Pursuant to an employment agreement entered into by Taihong with Ms. Gao, dated July 15, 2000, Ms. Gao is receiving a monthly salary of RMB 3,500, or approximately $512. Ms. Gao is entitled to PRC statutory holidays and leave for maternity, marriage and mourning with pay in accordance with relevant government laws and regulations.

In respect of Mr. Richard Crimmins and Ms. Pam Jowett, neither Richard Crimmins nor Pam Jowett entered into any employment agreement with First Growth.

Compensation Discussion and Analysis

The following discussion and analysis of compensation arrangements of the Company’s named executive officers for 2007 and 2008 should be read together with the compensation tables set forth above and related disclosures set forth below. This discussion contains forward-looking statements that are based on the Company’s current plans, considerations, expectations and determinations regarding future compensation programs. The actual amount and form of compensation and the compensation programs that the Company adopts may differ materially from currently planned programs as summarized in this discussion.

Evolution of the Company’s Compensation Approach; Compensation Philosophy

The Company’s historical executive compensation programs were developed and implemented while the Company was a private company. To date, the Company’s compensation programs and the process by which they were developed, were less formal than that typically employed by public companies. The Company’s board of directors currently consists of five members: Gao Zhentao, Han Chengxiang, Peter Li, Liu Yaojun and Greg Huett. The Company’s board of directors appointed a compensation committee on June 13, 2008. The Company’s Compensation Committee comprises three members and is responsible for the administration of all salary, bonus and incentive compensation plans for the Company’s officers and key employees. The members of the Company’s Compensation Committee are Liu Yaojun, Peter Li and Greg Huett.

The Company has traditionally placed significant emphasis on the business judgment of its board of directors and the recommendations of the Company’s chief executive officer with respect to the determination of executive compensation. The Company has not used a compensation consultant in any capacity but believe that its executive officer compensation package is comparable and competitive to similar businesses in northern China. As the Company gains experience as a public company, the Company expects the specific direction, emphasis and components of the Company’s compensation program will evolve and become more formalized.

Components of the Company’s Executive Compensation Program

The Company’s executive compensation consists of the following elements:

The Company’s compensation objective is to ensure that executives are provided incentives and compensated in a way that advances both the Company’ short and long-term interests while also ensuring the Company’s ability to attract and retain executive management talent.

The Company approaches this objective through three key components, base salary, discretionary bonus and grant of options.

Base Salary. Base salaries for the Company’s executives are used to recognize the experience, skills, knowledge and responsibilities required of all the Company’s employees, including the Company’s executives. The 2008 base salary for each of the Company’s executive officers was based on the recommendation of the chief executive officer, and was based on his review of his business judgment and the assessment of the executive’s performance and is intended to be similar to salaries paid to executives at other companies in similar positions in Weifang, Shandong Province, China. The Company used Shandong Minhe Animal Husbandry Co., Ltd. as a benchmark for base salary. Shandong Minhe Animal Husbandry Co., Ltd. is located in Shandong Province and is one of the Company’s major competitors for sales of day-old broilers.

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Base salaries are reviewed annually to confirm that they remain aligned with market levels after taking into account individual responsibilities, performance and experience.

Discretionary Annual Bonus. The Company’s board of directors has the authority to award discretionary annual bonuses to its executive officers, including the Company’s chief executive officer. Bonuses awarded were intended to compensate officers for achieving financial and operational goals, such as the business targets noted above, and for achieving individual annual performance objectives. These objectives vary depending on the individual, but relate generally to strategic factors such as the financial performance, results of operations, per share performance of the Company’s common stock and the level of responsibility of each individual’s position.

As the Company’ specific after tax net income target was $9 million for the year 2008, discretionary annual bonuses will be provided to the Company’s Chief Executive Officer and other executives if the Company exceeds the after tax net income target of $9 million, with an aggregate amount equivalent to 0.5%-1.5% of any excess. When deciding the amount of bonus to be awarded to other employees, the Company will consider the survival rate, productivity and hatching rate of the broilers. Such factors will be determined from time to time by the Company’s Compensation Committee.

In 2007 and 2008 these objectives specifically include the individual’s contribution to the process of going public and revenue growth. The actual amount of discretionary bonus granted is determined following a review of each executive’s individual performance and contribution to the Company’s strategic goals conducted within three months following the end of the applicable fiscal year.

The Company’s Compensation Committee as established pursuant to its charter is responsible for the administration of all salary, bonus and incentive compensation plans for the Company’s officers and key employees.

Long-Term Incentive Plan Awards. The Company currently does not have a stock option plan, stock appreciation rights plan or other long-term incentive plans. The Company only grants options to its Chief Financial Officer thus far. However, the Company is reviewing the arrangement to grant options to other senior executives. The Company may implement a long-term incentive plan in the future; however because of Chinese tax laws, the Company currently does not consider these types of awards desirable.

Defined Benefit or Actuarial Plan. The Company contributes 20% from an individual employee’s total amount of monthly salary to pension insurance as required under Shandong Province local labor regulations, which has been reflected in the summary compensation table above. Each employee contributes 8% from his total amount of monthly salary to the same government-sponsored program, although the Company withholds and pays such percentage on behalf of the employee. However, no benefits are determined by final compensation and years of service.

Employment contracts and change of control arrangements

All executive officers and key employees of PRC Yuhe and Taihong are under employment contracts. None of the executive officers or key employees has a change-of-control related arrangement with us. These contracts typically have period of validity of between three to ten years and one-month notice period for early termination. The executive officers and key employees as of December 31, 2008 have the following initial term of employment in their respective employment contracts:-

Executive Officers	Initial term
Gao Zhentao	3 years
Han Chengxiang	10 years
Hu Gang	3 years
Key Employees	Initial term
Tan Yi	5 years
Ding Wengui	5 years
Jiang Yingjun	8 years
Zhao Beijing	8 years
Wang Jianbo	10 years
Gao Aiping	10 years

Copies of these employment contracts have also been filed with the Registration Statement on Form S-1/A on December 19, 2008 and are incorporated by reference herein.

Security ownership guidelines

The Company does not have a stock grant policy or any stock ownership guidelines.

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Accounting and tax treatment

Given the Company’s current levels of compensation, the accounting and tax considerations have not significantly impacted the Company’s forms of compensation. The board considers as one factor the impact of accounting and tax treatment on compensation in the Company’s compensation programs.

Director Compensation

None of the directors who served during the past two fiscal years received any form of compensation from the Company.  The Company’s former sole director, Gao Zhentao, is also an officer of Yuhe and received no additional compensation for being a director.

TRANSACTIONS WITH RELATED PERSONS

Security Interest in Personal Real Estate. On November 9, 2006, PRC Yuhe borrowed $266,667 from Wei Fang Han Ting Rural Credit Cooperatives Union, which was secured by a mortgage on the personal residence of Gao Zhentao, the Company’s chief executive officer. There is currently a principal balance of $266,667 outstanding on the loan, which accrues interest at the rate of 0.6825% per month. Accrued interest on the loan is payable on a monthly basis, and all outstanding principal and interest will become due and payable on November 8, 2009.

Salary paid by the Group. Since PRC Yuhe’s inception, the salary of the Company’s chief executive officer, Gao Zhentao, was paid by Shandong Yuhe Food Group Co., Ltd., or “Yuhe Group”, a PRC company based in Weifang, Shandong Province that is controlled by the Company’s chief executive officer and his brother, Gao Zhenbo. In 2008 this salary totaled $8,000.

Share Exchange Agreement Transaction Between Mr. Kunio Yamamoto and First Growth. The Company entered into an Equity Transfer Agreement, the “Equity Transfer Agreement”, dated as of March 12, 2008, with Mr. Kunio Yamamoto, the sole shareholder of Bright Stand, to exchange all of the issued and outstanding shares of Bright Stand owned by him in exchange for the Company’s issuing to Mr. Yamamoto 8,626,318 unregistered shares of the Company’s common stock. As a result of the transaction, Mr. Yamamoto holds 8,626,318 shares, or 88.8 % of the Company’s 9,714,312 shares of common stock then outstanding following the completion of all matters referred to above.

Mr. Gao is the controlling shareholder, legal representative and executive director of Shandong Yuhe Food Group Co., Ltd., "Yuhe Group", holding 80% of its shares. Mr. Gao does not have any affiliation or relationship with any of the Company’s competitors, suppliers, customers, distributors and similar companies, including without limitation, Hefeng Green Agriculture Co., Ltd., Shandong Yuhe New Agriculture Academy of Sciences, and Weifang Hexing Breeding Co., Ltd.

In previous years when the Company needed working capital, it received advances from time to time from related companies and related companies also paid some expenses on the Company’s behalf. At December 31, 2006, the accumulated amount due to related companies was $2,567,739. The Company provided advances to and paid some expenses for other related parties when they needed working capital. The related parties serve as a source of temporary financing for each other in order to save on significant interest expenses.

The amounts due from related parties are an accumulation of some trade transactions and advances to related companies for working capital purposes. There are no agreements signed between the related companies and no fixed repayment dates, although the lenders have the right to demand repayment in full at anytime. 

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Related Party	Terms	Yuhe International, Inc. Balance as at December 31, 2008		PRC Yuhe Balance as at December 31, 2007		PRC Yuhe Balance as at December 31, 2006
Loans to Former Owners of PRC Yuhe
Mr. Gao Zhentao, Director and former owner of PRC Yuhe	The first oral loan agreement between PRC Yuhe as lender and Mr. Gao Zhentao as borrower was made in or about December 2006. Since then, there have been a number of borrowings and repayments under identical terms between these parties. Unsecured, interest free loans, have no fixed repayment date. For allowing Mr. Gao to make payments for his business trips and other expenses purpose. Balance in the sum of $74,125 was repaid on February 19, 2008. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	-	$	74,125	$	-
Mr. Gao Zhenbo, Director of PRC Yuhe and former owner of Taihong	The first oral loan agreement between PRC Yuhe as lender and Mr. Gao Zhenbo as borrower was made before January 1, 2005. Since then, there have been a number of borrowings and repayments under identical terms between these parties. Unsecured, interest free loans, have no fixed repayment date. For allowing Mr. Gao to make payments for his business trips and other expenses purpose. Balance in the sum of $76,716 was repaid on February 19, 2008. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	-	$	76,716	$	-
Mr. Tan Yi, Director of PRC Yuhe	The first oral loan agreement between PRC Yuhe as lender and Mr. Tan Yi as borrower was made on or about January 31, 2005. Since then, there have been a number of borrowings and repayments under identical terms between these parties. Unsecured, interest free loans, have no fixed repayment date. For allowing Mr. Tan to make payments for his business trips and other expenses purpose. Balance in the sum of $78,092 was repaid on February 19, 2008. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	-	$	78,092	$	-
Due from directors shown under non-current assets in balance sheet		$	-	$	228,933	$	-

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Loans to Companies in which Former Owner of PRC Yuhe Served as a Director
Hexing Green Agriculture Co., Ltd, a company in which Mr. Gao Zhentao served as a director	The first oral loan agreement between PRC Yuhe as lender and Hexing Green Agriculture Co., Ltd. as borrower was made on or about September 30, 2005. Since then, there have been a number of borrowings and repayments under identical terms between these parties.
	Unsecured, interest free loans, have no fixed repayment date. For working capital purposes. The management expects to receive the loan balance on demand in December 2009. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	75,754	$	70,990	$	66,419
Shandong Yuhe Food Group Co., Ltd., a company in which Mr. Gao Zhentao served as a director	The first oral loan agreement between PRC Yuhe and Taihong as lenders and Shandong Yuhe Food Group Co., Ltd. as borrower was made before January 1, 2005. Since then, there have been a number of borrowings and repayments under identical terms among these parties. Unsecured, interest free loans, have no fixed repayment date. For working capital purposes. The management expects to receive the loan balance on demand in December 2009. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	3,580,553	$	5,617,363	$	4,015,833
Shandong Yuhe New Agriculture Academy of Sciences, a company in which Mr. Gao Zhentao served as a director	The first oral loan agreement between PRC Yuhe as lender and Shandong Yuhe New Agriculture Academy of Sciences as borrower was made before January 1, 2005. Since then, there have been a number of borrowings and repayments under identical terms between these parties. Unsecured, interest free loans, have no fixed repayment date. For working capital purposes. The management expects to receive the loan balance on demand in December 2009. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	50,257	$	48,384	$	45,268

Weifang Hexing Breeding Co., Ltd., a company in which Mr. Gao Zhentao served as a director	The first oral loan agreement between Taihong as lender and Weifang Hexing Breeding Co., Ltd. as borrower was made before January 1, 2005. Since then, there have been a number of borrowings and repayments under identical terms between these parties. Unsecured, interest free loans, have no fixed repayment date. For working capital purposes. The balance in the sum of $214,954 was repaid on March 31, 2008. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	-	$	53,723	$	-
Weifang Jiaweike Food Co., Ltd., a company in which Mr. Gao Zhentao served as a director	The first oral loan agreement between Taihong as lender and Weifang Jiaweike Food Co., Ltd. as borrower was made on or about September 3, 2005. Since then, there have been a number of borrowings and repayments under identical terms between these parties. Unsecured, interest free loans, have no fixed repayment date. For working capital purposes. The management expects to receive the loan balance on demand in December 2009. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	25	$	26	$	-

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Due from related companies shown under non-current assets on balance sheet		$	3,706,589	$	5,790,486	$	4,127,520
Loans from Companies in which Former Owner of PRC Yuhe Served as a Director
Weifang Hexing Breeding Co., Ltd, a company in which Mr. Gao Zhentao served as a director	The first oral loan agreement between Weifang Hexing Breeding Co., Ltd. as lender and PRC Yuhe as borrower was made before January 1, 2005. Since then, there have been a number of borrowings and repayments under identical terms between these parties.
	Unsecured, interest free loans, have no fixed repayment date. For working capital purposes. Balance in the sum of $2,169,237 was repaid on June 30, 2007. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	-	$	-	$	1,879,785
Weifang Jiaweike Food Co., Ltd, a company in which Mr. Gao Zhentao served as a director	The first oral loan agreement between Weifang Jiaweike Food Co., Ltd. as lender and PRC Yuhe as borrower was made before January 1, 2005. Since then, there have been a number of borrowings and repayments under identical terms between these parties. Unsecured, interest free loans, have no fixed repayment date. For working capital purposes. Balance in the sum of $473,220 was repaid on June 30, 2007. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	-	$	-	$	687,954
Weifang Hexing Breeding Co., Ltd, a company in which Mr. Gao Zhentao served as a director	The first oral loan agreement between Weifang Hexing Breeding Co., Ltd. as lender and PRC Yuhe as borrower was made on or about March 12, 2008. Since then, there have been a number of borrowings and repayments under identical terms between these parties.
	Unsecured, interest free loans, have no fixed repayment date. For working capital purposes. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	185,885	$	-	$	-
Others	Unsecured, interest free loan, has no fixed repayment date. For working capital purposes.	$	24,748	$	-	$	-

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Due to related companies in which Former Owner of PRC Yuhe Served as a Director		$	210,633	$	-	$	2,567,739
Loan from Bright Stand International Limited
Bright Stand International Limited, a company in which Mr. Gao Zhentao served as a director	Unsecured, interest free loan, has no fixed repayment date. The Balance was eliminated upon consolidation between Yuhe International and Bright Stand as a result of the reverse merger. Remedies available to the creditor are prescribed pursuant to the laws of the PRC.	$	-	$	*1,000,000	$	-

Loan from Bright Stand International Limited	$	-	$	1,000,000	$	-
Due to related companies shown under current liabilities on balance sheet	$	210,633	$	1,000,000	$	2,567,739

* This is the cash deposits to PRC Yuhe by Bright Stand as capital injection, since registration was not completed at December 31, 2007, and was classified as Loan accounts instead of Common Stock.

Providing Guarantees on Behalf of A Former Owner of PRC Yuhe. PRC Yuhe provided a guarantee in favor of Shandong Yuhe Food Group Co., Ltd., a former owner of PRC Yuhe, in the amount of $2,128,399. The guarantee expired in January 2008.

Acquisition by Halter Financial . The Company entered into a Stock Purchase Agreement, the “Stock Purchase Agreement”, with Halter Financial Investments, L.P., a Texas limited partnership, “Halter Financial”, dated as of November 6, 2007, pursuant to which the Company agreed to sell to Halter Financial 951,996 unregistered shares of the Company’s common stock for $425,000. The transaction closed on November 16, 2007. As a result of the transaction, Halter Financial held 951,996 shares, or 87.5% of the Company’s 1,087,994 shares of common stock then outstanding following the completion. The Stock Purchase Agreement also required the Company’s Board of Directors to declare and pay a special cash dividend of $3.088 per share to its shareholders on November 19, 2007. Halter Financial did not participate in such dividend. The dividend was payable to shareholders of record on November 15, 2007, which was prior to the date the shares were issued to Halter Financial under the Stock Purchase Agreement. The dividend payment date was November 19, 2007. The dividend was payable to the Company’s shareholders who held 135,999 shares of its common stock and resulted in a total dividend distribution of $420,000. The funds for the dividend came from the $425,000 proceeds received from the sale of common stock to Halter Financial. Halter Financial is a Texas limited partnership of which Halter Financial Investments GP, LLC, a Texas limited liability company is the sole general partner. The limited partners of HFI are: (i) TPH Capital, L.P., a Texas limited partnership of which TPH Capital GP, LLC is the general partner and Timothy P. Halter is the sole member of TPH Capital GP, LLC; (ii) Bellfield Capital, L.P., a Texas limited partnership of which Bellfield Capital Management, LLC is the sole general partner and David Brigante is the sole member of Bellfield Capital Management, LLC; (iii) Colhurst Capital LP, a Texas limited partnership of which Colhurst Capital GP, LLC is the general partner and George L. Diamond is the sole member of Colhurst Capital GP, LLC; and (iv) Rivergreen Capital, LLC of which Marat Rosenberg is the sole member. As a result, each of the foregoing persons may be deemed to be a beneficial owner of the shares held of record by Halter Financial.  Halter Financial has advised the Company that there is no correlation between the decision of Bright Stand to engage HFG International, Limited to provide consulting services to Bright Stand and the decision of Halter Financial to acquire a control position in First Growth. After Halter Financial became a 87.5% shareholder of First Growth pursuant to a Stock Purchase Agreement, there was a potential conflict of interest associated with an affiliate of Halter Financial, HFG International, Limited, advising Bright Stand about its purchase of a U.S. shell company, First Growth. Despite this potential conflict of interest, HFG International, Limited has informed the Company that its advice to Bright Stand was based on its research results into the prices paid by other groups to acquire control positions in publicly traded shell companies, which were similarly situated as First Growth at the time Bright Stand acquired First Growth.

The Halter Financial transaction was described under related party transactions due to the special dividend payment to former officers and other former major shareholders

Equity Investment by Certain Investors . Effective March 12, 2008, the Company closed a Securities Purchase Agreement, the “Securities Purchase Agreement”, with certain investors. Pursuant to the terms of such Securities Purchase Agreement, such investors collectively invested approximately $18,000,000 into the Company at the price of $3.088 per share in exchange for the Company’s issuance of 5,829,018 shares to such investors. Mr. Yamamoto also sold 971,500 shares of common stock to such investors for $3,000,000. Immediately following the closing of the Securities Purchase Agreement, Mr. Yamamoto owned 7,654,818 shares of the Company’s common stock, and the investors owned 6,800,518 shares of the Company’s common stock.

Agreements with Placement Agents. On March 12, 2008, as part of the compensation to the Company’s placement agent, Roth Capital Partners, LLC, in connection with their services under the Securities Purchase Agreement, the Company issued to Roth Capital Partners, LLC and WLT Brothers Capital, Inc. warrants to acquire an aggregate of 476,014 shares of common stock, exercisable at any time after the date falling 6 months after their issuance. The warrants have a strike price equal to $3.705, have a term of three years starting from March 12, 2008 and permit cashless or cash exercise at all times after they are exercisable until they expire on March 12, 2011.  On October 27, 2008, the Company issued 178,848 new shares to Roth Capital Partners, LLC based on their cashless exercise of 333,198 warrants issued to it as compensation for their services as co-placement agent.  The issuance of these securities was deemed to be exempt from registration pursuant to Section 4(2) of the Securities Act. The shares of common stock issuable upon the exercise of the warrants have registration rights. In addition, Roth Capital Partners, LLC and WLT Brothers Capital, Inc. received cash compensation in the amount of $1.47 million. The above may have been disclosed as a promoter under S-K 404(c).

