China Ginseng 10Q 2013 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2012

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______________ to ______________

China Ginseng Holdings, Inc.

(Exact name of registrant as specified in its charter)

Nevada		20-3348253
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1562 Jie Fang Great Road 16 FL Zhongji Building, Suite 1062-1063 Nanguan District, Changchun City, China		130022
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone (01186) 43188952022

SEC File Number: 000-54072

N/A

(Former name, former address and former three months, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesx No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		Smaller Reporting Company		x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso Nox

As of November 13, 2012 there were 44,397,297 shares issued and outstanding of the registrant’s common stock.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements	F-1

Item 2. Management’s Discussion and Analysis or Plan of Operation.	3

Item 3. Quantitative and Qualitative Disclosure about Market Risk	16

Item 4. Controls and Procedures.	16

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.	17

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	17

Item 3. Defaults Upon Senior Securities	17

Item 4. (Removed and Reserved).	17

Item 5. Other Information.	17

Item 6. Exhibits.	20

PART I — FINANCIAL INFORMATION

Contents

Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and June 30, 2012	F-2

Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended September 30, 2012 and 2011 (Unaudited)	F-3

Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2012 and 2011 (Unaudited)	F-4

Notes to Consolidated Financial Statements - September 30, 2012 (Unaudited)	F-6

F-1

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30, 2012			June 30, 2012
	(Unaudited)

CURRENT ASSETS
Cash	$	52,192		$	24,183
Accounts receivable- net		964,110			1,332,043
Inventory		2,939,500			1,819,905
Ginseng crops, current portion		-			909,665
Due from related parties		210,170			152,394
Prepaid expenses		410,336			311,251
Total Current Assets		4,576,308			4,549,441

PROPERTY AND EQUIPMENT, net		1,575,060			1,629,664

OTHER ASSETS
Ginseng crops, non-current portion		712,751			1,585,878
Intangible assets-patents, net		4,203			6,447
Receivable from farmers		236,725			191,794
Investment in unconsolidated subsidiaries		39,900			40,001
Deferred income tax asset		169,612			170,044

Total Assets	$	7,314,559		$	8,173,269

CURRENT LIABILITIES
Loan payable to financial institution	$	315,408		$	316,211
Note payable – building purchase		315,408			1,264,842
Notes payable – related parties		1,786,939			1,667,047
Accounts payable		1,414,416			1,068,765
Accrued expenses		265,061			288,873
Taxes payable		273,180			291,760
Payments received in advance		282,808			199,423
Total Current Liabilities		4,653,220			5,096,921
OTHER LIABILITIES
Note payable – building purchase, net of current portion		946,222			-
Payable to farmers		566,612			549,841
Total Liabilities		6,166,054			5,646,762

STOCKHOLDERS’ EQUITY
Common Stock, $0.001 par value, 50,000,000
shares authorized; 44,397,297 shares issued and
outstanding at September 30, and June 30, 2012,
respectively		44,398			44,398
Additional paid-in capital		7,428,651			7,370,043
Accumulated deficit		(7,154,611	)		(5,761,409	)
Accumulated other comprehensive income		830,067			873,475
Total Stockholders’ Equity		1,148,505			2,526,507

Total Liabilities and Stockholders’ Equity	$	7,314,559		$	8,173,269

See accompanying notes to consolidated financial statements.

F-2

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

	For the Three Months Ended
	September 30,
	2012			2011

REVENUE	$	503,772		$	892,405

COSTS AND EXPENSES
Cost of goods sold		500,439			723,466
Selling, general and administrative expenses		334,739			501,563
Impairment of ginseng crops		918,392			-
Depreciation and amortization		51,908			6,366
Total Costs and Expenses		1,805,478			1,231,395

LOSS FROM OPERATIONS		(1,301,706	)		(338,990	)

NON OPERATING EXPENSE
Interest expense		91,496			56,816
Net Other Expense		91,496			56,816

LOSS BEFORE INCOME TAXES		(1,393,202	)		(395,806	)

PROVISION FOR INCOME TAXES		-			16,453

NET LOSS	$	(1,393,202	)	$	(412,259	)

OTHER COMPREHENSIVE INCOME (LOSS)
Translation Adjustment		(43,408	)		30,615

COMPREHENSIVE LOSS	$	(1,436,610	)	$	(381,644	)

NET LOSS PER COMMON SHARE
Basic	$	(0.03	)	$	(0.01	)
Diluted	$	(0.03	)	$	(0.01	)

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING –
Basic		44,397,297			44,371,119
Diluted		44,397,297			44,371,119

See accompanying notes to consolidated financial statements.

F-3

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Three Months Ended
	September 30,
	2012			2011

Cash Flows from Operating Activities:
Net loss	$	(1,393,202	)	$	(412,259	)
Adjustments to reconcile net loss to
net cash from operating activities:
Impairment of ginseng crops		918,392			-
Depreciation and amortization		51,908			61,731
Imputed interest		58,608			19,292
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		367,933			144,579
(Increase) decrease in inventory		(256,319	)		(121,073	)
(Increase) decrease in prepaid expense		(99,085	)		96,870
(Increase) decrease in due from related parties		(57,776	)		154,552
(Increase) decrease in amounts due from farmers		(44,931	)		(40,789	)
Increase (decrease) in accounts payable		345,651			(116,027	)
Increase (decrease) in taxes payable		(18,580	)		28,044
Increase in receivables in advance		83,385			(38,234	)
Increase (decrease) in accrued expenses		(23,812	)		(101,229	)
Increase (decrease) in amounts due to farmers		16,771			16,316
Net cash provided by (used in)
operating activities		(51,057	)		(308,227	)

Cash Flows from Investing Activities:
Investment in unconsolidated subsidiary		-			(15,736	)
Purchase of property and equipment		(272	)		(61,822	)
Net cash provided by (used in)
investing activities		(272	)		(77,558	)

Cash Flows from Financing Activities:
Sale of common stock for cash		-			49,940
Proceeds from loans payable to related parties		119,892			310,166
Net cash provided by (used in)
financing activities		119,892			360,106

Effect of exchange rate on cash		(40,554	)		(3,142	)

Increase (decrease) in cash		28,009			(28,821	)

Cash at beginning of period		24,183			69,094

Cash at end of period	$	52,192		$	40,273

See accompanying notes to consolidated financial statements.

F-4

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES (CONTINUED)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Three Months Ended
	September 30,
	2012		2011

Supplemental Disclosure of Cash Flow
Information:
Cash paid for:
Interest	$	14,838	$	5,160
Income taxes		-		-

See accompanying notes to consolidated financial statements.

F-5

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012 (UNAUDITED)

NOTE A – PRESENTATION, NATURE OF BUSINESS, AND GOING CONCERN

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10K for the year ended June 30, 2012. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the consolidated financial statements not misleading have been included. Results for the three months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending June 30, 2013.

Nature of Business

China Ginseng Holdings, Inc. and Subsidiaries (the “Company”), was incorporated under the laws of Nevada on June 24, 2004.

On November 24, 2004, the Company acquired 55% of Yanbian Huaxing Ginseng Industry Co. Limited (“Yanbian Huaxing”), which is located in China and, is in the business of farming, processing, distribution, and marketing of Asian Ginseng products. In 2010, the Company ceased marketing ginseng and is presently utilizing the harvest to produce a ginseng beverage. However, it continues to buy ginseng for the resale market. On November 24, 2005, the Company acquired the remaining 45% of Yanbian Huaxing.

Yanbian Huaxing controls, through 20 year leases granted by the Chinese Government, approximately 1,500 hectors (3,705 acres) of land used to grow ginseng. The Company had no operations prior to November 24, 2004. These leases expire through 2024.

On August 24, 2005, the Company acquired Jilin Ganzhi Ginseng Produce Co. Limited, whose principal business is the manufacture of ginseng drinks.

On October 19, 2005, the Company incorporated a new company, Jilin Huamei Beverage Co. Limited (“Jilin Huamei”), which operates as a sales department for the Company’s canned ginseng juice and wine, which are produced by other subsidiaries of the Company.

On March 31, 2008 the Company acquired Tonghua Linyuan Grape Planting Co. Limited (“Tonghua Linyuan”) whose principal activity is the growing, cultivation and harvesting of a grape vineyard. The Company plans to produce wine and grape juice but to date has not commenced production. In June 2012, the Company decided to abandon the growing and harvesting of grapes due to the poor quality of recent harvests which were not suitable for the production of wine or grape juice. The Company has also decided not to renew its leases with the Chinese Government. The Company will now purchase grapes in the open market to produce wine and grape juice.

On March 2, 2012, the Company approved the incorporation of a new subsidiary, Hong Kong Huaxia International Industrial Co., Limited (“Hong Kong Huaxia”) in Hong Kong in order to sell health and specialized local products. Hong Kong Huaxia was incorporated in Hong Kong on March 18, 2012 and began operations in April 2012.

F-6

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012 (UNAUDITED)

NOTE A – PRESENTATION, NATURE OF BUSINESS, AND GOING CONCERN (CONTINUED)

Consolidated Financial Statements

The consolidated financial statements include the accounts and activities of China Ginseng Holdings, Inc. and its wholly-owned subsidiaries, Yanbian Huaxing Ginseng Co. Limited, Jilin Huamei Beverage Co. Limited, Jilin Ganzhi Ginseng Products Co. Limited, Tonghua Linyuan Grape Planting Co. Limited and Hong Kong Huaxia International Industrial, Co. Limited. All intercompany transactions have been eliminated in consolidation.

Going Concern

As indicated in the accompanying financial statements, the Company had net losses of $1,393,202 and $412,259 for the three months ended June 30, 2012 and 2011, respectively, and an accumulated deficit of $7,154,611 as of September 30, 2012 and there are existing uncertain conditions the Company foresees relating to its ability to obtain working capital and operate successfully. Management’s plans include the raising of capital through the debt and equity markets to fund future operations and the generating of revenue through its businesses. Failure to raise adequate capital and generate adequate sales revenues could result in the Company having to curtail or cease operations.

Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. However, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE B - PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following at:

	September 30,		June 30,
	2012		2012
Buildings and improvements	$	1,504,242	$	1,508,071
Machinery and equipment		814,292		816,365
Motor vehicles		30,849		30,635
Office equipment		76,432		76,626
		2,425,815		2,431,697
Less accumulated depreciation		850,755		802,033
	$	1,575,060	$	1,629,664

Substantially all of the property and equipment is located in China.

F-7

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012 (UNAUDITED)

NOTE B - PROPERTY AND EQUIPMENT (CONTINUED)

Total Depreciation was $50,802 and $61,021 for the three months ended September 30, 2012 and 2011, respectively. Depreciation is recorded in the financial statements as follows:

	Three Months Ended
	September 30,
	2012		2011
Depreciation Expense	$	49,678	$	5,656
Capitalized Inventory		-		22,780
Capitalized Ginseng Crops		1,124		32,585
	$	50,802	$	61,021

Depreciation expense is included within Deprecation and amortization on the consolidated Statements of Operations. Capitalized Inventory and Ginseng Crops are included within their respective balances on the consolidated Balance Sheets.

NOTE C –INVENTORY

Inventory is comprised of the following at:

	September 30,		June 30,
	2012		2012
Fresh and dried harvested Ginseng	$	1,137,807	$	-
Raw materials		1,586,234		1,590,531
Finished goods		211,218		225,122
Operating supplies		4,241		4,252
	$	2,939,500	$	1,819,905

At Sepember 30, 2012 and June 30, 2012, there were no shipments of Ginseng at customer locations awaiting inspection and approval that may be subject to invoicing.

NOTE D – INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES

In December 2010, the Company invested $24,129 (RMB 153,000) in Changchun Zhongshen Beverage Co. Ltd. (“Zhongshen”). This investment represented a 17% interest in Zhonghsen. Zhongshen is a retailer of ginseng juice and wine. The Company accounts for this investment utilizing the cost method.

In September 2011, the Company entered into an agreement with three other companies to establish a new entity, Jilin Province Jiliang Beverage Investment Management Co., Ltd (“Jilin Jiliang”). The purpose of Jilin Jiliang is to provide investment and project consultation. Under the agreement, the Company is required to invest a total of $78,852 (RMB 500,000) for a 10% interest in Jilin Jiliang by September 25, 2012. In September 2011, the Company invested $15,771 (RMB 100,000) in Jilin Jiliang. As of the date of this Report, the Company has not yet invested the remaining $63,082 (RMB 400,000). The Company accounts for this investment utilizing the cost method.

F-8

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012 (UNAUDITED)

NOTE E – GINSENG CROPS (CONTINUED)

The Company’s business, prior to June 30, 2009, was primarily to harvest and sell fresh and dried Ginseng. The growth period takes approximately 5 to 6 years before harvest can commence and up to 8 years for improved harvest and seedling yields. The Company is changing its business model to utilize the harvested Ginseng to manufacture Ginseng juice and other Ginseng beverages. It commenced the juice operation in August 2011. The Company plants selected areas each year and tracks the costs expended each year by planting area. The Chinese government owns all the land in China.

Currently, the Company has land grants from the Chinese government for approximately 1,500 hectors of land (approximately 3,705 acres) to grow Ginseng which were awarded in April and May 2005. These grants are for 20 years and the management of the Company believes that the grants will be renewed as the grants expire in different areas. However, there are no assurances that the Chinese government will continue to renew these grants in the future. The planting of new Ginseng is dependent upon the Company’s cash flow and its ability to raise working capital.

The Company has planted approximately 287,984 square meters of land. The Company plans to plant, over the next 5 years, 100,000 square meters, representing approximately 20,000 square meters per year. In the succeeding five years, the Company plans to harvest approximately 176,145 square meters of Ginseng. The harvest plan by year is as follows: 2014-58,281 and 2017-2,664. As discussed in Note F, in August of 2012, a typhoon damaged the remaining 111,839 square meters of ginseng crops.

An analysis of ginseng crop costs for each of the applicable periods is as follows:

	September 30, 2012			June 30, 2012
Beginning Crop Costs	$	2,495,543		$	2,930,278
Currency Conversion Adjustment to Beginning Balance		-			47,603
Capitalized Costs During Year:
Wages		-			59,747
Fertilizer		-			463
Field clearing and cultivation		97,518			-
Farmer lease fee net of management fee		(27,251	)		(95,515	)
Labor		275,129			-
Irrigation		35,240			-
Depreciation		1,124			5,025
Other		63,551			-
Total Capitalized Costs		445,311			(30,280	)
Less:
Cost of crops harvested		(1,309,711	)		(452,058	)
Impairment adjustment		(918,392	)		-	)
		(2,228,103	)		(452,058	)
Ending Crop Costs		712,751			2,495,543
Less: Current portion		-			909,665
Non-Current Portion of Crop Costs	$	712,751		$	1,585,878

F-9

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012 (UNAUDITED)

NOTE E – GINSENG CROPS (CONTINUED)

The cost of harvest is calculated by reference to the planting area and the detailed costs maintained for each planting area. Based upon the square meters planted by area, a square meter cost is calculated and applied to the square meters harvested, rendering a cost of harvest.

For each financial reporting period, the Ginseng crop harvested is valued at net realizable value. If the net realizable value is lower than carrying value, a write down is made for the difference.

NOTE F – IMPAIRMENT OF GINSENG CROPS

In August 2012, a typhoon struck the Mudanjiang Ginseng farm destroying approximately 111,839 square meters of planted ginseng having an approximate value of RMB 5,817,110 (US$ 918,392). This loss was charged to operations during the first quarter of 2013. Management is presently unable to ascertain the impact this will have on future operations.

NOTE G – AGREEMENTS WITH FARMERS

The Company has executed agreements with a number of local farmers to grow, cultivate and harvest Ginseng utilizing the Company’s land grants. The farming contracts commenced in January 2008. In connection with these agreements, the Company (1) leases sections of the Ginseng land grants to the farmers at approximately $1.50 (10 RMB) per square meter per year, (2) provides the seeds and fertilizer to the farmers and clears the land of large debris. These costs are capitalized by the Company and included in the Ginseng Crop inventory, (3) pays the farmers a management fee of approximately $0.50 (4.00 RMB) per square meter per year and (4) the farmers are required to produce 2kg of Ginseng for each square meter that they manage. The Company pays the farmers market price for their Ginseng. If the harvest is below 2kg per square meter, the difference will be deducted from the total payment for Ginseng purchased. If the harvest produces more that 2kg per square meter, the Company pays approximately $3.00 for every extra kilo. The Company records these agreements on a net basis by individual farmers. The Company has recorded a receivable from the farmers for the rental income of the leased Ginseng land grants of $236,725 and $191,794 at September 30, and June 30, 2012, respectively. The Company has also recorded a long-term payable-farmers for the management fee due to the farmers. The liability at September 30, and June 30, 2012 was $566,612 and $549,841, respectively. The receivable and payable balances for the respective areas will be settled at harvest time when the Company purchases the harvest at the current market value for Ginseng.