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 On March 12, 2008, concurrent with the reverse acquisition of First Growth, the Company’s board of directors approved the dismissal of Pritchett, Siler & Hardy, P.C. as the Company’s independent auditor, effective upon the completion of the audit of financial statements of First Growth as of and for the fiscal year ended December 31, 2007 and the issuance of its report thereon. Concurrent with the decision to dismiss Pritchett, Siler & Hardy, P.C. as the Company’s independent auditor, the Company’s board of directors elected to continue the existing relationship of the Company’s new subsidiary Weifang Yuhe Poultry Co., Ltd. with Child, Van Wagoner & Bradshaw, PLLC and appointed Child, Van Wagoner & Bradshaw, PLLC as the Company’s independent auditor.

The dismissal of Pritchett, Siler & Hardy, P.C. became effective when Pritchett, Siler & Hardy, P.C. completed its audit of such financial statements and released its report with respect thereto on March 31, 2008.

The reports of Pritchett, Siler & Hardy, P.C. on the Company’s financial statements for the fiscal year ended December 31, 2007 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to any uncertainty, audit scope or accounting principles. During the Company’s fiscal years ended December 31, 2006 and 2007 and the subsequent interim periods preceding the termination, there were no disagreements with Pritchett, Siler & Hardy, P.C. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Pritchett, Siler & Hardy, P.C. would have caused Pritchett, Siler & Hardy, P.C. to make reference to the subject matter of the disagreements in connection with its report on the financial statements for such years or subsequent interim periods.

During the Company’s two most recent fiscal years ended December 31, 2007 and 2006, the Company did not consult Child, Van Wagoner & Bradshaw, PLLC with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on its consolidated financial statements, and neither a written report was provided to the Company nor oral advice was provided that Child, Van Wagoner & Bradshaw, PLLC concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to that Item, or a reportable event, as described in Item 304(a)(1)(v) of Regulation S-K.

The Company provided Pritchett, Siler & Hardy, P.C. with a copy of this disclosure on April 2, 2008, providing Pritchett, Siler & Hardy, P.C. with the opportunity to furnish the Company with a letter addressed to the SEC stating whether it agrees with the statement made by the Company herein in response to Item 304(a) of Regulation S-K and, if not, stating the respect in which it does not agree. A letter from Pritchett, Siler & Hardy, P.C. dated April 3, 2008 was filed by the Company as Exhibit 16.1 to its current report on Form 8-K on April 4, 2008.

SELLING SECURITY HOLDERS

On behalf of the Selling Security Holders named in the table below, including their donees, pledgees, transferees or other successors-in-interest who receive any of the shares covered by this prospectus, the Company is registering, pursuant to the registration statement of which this prospectus is a part, 4,730,251shares of the Company’s common stock.

The Company is registering the shares being offered under this prospectus pursuant to a Registration Rights Agreement, the “Registration Rights Agreement”, dated March 12, 2008, between the Company and the Selling Security Holders. The Registration Rights Agreement was entered into in connection with the Company’s 2008 private placement financing transaction, which is described in more detail below in the section entitled “Description of Capital Stock.”

The number of shares of common stock that will be outstanding immediately after this offering is based on the number of shares outstanding as of March 19, 2009, which includes the 4,730,251shares being offered under this prospectus. The Company is registering the shares to permit the Selling Security Holders to offer these shares for resale from time to time. The Selling Security Holders may sell all, some or none of the shares covered by this prospectus. For more information, see the section of this prospectus entitled “Plan of Distribution.”

The table below lists the Selling Security Holders and other information regarding the beneficial ownership of the shares of common stock by each of the Selling Security Holders as of March 19, 2009. The following table and the footnotes thereto were prepared based on the records of the Company’s transfer agent as of March 19, 2009, except that all information with respect to beneficial ownership has been furnished to the Company by the Selling Security Holders. The inclusion of any securities in the following table does not constitute an admission of beneficial ownership by the persons named below. Except as indicated in the footnotes to the table, no Selling Security Holder has had any material relationship with the Company or its predecessors or affiliates during the last three years.

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Halter Financial Investments, L.P. and Halter Financial Group, L.P. represented to the Company that they purchased their securities in the ordinary course of business and that at the time of purchase of the securities to be resold, they had no agreements or understandings, directly or indirectly, with any person to distribute the securities. The Company has been informed that Timothy P. Halter, David Brigante, Marat Rosenberg and George Diamond, who own the outstanding limited partnership interests of Halter Financial Investments, L.P., collectively own all outstanding shares of WLT Brothers Holdings, Inc., the parent company of WLT Brothers Capital, Inc., a registered broker dealer. The Company has  further been informed that each shareholder of WLT Brothers Holdings, Inc. has signed an affidavit of non-involvement and is otherwise not involved in the management or operations of WLT Brothers Capital, Inc.

	Number of Shares  Beneficially  Owned Prior to		Number of  Shares  Registered		Shares Owned After Sale of All  Registered Shares (1)
Name of Selling Security Holder	Offering		for Sale (1)		No. Shares		Percentage (2)
Halter Financial Investment, L.P 3		429,046		429,046		0		*
Halter Financial Group, L.P. 4		522,950		522,950		0		*
Pam Jowett 5		2,380		2,380		0		*
Lynn Dixon 6		38,647		38,647		0		*
Van L. Butler 7		680		680		0		*
Devonshire Partners, LLC 8		38,647		38,647		0		*
Real Path, Inc. 9		27,200		27,200		0		*
Lazlo Schwartz 10		11,447		11,447		0		*
Dehua Qian 11		9,715		9,715		0		*
Westpark Capital, L. P. 12		37,848		37,848		0		*
Liping Gu 13		32,383		32,383		0		*
Ruoling Wang 14		32,383		32,383		0		*
Wu Mijia 15		16,192		16,192		0		*
Ancora Greater China Fund, LP 16		32,383		32,383		0		*
Atlas Allocation Fund, L.P. 17		36,027		36,027		0		*
Howard H. Lu 18		6,477		6,477		0		*
Investment Hunter, LLC 19		485,751		485,751		0		*
Black River Commodity Select Fund Ltd. 20		971,503		333,071		638,432		4.1	%
Black River Small Capitalization Fund Ltd. 21		1,295,337		444,095		851,242		5.4	%
Chestnut Ridge Partners, LP 22		36,027		36,027		0		*
Hua-Mei 21 st Century Partners, LP 23		64,767		64,767		0		*
Southwell Partners, L.P. 24		37,848		37,848		0		*
Kevin B Halter Jr. 25		32,383		32,383		0		*
Octagon Capital Partners 26		10,120		10,120		0		*
Guerrilla Partners LP 27		64,767		64,767		0		*
Pinnacle China Fund L.P. 28		1,214,378		388,583		825,795		5.3	%
Pinnacle Fund L.P. 29		1,214,378		388,583		825,795		5.3	%
Straus Partners, LP 30		21,859		21,859		0		*
Straus-GEPT Partners, LP 31		14,573		14,573		0		*
Ardsley Partners Fund II, LP 32		478,667		478,667		0		*
Marion Lynton 33		12,144		12,144		0		*
Ardsley Offshore Fund, LP 34		333,954		333,954		0		*
Ardsley Partners Institutional Fund, LP 35		308,654		308,654		0		*
Total		7,871,515		4,730,251

* Less than 1%

(1)

Assumes that the Selling Security Holders dispose of all the shares of common stock covered by this prospectus and do not acquire or dispose of any additional shares. The Selling Security Holders are not representing, however, that any of the shares covered by this prospectus will be offered for sale, and the Selling Security Holders reserve the right to accept or reject, in whole or in part, any proposed sale of shares.

(2)

The percentage of common stock beneficially owned is based on 15,722,180 shares of common stock outstanding on March 19, 2009.

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(3)	Address is 12890 Hilltop Road, Argyle, TX 76226. Halter Financial Investments, L.P. (“HFI”) is a Texas limited partnership of which Halter Financial Investments GP, LLC, a Texas limited liability company, is the sole general partner. The natural persons who are the beneficial owners of a majority of the voting stock of Halter Financial Investments GP, LLC include: (i) TPH Capital, L.P., a Texas limited partnership of which TPH Capital GP, LLC is the general partner and Timothy P. Halter is the sole member of TPH Capital GP, LLC; (ii) Bellfield Capital, L.P., a Texas limited partnership of which Bellfield Capital Management, LLC is the sole general partner and Dave Brigante is the sole member of Bellfield Capital Management, LLC; (iii) Colhurst Capital LP, a Texas limited partnership of which Colhurst Capital GP, LLC is the general partner and George L. Diamond is the sole member of Colhurst Capital GP, LLC; and (iv) Rivergreen Capital LLC of which Marat Rosenberg is the sole member. The other limited partners of HFI are: (i) TPH Capital, L.P., a Texas limited partnership of which TPH Capital GP, LLC is the general partner and Timothy P. Halter is the sole member of TPH Capital GP, LLC; (ii) Bellfield Capital, L.P., a Texas limited partnership of which Bellfield Capital Management, LLC is the sole general partner and Dave Brigante is the sole member of Bellfield Capital Management, LLC; (iii) Colhurst Capital LP, a Texas limited partnership of which Colhurst Capital GP, LLC is the general partner and George L. Diamond is the sole member of Colhurst Capital GP, LLC; and (iv) Rivergreen Capital LLC of which Marat Rosenberg is the sole member. As a result, each of the foregoing persons may be deemed to be a beneficial owner of the shares held of record by HFI.
(4)	Address is 12890 Hilltop Road, Argyle, TX 76226. Halter Financial Group, L.P. (“HFG”) is a Texas limited partnership of which Halter Financial Group GP, LLC, a Texas limited liability company, is the sole general partner. The members of Halter Financial Group GP, LLC include: (i) TPH Capital, L.P., a Texas limited partnership of which TPH Capital GP, LLC is the general partner and Timothy P. Halter is the sole member of TPH Capital GP, LLC; (ii) Bellfield Capital, L.P., a Texas limited partnership of which Bellfield Capital Management, LLC is the sole general partner and Dave Brigante is the sole member of Bellfield Capital Management, LLC; (iii) Colhurst Capital LP, a Texas limited partnership of which Colhurst Capital GP, LLC is the general partner and George L. Diamond is the sole member of Colhurst Capital GP, LLC; and (iv) Rivergreen Capital LLC of which Marat Rosenberg is the sole member. As a result, each of the foregoing individuals may be deemed to be a beneficial owner of the shares held of record by Halter Financial Group GP, LLC. Similarly, the limited partners of HFG are: (i) TPH Capital, L.P., a Texas limited partnership of which TPH Capital GP, LLC is the general partner and Timothy P. Halter is the sole member of TPH Capital GP, LLC; (ii) Bellfield Capital, L.P., a Texas limited partnership of which Bellfield Capital Management, LLC is the sole general partner and Dave Brigante is the sole member of Bellfield Capital Management, LLC; (iii) Colhurst Capital LP, a Texas limited partnership of which Colhurst Capital GP, LLC is the general partner and George L. Diamond is the sole member of Colhurst Capital GP, LLC; and (iv) Rivergreen Capital LLC of which Marat Rosenberg is the sole member. As a result, each of the foregoing persons may be deemed to be a beneficial owner of the shares held of record by HFG.
(5)	Address is 2508 South 1300 East, Salt Lake City, UT 84106. Ms. Pam Jowett was the sole officer and director of the Company from its inception in 1997 until November 16, 2007.
(6)	Address is 311 S State Street Suite No 460, Salt Lake City, UT 84111. Mr. Thomas G. Kimble and Mr. Dixon were principal shareholders of the Company for the three years prior to November 16, 2007, when they ceased to be 10% shareholders.
(7)	Address is 311 S State Street Suite No 440, Salt Lake City, UT 84111.
(8)	Address is 311 S State Street Suite No 440, Salt Lake City, UT 84111. These shares held of record in the name of Devonshire Partners, LLC., a Colorado limited liability company, are owned and controlled solely by Thomas G. Kimble. Mr. Kimble and Mr. Dixon were the principle shareholders of the company for the three years prior to November 16, 2007, when they ceased to be 10% shareholders.
(9)	Address is 2232 South Nellis Blvd No 211, Las Vegas, NV 89104. These shares held of record in the name of Real Path, Inc., a Nevada corporation, are owned and controlled solely by Suzanne Rupert.
(10)	Address is 14 Dover Terrace, Monsey, NY 10952.
(11)	Address is Rm.301 No.121 Block, Jiaxin Garden, Huanghua Rd., Shanghai 201103 PRC.
(12)	Address is 4965 Preston Park Blvd, Suite 220, Plano, TX 75093. Patrick J. Brosnahan, the General Partner of Wespark Capital, L. P. has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Westpark Capital, L. P. Mr. Brosnahan disclaims beneficial ownership of the shares to the extent of his direct or indirect pecuniary interest.
(13)	Address is 16F, East Tower of Julong Plaza No. 9, Hangda, Hang Zhou, 310007 PRC.
(14)	Address is Rm 1701, 21 Building, 669 Baiyu Rd., Shanghai, 200063 PRC.
(15)	Address is 3-52-402 Jinhui Garden, Hongsong Road, Shanghai, 201103 PRC.
(16)	Address is One Chagrin Highlands, 2000 Auburn Dr #300, Cleveland, OH 44122. John P. Micklitsch has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Ancora Greater China Fund, LP.
(17)	Address is 100 Crescent Court, Suite 880, Dallas, TX 75201. Robert H. Alpert has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Atlas Allocation Fund, L.P.
(18)	Address is 1224 East Green Street, Suite 200, Pasadena, CA 91106.
(19)	Address is P.O. Box 540308, Dallas, TX 75354-0308. Gary C. Evans has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Investment Hunter, LLC.
(20)	Address is 12700 Whitewater Drive, Minnetonka, MN 55343-9438. Pursuant to an investment advisory agreement, Black River Asset Management LLC has investment and voting power with respect to the securities held by the Black River Commodity Select Fund Ltd. Rosamond Borer has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Black River Commodity Select Fund Ltd. Ms. Borer disclaims beneficial ownership of the shares to the extent of her direct or indirect pecuniary interest.
(21)	Address is 12700 Whitewater Drive, Minnetonka, MN 55343-9438. Pursuant to an investment advisory agreement, Black River Asset Management LLC has investment and voting power with respect to the securities held by the Black River Small Capitalization Fund Ltd. Richard Gammill has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Black River Small Capitalization Fund Ltd. Mr. Gammill disclaims beneficial ownership of the shares to the extent of his direct or indirect pecuniary interest.
(22)	Address is 50 Tice Boulevard, Woodcliff Lake, NJ 07677. Kenneth Pasternak has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Chestnut Ridge Partners, LP.

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(23)	Address is 237 Park Ave 9th Fl, New York, NY 10017. Peter Siris and Leigh S. Curry has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Hua-Mei 21 st Century Partners, LP.
(24)	Address is 1901 North Akard St., Dallas, TX 75201. Wilson S. Jaeggli has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Southwell Partners, L.P.
(25)	Address is 2591 Dallas Parkway #102, Frisco, TX 75034.
(26)	Address is 155 West 68th Street, #27E, New York, NY 10023. Steven Hart has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Octagon Capital Partners.
(27)	Address is 237 Park Ave 9th Fl, New York, NY 10017. Peter Siris and Leigh S. Curry has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Guerrilla Partners LP.
(28)	Address is 4965 Preston Park Blvd., Suite 240, Plano, TX 75093. Barry Kitt has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by each of Pinnacle China Fund, L.P. and The Pinnacle Fund, L.P.  Mr. Kitt disclaims beneficial ownership of the shares to the extent of his direct or indirect pecuniary interest.
(29)	Address is 4965 Preston Park Blvd., Suite 240, Plano, TX 75093. Barry Kitt has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by each of Pinnacle China Fund, L.P. and The Pinnacle Fund, L.P.  Mr. Kitt disclaims beneficial ownership of the shares to the extent of his direct or indirect pecuniary interest.
(30)	Address is 320 Park Avenue, 10th Floor, New York, NY 10022. Melville Straus has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Straus Partners, LP.
(31)	Address is 320 Park Avenue, 10th Floor, New York, NY 10022. Melville Straus has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Straus-GEPT Partners, LP.
(32)	Address is 262 Harbor Drive, 4 th Floor, Stamford CT 06902. Ardsley Advisory Partners has investment and voting power with respect to the shares held by Ardsley Partners Fund II, L.P. Phil Hempleman has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Ardsley Partners Fund II, LP. Mr. Hempleman disclaims beneficial ownership of the shares to the extent of his direct or indirect pecuniary interest.
(33)	Address is 262 Harbor Drive, 4 th Floor, Stamford CT 06902. Ardsley Advisory Partners has investment and voting power with respect to the shares held by Marion Lynton. Phil Hempleman has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Marion Lynton. Mr. Hempleman disclaims beneficial ownership of the shares to the extent of his direct or indirect pecuniary interest.
(34)	Address is 262 Harbor Drive, 4 th Floor, Stamford CT 06902. Ardsley Advisory Partners has investment and voting power with respect to the shares held by Ardsley Offshore Fund, Ltd. Phil Hempleman has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Ardsley Offshore Fund, LP. Mr. Hempleman disclaims beneficial ownership of the shares to the extent of his direct or indirect pecuniary interest.
(35)	Address is 262 Harbor Drive, 4 th Floor, Stamford CT 06902. Ardsley Advisory Partners has investment and voting power with respect to the shares held by Ardsley Partners Institutional Fund, L.P. Phil Hempleman has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by Ardsley Partners Institutional Fund LP. Mr. Hempleman disclaims beneficial ownership of the shares to the extent of his direct or indirect pecuniary interest.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

The following table sets forth certain information regarding the Company’s common stock beneficially owned on March 19, 2009 and as adjusted after giving effect to the sale of the shares being sold in this offering for (i) each shareholder the Company knows to be the beneficial owner of 5% or more of its common stock, (ii) each of its “named executive officers” and directors, and (iii) all executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. In general, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of such security, or the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which the person has the right to acquire beneficial ownership within 60 days. Unless otherwise indicated by the footnotes below, the Company believes, based on the information furnished to it and subject to community and marital property laws, all persons named have sole voting and investment power with respect to such shares, except as otherwise noted. Percentage of ownership is based on 15,722,180 shares of the Company’s common stock outstanding as of March 19, 2009.

The following table excludes any shares of the Company’s common stock which may be issued for the round up of fractional shares and the special treatment to preserve round lot shareholders.

55

Name of Beneficial Owner	Number of Shares Beneficially Owned		Percent of Shares Beneficially Owned
Greater than 5% Shareholders
Kunio Yamamoto 1		7,654,817		48.7	%
Pinnacle China Fund L.P. 2		1,214,378		7.7	%
Pinnacle Fund L.P. 2		1,214,378		7.7	%
Black River Small Capitalization Fund Ltd. 3		1,295,337		8.2	%
Black River Commodity Select Fund Ltd. 4		971,503		6.2	%
Ardsley Partners Fund II, LP 5		1,133,419		7.2	%
CEDE & Co 7		1,179,619		7.5	%
Directors and Executive Officers
Gao Zhentao 1		0		*	%
Han Chengxiang 1		0		*	%
Hu Gang 1		0		*	%
Peter Li 1		0		*	%
Liu Yaojun 1		0		*	%
Greg Huett 1		0		*	%
Jiang Yingjun 1		0		*	%
Richard Crimmins 6		0		*	%
All Executive Officers and Directors as a group		0		*	%

* Less than 1%

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(1) Address is c/o Weifang Yuhe Poultry Co. Ltd., 301 Hailong Street, Hanting District, Weifang, Shandong Province, The People’s Republic of China.