NOTE H – INTANGIBLE ASSETS

Intangible assets consist of the patent rights for Ginseng drinks. The cost and related amortization is as follows:

	September 30,			June 30,
	2012			2012
Cost	$	17,719		$	17,362
Less accumulated amortization		(13,516	)		(10,915	)
	$	4,203		$	6,447

Amortization expense was $2,230 and $2,601 for the three months ended September 30, 2012 and 2011, respectively.

F-10

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012 (UNAUDITED)

NOTE I – LOAN PAYABLE TO FINANCIAL INSTITUTION

In 2002, the Company’s subsidiary, Tonghua Linyuan Grape Co. Limited, borrowed 2,000,000 RMB from Ji’an Qingshi Credit Corporation at an interest rate of 6.325% per annum with a maturity date of April 4, 2003. The loan is currently in default. In March 2008, the lender verbally agreed that no principal or interest need be paid until the company is generating profits. Interest has been paid on the loan through June 30, 2009 and will be accrued in subsequent periods. The loan is secured by the company’s inventory and equipment. The loan balance at September 30, and June 30, 2012 is $315,408 and $316,211, respectively.

NOTE J – NOTE PAYABLE – BUILDING PURCHASE

On March 2, 2011, the Company entered into an agreement with Meihekou Hang Yilk Tax Warehousing Logistics, an auctioneer, to purchase office and warehouse facilities. The purchase price was $1,325,479 (RMB 9,000,000). On June 24, 2011, the Company made payment of $73,804 (RMB 500,000) leaving a balance of $1,251,675 (RMB 8,500,000). On September 10, 2011, the Company paid 8,000,000 RMB through the proceeds of a loan with Merkekou City Rural Credit Union. The loan was due on August 12, 2012. The interest rate is a floating rate adjusted upwards by 90%. At June 30, 2012, the Central Bank Rate was 6.31%. Applying the adjustment factor yields a rate of 11.989%. The loan is secured by the building. The remaining 500,000 RMB was paid as follows: (a) 100,000 RMB in December 2010 and (b) 400,000 RMB in June 2011. On August 30, 2012, the loan was renegotiated extending the maturity date to August 29, 2014 and requires principal payments of 1,000,000 RMB (USD 157,704) in September 2012; 1,000,000 RMB (USD 157,704) on August 29, 2013; 1,000,000 RMB (USD 157,704) on December 20, 2013 and 5,000,000 RMB (USD 788,518) on August 29, 2014.

NOTE K - RELATED PARTY TRANSACTIONS

The Company had been financing its operations from loans from individuals, principally residents of China, who are deemed to be related parties because of their ownership interest in the Company (shareholders). The individuals have loaned the Company funds which are interest free, have no specific repayment date, and are unsecured. The funds received are evidenced by receipt of cash acknowledgments. As of September 30, 2012 and June 30 2012 funds borrowed to fund the current operations of the Company were $1,786,939 and $1,667,047, respectively. In accordance with FASB ASC 835-30, the Company has inputted an interest charge of $58,608 and $19,292 which has been recorded in the financial statements for the three months ended September 30, 2012 and 2011, respectively.

As of September 30, and June 30, 2012, the Company had receivables from related parties aggregating $210,170 and $152,394, respectively.

NOTE L – PROVISION FOR INCOME TAXES

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

F-11

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012 (UNAUDITED)

NOTE L – PROVISION FOR INCOME TAXES (CONTINUED)

Deferred tax assets consist of the following at:

	September 30,			June 30,
	2012			2012
Timing difference related to inventory provisions	$	169,612		$	170,044
Net operating losses		813,571			1,126,540
Valuation allowance		(813,571	)		(1,126,540	)
Deferred tax asset	$	169,612		$	170,044

The deferred tax asset is the result of an inventory provision and related reserve of $169,612 (RMB 1,075,510). Under Chinese tax laws, the Company is not entitled to a deduction for the provision until the inventory is completely discarded. Accordingly, the liability has been recorded offset by a deferred tax asset representing a timing difference.

The Company has a net operating loss carry forward as follows:

	September 30,		June 30,
	2012		2012
International (China)	$	2,031,413	$	748,142
United States		1,222,869		1,112,938
	$	3,254,282	$	1,861,080

The operating losses are available to offset future taxable income. The China net operating loss carryforwards can only be carried forward for five years and will commence expiring in the year 2013. The Company does not file a consolidated tax return in China. Therefore, the profitability of the individual Chinese companies will determine the utilization of the carryforward losses. The U.S. carryforward losses are available to offset future taxable income for the succeeding 20 years and commence expiring in the year 2027.

The components of income before taxes are as follows:

	For the Three Months Ended September 30,
	2012			2011
International (China)	$	(109,931	)	$	(258,847	)
United States		(1,283,271	)		(136,959	)
	$	(1,393,202	)	$	(395,806	)

F-12

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012 (UNAUDITED)

NOTE L – PROVISION FOR INCOME TAXES (CONTINUED)

A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and Federal statutory rate for the three months ended September 30, 2012 and 2011, respectively, are as follows:

	For the Three Months Ended September 30,
	2012			2011
Federal statutory rate		(34.0	)%		(34.0	)%
State income taxes, net of federal benefit		3.3			3.3
Valuation allowance		30.7			30.7
Earnings taxed at other than US statuory rate		-			-
Effective tax rate		-	%		-	%

NOTE M – FAIR VALUE MEASUREMENTS

The Company follows ASC 820 which defines fair value, provides a consistent framework for measuring fair value under generally accepted accounting principles and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions.

ASC 820 classifies these inputs into the following hierarchy:

Level 1 inputs:	Quoted prices for identical instruments in active markets.

Level 2 inputs:	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 inputs:	Instruments with primarily unobservable value drivers.

NOTE N – CONCENTRATIONS

In the three months ended September 30, 2012, two customers accounted for 99% of revenues.

In the three months ended September 30, 2011, two customers accounted for 91% of revenues.

NOTE O – COMMITMENTS AND CONTINGENCIES

The Company has a three year employment contract with the Chief Executive Officer expiring on January 1, 2014 aggregating $15,108 per year.

The Company has a three year contract with the Chief Financial Officer expiring on January 1, 2014 aggregating $ 5,664 per year.

The Company has a three year employment contract with a staff accountant expiring on March 2, 2015 aggregating $5,316 per year.

The Company has a two year employment agreement with an office employee expiring in February 2014 aggregating $5,110 per year.

F-13

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012 (UNAUDITED)

NOTE O – COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company has a three contract with the Chief Marketing Officer expiring on February 1, 2014 aggregating $17,564 per year.

The Company has a three year employment contract with two office employees expiring between June 2015 and November 2015 aggregating $6,972 per year.

The Company has a three year employment contract with the General Manager of Hong Kong Huaxia International Industrial Co., Limited expiring on August 18, 2015 aggregating $15,108 per year.

The Company has a one year lease for its corporate offices in China aggregating $109,432 RMB per year (USD $17,000) expiring on December 31, 2012. The Company is currently negotiating a new contract.

The Chinese government owns all the land in China. Currently, the Company has grants from the Chinese government for approximately 1,500 hectors of land (3,705 acres) to grow Ginseng. These grants are for 20 years. There is no assurance that the Chinese government will continue to renew these grants in the future.

The Company has a 15 year lease with the Representative of Group One Farmer, Si’An City, Qingshi, Qingshi Town, Qingshi Village, China to lease 750 acres to grow and harvest grapes. The lease expires December 31, 2014. The annual lease fee is 187,500 RMB or approximately $29,600 per year to lease the acreage. The land and buildings on the premises have a separate lease concurrent with the property lease. The company does not plan to renew the leases in 2014.

In 2008, the Company entered into a 5 year lease to refrigerate and store fresh Ginseng The annual lease fee approximates $15,500 per year.

Rent expense was $50,075 and $0 for the three months ended September 30, 2012 and 2011, respectively.

NOTE P – OPERATING SEGMENTS

The Company presently organizes its business into two reportable farming segments: (1) the cultivation and harvest of Ginseng for the production of Ginseng beverages and (2) the cultivation and harvest of grapes for the eventual production of wine and grape juice.

The Company’s reportable business segments are strategic business units that offer different products. Each segment is managed separately because they require different production techniques and market to different classes of customers.

F-14

CHINA GINSENG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012 (UNAUDITED)

NOTE P – OPERATING SEGMENTS (CONTINUED)

Three months ended September 30, 2012:

	Parent Company			Ginseng			Wine			Total
Revenues	$	-		$	503,772		$	-		$	503,772
Net loss		(109,931	)		(1,393,202	)		(33,146	)		(1,393,202	)
Total assets		194,153			5,692,194			1,428,212			7,296,393

Other significant items:
Depreciation and amortization		571			28,257			23,080			51,908
Interest expense		24,169			58,492			8,835			91,496
Expenditures for fixed assets		272			-			-			272
Impairment of ginseng crops		-			918,392			-			918,392

Three months ended September 30, 2011:

	Parent Company			Ginseng			Wine			Total
Revenues	$	-		$	892,405		$	-		$	892,405
Net loss		(136,959	)		(270,635	)		(4,665	)		(412,259	)
Total assets		179,081			6,970,507			2,420,371			9,569,959

Other significant items:
Depreciation and amortization		227			5,920			219			6,366
Interest expense		15,342			40,304			1,170			56,816
Expenditures for fixed assets		-			61,822			-			61,822

F-15

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

This Form 10−Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the financial statements of China Ginseng Holdings Inc. for the periods ended September 30, 2012 and 2011 and should be read in conjunction with such financial statements and related notes included in this report and the Company’s Annual Report on Form 10-K for the year ended June 30, 2012. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.

Company Overview

Our company, China Ginseng Holdings Inc., was incorporated on June 24, 2004 in the State of Nevada. The Company conducts business through its four wholly-owned subsidiaries located in China. We have been granted 20-year land use rights to 3,705 acres of lands by the Chinese government for ginseng planting and we control through lease approximately 750 acres of grape vineyards. However, recent harvests of grapes showed poor quality for wine production which indicates that the vineyards are no longer suitable for planting grapes for wine production. Therefore, we decide not to renew our lease for vineyard with the Chinese government when it expires in 2013 and going forward, we will purchase grape from open market to produce grape juice and wine.

Since our inception in 2004, we have been engaged in the business of farming, processing, distribution and marketing of fresh ginseng, dry ginseng, ginseng seeds, and seedlings. Starting in August 2010, we have gradually shifted the focus of our business from direct sales of ginseng to canned ginseng juice production and wine production.

Since we shifted the focus of our business into the ginseng beverage business and the wine business, we have started to store our raw material and sell very limited self-produced ginseng. We also purchase ginseng from outside sources, and then resell them to generate revenue and those sales are based on the order from the market. However, due to the global recession and local market conditions, demand for ginseng exports declined beginning in 2008, creating a significant oversupply in China. All those factors caused us to have losses in 2009 and 2010. In addition, our new business is in the initial stages, we need to spend capital to promote our new products, and develop our marketing plan. There is no assurance that there will be sufficient demand for our beverages and wine to allow us to operate profitably initially, or at all. We have recurring operating losses and there is substantial doubt about our ability to continue as a going concern. As of September 30, 2012, the cash balance on hand for the Company was $52,192.

In order to meet the challenge, we raised capital to support our operation through a Regulation S private placement and we are recruiting distributors for ginseng beverage and wine products. In addition, we established Hong Kong Huaxia in Hong Kong as a sale company for health product and specialized local goods in March 2012. It was set up as a part of our adjusted marketing strategy so that we can explore the Asia Market through Hong Kong Huaxia while Jilin Huamei is focused on domestic sales. The focus of Hong Kong Huaxia is sales of our ginseng juice and wine in Asia market. It is currently recruiting distributors for Asia market in addition to its online shopping platform for direct sales of our ginseng juice and wine.

Although, we have generated only limited revenues from our ginseng beverage and wine businesses, we believe there is future potential to do so because (i) the China ginseng market is recovering now, (ii) the demand and the price is in an uptrend due to Chinese government restrictions on the amount of land available for ginseng farming (land under our Company’s control has not been affected by the government restrictions), (iii) as of the date of this filing, we have already entered into binding agreements with 20 distributors to distribute our beverage in different cities and 1 distributor to distribute our ginseng beverage in Singapore, Malaysia, Thailand, and (iv) we set up Hong Kong Huaxia to promote our products in the Asia Market and initiated online shopping for direct sales of our ginseng juice and wine.

As the impact of the shift in the focus of our business away from the ginseng business and into the ginseng beverage business and the wine business is uncertain and the shift represents a material change in our business, our past revenues and other financial results does not provide a meaningful basis for future performance and there is no guarantee that we will be able to attain profitability in the foreseeable future.

Our Subsidiaries:

Our business in China is currently conducted through four wholly owned subsidiaries located inChina, the current operational status of each of these businesses as of the date of this filing is as follows:

Yanbian Huaxing Ginseng Industry Co. Limited (“Yanbian Huaxing”) – Ginseng farming and sales

●

On January 15, 2008, we acquired 100% equity interest in Tonghua Linyuan from two PRC individual shareholders at a price of $1,000,000. The price was determined by arm’s-length negotiations based upon the appraised net asset value of Tonghua Linyuan at the time of acquisition which was approximately $1,332,248. We received a certificate of approval issued by the competent local approval authority on January 15, 2008 and a business license issued by the competent local registration authority on April 1, 2008 certifying Tonghua Linyuan as a WFOE lawfully owned by us with a registered capital of RMB 10,330,000. However, the WFOE certificate is conditioned on us injecting the registered capital into Tonghua Linyuan before or on June 15, 2012. Because we failed to satisfy this condtion, Honghua Linyuan lost its status as a WFOE beginning June 15, 2012. Tonghua Linyuan is operated to plant grapes and produce wine. However, recent harvests from Tonghua Linyuan showed poor quality for wine production, which indicates that the vineyard is no longer suitable to grow grapes for grape juice and wine production. Therefore, we have decided not to renew our lease with the Chinese government when it expires in 2013 and going forward, we will purchase grapes from the open market. In addition, Tonghua Linyuan has contracted for the production of wine with a winery producer whereby Tonghua Linyuan provides the producer with grape juice and supplies and producer charges processing fee per bottle. Tonghua Linyuan started wine production through a winery producer in March 2011 and the sale of wine is conducted through Jilin Huamei and Hong Kong Huaxia..

Jilin Ganzhi Ginseng Products Co. Ltd. (“Jilin Ganzhi”) - Producing Canned Ginseng Juice.

●

On May 31, 2006, we acquired 100% equity interest in Jilin Ganzhi at a price of $95,691. We received a certificate of approval issued by the competent local approval authority on May 31, 2006 and a business license issued by the competent local registration authority on June 19, 2006. Subsequently on September 26, 2007 and August 31, 2008 we increased Jilin Ganzhi’s registered capital by $50,000 and $20,000 respectively. Now the registered capital of Jilin Ganzhi is $100,000. We applied with the relevant PRC approval and registration authorities for each of the aforesaid capital increases and have obtained all applicable approvals and registrations for such changes, including a renewed certificate of approval issued by the local approval authority and a renewed business license issued by the local registration authority certifying Jilin Ganzhi as a WFOE lawfully owned by us. Jilin Ganzhi is operated to process ginseng and produce canned ginseng juice. Jilin Ganzhi started production of canned ginseng juice in the three months ended December 31, 2010.