(2) Address is 4965 Preston Park Blvd., Suite 240, Plano, TX 75093. Barry Kitt has dispositive and voting power over the shares and may be deemed to be the beneficial owner of the shares of common stock beneficially owned by each of Pinnacle China Fund, L.P. and The Pinnacle Fund, L.P.  Mr. Kitt disclaims beneficial ownership of the shares to the extent of his direct or indirect pecuniary interest.

(3) Address is 12700 Whitewater Drive, Minnetonka, MN 55343-9438. Pursuant to an investment advisory agreement, Black River Asset Management LLC has investment and voting power with respect to the securities held by the Black River Small Capitalization Fund Ltd. 851,242 shares are held directly by Black River Small Capitalization Fund Ltd. and 444,095 shares are held by UBS Securities LLC as custodian on behalf of Black River Small Capitalization Fund Ltd. The said 444,095 shares are held by CEDE & Co as nominee for UBS Securities LLC as described in note (7) below.  In the above table, the total number of shares beneficially owned by Black River Small Capitalization Fund Ltd. in the sum of 1,295,337 includes 444,095 shares held by CEDE & Co as nominee for UBS Securities LLC.

(4) Address is 12700 Whitewater Drive, Minnetonka, MN 55343-9438. Pursuant to an investment advisory agreement, Black River Asset Management LLC has investment and voting power with respect to the securities held by the Black River Commodity Select Fund Ltd.  638,432 shares are held directly by Black River Commodity Select Fund Ltd. and 333,071 shares are held by UBS Securities LLC as custodian on behalf of Black River Commodity Select Fund Ltd.  The said 333,071 shares are held by CEDE & Co as nominee for UBS Securities LLC as described in note (7) below.  In the above table, the total number of shares beneficially owned by Black River Commodity Select Fund Ltd. in the sum of 971,503 includes 333,071 shares held by CEDE & Co as nominee for UBS Securities LLC.

(5) Address is 262 Harbor Drive, 4th Floor, Stamford CT 06902. Ardsley Advisory Partners has investment and voting power with respect to the 178,571 shares held by Marion Lynton, 7,038,690 shares held by Ardsley Partners Fund II, L.P., 4,910,714 shares held by Ardsley Offshore Fund, Ltd. and 4,538,690 shares held by Ardsley Partners Institutional Fund, L.P.

(6) Address is 4432 Long Fellow Drive, Plano, Texas 75093.

(7) Address is c/o PO Box 222 Bowling Green Stati, New York, 10274.  CEDE & Co holds 444,095 shares as nominee for UBS Securities LLC as described in note (3) above and 333,071 shares as nominee for UBS Securities LLC as described in note (4) above.  In the above table, the total number of shares beneficially owned by CEDE & Co in the sum of 1,179,619 excludes 777,166 shares held as nominee for UBS Securities LLC.

DESCRIPTION OF CAPITAL STOCK

As of December 31, 2008, the Company’s authorized capital stock consisted of 500 million shares of common stock, par value $0.001 per share. As of December 31, 2008, an aggregate of 15,722,180 shares of common stock were outstanding. There are outstanding warrants to acquire 297,166 shares of common stock, exercisable at any time after 6 months from March 12, 2008. There are no shares of preferred stock outstanding. A description of the material terms and provisions of the Company’s articles of incorporation and bylaws affecting the rights of holders of the Company’s capital stock is set forth below. The description is intended as a summary, and is qualified in its entirety by reference to the form of articles of incorporation and the form of the Company’s bylaws that are filed with this prospectus.

While the registration statement covers the sale of some of the shares purchased by the 25 investors, it does not cover transfers of the escrow shares. The total number of shares covered by the registration statement represents the sum of (i) 3,659,254 shares, part of the total shares, purchased by the 25 private placement investors from the Company in the amount of US$18 million and from Mr. Yamamoto in the amount of US$3 million on March 12, 2008 for US$21 million, (ii) 951,996 shares held by Halter Financial, and (iii) 119,001 shares held by the existing shareholders of the Company holding restricted securities before the reverse merger, which gives a total of 4,730,251 shares.

Common Stock

Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefore at times and in amounts as the Company’s board of directors may determine. Each shareholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of the shareholders. Cumulative voting is not provided for in the Company’s amended articles of incorporation, which means that the majority of the shares voted can elect all of the directors that stand for election. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. Upon the occurrence of a liquidation, dissolution or winding-up, the holders of shares of common stock are entitled to share ratably in all assets remaining after payment of liabilities and satisfaction of preferential rights of any outstanding preferred stock. There are no sinking fund provisions applicable to the common stock. The outstanding shares of common stock are fully paid and non-assessable.

Registration Rights of Private Placement Investors

Concurrently with the execution of the Securities Purchase Agreement, the Company and the investors entered into a Registration Rights Agreement, a copy of which is attached hereto as Exhibit 4.1. The following summary description relating to the registration rights does not purport to be complete and is qualified in its entirety to the related agreements referenced below.

With respect to the 6,800,518 shares, purchased by the investors at closing on March 12, 2008, the Company is required to file a resale registration statement on Form S-1 or any other appropriate form (i) within 60 days following the closing for purposes of registering the resale of these shares, (ii) within 15 days with respect to any additional registration statement, covering the 2008 make good shares or 2009 make good shares, as applicable (iii) within 15 days with respect to any additional registration statements required to be filed due to SEC Restrictions, (iv) within 30 days following the date on which the Company becomes eligible to utilize Form S-3 to register the resale of common stock, or (v) within 45 days following the date the 2008 make good shares or 2009 make good shares, the “Make Good Shares”, as defined in “Description of Business-Securities Purchase Agreement”, are delivered by Mr. Yamamoto to the investors.

57

Among other things, the Company will be required to pay the investors liquidated damages if the Company fails to file a registration statement by the above filing deadlines or if the Company does not promptly respond to comments received from the SEC. The liquidated damages accrue at a rate of 0.5% per month of the aggregate investment proceeds received from the investors, capped at 5% of the total investment proceeds.

The Make Good Shares, when and if released from the escrow account to the investors, will also have registration rights. With respect to the Make Good Shares, the Company agreed to file a registration statement within 45 days following the respective delivery date of the Make Good Shares and make the registration statement effective no later than the 120th day, or the 150th day in the case that the SEC reviews and has written comments to such filed registration statement that would require the filing of a pre-effective amendment thereto with the SEC, following the delivery date or the fifth trading day following the date on which the Company is notified by the SEC that the registration statement will not be reviewed or is no longer subject to further review and comments, whichever date is earlier.

The Company is required to keep the registration statement(s) effective during the entire effectiveness period of the registration rights, which commences on the effective date of the registration statement and ends on the earliest to occur of (a) the second anniversary of the date the registration statement becomes effective, (b) such time as all the shares covered by such registration statement have been publicly sold by the holders of such shares, or (c) such time as all of the shares covered by the registration statement may be sold by holders without volume restrictions pursuant to Rule 144.

In addition, the investors have piggy-back registration rights, pursuant to which, if at any time during the effectiveness period of the registration rights there is not an effective registration statement covering all the securities with registration rights and the Company determines to prepare and file with the SEC a registration statement relating to an offering for its own account or the account of others of any of its equity securities, other than on Form S-4 or S-8 or their equivalents relating to equity securities to be issued solely in connection with any acquisition of any equity issuable in connection with stock options or other employee benefit plans, then the Company should include the shares of the investors into the registration statement if the investors so request. See “Description of Business - History and Background - Equity Investment by Certain Investors.”

Registration Rights of Roth Capital/ WLT Brothers

On March 12, 2008, as part of the compensation to the Company’s placement agents, Roth Capital Partners, LLC, and WLT Brothers Capital, Inc. in connection with their services under the Securities Purchase Agreement, the Company issued to Roth Capital Partners, LLC and WLT Brothers Capital, Inc. warrants to acquire an aggregate of 476,014 shares of common stock, exercisable at any time after date 6 months after March 12, 2008. The shares of common stock issuable upon the exercise of the warrants have registration rights.

Registration Rights of Halter Financial

Pursuant to the Common Stock Purchase Agreement dated November 6, 2007 by and between the Company and Halter Financial Investments, L. P., upon the demand of Halter Financial Investments, L.P. and/or Halter Financial Group, L.P., the Company is required to file a registration statement on Form S-3, or such other form if Form S-3 is unavailable, within 10 days covering the resale of the aggregate of 951,996 shares of the Company’s common stock. In addition, Halter Financial has a piggy-back registration right pursuant to which, if the Company decides to register any of its common stock or securities convertible into or exchangeable for its common stock under the Securities Act on a form which is suitable for an offering for cash or shares of the Company held by third parties and which is not a registration solely to implement an employee benefit plan, a registration statement on Form S-4 or a transaction to which Rule 145 or any other similar rule of the SEC is applicable, the Company will include the shares of Halter Financial into the registration statement if Halter Financial so requests.

Registration Rights of Other Shareholders

Pursuant to the Common Stock Purchase Agreement, dated November 6, 2007 as referenced above, certain other former officers, directors and holders of the Company’ shares of common stock have the rights to register up to 119,001 shares of the Company’s common stock. Also, all other shareholders of the shell have registration rights except for 16,997 shares, which are publicly traded.

Registration Expenses

All fees and expenses incident to the registrations will be borne by the Company whether or not any securities are sold pursuant to a registration statement.

58

Anti-Takeover Provisions

The Company’s Articles of Incorporation and Bylaws contain certain provisions that are intended to enhance the likelihood of continuity and stability in the composition of the Company’s board and in the policies formulated by the Company’s board and to discourage certain types of transactions which may involve an actual or threatened change of the Company’s control. The Company’s board is authorized to adopt, alter, amend and repeal its Bylaws or to adopt new Bylaws. In addition, the Company’s board has the authority, without further action by its stockholders, to issue up to 10 million shares of the Company’s preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. The issuance of the Company’s preferred stock or additional shares of common stock could adversely affect the voting power of the holders of common stock and could have the effect of delaying, deferring or preventing a change in the Company’s control.

NASDAQ Over-the-Counter Bulletin Board

The Company’s common stock is traded in the over-the-counter market and prices are quoted on The NASDAQ Stock Market’s Over-The-Counter Bulletin Board under the symbol “YUII.OB.”

Transfer Agent and Registrar

The transfer agent and registrar for the Company’s common stock is Interwest Transfer Company, Inc. Their phone number is 801.272.9294.

SHARES ELIGIBLE FOR FUTURE SALE

As of December 31, 2008, the Company had outstanding 15,722,180 shares of common stock.

Shares Covered by this Prospectus

All of the 4,730,251 shares of Common Stock being registered in this offering may be sold without restriction under the Securities Act.

Rule 144

In general, under Rule 144 promulgated under the Securities Act as currently in effect, a person, or group of persons whose shares are required to be aggregated, who has beneficially owned shares that are restricted securities as defined in Rule 144 for at least six months is entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:

• 1% of the number of shares of common stock then outstanding, which as of November 30, 2008, would equal 15,433 shares; or

• the average weekly trading volume of the Company’s common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

However, since the Company’ shares are quoted on the NASD’s Electronic Bulletin Board, which is not an “automated quotation system,” the Company’ stockholders cannot rely on the market-based volume limitation described in the second bullet above. If in the future the Company’ securities are listed on an exchange or quoted on NASDAQ, then the Company’ stockholders would be able to rely on the market-based volume limitation. Unless and until the Company’ stock is so listed or quoted, the Company’ stockholders can only rely on the percentage based volume limitation described in the first bullet above.

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us. In addition, a person who is not deemed to have been an affiliate at any time during the three months preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years would be entitled to sell these shares under Rule 144(k) without regard to the requirements described above. To the extent that shares were acquired from one of the Company’s affiliates, a person’s holding period for the purpose of effecting a sale under Rule 144 would commence on the date of transfer from the affiliate. The Company believes that 13,342 of the Company’s outstanding shares may currently be sold in reliance on Rule 144(k).

PLAN OF DISTRIBUTION

The Selling Security Holders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of the Company’s common stock on any stock exchange, market or trading facility on which the shares are traded or quoted or in private transactions. These sales may be at fixed or negotiated prices. The Selling Security Holders may use any one or more of the following methods when selling shares:

o ordinary brokerage transactions and transactions in which the broker-dealer solicits Investors;

o block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

59

o purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

o an exchange distribution in accordance with the rules of the applicable exchange;

o privately negotiated transactions;

o to cover short sales made after the date that this prospectus is declared effective by the Commission;

o broker-dealers may agree with the Selling Security Holders to sell a specified number of such shares at a stipulated price per share;

o a combination of any such methods of sale; and

o any other method permitted pursuant to applicable law.

The Selling Security Holders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Security Holders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Security Holders, or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser, in amounts to be negotiated. The Selling Security Holders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

The Selling Security Holders may from time to time pledge or grant a security interest in some or all of the shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of the Company’s common stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling security holders to include the pledgee, transferee or other successors in interest as selling security holders under this prospectus.

Upon the Company being notified in writing by a Selling Security Holder that any material arrangement has been entered into with a broker-dealer for the sale of the Company’s common stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such Selling Security Holder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares of the Company’s common stock were sold, (iv)the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon the Company being notified in writing by a Selling Security Holder that a donee or pledgee intends to sell more than 500 shares of the Company’s common stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law.

The Selling Security Holders also may transfer the shares of the Company’s common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The Selling Security Holders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of Securities will be paid by the Selling Security Holder and/or the purchasers. Each Selling Security Holder has represented and warranted to the Company that it acquired the securities subject to this prospectus in the ordinary course of such Selling Security Holder’s business and, at the time of its purchase of such securities such Selling Security Holder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.

We have advised each Selling Security Holder that it may not use shares registered on this prospectus to cover short sales of the Company’s common stock made prior to the date on which this prospectus shall have been declared effective by the Commission. If a Selling Security Holder uses this prospectus for any sale of the Company’s common stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Selling Security Holders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such Selling Security Holders in connection with resales of their respective shares under this prospectus.

We are required to pay all fees and expenses incident to the registration of the shares, but the Company will not receive any proceeds from the sale of the Company’s common stock. The Company has agreed to indemnify the Selling Security Holders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

60

LEGAL MATTERS

The validity of the common stock being offered by this prospectus will be passed upon for the Company by Thomas G. Kimble & Associates, P.C., of Salt Lake City, Utah, which has acted as the Company’s counsel in connection with this offering.

EXPERTS

Child, Van Wagoner & Bradshaw, PLLC, independent public accountants located at 5296 South Commerce Drive, Suite 300, Salt Lake City, Utah 84107, have audited the financial statements of the Company included in this registration statement to the extent and for the periods set forth in their reports. We have relied upon such reports, given upon the authority of Child, Van Wagoner & Bradshaw, PLLC as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

The Company files reports, proxy statements and other information with the Securities and Exchange Commission. The Company has filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered in this prospectus. This prospectus, which forms a part of the registration statement, does not contain all of the information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits for that information. With respect to references made in this prospectus to any contract or other document of Yuhe, such references are not necessarily complete and, if such contract or document is filed as an exhibit to the registration statement, you should refer to the applicable exhibit attached to the registration statement for a copy of the actual contract or document.

You may review a copy of the registration statement, including exhibits and any schedule filed therewith, and obtain copies of such materials at prescribed rates, at the Securities and Exchange Commission’s Public Reference Room in Room 1580, 100 F Street, NE, Washington, D.C. 20549-0102. You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, such as Yuhe, that file electronically with the Securities and Exchange Commission.

The Company’s Internet address is http://www.yuhepoultry.com. The information contained on the Company’s website is not incorporated by reference in this prospectus and should not be considered a part of the prospectus. 

61

WEIFANG YUHE POULTRY CO., LTD

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Stated in US dollars)

62

WEIFANG YUHE POULTRY CO., LTD

	Page
Condensed Consolidated Balance Sheet – unaudited	F-3 to F-4
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) – unaudited	F-5
Condensed Consolidated Statements of Changes in Stockholders’ Equity – unaudited	F-6
Condensed Consolidated Statements of Cash Flows – unaudited	F-7 to F-8
Notes to Condensed Consolidated Financial Statements – unaudited	F-9 to F-23

F-2

WEIFANG YUHE POULTRY CO., LTD

CONDENSED CONSOLIDATED BALANCE SHEET – unaudited

AS AT JANUARY 31, 2008

(Stated in US Dollars)

ASSETS
Current assets
Cash and cash equivalents	$	1,051,106
Accounts receivable		1,475
Inventories		4,624,425
Advances to suppliers		305,013
Total current assets	$	5,982,019
Deposits paid		1,084,265
Other receivables, net		3,001,699
Unlisted investments		279,738
Plant and equipment, net		15,323,245
Intangible assets, net		2,832,869
Due from related companies		3,775,469
Due from directors		233,037
Deferred expenses		602,918
Total assets	$	33,115,259
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	4,800,664
Current portion of long-term loans		4,383,951
Loans payable		1,770,862
Payroll and payroll related liabilities		545,565
Accrued expenses		473,020
Advances from customers		209,694
Tax payables		125,645
Due to related companies		320,913
Total current liabilities	$	12,630,315

See accompanying notes to condensed consolidated financial statements

F-3

WEIFANG YUHE POULTRY CO., LTD

CONDENSED CONSOLIDATED BALANCE SHEET – unaudited (Continued)

AS AT JANUARY 31, 2008

(Stated in US Dollars)

Long-term liabilities
Long-term loans	$	6,165,365
Total liabilities	$	18,795,680
Commitments and contingencies	$	-
Minority interests	$	278,766
STOCKHOLDERS’ EQUITY
Registered capital	$	3,019,003
Additional paid-in capital		7,009,523
Retained earnings		3,058,878
Accumulated other comprehensive income		953,409
	$	14,040,813
Total liabilities and stockholders’ equity	$	33,115,259

See accompanying notes to condensed consolidated financial statements

F-4

WEIFANG YUHE POULTRY CO., LTD

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS) – unaudited

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

(Stated in US Dollars)

Net revenues	$	1,491,329
Cost of revenues		(1,337,438	)
Gross profit	$	153,891
Operating expenses:
Selling expenses		(28,997	)
General and administrative expenses		(122,695	)
Bad debts recovery		219,893
Total operating income		68,201
Income from operations	$	222,092
Other income		5,604
Interest income		5
Interest expenses		(86,167	)
Income before income taxes	$	(80,558	)
Income taxes		-
Net income before minority interests	$	141,534
Minority interests (earnings)		(73,398	)
Net income	$	68,136
Other comprehensive income		-
Foreign currency translation adjustment		201,390
Comprehensive income	$	269,526

See accompanying notes to condensed consolidated financial statements

F-5

WEIFANG YUHE POULTRY CO., LTD

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY – unaudited

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

(Stated in US Dollars)

										Accumulated
				Additional						Other
	Registered			paid-in			Retained			Comprehensive
	capital			capital			earnings			Income			Total
Balance, January 1, 2008		$	482,713		$	7,009,523		$	2,990,742		$	752,019		$	11,243,997
Net income			-			-			68,136			-			68,136
Injection of additional capital from Bright Stand (Note 12)			2,536,290			-			-			-			2,536,290
Foreign currency translation adjustment			-			-			-			201,390			201,390
Balance, January 31, 2008		$	3,019,003		$	7,009,523		$	3,058,878		$	953,409		$	14,040,813

See accompanying notes to condensed consolidated financial statements

F-6

WEIFANG YUHE POULTRY CO., LTD

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

(Stated in US Dollars)

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

WEIFANG YUHE POULTRY CO., LTD

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – unaudited (Continued)

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

(Stated in US Dollars)

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

See accompanying notes to condensed consolidated financial statements

F-8

WEIFANG YUHE POULTRY CO., LTD

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

1. Organization and principal activities

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).

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

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies (Continued)

(d) Economic and political risks

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

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

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

(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

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies (Continued)

(g) Guarantee Expense

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.