Tonghua Linyuan Grape Planting Co. (“Tonghua Linyuan”) – Growing grapes and producing wine

●

On January 15, 2008, we acquired 100% equity interest in Tonghua Linyuan from two PRC individual shareholders at a price of $1,000,000. The price was determined by arm’s-length negotiations based upon the appraised net asset value of Tonghua Linyuan at the time of acquisition which was approximately $1,332,248. We received a certificate of approval issued by the competent local approval authority on January 15, 2008 and a business license issued by the competent local registration authority on April 1, 2008 certifying Tonghua Linyuan as a WFOE lawfully owned by us with a registered capital of RMB 10,330,000. However, the WFOE certificate is conditioned on us injecting the registered capital into Tonghua Linyuan before or on June 15, 2012. Because we failed to satisfy this condtion, Tonghua Linyuan lost its status as a WFOE beginning June 15, 2012. Tonghua Linyuan is operated to plant grapes and produce wine. However, recent harvests from Tonghua Linyuan showed poor quality for wine production, which indicates that the vineyard is no longer suitable to grow grapes for grape juice and wine production. Therefore, we have decided not to renew our lease with the Chinese government when it expires in 2013 and going forward, we will purchase grapes from the open market. In addition, Tonghua Linyuan has contracted for the production of wine with a winery producer whereby Tonghua Linyuan provides the producer with grape juice and supplies and producer charges processing fee per bottle. Tonghua Linyuan started wine production through a winery producer in March 2011 and the sale of wine is conducted through Jilin Huamei and Hong Kong Huaxia.

Jilin Huamei Beverage Co. Ltd (“Jilin Huamei”) - Marketing of our canned ginseng juice and wine

●

We incorporated Jilin Huamei as a WFOE on October 17, 2005. We received a certificate of approval issued by the competent local approval authority on October 17, 2005 and a business license issued by the competent local registration authority on October 19, 2005 certifying Jilin Huamei as a WFOE lawfully owned by us. The registered capital of Jilin Huamei is $200,000. Jilin Huamei operates as a sales department for our canned ginseng juice and wine, which are produced by our other subsidiaries. We plan to recruit one general distributor for our canned ginseng juice and one general distributor for our wine in each big city in China through Jilin Huamei. As of the date of this filing, Jilin Huamei has signed 20 general distributors for our ginseng beverage and one general distributor for our wine, as well as established one sales branch office in Jiangsu Province. We commenced sales of ginseng beverage in October 2010 and Jilin Huamei started generating revenue in November 2010.

Hong Kong Huaxia International Industrial Co., Limited (“Hong Kong Huaxia”) – Sell health and specialized local products

●

Hong Kong Huaxia was incorporated in Hong Kong on March 18, 2012 to sell health and specialized local products and it began operations in April 2012. The registered capital of Hong Kong Huaxia is 1 million Hong Kong dollars (approximately $128,838), 1% of which is payable and paid upon registration. Hong Kong Huaxia is focused on recruiting distributors exporting our ginseng juice products and wine to other countries in Southeast Asia. As a part of our adjusted marketing strategy, Hong Kong Huaxia is focused on sales of our ginseng juice and wine in the Asia Market while Jinlin Huamei is focused on domestic sales. In addition, Hong Kong Huaxia sells other famous local products from Northeast China such as ginseng, deer antler velvet, deer products, black fungus, mushroom, pine seeds, pine flower powder. It is currently recruiting distributors for the Asia Market in addition to its online shopping platform for direct sales of our ginseng juice and wine.

Our Products:

Previously, through Yanbian Huaxing, we focused on the farming, processing, distribution and marketing of Asian and American Ginseng and related byproducts in the following varieties:

	o	Fresh Ginseng: For pharmaceutical, health supplement, cosmetic industry and fresh consumption.
	o	Dry Ginseng: Dried form for pharmaceutical and health supplement consumption.

Ginseng Seeds: Selling of ginseng seeds.

Ginseng Seedling: Selling of ginseng seedling.

Ginseng's growing cycle is from April to September, six months a year. Normally we sow the seed in April and harvest in September and October. Ginseng seeds are obtained after the blossom in autumn. The seeds can be sowed in September or next spring. It takes 10 days to germinate and the growing cycle for seedling is 10 days. For every hectare cultivated, we can harvest approximately 18 to 20 kg ginseng. As of September 30, 2012, the planting area for ginseng is 111 acres.

Since August 2010, we have gradually shifted our business focus from direct sales of ginseng and ginseng byproducts to production and sales of canned ginseng juice and wine.

Through Jilin Ganzhi, we are producing two types of canned ginseng juice:

Ganzhi Asian Ginseng Beverage

Ganzhi American Ginseng Beverage

In addition to canned ginseng juice, we have added wine production to our business focus. We have already grown and crushed the grapes from our vineyards and reserved the juices. We started wine production through a winery producer in March 2011 and sales in April 2011. We contracted for the production of the wine.

We are producing and selling three kinds of wine:

Bingqing Ice Wine

Pearl in the Snow (Red)

Linyuan Hong Wine (red wine)

New Focus of Our Business

Canned Ginseng Juice

Currently, there are about 10 kinds of ginseng drinks on the market; all of them are imported from Korea. The price range for those products is 4 –30 RMB per can (about USD $0.60-$ 4.51).

The most important component of ginseng is ginsenoside. Based upon reading our competitors’ product labels, all of their ginseng drinks are blended after extracting ginsenosides through chemical methods. The extraction for ginsenosides will cause damage to its nutritional components. Our technology is different from the traditional method used by our competitors. We squeeze out the natural juice from fresh ginseng, use that as our main ingredient and then add in natural extracts like xylitol, citric acid and steviosides as subsidiary ingredients. We have farming technicians periodically inspect farmers to ensure they follow our growing guidelines to control the quality of the fresh ginseng. We use low residue pesticide and biodegradable fertilizer for ginseng planting. We also use xylitol, which does not cause a sour taste, instead of sugar to lower the calorie content of our drinks.

Squeezing is not commonly used in canned ginseng juice because it requires fresh ginseng, the preservation of which is very difficult. However, our drink formula uses refrigerated ginseng and therefore we are able to preserve its freshness and nutrition in our final products. The drink formula for our ginseng beverages is a registered patent approved by the Chinese government, patent number ZL 03111397.6. This patent was issued on January 23, 2008 and expires 20 years after issuance.

To produce canned ginseng juice, we store our fresh ginseng in refrigerated warehouse space. We are currently renting a refrigerated warehouse (-20 C degree) to store all fresh ginseng inventory necessary for production of the ginseng beverages. Monthly rent for refrigerated warehouse is RMB 4,500 (about USD $676.86). We commenced production in August 2010 and sales in October 2010. However, as we are in the initial stage of the ginseng beverage business, we cannot assure the demands for our ginseng beverage will be high enough to make our business profitable in the short term and there is no guarantee that we will be able to generate the revenue from ginseng beverage business.

We own the production plant. The plant is certified by the Chinese government as a Good Manufacturing Process facility, which is required for our production of these products. Good Manufacturing Process standards cover organization and personnel, building and facilities, equipment, materials, hygiene and sanitation, validation, documentation, production management, quality management, production distribution and recall, complaints and adverse reactions report, and self-inspections.

Wine

Our grapes grow on 750 acres of land leased from a group of individual farmers, paying approximately $37.50 per acre a year for 15 years. This lease expires on December 31, 2014. However, recent harvests from our vineyard showed poor quality indicating the vineyard is long longer suitable for the production of wine. We decide to abandon the growing and harvesting of grapes and will now purchase grapes in the open market to produce wine. We started production of wine in March 2011 and sales in April 2011. Through our subsidiary Tonghua Linyuan, we have a written production agreement with Tonghua Jinyuanshan Winery (“Jinyuanshan Winery”) to produce Pearl in Snow Wine and Ice Wine for us from May 20, 2012 to May 19, 2017. Under the terms of the agreement, we provide Jinyuanshan Winery with grape juice, bottling supplies and packaging supplies, and Jinyuanshan Winery produces and bottles the wine with a charge of approximately $0.16-0.24 per bottle (approximately $0.16 a bottle for processing red wine, and approximately $0.24 per bottle for processing ice wine). We, through our subsidiary Tonghua Linyuan, have another written production agreement with Jinyuanshan Winery to produce. Linyuan Hong Red for us at a charge of approximately $0.16 per bottle from May 20, 2012 to May 19, 2017. The agreement contains similar terms as the production written agreement we have with Jinyuanshan Wineary for producing Pearl in Snow Wine and Ice Wine.

Distribution

We intend to recruit one general distributor for our products of ginseng beverage and wine in every city in China. The city level distributor can recruit the second level distributors. In addition to recruiting general distributors, in some major cities, Jilin Huamei will establish sale branch offices to facilitate the local sales. Our direct sales will target customers of high end retailers such as supermarkets, pharmacies, hotels, gift shops, entertainment centers, tourists attractions, airport and high speed trains, etc.

We started negotiating distribution and sales agreements with potential general distributors. Currently, we have signed 20 general distributors for our ginseng beverage, 1 distributor to distribute our ginseng beverage in Singapore, Malaysia, Thailand and 1 general distributor for our wine, as well as established one sales branch office in Jiangsu Province.

As a part of our adjusted marketing strategy, we set up Hong Kong Huaxia as a HK subsidiary which is focused on sales and distribution of our products and famous local goods to the Asia Market outside China in addition to its online shopping platform for direct sales of our ginseng juice and wine.

Competitive environment

The market for ginseng products and wine is highly competitive. Our operations may be affected by technological advances by competitors, industry consolidation, patents granted to competitors, competitive combination products, new products offered by our competitors, as well as new information provided by other marketed products and/or other post-market studies.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believes to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

In addition, past financial results are not indicative of future performance due to our emphasis on further commercializing ginseng juice with our crops as raw materials and broadening our offing, such as wine sale. Furthermore, we cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.

Consolidated Financial Statements

The financial statements include the accounts and activities of China Ginseng Holdings, Inc. and its wholly-owned subsidiaries: Yanbian Huaxing Ginseng Co. Limited, Jilin Huamei Beverage Co. Limited, Jilin Ganzhi Ginseng Products Co. Limited, Tonghua Linyuan Grape Planting Co. Limited and Hong Kong Huaxia International Industrial, Co. Limited. All intercompany transactions have been eliminated in consolidation.

Inventory

Our inventory consists of fresh and dried ginseng as well as crushed grapes and is stated at the lower of cost or market value. Cost is determined using the First-In, First-Out (FIFO) Method.

Ginseng Crops and Grape Crops

The Company uses the full absorption costing method to value its ginseng crops. Included in crop costs are seeds, labor, applicable overhead including depreciation, and supplies. Common costs are allocated in each period based upon the total number of hectors under cultivation during the period.

The carrying value of the ginseng crops is reviewed on a regular basis for any impairment in value using management’s best estimate as to expect future market values, yields and costs to harvest. Costs accumulated on the acres expected to be harvested during the next fiscal year have been classified as a current asset.

In August 2012, a typhoon struck the Mudanjiang Ginseng farm destroying approximately 111,839 square meters of planted ginseng having an approximate value of RMB 5,817,110 (US $ 918,392). This loss was charged to operations during the first quarter of 2013. Management is presently unable to ascertain the impact this will have on future operations.

Revenue Recognition

Through the year ended June 30, 2011, the Company’s primary source of revenue was the sale of fresh and dried Ginseng. During the year ended June 30, 2012, the Company reserved and processed its grown Ginseng suitable for ginseng juice production and sold the rest of its grown ginseng. In addition, the Company purchased Ginseng from farmers for its resale business. Ginseng is planted in the Spring (March) and Fall (September) of each year and is generally harvested in September. It usually takes 6 years for a Ginseng root to mature, although, senior maturity can be 8 years.

Harvested ginseng can be sold in two ways: (1) fresh ginseng which can be sold immediately and stored in refrigerators for up to 3 years and (2) dried ginseng which is processed and dried via sunlight and steam machines. Drying is a two month process. Dried ginseng can be stored up to 5 years. The Company has focused on selling dried ginseng as it is more profitable than selling fresh ginseng. The Company has also been storing fresh Ginseng for future juice manufacturing paid upon delivery as payment in advance. The balance is billed after the customer incurs a lengthy inspection process which can take up to 60 days. Until the customer finalizes its inspection and deems the shipment acceptable, the shipment is still the property of the Company. Upon customer completion of inspection and approval, the sale is then recognized and the balance of the invoice price is wired to the Company. For smaller sales, customers pick up the Ginseng from the Company, pay in cash at time of pick up and receive an invoice with appropriate sales tax applied and a cash acknowledgement. On these orders, revenue is recognized upon shipment/payment.

The Company has entered into several distribution agreements to sell Ginseng juice and wine. In accordance with these agreements, the distributors will advance funds to the Company for orders to be placed. Upon the placement of orders by the distributor, the Company will ship the product to the distributor and title will pass to the distributor. In relation to distribution agreements for Ginseng beverages, it is the Company’s policy, commencing with the initiation of the distribution agreements, to allow the distributors to return all unsold products at the end of six months from the shipment date should the product not be sold and the product has not exceeded the expiration date. The Company is establishing history as to the quantity of the Ginseng which has been returned in order to determine if a reserve for returns and allowances is necessary. To date, returns have been minimal. For each reporting period, the Company ascertains from each distributor its’ current on hand quantity and assesses the situation in order to establish a return allowance, if necessary. As of June 30, 2012, all distribution sales had been sold to third parties.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist principally of trade receivables. When ginseng is shipped to a customer, the customer pays 20%-30% of the invoice and is entitled to an inspection process which could take up to 60 days. Upon completion of the inspection and approval process, the customer notifies the company, and a sale is recorded. The allowance for doubtful accounts represents management’s estimate of the amount of probable credit losses, determined by reviewing past due balances and other information. Account balances are written off against the allowance if management determines the receivable is uncollectible. The Company’s standard terms stipulate payment in 60 days and consider a receivable to be uncollectible after appropriate collection efforts have been exhausted. The allowance for doubtful accounts was $664,976 and $498,198 at June 30, 2012 and June 30, 2011, respectively.

Vineyard Development Costs

Vineyard development costs consist primarily of the costs of the vines and expenditures related to labor and materials to prepare the land and construct vine trellises. The costs are capitalized within Property and Equipment. When the vineyard becomes commercially productive, annual amortization is recognized using the straight-line method over the estimated economic useful life of the vineyard, which is estimated to be 40 years.

In June 2012, the Company decided to abandon the growing and harvesting of grapes due to the poor quality of recent harvests indicating the vineyard land was no longer suitable for the production of wine or grape juice. Accordingly, the Company has abandoned the vineyard and recorded a charge to operations of $872,568. The Company has also decided not to renew its leases with the Chinese Government. Going forward, the Company will purchase grapes in the open market to produce wine and grape juice.

Going Concern

Recently Issued Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued an accounting standard update to provide guidance on achieving a consistent definition of and common requirements for measurement of and disclosure concerning fair value as between U.S. GAAP and International Financial Reporting Standards. This accounting standard update is effective for the Company beginning in the third quarter of fiscal 2012. The Company is currently evaluating the impact of this accounting standard update on its Consolidated Financial Statements but does not expect it will have a material impact.

In June 2011, the FASB issued an accounting standard update to provide guidance on increasing the prominence of items reported in other comprehensive income. This accounting standard update eliminates the option to present components of other comprehensive income as part of the statement of equity and requires that the total of comprehensive income, the components of net income, and the components of other comprehensive income be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. It is also required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. This accounting standard update is effective for the Company beginning in the first quarter of fiscal 2013.

In August 2011, the FASB approved a revised accounting standard update intended to simplify how an entity tests goodwill for impairment. The amendment will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. This accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2013 and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its Consolidated Financial Statements.

Result of Operations

The following tables present certain consolidated statement of operations information. Financial information is presented for the three months ended September 30, 2012 and 2011 respectively.