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

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies (Continued)

(k) Cash and cash equivalents

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.

(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

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies (Continued)

(p) Income tax

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.

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

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies (Continued)

(t) Comprehensive income

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.

(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

WEIFANG YUHE POULTRY CO., LTD

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

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

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

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

5. Unlisted investments

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.

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

WEIFANG YUHE POULTRY CO., LTD

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 - Mr. Gao Zhentao, the director of the company is also the director	$	72,263
Shandong Yuhe Food Group Co., Ltd - Mr. Gao Zhentao, the director of the company is also the director		3,653,930
Shandong Yuhe New Agriculture Academy of Sciences - Mr. Gao Zhentao, the director of the company is also the director		49,251
Weifang Jiaweike Food Co., Ltd - Mr. Gao Zhentao, the director of the company is also the director		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 - Mr. Gao Zhentao, the director of the company is also the director	$	301,965
Shandong Yuhe Food Group Co., Ltd - Mr. Gao Zhentao, the director of the company is also the director		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

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

14. 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 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.

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

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

15. Related parties transactions

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:

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, Jiaweike was disposed of to the Weifang Hexing Breeding Co., Ltd, a related company where Mr. Gao Zhentao, the 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

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

16. Significant concentrations and risk (Continued)

(c)   Group’s operations are in China

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.

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

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

18. Commitments and contingencies

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:

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

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

 

F-24

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors, Inc.)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

Index to consolidated financial statements

	Page
Report of Independent Registered Public Accounting Firm	F-26
Consolidated Balance Sheets	F-27
Consolidated Statements of Income and Comprehensive Income	F-28
Consolidated Statements of Changes in Stockholders’ Equity	F-29
Consolidated Statements of Cash Flows	F-30
Notes to Consolidated Financial Statements	F-31 - F-60

F-25

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors, Inc.)

Report of Independent Registered Public Accounting Firm

Douglas W. Child, CPA Marty D. Van Wagoner, CPA J. Russ Bradshaw, CPA William R. Denney, CPA Roger B. Kennard, CPA Russell E. Anderson, CPA Scott L. Farnes        1284 W. Flint Meadow Dr. #D Kaysville, Utah 84037 Telephone 801.927.1337 Facsimile 801.927.1344   5296 S. Commerce Dr. #300 Salt Lake City, Utah 84107 Telephone 801.281.4700 Facsimile 801.281.4701   Suite B, 4F North Cape Commercial Bldg. 388 King’s Road North Point, Hong Kong         www.cpaone.net Report of Independent Registered Public Accounting Firm   To the Board of Directors and Audit Committee Yuhe International, Inc. Shandong   Province , Peoples   Republic of China     We have audited the consolidated balance sheets of Yuhe International, Inc. (the Company) as of December 31, 2008 and 2007, and the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for the years ended December 31, 2008 and 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.   We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board ( United States ). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion.An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.   In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Yuhe International, Inc. as of December  31, 2008 and 2007, and the results of its consolidated operations and its consolidated cash flows for the years ended December 31, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America.   /s/ Child, Van Wagoner & Bradshaw, PLLC Child, Van Wagoner & Bradshaw, PLLC Salt Lake City, Utah  March 27, 2009

F-26

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors, Inc.)

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

	December 31,
	2008		2007
ASSETS
Current assets:
Cash and cash equivalents	$	13,412,205	$	1,050,168
Accounts receivable		902		-
Inventories		6,644,961		-
Advances to suppliers		4,472,509		-
Total current assets		24,530,577		1,050,168
Plant and equipment, net		27,112,276		-
Deposits paid for acquisition of long term assets		2,280,988		-
Notes receivable, net		74,070		-
Other receivables, net		650		-
Unlisted investments held for sale		299,427		-
Intangible assets, net		2,909,752		-
Due from related companies		3,706,589		1,000,000
Deferred expenses		604,973		-
Total assets	$	61,519,302	$	2,050,168
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,606,055	$	-
Current portion of long term loans		1,356,832		-
Other payable		937,535		-
Payroll and payroll related liabilities		1,397,221		-
Accrued expenses		728,366		70
Advances from customers		673,528		-
Other taxes payable		141,541		-
Loan from director		291,792		-
Other liabilities		143,591		-
Due to related companies		210,633		2,210
Total current liabilities		10,487,094		2,280
Non-current liabilities
Long-term loans		9,410,289		-
Total liabilities		19,897,383		2,280
Stockholders' Equity
Common stock at $.001 par value; authorized 500,000,000 shares authorized, 15,722,178 and 8,626,318 equivalent shares issued and outstanding		15,722		8,626
Additional paid-in capital		29,944,016		2,041,474
Retained earnings (accumulated deficits)		10,522,673		(2,212	)
Accumulated other comprehensive income		1,139,508		-
Total stockholders’ equity		41,621,919		2,047,888
Total liabilities and stockholders’ equity	$	61,519,302	$	2,050,168

The accompanying notes are an integral part of these consolidated financial statements

 

F-27

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors, Inc.)

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Stated in US Dollars)

	December 31
	2008			2007
Net revenue	$	34,626,282		$	-
Cost of revenue		(21,572,722	)		-
Gross profit		13,053,560			-
Operating Expenses
Selling		(425,460	)		-
General and administrative expenses		(2,538,590	)		(2,340	)
Total operating expenses		(2,964,050	)		(2,340	)
Income (loss) from operations		10,089,510			(2,340	)
Non-operating income (expenses)
Bad debts recovery		813,000			-
Interest income		249,738			-
Other income (expenses)		(21,704	)		198
Gain on disposal of fixed assets		84,663			-
Investment income		12,251			-
Interest expenses		(702,573	)		(70	)
Total other income (expenses)		435,375			128
Net income (loss) before income taxes		10,524,885			(2,212	)
Income taxes		-			-
Net income (loss)	$	10,524,885		$	(2,212	)
Other comprehensive income
Foreign currency translation		1,139,508			-
Comprehensive income	$	11,664,393		$	(2,212	)
Earnings per share
Basic	$	0.74		$	-
Diluted	$	0.73		$	-
Weighted average shares outstanding
Basic		14,233,268			8,626,318
Diluted		14,476,504			8,626,318

The accompanying notes are an integral part of these consolidated financial statements

 

F-28

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors, Inc.)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Stated in US Dollars)

	Common stock
	Shares outstanding		Amount		Additional paid-in capital			Retained Earnings			Accumulated other comprehensive income		Total Stockholders’ Equity
Balance at December 31, 2006		-	$	-	$	-		$	-		$	-	$	-
Issue of common stock on incorporation		100		100		-			-			-		100
Net loss		-		-		-			(2,212	)		-		(2,212	)
Contribution from shareholder		8,626,218		8,526		2,041,474			-			-		2,050,000
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	)
Stock based compensation						401,359								401,359
Cashless exercise of warrants		178,848		179		(179	)							-
Net income for the year									10,524,885					10,524,885
Foreign currency translation difference												1,139,508		1,139,508
Balance at December 31, 2008		15,722,178	$	15,722	$	29,944,016		$	10,522,673		$	1,139,508	$	41,621,919

The accompanying notes are an integral part of these consolidated financial statements

 

F-29

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated in US Dollars)

	Year Ended
	December 31
	2008			2007
Cash flows from operating activities
Net income (loss)	$	10,524,885		$	(2,212	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock based compensation		401,359			-
Depreciation		1,668,059			-
Amortization		59,209			-
Capitalized interest in construction in progress		437,221			-
Bad debts recovery		(813,000	)
Gain on disposal of fixed assets		(84,663	)		-
Income from unlisted investment		(6,074	)		-
Changes in operating assets and liabilities:
Accounts receivable		(25	)		-
Advances to suppliers		(11,781,086	)		-
Inventories		(1,652,341	)		-
Deferred expenses		(1,000	)		-
Accounts payable		(408,001	)		-
Other payable		(739,165	)		-
Payroll and payroll related liabilities		626,620			-
Accrued expenses		(459,221	)		70
Advances from customers		455,983			-
Other taxes payable		9,386			-
Prepaid expenses					-
Net cash provided by (used in) operating activities		(1,761,854	)		(2,142	)
Cash flows from investing activities
Deposit paid and acquisition of property, plant and equipment		(5,461,344	)		-
Advance to notes receivable		(3,432,603	)
Proceeds from disposal of fixed assets		118,216			-
Acquisition of subsidiaries		(10,567,946	)		-
Proceeds from notes receivable		4,309,226			-
Proceeds received from related parties receivables		1,106,240			-
Advance to related companies		-			(1,000,000	)
Net cash (used in) investing activities		(13,928,211	)		(1,000,000	)
Cash flows from financing activities
Proceeds from loan payable		1,300,726			-
Repayment of loan payable		(1,099,842	)		-
Proceeds from related party payable		260,454			2,210
Repayment of related party payable		(58,629	)		-
Capital contribution by shareholder		12,149,750			2,050,000
Proceeds from issuance of common stock		15,359,523			100
Net cash flows provided by financing activities:		27,911,982			2,052,310
Effect of foreign currency translation on cash and cash equivalents		140,120			-
Net increase in cash		12,362,037			1,050,168
Cash- beginning of year		1,050,168			-
Cash- end of year	$	13,412,205		$	1,050,168
Cash paid during the period for:
Interest paid	$	1,199,467		$	-
Income taxes paid	$	-		$	-

The accompanying notes are an integral part of these consolidated financial statements

 

F-30

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

1. Organization and Basis of Preparation of Financial Statements

Yuhe International, Inc.

Yuhe International, Inc., formerly known as First Growth Investors, Inc., “Yuhe” or “the Company”, was originally organized under the laws of the State of Nevada on September 9, 1997. The Company was not engaged in any business activities and had no operations, income producing assets or significant operating capital. At December 31, 2007, the Company was at development stage until its business combination with Bright Stand on March 12, 2008.

On March 12, 2008, the Company completed a reverse acquisition transaction with Bright Stand International Co., Ltd., “Bright Stand”, and Kunio Yamamoto, a Japanese person and the sole former stockholder of Bright Stand. Pursuant to the terms of the Equity Transfer Agreement, the Company acquired all of the outstanding capital stock of Bright Stand from Mr. Yamamoto in exchange for 126,857,134 shares, equivalent to 8,626,318 post-split shares, of its common stock. As a result of the transaction, Mr. Yamamoto held 126,857,134 shares, equivalent to 8,626,318 post split shares, or 88.8 % of the Company’s 142,857,134 shares, equivalent to 9,714,312 post–split shares, of common stock then outstanding following the completion of all matters referred to above. At the closing, Bright Stand became a wholly-owned subsidiary of the Company. Accordingly, all references to common shares of Bright Stand’s common stock have been restated to reflect the equivalent numbers of Yuhe International Inc. equivalent shares. Bright Stand thereby became the Company’s wholly owned subsidiary and the former shareholders of Bright Stand became the Company’s controlling stockholders.

This share exchange transaction resulted in Bright Stand former stockholders obtaining a majority voting interest in the Company. Generally accepted accounting principles require that the company whose stockholders retain the majority interest in a combined business be treated as the acquirer for accounting purposes, resulting in a reverse acquisition with Bright Stand as the accounting acquirer and Yuhe International, Inc. as the acquired party. Accordingly, the share exchange transaction has been accounted for as a recapitalization of the Company. The equity section of the accompanying financial statements has been restated to reflect the recapitalization of the Company due to the reverse acquisition as of the first day of the first period presented. The assets and liabilities acquired that, for accounting purposes, were deemed to have been acquired by Bright Stand were not significant.

 

F-31

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

1. Organization and Basis of Preparation of Financial Statements - continued

On March 12, 2008, the Company closed a Securities Purchase Agreement with certain investors, the “Financing”. Pursuant to the terms of such Securities Purchase Agreement, such investors collectively invested $18,000,000 into Yuhe at the price of $0.21, $3.088 post-split, per share in exchange for the Company’s issuance of 85,714,282, equivalent to approximately 5,829,018 post-split shares, shares to such investors. Mr. Yamamoto also sold 14,285,710, equivalent to 971,500 post-split shares, shares of common stock to such investors for $3,000,000. Immediately following the closing of the Securities Purchase Agreement, Mr. Yamamoto owned 112,571,424, equivalent to 7,654,895 post-split shares, shares of the Company’s common stock, and the investors owned 99,999,992 shares, equivalent to 6,800,518 post-split shares, of the Company’s common stock.

From the private placement arrangement, the Company raised gross proceeds of $18,000,000.

The Company amended its articles of incorporation on April 4, 2008 and changed its name into Yuhe International Inc.

Bright Stand International Limited, “Bright Stand”

On August 3, 2007, Bright Stand International Limited, “Bright Stand”, was incorporated with limited liability in the British Virgin Islands. On January 31, 2008, Bright Stand International Limited completed the acquisition (note 3) of 100% common stock of Weifang Yuhe Poultry Co., Limited “PRC Yuhe” and 43.75% of Weifang Taihong Feed Co., Ltd., “Taihong”. As a result, Bright Stand owned 100% of PRC Yuhe and owned 43.75% direct interest of Taihong and 56.25% indirect interest of Taihong through PRC Yuhe. PRC Yuhe and Taihong became the wholly-owned subsidiaries of Bright Stand.

Weifang Yuhe Poultry Co., Ltd., “PRC Yuhe”

Weifang Yuhe Poultry Co., Ltd., “PRC Yuhe”, was established in Weifang, Shandong of the People’s Republic of China, the “PRC”, as a limited company on March 8, 1996.  PRC Yuhe is a supplier of day-old chickens raised for meat production, or broilers, in the People’s Republic of China.

Weifang Taihong Feed Co., Ltd., “Taihong”

Weifang Taihong Feed Co., Ltd. was established in Weifang, Shandong of the People’s Republic of China, the “PRC”, as a limited company on May 26, 2003. Taihong is a feed stock company whose primary purpose is to supply feed stock for PRC Yuhe’s breeder chickens.

 

F-32

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

1. Organization and Basis of Preparation of Financial Statements - continued

The Company’s operations are conducted through its subsidiaries in the People’s Republic of China, PRC Yuhe, and 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) Principles of consolidation

The consolidated financial statements, prepared in accordance with generally accepted accounting principles in the United States of America, include the assets, liabilities, revenues, expenses and cash flows of the Company and all its subsidiaries. This basis of accounting differs in certain material respects from that used for the preparation of the books and records of the Company’s principal subsidiaries, which are prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises with limited liabilities established in the PRC, “PRC GAAP”, the accounting standards used in the place of their domicile.  The accompanying consolidated financial statements reflect necessary adjustments not recorded in the books and records of the Company’s subsidiaries to present them in conformity with generally accepted accounting principles in the United States of America.

The consolidated financial statements of the Company include the accounts of Yuhe International, Inc, Bright Stand International Limited, Weifang Yuhe Poultry Co., Ltd and Weifang Taihong Feed Co., Ltd. after the date of acquisitions. All significant intercompany accounts, transactions and cash flows are eliminated on consolidation.

The following table depicts the identities of the subsidiary:

Name of Company	Place & date of Incorporation	Attributable Equity Interest %			Registered Capital
Weifang Yuhe Poultry Co., Ltd	PRC/ March 8, 1996		100	%	$	11,045,467	(equivalent to RMB77,563,481)
Weifang Taihong Feed Co., Ltd.	PRC/ May 26 2003		100	%	$	965,379	(equivalent to RMB8,000,000)

 

F-33

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies – continued

(b) 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.

(c) 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 PRC, the government owns all of the land in PRC. Companies or individuals are authorized to possess and use the land only through land usage rights approved by the PRC government.

(d) Economic and political risks

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

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.

 

F-34

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies - continued

(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

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

(f) Guarantee Expense

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.

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 year-end. Guarantee expense for the years ended December 31, 2008 and 2007 were $65,769 and $0, respectively.

(g) 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.

 

F-35

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2.  Summary of significant accounting policies - continued

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.

(h) 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.

(i) 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% of 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 prior to delivery of the products. As a result, the Company maintains a low level of trade receivables.

(j) Notes receivable

Notes receivable are stated at the original principal amount less allowance for any uncollectible amounts. Management provides for an allowance when collection of the full amount is no longer probable by establishing an allowance equivalent to 30% of gross amount of notes receivables due over 6 months and 60% of gross amount of notes receivable due over 1 year. Full provision will be made for notes receivable due over 2 years.

 

F-36

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies - continued

(k) Cash and cash equivalents

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.

(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.

Customers do not have a general right of return on products delivered.

(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 Company expensed all advertising costs as incurred.  There were no advertising expenses for the years ended December 31, 2008 and 2007.

(o) Retirement benefit plans

The employees of the Company are members of a state-managed retirement benefit plan operated by the government of the PRC.  The Company is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Company 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 years ended December 31, 2008 and 2007 were $75,049 and $0 respectively.

 

F-37

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies - continued

(p) Income tax

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.

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%. Weifang Yuhe Poultry Co., Ltd 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.

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.  During the years ended December 31, 2008 and 2007, Shipping and handling charges included in the selling expenses were $11,686 and $0 respectively.

(r) 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.

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 $ at the rates used in translation.

 

F-38

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies - continued

(s) Comprehensive income

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 component of comprehensive income includes foreign currency translation adjustment.

(t) 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 years ended December 31, 2008 or 2007.

(u) Basic and diluted earnings per share

The Company reports basic earnings per share in accordance with SFAS No. 128, “Earnings Per Share”. Basic earnings per share are computed using the weighted average number of shares outstanding during the periods presented. The weighted average number of shares of the Company represents the common stock outstanding during the reporting periods.

Diluted earnings per share are based on the assumption that all dilutive options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options are assumed to be exercised at the time of issuance, and as if funds obtained thereby were used to purchase common stock at the average market price during the year.

 

F-39

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies - continued

(v) Statutory reserve

In accordance with the relevant laws and regulations of the PRC and the articles of association of the Company’s PRC subsidiaries, PRC Yuhe and Taihong are required to allocate 10% of their net income reported in the PRC statutory accounts, after offsetting any prior years’ losses, to the statutory surplus reserve, on an annual basis.  When the balance of such reserve reaches 50% of the respective registered capital of the subsidiaries, any further allocation is optional.  The statutory surplus reserves can be used to offset prior years’ losses, if any, and may be converted into registered capital, provided that the remaining balances of the reserve after such conversion is not less than 25% of registered capital. The statutory surplus reserve is non-distributable.

(w) 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. The Company is currently evaluating the impact of adopting SFAS No. 141R on its 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. The Company is currently evaluating the impact of adopting SFAS No. 160 on its consolidated financial statements.

 

F-40

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies - continued

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” which requires enhanced disclosures about an entity’s derivative and hedging activities. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Since FAS 161 only provides for additional disclosure requirements, there will be no impact on the Company’s results of operations and financial position.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162"). This Standard identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. FAS 162 directs the hierarchy to the entity, rather than the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with generally accepted accounting principles. The Standard is effective 60 days following SEC approval of the Public Company Accounting Oversight Board amendments to remove the hierarchy of generally accepted accounting principles from the auditing standards. FAS 162 is not expected to have an impact on the consolidated financial statements.

In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60 (SFAS 163).  This statement clarifies accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises.  SFAS 163 is effective for fiscal years and interim periods within those years, beginning after December 15, 2008.  Because the Company does not issue financial guarantee insurance contracts, it does not expect the adoption of this standard to have an effect on its financial position or results of operations.

In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets , which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. This Staff Position is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. Application of this FSP is not currently applicable to the Company as the Company’s intangible assets consist of land used rights which has a fixed useful life of 50 years.

 

F-41

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. Summary of significant accounting policies - continued

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted Share-Based Payment Transactions are Participating Securities . This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method.

This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years.  All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of this FSP.  Early application is not permitted. The Company is currently evaluating the impact of adopting EITF 03-6-1 on its consolidated financial statements.

3. Acquisition of subsidiaries

On January 31, 2008, Bright Stand acquired 100% common stock of Weifang Yuhe Poultry Co., Limited for $11,306,522, RMB 81,450,000, and 43.75% of Weifang Taihong Feed Co., Ltd for $312,530, RMB 2,244,000,  and total amount is $11,619,052.

The Company adopted SFAS No. 141, Business Combinations, which requires the use of the purchase method of accounting for any business combinations initiated after June 30, 2002. The results of PRC Yuhe and Taihong and the estimated fair market values of the assets and liabilities have been included in the Company’s consolidated financial statements from the date of acquisition. The purchase price for PRC Yuhe and Taihong was allocated to the assets acquired and liabilities assumed of PRC Yuhe and Taihong. All assets and liabilities assumed, based on their fair values as follows:

F-42

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

3. Acquisition of subsidiaries - continued

Accounts receivable	$	1,475
Other receivables		3,001,699
Deposits paid		1,084,265
Deferred expenses		602,918
Advance to suppliers		305,013
Inventories		4,624,425
Due from related companies		4,008,506
Unlisted investment		279,738
Plant and equipment		15,323,245
Intangible assets		2,832,869
Accounts payable		(4,800,664	)
Accrued expenses		(473,020	)
Payroll and related liabilities		(545,565	)
Other tax payable		(125,645	)
Advances from customers		(209,694	)
Other payables		(1,770,862	)
Due to related company		(320,913	)
Notes payable		(10,549,316	)
Other assumed liabilities/Other payable		(2,520,531	)
Net assets acquired	$	10,747,943
Less : Purchase Consideration (net of cash received)		(10,567,946	)
Negative goodwill being transfer to construction in progress		179,997

F-43

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

3. Acquisition of subsidiaries - continued

The following table presents the unaudited results of operations of the Company as if the Yuhe acquisitions had been consummated as of January 1, 2008 and 2007 and the results are shown for the years ended December 31, 2008 and 2007 including certain pro forma adjustments, including depreciation and amortization on the assets acquired, and other adjustments.

	For the year ended		For the year ended
	December 31,		December 31,
	2008		2007
	(Pro forma)		(Pro forma)
Revenues	$	36,117,611	$	22,075,224
Net income	$	10,666,419	$	5,885,060
Earnings per share
Basic	$	0.75	$	0.68
Diluted	$	0.74	$	0.68
Weighted average shares outstanding
Basic		14,233,268		8,626,318
Diluted		14,476,504		8,626,318

4. Inventories

Inventories consist of the following:

	December 31		December 31
	2008		2007
Raw materials	$	5,281,429	$	-
Work in progress		1,272,217		-
Finished goods		91,315		-
	$	6,644,961	$	-

 

F-44

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

5. Other receivables, net

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

During the years ended December 31, 2008 and 2007, bad debt recovery was $373,042 and $0 respectively.

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 collectability of outstanding accounts. The Company evaluates the credit risks of its customers utilizing historical data and estimates of future performance.

6. Notes receivable, net

Notes receivable, net consists of the following:

	December 31,			December 31,
	2008			2007
Notes receivables	$	119,682		$	-
		119,682			-
Less: Allowances		(45,612	)		-
	$	74,070		$	-

Notes receivable are unsecured, interest free and have no fixed repayment date.

Management provides for an allowance when collection of the full amount is no longer probable by establishing an allowance equivalent to 30% of gross amount of notes receivables due over 6 months and 60% of gross amount of notes receivables due over 1 year. Full provision will be made for notes receivables due over 2 years.

During the years ended December 31, 2008 and 2007, the recovery of bad debts was $439,958 and $0 respectively.

 

F-45

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

7. Unlisted investments

Unlisted investments at December 31, 2008 represent the 3% investments in Hanting Rural Credit Cooperative, “Hanting”, recorded at cost.  It is stated at cost because the Company does not have significant influence or control over Hanting. Under the cost method, the Company records the investment at cost, and recognizes income dividends received that are distributed from net accumulated earnings of the investee since the date of acquisition by the Company. The net accumulated earnings of the investee subsequent to the date of investment are recognized by the Company only to the extent distributed by the investee as dividends. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions of cost of the investment. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred which is other than temporary and should accordingly be recognized.

For the years ended December 31, 2008 and 2007, the Company recorded $12,251 and $0 as income from unlisted investment for dividends received from Hanting.  Management of the Company has reviewed the investment in Hanting for impairment and determined there is no indication that the carrying amount of Hanting may not be recoverable.

8. Plant and equipment, net

Plant and equipment consists of the following: 

	December 31,			December 31,
	2008			2007
At cost
Buildings	$	14,951,197		$	-
Machinery		5,064,593			-
Motor vehicles		119,786			-
Furniture and equipment		82,815			-
		20,218,391			-
Less: accumulated depreciation		(1,678,071	)		-
Construction in progress	$	8,571,956		$	-
		27,112,276			-

During the year ended December 31, 2008, depreciation expenses amounted to $1,668,059 among which $1,431,939 and $236,120 were recorded as cost of sales and administrative expense respectively.  During the year ended December 31, 2007, depreciation expenses amounted to $0.

 

F-46

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

8. Plant and equipment, net - Continued

Capitalized interest expense included in construction in progress totaled $437,221 for the year ended December 31, 2008.

As of December 31, 2008, buildings and machinery of the Company with net book value of $14,391,536 were pledged as collateral under certain loan arrangements.

9. Deposits paid for acquisition of long term assets

Deposits paid consist of the following:

	December 31,			December 31,
	2008			2008
Deposits paid for purchase of land use right	$	1,458,959		$
Deposits paid for construction in progress		6,274,903
Deposits paid for acquisition of farm		2,480,231
Deposits paid for capital commitment		10,214,093
Less: Transfer to construction in progress		(8,755,134	)
Deposits paid for purchase of equipment		822,029
Total Deposits paid for acquisition of long term assets	$	2,280,988		$

10. Intangible assets, net

Intangible assets consist of the following:

	December 31,			December 31,
	2008			2007
Land use rights, at cost	$	2,969,714		$	-
Less: accumulated amortization		(59,962	)		-
	$	2,909,752		$	-

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

During the years ended December 31, 2008 and 2007, amortization expenses included in the cost of sales were $59,209 and $0 respectively.

F-47

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

11. Due from related companies

	December 31,		December 31,
	2008		2007
Hexing Green Agriculture Co., Ltd., "Hexing Green", - Mr. Gao Zhentao, a director of the Company is also a director of Hexing Green	$	75,754	$	-
Shandong Yuhe Food Co., Ltd, "Yuhe Group"- Mr. Gao Zhentao, a director of the Company is also a director of Yuhe Group		3,580,553		-
Shandong Yuhe New Agriculture of Sciences, "Shandong Yuhe"- Mr. Gao Zhentao, a director of the Company is also a director of Shandong Yuhe		50,257		-
Weifang Jiaweike Food Co., Ltd, "Weifang Jiaweike" - Mr. Gao Zhentao, a director of the Company is also a director of Weifang Jiaweike		25		-
Weifang Yuhe Poultry Co., Ltd, "PRC Yuhe" - Mr. Gao Zhentao, a director of the Company is also a director of PRC Yuhe		-		1,000,000
	$	3,706,589	$	1,000,000

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

12. Other payable

	December 31,		December 31,
	2008		2007
Interest payable	$	69,021	$	-
Deposits received		473,448		-
Others		395,066		-
	$	937,535	$	-

Deposit received represent deposits collected from customers as security for non-payment. Other payable represents apartment rental reimbursement to staff and insurance payable.

 

F-48

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

13. Loan from director

Loan from director totaled $291,792 at December 31, 2008 represents bank loan borrowed by a director on behalf of the Company.  The loan is due on November 9, 2009 and bears interest at 8.19% per annum.

14. Due to related companies

	December 31,		December 31,
	2008		2007
Weifang Hexing Breeding Co., Ltd. "Weifang Hexing" - Gao Zhentao, a director of the Company is also a director of Weifang Hexing	$	185,885	$	-
Others		24,748		-
	$	210,633	$	-

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

15. Long-term loans

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

	December 31,			December 31,
	2008			2007
Loans from Nansun Rural Credit, interest rate at 10.46% to 13.82% per annum, $291,792 due on December 9, 2009, remaining balance due on March 10, May 17 and May 28, 2010	$	8,753,757			-
Loan from Shuangyang Rural Credit, interest rate at 9.83% per annum, due on October 13, 2010		948,324			-
Loan from Hanting Kaiyuan Rural Credit Cooperative, interest rate at 11.09% per annum, due from November 28, 2008 to January 10, 2009		1,065,040			-
		10,767,121			-
Less: current portion of long-term loans		(1,356,832	)		-
	$	9,410,289			-

F-49

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

15. Long-term loans - continued

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

	December 31
2009	$	1,356,832
2010	$	9,410,289

16. Payroll and payroll related liabilities

	December 31,		December 31,
	2008		2007
Salary	$	1,142,094	$	-
Employee benefits		97,520		-
Others		157,607		-
	$	1,397,221	$	-

Payroll and payroll related liabilities represent accrued payroll and welfare benefits to employees.

17.  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 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.

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%.

On January 1, 2008, the Company adopted FIN 48, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken in the tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

F-50

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

17. Income tax - continued

Until December 31, 2008, the directors considered that the Company had no uncertain tax positions which affected its consolidated financial position and results of operations or cash flow, and will continue to evaluate for the uncertain position in future. There are no estimated interest costs and penalties provided in the Company’s financial statements for the year ended December 31, 2008.

The Company 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. Taihong has a net operating loss carry forward and resulted in deferred tax asset of $60,204 as of December 31, 2008. Taihong historically experiences net losses before income taxes, and management does not expect Taihong to generate net income before taxes in the future as its business is to supply feed to PRC Yuhe. As such, a full valuation allowance of $60,204 is recorded against the deferred tax asset.

The provision for income taxes consists of the following:

	December 31,			December 31,
	2008			2007
Current tax
- PRC		-			-
- Change in deferred tax asset		60,204			-
- Change in valuation allowance		(60,204	)		-
		-			-

All of the Company’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% and 33% for the fiscal years of 2008 and 2007 respectively to income (loss) before income taxes for the years ended December 31, 2008 and 2007 for the following reasons:

	December 31,			December 31,
	2008			2007
Income (loss) before income taxes	$	10,524,885		$	(2,212	)
Computed “expected” income tax asset at 25%		2,631,221			-
Tax effect on net taxable temporary differences		(60,204	)		-
Effect of cumulative tax losses		258,236			-
Effect of tax holiday		(2,829,253	)		-
	$	-		$	-

F-51

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

18. Fair value of financial instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, trade accounts receivable, other receivables, accounts payable, and other payables, approximate their fair values because of the short maturity of these instruments and market rates of interest.

19. Common stock and warrants

(a) Common Stock

On March 12, 2008, the Company issued 126,857,134 shares, equivalent to approximately 8,626,318 post –split shares, of its common stock, par value $0.001 per share, to the sole stockholder of Bright Stand to effect the Reverse Merger Acquisition. At the same time, the Company issued 85,714,282, equivalent to approximately 5,829,018 post-split shares, shares of common stock to the investors for gross proceeds of $18 million in the private placement.

The Company's issued and outstanding number of common stock immediately prior to the Reverse merger Acquisition is 16,000,000 shares, equivalent to 1,087,994 post-split shares, shares.

Effective on April 4, 2008, the Company effected a 1-for-14.70596492 reverse stock split of its common stock.

After the reverse acquisition, the total common stock issued and outstanding of the Company is 15,543,330 post-split shares.

On March 12, 2008, the Company’s majority stockholder, Mr. Yamamoto, entered into an escrow agreement with the private placement investors. Mr. Yamamoto will deliver a certain number of shares of the Company’s common stock owned by him to the investors pro-rata in accordance with their respective investment amount for no additional consideration if:

(i)         the Company’s after tax net income for its fiscal year ending on December 31, 2008 is less than $9,000,000 and fiscal year ending on December 31, 2009 is less than 95% of $13,000,000; and

(ii)         the Company’s earnings per share reported in the fiscal year ending on December 31, 2009 is less than $0.74 on a fully diluted basis (the “Low Performance Events”).

F-52

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

19.  Common stock and warrants - continued

Mr. Yamamoto has placed an aggregate of 49,411,763 shares, equivalent to 3,359,889 post-split shares, of common stock, “Make Good Shares”, into an escrow account pursuant to the terms of the Make Good Escrow Agreement by and among us, Mr. Yamamoto, the Investors and the escrow agent named therein. In the event the Company does not achieve the targets in 2008 and 2009, Make Good Shares will be conveyed to the Investors pro-rata in accordance with their respective investment amount for no additional consideration. In the event that the foregoing Low Performance Events do not occur, the Make Good Shares will be transferred to Mr. Yamamoto.

(b) Warrants

The Company granted warrants to acquire an aggregate of 6,999,999 shares, equivalent to 476,014 post-split shares, of common stock to Roth Capital Partners, LLC and WLT Brothers Capital, Inc., for the services in connection with the private placement on March 12, 2008. The warrants have a strike price equal to $3.706, have a term of three years starting from March 12, 2008 and permit cashless or cash exercise at all times that they are exercisable. The warrants are exercisable at any time 6 months after their issuance. The Company valued the options by Black-Scholes option-pricing model with the amount of $2,398,975 which recorded as cost of raising capital against additional paid-in capital.

The Company estimated the fair value of each warrant award on the date of grant using the Black-Scholes option-pricing model and the assumption noted in the following table. Expected volatility is based on the historical and implied volatility of a peer group of publicly traded entities. The expected term of options gave consideration to historical exercises, post-vesting cancellations and the options’ contractual term. The risk-free rate for the expected term of the option is based on the U.S. Treasury Constant Maturity at the time of grant. The assumptions used to value options granted during the year ended December 31, 2008 were as follows:

	Year Ended December 31, 2008
Risk free interest rate		3	%
Expected volatility		109	%
Expected life (years)		3

On October 27, 2008, the Company issued 178,848 of common shares to Roth Capital Partners, LLC based on its cashless exercise of 333,198 warrants issued to it.  The total number of warrants outstanding as at December 31, 2008 was 142,816.

F-53

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

19.  Common stock and warrants - continued

(c) Additional paid-in capital

Prior to the Reverse Merger, the stockholder of Bright Stand contributed additional capital of $12,149,766 to Bright Stand for the acquisition of PRC Yuhe. Subsequent to the contribution of capital, Bright Stand entered into a reverse acquisition with Yuhe International, Inc. and raised $18 million gross proceeds in the private placement as described in Note 19 (a).

20. Obligations under registration rights agreements

The Company entered into a Registration Rights Agreement with certain investors on March 12, 2008 in the private placement. The Company is required to file a resale registration statement on Form S-1 or any other appropriate form (i) within 60 days following the closing for purposes of registering the resale of these shares, (ii) within 15 days with respect to any additional registration statement, (iii) within 15 days with respect to any additional registration statements required to be filed due to SEC Restrictions, (iv) within 30 days following the date on which it becomes eligible to utilize Form S-3 to register the resale of common stock, or (v) within 45 days following the date the Make Good Shares are delivered by Mr. Yamamoto to the investors.

The Company will be required to pay the investors liquidated damages if it fails to file a registration statement by the above filing deadlines or if it does not promptly respond to comments received from the SEC. The liquidated damages accrue at a rate of 0.5% per month of the aggregate investment proceeds which are $18 million received from the investors, capped at 5% of the total investment proceeds, or $900,000. The Company’s Registration Statement was declared effective on December 29, 2008, and therefore it has not recorded a liability for that potential obligation as at December 31, 2008.

21.  Stock options

On June 13, 2008, the Company granted to the Chief Financial Officer (CFO) of the Company an option to purchase 150,000 shares of the Company’s common stock at an exercise price of $3.708 per share for the 3 year’s employment. The options shall vest with respect to 33.3% of the total number of shares purchasable upon exercise thereof one year after the grant date and 33.3% on the second and third anniversary of the grant date, Mr. Hu will be fully vested in the option by that date and shall cease to vest if the executive ceases to be Chief Financial Officer of the Company for any reason.

F-54

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

21.  Stock options - continued

On the same date, the Company granted each of the three independent directors of the Company an option to purchase 77,717 share of the Company’s common stock at an exercise price of $3.708 per share for the 3 year’s employment. The options shall vest with respect to 33.3% of the total number of shares purchasable upon exercise thereof one year after the grant date and 33.3% on the second and third anniversary of the grant date, the directors will be fully vested in the option by that date and shall cease to vest if the three independent directors cease to be independent directors of the Company for any reason.

The options granted to the CFO and the three independent directors will expire on the fifth anniversary of the grant date and cease to vest if they cease to be the CFO or independent directors of the company for any reason.

During the year ended December 31, 2008, the Company granted 383,151 stock options. The Company recognizes compensation expense, net of estimated forfeitures, over the requisite service period, which is the period during which the grantee is required to provide services in exchange for the award.  The Company has elected to recognize compensation cost for awards with only a service condition that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award, with the following assumptions: no dividend yield, expected volatility of 109.40%, and a risk-free interest rate of 3.00%. In determining volatility of the Company’s options, the Company used the average volatility of the Company’s stock. Based on the Black-Scholes option pricing model, the entire option was valued at $2,186,499. In accordance with SFAS No. 123R, the Company has recorded stock-based compensation expense for the year ended December 31, 2008 of $401,359 in connection with the issuance of this option.

F-55

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

21.  Stock options - continued

The following table summarizes all Company stock option transactions between January 1, 2008 and December 31, 2008

	Option Shares		Vested Shares		Weighted Average Exercise Price		Remaining Contractual Term
Balance, January 1, 2008		-		-	$	-	$	-
Granted or vested during the year ended December 31, 2008		383,151		-	$	3.708	$	4.55
Expired during the year ended December 31, 2008		-		-		-		-
Balance, December 31, 2008		383,151		-	$	3.708	$	5

The weighted average grant date fair value of options granted was $7.35 per share. The total number of stock options outstanding as at December 31, 2008 was 383,151 shares.

22.  Significant concentrations and risk

(a) Customer Concentrations

The Company does not have concentrations of business with any customer constituting greater than 10% of the Company’s gross sales.

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

	For the year ended
	December 31,
	2008			2007
Ma Zhuping		27.60	%		-

F-56

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

22.  Significant concentrations and risk - continued

(b) Credit Risk

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

(c) Company’s operations are in China

All of the Company’s products are produced in China.  The Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in China.  Among other risks, the Company’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.

23.  Business and geographical segments

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

Reportable Segments

	For the year ended Dec 31, 2008									For the year ended Dec 31, 2007							For the years ended Dec 31,
	Production of chicks			Production of feeds			Corporate			Production of chicks		Production of feeds		Corporate			Total
																	2008			2007
External revenue	$	34,166,334		$	459,948		$	-		$	-	$	-	$	-		$	34,626,282		$	-
Intersegment revenue		-			11,885,562			-			-		-		-			11,885,562			-
Interest income		245,573			34			4,131			-		-		-			249,738			-
Interest expense		(33,739	)		(668,834	)		-			-		-		(70	)		(702,573	)		(70	)
Depreciation and amortization		(1,611,941	)		(115,327	)		-			-		-		-			(1,727,268	)		-
Net profit/(loss) after tax		11,317,014			240,818			(1,032,947	)		-		-		(2,212	)		10,524,885			(2,212	)
Expenditures for long-lived assets		12,582,823			108,771			-			-		-		-			12,691,594			-

Note: Intersegment revenue of $11,885,562 was eliminated in consolidation.

F-57

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

23.  Business and geographical segments - continued

The Company’s operations are located in the PRC. All revenue is from customers in the PRC.  All of the company’s assets are located in the PRC. Accordingly, no analysis of the Company's sales and assets by geographical market is presented.

24. Commitments and contingencies

Operating Leases - In the normal course of business, the Company leases the land for the 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:

F-58

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

24.  Commitments and contingencies – continued

As of  December 31,

2009	$	89,901
2010		89,901
2011		89,901
2012		89,901
2013		89,901
Thereafter		89,901
		1,752,587
Total minimum lease payments		2,291,993

During the years ended December 31, 2008 and 2007, rental expenses were $155,349 and $0 respectively.