	For the Three Months Ended September 30,
					Change
	2012		2011		Amount		%
Revenues	$	503,772	$	892,405	$	-388,633		-43.55	%
Cost of Goods Sold		500,439		723,466		-223,027		-30.83	%
Gross Profit		3,333		168,939		-165,606		-98.03	%
Selling, general and Administrative Expenses		334,739		501,563		-166,824		-33.26	%
Impairment of ginseng corps		918,392		----		918,392		----
Interest expense		91,496		56,816		34,680		61.04	%
Provision for income taxes		---		16,453		-16,453		-100	%
Net Income (Loss)		1,393,202		412,259		980,943		237.94	%

Revenue

	September 30,		September 30,				2012-2011
	2012		2011		Dollar		%
	Revenue		Revenue		Variance		Change
Ginseng (purchase)	$	502,451	$	838,618	$	-336,167		-40.09	%
Ginseng Beverage		1,321		52,511		-51,190		-97.48	%
Wine		----		1,276		-1,276		-100	%
Total	$	503,772	$	892,405	$	-388,633		43.55	%

Our total revenue decreased from $892,405 for the three months ended September 30, 2011, to $502,452 for the three months ended September 30, 2012, a decrease of $388,633 or 43.55%. The decrease in revenues was primarily due to:

Purchasing and reselling ginseng based on orders we receive from our major customers: Our revenues of resale of purchased ginseng decreased from $838,618 for the three months ended September 30, 2011 to $502,451 for the three months ended September 30, 2012, a decrease of $336,167 or 40.09%. These decreased sales were primarily due to the quantity we can sell to the market. In August 2012, a typhoon struck the Mudanjiang Ginseng farm destroying approximately 111,839 square meters of planted ginseng with an approximate value of RMB 5,817,110 (US$ 918,392). This loss was charged to operations during the three months ended September 30, 2012. In addition, impacted by the typhoon, the company could not get enough ginsengs from outside farmers and resell it to the market during the three months ended September, 2012.

Ginseng beverage sales: For the three months ended September 30, 2012, about $1,321 of our revenue was generated from our ginseng juice production, a decrease of $51,190, or 97.48% compared to the three months ended September 30, 2011. The decrease was due to decreased sales of canned ginseng juice. Limited by our cash position in the fiscal year 2012, we were not able to promote the market for our ginseng beverage. Thus, in April 2012, the Company decided to adjust our marketing strategy of ginseng beverages and wine. We established Hong Kong Huaxia to recruit distributors to sell our ginseng juice and wine outside of China in the Asia Market and to set up an online shopping platform to accept orders directly from customers. In addition, we plan to produce smaller pack of our ginseng juice in addition to our current pack of ginseng juice to accommodate different needs from the customers and to attract new customers.

We feel that we will be able to promote the market through Hong Kong Huaxia; expand our market shares by our upcoming new packs. We expect that sales of ginseng beverage will rise to 70% of our revenue in the next five years. However, there is no assurance that our sales of ginseng beverage will meet our expectation as the market conditions may change.

Cost of Goods Sold

			% of total					% of total			Dollar
	9/30/2012		cost of goods sold			9/30/2011		cost of goods sold			Variance		% change
Ginseng Purchase for Resale	$	499,456		99.80	%	$	682,798		94.38	%	$	-183,342		-26.85	%
Ginseng beverage		983		0.20	%		39,499		5.46	%		-38,516		-97.51	%
Wine		----		-----			1,169		.16	%		-1,169		-100	%
Total	$	500,439		100	%	$	723,466		100	%	$	-223,027		-30.83	%

Our total cost of goods sold decreased from $732,466 for the three months ended September 30, 2011 to $500,439 for the three months ended September 30, 2012, a decrease of $223,027 or 30.83%. The primary reason for the decrease was a decrease in the cost of purchasing ginseng for resale and the cost of ginseng juice production.

Our cost of purchasing ginseng for resale decreased from $682,798 in the three months ended September 30, 2011 to $499,456 in the three months ended September 30, 2012, decreased by $183,342 or 26.85% primarily because the quantity of the ginseng we purchased decreased.

Our cost of ginseng juice production decreased substantially from $39,499 in the first three months ended 30, 20101 to $982 in the three months ended September 30, 2012 mainly because we produced less ginseng juice in this period time.

Gross Profit

Gross profit was approximately $3,333 for the three months ended September 30, 2012 compared to $168,939 for the three months ended September 30, 2011, a decrease of $165,606 or 98.03%. The decrease was primarily due to the decrease in overall sales.

Selling General and Administration Expenses

Sales costs, general expenses and administrative expenses decreased from $501,563 for the three months ended September 30, 2011 to $ 334,739 for the three months ended September 30, 2012, a decrease of $166,824 or 33.26%. The decrease was mainly due to the decrease in our operation expense from Jilin Huamei, such as salary for the workers who participate ginseng juice production.

Impairment of Ginseng Corps

In August, 2012, Mudanjiang Huanxing had a damage caused by the typhoon with a loss of approximate $918,392 planted ginseng in Mudanjinag farming land.

Interest Expense

Our Interest expense increased by $34,680 from $56,816 for the three months ended September 30, 2011 to $91,496 for the three months ended September 30, 2012, representing a 61.04 % increase. The change in imputed interest to related party loans and the interest paid to bank loans for the Jilin Ganzhi building are the primary reasons for the increase in interest expense.

Income Tax Expense

We do not have any income tax expense in the three months ended September 30, 2012 due to the operation loss from Mudanjing Huaxing

Net Loss

The net loss for the three months ended September 30, 2012 was $1,393,202; an increase of $ 980,943 or 237.94% compared to a net loss of $412,259 for the three months ended September 30, 2011. The damages brought by the Typhoon to our Huaxing ginseng farming land in August 2012 caused the increase in operation expenses and administrative expenses which resulted in a net loss during the period ended September 30, 2012.

Other Comprehensive Income

We operate primarily in the PRC and the functional currency of our operating subsidiary is the Chinese Renminbi (”RMB”). The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is intended to imply that the Renminbi amounts could have been, or could be, converted, realized or settled into USD at the rate on September 30, 2012 or at any other rate.

The value of RMB against U.S. dollar may fluctuate and is affected by changes in political and economic conditions. Our revenues, costs and financial assets are mostly dominated in RMB while our reporting currency is the U.S. dollar. Accordingly, this may result in gains or losses from currency translation on our financial statements.

Translation adjustments resulting from this process amounted to ($43,408) and $30,615 for the three months ended September 30, 2012 and 2011, respectively. And we have comprehensive loss of $1,436,610 and $381,644 for the three months ended September 30, 2012 and 2011, respectively. The assets and liabilities amounts with the exception of equity for the three months ended September 30, 2012 were translated at RMB to 1.00 USD as compared to 6.3410 RMB to 1.00 USD for the three months ended September 30, 2011. The equity accounts were stated at their historical rate. The average translation rates applied to the income statements accounts for the three months ended September 30, 2012 and 2011 were 6.3344 RMB and 6.4179 RMB, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. We have historically financed our operations and capital expenditures through loans from related parties, including officers, directors and other shareholders of the Company and have also raised capital through a private placement pursuant to Regulation S as promulgated under the Securities Act of 1933, as amended. Our current activities are related to developing our new business strategy, the sale of ginseng juice and wine products.

As of September 30, 2012, we had a negative working capital of $76,912, compared to a deficit of $547,480 in working capital as of June 30, 2012.

As of September 30, 2012, there was no change in our loan payments compared with the three months ended September 30, 2011 since the loans remained constant. As of September 30, 2012, we had outstanding loan of 2,000,000 RMB (about $315,408) to Ji’An Qingshi Credit Cooperatives (“Ji’An Qingshi”). The principal terms of the loan are as follows:

	1.	Type of Loan: Short Term Agriculture Loan
	2.	Loan Purpose: Planting
	3.	Loan Amount: Principal of 2,000,000 RMB (about USD $315,408) with an annual interest of 6.325%
	4.	Loan Period: From February 4, 2002 to February 4, 2003; Repayment due date was February 4, 2003

Security: The loan is secured by assets of Tonghua including 14 carbon-steel storage cans; 16 high-speed steel storage cans and 150 tons of grape juice.

We have not paid any principal or interest of the loan; however, Ji’An Qingshi verbally agreed in March 2008 not to call the loan. The material terms for the verbal agreement are: No principal or interest payments are required to be made until the Company is generating profits and interest continues to accrue until we repay the loan. Thus, the debt in Tonghua Linyuan acquisition will not have impact on our liquidity and capital resource before we start to repay the lender. Nevertheless, we had a net loss of $1,393,202 for the year ended June 30, 2012. If we continue operation without generating net income, Ji’An Qingshi might revoke the oral agreement and call the loan. If we cannot pay off the loan in the event Ji’An Qingshi revokes the oral agreement, Ji’An Qingshi has the right to sell, initiate an auction sale or take any other methods to liquidate the secured assets and receive the payment of outstanding principal and interests senior to any other party out of the secured assets. As of the date of this filing, Tonghua Linyuan has 31 storage cans in total including 15 carbon-steel cans and 16 high-speed steel storage cans; 2 white-steel transport tanks, 1170 tons of grape juice. Therefore, if Ji’An Qinshi decides to revoke the oral agreement and call the loan, it will not lead to the close of operation and business of Tonghua Linyuan; however, it will cause extra costs for Tonghua Linyuan to rent additional storage cans from third parties.