Construction of Breeding Farm No. 1

On August 15, 2008, PRC Yuhe completed construction work and facilities to set up the southern farm of breeding farm No 1.  On August 30, 2008, PRC Yuhe purchased 100,000 sets of parent breeders and began to feed.  By the end of December 2008, PRC Yuhe has spent RMB 29 million, approximately equivalent to $4.5 million, to build breeding farm No 1.  The breeding farm can be split into the southern and the northern regions.  PRC Yuhe looks forward to completing the northern farm construction work and facilities by July 2009; and beginning to breed parent broilers in the northern region by the end of 2009.  The residual scheduled payment is RMB 6 million, equivalent to $0.9 million, for the building and facilities; and RMB 4.9 million, approximately equivalent to $0.75 million, in machineries.  The capacity of the northern factory is 140,000 sets of parent broilers

Construction of Breeding Farm Nos. 2, 3, 5, 6, and 7

On December 6, 2008, PRC Yuhe entered into a construction agreement with a contractor to build and renovate five of its breeding farms for a total consideration of RMB2.6 million, approximately equivalent to $379,000. The construction period is estimated to be from February 2009 to April 2009.

Construction of Steel Structural Surface for Hatchery Farm No. 3

On December 10, 2008, PRC Yuhe entered into a construction agreement with a contractor to build the steel structure for its hatchery farm No. 3 for a total consideration of RMB3.9 million, approximately equivalent to $564,000. The construction period is estimated to be from February 2009 to March 2009.

F-59

YUHE INTERNATIONAL, INC.

(Formerly known as First Growth Investors Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

25.  Equipment Leasing and Rental Arrangement

On November 11, 2008, PRC Yuhe entered into equipment leasing agreement and property rental agreement, collectively, the “Agreements”, with Shandong Nongbiao Purina Feed Co., Ltd., “Shandong Nongbiao Purina”. Shandong Nongbiao Purina will construct a feed production facility on a property leased from PRC Yuhe and become the exclusive feed supplier for PRC Yuhe. Pursuant to the terms and conditions of the Agreements, Shandong Nongbiao Purina will lease certain equipment for feed production from, and install them at the premises owned by PRC Yuhe. The lease term for both the equipment leasing agreement and property rental agreement is 10 years. After  completion of the feed production facility, the lease term will commence on the date of the production begins.  Shandong Nongbiao Purina shall pay to PRC Yuhe an annual rental payment for the leased land, premises and facilities of RMB 1,500,000, approximately equivalent to $219,000. The rent payable by Shandong Nongbiao Purina under the rental agreement will be offset against the prepaid equipment rental costs of RMB10,000,000, approximately equivalent to $1,459,000.  As at December 31, 2008, Shandong Nongbiao Purina advanced $400,000 (RMB2,740,000) to PRC Yuhe as rental payment and was recorded as advances from customers.

In connection with the execution of the Agreements, Shandong Yuhe Food Group Co., Ltd., “Yuhe Group”, a PRC company based in Shandong Province, would be the guarantor of PRC Yuhe for RMB 4,500,000, approximately equivalent to $657,000, for the first five years and for RMB 3,000,000, approximately equivalent to $438,000, for the next five years. No guarantee fee is required according to the above Agreements.

F-60

YUHE INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

F-61

YUHE INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

On March 12, 2008, Yuhe International, Inc. entered into a Share Exchange Agreement with Bright Stand International Co. Ltd. and its stockholders, pursuant to which Yuhe International, Inc. acquired all of the issued and outstanding capital stock of Bright Stand International Co. Ltd. in exchange for a total of 8,626,236 shares of the Company’s common stock, constituting 56% shares of Yuhe International, Inc. issued and outstanding common stock at the time of the merger agreement, $0.001 par value per share.

Yuhe International, Inc. completed the acquisition of Bright Stand International Co. Ltd., pursuant to the Merger Agreement, in March 2008. The acquisition was accounted for as a reverse merger effected by a share exchange, wherein Bright Stand International Co. Ltd. is considered the acquirer for accounting and financial reporting purposes.

The unaudited pro forma consolidated statement of operations reflects the results of operations of the company had the merger consummated on January 1, 2007. These pro forma consolidated statements of operations have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the transaction occurred on the date indicated and are not necessarily indicative of the results that may be expected in the future.

Due to the fact that there was not any trading and shareholding relationship between Yuhe International, Inc. with Bright Stand International Co. Ltd. before the share exchange, in the opinion of management, no pro forma adjustment directly attributable to the share exchange contemplated by the Agreement is to be made to the unaudited pro forma consolidated statements of operations of Yuhe International, Inc.

F-62

YUHE INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	2008			2007
Net revenues	$	36,117,611		$	22,075,224
Cost of revenue		(22,910,160	)		(13,502,545	)
Gross profit		13,207,451			8,572,679
Operating expenses
Selling		(454,457	)		(312,927	)
General and administrative expenses		(2,661,285	)		(1,112,758	)
Total operating expenses		(3,115,742	)		(1,425,685	)
Income from operations		10,091,709			7,146,994
Non-operating income (expense)
Bad debts recovery (expense)		1,032,893			(231,569	)
Interest income		249,743			796
Other income		102,518			198
Interest expenses		(788,740	)		(924,915	)
Other expenses		(21,704	)		(106,444	)
Total other income (expenses)		574,710			(1,261,934	)
Net Income before income tax		10,666,419			5,885,060
Income Tax		-			-
Net income	$	10,666,419			5,885,060
Earnings per share
Basic	$	0.75		$	0.68
Diluted	$	0.74		$	0.68
Weighted average shares outstanding
Basic		14,233,268			8,626,318
Diluted		14,476,504			8,626,318

F-63

YUHE INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	Pro forma for the period from January 1, 2008 to January 31, 2008			As reported from February 1, 2008 to December 31, 2008			Pro forma adjustment	2008 Pro forma Total
Net revenue	$	1,491,329		$	34,626,282		$	$	36,117,611
Cost of revenue		(1,337,438	)		(21,572,722	)			(22,910,160	)
Gross profit		153,891			13,053,560				13,207,451
Operating expenses
Selling		(28,997	)		(425,460	)			(454,457	)
General and administrative		(122,695	)		(2,538,590	)			(2,661,285	)
Total operating income (expenses)		(151,692	)		(2,964,050	)			(3,115,742	)
Income from operations		2,199			10,089,510				10,091,709
Non-operating income (expense)
Bad Debts recovery		219,893			813,000				1,032,893
Interest income		5			249,738				249,743
Other income		5,604			96,914				102,518
Interest expenses		(86,167	)		(702,573	)			(788,740	)
Other expenses		-			(21,704	)			(21,704	)
Total other income (expense)		139,335			435,375				574,710
Net Income before income tax		141,534			10,524,885				10,666,419
Income Tax		-			-				-
Net income	$	141,534		$	10,524,885		$	$	10,666,419
Earnings per share
Basic	$	0.02		$	0.74		$	$	0.74
Diluted	$	0.02		$	0.73		$	$	0.73
Weighted average shares outstanding
Basic		8,626,318			14,233,268				14,233,268
Diluted		8,626,318			14,476,504				14,476,504

F-64

WEIFANG YUHE POULTRY CO., LTD

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

(Stated in US dollars)

F-65

WEIFANG YUHE POULTRY CO., LTD

CONTENTS	PAGES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-67
CONSOLIDATED BALANCE SHEETS	F-68 to F-69
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)	F-70
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	F-71
CONSOLIDATED STATEMENTS OF CASH FLOWS	F-72 to F-73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	F-74 to F-91

F-66

F-67

WEIFANG YUHE POULTRY CO., LTD

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2007 AND 2006

(Stated in US Dollars)

	Note		2007		2006
ASSETS
Current assets
Cash and cash equivalents			$	47,455	$	563,062
Accounts receivable, net of allowances of $16,835 and $15,660 respectively				1,586		-
Prepaid expenses				63,419		-
Inventories		3		3,946,538		3,362,941
Advances to suppliers				1,137,767		471,791
Total current assets			$	5,196,765	$	4,397,794
Prepaid deposits				665,885		143,106
Other receivables, net		4		2,714,589		1,952,118
Unlisted investments		5		274,812		1,207,099
Plant and equipment, net		7		15,135,284		13,035,768
Intangible assets, net		8		2,501,744		2,365,384
Due from related companies		9		5,790,486		4,127,520
Due from directors		10		228,933		-
Deferred expenses				551,795		463,922
TOTAL ASSETS			$	33,060,293	$	27,692,711
LIABILITIES AND  STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable			$	5,471,271	$	7,352,688
Current portion of long-term
liabilities		14		4,306,750		5,219,060
Loans payable		11		3,268,087		4,882,907
Payroll and payroll related liabilities				835,372		424,317
Accrued expenses				361,926		96,938
Advances from customers				190,808		5,544
Tax payables				132,536		115,580
Due to related companies		12		1,000,000		2,567,739
Total current liabilities			$	15,566,750	$	20,664,773

See accompanying notes to consolidated financial statements

F-68

WEIFANG YUHE POULTRY CO., LTD

CONSOLIDATED BALANCE SHEETS (Continued)

DECEMBER 31, 2007 AND 2006

(Stated in US Dollars)

	Note		2007		2006
Long-term liabilities		14	$	6,056,794	$	4,603,032
TOTAL LIABILITIES			$	21,623,544	$	25,267,805
Commitments and contingencies			$	-	$	-
Minority interests			$	201,752	$	263,144
STOCKHOLDERS’ EQUITY
Registered capital		13	$	482,713	$	482,713
Additional paid in capital				7,009,523		4,403,806
Retained earnings (deficit)				2,990,742		(2,957,922	)
Accumulated other comprehensive income				752,019		233,165
			$	11,234,997	$	2,161,762
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	33,060,293	$	27,692,711

See accompanying notes to consolidated financial statements

F-69

WEIFANG YUHE POULTRY CO., LTD

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

(Stated in US Dollars)

	Note		2007			2006
Net revenues			$	22,075,224		$	14,595,716
Cost of revenues				(13,502,545	)		(15,483,641	)
Gross profit (loss)			$	8,572,679		$	(887,925	)
Operating expenses:
Selling				(312,927	)		(430,122	)
General and administrative				(1,341,987	)		(1,279,238	)
Operating income (loss)			$	6,917,765		$	(2,597,285	)
Other income (expenses):
Interest income				796			9,553
Interest expenses				(924,845	)		(971,785	)
Investment losses				(101,264	)		(152,521	)
Profit (loss) on disposal of fixed assets				(5,180	)		172,314
Income (loss) before income taxes			$	5,887,272		$	(3,539,724	)
Income taxes		15		-			-
Net income (loss) before minority  interests			$	5,887,272		$	(3,539,724	)
Minority interests (earnings) loss				61,392			(68,387	)
Net income (loss)			$	5,948,664		$	(3,608,111	)
Other comprehensive income:
Foreign currency translation adjustment				518,854			67,066
Comprehensive income (loss)			$	6,467,518		$	(3,541,045	)

See accompanying notes to consolidated financial statements

F-70

WEIFANG YUHE POULTRY CO., LTD

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

(Stated in US Dollars)

	Registered  capital		Additional  paid-in capital		Retained earnings (deficits)			Accumulated  other comprehensive income		Total
Balance, January 1, 2006	$	482,713	$	-	$	650,189		$	166,099	$	1,299,001
Net loss		-		-		(3,608,111	)		-		(3,608,111	)
Injection of additional capital from shareholders		-		4,403,806		-			-		4,403,806
Foreign currency translation adjustment		-		-		-			67,066		67,066
Balance, December 31, 2006	$	482,713	$	4,403,806	$	(2,957,922	)	$	233,165	$	2,161,762
Balance, January 1, 2007	$	482,713	$	4,403,806	$	(2,957,922	)	$	233,165	$	2,161,762
Net profit		-		-		5,948,664			-		5,948,664
from shareholders		-		2,605,717		-			-		2,605,717
adjustment		-		-		-			518,854		518,854
Balance, December 31, 2007	$	482,713	$	7,009,523	$	2,990,742		$	752,019	$	11,234,997

See accompanying notes to consolidated financial statements

F-71

WEIFANG YUHE POULTRY CO., LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

(Stated in US Dollars)

	2007			2006
Cash flows from operating activities
Net income (loss)	$	5,948,664		$	(3,608,111	)
Adjustments to reconcile net income
Depreciation		1,454,616			1,441,868
Amortization		25,388			59,202
Minority interests		(61,392	)		68,387
Allowances for bad debt of other receivables		231,569			151,772
Loss (gain) on disposal of fixed assets		5,180			(172,314	)
Write off of inventories		-			1,369,460
Loss on investments (loss) to net cash provided by operating activities		101,264			152,521
Change in assets and liabilities
Accounts receivable		(1,504	)		1,433
Advances to suppliers		(608,297	)		(316,980	)
Prepaid expenses		(60,895	)		-
Prepaid deposits		-			147,031
Inventories		(338,126	)		(10,507	)
Deferred expenses		(53,718	)		277,187
Accounts payable		(2,292,471	)		2,985,356
Payroll and payroll related liabilities		366,659			283,781
Accrued expenses		248,038			(108,509	)
Advances from customers		177,526			5,064
Tax payables		8,642			111,154
Net cash provided by operating activities	$	5,151,143		$	2,837,795
Cash flows from investing activities
Purchase of fixed assets	$	(1,881,815	)	$	(205,335	)
Sale of plant and equipment		-			1,493,381
Prepayment in equipment deposits		(492,519	)		-
Sale of equity investments		873,700			-
Advances to loans receivables		(2,192,163	)		(367,407	)
Proceeds for sales of henhouses		1,357,454			-
Advances to directors		(219,824	)		-
Advances to related parties receivables		(1,323,918	)		(1,496,339	)
Net cash (used in) investing activities	$	(3,879,085	)	$	(575,700	)

F-72

WEIFANG YUHE POULTRY CO., LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

(Stated in US Dollars)

	2007			2006
Cash flows from financing activities
Repayments to loans payable	$	-		$	(1,139,553	)
Repayments to other long-term loans		(129,208	)		-
Proceeds from loans payables		-			5,024,446
Repayment of due to related parties		(1,675,151	)		(6,038,217	)
Net cash (used in) financing activities	$	(1,804,359	)	$	(2,153,324	)
Effect of foreign currency translation on cash and cash equivalents		16,694			16,614
(Decrease) increase in cash and cash equivalents		(515,607	)		125,385
Cash and cash equivalents-beginning of year		563,062			437,677
Cash and cash equivalents-end of year	$	47,455		$	563,062
Supplementary cash flow information:
Interest paid in cash	$	710,347		$	716,310

Non-cash investing and financing activities:

1. During 2006, the Company sold its henhouse with unpaid receivable of $1,688,519 as of December 31, 2006.

2. During 2007 and 2006, fixed asset additions financed with loans payable of $733,149 and $1,109,104, respectively.

3. During 2007 and 2006, additional paid-in capital of $2,605,717 and $4,403,806 was recorded when shareholder assumed the company’s debt.

See accompanying notes to consolidated financial statements

F-73

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

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).

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 and its 56.25% subsidiary, Taihong. 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 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	RMB	(8,000,000	)

(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-74

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(d) Economic and political risks

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

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

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

(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-75

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(g) Guarantee Expense

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.

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 year-end. The Company records guarantee expense as incurred. Guarantee expense for the years ended December 31, 2007 and 2006 were $7,000 and $0, respectively.

(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% of 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 prior to delivery of the products. As a result, the Company maintains a low level of trade receivables.

F-76

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(k) Note receivables

Note receivables are stated at the original principal amount less allowance for any uncollectible amounts. Management provides for an allowance when collection of the full amount is no longer probable by establishing an allowance equivalent to 30% of gross amount of notes receivables due over 6 months and 60% of gross amount of notes receivables due over 1 year. Full provision will be made for notes receivables due over 2 years.

(l) Cash and cash equivalents

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.

(m) 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.

Customers do not have a general right of return on products delivered.

(n) 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.

(o) Advertising

The Group expensed all advertising costs as incurred. Advertising expenses for the years ended December 31, 2007 and 2006 were $1,776 and $23,266 respectively.

(p) 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 years ended December 31, 2007 and 2006 were $237,128 and $153,580 respectively.

F-77

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(q) Income tax

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.

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 33%. 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 December 31, 2007.

The corporate income tax for the subsidiary, Weifang Taihong Feed Co., Ltd is 33%.

(r) Shipping and handling fees

Shipping and handling fees are expensed when incurred. Shipping and handling charges included in the selling expenses for the years ended December 31, 2007 and 2006 were $12,217 and $25,913 respectively.

(s) Minority interests

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

(t) 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.

December 31, 2007
Balance sheet	RMB	7.31410 to US$1.00
Statement of income and comprehensive income	RMB	7.61720 to US$1.00
December 31, 2006
Balance sheet	RMB	7.81750 to US$1.00
Statement of income and comprehensive income	RMB	7.98189 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-78

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(u) Comprehensive income

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 component of comprehensive income includes foreign currency translation adjustment.

(v) 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 years ended December 31, 2007 or 2006.

F-79

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(w) 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.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - an amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. We expect the Statement will have no material impact on our consolidated financial statements.

F-80

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

3. INVENTORIES

Inventories consist of the following:

	2007		2006
Raw materials	$	235,278	$	19,131
Work in progress		1,787,960		3,060,157
Finished goods		1,923,300		283,653
	$	3,946,538	$	3,362,941

4. OTHER RECEIVABLES, NET

Other receivables, net consist of the following:

	2007			2006
Loan receivables	$	2,816,516		$	495,682
Henhouses sales (note 6)		350,009			1,688,519
Others		37,305			-
	$	3,203,830		$	2,184,201
Less: Allowances		(489,241	)		(232,083	)
	$	2,714,589		$	1,952,118

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

Allowances for bad debts of other receivable for the years ended December 31, 2007 and 2006 included in the general and administrative expenses were $231,569 and $151,772 respectively.

The note receivables - others mainly represents notes receivable incurred prior to 2006 and allowance of $489,241 was provided as of December 31, 2007.

Management provides for an allowance when collection of the full amount is no longer probable by establishing an allowance equivalent to 30% of gross amount of notes receivables due over 6 months and 60% of gross amount of notes receivables due over 1 year. Full provision will be made for notes receivables due over 2 years.

F-81

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

5. UNLISTED INVESTMENTS

Unlisted investments at December 31, 2007 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.

Unlisted investments at December 31, 2006 are investments in Weifang Jiaweike Food Co., Ltd (“Jiaweike”) and Hanting.

Investment in Jiaweike was recorded using the equity method of accounting. The consolidated statement of income includes the Group's share of the post-acquisition results of Jiaweike for the year. In the consolidated balance sheet, unlisted investments related to Jiaweike are stated at the Group's share of the net assets of Jiaweike plus the premium paid less any discount on acquisition in so far as it has not already been amortized to the statement of income, less any identified impairment loss.

				Portion of
				nominal
Name of	Place		Form of	value of
associate	of		business	registered		Principal
company	registration		structure	capital		activities
Weifang Jiaweike Food Co., Ltd.		PRC	Limited company		48.54	Processing of foodstuff

The remaining 51.46% of Jiaweike was hold by Shandong Yuhe Food Group Co., Ltd from which Mr. Gao Zhentao, the director of the company is also the director

Reconciliation on the unlisted investments is as follows:

Balance, January 1, 2006	$	1,319,631
Equity share of investment losses		(152,521	)
Effect of foreign currency translation		39,989
Balance, December 31, 2006	$	1,207,099
Equity share of investment losses		(101,264	)
Disposal of Jiaweike		(848,719	)
Effect of foreign currency translation		17,696
Balance, December 31, 2007	$	274,812

During 2007, Jiaweike was disposed of to Weifang Hexing Breeding Co., Ltd, a related company where Mr. Gao Zhentao, the director of the Company is also the director. No gain or loss was recognized on disposal as the consideration was at the carrying value of the equity investment.

F-82

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

6. DISPOSAL OF HENHOUSES

During the year 2006, the Group disposed of three henhouses for business operational reason with a sales price of the following:

Buildings	$	1,976,178
Land use rights		902,042
Others		269,740
	$	3,147,960
Amount received		1,459,441
Receivables - sales of fixed assets	$	1,688,519	(note 4 )

7. PLANT AND EQUIPMENT, NET

Plant and equipment consists of the following:

	2007			2006
At cost
Buildings	$	10,092,337		$	9,215,455
Machinery		5,641,344			5,452,976
Motor vehicles		424,679			411,660
Furniture and equipment		374,713			346,625
	$	16,533,073		$	15,426,716
Less: accumulated depreciation		(5,702,882	)		(3,919,713	)
Construction in progress		4,305,093			1,528,765
	$	15,135,284		$	13,035,768

Depreciation expenses included in the cost of sales for the years ended December 31, 2007 and 2006 were, $1,207,093 and $1,158,565 respectively, and included in the general and administrative expenses for the years ended December 31, 2007 and 2006 were, $ 247,523 and $283,303 respectively.

As of December 31, 2007 and December 31, 2006, buildings and machinery of the Group were pledged as collateral under certain loan arrangements.

Interest capitalized for the construction in progress for the years ended December 31, 2007 and 2006 were amounted to $99,900 and $69,960 respectively.

F-83

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

8. INTANGIBLE ASSETS, NET

Intangible assets consist of the following:

	2007				2006
Land use rights, at cost		$	2,748,026			$	2,571,070
Less: accumulated amortization			(246,282	)			(205,686	)
		$	2,501,744			$	2,365,384

As of December 31, 2007 and December 31, 2006, land use rights of the Group were pledged as collateral under certain loan arrangements.

Amortization expenses included in the cost of revenues for the years ended December 31, 2007 and 2006 were, $25,388 and $59,202 respectively.

9 DUE FROM RELATED COMPANIES

	2007		2006
Hefeng Green Agriculture Co., Ltd - Mr. Gao Zhentao, the director of the company is also the director	$	70,990	$	66,419
Shandong Yuhe Food Group Co., Ltd - Mr. Gao Zhentao, the director of the company is also the director		5,617,363		4,015,833
Shandong Yuhe New Agriculture Academy of Sciences - Mr. Gao Zhentao, the director of the company is also the director		48,384		45,268
Weifang Hexing Breeding Co., Ltd - Mr. Gao Zhentao, the director of the company is also the director		53,723		-
Weifang Jiaweike Food Co., Ltd - Mr. Gao Zhentao, the director of the company is also the director		26		-
	$	5,790,486	$	4,127,520

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

F-84

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

10. DUE FROM DIRECTORS

Details of due from directors are as follows:

	2007		2006
Mr. Tan Yi	$	78,092	$	-
Mr. Gao Zhenbo		76,716		-
Mr. Gao Zhentao		74,125		-
	$	228,933	$	-

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

11. LOANS PAYABLE

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

12. DUE TO RELATED COMPANIES

	2007		2006
Weifang Hexing Breeding Co., Ltd – Mr. Gao Zhentao, the director of the company is also the director	$	-	$	1,879,785
Bright Stand International Limited – Mr. Gao Zhentao, the director of the company is also the director		1,000,000		-
Weifang Jiaweike Food Co., Ltd – Mr. Gao Zhentao, the director of the company is also the director		-		687,954
	$	1,000,000	$	2,567,739

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 our 100% shareholder after January 31, 2008 business combination.

F-85

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

13. REGISTERED CAPITAL

As of December 31, 2007 and 2006, capital contributions paid-up amounted to $482,713 (RMB 4,000,000).

14. LONG-TERM LIABILITIES

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

	2007			2006
Loans from Nansun Rural Credit, interest rate at 9.22% to 10.51% per annum, due from Nov 28, 08 to May 17, 10	$	8,203,333		$	8,608,890
Loans from Shuangyang Rural Credit interest rate at 9.33% per annum, due on Oct 12, 08		888,694			831,468
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		874,555			-
Loans from Hanting Rural Credit Cooperative, interest rate at 8.19% per annum, due from Nov 8, 09		396,962			381,734
	$	10,363,544		$	9,822,092
Less: current portion of long-term liabilities		(4,306,750	)		(5,219,060	)
	$	6,056,794		$	4,603,032

Future maturities of long-term loans as at December 31, 2007 are as follows:

2008	$	4,306,750
2009		2,638,738
2010		3,418,056
	$	10,363,544

F-86

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

15. 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 33%. 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.

Taihong is operating in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the corporation income tax rate is 33%. Taihong has net operating losses of $4,115,841 at December 31, 2007, resulting in a deferred tax asset of $1,358,228 which has been fully reserved.

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 December 31, 2007 and 2006.

The provision for income taxes consists of the following:

	2007		2006
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 33% to income (loss) before income taxes for the two years ended December 31, 2007 and 2006 for the following reasons:

	2007			2006
Income (loss) before income taxes	$	5,887,272		$	(3,539,724	)
Computed “expected” income tax expense (benefit) at 33%	$	1,942,800		$	(1,168,109	)
Valuation allowance for deferred tax assets		(352,732	)		-
Effect of cumulative tax losses		-			540,778
Tax holiday		(1,590,068	)		627,331
	$	-		$	-

F-87

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

16. RELATED PARTIES TRANSACTIONS

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:

	2007		2006
Sales of goods to a related company	$	-	$	266,725

Sales to Weifang Hexing Breeding Co., Ltd, a related company, for the years ended December 31, 2007 and 2006 was nil and $266,725 respectively.

During 2007, Jiaweike was disposed of to the Weifang Hexing Breeding Co., Ltd, a related company where Mr. Gao Zhentao, the director of the Company is also the director. (note 5)

17. 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:

	2007			2006
Wang Jianbo		14.27	%	9.54	%-
Li Chuanwang		11.50	%	-
Wei Yunchao		10.96	%	-

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 did not have any suppliers that individually constituting greater than 10% of the Company’s purchase for the years ended December 31, 2007 and 2006.

(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 December 31, 2007 and 2006, 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.

(c) Group’s operations are in China

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.

F-88

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

18. BUSINESS 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 breeding chicks 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  chicks Weifang			Production  of feeds Taihong			Production  of chicks Weifong			Production  of feeds Taihong			Total
	2007			2007			2006			2006			2007			2006
External revenue	$	21,576,924		$	498,300		$	6,489,779		$	8,105,937		$	22,705,224		$	14,595,716
Intersegment revenue					6,709,682			-			-			6,709,682			6,034,576
Interest income		733			63			9,426			127			796			9,553
Interest expense		(350,175	)		(574,670	)		(368,418	)		(603,367	)		(924,845	)		(971,785	)
Depreciation and amortization		1,354,865			125,139			1,364,781			136,289			1,480,004			1,501,070
Net profit/(loss) after tax		6,027,597			(140,325	)		3,365,580			(174,144	)		5,887,272			(3,539,724	)
Assets
Expenditures for long-lived assets		1,872,801			9,014			164,224			41,111			1,881,815			205,335

Note: Intersegment revenue of $6,709,682 and $6,709,682 was eliminated in consolidation for years ended 2007 and 2006 respectively.

The Group’s operations are located in the PRC. All revenue is from customers in the PRC. All of the company’s assets are located in the PRC. Accordingly, no analysis of the Group's sales and assets by geographical market is presented.

F-89

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

19. COMMITMENTS AND CONTINGENCIES

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

Up to December 31,
2008	$	145,422
2009		145,422
2010		134,029
2011		77,061
2012		77,061
Thereafter		1,433,120
Total minimum lease payments	$	2,012,115

During the year ended December 31, 2007 and 2006, rent expenses amounted to $50,284 and $79,750 was recorded as cost of sales.

The Group has given guarantee to the following parties as at December 31, 2006 which are summarized as follows:

Weifang Sansong Food Co., Ltd – a non-related party	$	370,962
Shandong Yuhe Food Group Co., Ltd – shareholder of the Company		2,046,690
Shandong Dongxiang Logistic Co., Ltd – a non-related party		255,836
Weifang Yibang Commerce Co., Ltd – a non-related party		319,795
	$	2,993,283

Management has assessed the fair value of the obligation arising from the above financial guarantees and considered the likelihood of the Company having to assume these liability to be remote based on the financial health of these companies and previous experiences. Therefore, no obligations in respect of the above guarantees were recognized as of December 31, 2006.

The Company did not provide guarantee to the above companies as at December, 31, 2007.

F-90

WEIFANG YUHE POULTRY CO., LTD

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

20. ADDITIONAL PAID IN CAPITAL

During the years ended December 31, 2007 and 2006, additional paid in capital of the Group of $2,605,717 and $4,403,806 were recorded when shareholders assumed the Company’s debt.

21. SUBSEQUENT EVENTS

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

F-91

BRIGHT STAND INTERNATIONAL LIMITED

FINANCIAL STATEMENTS

FOR THE PERIOD FROM AUGUST 3, 2007 (DATE OF INCEPTION)

TO DECEMBER 31, 2007

(Stated in US dollars)

F-92

BRIGHT STAND INTERNATIONAL LIMITED

CONTENTS	PAGES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-94
BALANCE SHEET	F-95
STATEMENT OF OPERATIONS	F-96
STATEMENT OF STOCKHOLDERS’ EQUITY	F-97
STATEMENT OF CASH FLOWS	F-98
NOTES TO FINANCIAL STATEMENTS	F-99 to F-103

F-93

F-94

BRIGHT STAND INTERNATIONAL LIMITED

BALANCE SHEET

DECEMBER 31, 2007

(Stated in US Dollars)

ASSETS
Current assets
Cash and cash equivalents		$	1,050,168
Total current assets		$	1,050,168
Due from a related company	3		1,000,000
TOTAL ASSETS		$	2,050,168
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accrued expenses		$	70
Due to related companies	4		2,210
Total current liabilities		$	2,280
TOTAL LIABILITIES		$	2,280
Commitments and contingencies		$	-
STOCKHOLDERS’ EQUITY
Common stock, par value $1.00, 50,000 shares authorized, 100 shares issued and outstanding	5	$	100
Additional paid in capital			2,050,000
Accumulated deficit			(2,212	)
		$	2,047,888
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	2,050,168

See accompanying notes to financial statements

F-95

BRIGHT STAND INTERNATIONAL LIMITED

STATEMENT OF OPERATIONS

FOR THE PERIOD FROM AUGUST 3, 2007 (DATE OF INCEPTION)

TO DECEMBER 31, 2007

(Stated in US Dollars)

Revenues		$	-
Operating expenses:
Selling and distribution			-
General and administrative			(2,340	)
Operating loss		$	(2,340	)
Other income			198
Interest expenses			(70	)
Loss before taxes		$	(2,212	)
Income taxes	6		-
Net loss		$	(2,212	)
Basic and diluted loss per common share		$	(22.12	)
Weighted average shares outstanding		$	100

See accompanying notes to financial statements

F-96

BRIGHT STAND INTERNATIONAL LIMITED

STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE PERIOD FROM AUGUST 3, 2007 (DATE OF INCEPTION)

TO DECEMBER 31, 2007

(Stated in US Dollars)

	Common stock					Additional
	Number					paid in			Accumulated
	Of shares		Amount			capital			deficit				Total
Issue of common stock on incorporation		100		$	100		$	-		$	-			$	100
Net LOSS		-			-			-			(2,212	)			(2,212	)
Contribution from shareholder		-			-			2,050,000			-				2,050,000
Balance, December 31, 2007		100		$	100		$	2,050,000		$	(2,212	)		$	2,047,888

See accompanying notes to financial statements

F-97

BRIGHT STAND INTERNATIONAL LIMITED

STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM AUGUST 3, 2007 (DATE OF INCEPTION)

TO DECEMBER 31, 2007

(Stated in US Dollars)

Cash flows from operating activities
Net loss	$	(2,212	)
Adjustments to reconcile net loss to net cash used in operating activities
Accrued expenses		70
Net cash used in operating activities	$	(2,142	)
Cash flows from investing activities		-
Due from a related company		(1,000,000	)
Net cash used by investing activities	$	(1,000,000	)
Cash flows from financing activities
Sale of Stock	$	100
Contributions from a shareholder	$	2,050,000
Proceeds from related party loan		2,210
Net cash provided by financing activities	$	2,052,310
Net cash and cash equivalents sourced	$	1,050,168
Cash and cash equivalents-beginning of period		-
Cash and cash equivalents-end of period	$	1,050,168

See accompanying notes to financial statements

F-98

BRIGHT STAND INTERNATIONAL LIMITED

NOTES TO FINANCIAL STATEMENTS

(Stated in US Dollars)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Bright Stand International Limited (the Company) was established in the British Virgin Islands as a BVI business company on August 3, 2007. The Company is principally engaging in the holding of investments.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Method of Accounting

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

(b)  Use of estimates

The preparation of the financial statements in conformity with accounting principles generally accepted 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.

(c)  Cash and cash equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

(d) Income tax

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.

F-99

BRIGHT STAND INTERNATIONAL LIMITED

NOTES TO FINANCIAL STATEMENTS

(Stated in US Dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(e) Recent accounting pronouncements

In September 2006, the FASB issued SFAS 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, where fair value is the relevant measurement attribute. The standard does not require any new fair value measurements. SFAS 157 is effective for financial statements issued for fiscal year beginning after November 15, 2007, and interim periods within that fiscal year. The Company is currently evaluating the impact of SFAS 157 on its operation and financial condition.

In February 2007, FASB issued Statement of Financial Accounting Standards No. (“SFAS”) 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Entities that elect the fair value option will report unrealized gains and losses in earnings at each subsequent reporting date. The fair value option may be elected on an instrument-by-instrument basis, with a few exceptions. SFAS 159 also establishes presentation and disclosure requirements to facilitate comparisons between entities that choose different measurement attributes for similar assets and liabilities. The requirements of SFAS 159 are effective for our fiscal year beginning on January 1, 2008.

The Company does not anticipate that the adoption of this standard will have a material impact on these financial statements.

In December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB 110”). SAB 110 permits companies to continue to use the simplified method, under certain circumstances, in estimating the expected term of “plain vanilla” options beyond December 31, 2007. SAB 110 updates guidance provided in SAB 107 that previously stated that the Staff would not expect a company to use the simplified method for share option grants after December 31, 2007. Adoption of SAB 110 is not expected to have a material impact on the Company’s financial statements

F-100

BRIGHT STAND INTERNATIONAL LIMITED

NOTES TO FINANCIAL STATEMENTS

(Stated in US Dollars)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended December 31, 2009. The Company is currently evaluating the impact of SFAS 160 on its financial statements but does not expect it to have a material effect.

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 141(R), "Business Combinations”. SFAS 141(R) establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, an any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended December 31, 2009. The Company is currently evaluating the impact of SFAS 141(R) on its financial statements but does not expect it to have a material effect.

3.  DUE FROM RELATED COMPANIES

The amount due from a related company is unsecured, interest free and repayable on demand.

Weifang Yuhe Poultry Co., Ltd $ 1,000,000

The shareholder of Weifang Yuhe Poultry Co., Ltd is Gao Zhentao who is also the director of the Company.

4. DUE TO RELATED COMPANIES

The amount due to a related company is unsecured, interest free and repayable on demand.

Weifang Hexing Breeding Co., Ltd $ 2,210

The shareholder of Weifang Hexing Breeding Co., Ltd is Gao Zhentao who is also the director of the Company.

F-101

BRIGHT STAND INTERNATIONAL LIMITED

NOTES TO FINANCIAL STATEMENTS

(Stated in US Dollars)

5. COMMON STOCK

Authorized:
50,000 ordinary shares of $1 each	$	50,000
Issued and fully paid, including additional paid in capital:
100 ordinary shares of $1.00 each	$	2,050,100

The Company was incorporated at August 3, 2007, with an authorized share capital of $50,000 divided into 50,000 shares of $1.00 each. One Hundred shares were subscribed upon its incorporation for working capital purposes. On December 28, 2007, the shareholder of the Company contributed $2,050,000 for the acquisition of subsidiary. Mr. Yamamoto Kunio has 100% equity ownership.

The calculation of the basic and diluted earnings per share attributable to the common stock holders is based on the following data:

Earnings:
Earnings for the purpose of basic earnings per share	$	(2,212	)
Effect of dilutive potential common stock		-
Earnings for the purpose of basic earnings per share	$	(2,212	)
Number of shares
Weighted average number of common Stock for the purpose of basic earnings per share		100
Effect of dilutive potential common stock		-
Weighted average number of common stock for the purpose of dilutive earnings per share	$	100

F-102

BRIGHT STAND INTERNATIONAL LIMITED

NOTES TO FINANCIAL STATEMENTS

(Stated in US Dollars)

6. INCOME TAX

The Company was incorporated in the British Virgin Islands and is not subject to income taxes under the current laws of the British Virgin Islands.

No deferred tax has been provided as there is no material temporary difference arising for the period from August 3, 2007 to December 31, 2007.

7. SUBSEQUENT EVENTS

In January 2008, the Company acquired 100% equity ownership of Weifang Yuhe Poultry Co., Ltd (“PRC Yuhe”) and 43.75% equity ownership of Weifang Taihong Feed Co., Ltd. (“Taihong”). As PRC Yuhe directly holds 56.25% of Taihong, the Company indirectly holds 100% equity of Taihong after the acquisition.

The Company presently has one wholly-owned subsidiary PRC Yuhe, and one indirect wholly-owned subsidiary Taihong.

F-103

PROSPECTUS

4,730,251 shares

YUHE INTERNATIONAL, INC.

Common Stock

______, 2009

Until ________, 2009 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

Information Not Required in Prospectus

Item 13.   Other Expenses of Issuance and Distribution

The following table sets forth all expenses to be paid by Yuhe International, Inc., “Yuhe”, other than the underwriting discount and commission payable by Yuhe in connection with the sales of the common stock being registered. All amounts shown are estimates except the Securities and Exchange Commission registration fee. The Company will pay all these expenses.

	Amount to be Paid
Securities and Exchange Commission registration fee	$	1,896.32
FINRA filing fee		n/a
Blue sky fees and expenses		n/a
Printing and engraving expenses		5,000
Legal fees and expenses		400,000
Accounting fees and expenses		290,000
Directors’ and officers’ insurance		n/a
Transfer Agent and Registrar fees		716
Miscellaneous expenses		10,000	*
Total	$	707,612.32

*   To be completed by amendment.

Item 14.   Indemnification of Directors and Officers

Pursuant to Nevada law, a Nevada corporation like the Company has the power to indemnify any person who was or is a party to any proceeding, other than an action by, or in the right of, the corporation, by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against liability incurred in connection with such proceeding, including any appeal thereof, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the corporation or, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

Under Sections 78.751 and 78.752 of the Nevada Revised Statutes, the registrant has broad powers to indemnify and insure its directors and officers against liabilities they may incur in their capacities as such. The registrant’s Bylaws implement the indemnification and insurance provisions permitted by Chapter 78 of the Nevada Revised Statutes by providing that:

o The registrant must indemnify its directors to the fullest extent permitted by Chapter 78 of the Nevada Revised Statutes and may, if and to the extent authorized by the registrant’s board of directors, so indemnify its officers and any other person whom it has power to indemnify against liability, reasonable expense or other matter whatsoever.

o The registrant may at the discretion of its board of directors purchase and maintain insurance on behalf of the registrant and any person whom it has power to indemnify pursuant to law, its articles of incorporation, its bylaws or otherwise.

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These indemnification provisions may be sufficiently broad to permit indemnification of the registrant’s directors and officers for liabilities (including reimbursement of expenses incurred) arising under the Securities Act.

Our Articles of Incorporation provides that none of the Company’s directors or officers shall be personally liable to the Company or its stockholders for monetary damages for a breach of fiduciary duty as a director or officer provided, however, that the foregoing provisions shall not eliminate or limit the liability of a director or officer for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Limitations on liability provided for in the Company’s Articles of Incorporation do not restrict the availability of non-monetary remedies and do not affect a director’s responsibility under any other law, such as the federal securities laws or state or federal environmental laws.