On August 30, 2012, we refinanced the 8 million RMB bank loan which we obtained from Meihekou City Rural Credit Union on November 8, 2010 by a new loan of 8 million RMB (approximately USD $1,261,630) from the same lender. The principal terms of the new 8 million RMB bank loan agreement are as follows:

	●	Parties: Jilin Ganzhi Ginseng Products Co., Ltd (“Jilin Ganzhi”) and Meihekou City Rural Credit Union (“Meihekou Credit Union”);
	●	Meihekou Credit Union granted a loan of 8 million RMB (approximately USD $ 1,264,842 ) to Jilin Ganzhi to be used in calling in and refuding and the term of the loan is 24 months from August 30, 2012 to August 29, 2014.
	●	The loan carries a benchmark interest rate is the rate announced by the People’s Bank of China as an interest rate of same type and class of loans at the date of the loan and changes with the adjustment of national bank rate. Meihekou Credit Union calculates the interest on a monthly basis applying this annual floating rate which is payable on the 21st day of each month. We paid interest of 94,127 RMB (about USD $ 14,838) on August 21, 2012.And we have not paid interest in September and October, 2012 and we plan to pay all outstanding interest in November, 2012 provided that we have sufficient cash.
	●	Repay the principal by installments according to the following repayment plan: principal payment of RMB1M (approximately USD $157,704) on September 20, 2012, RMB 1M (approximately USD $157,704) on August 29, 2013, RMB 1M (approximately USD $157,704) on December 20, 2013 and RMB 5M (approximately USD $788,518) on August 29, 2014.

For the three months ended September 30, 2012, and 2011, we had notes payables of approximately $ 1,786,939 and $1,140,736 to related parties, respectively. These amounts are mainly due to the working capital demands of the business. Most of these related parties are our individual shareholders or immediate family members of our shareholders. The individuals loaned us funds which are interest free, have no specific repayment date, and are unsecured. The funds received are evidenced by receipt of cash acknowledgments.

As of September 30, 2012, we had no material commitments for capital expenditures other than for those expenditures incurred in the ordinary course of business. We plan to fund operations and capital expenditures with cash from operations, as well as loans from major shareholders and management members and their affiliates. We might also pursue additional financings in the form of debt, equity or convertible security offerings. There can be no assurance that we will be able to obtain such additional financing at acceptable terms to us, or at all.

Discussion of Cash Flow

Cash flows results for the three months ended September 30, 2012 and the three months ended September 30, 2011 are summarized as follows:

	September 30, 2011			September 30, 2011
Net cash provided by(used in) operating activities	$	(51,057	)	$	(308,227	)
Net cash (used in) investing activities		(272)			(77,558)
Net cash provided by financial activities		119,892			360,106

Operating activities

Cash flow used in operating activities from operating activities decreased by $51,057 for the three months ended September 30, 2012 compared to the comparative period in 2011. This change was mainly result of an increase in net losses of $1,393,202, in addition to an increase in inventory of $256,319, an increase in due from related parties of $57,776 and an increase in prepaid expense of $99,085, which were offset by impairment of ginseng corps of $918,392, an increase in accounts payable of $345,651, a decrease in accounts receivable of $367,933 and an increase in receivables in advances of $83,358.

The inventory increase was due to the stocking of more raw materials to avoid the potential raw material shortage and price increase in the near future and ginseng for resale; The increase in due from related parties was because of advanced expenses for our ginseng and beverage businesses which were incurred in the three months ended September 30, 2012; The increase in prepaid expense was due to increased ginseng purchased by the Company. The increase in accounts payable was due to ginseng purchase during the three months ended September 30, 2012. The increase in receivables in advances was primary due to the deposit we received from our ginseng customers.

A decrease in our accounts receivable is a result of our successfully collecting money from our credit sales during the three months ended September 30, 2012

Investing activities

Cash flows used in investing activities amounted to $272 for the three months ended September 30, 2012, which consisted of a purchase of office equipment of $272. In July, 2012, the Company purchased a cell phone for sales department.

Cash flows used in investing activities amounted to $77,558 for the three months ended September 30, 2011, which consisted of a long-term investment of $15,736 and a purchase of equipment of $61,822. During the three months ended September 30, 2011, Jilin Ganzhi spent $47,716(310,000 RMB) purchasing a Liquid nitrogen machine and Water storage tank for business operation use. Yanbian Huaxing spent $3,775 (24,500 RMB) to purchase a tractor for ginseng farming business and Jilin Huamei spent $8,163 (52,980 RMB) purchasing office supplies, such as computers, printers; office tables; desks, bookcases, chairs and sofa. On September 25, 2011, the Company invested $15,736 (100,000 RMB) in Jilin Province Jiliang Beverage Investments Co. Ltd. (“Jilin Jiliang”). This investment represented a 10% interest in Jilin Jiliang. Jilin Jiliang is an investment management company. The Company accounts for this investment utilizing the cost method.

Financing activities

Cash flows provided by financing activities for the three months ended September 30, 2012 was $119,892, primarily proceeds from loans payable to related parties of $119,892.

Cash flows provided by financing activities for the three months ended September 30, 2011 was $360,106, primarily proceeds from sale of common stock of $49,940 and proceeds from loans payable to related parties of $310,166.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Not applicable.

Item 4. Controls and Procedures.

(a)	Evaluation of disclosure controls and procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the CEO and CFO concluded that, as of the end of such period, the Company’s disclosure controls and procedures were ineffective to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

(b)	Management’s assessment of internal control over financial reporting

We do not expect that our controls and procedures will prevent all errors and all instances of fraud. Controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the controls and procedures are met. Further, the design of controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all controls and procedures, no evaluation of controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management is responsible for establishing and managing adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and may find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Company’s operations and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

Management has assessed the effectiveness of our internal control over financial reporting as of June 30, 2012. In making this assessment, management used the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The objective of this assessment is to determine whether our internal control over financial reporting was effective as of June 30, 2012. Based on our assessment utilizing the criteria issued by COSO, management has concluded that our internal control over financial reporting was not effective as of June 30, 2012 due to the existence of the following material weaknesses:

–	As of June 30, 2012, there was a lack of accounting personnel with the requisite knowledge of Generally Accepted Accounting Principles (“GAAP”) in the U.S. and financial reporting requirements of the Securities and Exchange Commission;

–	As of June 30, 2012, there were insufficient written polities and procedures to ensure the correct application of accounting and financial reporting with respect to the current requirements of GAAP and SEC disclosure requirements.

–	As of June 30, 2012, there was a lack of segregation of duties, in that we only had one person performing all accounting related duties;

–	As of June 30, 2012, there was no independent audit committee.

Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, our management believes that the financial statements included in its reports fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented. We continue to evaluate the effectiveness of internal controls and procedures on an on-going basis. Once our cash flows from operations improve to a level where we are able to hire additional personnel in financial reporting, we plan to improve our internal controls and procedures by hiring an experienced controller and building an internal accounting team with sufficient in-house expertise in US GAAP reporting. However, due to the limited cash flow we are currently having, we can not assure you when we will be able to implement those remediation methods.

(c)	Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this report that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

None.

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

(a)	Unregistered Sales of Equity Securities.

None.

(b)	Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

(a)

Exhibits.

Exhibit No.		Document Description
31.1		CERTIFICATION of CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.

31.2		CERTIFICATION of CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.

32.1		CERTIFICATION of CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002.

32.2		CERTIFICATION of CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002.

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

China Ginseng Holdings, Inc.,

Title		Name		Date		Signature
Principal Executive Officer		Changzhen Liu		November 14, 2012		/s/ Changzhen Liu

In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

SIGNATURE	NAME	TITLE	DATE
/s/ Changzhen Liu	Changzhen Liu	Principal Executive Officer and Director	November 14, 2012
/s/ Ren Ying	Ren Ying	Principal Financial Officer and Principal Accounting Officer	November 14, 2012

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Legalese
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Readability	8th grade Good

China Ginseng (CSNG) Inactive 10-Q2013 Q1 Quarterly report

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