We believe that these provisions will assist the Company in attracting and retaining qualified individuals to serve as executive officers and directors. The inclusion of these provisions in the Company’s Articles of Incorporation may have the effect of reducing a likelihood of derivative litigation against the Company’s directors and may discourage or deter stockholders or management from bringing a lawsuit against directors for breach of their duty of care, even though such an action, if successful, might otherwise have benefited the Company or its stockholders.

Our Bylaws provide that the Company will indemnify the Company’s directors to the fullest extent provided by the Nevada Revised Statutes and the Company may, if and to the extent authorized by the Company’s board of directors, so indemnify its officers and other persons whom the Company has the power to indemnify against liability, reasonable expense or other matters.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to the Company’s directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by the Company, of expenses incurred or paid by a director, officer or controlling person of the Company, in the successful defense of any action, suit or proceeding, is asserted by such director, officer, or controlling person in connection with the securities being registered, the Company will (unless in the opinion of the Company’s counsel the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Item 15.    Recent Sales of Unregistered Securities

Since January 1, 2005, Yuhe International, Inc. issued unregistered securities to a limited number of accredited investors as described below:

(1) On November 16, 2007, the Company issued 951,996 shares of its Common Stock to Halter Financial Investments, L.P., an accredited investor, for aggregate proceeds of $425,000. The issuance and sales of these securities were deemed to be exempt from registration pursuant to Section 4(2) of the Securities Act.

(2) On March 12, 2008 in connection with transactions related to the acquisition of Bright Stand International Limited, the Company issued 8,626,318 shares of the Company’s Common Stock to Kunio Yamamoto, an accredited investor. The issuance and sales of these securities were deemed to be exempt from registration pursuant to Section 4(2) of the Securities Act.

(3) On March 12, 2008,  the Company issued 5,829,018 shares of its Common Stock to twenty-five accredited investors for aggregate proceeds of approximately $18,000,000. The issuance and sales of these securities were deemed to be exempt from registration pursuant to Rule 506 under the Securities Act.

There were no underwritten offerings or general solicitations employed in connection with any of the transactions set forth above. The above sales did not involve any pubic offering.

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Item 16.   Exhibits and Financial Statement Schedules

(a)  Exhibits

Exhibit Number	Description of Document
3.1	Articles of Incorporation of the registrant as filed with the Secretary of State of Nevada, as amended to date. [Incorporated by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed on April 10, 2007]
4.1	Registration Rights Agreement dated March 12, 2008 by and among First Growth Investors, Inc., and certain investors. [Incorporated by reference to Exhibit 10.4 to the registrant’s current report on Form 8-K filed on March 17, 2008]
5.1	Opinion of Thomas G. Kimble & Associates, PC as to the legality of the shares. [Incorporated by reference to exhibit 5.1 to the registrant’s registration statement on Form S-1 filed on May 12, 2008]
5.2	Opinion of Long An Law Firm. [Incorporated by reference to exhibit 5.2 to the registrant’s registration statement on Form S-1 filed on May 12, 2008]
10.1	Stock Purchase Agreement dated November 6, 2007 between First Growth Investors, Inc. and Halter Financial Investments, L.P. [Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on November 6, 2007]
10.2	Equity Transfer Agreement dated March 12, 2008 between First Growth Investors, Inc. and Kunio Yamamoto. [Incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.3	Securities Purchase Agreement dated March 12, 2008 by and among First Growth Investors, Inc., Bright Stand International Limited, Weifang Yuhe Poultry Co., Ltd., Kunio Yamamoto and certain investors. [Incorporated by reference to Exhibit 10.3 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.4	Make Good Escrow Agreement dated March 12, 2008 by and among First Growth Investors, Inc., Kunio Yamamoto, certain investors, Roth Capital Partners, LLC and Tri-State Title and Escrow, LLC. [Incorporated by reference to Exhibit 10.5 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.5	Holdback Escrow Agreement dated March 12, 2008 by and among First Growth Investors, Inc., certain investors, and Tri-State Title and Escrow, LLC. [Incorporated by reference to Exhibit 10.6 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.6	Warrant dated Mach 12, 2008 issued by First Growth Investors, Inc. to Roth Capital Partners, LLC [Incorporated by reference to Exhibit 10.7 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.7	Make Good Escrow Agreement dated March 12, 2008 by and among First Growth Investors, Inc., Kunio Yamamoto, HFG International, Limited, and Interwest Transfer Company, Inc. [Incorporated by reference to Exhibit 10.8 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.8	Lock-up Agreement dated March 12, 2008 between Kunio Yamamoto and First Growth Investors, Inc. [Incorporated by reference to Exhibit 10.9 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.9	Audited Financial Statements of First Growth Investors, Inc. for the Year Ended December 31, 2005. [Incorporated by reference to the registrant’s current report on Form 10-KSB filed on April 4, 2006]

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10.10	Audited Financial Statements of First Growth Investors, Inc. for the Year Ended December 31, 2006. [Incorporated by reference to the registrant’s current report on Form 10K-SB filed on April 2, 2007]
10.11	Audited Financial Statements of First Growth Investors, Inc. for the Year Ended December 31, 2007. [Incorporated by reference to the registrant’s current report on Form 10K-SB filed on March 31, 2008]
10.12	Labour Contract dated July 15, 2000 entered into between Weifang Taihong Feed Co., Ltd. and Gao Aiping. [Incorporated by reference to Exhibit 10.12 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.13	Labour Contract dated December 25, 2000 entered into between Weifang Taihong Feed Co., Ltd. and Wang Jianbo. [Incorporated by reference to Exhibit 10.13 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.14	Labour Contract dated July 10, 2001 entered into between Weifang Yuhe Poultry Co. Ltd. and Zhao Beijing. [Incorporated by reference to Exhibit 10.14 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.15	Commitment to Product Quality and Customer Services Agreement dated February 12, 2004. entered for and on behalf of Weifang Yuhe Poultry Co. Ltd. [Incorporated by reference to Exhibit 10.15 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.16	Contract of land dated April 12, 2005 entered into between Yejiazhuang Village, Dabucum Village and Weifang Yuhe Poultry Co., Ltd. [Incorporated by reference to Exhibit 10.16 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.17	Lease Agreement dated June 25, 2005 entered into between Standing Weifang Farm and Weifang Yuhe Poultry Co., Ltd. [Incorporated by reference to Exhibit 10.17 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.18	Labour Contract dated July 11, 2005 entered into between Weifang Yuhe Poultry Co. Ltd. and Ding Wengui. [Incorporated by reference to Exhibit 10.18 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.19	Labour Contract dated October 15, 2005 entered into between Weifang Yuhe Poultry Co. Ltd. and Jiang Yingjun. [Incorporated by reference to Exhibit 10.19 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.20	Summary of loan agreements with Nansun Rural Credit in respect of loan agreement dated November 28, 2005. [Incorporated by reference to Exhibit 10.20 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.21	Feed Purchase Contract dated January 1, 2006 entered into between Weifang Taihong Feed Co., Ltd. and Weifang Yuhe Poultry Co., Ltd.  [Incorporated by reference to Exhibit 10.21 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.22	Labour Contract dated March 10, 2006 entered into between Weifang Yuhe Poultry Co., Ltd. and Tan Yi. [Incorporated by reference to Exhibit 10.22 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.23	Summary of Loan Agreement dated November 10, 2006 with Hanting Rural Credit Cooperative. [Incorporated by reference to Exhibit 10.23 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.24	Summary of Loan Agreement dated May 12, 2007 with Shuangyang Rural Credit. [Incorporated by reference to Exhibit 10.24 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.25	Summary of Loan Agreement dated July 1, 2007 with Hanting Kaiyuan Rural Credit Cooperative. [Incorporated by reference to Exhibit 10.25 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.26	Labour Contract dated December 1, 1998 entered into between Weifang Yuhe Poultry Co. Ltd. and Han Chengxiang. [Incorporated by reference to Exhibit 10.26 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.27	Labour Contract dated June 13, 2008 entered into between Yuhe International, Inc. and Han Chengxiang. [Incorporated by reference to Exhibit 10.27 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.28	Labour Contract dated June 13, 2008 entered into between Yuhe International, Inc. and Jiang Yingjun. [Incorporated by reference to Exhibit 10.28 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.29	Employment Agreement dated June 13, 2008 entered into between Yuhe International, Inc. and Gao Zhentao [Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on June 13, 2008]
10.30	Employment Agreement dated June 13, 2008 entered into between Yuhe International, Inc. and Hu Gang [Incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed on June 13, 2008]
10.31	Supplemental Feed Purchase Agreement dated August 5, 2008 entered into between Weifang Taihong Feed Co., Ltd. and Weifang Yuhe Poultry Co., Ltd.  [Incorporated by reference to Exhibit 10.31 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]

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10.32	Form of Stock Option Agreement [Incorporated by reference to Exhibit 10.1 to the registrant’s quarterly report on Form 10-Q filed on August 14, 2008]
10.33	Summaries of Oral Loan Agreements as disclosed under section “Transactions with Related Persons”. [Incorporated by reference to Exhibit 10.33 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.34	Capital Transfer Agreement dated November 28, 2007. [Incorporated by reference to Exhibit 10.34 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.35	Translation of the Equipment Leasing Agreement dated November 11, 2008 in English. [Incorporated by reference to Exhibit 99.1 to the registrant’s 8-K filed on November 21, 2008]
10.36	Translation of the Tenancy Agreement dated November 11, 2008 in English. [Incorporated by reference to Exhibit 99.2 to the registrant’s 8-K filed on November 21, 2008]
14.1	Code of Ethics. [Incorporated by reference to Exhibit 14.1 to the registrant’s 10-K filed on March 31, 2009]
*23.1	Consent of Child, Van Wagoner & Bradshaw, PLLC.
23.2	Consent of Thomas G. Kimble and Associates, PC, included in Exhibit 5.1.[Incorporated by reference to Exhibit 23.2 to the registrant’s Registration Statement S-1 filed on May 12, 2008]
23.3	Consent of Long An Law Firm.[Incorporated by reference to Exhibit 23.3 to the registrant’s Registration Statement on Form S-1 filed on May 12, 2008]
24.1	Power of Attorney [Incorporated by reference to Exhibit 24.1 to the registrant’s Amendment No. 5 to Registration Statement on Form S-1 filed on December 19, 2008]

*   Filed herewith

Item 17.   Undertakings

(a)  The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the “Securities Act”);

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; ; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for purposes of determining liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) For determining liability of the undersigned registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

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(i) any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(5) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1), or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(6) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering of those securities.

(b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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Signature

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Weifang, Shandong Province, The People’s Republic of China on April 22, 2009.

Yuhe International, Inc.
By:	/s/ Gao Zhentao
	Gao Zhentao
	Chief Executive Officer (On behalf of the Registrant as Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Dated April 22, 2009	/s/ Gao Zhentao
	Gao Zhentao
	Chief Executive Officer and Director
Dated April 22, 2009	/s/ Hu Gang
	Hu Gang Chief Financial Officer (Principal Financial Officer)
Dated April 22, 2009	/s/ Jiang Yingjun
	Jiang Yingjun Chief Accounting Officer (Principal Accouting Officer)
Dated April 22, 2009	/s/ Gao Zhentao
	Gao Zhentao, attorney-in-fact executing on behalf of Peter Li, Director of the Registrant
Dated April 22, 2009	/s/ Gao Zhentao
	Gao Zhentao, attorney-in-fact executing on behalf of Lin Yaojun, Director of the Registrant
Dated April 22, 2009	/s/ Gao Zhentao
	Gao Zhentao, attorney-in-fact executing on behalf of Greg Huett, Director of the Registrant
Dated April 22, 2009	/s/ Han Chengxiang
	Han Chengxiang
	Director

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EXHIBIT INDEX

Exhibit Number	Description of Document
3.1	Articles of Incorporation of the registrant as filed with the Secretary of State of Nevada, as amended to date. [Incorporated by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed on April 10, 2007]
4.1	Registration Rights Agreement dated March 12, 2008 by and among First Growth Investors, Inc., and certain investors. [Incorporated by reference to Exhibit 10.4 to the registrant’s current report on Form 8-K filed on March 17, 2007]
5.1	Opinion of Thomas G. Kimble & Associates, PC as to the legality of the shares. [Incorporated by reference to exhibit 5.1 to the registrant’s registration statement on Form S-1 filed on May 12, 2008]
5.2	Opinion of Long An Law Firm. [Incorporated by reference to exhibit 5.2 to the registrant’s registration statement on Form S-1 filed on May 12, 2008]
10.1	Stock Purchase Agreement dated November 6, 2007 between First Growth Investors, Inc. and Halter Financial Investments, L.P. [Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on November 6, 2007]
10.2	Equity Transfer Agreement dated March 12, 2008 between First Growth Investors, Inc. and Kunio Yamamoto. [Incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.3	Securities Purchase Agreement dated March 12, 2008 by and among First Growth Investors, Inc., Bright Stand International Limited, Weifang Yuhe Poultry Co., Ltd., Kunio Yamamoto and certain investors. [Incorporated by reference to Exhibit 10.3 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.4	Make Good Escrow Agreement dated March 12, 2008 by and among First Growth Investors, Inc., Kunio Yamamoto, certain investors, Roth Capital Partners, LLC and Tri-State Title and Escrow, LLC. [Incorporated by reference to Exhibit 10.5 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.5	Holdback Escrow Agreement dated March 12, 2008 by and among First Growth Investors, Inc., certain investors, and Tri-State Title and Escrow, LLC. [Incorporated by reference to Exhibit 10.6 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.6	Warrant dated Mach 12, 2008 issued by First Growth Investors, Inc. to Roth Capital Partners, LLC [Incorporated by reference to Exhibit 10.7 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.7	Make Good Escrow Agreement dated March 12, 2008 by and among First Growth Investors, Inc., Kunio Yamamoto, HFG International, Limited, and Interwest Transfer Company, Inc. [Incorporated by reference to Exhibit 10.8 to the registrant’s current report on Form 8-K filed on March 17, 2008]

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10.8	Lock-up Agreement dated March 12, 2008 between Kunio Yamamoto and First Growth Investors, Inc. [Incorporated by reference to Exhibit 10.9 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.9	Audited Financial Statements of First Growth Investors, Inc. for the Year Ended December 31, 2005. [Incorporated by reference to the registrant’s current report on Form 10-KSB filed on April 4, 2006]
10.10	Audited Financial Statements of First Growth Investors, Inc. for the Year Ended December 31, 2006. [Incorporated by reference to the registrant’s current report on Form 10K-SB filed on April 2, 2007]
10.11	Audited Financial Statements of First Growth Investors, Inc. for the Year Ended December 31, 2007. [Incorporated by reference to the registrant’s current report on Form 10K-SB filed on March 31, 2008]
10.12	Labour Contract dated July 15, 2000 entered into between Weifang Taihong Feed Co., Ltd. and Gao Aiping. [Incorporated by reference to Exhibit 10.12 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.13	Labour Contract dated December 25, 2000 entered into between Weifang Taihong Feed Co., Ltd. and Wang Jianbo. [Incorporated by reference to Exhibit 10.13 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.14	Labour Contract dated July 10, 2001 entered into between Weifang Yuhe Poultry Co. Ltd. and Zhao Beijing. [Incorporated by reference to Exhibit 10.14 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.15	Commitment to Product Quality and Customer Services Agreement dated February 12, 2004. entered for and on behalf of Weifang Yuhe Poultry Co. Ltd. [Incorporated by reference to Exhibit 10.15 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.16	Contract of land dated April 12, 2005 entered into between Yejiazhuang Village, Dabucum Village and Weifang Yuhe Poultry Co., Ltd. [Incorporated by reference to Exhibit 10.16 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.17	Lease Agreement dated June 25, 2005 entered into between Shandong Weibei Farm and Weifang Yuhe Poultry Co., Ltd. [Incorporated by reference to Exhibit 10.17 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.18	Labour Contract dated July 11, 2005 entered into between Weifang Yuhe Poultry Co. Ltd. and Ding Wengui.
	[Incorporated by reference to Exhibit 10.18 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.19	Labour Contract dated October 15, 2005 entered into between Weifang Yuhe Poultry Co. Ltd. and Jiang Yingjun. [Incorporated by reference to Exhibit 10.19 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.20	Summary of loan agreements with Nansun Rural Credit in respect of loan agreement dated November 28, 2005. [Incorporated by reference to Exhibit 10.20 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.21	Feed Purchase Contract dated January 1, 2006 entered into between Weifang Taihong Feed Co., Ltd. and Weifang Yuhe Poultry Co., Ltd. [Incorporated by reference to Exhibit 10.21 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.22	Labour Contract dated March 10, 2006 entered into between Weifang Yuhe Poultry Co., Ltd. and Tan Yi. [Incorporated by reference to Exhibit 10.22 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.23	Summary of Loan Agreement dated November 10, 2006 with Hanting Rural Credit Cooperative. [Incorporated by reference to Exhibit 10.23 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.24	Summary of Loan Agreement dated May 12, 2007 with Shuangyang Rural Credit. [Incorporated by reference to Exhibit 10.24 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.25	Summary of Loan Agreement dated July 1, 2007 with Hanting Kaiyuan Rural Credit Cooperative. [Incorporated by reference to Exhibit 10.25 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.26	Labour Contract dated December 1, 1998 entered into between Weifang Yuhe Poultry Co. Ltd. and Han Chengxiang. [Incorporated by reference to Exhibit 10.26 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.27	Labour Contract dated June 13, 2008 entered into between Yuhe International, Inc. and Han Chengxiang. [Incorporated by reference to Exhibit 10.27 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.28	Labour Contract dated June 13, 2008 entered into between Yuhe International, Inc. and Jiang Yingjun. [Incorporated by reference to Exhibit 10.28 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.29	Employment Agreement dated June 13, 2008 entered into between Yuhe International, Inc. and Gao Zhentao [Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on June 13, 2008]

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10.30	Employment Agreement dated June 13, 2008 entered into between Yuhe International, Inc. and Hu Gang [Incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed on June 13, 2008]
10.31	Supplemental Feed Purchase Agreement dated August 5, 2008 entered into between Weifang Taihong Feed Co., Ltd. and Weifang Yuhe Poultry Co., Ltd. [Incorporated by reference to Exhibit 10.31 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.32	Form of Stock Option Agreement [Incorporated by reference to Exhibit 10.1 to the registrant’s quarterly report on Form 10-Q filed on August 14, 2008]
10.33	Summaries of Oral Loan Agreements as disclosed under section “Transactions with Related Persons”. [Incorporated by reference to Exhibit 10.33 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.34	Capital Transfer Agreement dated November 28, 2007. [Incorporated by reference to Exhibit 10.34 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.35	Translation of the Equipment Leasing Agreement dated November 11, 2008 in English. [Incorporated by reference to Exhibit 99.1 to the registrant’s 8-K filed on November 21, 2008]
10.36	Translation of the Tenancy Agreement dated November 11, 2008 in English. [Incorporated by reference to Exhibit 99.2 to the registrant’s 8-K filed on November 21, 2008]
14.1	Code of Ethics. [Incorporated by reference to Exhibit 14.1 to the registrant’s 10-K filed on March 31, 2009]
*23.1	Consent of Child, Van Wagoner & Bradshaw, PLLC.
23.2	Consent of Thomas G. Kimble and Associates, PC, included in Exhibit 5.1. [Incorporated by reference to Exhibit 23.2 to the registrant’s Registration Statement S-1 filed on May 12, 2008]
23.3	Consent of Long An Law Firm. [Incorporated by reference to Exhibit 23.3 to the registrant’s Registration Statement S-1 filed on May 12, 2008]
24.1	Power of Attorney [Incorporated by reference to Exhibit 24.1 to the registrant’s Amendment No. 5 to Registration Statement on Form S-1 filed on December 19, 2008]

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